Thread: Gold and Silver Jump Again as Fed Threatens to Print Money

Gold and Silver Jump Again as Fed Threatens to Print Money

Commodities / Gold and Silver 2010
Oct 05, 2010 - 08:46 AM

By: Adrian_Ash

THE PRICE OF SILVER and gold bullion leapt overnight in Asian and early London trade on Tuesday, hitting new highs vs. the Dollar as world stock markets also rose on fresh promises of quantitative easing on either side of the Pacific.

Both the central banks of Australia and Japan defied analyst expectations – and Asian Gold Dealing "finally saw a little volatility" said one Hong Kong dealer – by failing to raise and by slashing their interest rates respectively.

Overnight rates were left at 4.50% by the Reserve Bank of Australia, while the Bank of Japan cut its key lending rate from 0.1% to 0.0%.
Tokyo also opened the door to a new round of money creation, establishing a new "asset purchase program" worth an initial ¥5 trillion ($60bn).

Most critically, notes Diapason Commodities' Sean Corrigan, "They've lifted the long-standing bank note vs. JGB cap" – under which the central bank would only buy Japanese government bonds to the value of bank-notes in issue, rather than "monetizing" Tokyo's debt and moving towards "turning all titles [to financial assets] into money."

Over in the United States too, "QE II looks as if it is coming," says Steve Barrow at Standard Bank today, "and there's not much that [Friday's] payroll data can do about it."

"I think it is fair to say that [quantitative easing] is an imperfect policy tool," said the New York Federal Reserve's Brian Sack – head of the US central bank's bond-buying program – in a speech on Monday.

But ahead of Nov.'s widely-expected return to quantitative easing by the Fed, however, "Balance-sheet expansion appears to push financial conditions in the right direction," Sack went on, "in that it puts downward pressure on longer-term real interest rates and makes broader financial conditions more accommodative.

Speaking to college students yesterday, Fed chairman Ben Bernanke also called quantitative easing "an effective program."

Back in the gold and silver markets, meantime, "[Precious metals] had dipped briefly and quickly rebounded – a sign of a short market," says one Japanese broker in a note.

"The Bank of Japan's rate-move was the trigger that started traders' short-covering" – i.e. buying gold and silver to cover the bearish positions they already had in place.

Gold priced in Japanese Yen jumped this morning to a 16-week high above ¥3,567 per gram.

Australian investors looking to Trade Gold today saw the price rise 1.8% to a 5-week high of A$1385 per ounce.

"Last week's anticipated correction lower [in Gold Prices] was very short-lived indeed," says Commerzbank's Axel Rudolph in his weekly report today.

"We will therefore remain bullish," says Commerzbank's technical analyst, for as long as gold trades above last week's low of US$1280.70 per ounce.

"Projected upwards from the March low" and on a short-term view of 1-3 weeks, "$1350.50 [is] in sight."

By the start of New York trade on Tuesday, the US-Dollar gold price stood above $1331 per ounce, some 15% higher from the low hit in late July.

Elsewhere on Tuesday, silver prices jumped to fresh three-decade highs above $22.40 per ounce, adding almost than 3.1% during the first 3 trading days of October alone.

Major-economy government bonds held flat overall, while Japanese stocks rose 1.5% and European equities added almost 1% on average.

Crude oil rebounded to $82 per barrel, while the broader commodity markets also rose.

By Adrian Ash

http://www.marketoracle.co.uk/Article23253.html

Gold's New Record Highs on BOJ's Buying Assets and Zero Interest Rates

Commodities / Gold and Silver 2010
Oct 05, 2010 - 08:30 AM

By: GoldCore

Gold rose in all currencies and rose 1% to new record dollar highs (nominal) at $1,327.90/oz this morning. The Bank of Japan pledged to pump more funds into the struggling economy and keep rates "virtually at zero". This surprised markets and given that the Federal Reserve and other central banks look set to soon provide fresh injections of economic stimulus is leading to demand for gold as a store of wealth.

Gold is currently trading at $1,330.50/oz, €964.76/oz, £837.71/oz.

Gold in Yen - 30 Day (Tick).



"Comprehensive monetary easing" (as described by central bank Governor Masaaki Shirakawa) should lead to a weaker yen and gold rising in yen terms and in other fiat currencies. Gold rose to its highest price in Japanese yen since June at 111,036 yen per ounce.

Gold in Yen - 1 Year (Daily).



While stock markets have reacted somewhat favourably to the Japanese central bank announcement, the dollar and most currencies fell versus gold. It is a another sign that central banks are engaged in competitive currency devaluations and are willing to debase their currencies in order to avert deflationary pressures and to gain a short term export driven economic advantage.

The US Mint plans to discontinue offering the one-ounce American Eagle Silver Uncirculated coin and the one-ounce American Eagle Gold Uncirculated coin this year, according to Bloomberg.

Silver

Silver has risen again to multi year highs and its highest price level since September 1980. Silver's relative undervaluation versus gold is seeing continuing diversification. Indeed, some clients have recently been taking profits on gold and allocating funds to silver.

Silver is currently trading at $22.29/oz, €16.17/oz and £14.04/oz.

Platinum Group Metals

Platinum has risen to over $1,685/oz which is its highest price level since May 18th.

Platinum is trading at $1,683.00/oz, palladium is at $568/oz and rhodium is at $2,175/oz.

This update can be found on the GoldCore blog here.

Mark O'Byrne
Director

http://www.marketoracle.co.uk/Article23250.html

Jim Rogers Sees Gold Cross $2,000, and My Contrarian View on Silver

Commodities / Gold and Silver 2010
Oct 05, 2010 - 05:23 AM

By: Dian_L_Chu

In an exclusive interview with CNBC on Monday, Oct. 4, Jim Rogers talks about commodities, bond and the currency market.

Commodities to Outshine Stocks and Bonds

Because of the global central banks’ money printing express, Rogers says commodities will outperform equities regardless if the economy recovers or not. However, not all commodities are created equal, he points out in the case of aluminum, whose price is lagging mostly due to the increased capacity in China.

He advises investors to look for commodities that are still cheap. From that perspective, he sees opportunity in sugar and rice. Overall, Rogers thinks agriculture has a "wonderful future" in the next 5-15 years due to diminishing farming activity around the world.

Rogers also sees a U.S. bond bubble and indicates although he is not shorting the U.S. Treasury in any "significant way" yet, he may not wait much longer.

Gold - $2,000 in Five to Ten Years

"Gold is going to go a lot higher over the next decade. It may slow down for a while because it's run up so dramatically here in the last few weeks. But gold's going to be much higher. Adjusted for inflation it should be well over $2,000 now."

Rogers says gold will continue to gain on the failed monetary policies of the U.S. government. In precious metal, from a valuation standpoint, he thinks silver would be a better investment than gold right now as it is still 60 percent below its all-time highs, while gold keeps making all-time highs. But he also tells investors holding onto gold and not to take profit at this juncture. He owns both metals.

On U.S. Dollar & Brazil

Rogers said based on experience, he's found in life it is better to be a contrarian. Applying that philosophy, Rogers does not think he would sell any more US dollar at this time, and if anything, he might contemplate buying instead, since everyone is so pessimistic about the dollar right now.

He also said he owns some Chinese, Malaysian shares and some international airlines, but cautions against jumping on the "moving ship" of Brazil.

My Contrarian Take on Silver

Rogers has been quite consistently long on agriculture, gold and silver for the past year or so. I generally tend to agree that gold and commodities could head higher driven by the fear factors like currency debase and inflation arising out of the global monetary QE1 and incoming QE 2.

However, with regards to silver, I am going to be a contrarian this time around.

Gold has had a spectacular 20% run-up this year hitting new all time highs, but it pales in comparison to silver. On Monday, spot silver prices shot up to $22.13 an ounce, a fresh 30-year high, up a staggering 31% this year.

On the surface, Rogers has a point that silver is still a long off its all time high, which was reached in 1980 when the Hunt brothers decided to buy up almost a third world’s deliverable supply of silver as a hedge against inflation. Within one year, silver went from $5 to peaking at $54 in 1980. Ultimately, COMEX and Federal Reserve intervened resulting in the collapse of the silver market.

Now that we've had a crash course on the history of sliver, it should not take long for one to realize that, in contrast to gold, there’s very little chance for silver to touch, let along surpass that all-time-high mark.

Furthermore, since both gold and silver are part of the precious metals family, silver has been attracting interest of fund managers as a cheaper alternative to gold. But unlike gold, silver is also a base metal, since around 40% of the silver supply in 2009 was used in industrial applications such as electronics manufacturing.

So, silver, more base metal than precious metal, has essentially been piggyback on gold as an investment metal based on attractive valuation relative to gold. However, silver is called “’Poor Man’s Goldâ€