Gold Getting Dearer at Home

Gold Getting Dearer at Home

THT Online

Kathmandu, November 23 The price of gold saw a continuous rise this week. According to Nepal Gold and Silver Dealers' Association (NEGOSIDA), "The price of gold kept increasing in the domestic market despite decreasing in the international market due to devaluation of the Nepali rupee against the US dollar, and the fluctuation in price of oil in the international market." There was no respite for the domestic market as the precious yellow metal has been getting dearer despite the fall in international price. On Friday, gold closed at Rs 19,935 per 10 gram in the domestic market despite it dropping to $748 per ounce. The precious yellow metal on Sunday opened at Rs 19,375 per 10 gram - Rs 170 higher than last week's closing price. The price remained constant on Monday whereas on Tuesday it surged by Rs 155 to Rs 19,550 per 10 gram and again remained constant on Wednesday. However, it went up to Rs 19,760 on Thursday and closed at Rs 19,935 per 10 gram on Friday. Silver remained constant at its opening price of Rs 287 per 10 gram throughout the week.

Aussie gold production at 20-year low

Australia is on track to record its lowest annual gold production in 20 years, but prices for the precious metal are at record highs, a report says.

Production in the September quarter rose slightly from the previous quarter, with output totalling 56 tonnes, mining consultants Surbiton Associates said.

However, it was still the third lowest quarterly production figure in 20 years, Surbiton Associates director Sandra Close said.

"It looks as though Australia's gold production for the full 2008 year will be the lowest since 1989," Dr Close said.

"It will be somewhere between 25 to 30 per cent lower than the peak year of 1997."

Offsetting the lower output is the soaring value of gold, with its average price in Australian dollars near $1,000 per ounce during the quarter.

"In early October, Australian gold prices rose to an all-time record of just over $1,400 per ounce during intra-day trading," Dr Close said.

"This was due to a combination of a high US dollar gold price and a rapidly declining Australian dollar exchange rate."

Investors seeking security have flocked to gold in recent months as world stock markets plunge.

The September quarter was a mixed one for individual producers, with several reporting strong results while others went to the wall, the report said.

GBS Gold Australia, the operator of Union Reefs south of Darwin, and Mercator Gold, at Meekatharra in Western Australia, went into administration during the quarter, Dr Close said.

"The low-cost producers are making excellent profits, but those at the high end of the cost curve are battling," Dr Close said.

"Some of the miners and also some of the explorers with limited cash resources are vulnerable."

The economic downturn has begun to impact mineral exploration, including gold, Dr Close said.

Governments need to look at encouraging exploration as it is key to securing long-term prosperity in Australia's gold mining industry, she said.

"Commodities such as iron ore, base metals and coal are dependent on industrial demand but gold can always be sold," Dr Close said.

"Gold projects can be developed relatively quickly and as gold is a high-value, low-volume product, it does not require expensive transport and port facilities."

For Sellers, Cash Is Good As Gold

(Tampa Tribune (FL) Via Acquire Media NewsEdge) Nov. 23--TAMPA -- Tough economic times are turning jewelry stores into buyers instead of sellers as people bring their gold to convert glitter into green.

"It's the way a lot of our jewelers make their money now," said Sarah Streb, chief operating officer of the Retail Jewelers Organization, a Newton, Iowa-based group with about 800 retail jewelry store members.

The jewelers buy from customers and sell to a refiner at a profit.

"It's recycling the gold," Streb said.

The trend started about midyear.

"That's when our members started talking about it," Streb said.

At Magnon Jewelers in South Tampa, owner Winnie Marvel organizes gold parties. A host provides the house and wine; friends bring gold.

"I buy and they party," Marvel said.

Recently, Barbara Blair of St. Petersburg took some jewelry to the Gold and Diamond Source in Clearwater to convert to cash.

"I am one of those many people that live paycheck to paycheck. And you've got to do something to be able to pay house payments, buy food," Blair said.

She didn't like selling jewelry she had accumulated over the years or that came as gifts from her parents.

"It's kind of rough," Blair said. "But I like to eat, and I like to have power, so I have to take care of it somehow."

Most transactions are based solely on the value of the gold.

Aussie gold production set for record low as prices soar

Australia is on track to record its lowest annual gold production in 20 years, but prices for the precious metal are at record highs, a report says.

Production in the September quarter rose slightly from the previous quarter, with output totalling 56 tonnes, mining consultants Surbiton Associates said.

However, it was still the third lowest quarterly production figure in 20 years, Surbiton Associates director Sandra Close said.

"It looks as though Australia’s gold production for the full 2008 year will be the lowest since 1989,' Dr Close said.

"It will be somewhere between 25 to 30 per cent lower than the peak year of 1997."

Offsetting the lower output is the soaring value of gold, with its average price in Australian dollars near $1,000 per ounce during the quarter.

"In early October, Australian gold prices rose to an all-time record of just over $1,400 per ounce during intra-day trading,' Dr Close said.

"This was due to a combination of a high US dollar gold price and a rapidly declining Australian dollar exchange rate."

Investors seeking security have flocked to gold in recent months as world stock markets plunge.

The September quarter was a mixed one for individual producers, with several reporting strong results while others went to the wall, the report said.

GBS Gold Australia, the operator of Union Reefs south of Darwin, and Mercator Gold, at Meekatharra in Western Australia, went into administration during the quarter, Dr Close said.

"The low-cost producers are making excellent profits, but those at the high end of the cost curve are battling," Dr Close said.

"Some of the miners and also some of the explorers with limited cash resources are vulnerable."

The economic downturn has begun to impact mineral exploration, including gold, Dr Close said.

Governments need to look at encouraging exploration as it is key to securing long-term prosperity in Australia’s gold mining industry, she said.

"Commodities such as iron ore, base metals and coal are dependent on industrial demand but gold can always be sold," Dr Close said.

"Gold projects can be developed relatively quickly and as gold is a high-value, low-volume product, it does not require expensive transport and port facilities."

Gold Bugs Should Put Caution Aside

Gold Bugs Should Put Caution Aside !

Gold passed every strength test we could devise last week, ending on an upswing that hints of significantly more upside to come. From a purely technical standpoint, we like the fact that corrections have been routinely reversing at Fibonacci-based supports, and that most of the subsequent rebounds have easily surpassed at least two prior peaks on the hourly chart without pausing for breath. Such rallies are known as “impulse legs” in our Hidden Pivot nomenclature, and the ones that we’ve been seeing in bullion lately have been giving us the confidence to trade and position from the long side even as some well-known gold bulls have been calling for an correction to as low as $750.

We’ll be ready if and when it comes, since no important price reversal can possibly occur without signaling us first on the five- and fifteen-minute charts. When bearish impulse legs start to metastasize for a day or two in this way, that will be our warning to reef the sails. However, so far, gold has shown no signs of weakness, only a heartening eagerness to move higher.

Certain developments have understandably stoked fears that bullion is overdue for a punitive correction. For one, a sharp dive recently in Europe’s economic vital signs appears to be turning the European Central Bank dovish, and that would be bullish for the dollar, at least in theory. And for two, despite extremely aggressive easing by the Fed in recent weeks, the dollar has stood its ground. If it survived such a nasty hit without falling to new lows, the thinking goes, then it must be revving up for a powerful rally. Thus, with two seemingly good reasons for the dollar to strengthen, gold can only go down, right?

Credit-Fairy Skeptics

We don’t think so, and here’s why. In the first place, there is no chance the ECB is going to ease more aggressively than the Fed. Although most American economists evidently believe that easy money is the way back to growth, their European counterparts have never put much store in the credit fairy. Consequently, the ECB could lower administered rates somewhat, but not nearly as much as the Fed. And this means that both the dollar and the euro should continue to cede ground to gold.

Goldbugs who are worried about a rising dollar should keep in mind that when we speak of a “strong” dollar, it is only relative to other currencies, all of which are fundamentally worthless, that it could be so egregiously mischaracterized. In the weeks and months ahead, if the ECB shades toward easing, that could slow the dollar’s decline relative to the euro, but both currencies can only fall relative to gold. Indeed, gold priced in euros has just broken out on the long-term charts. As it gathers strength for an historic push above $1,000, we see little reason for caution.

When Gold Coins Were ‘Just Money’

When Gold Coins Were ‘Just Money’

With gold stealing up on the $1,000 mark, it’s silver bulls who are just coming to the party. Better late than never, we say. Silver would be trading for around $54 an ounce right now if it were keeping pace with gold the way it did in the early 1980s. In fact, you can still buy all the pure silver you want for around $20/ounce -- a relative bargain. That’s about where we got on board when ‘Ag’ was rampaging toward $48/ounce during the 1970s bull market in precious metals. We bought two bags of “junk” silver from “Trader Sam” Frudakis, whose San Francisco coin shop sits like a vault in the heart of the Mission District.

Coins are a great way to go if you find that you are constantly getting in and out of precious metal stocks as they nervously ascend to who-knows-how-high. Once the coins are socked away in your safe-deposit box, you’re not as likely to part with them as you would shares. They’re not so easy to lug around, since each bag contains a little more than 44 pounds worth of pre-1965 dimes, quarters and halves with a face value of $1,000.

It’s hard to believe there was a time when Americans actually paid for things like chewing gum, soap and cigarettes with coins that were 90% pure silver. But we did, and few even thought to hoard these coins when their pot-metal replacements first started to circulate in the mid-1960s. You’d have to be an old-timer to remember the ringing sound coins used to make when you dropped them on a hard surface. Now they just go “thunk,” since they are mostly zinc. Even the slugs that thieves once used in parking meters and vending machines were classier than what the government mints today.

An Insult to Jefferson

Some of the newer coins are downright insulting to those whose faces appear on them. Remember the Sacajawea dollar, which the Treasury practically couldn’t give away? And Thomas Jefferson, whose alleged face appears on a $1 coin currently circulating, didn’t fare much better: From most angles he looks like his eyes have been pecked out. Compare it to the $20 “Double Eagle” designed by Augustus St. Gaudens (shown above). Looking at this coin, you could get the idea that Miss Liberty was a source of deep pride to Americans back then.

Let the price of gold fall by 90 percent and the Double Eagle will still be an object of incomparable beauty. They were minted from 1907 and 1933 and used by ordinary Americans to buy ordinary things. The St. Gaudens was commissioned by Teddy Roosevelt, who, inspired by the beauty of ancient Greek coins, felt that America, too, should have magnificent coins. How ironic, then. that the St. Gaudens was confiscated by his cousin FDR for a measly $20.67 an ounce. The government seized them because they were not considered collectible.

Were any country to circulate coins like the St. Gaudens today, it would be set upon by barbarian hoards. Will such a nation as that ever rise again?

So Why Did Gold Barely Budge?

So Why Did Gold Barely Budge?

A tediously dull gold market appeared yesterday to shrug off the extremely inflationary implications of the Fed’s latest rescue plan for the banking system. The central bank sent shares soaring on Wall Street with the announcement that it will set aside $200 billion of Treasurys to lend to banks and securities dealers. The unsubtle subtext was that the central bank would accept as collateral for such loans any worthless or nearly worthless scraps of paper the borrowers might have lying around. That would represent a radical and unprecedented augmentation of the Fed’s role as lender of last resort, especially since no one believes that the initial, $200 billion will prove to be much more than the ante in this global-stakes game.

Considering the news, gold’s yawning reaction was most puzzling. Is it possible that bullion finally agrees with the theory, broached here with increasing urgency in recent months, that deflationary forces emerging in the financial sector have grown too powerful to be countered by loose monetary policy, no matter how profligate?

Nose-Deep in Garbage

The plan will effectively shift the risks in the banking system onto the Fed’s own balance sheet, so that instead of holding mainly Treasury securities, the central bank will soon be nose-deep in loans and mortgage-backed securities of dubious value. For individual investors looking for a way to respond to the news, the correct course of action would seem to be: keep buying gold and silver. Of course, this has been more or less true since the Federal Reserve was created in 1913, empowering the government to create money out of thin air. But given the inability of gold to achieve new highs yesterday, and because of its equally stolid reaction to last Friday’s alarming unemployment report, we would suggest that gold bugs ratchet up their cautiousness a notch or two in the weeks ahead. In practice, this will mean closely monitoring gold’s vital signs as it flirts with the $1,000 level.

Under the Fed’s new plan, bond dealers would be able to borrow up to $200 billion in Treasurys by pledging mortgage-backed securities (MBS) as collateral. The loans would be for up to 28 days instead of overnight, as is presently the case. To further buttress its intentions, the Fed has tripled the size of swap agreements with the European Central Bank and the Swiss National Bank, allowing them to borrow up to $36 billion dollars from the Fed that could be loaned to their own client banks.

Liquidity Not Enough

With the news, the U.S. stock market opened dramatically higher -- as well it should have, given the bracing dose of liquidity the changes will provide to the financial system. But we hasten to point out that the prospect of enhanced liquidity alone may not do much to boost consumer borrowing or collateral asset values, both of which have begun to implode for psychological reasons that go much deeper than any concerns most of us have about bank-system reserves. Although the banks’ freshly perfumed reserves will briefly exude the aroma of rose petals, there are probably few “worker bee” borrowers among us who still have a taste for imbibing more “nectar”. More likely is that raising banks’ credit limits and weakening the rules governing collateral will only temporarily lubricate interbank lending and sustain for a while longer the illusion that the banking system is solvent.

Recognizing that there is no way it can induce consumers to borrow-and-binge once again with the economy slipping into a real estate deflation, the Fed has seized on an extremely risky alternative. By assuming effective ownership of all the bad paper that has clogged the credit markets, the central bank has given the banks the statutory ability to create more loans. But if the demand for loans fails to materialize and now-burgeoning bank reserves go unused, then we are about to see a collapse in money velocity that would be deflationary in the extreme.

No Hyperinflation

That is what we expect, and it implies there will ultimately be no hyperinflation. However, as long as the threat of one seems real, gold and silver quotes are likely to remain firm. But the threat could vanish quickly if and when the speculative blowoff that has seized commodity markets ends, presumably taking the stock market with it. Even then, precious metals are bound to outperform other classes of investment assets and hold their purchasing power. But it nonetheless remains a possibility that this will come about because their price has fallen less steeply than that of other assets and investables.

That is what we expect, and it implies there will ultimately be no hyperinflation. However, as long as the threat of one seems real, gold and silver quotes are likely to remain firm. But the threat could vanish quickly if and when the speculative blowoff that has seized commodity markets ends, presumably taking the stock market with it. Even then, precious metals are bound to outperform other classes of investment assets and hold their purchasing power. But it nonetheless remains a possibility that this will come about because their price has fallen less steeply than that of other assets and investables.