The summer of 2012 saw gold prices turn up from their recent lows, rising approximately $250 per ounce — and we believe that it will rise for several years. We have no doubt that any engineered declines in the gold price today are to allow big speculators and investors to add to their positions at lower prices. This is not a time to get shaken out of your gold positions.
In our opinion, investors should hold their gold in two ways: physical gold (both in bullion form and in coins) and in gold ETFs backed by physical metal. ETFs are preferred for the situations where investors plan to trade out and switch into specific goldshares which also offer an opportunity if you are selective and physical gold at a later date. Comments on gold shares below.
It is no secret that many big names in the investment world have become recent converts to gold due to the actions of central banks throughout the world. Hedge funds have been accumulating gold, but they and retail investors only hold about 65 percent as much gold as at a typical peak in the gold market. Retail gold buying in September was well below recent peaks, according to a service known as Bullion Vault. Central banks have been buyers in recent years, but in reality they have just begun to acquire gold in order to protect themselves from the insidious devaluation of the dollar and other currency bonds that they hold.
In summary, we expect major new buying from central banks, and very large buying from hedge funds and other investors. Retail demand may or may not be big, so we are not paying as much attention to the amount that Indian, Chinese, and Western consumers spend on gold jewelry. The driver of gold prices has shifted from jewelry-driven demand to financial-driven demand. Some of those shorting gold today are jewelry manufacturers. They know jewelry demand is falling so they think that gold should fall. They will be in for a very big surprise when they realize how much higher investment demand can send gold prices…
Learn what mining stocks to avoid and what investors are better-off looking for in mining stocks.
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The news media — especially the financial news media — are full of misconceptions and inaccuracies about what is going on in China. How is it that so many who are not qualified economists, seem to be so sure that China will do this and that — that China has this problem and that problem?…
Will China experience a collapse of the real estate market? Is there a massive oversupply of real estate that cannot be sold? Is China experiencing a banking collapse? Has China’s industrial activity and domestic retail sales collapsed?
The Answer is No. Become a Gold Subscriber to find out why.
Conference Call Announcement
Guild Investment Management will be hosting its 3rd conference call for Gold Subscribers: (Global Investing In The Current Macro Environment) on October 12th, 2012 at 10:00AM PST.
Register today for the event, spaces are limited and we are coming close to full capacity. Learn about about upgrading to Gold Subscription. Please click the following link: Gold Subscription
Certified Financial Planners may be eligible to receive 1 CE credit for participating in the conference call.
If you have any questions, please contact us at (310) 826-8600.
Cost-Push Inflation Looms
St. Louis Fed President James Bullard mentioned last week in a speech in Memphis that “distant expectations from the TIPs (inflation adjusted bond) market seem to suggest that investors do not completely trust the Fed to deliver on its two percent inflation target,” according to Bloomberg. Bullard added that inflation “is sometimes seen as a way to partially default on existing nominal debts.” As we noted above, with the robust, open-ended, and flexible purchase of assets by the Fed, and the continued expansion of the money supply, cost-push inflation is a highly likely outcome, as more and more dollars chase tangible goods whose supply is not growing at nearly the same rate.
Bullard’s observations are correct: Fed Chairman Bernanke has expressed his concern about employment, which means that the Fed’s mandate to moderate inflation may be taking a back seat to its mandate to support maximal employment; and it is hard to imagine that the prospect of repaying an unsustainable debt with currency of lower value is far from the minds of central bankers worldwide. While we will take advantage of the opportunities for growth in asset values that this will produce, we must observe that the effects will be detrimental to Americans struggling to make ends meet, as the prices of essential goods continue to outpace their wages. The continuing story can be traced every two weeks as we present the Guild Basic Needs Index™.
Track the price of your basic needs today, go to www.gbni.info
In this week’s Premium Global Market Commentary available for Gold Subscribers, we also discuss:
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