Monday, August 29, 2011

Gold is in a Bubble

"Gold is in a bubble" is the catch cry.

In fact this has been a catch cry for years! When gold reached three hundred dollars an ounce, "Gold is in a bubble." We were told. Later when it reached six hundred dollars an ounce, "Gold is in a bubble" The headlines screamed. When it reached one thousand dollars an ounce, "Well that's it! Gold is a bubble." It was said authoritively. Then, when gold recently reached one thousand five hundred dollars an ounce, the bubble pronouncers must had a fit when gold, oblivious of the bubble pronouncements over the years, continued on its merry way to even more stratospheric heights.

If gold is in a bubble, this is the longest bubble in the history of man.

Of course, every time gold hits a new high, profit takers cannot resist and move in for the kill. A correction ensues and there is a drop. The bubble pronouncers then move in for their turn to announce, in ominous and authoritive tones, "Gold is in a Bubble."

Then, after the pause, gold starts up again and continues its steady climb.
Contributing in no small measure to the climb is the ailing dollar. The American Institute of Economic Research cost of living indicator shows that the cost of living has risen over 900 percent in the UIS since 1950. What cost 100 dollars in 1950 now costs 913 dollars and 69 cents. Like anything else, cars, bread, clothes, gold simply cost more now than it did in the 1950s. The intrinsic value of the gold itself has hardly changed. But the number of the dollars needed to buy gold, as well as silver, bread, cars, houses, telephones and all the other bric a brac humanity needs to live, has increased nine times.

If anything, currency is in a reverse bubble and every time gold goes up, perhaps we should be saying, "Oh Oh! The reverse bubble of currency is at it again!"
So why do people buy gold? Well people are not ‘stoopid’, They know which side their bread is buttered AND how much they pay for it. As the value of currency deteriorates and the amount of interest available by putting money in the bank deteriorates, in their own defense people will buy gold.

So when the bubble pronouncers say, "Gold is in a bubble!" Say, thank God! And buy more gold. It means gold is on the rise again.

Saturday, August 27, 2011

Storing your gold

For people who like to take delivery of gold they have bought, storing your gold can be an issue.

How you store your gold depends largely on how much you have. If you have gold bars by the dozen then bank vaults are the way to go. One must be sure, however, to take step to insure that the gold is registered to you and that it is classified as your property and not the banks. Banks around the world have been known to 'confiscate' gold so it is important in this instance to pick your bank wisely.

There are also private companies that will store gold for you and of course the same rules apply. You will be up for storage fees, but then, if you are holding such quantities of gold these will be immaterial.

Most people, however, will be holding or storing small quantities of gold or silver, usually just a few ounces of gold and or of silver. These can be stored at home or with friends and or relatives, IF you trust them implicitly of course.

If you are storing valuables, and that include gold and silver, where to store it can be important. Many people have safes they use. Of course this is the first place thieves look, so it has to be a very strong and secure safe. Built in to the wall is best otherwise it can be simply carted off and opened at leisure. Of course it can be well hidden and difficult to find. There are also security and alarm systems one can buy to assist in protecting ones valuables in a safe, or elsewhere for that matter.

Some people like to spread their valuables around, some in this sock, something else in that draw, some under the floor boards and so on. Spreading valuables such as gold and silver around makes sense as thieves often think they have found your stash and do not think to look elsewhere. Thieves often have time constraints also and want to get in and out fast before they are caught.

Then there are the issues of transport and insurance. Gold, and even silver, is heavy and shipping costs can be mighty large. Insurance is an additional cost one has to bear also. There are ways around these too.

If you do not feel comfortable storing your gold or silver in such a way there is another alternative. One can buy gold through the auspices of GoldMoney. Here one has no storage, insurance or shipping problems to worry about. One simply opens an account much as one would open a bank account. Send funds to the account and then use those funds to buy gold or silver. The precious metal you buy is allocated to you specifically and stored in any one of three bank vaults in London, Zurich or Hong Kong. You can choose. One can buy gold through the auspices of GoldMoney

Insurance is for all the metal stored and of course there are no shipping charges to worry about. There is a small regular storage fee but this is much less than it would be if you’re storing your gold or silver with a bank.

Storing your gold need not be a problem then with solutions available for even the most secure conscious and discerning gold lover.

Monday, August 22, 2011

Will Gold Crash?

Gold is rising at a meteoric rate and some media are predicting that gold is going to crash, that it is in a bubble and cannot sustain such a rise.

This looks like a true possibility on the face of it but lets look closer at what is happening. Much of the rise in gold is not an increase in the value of gold. It is a decrease in the value of the currencies by which the value of gold is measured. Anyone can check this themselves by looking at the amount of currencies needed to purchase any item over a period of time.

How much did groceries, white goods, even newspapers, fuel, even real estate cost 5, 10 20 years ago. The value of the dollar has decrease steadily over the years and with the recent debacle over debt, credit ratings also affecting the value of the dollar, for example, this has been exacerbated resulting in more and more people seeking safety for their assets in their own defense.

Over hundreds of years, gold has proven to be a save house for people wishing to preserve their assets and savings. Gold does not change. It remains gold and remains a perceived value. Currencies, not backed by anything more substantial than fast fading confidence have demonstrated a failure to be a safe haven. Not only are interest rates now at an all time low, bonds are not the 'safe' investment they onces were considered to be and it is hard metal that retains its intrinsic value.

So will gold crash? Under the circumstances it is most unlikely given that it is not gold that is losing its value but the currency by which it is measured.

For gold to 'crash' the value of the currency would need to jump up markedly and with the rising and almost unsurmountable debt accumulated by the US and Europe it is most unlikely that currencies are going to inspire any confidence again anytime soon.

Even if profit takers move in and there is a drop in the price of around 10 to 20 percent, that will still leave gold in a far better position than the dollar or euro. Besides which, as the debt continues to mount and value of currencies continue to deteriorate, gold will go not go anywhere but up.

Regardless of the price of gold, it will still be able to buy goods and services to the same extent as it ever did. And that is what is important. Not the 'price of gold.'

Gold Price to Reach 2000

The gold price will reach 2000 by all accounts within days or weeks at the most. At the time of writing it is over 1850 and only 8 percent away from the magic 2000 dollars an ounce.

Some of the contributing factors to this include the current economic climate. Both the major financial forces, the US and European economies are under the hammer with deteriorating currency values. Also the USA and Europe heavily laden with debt as they are means that many investors are seeking a safer harbour for their assets and, of course gold always comes through there.

"With the Indian wedding season just beginning, demand for gold from Asia is only going to increase in the next few months," says Bill Hionas, CEO of Pan American Metals of Miami. "Investment demand is also huge at the moment."

China is also continuing its strategy of massive build up of gold reserves.

According to the World Gold Council, India and China account for 52% of total bar and coin investment and 55% of global jewellery demand.

"Despite a higher gold price, Indian and Chinese demand grew 38% and 25% respectively during Q2 2011 compared to the same period of 2010. This growth is likely to continue, due to increasing levels of economic prosperity, high levels of inflation and forthcoming key gold purchasing festivals."


"Central banks are likely to remain net purchasers of gold. Purchases of 69.4t during Q2 2011 demonstrated that central banks are continuing to turn to gold to diversify their reserves."

The Bank of England (BOE) recently received a request from the Venezuelan government about transferring the 99 tons of gold Venezuela holds in the bank back to Venezuela. A spokesman from the Bank of England declined to comment whether Venezuela had any gold on deposit at the bank."

Venezuela may be starting a trend also with its desire to pull all its gold out of the Western banking system. Hinde Capital CEO Ben Davies, speaking at GATA's recent Gold Rush 2011 conference in London this month, pointed out that Venezuela's plan to withdraw its gold deposits from the Bank of England and several bullion banks is "the game changer" in the gold market, exposing the fractional-reserve gold banking system and likely hastening the stampede from "unallocated" gold to "allocated" gold. Gold's explosion in price amid Venezuela's withdrawal of gold is also, Davies says, vindication for GATA, as "this is everything they've been talking about."

All these factor indicate a world wide gold rush in the making which is sure to bring the gold price to reach 2000 if not more by the end of the year. Some Forecasts are predicting gold will reach 2500 without any trouble.

There is still plenty of leg room then for investors wishing to retain the value of their assets, by simply buying gold while the gold price is continuing its upward trend.

Wednesday, August 17, 2011

Gold Resource Corporation Minting its Own Gold Coins

Gold Resource Corporation has just announced it will be minting its own coins.

The Board of the junior US based Gold Resource Corporation has stated it will be holding some of its in house treasury in physical gold and silver in the form of coin bullion rather than cash.

The Company’s board have stated it has approved the company minting around one million dollars with of its own gold and silver into one ounce coins with this increasing proportionately as production increases. They will also possibly offer shareholders the chance to receive their dividends in silver and gold also rather than cash.

In a release issued by the company on the move, the company's President, Jason Reid, stated, "Holding physical gold and silver in our treasury provides an excellent means of diversification in light of today's world economic conditions and not only provides that diversification to shareholders but underscores Gold Resource Corporation's commitment to precious metals.. Minting Gold Resource Corporation's Double Eagle precious metal coins, currently underway, not only marks the next Company milestone but takes a large step towards potentially offering our shareholders a future in-kind dividend. With the unprecedented printing of fiat currencies around the world and the potential negative impact of governmental policies of various nations around the globe, Gold Resource Corporation provides investors excellent precious metal exposure from an increasing production profile, from dividends and now with physical exposure in the Company's treasury."

In its recent press release, the Company states it "is focused on its comprehensive business plan to become the “go to” gold investment (see image below). Part of that multipronged approach consists of holding a portion of its treasury in physical gold and silver as well as possibly offering shareholders holding certain minimum positions the ability to someday receive their dividends in-kind."

The Company has returned over $22 million to shareholders in special monthly dividends since declaring commercial production July 1, 2010.

Monday, August 15, 2011

The Real Price of Gold

The gold price you see every day on the news is not the real price of gold. Although it often says, "gold price", the price you see each day in the media is NOT the true gold price but the futures gold price and reflect what buyers of future gold dealers expect the price to be.

The REAL price of gold is actually higher. This can be seen on ebay, for example, where the price of gold coins and bullion bars is substantially higher per ounce that the gold futures price.

Buying gold has become so popular now that eBay has set up a Bullion Center where gold and other precious metals can be bought and sold. A lot of this has to do with the gradual devaluation of currency and much to do with the mounting debt that the US and Europe have been accumulating over the years. This mountain of debt does not translate into good savings and people are very much aware of this. It does not take an economics degree to understand that debt has tom be paid at the end of the day and cannot be starved off forever with further debt. Hence the massive scrabble to own gold and other precious metals. At least with gold you have something solid that is not going to deteriorate, does not wrack up debt and, importantly, keeps its value in times of crisis and the bullion Center is doing massive business as people flock to convert their life savings into gold.

So the REAL price of gold is not some market force manipulating gold for a nefarious or other reason. The real price of gold is, to put it plainly, the street value of gold, and that is around 10 to 20 percent higher than the futures gold price offered at the end of the news daily by the media.

In the summer of 2008 gold was trading around 900 dollars an ounce prior to the GFC being revealed. Since then it has risen to $1,600 in late May and then over $1,800 just recently before pulling back to $1,784 a day or so later.

American Gold eagles are now selling for over 1800 dollars an ounce. Checking the page, you can see the actual gold price in as much as what price people are prepared to pay to buy gold.

Chandler, of Great Southern Coins for example, said the company is selling more gold lately, and its silver sales remain strong, too. He estimated his business almost quadrupled during the past month or so an, ‘ it appeared to be up about five or six times during the past week, with most of this growth coming from sales on eBay.’
Daniel Hirsch, a New York-based statistician who purchased over a dozen gold coins on eBay from Great Southern Coins, state that he started buying gold less than a year ago in an effort to expand his investment portfolio.

It is a fact that people wish to invest in a stable option and when it comes to shares, the stock market, bonds and gold, gold wins hands down.

And when you have gold and can assess the value in terms of the real price of gold you can be sure your asset is going to retain its value come what may.

Thursday, August 11, 2011

The fortieth anniversary of NO gold standard

Monday the 15th of August will mark the 40th anniversary of the abandonment of the Gold Standard in the US.

What has this meant over the past 40 years? On that day gold was marked at 35 US dollars an ounce. Now it has peaked at 1800 US dollars an ounce and looks set to increase further. That is over 50 times increase in the value of gold expressed in US dollar terms. And other currencies fair not much better.

What has changed? Certainly not gold. It is still the same yellow shiny metal it has been for thousands of years. Its purchasing power has not changed at all in fact. One ounce of gold would buy a good quality suit forty years ago. It STILL buys a good quality suit. The amount of dollars you need to buy a good quality suit has changed significantly over the past forty years however. The purpose of removing the gold standard, whatever it might have been, has served only to immerse the US into a bottomless pit of debt it will take decades to get out of if it ever does.

In an interview given at Business Week in 2005, James Turk, Founder of GoldMoney stated, "Gold has been rising against all national currencies, and that's significant," he continued, "When there are problems with a national currency... people begin to worry about the value of their money, whether they're going to lose purchasing power because of inflation or other problems. As a consequence, they look for safe havens."

And just recently he told Reuters this week, "My long-standing forecast, made in a Barron's interview in October 2003, is that $8,000 per ounce will be reached sometime between 2013-2015. I've stayed with that forecast over the years and see no reason to change it."

"Politicians and central bankers are making decisions that debase national currencies, and the resulting bad monetary policies they are following are causing the gold price to rise," he said.

Gold’s latest meteoric rise probably has a lot to do with the plunging of Wall Street stocks to the lowest in almost a year and the gradual erosion of the purchasing power of the dollar, but it is more than that. With interest rates the lowest ever and Government Bonds precariously perched on a precipice, gold is seen as a solid and secure safe haven for investors.

Long-term gold bull David Beahm, vice president of marketing and economic research at New Orleans bullion dealer Blanchard and Co recently stated, "The best investment right now is gold. By diversifying one's portfolio with a negatively-correlated gold, investors can protect themselves from deep plunges in the equity market."
"There is no news in the market today or over the coming few months likely to stop the current gold bull market, as the fundamentals are firmly in place for gold to continue its rise," he says.

Traditional investment commentators have dismissed gold -- which, with no "intrinsic" value of its own, is only really as valuable as a buyer thinks it is -- as a classic bubble.

Many have predicted gold’s crash saying, "It's a bubble. It's a bubble!" How long is a bubble one analyst asked, "Gold has been rising for 40 years, I don't call that a bubble."

Said Jeffrey Nichols, the managing director of American Precious Metals Advisors and senior economic advisor to Rosland Capital, "I believe the price of gold will rise irregularly over the next several years, possibly reaching $1,850 an ounce by the end of this year, breaking above $2,000 in 2012, and possibly $3,000, $4,000, and even $5,000 in years to come,"

As the fortieth anniversary of NO gold standard draws near investing in gold for the future seems to be the way to go to hold onto your value.