There are a lot of people interested in buying Gold and Silver out there who may not know how to go about buying the physical metals. Many people end up settling for ETFs like GLD or try to trade them on the futures market. There's a lot of issues with doing this as the prices of gold and silver skyrocket, the ETFs could be exposed as not having enough of the physical metal to back them up and the short sides to any futures contracts will end up defaulting on their end of the trade.To truly protect yourself you have to get the physical metal. This essential course will teach you how to do so, as well as other important functions like how to safely store your gold and silver.
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Here are some great books and resources for investing in gold and silver:
Sunday, February 6, 2011
Investors’ $102 Billion Metals Wager Showing Bull Market Intact
Click here for the Gold Investing Profits Blueprint, a must-have report for investing in gold stocks
After the worst January for precious metals in two decades, investors still have a $102 billion bet on higher prices, hoarding more gold than all but four central banks and more silver than the U.S. can mine in almost 12 years.
The five analysts ranked by Bloomberg as the most accurate over two years expect silver to rise as much as 24 percent before the end of 2011 and gold 20 percent, the median of their estimates show. UBS AG predicts the strongest industrial demand for silver since at least 1990 and the second-highest sales of exchange-traded gold products on record.
The decade-long surge in gold attracted fund managers from John Paulson to George Soros and is now spurring central banks to add to their reserves for the first time in a generation. Once written off as demand for photographic film waned, silver found new uses in everything from solar panels to plasma screens, making it the precious metal most used in industry. As stocks rose 9 percent and Treasuries returned 67 percent since the end of 2000, gold surged fivefold and silver sixfold.
“I had to chuckle when I saw reports that it was over for gold,” said Michael Cuggino, who helps manage $10 billion at Permanent Portfolio Funds in San Francisco, and has about 20 percent of his assets in gold. “Some investors have taken money off the table after a significant run-up in 2010. If you look at the macro environment, the instability around the world, the worldwide currency devaluation, these factors all bode well.”
The Standard & Poor’s GSCI Precious Metals Index dropped 6.5 percent in January, the most for the month since 1991. Gold traded in London retreated 6.2 percent and silver 9.3 percent.
Monthly Slumps
Gold has had bigger monthly slumps four times in the last decade and plunged 34 percent from March to October 2008, before jumping 47 percent in the following four months. Silver posted larger monthly declines nine times over the same period and plummeted 57 percent over three months in 2008. It rallied 73 percent in the next four months.
Silver will climb as high as $36 an ounce this year, from $29.1375 now, and gold will reach $1,620 an ounce, from $1,348.85, according to the Bloomberg survey of analysts.
Investors in exchange-traded products backed by gold own 2,028 metric tons, worth $88 billion, even after cutting their holdings by 4.1 percent since December, data compiled by Bloomberg show. ETPs trade on exchanges, with each share representing metal held in a vault. They accounted for 21 percent of investment demand last year, according to GFMS Ltd., a London-based research firm. Silver-backed ETPs fell 4.4 percent to 14,511 tons worth about $14 billion since December.
CFTC Data
While hedge funds cut their bets on higher gold prices by 42 percent since October, they still hold a so-called net-long, or bullish, position of more than 151,000 futures contracts, almost three times the average over the last 18 years, according to data from the Commodity Futures Trading Commission.
Central banks, the biggest owners, will add to reserves for a third consecutive year in 2011, the first time that’s happened since the 1970s, Deutsche Bank AG predicts.
The risk now is that an improving economic outlook will cut the allure of precious metals as a wealth protector. The MSCI World Index of equities added 4 percent since the start of January, the best start to a year since 1998. The International Monetary Fund on Jan. 25 increased its forecast for 2011 global economic growth to 4.4 percent, from 4.2 percent.
“Gold is going quiet,” said Pete Sorrentino, who helps manage $13.8 billion at Huntington Asset Advisors in Cincinnati, Ohio. “It’s good and healthy and characteristic of gold’s stair-step rally. We’ll see a little more downward pressure and then begin to trade sideways for an indeterminate time.”
SEC Reports
Gold accounts for 5 percent of the company’s $98 million commodity fund, compared with 15 percent in mid-December.
Another risk is the biggest investors, whose holdings are scheduled to be reported by the U.S. Securities and Exchange Commission on Feb. 14, according to Credit Suisse Group AG. Prices will likely drop and volatility increase should quarterly data show any of them cut their position, the bank said in a report Jan. 28. Investors last disclosed their stakes as of Sept. 30 in filings in November.
Paulson & Co. is the largest investor in the SPDR Gold Trust, the biggest ETP backed by gold, according to data compiled by Bloomberg. The 7.8 percent stake was worth $4.03 billion on Sept. 30 and would be valued at $4.15 billion now. Armel Leslie, a spokesman for Paulson, 55, declined to comment.
Soros Fund
Soros Fund Management LLC, which manages about $27 billion, also listed the SPDR Gold Trust as its biggest holding in a Nov. 15 filing. Soros described gold at the World Economic Forum’s January meeting in Davos, Switzerland, last year as “the ultimate asset bubble.” In a Nov. 15 speech in Toronto the 80- year-old said conditions for the metal to keep rising were “pretty ideal” and at this year’s Davos forum said the boom in commodities may last “a couple of years” longer.
Michael Vachon, a spokesman for Soros, declined to comment.
The precious metals most used in industry outpaced gold since the U.S. economy returned to growth in the third quarter of 2009. Palladium rose threefold, silver more than doubled and platinum jumped 57 percent, compared with gold’s 46 percent gain. Platinum and palladium are used in catalytic converters for cars and trucks. The London Metal Exchange index of industrial metals from aluminum to zinc jumped 86 percent.
Industrial demand for silver, excluding photography, will rise 18 percent to 478 million ounces this year, according to UBS, Switzerland’s biggest bank. Investors will buy 450 tons of gold through ETPs this year, the Zurich-based bank forecasts.
Mining Index
The 16-member Philadelphia Stock Exchange Gold and Silver Index, led by Freeport-McMoRan Copper & Gold Inc. and Barrick Gold Corp., fell 8.5 percent this year as metal prices dropped. All but one firm in the mining index is forecast to report an increase in annual earnings, according to the median of analyst estimates compiled by Bloomberg.
Higher silver prices hurt the profit of Rochester, New York-based Eastman Kodak Co. last year and are a “significant headwind” in 2011, Chairman Antonio M. Perez said on a conference call Jan. 26. Agfa-Gevaert NV, Europe’s biggest maker of healthcare imaging systems, said in a statement Nov. 15 that its Agfa HealthCare division was increasing prices for all imaging film products because of higher raw-material costs.
Bullion’s slide from a record is attracting buyers. “We struggle to recall a month when our total physical sales have been stronger,” led by Chinese gold demand, and turnover on the Shanghai Gold Exchange in January was a record, Edel Tully, an analyst at UBS, said in a report last week. “Elevated physical demand usually signals an impending bottom,” she said.
Silver Coins
Silver buying is also accelerating. One-ounce silver coin sales from the U.S. Mint jumped to a record last month. Ex Oriente Lux AG, based in Reutlingen, Germany, will start adding the metal to its U.S. ATMs that sell gold in banks, shopping centers and jewelry stores this month.
Investor demand for precious metals accelerated after the collapse of Lehman Brothers Holdings Inc. in September 2008 and as governments and central banks led by the Federal Reserve pumped more than $2 trillion into the world financial system. That stoked concern that inflation will accelerate. The Fed cut interest rates to near zero in December 2008 and have kept them there since and Greece and Ireland got bailouts.
“At the moment, people still have fear about inflation, about the debt crisis, and I don’t see any resolution to the debt crisis when the Fed is buying debt again and again,” said Thorsten Proettel, an analyst at Landesbank Baden-Wurttemberg in Stuttgart. “Most people will be loyal to their investment because the fear doesn’t evaporate.”
Bloomberg Ranking’s top precious-metal forecasters:
Average Error
Jochen Hitzfeld UniCredit 8.1%
Thorsten Proettel LBBW 12.1%
Anne-Laure Tremblay BNP Paribas 12.6%
David Wilson Societe Generale 13.9%
Suki Cooper Barclays Capital 14.8%
A Must-Have Report for Buying Gold Stocks
Learn How to Buy Gold Below Spot Prices
After the worst January for precious metals in two decades, investors still have a $102 billion bet on higher prices, hoarding more gold than all but four central banks and more silver than the U.S. can mine in almost 12 years.
The five analysts ranked by Bloomberg as the most accurate over two years expect silver to rise as much as 24 percent before the end of 2011 and gold 20 percent, the median of their estimates show. UBS AG predicts the strongest industrial demand for silver since at least 1990 and the second-highest sales of exchange-traded gold products on record.
The decade-long surge in gold attracted fund managers from John Paulson to George Soros and is now spurring central banks to add to their reserves for the first time in a generation. Once written off as demand for photographic film waned, silver found new uses in everything from solar panels to plasma screens, making it the precious metal most used in industry. As stocks rose 9 percent and Treasuries returned 67 percent since the end of 2000, gold surged fivefold and silver sixfold.
“I had to chuckle when I saw reports that it was over for gold,” said Michael Cuggino, who helps manage $10 billion at Permanent Portfolio Funds in San Francisco, and has about 20 percent of his assets in gold. “Some investors have taken money off the table after a significant run-up in 2010. If you look at the macro environment, the instability around the world, the worldwide currency devaluation, these factors all bode well.”
The Standard & Poor’s GSCI Precious Metals Index dropped 6.5 percent in January, the most for the month since 1991. Gold traded in London retreated 6.2 percent and silver 9.3 percent.
Monthly Slumps
Gold has had bigger monthly slumps four times in the last decade and plunged 34 percent from March to October 2008, before jumping 47 percent in the following four months. Silver posted larger monthly declines nine times over the same period and plummeted 57 percent over three months in 2008. It rallied 73 percent in the next four months.
Silver will climb as high as $36 an ounce this year, from $29.1375 now, and gold will reach $1,620 an ounce, from $1,348.85, according to the Bloomberg survey of analysts.
Investors in exchange-traded products backed by gold own 2,028 metric tons, worth $88 billion, even after cutting their holdings by 4.1 percent since December, data compiled by Bloomberg show. ETPs trade on exchanges, with each share representing metal held in a vault. They accounted for 21 percent of investment demand last year, according to GFMS Ltd., a London-based research firm. Silver-backed ETPs fell 4.4 percent to 14,511 tons worth about $14 billion since December.
CFTC Data
While hedge funds cut their bets on higher gold prices by 42 percent since October, they still hold a so-called net-long, or bullish, position of more than 151,000 futures contracts, almost three times the average over the last 18 years, according to data from the Commodity Futures Trading Commission.
Central banks, the biggest owners, will add to reserves for a third consecutive year in 2011, the first time that’s happened since the 1970s, Deutsche Bank AG predicts.
The risk now is that an improving economic outlook will cut the allure of precious metals as a wealth protector. The MSCI World Index of equities added 4 percent since the start of January, the best start to a year since 1998. The International Monetary Fund on Jan. 25 increased its forecast for 2011 global economic growth to 4.4 percent, from 4.2 percent.
“Gold is going quiet,” said Pete Sorrentino, who helps manage $13.8 billion at Huntington Asset Advisors in Cincinnati, Ohio. “It’s good and healthy and characteristic of gold’s stair-step rally. We’ll see a little more downward pressure and then begin to trade sideways for an indeterminate time.”
SEC Reports
Gold accounts for 5 percent of the company’s $98 million commodity fund, compared with 15 percent in mid-December.
Another risk is the biggest investors, whose holdings are scheduled to be reported by the U.S. Securities and Exchange Commission on Feb. 14, according to Credit Suisse Group AG. Prices will likely drop and volatility increase should quarterly data show any of them cut their position, the bank said in a report Jan. 28. Investors last disclosed their stakes as of Sept. 30 in filings in November.
Paulson & Co. is the largest investor in the SPDR Gold Trust, the biggest ETP backed by gold, according to data compiled by Bloomberg. The 7.8 percent stake was worth $4.03 billion on Sept. 30 and would be valued at $4.15 billion now. Armel Leslie, a spokesman for Paulson, 55, declined to comment.
Soros Fund
Soros Fund Management LLC, which manages about $27 billion, also listed the SPDR Gold Trust as its biggest holding in a Nov. 15 filing. Soros described gold at the World Economic Forum’s January meeting in Davos, Switzerland, last year as “the ultimate asset bubble.” In a Nov. 15 speech in Toronto the 80- year-old said conditions for the metal to keep rising were “pretty ideal” and at this year’s Davos forum said the boom in commodities may last “a couple of years” longer.
Michael Vachon, a spokesman for Soros, declined to comment.
The precious metals most used in industry outpaced gold since the U.S. economy returned to growth in the third quarter of 2009. Palladium rose threefold, silver more than doubled and platinum jumped 57 percent, compared with gold’s 46 percent gain. Platinum and palladium are used in catalytic converters for cars and trucks. The London Metal Exchange index of industrial metals from aluminum to zinc jumped 86 percent.
Industrial demand for silver, excluding photography, will rise 18 percent to 478 million ounces this year, according to UBS, Switzerland’s biggest bank. Investors will buy 450 tons of gold through ETPs this year, the Zurich-based bank forecasts.
Mining Index
The 16-member Philadelphia Stock Exchange Gold and Silver Index, led by Freeport-McMoRan Copper & Gold Inc. and Barrick Gold Corp., fell 8.5 percent this year as metal prices dropped. All but one firm in the mining index is forecast to report an increase in annual earnings, according to the median of analyst estimates compiled by Bloomberg.
Higher silver prices hurt the profit of Rochester, New York-based Eastman Kodak Co. last year and are a “significant headwind” in 2011, Chairman Antonio M. Perez said on a conference call Jan. 26. Agfa-Gevaert NV, Europe’s biggest maker of healthcare imaging systems, said in a statement Nov. 15 that its Agfa HealthCare division was increasing prices for all imaging film products because of higher raw-material costs.
Bullion’s slide from a record is attracting buyers. “We struggle to recall a month when our total physical sales have been stronger,” led by Chinese gold demand, and turnover on the Shanghai Gold Exchange in January was a record, Edel Tully, an analyst at UBS, said in a report last week. “Elevated physical demand usually signals an impending bottom,” she said.
Silver Coins
Silver buying is also accelerating. One-ounce silver coin sales from the U.S. Mint jumped to a record last month. Ex Oriente Lux AG, based in Reutlingen, Germany, will start adding the metal to its U.S. ATMs that sell gold in banks, shopping centers and jewelry stores this month.
Investor demand for precious metals accelerated after the collapse of Lehman Brothers Holdings Inc. in September 2008 and as governments and central banks led by the Federal Reserve pumped more than $2 trillion into the world financial system. That stoked concern that inflation will accelerate. The Fed cut interest rates to near zero in December 2008 and have kept them there since and Greece and Ireland got bailouts.
“At the moment, people still have fear about inflation, about the debt crisis, and I don’t see any resolution to the debt crisis when the Fed is buying debt again and again,” said Thorsten Proettel, an analyst at Landesbank Baden-Wurttemberg in Stuttgart. “Most people will be loyal to their investment because the fear doesn’t evaporate.”
Bloomberg Ranking’s top precious-metal forecasters:
Average Error
Jochen Hitzfeld UniCredit 8.1%
Thorsten Proettel LBBW 12.1%
Anne-Laure Tremblay BNP Paribas 12.6%
David Wilson Societe Generale 13.9%
Suki Cooper Barclays Capital 14.8%
A Must-Have Report for Buying Gold Stocks
Learn How to Buy Gold Below Spot Prices
Tuesday, December 28, 2010
Indian Gold Appetite Remains Strong
Click here for the Gold Investing Profits Blueprint, a must-have report for investing in gold stocks
MUMBAI - Signs that the world’s second-largest economy China, is gearing into a formal monetary tightening cycle was apparent on Saturday, when the country’s central bank raised interest rates for the second time in two months.
Analysts maintained that gold would get pounded and the dollar rebound as a consequence.
But, on Monday, India’s gold demand was moderate as prices softened a touch on the back of a stronger rupee, and the news from China. However, on Saturday, December 25, gold broke through its five-days losing streak to rise marginally on mild-buying by retailers in Mumbai.
Traders said firmer trends in the global markets and the underlying appetite for the yellow metal continued to remain strong.
“Several buyers are waiting by the kerb for bigger dips as the year comes to a close,” said M Jhaverimal, a gold retailer in Mumbai.
He went on to add that overall, 2010 proved to be a solid year for gold, as the metal rose beyond 26%, after rising 24% in 2009 and 5% in 2008. “If one looks back, prices have not posted a negative annual return since the year 2000,” said Jhaverimal.
Bullion trader Ashish Shah added that the fundamentals for gold were supported by the lack of significant increase in mine outputs during 2010, and a fall in scrap gold sales.
“A sizeable chunk of the Indian population may still be living below the poverty line, but when it comes to buying gold, we are right up there in the front,” Shah added.
Though Indians spent around $ 6.9 billion to buy gold in the first three months (January-March) of the calendar year, and clearly gold demand in India is up, the question doing the rounds is, is it enough?
The figure is nearly ten times the $ 708 million that Indians spent to accumulate gold in the same period of the previous year. This clearly shows that the Indian consumers interest for the precious metal has grown by 10 times since the past year, Praful Sonawala, gold and diamond jewellery exporter said.
“Take a look at China. Its gold imports have already soared to a record 209 tonnes this year, putting it on track to overtake India as the world’s largest consumer,” he said.
China, already the largest bullion miner, imported more than 209 tonnes of gold during the first 10 months of the year, a five-fold increase from an estimated 45 tonnes last year. This clearly indicates that Beijing has overtaken India as the world’s largest consumer of gold.
China is also seen to be expanding its gold buying options for domestic buyers. The country’s regulatory authority has reportedly given its domestic mutual funds a nod to invest in gold ETFs (electronic traded funds) outside China.
The Industrial and Commercial Bank of China has also launched a gold accumulation plan for investors in mainland China. The daily payment scheme is very meagre, paving the way for small investors to invest in gold.
According to a report in a Chinese daily, when the People’s Bank of China announced the interest rate hike, Xia Bin, an advisor of the People’s Bank of China said that China should hold more gold reserves to diversify its forex reserve.
In a recent announcement, the World Gold Council said that as of mid-December, the United States remained the top country to hold reserves in gold and that the Chinese mainland ranked sixth with 1,054 tonne of reserves.
However, in spite of the Chinese mainland’s huge foreign exchange reserves, its gold reserve accounts for only 1.7% of total reserves. This only goes to show that China’s gold reserves are the lowest among the top 20 in terms of proportion.
India’s foreign exchange reserves, on the other hand, totalled $294.6 billion, down from $295.41 billion, as on December 10. According to a release from the Reserve Bank of India, foreign currency assets amounted to $265.4 billion, also down from $266.2 billion recorded in the previous week. At the same time, gold reserves remained unchanged at $22.12 billion.
“Both gold and silver are overbought at the moment. Technically, the market needs a severe correction,” said Shah, “But, the EU economy is still fragile, as are Japan and South America. Investors will still put money in gold,” he added.
A Must-Have Report for Buying Gold Stocks
Learn How to Buy Gold Below Spot Prices
MUMBAI - Signs that the world’s second-largest economy China, is gearing into a formal monetary tightening cycle was apparent on Saturday, when the country’s central bank raised interest rates for the second time in two months.
Analysts maintained that gold would get pounded and the dollar rebound as a consequence.
But, on Monday, India’s gold demand was moderate as prices softened a touch on the back of a stronger rupee, and the news from China. However, on Saturday, December 25, gold broke through its five-days losing streak to rise marginally on mild-buying by retailers in Mumbai.
Traders said firmer trends in the global markets and the underlying appetite for the yellow metal continued to remain strong.
“Several buyers are waiting by the kerb for bigger dips as the year comes to a close,” said M Jhaverimal, a gold retailer in Mumbai.
He went on to add that overall, 2010 proved to be a solid year for gold, as the metal rose beyond 26%, after rising 24% in 2009 and 5% in 2008. “If one looks back, prices have not posted a negative annual return since the year 2000,” said Jhaverimal.
Bullion trader Ashish Shah added that the fundamentals for gold were supported by the lack of significant increase in mine outputs during 2010, and a fall in scrap gold sales.
“A sizeable chunk of the Indian population may still be living below the poverty line, but when it comes to buying gold, we are right up there in the front,” Shah added.
Though Indians spent around $ 6.9 billion to buy gold in the first three months (January-March) of the calendar year, and clearly gold demand in India is up, the question doing the rounds is, is it enough?
The figure is nearly ten times the $ 708 million that Indians spent to accumulate gold in the same period of the previous year. This clearly shows that the Indian consumers interest for the precious metal has grown by 10 times since the past year, Praful Sonawala, gold and diamond jewellery exporter said.
“Take a look at China. Its gold imports have already soared to a record 209 tonnes this year, putting it on track to overtake India as the world’s largest consumer,” he said.
China, already the largest bullion miner, imported more than 209 tonnes of gold during the first 10 months of the year, a five-fold increase from an estimated 45 tonnes last year. This clearly indicates that Beijing has overtaken India as the world’s largest consumer of gold.
China is also seen to be expanding its gold buying options for domestic buyers. The country’s regulatory authority has reportedly given its domestic mutual funds a nod to invest in gold ETFs (electronic traded funds) outside China.
The Industrial and Commercial Bank of China has also launched a gold accumulation plan for investors in mainland China. The daily payment scheme is very meagre, paving the way for small investors to invest in gold.
According to a report in a Chinese daily, when the People’s Bank of China announced the interest rate hike, Xia Bin, an advisor of the People’s Bank of China said that China should hold more gold reserves to diversify its forex reserve.
In a recent announcement, the World Gold Council said that as of mid-December, the United States remained the top country to hold reserves in gold and that the Chinese mainland ranked sixth with 1,054 tonne of reserves.
However, in spite of the Chinese mainland’s huge foreign exchange reserves, its gold reserve accounts for only 1.7% of total reserves. This only goes to show that China’s gold reserves are the lowest among the top 20 in terms of proportion.
India’s foreign exchange reserves, on the other hand, totalled $294.6 billion, down from $295.41 billion, as on December 10. According to a release from the Reserve Bank of India, foreign currency assets amounted to $265.4 billion, also down from $266.2 billion recorded in the previous week. At the same time, gold reserves remained unchanged at $22.12 billion.
“Both gold and silver are overbought at the moment. Technically, the market needs a severe correction,” said Shah, “But, the EU economy is still fragile, as are Japan and South America. Investors will still put money in gold,” he added.
A Must-Have Report for Buying Gold Stocks
Learn How to Buy Gold Below Spot Prices
Sunday, December 19, 2010
India silver imports to hit 1200 tonnes in 2010
Click here for the Gold Investing Profits Blueprint, a must-have report for investing in gold stocks
MUMBAI (Commodity Online): India, the largest consumers of gold and silver in the world, is setting new records in the import of silver this year. Spurred by huge industrial and investment demand, silver import by India is likely to hit a record high this year.
According to the year-end estimates by the Bombay Bullion Association, the apex traders body in gold and silver, imports of silver by India will rise by nearly 25% in 2010 to hit more than 1200 tonnes.
Prithviraj Kothari, president of the Bombay Bullion Association, said that festive season sales and strong industrial demand has pushed up the consumption of the yellow metal in India in 2010.
“Despite the high prices of silver, the consumption of the metal has been rising in India. Silver sales have picked up in India during festivals. Silver imports by India will hit 1,200 tonnes in 2010," Kothari said.
In 2009, India’s import of silver was around 1,000 tonnes.
Kothari said that the increase in silver imports by India is supporting global prices, which have rallied to 30-year highs in December.
India's silver demand averages 2,500 tonnes per year and the country, which produces around 7.3 million ounces a year (206.95 tonnes).
Indian appetite for silver is coming partly from rural buyers as a normal monsoon in 2010 has boosted crop production with a consequent benefit to incomes, after last year's severe drought shriveled spending by farmers.
Around 50 percent of imports come from China while recycling makes up some of the supply of the metal.
Silver prices globally and domestically are currently running near record highs -- partly hauled up by gains in gold, but the poorer cousin is performing more brilliantly.
Domestic silver prices on India's Multi Commodity Exchange are currently close to records at 43,899 rupees per ounce and the metal is offering better returns than gold.
A Must-Have Report for Buying Gold Stocks
Learn How to Buy Gold Below Spot Prices
MUMBAI (Commodity Online): India, the largest consumers of gold and silver in the world, is setting new records in the import of silver this year. Spurred by huge industrial and investment demand, silver import by India is likely to hit a record high this year.
According to the year-end estimates by the Bombay Bullion Association, the apex traders body in gold and silver, imports of silver by India will rise by nearly 25% in 2010 to hit more than 1200 tonnes.
Prithviraj Kothari, president of the Bombay Bullion Association, said that festive season sales and strong industrial demand has pushed up the consumption of the yellow metal in India in 2010.
“Despite the high prices of silver, the consumption of the metal has been rising in India. Silver sales have picked up in India during festivals. Silver imports by India will hit 1,200 tonnes in 2010," Kothari said.
In 2009, India’s import of silver was around 1,000 tonnes.
Kothari said that the increase in silver imports by India is supporting global prices, which have rallied to 30-year highs in December.
India's silver demand averages 2,500 tonnes per year and the country, which produces around 7.3 million ounces a year (206.95 tonnes).
Indian appetite for silver is coming partly from rural buyers as a normal monsoon in 2010 has boosted crop production with a consequent benefit to incomes, after last year's severe drought shriveled spending by farmers.
Around 50 percent of imports come from China while recycling makes up some of the supply of the metal.
Silver prices globally and domestically are currently running near record highs -- partly hauled up by gains in gold, but the poorer cousin is performing more brilliantly.
Domestic silver prices on India's Multi Commodity Exchange are currently close to records at 43,899 rupees per ounce and the metal is offering better returns than gold.
A Must-Have Report for Buying Gold Stocks
Learn How to Buy Gold Below Spot Prices
India festive gold sales look bright, may bolster imports
India’s gold merchants are expecting a sustained pick-up in sales for the second round of festivals, as a reviving economy and stable prices may aid sentiment, triggering a reversal in declining trend in imports.
“People have started buying from July for the upcoming weddings, actually they all had money but unwilling to spend it due to recession, now they have started buying,” said Jaipur-based Jewel Ace Chief Executive Officer Justin Varkey, whose company sold Rs 25 million worth of jewellry last year.
India is currently hosting Asia’s second largest gems and jewellry exhibition in Mumbai, displaying gold ornaments from 700 domestic jewellers and 200 overseas makers.
The five-day fair is considered an indicator of order-book demand ahead of the August to November festival and wedding season, when gold buying tends to spike. Gold imports in 2009 fell to its lowest level in more than a decade as the worst monsoon in nearly four decades and fears of recession overseas dented sales.
“There could be a rise of over 10 per cent in imports this year as even monsoon are good, industrial activity is picking up along with employment,” said analyst Nayan Pansare.
Demand for gold in top consumer India hinges on a good monsoon, which boosts farm output and rural incomes. The crucial monsoon rains are likely to be above normal in the remaining two months of the June-September season.
“We have seen a growth in sales this year and are gung-ho for the season. We expect a rise of 50 per cent in sales,” said Mumbai-based retailer Cogent jewellry director.
Gold imports in India, the biggest consumer, rose 18.9 per cent to 155.6 tonnes in the first six months to June, and jewellers say there could be a reversal in trend this year given the positive feedback from consumers.
Prices have fallen more than 2 per cent from their all-time high of Rs 19,198 per 10 grams struck in early June, when investors overseas sought a safe-haven instrument amid the economic turmoil in the European Union. Prices have been in the range of Rs
17,500-18,750 for most part of the year. “It’s going to a cautious year after the recession last year,” said Pansare.
Industry participants say jewellry exports to the US would see a rise compared to other traditional markets like Japan and the European Union. “Order production has already begun for the US for Thanksgiving day and Chirstmas. We see a rise of 4 to 5 per cent in sales this year,” said Pansare, of Yash jewellry, which exported $100 million worth of jewellry last year.
India, which exported $28.41 billion worth of gems and jewellry last year to March 2010, shipped more than 60 per cent to the US, its largest market.
“In all, we feel that there could be a rise over 10 per cent in gems and jewellry exports and especially over 10 per cent from the US as the economy is coming out of recession,” said Gems and jewellry Export Promotion Council Chairman Vasant Mehta.
A Must-Have Report for Buying Gold Stocks
Learn How to Buy Gold Below Spot Prices
“People have started buying from July for the upcoming weddings, actually they all had money but unwilling to spend it due to recession, now they have started buying,” said Jaipur-based Jewel Ace Chief Executive Officer Justin Varkey, whose company sold Rs 25 million worth of jewellry last year.
India is currently hosting Asia’s second largest gems and jewellry exhibition in Mumbai, displaying gold ornaments from 700 domestic jewellers and 200 overseas makers.
The five-day fair is considered an indicator of order-book demand ahead of the August to November festival and wedding season, when gold buying tends to spike. Gold imports in 2009 fell to its lowest level in more than a decade as the worst monsoon in nearly four decades and fears of recession overseas dented sales.
“There could be a rise of over 10 per cent in imports this year as even monsoon are good, industrial activity is picking up along with employment,” said analyst Nayan Pansare.
Demand for gold in top consumer India hinges on a good monsoon, which boosts farm output and rural incomes. The crucial monsoon rains are likely to be above normal in the remaining two months of the June-September season.
“We have seen a growth in sales this year and are gung-ho for the season. We expect a rise of 50 per cent in sales,” said Mumbai-based retailer Cogent jewellry director.
Gold imports in India, the biggest consumer, rose 18.9 per cent to 155.6 tonnes in the first six months to June, and jewellers say there could be a reversal in trend this year given the positive feedback from consumers.
Prices have fallen more than 2 per cent from their all-time high of Rs 19,198 per 10 grams struck in early June, when investors overseas sought a safe-haven instrument amid the economic turmoil in the European Union. Prices have been in the range of Rs
17,500-18,750 for most part of the year. “It’s going to a cautious year after the recession last year,” said Pansare.
Industry participants say jewellry exports to the US would see a rise compared to other traditional markets like Japan and the European Union. “Order production has already begun for the US for Thanksgiving day and Chirstmas. We see a rise of 4 to 5 per cent in sales this year,” said Pansare, of Yash jewellry, which exported $100 million worth of jewellry last year.
India, which exported $28.41 billion worth of gems and jewellry last year to March 2010, shipped more than 60 per cent to the US, its largest market.
“In all, we feel that there could be a rise over 10 per cent in gems and jewellry exports and especially over 10 per cent from the US as the economy is coming out of recession,” said Gems and jewellry Export Promotion Council Chairman Vasant Mehta.
A Must-Have Report for Buying Gold Stocks
Learn How to Buy Gold Below Spot Prices
Thursday, December 16, 2010
The Chinese "rushing" to buy gold
Gold prices meandered within a fairly tight range overnight as fewer buyers or sellers were visible on the scene in the absence of substantial market news developments and amid the emergent trend among participants to square their books and head away from trading desks in search of holiday presents. This morning's market radar had two relatively noteworthy blips (one 'hot' the other 'not-so-hot') on display; the first one showed jobless claims filings dipping by 3K to 420,000 (the second lowest level of 2010) and the second one revealed that US housing starts gained by 3.9% in November (remaining sluggish, at best).
Spot gold dealings opened with muted (50-cent) gains this morning, quoted at $1,379.90 per ounce as the Kitco Gold Index revealed an about equal amount of dollar slippage-induced gains as it did losses from profit-taking selling among funds ahead of the end of the year. The low $1,370s remain an important support level that needs to hold, but on the other hand, the bullishness that was so pervasive even just a few days ago is thought to be invalid unless the metal manages to pierce through its most recent price peak. Following the data releases, bullion edged towards $1,375.00 per ounce.
As for future price peaks, well, they may run into a bit of a demand-side snag if the most recent take on the market by LiveMint.com turns out to be correct. LM Reporter Siddesh Mayenkar notes that India's gold demand will "take a hit as increasingly prosperous rural consumers switch to other investment options and step up on discretionary items."
While China's gold demand (provided a sizeable slowdown and/or higher interest rates do not alter the landscape significantly) may go part of the way towards filling such a potentially emergent demand slump, the author cites sources as projecting that "demand for gold from rural areas that account for about 70% of annual consumption, which averages 550 tonnes, is likely to fall to 50% in coming years, industry watchers say. With the government keen to make more savings avenues available, rural consumers would consider the newer instruments, taking away money from gold," said Pinakin Vyas, assistant vice-president with IndusInd Bank, a large gold importer."
Such a decline would amount to roughly 200 tonnes of gold not being sought by India's rural buyers as they shift purchase preferences towards durable goods and automobiles. Despite reports to the contrary and a heavy emphasis on this year's possibly much better gold intake, the bottom line is that India's 2009 gold demand hit its lowest level in nearly twelve years.
Bullion market participants note there are indications of market saturation in the consumption patterns visible of the world's top gold consumer and they fear that local investors are now more likely to switch to other asset classes, including equity mutual funds and real estate. All of this means, that the "pressure" to convince buyers to buy increasing amounts of yellow metals is now going to shift to China. What could be easier than tracking the number of stories on the topic (going forward) that include the country's name?
One can certainly blame the recent, ultra-high gold prices as the most visible culprit for this Indian trend, but one must also allow for this nascent shift in consumer priorities not only when it comes to investments, but to a 'general' and 'must-have' shopping list among Indian buyers."Sales of large domestic appliances and cars have grown exponentially and this was seen during Diwali itself, while gold sales have not kept pace with this rise," said Daman Prakash, director, MNC Bullion, a large gold seller."
The US dollar also offered little in terms of noteworthy movements as well, but managed to maintain above the 80-mark on the index as remaining concerns about the European debt situation kept bids on the US currency active and pressured regional equities. Moody's has motioned that it may yet need to take out its rating scissors and trim a letter or two off of Spain's current rating.
Over in the US, one of the most oft-gauged metrics of the housing market -foreclosure activity- showed a dramatic drop last month. The number of homes being notified that their title is about to be 'reassigned' to the lending bank fell by 21 percent in November, making for the largest such drop in five years. Part of the reason for such a contraction in troubled real estate filings can be found in a pattern that normally shows a 7 to 10 percent decline in such activity around year-end.
The other component that may be at work in this statistical release is the cessation of filings that resulted from the robo-signing scandal which made headlines during this fall. However, at the end of the day, actual repossessions by banks fell 28 percent last month to tally just over 67,000 US homes.
That is a relatively far cry from September's 100,000 mark, even as the current year's tally could well end up at a record one million homes seized. Nevada led the depressing parade of monthly foreclosures for what is now the fourth year in a row. The state also has the dubious distinction of showing the highest unemployment rate in the US.
Speaking of the Silver State, silver opened with a gain of twenty cents this morning, quoted at $28.99 per ounce as scattered buying was still manifest in fund-land and in ETFs. The white metal has been white-hot but it is precisely such a pattern that has prompted some observers to raise sizeable caution flags on the asset.
Last night's Elliott Wave update remarked that "stories of silver scandals and [market attempts at] corners are becoming so common that they are starting to surface in the mainstream press. No matter the news item or rumor, the interpretation among rabid silver bugs is invariably bullish." EW further notes that "a Wall Street Journal blog called "The Source" assesses the latest silver hysteria: "If you listen to reports and videos popping up on a number of websites these days, the same thing [that happened with the Hunt brother's attempted corner in 1980] is happening again."
"Only this time, [it is touted] silver could reach $500/oz from $29/oz currently, some of the reports suggest, because of the trading activities of a handful of banks that have been craftily cornering the market." Yes, it's happening again, and silver is actually a week past its peak. We could not ask for a more perfect confirmation that a protracted wave 3 down, is on for silver" concludes the update, targeting $25 as the first destination for silver prices as part of said wave that might be in the making.
Platinum opened with a $1 gain in New York, showing a quote on the bid-side at $1,696.00 per ounce. Its close relative, palladium, started Thursday's session with a $2 gain and a spot bid quote at $748.00 per troy ounce. Rhodium remained at rest at $2,280.00 per ounce. India (as shown above) and China remain at the front-centre (along with ETFs to be sure) in the platinum-group metals niche. This morning's announcement that GM sold its one-millionth passenger vehicle in China (a Buick Lacrosse, to a lucky buyer in Shanghai) this month only reinforces the trend.
The US automaker anticipates that is will move 2.3 million units (including minivans) in China this year. GM also looks for a 15% gain in sales for 2011. Hopefully, the possible expiration of government car-buying incentive schemes and (more importantly) China's new penchant for fighting inflation and imminently higher interest rates will not dent the locals' car fever to a significant extent.
Finally today, a round-up of potential winners for 2001 - as relayed by SFGate (the Chronicle) last night. The paper opines that while gold has been 2010's headline-maker, metals such as palladium, silver, lithium, and commodities such as coffee and most other food-related ones are likely to show good returns in the coming year. One must note that twenty-one commodities have "outgunned" the S&P this year, and that 17 of them are showing gains of over 20%. Thus, sustainability questions must also be posed at such a happy tally time.
Perhaps the more 'notable' stories of 2011 might just come from sectors such as the two commodities that were in the "dog house" in 2010: natural gas and cocoa. It's all about upside potential in undervalued niches versus chasing incremental gains (following 20, 30, and/or 50 percent gains already under the belt in certain commodities) at the risk of a trend reversal when least expected (with one possible exception: that to be allowed for certain items that we must all actually consume (or else): food and energy.
Until tomorrow,
Jon Nadler
Senior Analyst
Kitco Metals Inc. North America
A Must-Have Report for Buying Gold Stocks
Learn How to Buy Gold Below Spot Prices
Spot gold dealings opened with muted (50-cent) gains this morning, quoted at $1,379.90 per ounce as the Kitco Gold Index revealed an about equal amount of dollar slippage-induced gains as it did losses from profit-taking selling among funds ahead of the end of the year. The low $1,370s remain an important support level that needs to hold, but on the other hand, the bullishness that was so pervasive even just a few days ago is thought to be invalid unless the metal manages to pierce through its most recent price peak. Following the data releases, bullion edged towards $1,375.00 per ounce.
As for future price peaks, well, they may run into a bit of a demand-side snag if the most recent take on the market by LiveMint.com turns out to be correct. LM Reporter Siddesh Mayenkar notes that India's gold demand will "take a hit as increasingly prosperous rural consumers switch to other investment options and step up on discretionary items."
While China's gold demand (provided a sizeable slowdown and/or higher interest rates do not alter the landscape significantly) may go part of the way towards filling such a potentially emergent demand slump, the author cites sources as projecting that "demand for gold from rural areas that account for about 70% of annual consumption, which averages 550 tonnes, is likely to fall to 50% in coming years, industry watchers say. With the government keen to make more savings avenues available, rural consumers would consider the newer instruments, taking away money from gold," said Pinakin Vyas, assistant vice-president with IndusInd Bank, a large gold importer."
Such a decline would amount to roughly 200 tonnes of gold not being sought by India's rural buyers as they shift purchase preferences towards durable goods and automobiles. Despite reports to the contrary and a heavy emphasis on this year's possibly much better gold intake, the bottom line is that India's 2009 gold demand hit its lowest level in nearly twelve years.
Bullion market participants note there are indications of market saturation in the consumption patterns visible of the world's top gold consumer and they fear that local investors are now more likely to switch to other asset classes, including equity mutual funds and real estate. All of this means, that the "pressure" to convince buyers to buy increasing amounts of yellow metals is now going to shift to China. What could be easier than tracking the number of stories on the topic (going forward) that include the country's name?
One can certainly blame the recent, ultra-high gold prices as the most visible culprit for this Indian trend, but one must also allow for this nascent shift in consumer priorities not only when it comes to investments, but to a 'general' and 'must-have' shopping list among Indian buyers."Sales of large domestic appliances and cars have grown exponentially and this was seen during Diwali itself, while gold sales have not kept pace with this rise," said Daman Prakash, director, MNC Bullion, a large gold seller."
The US dollar also offered little in terms of noteworthy movements as well, but managed to maintain above the 80-mark on the index as remaining concerns about the European debt situation kept bids on the US currency active and pressured regional equities. Moody's has motioned that it may yet need to take out its rating scissors and trim a letter or two off of Spain's current rating.
Over in the US, one of the most oft-gauged metrics of the housing market -foreclosure activity- showed a dramatic drop last month. The number of homes being notified that their title is about to be 'reassigned' to the lending bank fell by 21 percent in November, making for the largest such drop in five years. Part of the reason for such a contraction in troubled real estate filings can be found in a pattern that normally shows a 7 to 10 percent decline in such activity around year-end.
The other component that may be at work in this statistical release is the cessation of filings that resulted from the robo-signing scandal which made headlines during this fall. However, at the end of the day, actual repossessions by banks fell 28 percent last month to tally just over 67,000 US homes.
That is a relatively far cry from September's 100,000 mark, even as the current year's tally could well end up at a record one million homes seized. Nevada led the depressing parade of monthly foreclosures for what is now the fourth year in a row. The state also has the dubious distinction of showing the highest unemployment rate in the US.
Speaking of the Silver State, silver opened with a gain of twenty cents this morning, quoted at $28.99 per ounce as scattered buying was still manifest in fund-land and in ETFs. The white metal has been white-hot but it is precisely such a pattern that has prompted some observers to raise sizeable caution flags on the asset.
Last night's Elliott Wave update remarked that "stories of silver scandals and [market attempts at] corners are becoming so common that they are starting to surface in the mainstream press. No matter the news item or rumor, the interpretation among rabid silver bugs is invariably bullish." EW further notes that "a Wall Street Journal blog called "The Source" assesses the latest silver hysteria: "If you listen to reports and videos popping up on a number of websites these days, the same thing [that happened with the Hunt brother's attempted corner in 1980] is happening again."
"Only this time, [it is touted] silver could reach $500/oz from $29/oz currently, some of the reports suggest, because of the trading activities of a handful of banks that have been craftily cornering the market." Yes, it's happening again, and silver is actually a week past its peak. We could not ask for a more perfect confirmation that a protracted wave 3 down, is on for silver" concludes the update, targeting $25 as the first destination for silver prices as part of said wave that might be in the making.
Platinum opened with a $1 gain in New York, showing a quote on the bid-side at $1,696.00 per ounce. Its close relative, palladium, started Thursday's session with a $2 gain and a spot bid quote at $748.00 per troy ounce. Rhodium remained at rest at $2,280.00 per ounce. India (as shown above) and China remain at the front-centre (along with ETFs to be sure) in the platinum-group metals niche. This morning's announcement that GM sold its one-millionth passenger vehicle in China (a Buick Lacrosse, to a lucky buyer in Shanghai) this month only reinforces the trend.
The US automaker anticipates that is will move 2.3 million units (including minivans) in China this year. GM also looks for a 15% gain in sales for 2011. Hopefully, the possible expiration of government car-buying incentive schemes and (more importantly) China's new penchant for fighting inflation and imminently higher interest rates will not dent the locals' car fever to a significant extent.
Finally today, a round-up of potential winners for 2001 - as relayed by SFGate (the Chronicle) last night. The paper opines that while gold has been 2010's headline-maker, metals such as palladium, silver, lithium, and commodities such as coffee and most other food-related ones are likely to show good returns in the coming year. One must note that twenty-one commodities have "outgunned" the S&P this year, and that 17 of them are showing gains of over 20%. Thus, sustainability questions must also be posed at such a happy tally time.
Perhaps the more 'notable' stories of 2011 might just come from sectors such as the two commodities that were in the "dog house" in 2010: natural gas and cocoa. It's all about upside potential in undervalued niches versus chasing incremental gains (following 20, 30, and/or 50 percent gains already under the belt in certain commodities) at the risk of a trend reversal when least expected (with one possible exception: that to be allowed for certain items that we must all actually consume (or else): food and energy.
Until tomorrow,
Jon Nadler
Senior Analyst
Kitco Metals Inc. North America
A Must-Have Report for Buying Gold Stocks
Learn How to Buy Gold Below Spot Prices
China Throttled, Gold & Silver a "Buy"
Hold "at least" 10% of your wealth in gold and Silver Bullion, says this analyst...
WITH THE RISK OF recession looming over the US and foreign economies once more, China seems to be coasting through with continuing growth through its exports, writes Byron King in Bill Bonner's Daily Reckoning.
But this trend does not seem likely to continue in the coming months.
A couple of weeks ago I was in Hong Kong attending the Roskill International Rare Earths Conference. So I was only in "China Lite" as one jaded acquaintance put it. (There's just no pleasing some people...) But it's as if the new airport, new bridges, new roads, new train station, new buildings and hustling, bustling, export-driven economics of Hong Kong just don't tell you enough. No. By some peoples' standards, you have to see the new airport, new bridges, new roads, new train station, new buildings and hustling, bustling, export-driven economics of Shanghai if you really want to experience the China story. But Hong Kong offered plenty of stimulus for one long trip.
Over the past 20 years, the key enabler of China's development was strong, export-led growth. With Hong Kong handling much of the cargo, China exported its way to dramatic prosperity, fueled by boatloads of imported Western currency – Dollars, Yen, Euros, etc. But that good fortune, and easy money from overseas, has come to a screeching, grinding halt.
Why? The global financial crisis has moved in for the long haul. Here in the United States, we're not enduring a typical, post-World War II, run-of-the-mill business cycle recession. It's not just the economic equivalent of a "standing eight count" in boxing. No, I'd say that the US economy is hard down on the mat.
Indeed, I believe that the current US economic situation is far graver than even the much-advertised Great Recession. When something recedes, that implies that it'll come back. If something recedes a lot, then it should come back in a big way, right? Thing is, I can't see how the US economy will come roaring back in any big way, and not anytime soon.
During a US recession in the olden days, for example, businesses would lay people off from a plant and then call the workers back when times were better. Today, businesses have laid people off, but then, in many instances, closed the plant for good and sold all the machinery for scrap. Under these circumstances, there won't be any recalls.
And if history is any guide, the United States cannot have an economic rebound without something like a recovery in housing. That's not happening, what with the banks still broken, lending stingy and the mortgage industry a total mess.
Nor is there significant evidence that other Western economies are poised for a major comeback. Really, which other economies are rebounding? Ireland? Italy? Britain? Japan? Nope. Even the mighty German economy isn't growing fast, and they brag about it.
So looking ahead, where's the continuing export-led growth for China? How can past patterns of trade and prosperity continue for China – and, by extension, for Hong Kong? Or stated differently, what does this mean for the future?
It's likely that the slowdown of external demand will throttle back China's ability to grow at its recent, historic rates. But is the Chinese leadership prepared to process and adapt to this new reality?
In the best light, the decline of foreign demand means the Chinese should channel less investment into their export model. The Chinese should redirect more investment toward internal consumption.
That's easy to say. But will this happen? Can China internalize its growth? Well, to be fair, it's already happening to some extent. Many China-based operations – for example, companies like Foxconn and Toyota – are paying Chinese workers higher wages. This translates into more purchasing power at the Chinese grass-root level.
But then we're also seeing stories about raging inflation in prices for food and energy at the Chinese retail level. And the vast multitude of Chinese people without the pay raises, who do not work for foreign companies, are stuck with the inflation as well.
Point is, there's nothing easy for China in making the transition from massive investment in formerly booming export-led growth to a new focus on internal consumption.
I believe that there's still a lot of thinking and planning in China that's stuck in the mind-set of economic boom times from the early part of this decade. We'll probably still see gross over-investment in obsolete economic ideas coming out of China. Entire industries will pursue growth and expansion in markets that are no longer there. The world will face the consequences of resources filtering through a trade model that's no longer valid. So what does all this mean for investors? Well, it means that there's even less reason to trust in national currencies over the long haul.
Sure, the local currency is how you keep score. It's what you get paid in. It's what you use to buy a house, pay bills, buy groceries, take a trip, etc. But looking forward, in any and every currency, inflation will nibble away at your wealth and savings.
What can you do? You can't change the world, right? No, but it gets back to that idea that you still want to own physical gold and silver as core holdings in your portfolio. For the past couple of years, I've been saying "5-10% in precious metals, or more if it helps you sleep at night." I'm going to change that to "At LEAST 10% in precious metals, or more if it helps you sleep at night."
I believe silver is probably a better play right now, with more upside than gold. I'd go for silver coins, without seeking any numismatic value. Just go for the Silver Eagles - bullion value - or any other high-quality metal issue from reputable mints.
Bill Bonner, 15 Dec '10
A Must-Have Report for Buying Gold Stocks
Learn How to Buy Gold Below Spot Prices
WITH THE RISK OF recession looming over the US and foreign economies once more, China seems to be coasting through with continuing growth through its exports, writes Byron King in Bill Bonner's Daily Reckoning.
But this trend does not seem likely to continue in the coming months.
A couple of weeks ago I was in Hong Kong attending the Roskill International Rare Earths Conference. So I was only in "China Lite" as one jaded acquaintance put it. (There's just no pleasing some people...) But it's as if the new airport, new bridges, new roads, new train station, new buildings and hustling, bustling, export-driven economics of Hong Kong just don't tell you enough. No. By some peoples' standards, you have to see the new airport, new bridges, new roads, new train station, new buildings and hustling, bustling, export-driven economics of Shanghai if you really want to experience the China story. But Hong Kong offered plenty of stimulus for one long trip.
Over the past 20 years, the key enabler of China's development was strong, export-led growth. With Hong Kong handling much of the cargo, China exported its way to dramatic prosperity, fueled by boatloads of imported Western currency – Dollars, Yen, Euros, etc. But that good fortune, and easy money from overseas, has come to a screeching, grinding halt.
Why? The global financial crisis has moved in for the long haul. Here in the United States, we're not enduring a typical, post-World War II, run-of-the-mill business cycle recession. It's not just the economic equivalent of a "standing eight count" in boxing. No, I'd say that the US economy is hard down on the mat.
Indeed, I believe that the current US economic situation is far graver than even the much-advertised Great Recession. When something recedes, that implies that it'll come back. If something recedes a lot, then it should come back in a big way, right? Thing is, I can't see how the US economy will come roaring back in any big way, and not anytime soon.
During a US recession in the olden days, for example, businesses would lay people off from a plant and then call the workers back when times were better. Today, businesses have laid people off, but then, in many instances, closed the plant for good and sold all the machinery for scrap. Under these circumstances, there won't be any recalls.
And if history is any guide, the United States cannot have an economic rebound without something like a recovery in housing. That's not happening, what with the banks still broken, lending stingy and the mortgage industry a total mess.
Nor is there significant evidence that other Western economies are poised for a major comeback. Really, which other economies are rebounding? Ireland? Italy? Britain? Japan? Nope. Even the mighty German economy isn't growing fast, and they brag about it.
So looking ahead, where's the continuing export-led growth for China? How can past patterns of trade and prosperity continue for China – and, by extension, for Hong Kong? Or stated differently, what does this mean for the future?
It's likely that the slowdown of external demand will throttle back China's ability to grow at its recent, historic rates. But is the Chinese leadership prepared to process and adapt to this new reality?
In the best light, the decline of foreign demand means the Chinese should channel less investment into their export model. The Chinese should redirect more investment toward internal consumption.
That's easy to say. But will this happen? Can China internalize its growth? Well, to be fair, it's already happening to some extent. Many China-based operations – for example, companies like Foxconn and Toyota – are paying Chinese workers higher wages. This translates into more purchasing power at the Chinese grass-root level.
But then we're also seeing stories about raging inflation in prices for food and energy at the Chinese retail level. And the vast multitude of Chinese people without the pay raises, who do not work for foreign companies, are stuck with the inflation as well.
Point is, there's nothing easy for China in making the transition from massive investment in formerly booming export-led growth to a new focus on internal consumption.
I believe that there's still a lot of thinking and planning in China that's stuck in the mind-set of economic boom times from the early part of this decade. We'll probably still see gross over-investment in obsolete economic ideas coming out of China. Entire industries will pursue growth and expansion in markets that are no longer there. The world will face the consequences of resources filtering through a trade model that's no longer valid. So what does all this mean for investors? Well, it means that there's even less reason to trust in national currencies over the long haul.
Sure, the local currency is how you keep score. It's what you get paid in. It's what you use to buy a house, pay bills, buy groceries, take a trip, etc. But looking forward, in any and every currency, inflation will nibble away at your wealth and savings.
What can you do? You can't change the world, right? No, but it gets back to that idea that you still want to own physical gold and silver as core holdings in your portfolio. For the past couple of years, I've been saying "5-10% in precious metals, or more if it helps you sleep at night." I'm going to change that to "At LEAST 10% in precious metals, or more if it helps you sleep at night."
I believe silver is probably a better play right now, with more upside than gold. I'd go for silver coins, without seeking any numismatic value. Just go for the Silver Eagles - bullion value - or any other high-quality metal issue from reputable mints.
Bill Bonner, 15 Dec '10
A Must-Have Report for Buying Gold Stocks
Learn How to Buy Gold Below Spot Prices
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