Comex Gold and Silver Prices have been holding ground but there have been some declines in the same at Multi Commodity Exchange – MCX in Indian Commodity Markets due to the sharp rise in the INR / US Dollar today.
The much needed boost for Gold and Silver Prices came last week Friday on the much weaker-than-expected US jobs report number, bolstering the case for prolonged central-bank stimulus. I had alerted over a week ago that we could see weaker than expectation US reports after a plethora of positive & encouraging Economic data out of the US for a long time & that these would provide the floor to Gold & Silver Prices after both facing a long losing streak. There were signs of economic weakness even before last week’s payrolls report. The Tempe, Arizona-based Institute for Supply Management’s factory index for March fell more than forecast, and its services gauge showed the slowest pace of expansion in seven months. Bullion prices may not have the necessary momentum right now, but I am sure that all dips in Gold & Silver now on, may witness a lot of opportune buying.
Legendary investor George Soros said Gold has been destroyed as a safe-haven asset, but expects continued central bank buying to support prices. Soros said gold has “disappointed the public, because it is meant to be the ultimate safe haven.” Soros Interview with South China Morning Post: He said people are reducing their holdings of gold as price movements & returns have been disappointing of late. “But the central banks will continue to buy them, so I don’t expect gold to go down. If you have the prospect of a crisis, you will have occasional flurries or jumps. So gold is very volatile on a day-to-day basis, no trend on a longer-term basis.” Soros, who called gold “the ultimate bubble” in 2011, slashed his position in the world’s largest gold-backed exchange-traded fund, SPDR Gold Trust, by more than half to 600,000 shares in the fourth quarter of 2012 from 1.32 million in the third quarter.
Big Money flows can be expected to Boost Gold and Silver Prices:
The Fed has been adding $85 Billion of fresh printed money each month & will continue doing so till labor numbers remain weak. There has been no change in the Fed’s zero interest rate policy and no diminution of its $85 billion per month pace of debt monetization. National deficits continue to rise ahead of nominal GDP growth and persistently weak employment data should keep the Fed’s level of QE unabated for at least several more quarters to come. The Bank of Japan (BOJ) has announced a mega Quantitative Easing program recently which showed immediate results on Gold Prices in Yen terms shooting off to all time highs on the Yen devaluating & Deficit numbers changed into Surplus. The BOJ aims to trigger Inflation & exit a long tussle with Deflation by way of monthly QE which is roughly twice those of the US Federal Reserve. In addition to the global money tsunami, in a few months, Mark Carney takes over the helm at the BOE (Bank of England) with an apparent mandate to ease. Many Central Banks seem to be adopting the highway to Deficit control & Boost GDP without any evidence to suggest that one can balance a current account deficit by lowering the value of currency or boost GDP growth either. Inflation is a definite result of mindless QE & the common man is left defenseless to face the disastrous & true effects of currency devaluation. And now the common man also has one more thing to fear – Deposit Confiscation in case of insolvency as seen in Cyprus. US Dollar holders should, at the earliest, realize the absurdity of believing their dollar is strong simply because other fiat currencies are currently weaker. Money flows into Gold and Silver will rise once the US Dollar starts weakening under the weight of the $17 trillion national debt and $1 trillion yearly deficits that are being monetized by the Fed. The artificial US economic growth has come at the cost of zero percent Interest Rates since the 18-month recession that began in December 2007 & QE that has ballooned the Fed’s Balance sheet beyond $3 trillion.
Trust in Gold & not Bernanke:- Bloomberg
Distrust of the US Federal Reserve and concern that U.S. dollars may become worthless are fueling a push in more than a dozen states to recognize Gold and Silver coins as legal tender. Lawmakers in Arizona are poised to follow Utah, which authorized bullion for currency in 2011. Similar bills are advancing in Kansas, South Carolina and other states. The measures reflect lingering dollar concerns, amplified by the Fed’s unconventional moves in recent years to stabilize the economy. The legislation is about signaling discontent with monetary policy and about what Ben Bernanke is doing. There is a fear that the government, or Bernanke in particular and the Federal Reserve, is pursuing a policy that will lead to the collapse of the dollar. That’s what is behind it.
Consumer prices rose just 1.3% in February from a year earlier, according to an inflation measure favored by the Fed. That was below the central bank’s 2% target and compares with occasional bouts of more-than 10% increases in the 1970s and early 1980s. Bets that inflation would pick up because of economic- stimulus measures helped fuel a 78% jump in Gold since December 2008. The dollar’s rise to less than 1% below a one-year high set in July and monthly increases of about 2% or less in the U.S. consumer price index have curbed demand for bullion. Since reaching a record $1,923.70 an ounce in 2011, Gold Prices have fallen and are near a bear market.
In Texas, lawmakers are considering a measure supported by Republican Governor Rick Perry to establish the Texas Bullion Depository to store gold bars valued at about $1 billion and held in a New York bank warehouse. The proposed facility would also accept deposits from the public, and would provide a basis for a payments system in the state in the event of a “systemic dislocation in a national and international financial system,” according to the measure. Should Texas take such a step, it would offer sovereign backing for deposits and make buying and storing gold easier. “We are seeing a distinct movement back to a world where gold is considered money,” Rickards said. Jim Rickards is senior managing director at Tangent Capital Partners LLC in New York and author of “Currency Wars: The Making of the Next Global Crisis.” The measures give “people the option of using money that won’t lose any purchasing power to inflation. Read More….
During the past three years, the Fed planned to cut accommodation early in the year only to boost it after economic growth lagged behind its forecasts. Determined not to repeat the error, the Fed will probably push on with $85 billion in monthly bond purchases through the summer, said Drew Matus, a former Federal Reserve Bank of New York economist. “The fact they’ve been fooled multiple times by slumps in the US Economy means they’re going to be a little gun-shy on the exit strategy,” said Matus, deputy chief U.S. economist at UBS Securities LLC in Stamford, Connecticut. In contrast to its previous quantitative easing programs, the Fed’s current round of asset purchases is open-ended, with no final date or amount specified in advance. That means policy makers can maintain stimulus until the economy gains a more stable footing.
The Best part I found was –
“It helps that we’ve removed one source of uncertainty which is, how will the Fed react?” said Julia Coronado, a chief economist for North America at BNP Paribas in New York. “Instead of asking how bad things need to get for the Fed to do more, its how good do they need to be before they stop helping.”
Chinese & Fed actions now may provide support to Silver Prices, more than Gold:
China has always been jumping out to buy Gold and Silver at sharp price declines in Bullions. The Chinese generally never chase price rises & prefer to await a fall. The price slump (manipulated or not) offers a great opportunity to China to dump its Dollar holdings & buy Silver and Gold Bullion. China has one of the largest Dollar Reserves & it knows that these can never be swapped for Gold at one go without triggering a large scale Price Rally in Gold, & so China prefers to do it in staggered moves.
Weaker Economic reports out of the US may force the Fed to not only continue monetary easing for a prolonged period, but also to add some boost to improve employment by supporting the housing market further & also launching large Infrastructural Projects. Demand thus created will boost raw commodity prices & trigger higher Inflation. Silver will benefit twice as much due to its role as an Industrial metal as well as a Safe-Haven investment & a hedge against Inflation. The biggest attraction for Silver Investment though is its price & the Gold to Silver ratio which today stands above 54.
Physical Demand for Gold and Silver clearly indicates Market Insecurity:
The recent slide in Paper Gold and Silver prices has done much damage to investor confidence, yet the indications are that physical demand for Gold and Silver remains strong. The difference between Gold and Silver Futures markets and physical demand is that the former is used by speculating investors and the latter by buyers seeking financial protection from systemic risks. This divergence of motive explains why paper markets seem to be playing a different tune because of manipulation from the physical market which cannot be manipulated as the huge risks of the economy are clearly visible to most. The Fed is suppressing Gold Prices so that markets do not lose confidence in the dollar. Research into US imports and exports of gold, conducted by Eric Sprott and Shree Kargutkar which analyzed US trade statistics since 1991 to conclude that at least 4,500 tonnes of gold over and above US gold production and recycling had been exported, and possibly as much as 11,200 tonnes when private sector demand in the US is included. This gold can only have come from official sources, which confirms deductive analysis over the years by our own James Turk and Frank Veneroso, that substantial amounts of gold have been supplied into the markets by Western governments and their central banks, reports Alasdair Macleod. The evidence that central banks and their agencies have been suppressing the price of Gold is therefore overwhelming, and Paul Roberts’ analysis confirms why this is happening. When Western central banks rig markets, punting against them is a mug’s game. But for those that recognize that central banks have dug themselves into a hole from which there is no escape for the banking system, governments and ultimately paper currencies, there is an irrefutable logic in possessing physical Gold and Silver. Instead of worrying about Gold and Silver prices going down, we should count our lucky stars for the gifts of artificially cheap Gold and Silver, courtesy of our central banks.