Gold prices....E-mail from Blanchard
DesertRat
Posts: 1,791 ✭
My broker at Blanchard just e-mailed this to me. Thought you'd find it interesting.
CNN/Money - After the gold rush
Gold has enjoyed a rapid run-up since May. Does it have more room to run?
October 6, 2004: 12:00 PM EDT
by Mark Gongloff, CNN/Money senior writer
NEW YORK (CNN/Money) - Confronted with a shaky U.S. dollar, soaring oil prices, sluggish stocks, and the ever-present threat of terrorism, investors have clamored lately for a commodity that's been a favorite pain reliever since the Stone Age: gold.
Earlier this year, the price of an ounce of the yellow stuff surged to its highest level in nearly a quarter-century, driven in part by the fear that impending inflation would weaken the U.S. dollar. When the world's most powerful currency falters, investors sometimes turn to gold to ease the sting.
Gold tumbled from its peak when inflation's fangs turned out not to be very sharp, but quickly started climbing again when the dollar continued to struggle, weighed down by an anemic stock market, an oil-soaked U.S. economy, continuing headaches in Iraq and more.
Since May 10, as the dollar has lost about 4 percent of its value against a basket of other major currencies, the price of an ounce of gold has risen about 10 percent. What's more gold is still down for the year, the U.S. dollar is still falling, and gold still hasn't returned to its earlier highs ... meaning it may still have room to run.
"The run-up in gold is completely justified," said Ron Coll, gold analyst with Jennings Capital in Toronto. "As long as the dollar continues to trend lower, gold will trend higher. That's the theme it will follow through the fall and into next year."
But a weak dollar may not be the only thing driving gold prices. As with every other investment that's enjoyed a hot summer, including oil and U.S. Treasury bonds, some observers smell a whiff of speculation in gold prices and think a correction is due.
Others point out that many people see gold as something to keep them warm at night in the face of impending doom -- after all, following a major disaster, either geopolitical or economic or both, gold will likely still have value, if only to accessorize post-apocalyptic Road Warrior outfits.
"We see gold not as a trade; we don't even look at it as an investment. We look at it as insurance," said Jean-Marie Eveillard, portfolio manager of the First Eagle Gold (SGGDX: Research, Estimates) fund, which has nearly $600 million in gold and gold-related stocks and securities. "It's the ultimate hedge -- it tends to prosper in difficult times."
With that in mind, Eveillard said, First Eagle has put 5 to 7 percent of its separate global fund in gold or gold-related assets. What could go so wrong that they need such insurance?
What could drive gold higher?
For one thing, there's always the chance that the dollar's decline could turn into a full-fledged rout, if foreign investors decide they've had enough of supporting America's wild deficit-spending binge. Oil prices could surge ever higher, slowing down the U.S. economy. Terror attacks could turn a slowdown into another full-fledged recession.
And certainly, from a technical standpoint alone, gold and several gold-related stocks have run far and fast without many breaks and could be in for a short-term correction, according to Katie Townshend, chief market technician at MKM Partners.
But there may be other, more fundamental reasons why gold could stay strong in the longer term, too, even without a major disaster, according to Frank Holmes, CEO and chief investment officer at U.S. Global Funds, which includes the $62-million Gold Shares Fund (USERX: Research, Estimates) in its family of funds:
The U.S. dollar will almost certainly have to keep falling, according to most analysts, especially if China agrees to revalue its currency, as so many U.S. officials are pressing it to do.
China has recently opened up a gold-trading market and allowed its consumers to buy gold, adding to the world's demand for the metal.
A recent lack of spending on new mines, thanks in part to stiffer environmental regulation, has tightened the supply of gold.
Even if the war in Iraq somehow ends fairly quickly -- which seems unlikely, at this point -- global military spending, oil prices and the threat of terrorism will still remain high, all of which are boons to inflation and to gold.
Like Eveillard of the First Eagle funds, Holmes says investors can't get rich trading gold. But he also recommends investors put 5-to-10 percent their money in gold and gold-related assets until the trouble for the U.S. dollar blows over -- which could take a while.
"Right now, we have negative real rates of return on Treasury bills and massive deficit spending," Holmes said. "Historically, a currency can't be strong with those two factors."
Richard Russell, 10/6/04 issue of the very well respected "Dow Theory Letters"
In the 10/6/04 issue of the very well respected "Dow Theory Letters", Richard Russell makes the following statements:
"I call the seven months since February a period of the most flagrant divergence and series of non-confirmations in the history of the US stock market." (emphasis added by the author)
"Note that the weaker Dow is exhibiting increased technical weakness."
"My instinct and my advice is to get into cash. When you're standing on the railroad tracks and the train is barreling down on you, you don't ask whether the train is the Midnight Special or the Wabash Cannonball, you just get the off the tracks."
"There's one area that is showing real improvement, and that's the world of gold. Below I show a daily chart of the metal itself, and it's a bullish chart showing rising bottoms and rising tops. The last preceding peak for Dec. gold was the August 20 peak of $415.50. Today gold gapped up over $417, so this is an important technical achievement, and the metal is at a five-month high." (note that Mr. Russell considers gold to be the ultimate form of cash, that which is not subject to government printing presses.)
"I don't view gold, the metal, as a trading vehicle or something akin to stocks. I view gold as pure wealth. The economic world can roll over on its fannie, my house can burn down, any stock can crash and burn- but gold as wealth is as old as civilization. Gold is pure wealth- it was wealth in 2000 BC, it was wealth in the 1600s, and its wealth today. The people at the Fed may wish gold was just an ancient relic, but gold will be accepted as wealth when these yo-yo's at the central banks are gone and forgotten along with the whole un-Constitutional Federal Reserve system."
Mr. Russell is not alone in his view of economic conditions. According to the October 2004 Forecast from the Bank Credit analyst, "The combination of low US national saving and investment rates and a large and growing current account deficit creates fertile ground for major economic and financial problems down the road." A major current account adjustment will probably occur in the context of a US recession and equity bear market. A further decline in the dollar seems inevitable."
These are all very powerful statements. Oil is over $50 and climbing. The US is in debt to the tune of $500,000 for each family of four. The deficit is growing at an exponential rate. The war in Iraq is costing billions more than expected. We have been in Korea for more than 50 years. How long do you think we will be in Iraq? What will be the ultimate cost? The dollar is in a long-term bear market.
We have frequently discussed the outstanding risk/reward ratio of gold and rare coins, especially as compared to financial assets such as stocks and bonds. Beginning in 1999, investors burned in the stock market crash began allocating funds to real estate. Now, even this last bastion is showing signs of weakness. Interest rates are rising. Home prices have risen to to "bubble" prices in some areas. In his October issue, Harry S. Dent, Jr., author of the "Roaring 2000s", states "Our recommendation: People considering selling a residential home, especially an upper-end home, should do so by Spring 2005, and better sooner than later."
We think that the next place for outsized returns is gold, and especially, rare coins.
CNN/Money - After the gold rush
Gold has enjoyed a rapid run-up since May. Does it have more room to run?
October 6, 2004: 12:00 PM EDT
by Mark Gongloff, CNN/Money senior writer
NEW YORK (CNN/Money) - Confronted with a shaky U.S. dollar, soaring oil prices, sluggish stocks, and the ever-present threat of terrorism, investors have clamored lately for a commodity that's been a favorite pain reliever since the Stone Age: gold.
Earlier this year, the price of an ounce of the yellow stuff surged to its highest level in nearly a quarter-century, driven in part by the fear that impending inflation would weaken the U.S. dollar. When the world's most powerful currency falters, investors sometimes turn to gold to ease the sting.
Gold tumbled from its peak when inflation's fangs turned out not to be very sharp, but quickly started climbing again when the dollar continued to struggle, weighed down by an anemic stock market, an oil-soaked U.S. economy, continuing headaches in Iraq and more.
Since May 10, as the dollar has lost about 4 percent of its value against a basket of other major currencies, the price of an ounce of gold has risen about 10 percent. What's more gold is still down for the year, the U.S. dollar is still falling, and gold still hasn't returned to its earlier highs ... meaning it may still have room to run.
"The run-up in gold is completely justified," said Ron Coll, gold analyst with Jennings Capital in Toronto. "As long as the dollar continues to trend lower, gold will trend higher. That's the theme it will follow through the fall and into next year."
But a weak dollar may not be the only thing driving gold prices. As with every other investment that's enjoyed a hot summer, including oil and U.S. Treasury bonds, some observers smell a whiff of speculation in gold prices and think a correction is due.
Others point out that many people see gold as something to keep them warm at night in the face of impending doom -- after all, following a major disaster, either geopolitical or economic or both, gold will likely still have value, if only to accessorize post-apocalyptic Road Warrior outfits.
"We see gold not as a trade; we don't even look at it as an investment. We look at it as insurance," said Jean-Marie Eveillard, portfolio manager of the First Eagle Gold (SGGDX: Research, Estimates) fund, which has nearly $600 million in gold and gold-related stocks and securities. "It's the ultimate hedge -- it tends to prosper in difficult times."
With that in mind, Eveillard said, First Eagle has put 5 to 7 percent of its separate global fund in gold or gold-related assets. What could go so wrong that they need such insurance?
What could drive gold higher?
For one thing, there's always the chance that the dollar's decline could turn into a full-fledged rout, if foreign investors decide they've had enough of supporting America's wild deficit-spending binge. Oil prices could surge ever higher, slowing down the U.S. economy. Terror attacks could turn a slowdown into another full-fledged recession.
And certainly, from a technical standpoint alone, gold and several gold-related stocks have run far and fast without many breaks and could be in for a short-term correction, according to Katie Townshend, chief market technician at MKM Partners.
But there may be other, more fundamental reasons why gold could stay strong in the longer term, too, even without a major disaster, according to Frank Holmes, CEO and chief investment officer at U.S. Global Funds, which includes the $62-million Gold Shares Fund (USERX: Research, Estimates) in its family of funds:
The U.S. dollar will almost certainly have to keep falling, according to most analysts, especially if China agrees to revalue its currency, as so many U.S. officials are pressing it to do.
China has recently opened up a gold-trading market and allowed its consumers to buy gold, adding to the world's demand for the metal.
A recent lack of spending on new mines, thanks in part to stiffer environmental regulation, has tightened the supply of gold.
Even if the war in Iraq somehow ends fairly quickly -- which seems unlikely, at this point -- global military spending, oil prices and the threat of terrorism will still remain high, all of which are boons to inflation and to gold.
Like Eveillard of the First Eagle funds, Holmes says investors can't get rich trading gold. But he also recommends investors put 5-to-10 percent their money in gold and gold-related assets until the trouble for the U.S. dollar blows over -- which could take a while.
"Right now, we have negative real rates of return on Treasury bills and massive deficit spending," Holmes said. "Historically, a currency can't be strong with those two factors."
Richard Russell, 10/6/04 issue of the very well respected "Dow Theory Letters"
In the 10/6/04 issue of the very well respected "Dow Theory Letters", Richard Russell makes the following statements:
"I call the seven months since February a period of the most flagrant divergence and series of non-confirmations in the history of the US stock market." (emphasis added by the author)
"Note that the weaker Dow is exhibiting increased technical weakness."
"My instinct and my advice is to get into cash. When you're standing on the railroad tracks and the train is barreling down on you, you don't ask whether the train is the Midnight Special or the Wabash Cannonball, you just get the off the tracks."
"There's one area that is showing real improvement, and that's the world of gold. Below I show a daily chart of the metal itself, and it's a bullish chart showing rising bottoms and rising tops. The last preceding peak for Dec. gold was the August 20 peak of $415.50. Today gold gapped up over $417, so this is an important technical achievement, and the metal is at a five-month high." (note that Mr. Russell considers gold to be the ultimate form of cash, that which is not subject to government printing presses.)
"I don't view gold, the metal, as a trading vehicle or something akin to stocks. I view gold as pure wealth. The economic world can roll over on its fannie, my house can burn down, any stock can crash and burn- but gold as wealth is as old as civilization. Gold is pure wealth- it was wealth in 2000 BC, it was wealth in the 1600s, and its wealth today. The people at the Fed may wish gold was just an ancient relic, but gold will be accepted as wealth when these yo-yo's at the central banks are gone and forgotten along with the whole un-Constitutional Federal Reserve system."
Mr. Russell is not alone in his view of economic conditions. According to the October 2004 Forecast from the Bank Credit analyst, "The combination of low US national saving and investment rates and a large and growing current account deficit creates fertile ground for major economic and financial problems down the road." A major current account adjustment will probably occur in the context of a US recession and equity bear market. A further decline in the dollar seems inevitable."
These are all very powerful statements. Oil is over $50 and climbing. The US is in debt to the tune of $500,000 for each family of four. The deficit is growing at an exponential rate. The war in Iraq is costing billions more than expected. We have been in Korea for more than 50 years. How long do you think we will be in Iraq? What will be the ultimate cost? The dollar is in a long-term bear market.
We have frequently discussed the outstanding risk/reward ratio of gold and rare coins, especially as compared to financial assets such as stocks and bonds. Beginning in 1999, investors burned in the stock market crash began allocating funds to real estate. Now, even this last bastion is showing signs of weakness. Interest rates are rising. Home prices have risen to to "bubble" prices in some areas. In his October issue, Harry S. Dent, Jr., author of the "Roaring 2000s", states "Our recommendation: People considering selling a residential home, especially an upper-end home, should do so by Spring 2005, and better sooner than later."
We think that the next place for outsized returns is gold, and especially, rare coins.
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Comments
I also agree that you should own some GOLD for insurance.
$20 Liberties are my insurance.
My website