The emerging market turmoil in January got the safe haven ball rolling. The slowing U.S. economy then added another boost, especially with Yellen keeping the same policies as Bernanke.

Gold is a safe haven

And now geopolitical concerns, like the crisis in Ukraine, are giving gold yet another safe haven push upward.

Plus, with the U.S. dollar under pressure, while interest rates stay low, it’s also bullish for gold.

Overall, physical demand and economic jitters are boosting the gold price.

The ever growing demand

Clearly, the world has plenty of uncertainty. From Russia, Ukraine, Venezuela, emerging currency devaluations, the sluggish U.S economy, as well as the slowdown in China, the world has hot spots. 

With this backdrop it’s easy to understand why demand continues to grow. The world wants gold.

Today gold is in a C rise that began with the December lows.

So far gold’s 15% rise looks good and gold is strong above $1300. Gold could now easily rise further to test its August high near $1420.

In fact, if gold rises back up to its 23 month moving average and prior support, we could see the $1485 – $1536 level tested.

Keep in mind, a rise of this type would be a very good looking rise. But gold won’t really turn bullish until it can rise and stay above these levels.

Gold stronger than gold shares… but for long?

Gold has fallen less than gold shares. Clearly, they are the volatile ones of the group. Gold shares tend to rise more, and fall more than gold does.

But comparing gold to gold shares, you can see on Chart 1 that the mega trend still favors gold.

In gold shares’ case, the ratio rose to an extreme high in 2013, favoring gold, because gold shares collapsed when gold fell. This is saying that gold shares are poised to continue outperforming gold until a more balanced situation evolves.

Chart 2A provides another angle. Here you can see how much weaker gold shares have been compared to gold since the 2011 peak. This weakness widened the most last year. But as the ratio (B) shows, it’s formed a downside wedge also suggesting that gold shares will continue to outperform gold this year, and possibly beyond.

Gold shares are up 33% on average since their mid-December lows, which suggests that a major shift in sentiment is taking place. Investors are starting to turn toward gold and gold shares.

We recommend buying and keeping both.

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Mar 14, 2014
Mary Anne & Pamela Aden
email: 
info@adenforecast.com 
The Aden Forecast

Condo prices to drop 4% this year and next and because of market machinations Single Family Homes are actually are rising and expected to be firm this year and next according to TD Economics. This TD interviewer MaryAnn speaks with Derek Burleton, who is the Deputy Chief Economist of the TD Bank Group about why this is happening & what factors they are looking at that allows them to be confident in their forecast.  Editor Money Talks 

Click HERE or on the image to listen to the 6 1/2 minute video interview:

Two economic reports hit the newswires Thursday morning (March 6). Both were important, yet each one had the opposite implication for the trend. 

The market chose one report over the other, and the question is, why — and what can we learn from that?

Both reports came out at the same time, 8:30 Eastern on Thursday morning. One was from Europe, where the European Central Bank said that they, “…decided to keep the key ECB interest rates unchanged.” That suggested that the European economy was getting stronger.

As the gold and silver markets turn the corner and move back to the uptrend, mining companies are recovering quite nicely. Ahead of the ‘credit crunch’ in 2007, the common belief was that almost any mine was a good investment. Since then, many investors have learned a salutary lesson on the subject often seeing his investment fall to a level far below the price he paid.

Each investor has his favourite gold shares and may continue to believe his chosen vehicle will reward him the most. Nevertheless, it’s good to review what a gold or silver share is and what principle should govern an investor’s selection of shares over all other principles.

What are your investing objectives?

Each investor usually has an investment objective, whether it is short-term profit, capital gain, dividend flow or the broad concept of ‘total return’ (capital and income returns added together). Which one do you fall under?

The most successful investors have the advantage of being able to reinvest their income flow from investments getting the joys of compound returns. This means that they have invested with shareholders in mind. When looking at an investment, one has to define it carefully, particularly in gold, silver mining companies.

After all, a mine is not gold and silver; it’s a derivative of the metals, in that it relies on the prices of both gold and silver for its success. But it remains a corporation run by fallible people facing many corporate risks. A great deal has to happen in this structure for the individual shareholder to benefit from the gold or silver prices.

Main Investment Principle

The first rule of investing in precious metal companies is to look for a company that is focussed on rewarding shareholders. This means that the cash flow they receive is targeted at paying dividends to shareholders. Some companies do this by formalizing an agreement to pay shareholders a percentage after tax cash flow. They also define what costs they will be spending their capital on, including exploration costs. As a shareholder you can relate your investment potential to gold and silver prices. Without this, how will you know the gold share will benefit from a rising gold price?

This was highlighted in the publication of Australian gold production in the December quarter. Remarkable on a low gold price, gold production had risen. At 74 tonnes, gold production was the highest it had been since June quarter of 2003. Why?

Gold producers are treating less low-grade material, which results in higher output and reduced costs. Lower prices forced a switch from lower grade ores to higher grade ores because of the need to maintain a particular level of profitability. The cut in reserves being seen among producers all over the world has the effect of shortening the life of the mine while production rises. Producers usually aim to maintain profitability, not necessarily to increase it. So if the gold price rises, we expect production to drop as miners return to lower grade material –this extends the life of the mine, but is it in the interests of shareholders? Of course not!

The days of pre-2007 –when shareholders were content to see mining company share rise in price—all long gone. The uncertainties of the financial world demand a specific return on the shareholders’ capital employed. In other words, the investor needs to maintain a cash flow that justifies the capital value placed on their shares.

What’s important to investors is that the companies behind the shares are not companies who extend the life of mines at the expense of shareholder cash flows.

Be Certain of Company Policies!

Gold and silver producers who link their profits to dividends irrevocably, reward shareholders. Investors should look for these companies. Such policies should be encapsulated in Mission Statements that define their approach to rewarding shareholders. A mining share will only reflect moves in the gold price, if the path to shareholder rewards is spelled out. If it isn’t, then the link to gold is muddied, and risks are heightened.

IDEAL GOLD, SILVER PRODUCERS FOR INVESTORS

Of course, the gold company that keeps increasing the size of its gold reserves faster than it uses these to produce gold, is the one that extends its life no matter the gold, silver price. The rate of production is then defined by its capacity and ability to produce. This number divided into the reserves is what defines its life. This is the mining company to choose.

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Legal Notice / Disclaimer

This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment.  Gold Forecaster – Global Watch / Julian D. W. Phillips / Peter Spina, have based this document on information obtained from sources it believes to be reliable but which it has not independently verified; Gold Forecaster – Global Watch / Julian D. W. Phillips / Peter Spina make no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Gold Forecaster – Global Watch / Julian D. W. Phillips / Peter Spina only and are subject to change without notice. Gold Forecaster – Global Watch / Julian D. W. Phillips / Peter Spina assume no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this Report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Furthermore, we assume no liability for any direct or indirect loss or damage or, in particular, for lost profit, which you may incur as a result of the use and existence of the information, provided within this Report.

With gold near $1,350, and the world worried about war breaking out in Ukraine, today an acclaimed money manager spoke with King World News about $10,000 gold, Russia, China, the United States, and Ukraine. Stephen Leeb has a friend who is one of the best Chess Coaches in Russia, and his perspective on what is going on makes this article worth reading – Editor Money Talks

$10,000 Gold, Russia, China, The United States & Ukraine

Leeb:  “Eric, I’m focused on geopolitical factors and how desperate the West seems to be to keep this world running.  Every day that goes by there are more signs of desperation.  Putin is giving no sign whatsoever of backing down in Ukraine.  It’s very clear that he is going to annex the Crimea….

“He will also make a run at other eastern Ukrainian enclaves where there are a lot of Russians.  I think the United States and Europe are going to be left holding the bag.  

Part of the desperation on the part of the West is because of the fact that Putin has tremendous access to energy resources, whereas the West does and it doesn’t. The costs of fracking are incredibly high, and the public has no idea about the chemicals that really go into fracking. Almost every single one of the chemicals that goes into fracking has a negative health effect.

The reason I am suspicious of the government’s motives with fracking is because this is really our only card left to play.  We don’t have any real viable energy resources in the Western world, aside from fracking.  We cannot satisfy demand for energy unless we go to extremes.

We are looking at a geopolitical crisis right now where there is no answer — where the West is powerless.  There is a tremendous alliance between Russia and China over natural resources.  What is not making the headlines is the fact that the president of China just had a long conversation with Merkel, Cameron, and Obama.  Did you see that anywhere in the headlines?

I can tell you the nature of that conversation:  The president of China warned the West not to start any trouble.  He also told them not to slap any sanctions on Russia.  Meanwhile, the United States is supporting a Ukrainian regime without legitimacy, that also has extreme Nazi-style support.  One of the biggest concentration camps in World War II was right outside of Kiev.  How does it make any sense for the West to support these thugs, Eric?  The answer is, it doesn’t.

But every day the West is becoming less and less powerful.  So how can we rely on the the U.S. dollar to remain as the world’s reserve currency?  How can we rely on the euro to be the second most desirable currency in the world?  It makes no sense, and people are starting to get this message.  This is why gold has bottomed.

The real run in gold, the one that takes us to $10,000, that comes when people realize that ‘the emperor has no clothes.’  Yes, China has problems but they are many steps ahead of us.  Russia also has the right idea.  Today Russians live much freer than they ever did in the past 400 years.

I have a friend who travels to Russia each year.  He is one of the best chess coaches in Russia.  He owns property in Russia, and he knows people all over the country who verify that the country is freer today than it has ever been.  Putin’s popularity within Russia is also higher than it’s ever been.

So this is why the West is acting out of such desperation.  They know the clock is ticking against them and their dominance of the world.  But all of the propaganda in the West is to convince the people that the West is still number one.  This is not true.  The emperor’s clothes are coming off, and the gold market is going to reveal this at some point.

We may have a few more chapters to complete before we see $10,000 gold, but this book will be completed.  And when the book is completed, this world will not be recognizable.  What we are seeing right now is the last gasp effort on the West’s part to show its dominance.

We are literally witnessing history before our eyes.  We are living through a point of inflection and the West is desperate to hold on to what it has but we won’t be able to do it.  The bottom line is the move to $10,000 gold will mark a dramatic shift of power from West to East.  It will also mark the end of Western dominance altogether.”

IMPORTANT – KWN has released more interviews since this one was published