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Ed Stein
For USA GOLD
Over
the course of 2010 the price of gold has wended its way higher much as has
been its annual custom throughout the entirety of the past decade. From the
final 2009 London fix at $1,104 to its current price, gold has brought a
year-end gleam of 28 percent gains to those fortunate few investors with enough investment acumen
(or, rather, that good old-fashioned thing called common sense!) to hold gold
in their portfolios.
As we prepare to pop the corks at the conclusion of
yet another fine year, we're reminded of Peter Grant's recent Survey
of Investments (click for charts)
and his pithy assessment of the y-o-y sector performances at Q3:
It has been another stellar year for gold, which
appreciated 31.26% in the 12-month period ended
September 30, 2010. Only the Liv-ex 100 Fine Wine Index
performed better, albeit nominally so. Nonetheless, let's raise a glass to
those two fine investments, gold and wine! No wait! Not the good stuff!
Once you've uncorked that heavenly bottle of Lafite Rothschild, the double-digit appreciation is
meaningless, and after just four or five glasses your asset is gone
completely. And worse yet, if the storage conditions were less than ideal,
not only do you lose the return, but you won't even enjoy the wine.
The first thing I notice about the one-year chart, unique
to recent surveys, is that nearly everything is positive. Only the dollar
bill in your pocket eroded in value as a result of the persistent weight of
inflation. On what tide are all these boats rising? Liquidity. Lots and lots
of Fed-provided liquidity. With a zero interest rate policy to boot, the Fed
is purposefully pushing investors out along the risk curve...
... Over
the past ten years, gold has risen the most of all
the assets we track. Gold stocks are a distant second, followed by
fine wines and commodities.
... As a gold broker, it's reassuring on some level
to see the asset you sell at (or near) the top of our own and other
investment surveys, year-in and year-out. As an American, however, the
policies that are driving this amazing performance are disheartening to say
the least, and sadly unlikely to change any time soon.
After decades of a declining dollar and the
inflation that results, the Fed is now suddenly worried that there isn't
enough inflation. They have made it abundantly clear that further
accommodations are necessary to prevent deflation and reinvigorate the
floundering US economy. We are likely on the cusp of QE2 and in the midst of
a currency war...
Richard Fisher, the president of the Dallas Federal
Reserve Bank, recently pointed out that the Fed is a monetary authority and
is therefore limited in what it can do. Fed policy is not a substitute for
fiscal policy and he suggested that regulatory and fiscal authorities
"get their acts together." Mr. Fisher went on to recommend that any
policy designed to stimulate our moribund economy -- whether it be monetary
of fiscal -- be done in a way that "doesn't scare people about the
ultimate liabilities we're going to pile up over time."
Too late. Many are plenty scared already. It is only
through proper portfolio diversification, including a physical gold component, that allows them to sleep at night... [as featured in our November newsletter]
So... now that we're smiling AND well rested by
virtue of having gold in our portfolios, we look ahead and ask, "What
can we anticipate for the coming year?" More of the same is our answer
-- that is, if there's a grain of credibility to be found in the venerable Wall Street Journal or in Wall Street's
top dogs such as Goldman Sachs Group or Morgan Stanley...
Gold set for fresh highs in 2011
by Rhiannon Hoyle
December 29, 2010 (The Wall Street Journal)
[article
excerpts] -- Gold bulls say
the price of the precious metal is set to reach fresh highs early in the new
year, on mounting inflation fears fueled by loose U.S. and euro-zone monetary
policies.
With central-bank purchases and Chinese imports
emerging to support gains, analysts and traders say they expect the metal to
quickly surpass $1,500 a troy ounce, reaching as high as $1,700 an ounce—or even $2,000, according to
forecasts by some of the industry's more bullish participants...
U.S. investment bank Goldman Sachs Group Inc. says
it expects gold prices to climb to $1,690
an ounce, and potentially even higher, over the next 12 months as a new round of quantitative easing keeps real interest rates low
and drives excess capital flows from countries with trade surpluses -- which
have traditionally parked their money in U.S. government bonds -- into other
investable assets, such as gold.
But it isn't just the U.S.; concerns about the euro
zone will continue to weigh on market sentiment, spilling over into the new
year as investors fear contagion in the region, analysts say. Inflation fears
are also expected to continue to fuel buying, particularly in China, where the
consumer-price index rose 5.1% in November, the biggest rise since July 2008.
Gold is traditionally seen as an inflation hedge due to its inherent value,
and low storage and handling costs.
... And because the gold market is small, relative
to other investment and financial markets, inward cash flows can more easily
push prices higher, the participants say. "At the moment, there is still
not a massive amount of money invested in gold, if you look at the total
financial equation," says J.P. Morgan resources fund manager Ian
Henderson.
"We are increasingly positive on the outlook
for gold in 2011," Morgan Stanley analysts said in a recent report.
"The desire to hedge political as well as financial and economic risks
makes the current situation a near perfect storm for an asset such as
gold."
For those who have an interest in adding gold to their portfolio to start the New Year right, we invite your inquiry, TOLL FREE! 1-800-869-5115
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