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Gold prices settled at a new record high yesterday, as
unrest in North Africa and the Middle East pushed the safe haven currency to
$1,435/oz. Silver surged to new 30-year record nominal highs at $34.74/oz.
Prices surged in dollars and all major currencies and look set to reach
record highs in other currencies.
Given the continuing strong fundamentals and the concerns
of geopolitical instability spreading to Saudi Arabia and other autocratic
oil producing nations, gold and silver look set to challenge $1,500/oz and
$40/oz in the coming weeks.
Gold’s all time record nominal high yesterday was
barely reported in most of the mainstream business and financial press today
- slightly more online but there was little or no coverage in print.
This is an indication that gold and silver remain far from
the “bubbles” that some have suggested. Speculative manias and
bubbles are characterised by mass participation and widespread enthusiasm and
“irrational exuberance” by all sectors of society including the
media and particularly the retail investor and the “man in the
street”.
As seen today, this is clearly not the case at the moment
as there continues to be little or no reporting (let alone analysis) about
gold and silver – even when they reach record nominal highs.
While the specialist financial press such as Bloomberg,
Reuters. Dow Jones, the Wall Street Journal and the Financial Times did
report the record highs; it was unreported in the mainstream press in most
western countries.
In the UK and Ireland, none of the main papers (including
the Times of London, The Guardian, the Daily Telegraph, The Irish Times, the
Irish Independent, and the Irish Examiner) reported the record highs.
The Financial Times print edition reported the news with
one sentence saying that “concerns were underlined by gold rising to a
three-month high”. In fairness to the Financial Times, they do report
on the gold market far more than most media outlets.
The media’s continuing non-coverage of gold and
silver is a clear indication of the lack of animal spirits in the sector. It
is proof, if any were needed, that the mainstream media and the man on the
street remains far from bullish on gold and silver.
Indeed, recent years and recent months have seen many so
called “experts” warning about the dangers of the gold
“bubble”. They have been proven badly wrong and it would be
interesting to read a story about how wrong they got it.
The majority of investors and savers in the western world
do not know what gold bullion is and could not tell you the price of an ounce
of gold or silver in dollars – let alone in pounds, euros or other
local currencies.
The majority are unaware of the huge developments in the
gold markets (only reported by specialist financial press) such as
China’s emergence as one of the largest buyers of gold in the world
(see news and our video below) and the fact
that central banks and astute hedge funds are some of the largest buyers of
gold in the world today.
A bubble only takes place when entire societies ,
including many - if not the majority - of journalists and media become
convinced that you “cannot go wrong” with a certain speculation
or investment and it is a risk free way of making returns.
This leads to gushing reportage and commentary about the
“sure thing” that is a certain stock, bond, commodity or property
market. It is characterised by widespread commentary and a belief not just in
the financial press but in the mainstream media (day time radio and television
etc) that one must speculate or “invest” by buying a certain
security or asset class – whether that be tulip bulbs, Nasdaq, Apple or
property in London.
Greed and buying motivated to make a profit or quick buck
becomes widespread. This has not happened in the bullion markets as the
majority of bullion buying has been safe haven buying for wealth preservation
purposes rather than accumulation.
Concerns about a bubble in gold may be justified when it
reaches its inflation adjusted high of $2,300/oz. Similarly with silver,
concerns about a bubble may be justified when it reaches its inflation
adjusted high of $130/oz.
Concerns about a bubble in gold will be justified when
gold is covered in a regular manner in not just the specialist press but also
in the mainstream. When vested interests selling gold regularly appear in
mainstream media advising people to but all their money into gold because it
is a sure thing, it will be time to become very cautious about the
sector.
Near the top of the gold market (when the price is likely
trading at thousands of dollars, euros and pounds per ounce) we are likely to
see front pages in the business press (such as Fortune, Business Week etc)
devoted to gold and snappy front page positive headlines about how “Gold
is King”, “Why Gold is a Must” etc.
When that happens it will be time to be wary of the gold
bubble and reduce allocations to gold and silver.
The lackluster, negligent media coverage of gold’s
record highs yesterday suggests that we are a long way from there yet.
Gold
Gold is trading at $1,432.88/oz, €1,036.59/oz and
£878.10/oz.
Silver
Silver is trading at $34.73/oz, €25.13/oz and
£21.28/oz.
Platinum Group Metals
Platinum is trading at $1,836.25/oz, palladium at
$818.00/oz and rhodium at $2,350/oz.
GoldNomics - Cash or Gold Bullion?
www.youtube.com/goldcorelimited
News
(Bloomberg) -- Silver Climbs to $34.795
in London, Highest Since March 1980
Silver for
immediate delivery climbed to $34.795 an ounce at 11:43 a.m. in London, the
highest price since March 6, 1980.
(FT) -- Gold touches all-time
high
Gold hit an
all-time high and oil surged higher after the US said it was moving military
resources to the Mediterranean heightening fears of a full-blown war in the
Middle East.
The US said it was moving marines and two warships into
the Mediterranean on Tuesday night amid growing international pressure on
Muammer Gaddafi, the Libyan leader, to stand aside.
Spot bullion rose 1.5 per cent to a record $1,432.10 a
troy ounce, surpassing the peak of $1,430.95 hit in December. ICE April Brent
rose 3.2 per cent to $115.56 a barrel, the highest since a spike on Thursday
that took the global oil pricing benchmark to within cents of $120.
“Guns and oil are a bullish mixture anywhere in the
Middle East and north Africa,” said Michael Wittner, head of oil
research at Société Générale in New York.
Gold glistens
Gold prices have jumped 9.5 per cent from a low of $1,308 in January, as
investors have become increasingly jittery over escalating political unrest
in the Middle East.
At the same time, silver has risen 30 per cent from its
January lows, on Tuesday hitting a 30-year high of $34.59 a troy ounce.
Some investors trimmed their gold positions in January,
believing a rosier outlook for the US economy would boost returns on other
assets.
Traders said the switch in broader market sentiment
triggered by the political uncertainty in the Middle East had driven investors
back to the precious metals.
“The buying has accelerated, both institutional and
individual,” said James Steel, precious metals strategist at HSBC.
“The geopolitical thermostat has not fallen. The situation in Libya
really is almost the worst of all worlds for markets because there’s no
clear winner.”
At the same time, the jump in oil prices – up $20
since January – has raised concerns of rising inflation, increasing
demand for precious metals as a means of wealth preservation.
The oil market is not only concerned about the loss of
production in Libya, but also the spread of unrest to other oil-rich
countries in the Middle East, particularly Saudi Arabia. Protests in Bahrain,
Oman, Yemen, Iraq and Jordan mean that most of Saudi Arabia’s neighbours
have been affected by the turmoil in the region.
Opposition groups in the country, the world’s top
oil exporter and holder of the majority of the spare production capacity,
have called for a “day of rage” to be held on March 11.
(Bloomberg) -- Copper May Slump on Mideast Unrest as Gold
Surges, UBS Says
Copper, corn and rubber may tumble in the next six months, while gold climbs
to a record $1,500 an ounce as turmoil in the Middle East boosts oil, fuels
inflation and weakens Chinese raw-material demand, according to UBS AG.
(Bloomberg) -- Gold Buying in China Climbs on Inflation
Concern, UBS Says
Gold purchases in China, the world’s largest producer, climbed to 200
metric tons in the first two months of 2011 as faster inflation boosted
consumer demand, according to UBS AG, which said the price may gain to
$1,500.
“China is the big buyer,” Peter Hickson,
global commodities strategist at Switzerland’s largest bank, said by
phone yesterday, without giving a comparable figure for 2010. The estimate
for the two-month period compares with full-year consumer demand from China
of 579.5 tons for last year, according to the World Gold Council, a
producer-funded group.
Bullion, which rallied 30 percent last year, surged to a
record yesterday as uprisings in the Middle East, quickening inflation and
currency debasement boosted global demand. China’s consumer prices rose
4.9 percent in January from a year earlier, exceeding policy makers’ 4
percent ceiling for a fourth month.
“Chinese interest is huge,” said Peter Tse, Hong
Kong- based head of precious metals at Bank of Nova Scotia. “Demand for
physical gold and imports has increased substantially” due to the Lunar
New Year holiday, Tse said today, referring to the week-long break that began
Feb. 2.
Immediate-delivery gold was at $1,429.05 an ounce at 5:08
p.m. in Singapore compared with yesterday’s peak of $1,434.93.
Yuan-denominated bullion rose 0.5 percent to 303.58 yuan ($46.19) a gram in
Shanghai, approaching the record 314 yuan, set Nov. 9.
‘Gold Is Attractive’
“Gold is attractive,” Hickson said. “The more the market
becomes concerned about inflation or concerns about unrest in Africa, more
and more people will look to gold.” The price may rise to $1,500 an
ounce in the next six months, said Hong Kong- based Hickson, who’s
worked for UBS since 1996.
Blackstone Group LP’s Byron Wien said in January
that gold may rise to more than $1,600 this year “as investors across
the world place more of their assets in something they consider
‘real’.” The price may reach $1,600 this year, Wayne
Atwell, a managing director at Casimir Capital LP said the same month.
Protests partly linked to record food prices have erupted
across North Africa and the Middle East this year, toppling leaders in
Tunisia and Egypt and boosting oil prices. Libyan rebels braced for renewed
clashes today with forces loyal to leader Muammar Qaddafi. Iranian protesters
have clashed with security forces in Tehran, Al Arabiya reported.
Gold investment in China, the largest buyer of the
precious metal after India, may gain 40 percent to 50 percent this year amid
a lack of alternatives, Wang Lixin, China representative for the World Gold
Council, said last month. He called that forecast a “conservative
estimate.”
Bars and Coins
China’s investment demand in 2010 jumped 70 percent to 179.9 tons,
surpassing Germany and the U.S., as buyers sought out bars and coins, the
London-based industry group said. Consumption by the jewelry sector rose to a
record 399.7 tons, it said. China imported more than 300 tons last year,
People’s Bank of China Vice Governor Yi Gang said on Feb. 26 in
Beijing.
China may be the “next big buyer” of gold,
driven by institutional and retail demand, Credit Suisse Group AG analyst Tom
Kendall said in Cape Town on Feb. 7. “If you’re sitting there in
China with money in a deposit account, you’re losing between 1-2
percent a year through inflation,” Kendall said.
The boom in gold demand in China is driven by concern
about inflation pressure and the poor performance of alternative investments,
the producer-funded council has said. Premier Wen Jiabao pledged on Feb. 27
to boost food supplies to hold down costs, and to tackle surging property
prices.
Spooked by Inflation
Jewelers at shopping malls across Beijing are witnessing a gold rush as residents
spooked by inflation look to protect their money, the China Daily reported on
Feb. 28.
Statistics from Beijing Caibai, the city’s largest
jewelry store, show sales of gold and other jewelry have totaled about 4
billion yuan so far this year, a 70 percent increase from a year ago, the
report said.
China displaced South Africa as the world’s biggest
gold producer in 2007. Imports through last October rose almost fivefold to
209 tons from the total shipped in the previous year, according to the Shanghai
Gold Exchange. Mine output reached a record 340 tons last year, the China
Gold Association has said.
The Industrial and Commercial Bank of China Ltd., the
world’s biggest lender by market value, started physical-gold linked
savings accounts in December with the World Gold Council. Account openings
have surpassed 1 million, with more than 12 tons of gold stored on behalf of
investors, it has said.
(Wall Street Journal) -- India Spot
Silver Hits Record High
The spot price
of silver in Mumbai rose Tuesday to an all-time high of 51,005 rupees
($1,127) a kilogram, the Bombay Bullion Association said, tracking firm
...
(BBC) -- Gold price hits record high on
Libya unrest
The price of
gold has hit a record high as investors worry about the political turmoil in
Libya and spreading tensions across the Middle East.
The price on the London Bullion Market jumped more than
$14 to $1,434.50 an ounce, topping the previous mark of $1,431.25, set in
December.
Gold is traditionally seen as a haven for investors in
times of uncertainty.
Unrest across the Middle East and North Africa fuelled a
6% rise in gold prices during February.
Analysts said that the political problems were pushing oil
prices higher and fanning concerns about inflation and slower global economic
growth.
"What gold needed was a catalyst, and it found it in
the form of tensions that are surfacing in the Middle East and rising oil
prices," said Mark Luschini from the brokerage Janney Montgomery
Scott.
Mr Luschini added that investors saw gold giving them
greater protection from inflationary pressures and political
instability.
On the New York Comex exchange, the price of gold reached
$1,434.40, a record for that market, before pulling back slightly.
Meanwhile oil prices, which have also been on the up since
unrest broke out in North Africa and the Middle East, rose again on
Tuesday.
In London, Brent crude rose 4.2% to $116.46, while US
light, sweet crude rose 3.7% to $100.52.
Mark O’Byrne
Goldcore
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