Gold Eases Toward $1,330
The yellow metal softened slightly as the dollar rose after a report said the Fed would likely adopt a gradual approach to further monetary easing

Author: Jan Harvey (Reuters)
Posted:  Wednesday , 27 Oct 2010

LONDON (Reuters) -

The dollar rose versus a currency basket after a report said the Federal Reserve would likely adopt a gradual approach to further U.S. monetary easing.

Spot gold was bid at $1,332.45 an ounce at 0923 GMT, against $1,338.70 late in New York on Tuesday. U.S. gold futures for December delivery fell $6.40 an ounce to $1,332.20.

The metal hit a record $1,387.10 an ounce earlier in October as expectations that the Fed would pursue a second round of quantitative easing pressured the dollar, but prices have slipped as investors worried the impact of this has already been too heavily priced into currencies and gold.

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Gold Eases Toward $1,330

Inflation-boosted gold price to reach new record high, GFMS tells China

By: Martin Creamer
8th July 2009

JOHANNESBURG (miningweekly.com) - After a possible short-term fallback below $900/oz, the gold price would reach a new record high in the second half of 2009 as the threat of inflation would drive a new wave of investment, consultancy GFMS said on Wednesday at the launch of its13th Chinese-language version of its annual Gold Survey in Beijing.

Inflation will drive gold prices

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Martin Creamer; Inflation-boosted gold price to reach new record high, GFMS tells China

Trusting in gold - Austria's Erste Bank

Austria's Erste Bank's latest Special report on Gold still rates the yellow metal positively as an investment. A minimally edited version of the introduction to this report is published below.

Author: Ronald Stoeferle
Posted:  Monday , 06 Jul 2009

VIENNA -

Since Erste Bank's first Special report on Gold in 2007 when the gold price was USD 650, gold has outperformed almost every other asset class. The gold bull market has been running with an annual performance of 16% since 2001. Gold closed the year 2008 with the eighth annual increase in a row. And in the year to date, the performance has been outstanding as well: the gold price has recorded an increase of 7% (in USD) and 8% (in EUR), respectively. The average price in 2008 was USD 872/ounce, i.e. 25% higher than in 2007 (USD 695).

For full article please click on special report on gold.

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Trusting in gold – Austria’s Erste Bank

WHATS NEW

HOLD SELECTED COMPANIES TO ADD VALUE

Gold price will rise in real terms - Roulston
Newsletter writer and analyst Lawrence Roulston provides his thoughts on the outlook for the economy and what factors impact gold and other metal markets. "As the Western world gets back on track," says Roulston, "commodity prices will continue higher." Interview with The Gold Report.

Author: The Gold Report
Posted:  Wednesday , 01 Jul 2009

Vancouver, BC -
The Gold Report: Lawrence, you have just returned from trips to Dubai, Hong Kong and Europe. What does the rest of the world think of the health of the U.S. and European economies?

The Gold Report Article

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The Gold Report; Gold price will rise in real terms – Roulston

GOLD ANALYSIS

SUMMER DOLDRUMS, HIGH DOLLAR
Last chance saloon for gold investors to jump in?

The currently stuttering gold price as the northern hemisphere enters the summer season, traditionally a weak time for the gold price, could, some experts believe be the last opportunity to buy gold before an autumnal surge.

Author: Lawrence Williams
Posted:  Monday , 29 Jun 2009

LONDON  -

Some analysts see the regular annual hiatus in investment in gold during the northern summer season, which is now upon us, coupled with what they see as unwarranted strength in the U.S. Dollar, as providing the last major chance for gold investors to buy at 'reasonable' prices before a big surge in the gold price later in the year.  Buy on weakness is the cry - again!

They may have a point, but gold has a nasty habit of defeating its proponents and does seem to have found so far a seemingly insuperable psychological barrier to advancement beyond the US$1,000 level - despite it from time to time surpassing old high points in most other major currencies.

gold analysis

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Lawrence Williams; Last chance saloon for gold investors to jump in?

Sprott Colleagues: Keep the Faith-Higher Gold Price Will Come - The Gold Report - (6/26/09) - On the global stage of currency devaluation and debasement, the reasons for owning gold seem obvious. But have you ever stopped to consider the derivative market? According to Charles Oliver and Jamie Horvat, both senior portfolio managers at Sprott Asset Management, "The impact of the derivatives has yet to express itself." In this exclusive interview with The Gold Report, Charles and Jamie explain how gold will react in the New Financial (dis)Order. Both foresee $2,0

Impact of Derivatives on Gold

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Sprott Colleagues: Keep the Faith-Higher Gold Price Will Come

Future Inflation Fears Fuel Price of Gold Shares and Warrants
By: Lorimer Wilson
www.PreciousMetalsWarrants.com and www.InsidersInsights.com

The 2008 stock market meltdown brought panic and forced liquidation to all market sectors and especially junior resource shares (- 58.2% on average) and their associated warrants (-80.1%). Shares of companies that had a solid foundation for development, production and growth were unceremoniously dumped along with those more numerous juniors that had little more than hopes centered on grass roots exploration prospects. As a result of this indiscriminate selling - this throwing out the baby with the bath water - extraordinary opportunities have emerged creating once-in-a-lifetime values for discerning investors.

In spite of major rallies in the GDM, HUI, SPTGD and CDNX indices year-to-date (see below) even greater increases are required for them just to match their 2008 highs i.e. 32%, 38%, 18% and 143% respectively. In the case of commodity related stocks with warrants and their associated warrants increases of 102% and 179%, respectively, are necessary to achieve their 2008 highs. As such, given the future expectations for inflation, the price of gold and the value of the U.S. dollar as discussed in last week's article "Why Gold Mining Stocks and Warrants are Up so Dramatically", major increases can be expected in the next few years for all commodity related stocks and their warrants and particularly those of gold and silver miners.

Click for full article on Future Inflation influences gold price and gold shares

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Lorimer Wilson;Future Inflation Fears Fuel Price of Gold Shares and Warrants

Posted on September 7, 2004

KENNETH J. GERBINO & COMPANY
INVESTMENT MANAGEMENT

9595 Wilshire Boulevard, Suite 303
Beverly Hills, California 90212
Telephone (310) 550-6304 · Fax (310) 550-0814
E-Mail: kjgco@att.net

There are three main aspects to consider when one is investing today.

Let's start with the latest monthly trade deficit of $58 billion, the largest monthly deficit in history, and negative for the dollar. This also means we are now on track to break $600 billion in trade deficits for the year. The dollar cannot stay strong in this environment. Here is exactly how this works. When a $10 million locomotive comes over from Japan, $10 million is sent over to pay for it. The local manufacturer who most likely makes a 5% profit will need 95% of that money to pay all his employees and suppliers. He will need Yen. He will send his $10 million check to his bank and his bank will sell those dollars to someone somewhere in the world who will pay for the dollars with Yen. Notice that the dollars are being sold. This is why trade deficits are bad for the dollar. With $600 billion more goods coming into the U.S. a year than going out, a lot of dollar selling takes place. The U.S. economy is an "importing" economy and excessive imports weaken the dollar. When the dollar goes down gold goes up.

Next, our economy is at the end of a major economic cycle that has been extended by artificially low interest rates made possible by massive amounts of paper money pumped into the economy out of thin air. In the last five years the money supply has increased by 39%. This is excessive and always eventually creates inflation. Gold related investments are an alternative that protects one from currency depreciation.

The next building block to our rationale for where to allocate assets is budget deficits. Just released by the White House is a projected $445 billion budget deficit for 2004. This is on the heels of the $375 billion in red ink from 2003. This means that money will have to come from somewhere to make up for this. Plenty will be just printed to make ends meet. Some will be borrowed from foreigners. We are running such high deficits that it almost demands continued excessive money creation. Other governments are also operating with budget deficits and they are printing money also. All this new money and paper floating around means it is worth less.

Gold will not be weak when printing presses are going so strong.

To sum up on a broad front: The trade deficits are the highest in history, the budget deficit for 2004 will be the highest in history, the recent money supply increases are the highest in history. Total public and private debt levels are also the highest in history and as a per-cent of GDP are much higher than 1929. This alone is why one should own some gold mining stocks and be cautious with other investments.

Interestingly, the stock market actually can benefit from budget deficits for long periods of time, but it always ends. The largest customer to corporate America is Uncle Sam. The more the U.S. government spends the more companies make. Unfortunately, when the market gets overvalued and interest rates get too low (as they are now) from excessive money creation, the artificial boom comes to an end and at best a sideways economy takes place. When interest rates are very low, it is not the time to expect too much from the stock market, as rates are most likely ready to go up which is usually bad for stocks and bonds.

Red Gold

I like owning precious metal mining companies with some base metal exposure especially copper. The commodity boom that has started could last a decade according to some experts. Currently there is a low level of inventory in the big three metal trading centers for copper. The stats in London, New York and Shanghai are the lowest I have ever seen. Warehouse stocks of copper in these trading centers were 795,000 tonnes six months ago. Today they are 225,000 tonnes. China alone consumes 258,000 tonnes per month. With the U.S and European economies stronger than last year, copper demand should continue to be healthy. Even a slow down in China may not curtail this very strong demand for this basic metal.

China ten years ago consumed 3 million barrels of oil per day and 750,000 tonnes of copper per year. Today China consumes 6 million barrels of oil a day and 3.1 million tonnes of copper per year. After my recent trip to Beijing, I am convinced the Chinese are just getting started. Gold consumption in China should also be strong, even with mild economic progress.

We recommend being over weighted in the gold and silver mining sector, where we believe strong value and growth opportunities exist. If gold stays in a $350-$400 range for many years, many mining companies should do well by opening new mines. Developmental mining companies with large, rich and well-defined billion dollar projects offer good potential. This sector is selling at a discount to underlying Adjusted Net Asset Values. Adjusted Net Asset Value is an important mining valuation tool; this is basically a company's balance sheet items added to the future value of the company's expected after tax cash flow. When these values are below historical averages and ranges (like right now), it usually signals excellent value.

Exposure to larger companies is also recommended. Best values look to me like Freeport Copper & Gold (FCX: NYSE) at 6.2x next years expected cash flow and Placer Dome (PDG: NYSE) at 10.8x. If Cortez Hills develops the way some think, then PDG could have some extra zip in its stock price.

Wheaton River (WHT: AMEX) also at 6.2x next year's cash flow looks good. We own all these stocks in our managed accounts.

Latest Gold Supply & Demand stats look good. Jewelry demand alone has outstripped all net mine supply by 150 tonnes, a $1.9 billion shortfall for Q2 2004. One indicator I like to calculate is scrap supply as a per-cent of jewelry demand. If this is trending down then gold should go up. It means a lot less gold is being melted down and sold into the market from bullion jewelry owners. In 2003 this was 37% and in the last quarter it was 27%, a sign that people are keeping more gold under the mattress.

Conclusion

The bottom line is that we are entering a period when almost every economic stat you can review is bullish for gold and commodities. It is for this reason that I believe we could have a substantial bull market in all the metals. The gold and silver mining sector currently presents a strong valuation premise. Trade and budget deficits and excessive money creation will have to continue to bail out the debt ridden U.S. economy. Inflation will return and all the above-mentioned factors will underpin the basic economic rationale to own some gold and the mining shares. These factors will also create a difficult environment for the stock market and long-term bonds. Please visit our website for more articles on gold and the economy.

Ken Gerbino
August 2004

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Why Ken Gerbino is Overweight Gold