Gold & Precious Metals

Euro-zone finance ministers panicked this weekend and agreed to a preemptive announcement of a $125 billion bailout for the Spanish banks, bringing the grand total for bank bailouts to $600 billion when Ireland, Portugal and Greece are added.

Money printing on this scale has only ever been good for precious metal prices by historical precedent. The bank bailouts are an example of money creation at the source with banks able to lend more against this new capital injection and sterilizing bad debts.

Precious Metal Prices

It sets gold up to power above the $1,923 all-time high of last September and hit $2,000 an ounce this fall, while silver will as usual outperform to the upside and cross the 1980 all-time high of $50 and go to $60. This is only what we heard in the Dubai Old Souk earlier this year (click here).

Of course the euro-zone politicians have been panicked by the upcoming Greek election on June 17 to do something now rather than wait for the contagion to hit Spain. It remains to be seen whether preempting market fears has actually put them ahead of the curve.

Nobody really knows the likely course of events after the Greek election. Watching the TV programs with politicians lashing out at each other smacks more of anarchy than a stable democracy. But many have begun to question the practicality of leaving the euro.

The single currency was not designed for countries to come and go. Liquid assets in euros have already fled Greece but going back to an independent currency would still mean huge losses for the rich, although it would also create a buying opportunity.

Perhaps then the euro zone will bite the bullet and accept even bigger losses on Greek debt, and create money to save its banking system as an alternative. The sudden cave in over Spain at the weekend certainly suggests that is the way the wind is blowing.

Monetary Inflation

More and more paper money in the system, more and more sovereign debt, it can only end badly and most certainly with much higher inflation levels. Inflation in China jumped last month as the world’s third largest economic bloc slowed down.

Investors who want to beat inflation are left with fewer and fewer options. Central banks cannot print gold, they can only buy it themselves as an inflation hedge and help to push up the price. Silver is a tiny market that will follow and outperform gold as a sister monetary metal.

There are few win-win scenarios for global investors in these markets, expect more and more investors to jump on this train. That is why prices are going higher.

 

About the Author

Peter Cooper

ArabianMoney.net editor and publisher Peter Cooper is based in the Dubai Media City, and has been working as a senior journalist in the region since 1996. He was then the founding editor of the Gulf Business, the first-ever business magazine published in Dubai. In the year 2000 he was a founding partner in the business news and information website ameinfo.com.

His book about ameinfo.com, ‘Opportunity Dubai: Making a Fortune in the Middle East’ was No.1 in The Daily Telegraph Book Club for six months. An Oxford graduate in politics and economics, Cooper spent a decade in London as a financial journalist specializing in real estate and construction. He is also the author of ‘Dubai Sabbatical: The Road to $5,000 Gold’.

ArabianMoney.net editor and publisher Peter Cooper is based in the Dubai Media City, and has been working as a senior journalist in the region since 1996. He was then the founding editor of the Gulf Business, the first-ever business magazine published in Dubai. In the year 2000 he was a founding partner in the business news and information website ameinfo.com.

His book about ameinfo.com, ‘Opportunity Dubai: Making a Fortune in the Middle East’ was No.1 in The Daily Telegraph Book Club for six months. An Oxford graduate in politics and economics, Cooper spent a decade in London as a financial journalist specializing in real estate and construction. He is also the author of ‘Dubai Sabbatical: The Road to $5,000 Gold’.

Market Update: S&P 500 Technical Status

Posted by Brooke Thackray Market Letter

on Tuesday, 12 June 2012 14:15

Market Update
Europe is back in the news with Spanish banks in trouble. Interestingly, until very recently Spanish Prime Minister Mariano Rajoy denied that Spanish banks needed assistanceat all. It is always the same, deny, deny, deny….until you have to admit the truth. At the current time it appears that Europe is trying to put together a rescue package to help the Spanish banks. In all likelihood a package will materialize. It is diffi cult to say where the funding will be sourced: ideally it would be sourced from the EFSF, but its statutes only allow bank recapitalization through a sovereign government. Europe has proven itself to be a master of developing methods and special funds to break its own rules.
 
Rajoy is insistent that the recapitalization should not go through the Spanish government and should be direct to the banks. Basically, he wants to avoid the stigma of a bailed-out nation and any austerity measures that may be
 
Cont….page 3 (full Market Letter)

 
S&P 500 Technical Status
I was almost premature last month on calling a target of 1250 for the S&P 500. On June 1st the S&P 500 almost reached the target and closed at 1278, just below its 200 day moving average. The market has since bounced strongly and is just short of its resistance level of 1350. Ceteris paribus, everything else being held constant except normal market action, the market is going to have diffi culty getting through the 1350 level. If it does, look for a challenge up to the April high just above 1400. I say this knowing full well that in current times there is no such thing as normal market action. If Europe comes up with an aggressive solution to solve their on-going crisis, the market will respond positively. If Greece elects a government that is anti-austerity, the market will respond negatively. It is very difficult to predict these exogenous varaibles that can move the market strongly one way or the other.
 
On the downside I still expect the S&P 500 to reach at least 1250. If Europe, in typical European fashion, continues to muddle through their problems and present iterative solutions that are barely enough to solve the immediate crisis, then it is very conceivable that the market will challenge the 1150 level. The S&P 500 is currently in the 1250-1350 channel that was established over a number of months last year which is a signifiant channel and if it is broken to the downside on strong volume, a challenge at 1150 is very conceivable.
 
Given that we are still in the six month unfavourable season it is best for investors to remain conservative. Despite a conservative stance, a possibe tradeable rally may exist from late June until mid-July, as the market typically anticipates positive earnings from U.S. companies. Overall investors should remain cautious in their positions.
Picture 1
 

A golden idea to save (or doom) the euro

Posted by Eric Regully via Peter Grandich

on Tuesday, 12 June 2012 7:00

Gold is back in the news, big time, and not just because the price may be on the verge of another upswing or that Peter Munk is turning Barrick, the world’s biggest gold company, into a CEO meat grinder. It’s because Germany, it appears, wants to make gold the effective currency of the euro zone before the region plunges to the bottom of the seas like a concrete U-boat.

MORE RELATED TO THIS STORY

  • IMF says Spanish banks need at least $50-billion in aid
  • Stumbling economies have central banks girding for more intervention
  • Greek economy continues to crumble

 

The weakest euro zone countries are tapped out financially and economically. But a few of them are brimming with gold reserves. Take Italy…

…..read more HERE

goldcoinsbars

Global Insights – June 11th

Posted by Kevin Konar

on Monday, 11 June 2012 17:47

Kevin Konar

»» Stocks in North America and Europe rallied on news reports a Spanish bank bailout forthcoming. The clock is ticking.

»» Even though Bernanke didn’t tip his hand, the Fed may end up launching QE3 after all, but to what end? (page 3)

»» Many Americans are turning a blind eye toward U.S. fiscal cliff and European risks. (page 3 – U.S. section)

»» China’s interest-rate cut may be seen as reactive, rather than preemptive. (page 4 – Asia Pacific section)

»» Global Roundup: Updates from the U.S., Canada, Europe, and Asia. (pages 3-4)

Click Here to read the complete analysis

Investing for Income – Sat. June 16th

Our good friend Kevin Konar of RBC Dominion Securities is hosting a special seminar on Saturday, June 16th in West Vancouver entitled “Investing for Income  – What you need to know TODAY to Increase Income, Reduce Taxes and Minimize Risk.”

Kevin has been gracious enough to set aside some FREE seats exclusively for our MoneyTalks audience. If you live in the Lower Mainland we highly recommend that you take advantage of this opportunity. Michael Campbell asked Kevin to present on this topic last February at the 2012 World Outlook Financial Conference and this seminar is an expanded version of that presentation. Seating is limited.

Date: June 16th, 2012
Time: 10:30am
Location: Welsh Hall – West Vancouver Public Library – 1950 Marine Drive, West Vancouver (enter library via main entrance, Welsh Hall is downstairs on the bottom floor)

There is a parking lot beside the West Van Library that you can enter via Bellevue Street

To confirm your attendance please e-mail Brian Moore at brian.e.moore@rbc.com“>brian.e.moore@rbc.com This e-mail address is being protected from spambots. You need JavaScript enabled to view it with your name and contact information. For more detailed information, please call 604-981-6645.

Topics to be discussed include:
– specific income alternatives to today’s low rates
– why dividend income is so crucial for anybody who pays taxes
– time tested investment strategies that minimize risk
– how to invest so that both your  income and your capital increases in value over time
– the current outlook for both interest rates and the equity markets

Financial markets around the globe are struggling to figure out how to price in the European political response to the European debt/financial crisis. One minute it looks like there is a serious risk of contagion, bank runs and a death spiral that will set off a true global depression…the next minute it seems that there is hope that the authorities will finally “come together” and “fix” the problem

It reminds me of an observation made by Robert Prechter (www.elliottwave.com) many years ago, “Markets reflect the social mood, not the other way round…when the social mood changes the markets change.

On Friday June 1 stock markets ended hard on their lows (and gold rallied $60) as the European mood was grim and the American employment data added to the picture of a very weak global economy. On Monday June 4 there was additional downside pressure in the stock markets early in the day…but then markets felt “sold out”…and went sideways to better through Tuesday.Wednesday through Friday saw a huge change in mood with the DJI rallying over 500 points from Monday’s lows to Friday’s close…with some violent intraday price swings across asset classes (stocks, currencies, interest rates and commodities.)

I’m wondering if we may have seen another KEY TURN date on June 1/June 4…or just a s/t change in psychology. Market sentiment was extremely negative June 1/June 4, yet prices reversed sharply across asset classes this past week…see charts below.

Short Term Trading: I bought gold May 25 (after holding a short position from early Feb to early May) and I liked the $60 surge on June 1…but I liquidated my position Tuesday June 5 when I sensed a change in psychology across markets (less reason to “want” to hold gold?) and noticed on the charts that gold had rallied into serious resistance levels around $1625. I felt some seller’s remorse Wednesday when prices went higher but I was happy to be out of the position when gold fell on Thursday and Friday. This week I also liquidated the S+P contracts I bought May 24 at around breakeven. I probably should have liquidated the trade for a loss when the market broke to new lows on June 1…but “trader’s instinct” told me the market was s/t oversold and might bounce off the support levels around 1275 created last October, November and December. In truth, I didn’t manage the S+P trade very well…I justified hanging onto a losing trade by changing the time frame of my analysis…usually a really dumb idea…and I was lucky to get out around breakeven. I ended the week with no positions and felt fortunate to have made some money in very choppy markets. Now I can start next week with a clear mind and look for trading opportunities without the emotional baggage of holding a position!  

Charts: To say that we have had very choppy markets with manic depressive mood swings would be an understatement. Last week I pointed out Weekly Key Reversals Up in gold, silver and platinum and Weekly Key reversals Down in the S+P…this week we have a Weekly Key Reversal Up in the S+P and Ross Clark points out a three day Island Reversal Up on the S+P day session chart  for June 1,2 and 3. Note: On the weekly chart the S+P may have found support around the 1250/1275 levels from last fall.

In terms of “did we just see a Key Turn Date June 1/June4?” here are some charts from the commodity, currency, and interest rate markets that show reversals around those dates:

Here’s a very interesting Weekly Island Reversal Up for Banco Santander…one of Spain’s biggest banks:

 

:

 

 

 

Politics and the Social Mood: The Republican win in Wisconsin‘s recall election may be seen as a turning point in US politics, and that turn may herald a loss for Obama in the Presidential elections. Governor Walker represents a mood in America that says, “We’ve got to cut back on the expensive promises we’ve made to government employees.” The fact that the people of the state returned him to office may be a sign that enough people across the country know that Big Expensive Government has to be cut back. There seems to be little sign of that kind of mood in Europe where the welfare state remains entrenched…(Hollande election) and at the margin capital will flow away from Europe and towards America if it becomes increasingly clear that America is prone to (relatively!) less government and Europe is prone to more. The Supreme Court ruling on Obamacare…due before the end of June…may be another signal of a changing social mood…a ruling against Obamacare will be bullish for US stocks and USD.

My Big Picture View: Deflationary pressures remain unrelenting across global financial markets…with the potential for a “deflationary shock” if the European crisis ramps up. The first interest rate cut in China in 4 years is not “reflation bullish”…but is a sign that the economy there is slowing and the authorities are trying to counter deflationary pressures. My “rolling thunder” thesis for the sequence of deflationary pressures showing up first in America, now in Europe and next in Asia is based on a crude assessment of cultural willingness to “come clean” on problems…in other words…the Americans wash their laundry in public, the Europeans don’t and the Asians definitely don’t!

Article from http://www.victoradair.com/