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Archive for February 19th, 2010

Gold, Nonferrous Metal, Nonferrous Metals Prices

February 19, 2010

GOLD RISES WITH UNCERTAINTY

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Debt monsters of the past have tended to end in deflationary depressions, but it’s important to understand that gold can rise in this kind of environment. Remember, gold rises during economic uncertainty. In the early 1930s, for example, during the Great Depression, President Roosevelt raised the price of gold almost 70% from $20.65 to $35 an ounce in a struggle to bring back inflation.

Gold is money. It’s the currency of last resort when monetary times are difficult. So when gold rises in all currencies, as it’s been doing for several years, you know the rise is enduring and superior. So even though gold has no yield or earnings to measure like the other markets do, it has true value.

The central banks are flooding the markets with their own currencies, and competitive devaluations will continue to grow. Many countries depend on exports for economic survival. This means the best price in the current deflationary environment wins, which is what a cheaper currency does.

This situation originally started with globalization and it’s bullish for gold. The U.S. is still in a delicate situation. It needs a weaker dollar to compete and stimulus measures must continue, which are both ultimately bullish for gold.

This is one important reason why we do not think gold or commodities are in a bubble. We believe they are rising within a mega trend that could last several more years, perhaps a decade. Some say that China is in a bubble and if they are, the demand for commodities will fall. China may be overheated but we don’t think it’s in a bubble. Their growth, even if it’s only a part of what they claim, is solid.

Gold, Nonferrous Metal, Nonferrous Metals Prices

Gold Prices End Higher After Fed Rate Discount

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It was reported from NEW YORK that gold prices may have retested the $1,100 support zone after the Fed’s surprise discount rate hike announcement, but the market has stabilized and Kitco Metals analyst Jon Nadler says there are more pressing issues on the plate right now.

Although Nadler agrees that Thursday’s announcement was “psychologically beneficial for the dollar, but not so hot for gold,” he maintains that the impact has been small so far.

“By this morning the realization that the discount rate is not the Fed funds rate started to sink in among speculators,” Nadler explained. He adds that “it was a surprise announcement, but one shouldn’t read too much into it… The hike only affects $14 billion worth of borrowing.”

At the moment, Nadler, like many gold observers, is more focused on the IMF’s (International Monetary Fund) decision to sell 191.3 tonnes of gold from a previously planned sale of 403 tonnes of gold.

That move could indeed hurt gold prices. “This is a more critical situation because the market is already in surplus supply mode,” Nadler explains.

Nadler notes that he isn’t completely ignoring the Fed discount rate hike announcement, given that it forecasts a possibly more qualitatively important Fed funds hike between August and October. This signals that the dollar could rise against the Euro, putting pressure on gold prices.

On a long-term basis, Jon Nadler  is looking at lower gold prices as he sees continued dollar strength – as well as the Fed shift towards an exit strategy whereby it is less accommodative and more inclined to mop up excess liquidity. Still, Nadler argues that no downward spiral in gold prices is on the horizon.

In January, Nadler projected a price range of $880 to $1,280 an ounce for the next six months, taking volatility into account. It sees a price range of $970 to $1,170 in the short-term.

Nadler continues to encourage his investors to hold a 5% to 10% core allocation in gold, even if prices edge lower. “There’s no reason to shift out of that,” he said.

Gold futures for April delivery was falling $2.8 to $1,115.90 an ounce at the Comex division of the New York Mercantile Exchange Friday.

Gold, Nonferrous Metal, Nonferrous Metals Prices

How to Trade Gold?

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It’s hard to believe so when some of the smartest and wealthiest financial investors keep buying it. Gold being a tangible asset not a paper one is considered to be valuable in times of declining paper assets.

Exchange traded funds offer a way for investors to purchase shares without taking delivery on gold bullion.  There is no need to worry about storage.  You could sell these shares at another time back to the market place. Another way to invest in gold is to purchase call option contracts.  These financial instruments offer a tremendous amount of leverage with a limited risk.  Using the leverage is a way to maximize your returns.  Just like ETFS, there is no obligation to take delivery.  Acquiring a financial option specialist can help you trade gold option contracts.  HB Group can be very helpful with their experience and knowledge with these financial instruments.  You could visit them at www.hbgroupintl.com

Multibillion dollar investments are being made in gold today.  Only one could think that the prices are still relatively low.  Most investment portfolios do not have Gold in them.  With today’s investment gold rush, a shift of portfolio funds may cause prices to jump to $1300.

Gold, Nonferrous Metal, Nonferrous Metals Prices

Live Spot Gold for 19 Feb 2010

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Bid/Ask 1117.10 - 1118.10
Low/High 1099.40 - 1126.70
Change +9.00 +0.81%
30daychg +5.80 +0.52%
1yearchg +143.90 +14.79%

Gold, Nonferrous Metal, Nonferrous Metals Prices

London Gold Fix for 18 Feb 2010

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2010-2-19 AM PM
USD 1107.00 1112.75
GBP 719.49 721.82
EUR 819.7 824.2
2010-2-18 AM PM
USD 1105.50 1118.00
GBP 708.11 714.24
EUR 813.77 820.13

Iron Ore, Metal News, Steel Prices

LME Official Prices (US$/tonne) for 19 Feb 2010

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Far East (US/ton) Mediterranean (US/ton)
CASH BUYER 430 429
CASH SELLER & SETTLEMENT 440 431
3-MONTHS BUYER 450 440
3-MONTHS SELLER 460 450
15-MONTHS BUYER 480 480
15-MONTHS SELLER 490 490
27-MONTHS BUYER N/A N/A
27-MONTHS SELLER N/A N/A