Bank of America Merrill Lynch raised its 12-month gold price target to $2,000 per ounce

The gold price dove Friday morning after the CME Group raised margins on gold futures contracts by 22%. The price of gold traded to a new all-time high of $1,815 per ounce overnight before falling back to $1,756. Initial margin will climb from $6,075 to $7,425 and variation margin – for hedging purposes – will move up to $5,500 from $4,500. The move by CME led to liquidation in electronic trading on the COMEX. 

One primary catalyst for the gold price rally and broader market weakness on Wednesday was escalating concerns that the European sovereign debt crisis was spreading to the euro zone’s second-largest economy, France. Rumors surfaced yesterday that Societe Generale – one of France’s largest banks – was facing liquidity issues related to its sovereign debt exposures.

In addition, speculation arose that the ratings agencies were preparing to downgrade France’s credit rating from AAA status. However, Societe Generale’s CEO emphatically denied the speculation, and a French downgrade has yet to materialize.

As for developments in the United States impacting the price of gold, Bank of America Merrill Lynch raised its 12-month gold price target to $2,000 per ounce. According to the firm, S&P’s downgrade of the U.S. AAA rating is likely to further contribute toward an uncertain economic backdrop in which gold prices generally flourish.

The downgrade will also “probably increase the pressure on emerging market central banks to diversify their international reserves of U.S. dollars and into gold,” Bank of America wrote in a note to clients. Furthermore, the firm wrote that “With inflation expectations anchored by high energy prices, real interest rates should remain low and provide support to gold prices going forward.” With respect to the Federal Reserve and its impact on the gold price, Bank of America estimated that there is a 40% chance that the Bernanke-led Fed will launch a third round of quantitative easing (QE3) within the next 12 months. This prediction echoed a call made by Goldman Sachs earlier this week that the odds of QE3 have risen above 50%, which would make the case for higher gold prices even

Source: http://malaysiagoldinvestment.blogspot.com/

When will silver catch up with gold’s stunning $100 advance?

The gold price shows every sign of going exponential as predicted by Jim Sinclair (click here). We have surged from $1,700 past $1,800 in a matter of days, so much for the normal low season in the summer for precious metals.

Silver has lagged behind and even slipped back a bit over the same period, albeit not dramatically from $42 to $39 at the time of writing. Then again in the run-up to the $1,700 gold price silver delivered almost twice the price gain of gold (click here).

Silver best buy

So what we have is a picture of volatile price movements, with gold and silver occasionally swapping places as the lead precious metal. Logically then with gold out front now, silver is the better buy and due for an upswing.

Why are these two precious metals so inter-linked? Well basically because they are both monetary metals, although both also have industrial and other uses. There are no other monetary metals.

Silver is often tagged as ‘poor man’s gold’ because it is so much cheaper than gold. Yet that gap has been closing for some years. The gold:silver ratio of three years ago was around 80, now its a little over 40.

Over the centuries the average gold:silver ratio is 12-16 and as gold increasingly becomes the currency of choice again we can expect to see this historic relationship resumed. Silver reserves are also much smaller than gold reserves and that is a key determinator of the supply/demand price dynamic as Eric Sprott recently pointed out (click here).

Higher than gold?

If you are really bullish on silver like author Mike Maloney then you can envisage silver one day being worth more than gold (click here). That still sounds a bit far fetched but the notion of silver outperforming gold in the coming precious metal bubble is not hard to imagine at all.

Perhaps over the past few days silver has sold down because it is also an industrial commodity. But it is not down by nearly as much as oil, for example, and is being supported by buyers who see it as a precious metal.

Also there might have been a temporary shift into gold from silver as a safe haven trade. But if so this is only a buying opportunity for what promises to be the best investment this year and most likely the next few years too. Buy now, these prices can not last much longer (click here).

Source: http://news.silverseek.com/SilverSeek/1313069178.php

The coming Silver Supernova

“Few investment opportunities arise in our lifetime like silver. The stage is set for a silver price percentage gain of extraordinary magnitude! Forget the popular refrain of “Got Gold?” and make some additions to your portfolio to take advantage of the coming silver supernova!" So said Donald J. Poitras in an email he sent me after reading an updated version of a recent article by me about the possible impact the historical gold:silver ratio could have on the price of silver should gold go parabolic to various levels. With Poitras’ permission I present below, in a reformatted and edited version, his views on why he believes there are other sound reasons why silver, in and of its self, can expect to experience a “percentage gain of extraordinary magnitude” in the years to come. As Poitras sees it: These Facts About Silver Say It All a) Diminishing Supply: Increasing Demand - Only 600 million ounces of silver are mined yearly yet industrial demand, with new uses being implemented every year, is currently over 900 million ounces per year. - Investment demand for physical silver has exploded with the advent of silver ETFs and the increase in actual ownership of the physical metal by interested parties worldwide. China, for example, is now encouraging its citizens to own silver. Demand is such in the U.S. that he U.S. mint is rationing silver coins. - Total known world above-ground silver inventories have declined by more than 98% in the past 75 years. b) Massive Short Position Exists - Silver has a massive short position, probably greater than any commodity in history. If one factors in short positions on COMEX and the leasing of silver by bullion banks, banks and brokers selling silver certificates and other silver instruments with no silver to back them  then it is quite possible that hundreds of millions – perhaps even billions – of ounces of silver are sold on paper that do not physically exist. c) Inground Silver Is Limited and Will Become Much More Expensive to Mine - The average occurrence of silver in igneous rock (igneous rock composes ~92.5% of the earth’s crust) is 0.07 PPM or 0.07grams of silver per metric ton of igneous rock, which means that on average 444.3 metric tons of igneous rock must be mined to obtain 1 troy oz of silver (1 metric ton/.07gram Ag)*(31.1gram/1troy oz)! - Because of the geological phenomenon of epithermal deposition, very little silver remains underground. - Only the recycling of silver-containing products, the mining of scarce surface silver veins and the silver by-product of base metal mining can provide fairly cheap silver. - Silver is not found in placer deposits like gold but in veins and these silver veins are formed as epithermal depositions or condensation near the earth’s surface (like whipped cream on the surface of coffee). Simply put, the richest silver deposits are nearest the surface of the earth, and the deeper mines go, the less silver they tend to produce. Economically, the deeper the mine, the more expensive the silver is to obtain. The Result: The Price of Silver Can Only Increase – Dramatically! - As current silver is depleted from the abovementioned epithermal deposits and mined deeper at much lower grades (approaching 0.07 grams per metric ton), the costs of mining silver must skyrocket and consequently the price of silver must explode. The stage is set for a silver price percentage gain of extraordinary magnitude! It is time to embrace the new refrain “Got silver?”

http://www.24hgold.com/english/contributor.aspx?article=3024350074G10020&contributor=Lorimer+Wilson

Silver Projected To Hit $90 Before The End of 2011

Elizabeth Kraus

While Paul Ryan’s proposal will do nothing to reduce health care cost but do the opposite, where individuals will have to carry a heavier burden, is not a “path to prosperity”, as the Ryan plan was titled. To summon up the words of the dean of progressive social policy, FDR who was asked his opinion of the platform of the American liberty League in 1935, which like the Ryan’s cabal, aimed to dismantle the New Deal under the guise of preserving individual rights and free enterprise, he told reporters, “say you shall love God and then forget your neighbor. For people who want to keep themselves free from starvation, keep a roof over their heads, lead decent lives, have proper educational standards, those are the concerns of the government.” Those are still the concerns of the government today, and to say we can’t afford them is an affront to the working people who built America today.But where ideals today lead us? Already a substantial percentage of the American people are feeling quite stressed, and they know, we are heading for some really difficult economic times– all the while looking to the government for personal bail outs. However, while this economy has millions of Americans feeling depressed, it is not the appropriate response, nor will it solve anything. Rather, once we understand just how bad our economic problems are, we should feel empowered, because then, we can start focusing on real solutions. And somebody really needs to start focusing on solutions because panic is starting to abound as already many top corporate insiders are selling off stock like there is no tomorrow. The biggest bond fund in the world, PIMCO, has been getting rid of all of their U.S. Treasuries. When Wall Street big shots starts freaking out you know that the hour is late. And, it certainly doesn’t help that the Middle East is in a state of chaos and that the Japanese economy is falling apart as a result of the recent disasters. So, in these uncertain times is where critics of investing in gold and silver really drive home … to own gold or silver to really save you, you might ask, is it really worth it? According to the Regal Assets analyst PIMCO is just another addition to the many who have been ditching U.S. Treasuries. “China has been unloading billions of dollars in U.S. Treasuries and will continue to unload as the dollar depletes in value” Regal Assets stated this morning in an interview.

In this economy, a lot of people have questions about silver and gold. As investors are turning to real “global currencies” such as gold, silver and oil, the answer suggests that paper currencies are not only becoming worthless, but rampant inflation is on the horizon, that says to analysts, gold and silver is the only safe haven…predicting that silver prices will reach as high as $100 in 2011 and $250 by 2015.

So, if one asks, is it worth it? Why is China buying like crazy! China’s silver consumption already accounts for 70% of the global total of industrial use, and its middle class isn’t even close to reaching its spending potential. But, China’s impact on the market isn’t the only thing catching the attention of silver analysts. As the global economy expands its size and reach… as technology advances… and as more ways to buy silver become available… as silver supplies have dwindled… more factors began affecting the price of silver more exclusively – for better or worse, which makes silver quickly gaining serious value in many highly profitable industries. Although it’s a less active and lower-volume market than gold, which means that purchases, even by individual investors, can make an impact on prices, 100 silvers buyers purchasing the same amount of metal as 100 gold buyers will have a bigger impact on the market. Think how much prices can spike when millions of Chinese investors flood the market with bids to purchase silver. Now, combine that with the global return of industrial silver demand.

Martin Hutchinson of Money Morning believes both silver and gold will continue climbing into 2011 and beyond. If enough investor momentum gains – and if China’s push for individual silver investment intensifies – he believes silver could peak past $100 in 2011. But that’s just the beginning. Silver could top out at $250 oz. in the next five years, as global mine production crawls in the face of increasing consumer and industrial demand. That’s an increase of more than 1,150% over current prices. Bear in mind that silver prices have been moving as fast if not faster than gold. So those who want to invest in silver better pull the trigger soon, or be prepared to watch from the sidelines as silver’s price explodes upward.

Matt Turner at Mitsubishi said this week, “one ounce of silver briefly rose above 40 of today’s US dollars per ounce in 1864, when the American Civil War neared its climax. In nominal dollars, the Hunt brothers’ multi-billion-dollar corner only saw it more highly priced on 5 trading days in January 1980. And while US investors waiting to buy silver are also still waiting for it to record a new intra-day high, it’s already broken new ground against the British pound and for most of the Eurozone, too.”

The cause? Gold investors have long tried to explain how metals are “telling us” something. “First warning” of the looming financial crisis, said Marc Faber in his Gloom, Boom & Doom Report of September ’07, was when “the price of gold more than doubled in nominal terms and against the Dow Jones Industrial Average [because of] ultra-expansionary US monetary policies with artificially low interest rates.” In which case, and with global interest rates further below zero today after inflation than at any time since 1980, what in the hell is silver telling us now?
“TIPS pay a lower rate of interest than regular Treasuries,” explained Bloomberg News when the yield offered by 5-year Treasury Inflation Protected Securities briefly dipped below zero (and $20 silver broke a 28-year high) back in March 2008. [That’s] because their principal rises in tandem with a version of the consumer price index which includes food and energy prices. Rising demand for TIPS [which pushes up prices and so pushes down the nominal yield] indicates investors expect the inflation adjustment to make up the difference.”

What great expectations TIPS buyers must have of Uncle Sam’s “inflation adjustment” today! They’re buying 5-year index-linked bonds with a nominal yield of minus 0.6%, anticipating a full 2.8% per year fillip from Washington when compared with the annual yield now offered by conventional 5-year bonds. And what greater hopes still must the new rush of silver investment hold…rejecting TIPS in favor of metal, and breaking silver’s tight connection with both gold prices and TIPS yields. The point that broke silver higher – was right when Fed chairman Bernanke vowed to begin QE2 in summer last year. That a fast-growing nugget of the world’s private wealth is fearful of the result is clear. That silver looks a turbo-charged play is clearer still.

There’s no bull market like a silver bull market, in short – just ask the Hunt brothers ahead of their bankruptcy, eight years after their corner blew up with the big inflation-fueled 1970s’ bull market. Double-digit Fed interest rates popped the bubble back then (plus a good dose of anti-speculative action by regulators and the exchanges, otherwise known as “saving the system” of course. It was sparked in turn by the Hunt brothers’ own naked greed, otherwise known to them as “inflation protection”). The most recent time silver got hot, however, it took oil at $150 and then the Lehman Brothers’ collapse to do to GDP growth and commodity prices what central bankers wouldn’t dare. Because raising interest rates to double digits to kill a “speculative frenzy” wasn’t politically possible. Silver’s and gold’s Bull Run on inflation. Which is worth bearing in mind whether you’re quitting, holding, ignoring or looking to buy gold or silver today. Did anyone imagine gold at $1492.40 or silver at $42.40? Well there you are!

Source: http://goldcoinblogger.com/silver-projected-to-hit-90-before-the-end-of-2011/#more-2955

I can already smell QE3

The gold price climbed $10.20 to $1,657.85 per ounce Friday morning, holding firm despite a stronger than expected jobs report in the United States. The Labor Department reported a gain of 117,000 nonfarm payrolls versus an estimate of 85,000 according to a Bloomberg survey of economists. The unemployment rate fell 0.1% to 9.1%. The weak jobs picture has been a key area of focus for the U.S. Federal Reserve. Tepid jobs data, notwithstanding this stronger than anticipated report, has been a key driver of rising speculation that Chairman Bernanke may be preparing for a third round of quantitative easing.

Gold prices are advancing as traders and investors add to positions in the yellow metal via physical gold, gold futures, and exchange-traded funds backed by gold bullion.

Marc Faber, not exactly the biggest fan of Ben Bernanke, had some interesting words for the Federal Reserve Chairman.

Faber, the author of The Gloom, Boom and Doom Report, said in a Bloomberg interview that in light of the recent turmoil in financial markets “I can already smell QE3.”

“Next week we will see if Bernanke is a true money printer or just an amateur money printer,” Faber continued, referencing the upcoming Federal Open Market Committee (FOMC) meeting.

As for his view on the broader markets, Faber predicted substantial volatility in the months ahead. ”Stocks will be dropping 30%, then rallying 20%, and dropping another 30%. That’s going to be the pattern. And whoever can’t live with that shouldn’t be buying equities at all.”

Faber – who has been bullish on gold for many years – also noted that with real interest rates in negative territory, investors have few safe choices. U.S. government bond yields are extremely low, and are denominated in what he described as a weakening currency. Cash pays next to nothing, and equities are very risky. As a result, Faber reiterated his positive outlook on the yellow metal, but did not provide a price target at this time.

Source: http://malaysiagoldinvestment.blogspot.com/ 

Global Debts Are Compounding

To understand the aberration in any system, one simply needs to look at the present economic actions being structured throughout world governments. The fact that there are forces building toward a massive global economic meltdown has left little trust in governments. The positive aspect to this present economic crisis is, that its time for a good housecleaning if you will. Leaving the doors wide open to reexamine an out of control mechanics in the presently aberrated policies. Such no less evident in the latest crisis yesterday as 50% of Spain’s youth out of jobs were protesting the Spanish government. While millions of Italian are smoldering on a brink of default Greece is going to need a third bailout along with a slew of 19 more European countries heading for default. Each risk sparks a deeper economic crisis for a new global transformation that proves to be imminent. Collectively, world wide debt is much too high and it compounds daily. Bailouts of any kind further dig the debt hole while addressing the political and economical situation as well in the US. Those still in the la-la-Ameriland expecting economic growth by listening to politicians’ own agenda’s, are unable to fathom, the US is in an economical decline.

It is clear, that to shrink the deficit in the US is a no brainer and must be done. It is on everyone’s mind without putting American economy at risk. However, American economy has been long at risk. The smoke in the mirror is gone; the US is caught in a catch 22. The chess game in Washington stalling is a slow economic checkmate. Whether its politicking or nobody knows what to do, or the debt ceiling is raised or not, taxes will come into play as the battle for the future of this country continues. With the financial calamity of I want what I want with politicians, it’s like a water balloon, you squash it on one side and it balloons on the other until it pops.

The fact remains, the globe is caught up in overspending and the clock is ticking toward hyperinflation —which is impossible to dispute. The guardians of the land do not know how to cross over to protect the land and its inhabitance, thereby giving gold to take the helm. As a true store of value, gold again becomes a demand for safe-haven and oasis in a financial world. With the U.S. and Europe having repeatedly shown that they are both unwilling and unable to take the difficult steps to really deal with serious and catastrophic debt issues, it’s easy to see why today’s development is going to be highly bullish for long-term gold and silver prices. Asian’s muscle not to be underestimated. Neither is Mark Faber’s market advice, who has since 2000 been quite accurate in predicting gold and oil prices as he reminds investors, “I just calculated if we take an average gold price of say around $350 in the 1980’s and then we compare that to the average monetary base in the 1980’s, and to the average US government debt in the 1980’s…but if I compare this to the price of gold to these government debts and monetary base, then gold hasn’t gone up at all. It’s gone actually against these monetary aggregates and against debt it has actually gone down. So I could make the case that probably gold is today very inexpensive….”

Every time gold looks too expensive it reach a new record. Investors are beginning to see the catastrophic economic situation is only the beginning. States in the US are in just as much trouble and will be going to the Fed for bailouts. “While waiting for the shoe to drop on taxes and other credit bailouts along further crisis yet to be unveiled, it’s important to see how China in particular are protecting their assets with gold, and will be to long-term commodity prices,” says Regal Asset Team of Analyst.

Source: http://goldcoinblogger.com/global-debts-are-compounding/#more-3308 

US Deficit

Pimco Total Return Fund manager and bond guru, Bill Gross, states the obvious.  Now that the debt ceiling debate is over, we have to realize that this whole kerfuffle did not make a dent in the budget deficit.  By the way, you heard it here many times that we would, in fact, get a debt ceiling increase and that all the drama was overdone.

Here is what Bill Gross wrote on our growing government debt in his latest monthly Investment Outlook column [emphasis added]:

• Nothing in the Congressional compromise reached over the weekend makes a significant dent in our $1.5 trillion deficit.
• In addition to an existing nearly $10 trillion of outstanding Treasury debt, the U.S. has a near unfathomable $66 trillion of future liabilities at “net present cost.”
• Aside from outright default, there are numerous ways a government can reduce its future liabilities. They include balancing the budget, unexpected inflation, currency depreciation and financial repression.

Now, that the debt ceiling legislation has passed, we can and should move on to the greater and far more important issue — huge annual budget deficits and burgeoning debt.   Despite all the talk about trillions in budget cuts, Gross points out that there is very little substance to those claims:

…The Office of Management and Budget (OMB) estimates that future deficits will be reduced at most by .5%…

Did you get that?  OMB estimates a 0.5% (1/2 percent) decrease in future deficits. Right now we are hearing anguished cries about budgets being slashed, but the reality is that there is nothing in the debt ceiling compromise other than a modest slowing of the rate our debt is growing.

Let’s take a look at the future deficits as foreseen by the Congressional Budget Office (CBO) and you can judge for yourself if there is any budget cutting at work.

Source: Congressional Budget Office / Heritage Foundation

According to the CBO projections, deficits will be at or above $1 trillion as far as the eye can see.  So, we will quickly burn through this latest debt ceiling increase and we will have to go through this whole thing again.