Gold Futures Rallied as Investor Jitters Increase
Spot gold prices opened the week at $1,414 trading as high as $1,440 on Wednesday and as low as $1,408 on Monday. Settlement price on Friday was $1,428, up $14 for the week. Gold support is now anticipated at $1,422, then $1,405, and then $1,398. Resistance anticipated at $1,435, then $1,440, and then $1,461.
From Matt Whittaker, in a Dow Jones Newswires posting on The Wall Street Journal website on March 4th:
"Gold futures rallied and silver hit its highest point in nearly 31 years Friday as jitters about rising oil prices amid Middle East tensions boosted the metals as refuge investments.
The most actively traded gold contract, for April delivery, was recently up $12.60, or 0.9%, at $1,429 a troy ounce on the Comex division of the New York Mercantile Exchange. Nearby March gold was also up 0.9%, at $1,428.20, while March silver hit $35.300 an ounce, its highest intraday price since March 6, 1980.
Stocks have sold off, (prompting) a flight to quality,' said Bob Haberkorn, senior market strategist with Lind-Waldock in Chicago.
U.S. stocks moved lower Friday as investors fretted about $104 oil and a mixed U.S. government jobs report, which said the unemployment rate unexpectedly fell to below 9% in February but payrolls rose by less than expected. The Dow Jones Industrial Average was recently down 0.6%.
Meanwhile, investors continued to worry about the potential impact of rising energy prices. They were buying gold and silver as hedges against the potential economic drag of $104 a barrel oil, as well as a safe haven as Libya's capital braced for violence from antigovernment protests after Muslim prayers Friday."
Crony Capitalism: Trillions of Dollars in Monetary Pumping is Creating Yet Another Bubble
Spot gold prices opened the week at $1,402 traded as high as $1,417 on Thursday and as low as $1,397 on Tuesday. The settlement price on Friday was $1,410, up $8 for the week. Gold support is now anticipated at $1,398, then $1,371, and then $1,302. Resistance, on the other hand, is anticipated at $1,418, then $1,431, and then $1,435.
From Congressman Ron Paul, in his weekly "Texas Straight Talk" column on his House of Representatives website, posted on February 21st:
"Without the Federal Reserve's massive expansion of credit throughout the 1990s and early 2000s, there could have been no excessive borrowing or explosion of subprime lending. Through easy credit, the Fed initiated the economic boom that created the dot-com bubble. When that bubble burst the Fed pumped additional liquidity into the system, which led to a new boom that created the housing bubble. And now the Fed's additional trillions of dollars in monetary pumping is creating yet another bubble. This is the exact opposite of stability in the marketplace and has nothing to do with free markets. It is central economic planning at its worst.
It is imperative that the historic record accurately reflect what actually happened. In the popular press we see columnists attempting to blame the financial crisis on the 'small-government,' 'free-market' policies of President Bush. Hundreds of billions of dollars in stimulus payments, a $700 billion bailout program, and trillions of dollars of Federal Reserve credit facilities hardly represent small-government and free-market principles in action! On the contrary, these government interventions by both major parties demonstrate quite clearly our nation's acceptance of crony capitalism.
Schoolchildren today are taught the myth that Herbert Hoover was a small-government President who did nothing to stop the Depression, while the truth is exactly the opposite. Fed Chairman Bernanke failed to understand the true cause of the Great Depression, so his policy prescriptions to combat the current crisis are understandably flawed. Unless we confront and correct false economic rhetoric, truly understand the causes of the economic crisis, and do away with our loose monetary policy, we will find ourselves in ever more vicious business cycles."
Unrest in the Middle East bumps the Price of Gold
Spot gold prices opened the week at $1,360 and traded as high as $1,391 on Friday and as low as $1,360 on Monday The price on Friday was $1,388, up $28 for the week. Gold support is now anticipated at $1,384, then $1,371, and then $1,356 with resistance anticipated at $1,394 then $1,411, and then $1,435.
Gold rose, silver gained to a 30- year high and palladium jumped to the highest price in almost 10 years on demand for precious metals to hedge against declines in other assets because of unrest in the Middle East. At least five people have been killed since demonstrations against Bahrain's ruling Al Khalifa family began on Feb.14. Demonstrators in Libya yesterday demanded the government's overthrow. Gold bar and coin demand in the Middle East jumped 39 percent in the fourth quarter from a year earlier, according to World Gold Council figures released yesterday.
USB to Rich Clients: Buy Gold
The world's wealth piling into gold and their bankers are encouraging the trend.
UBS is recommending their top-tier clients hold 7-10 percent of their assets in precious metals like gold, which is on course for its tenth consecutive yearly gain and traded at around $1,317 an ounce on Monday.
Why a Worthless Dollar Doesn’t Work
Gold prices opened the week at $1,298 and traded as high as $1,320 on Friday and as low as $1,286 on Tuesday. The settlement price on Friday was $1,316, up $18 for the week. Gold support is now anticipated at $1,310, then $1,298, and then $1,272. Resistance anticipated at $1,318, then $1,327, and then $1,400.
From Peter Schiff, president and chief global strategist of Euro Pacific Capital, in the Euro Pacific Global Investor Newsletter, on September 30th:
''Given the US dollar's status as the world's reserve currency, America's oversized status as the world's biggest consumer, and the influence of overseas export-oriented businesses on their home governments, the falling dollar is a difficult issue for many countries to ignore. And with the imminent arrival of a second round of 'quantitative easing' from the Fed, the big guns of dollar destruction are being locked and loaded. The move looks poised to set off a frantic race to the bottom among global currencies, which will have important ramifications for every investor. Unfortunately, this is one race the United States is poised to win.
The goal of those trying to win the race to the bottom is to promote exports and create jobs. However, people don't work simply for their love of labor. They work so that they can earn enough to consume the things they need and want. Under normal conditions, a nation only exports its production, rather than consuming it domestically, to leverage its comparative advantages. If a country can produce one type of good especially efficiently, it can trade that good for other goods it doesn't make as efficiently at home. As a result of this process, its citizens will be able to consume more goods than if consumption had been limited to domestically produced goods.
However, when a government debases its currency in order to gain sales overseas, the nation earns less foreign exchange for the goods that it exports. As a result, its comparative advantage is blunted, and its citizens consume less as a result. In other words, as a nation's currency declines, its citizens are forced to work harder for less.''
It’s Blue Sky for Gold
Gold prices opened this week at $1,280 trading as high as $1,299 on Friday and as low as $1,272 on Tuesday. The settlement price on Friday was $1,296, up $16 for the week. Gold support is now anticipated at $1,270, then $1,238, and then $1,215. Resistance anticipated at $1,300, then $1,325, and then ''blue sky'' from there.
Going forward from Mary Anne and Pamela Aden, editors of The Aden Forecast newsletter, in a weekly update posted on their website on September 22nd:
''The Federal Reserve is concerned as their latest statement shows . . . they will put more cash in the economy if necessary to support the economic recovery. This means you can bet more quantitative easing (printing money) is coming . . . just not yet.
The markets reacted by pushing gold further into record high territory, silver reached its 1980 highs, the currencies jumped up, and so did bonds, while the U.S. dollar took an important dive.
The gold price surged forward as it nears $1300. . . . Gold's phenomenal rise since November, 2008 has been impressive with not even a 14% correction along the way. In other words, gold has moved into a stronger phase of the bull market since then and it's taking off in an extended C rise. Yes, the C rise is longer than normal but this is how we see it. Gold's soaring rise of the past eight weeks has been coinciding with a fall in the dollar for the first time this year . . . Gold is super strong above $1255 as it nears our next target of $1300-$1350."
Forget $1,300, Think Gold at $3,000
Just because we hit that that big round-numbered milestone of $1300/oz this morning, don't think that we're at the peak of a gold bubble. That's at least how David Rosenberg sees it:
Gold has made this transition this year away from being a strict commodity towards a role befitting a monetary metal that is no government’s liability. Look at what is happening around the world.
The Fed is openly contemplating a round of quantitative easing. So is the Bank of England. The Bank of Japan’s latest unsterilized intervention effort to reverse or at least stem some of the yen’s strength was quantitative easing in a different form. The Swiss National Bank has spent countless of resources to prevent the franc from firming and now some Asian countries, and even Brazil, are thinking about taking similar actions. The ECB already jeopardized the sanctity of its balance sheet during the height of the Eurozone debt crisis this spring.
In 1980, What Happened to the Price of Gold?
Almost every investor knows about the commodity boom of the '80s, just like they know of the tech boom in the next decade. But what most people remember the boom, more people remember the bust. The bust hurts more than the excitement of the boom. Moving on, so what did happen to gold during those boom and bust years?
"Back in 1980, the price of gold spiked and reached a then-record price of $850 per ounce. Shortly thereafter, the price of gold sharply dipped and stayed between $300 and $400 for many years to come. Now gold has reached record heights again, recently trading at over $1,200 per ounce," notes The Gold Gazette in "What happened to the gold price in 1980?"
It's that crash at the end of the boom that most investors fear again. However, the recent increase in gold prices has been steady over a number of years since gold hit the bottom near 2000. The increase in gold prices in 1980 was a quick, sudden upturn. The steady nature of the recent increase in gold prices suggests that it is a more sustainable and long-term price increase than the 1980 spike.
"Also, in adjusted dollars, the $850 gold sold for in 1980 would be worth about $2,100 today. This means that gold still has a long way to go to reach the heights it did in 1980," explains The Gold Gazette.
Also, the government was taking a number of actions that helped cause the gold crash in 1980 that the government isn't doing today. In fact, actions by the government may actually contribute to continued increases in gold prices. At the time gold hit its height in 1980, the nation was in the grip of crippling inflation. It was around then that the U.S. government was engaged in serious inflation-fighting efforts. When inflation is low, gold prices tend to drop. High inflation tends to drive the price up.
This Week on Gold 7/30
Spot gold prices opened the week at $1,189, traded as high as $1,191 on Monday and as low as $1,156 on Wednesday. The settlement price on Friday was $1,182, down $7 for the week. Gold support is now anticipated at $1,175, then $1,157, and then $1,145, with resistance anticipated at $1,183, then $1,197, and then $1,210.
Going forward, Richard Russell, editor of Dow Theory Letters explains:
''World deflationary forces are pressing down on the US economy. Unemployment continues to be a chronic problem, housing prices throughout the nation are still weak -- over a million foreclosures are slated to materialize over the coming year, commodities for the most part are weak, gold is flashing deflationary signals.
What will the Fed's reaction to all this be? My opinion is that the Bernanke Fed is becoming progressively more uncomfortable with the way the economy is going, and they are getting ready to pull out their 'big anti-deflationary guns' in another attempt to pre-empt deflation. The anti-deflation 'guns' that the Fed manages are zero short rates, buying longer-term bonds and speeding up the money 'printing presses.'
I believe the stock and bond markets already sense all of the above. Thus the stock market is dancing to the money printing tunes, and the Treasury bonds are backing off. The dollar has been weak as it senses the coming avalanche of new dollars.''
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