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Which Way Next for Precious Metals?

On February 6, 2012, in Commodities, by Tim

[Following are excerpts from the current issue of the Weekend Update at Iacono Research.]

After marching steadily higher early in the week, gold and silver saw their biggest one-day losses in more than a month on Friday as hopes for more Fed money printing were dashed after the better-than-expected labor report. Still, both metals maintain impressive gains for 2012 after a disappointing end to 2011 as more attention is focused on demand in China and actions by central banks, two of the most important price drivers in recent months.

After rising above $1,760 an ounce for the first time since November, the spot gold price ended the week 0.7 percent lower, down from $1,737.30 an ounce to $1,725.90, as the silver price surged past the $34 mark before reversing course, ending the week down 0.9 percent, from $33.99 an ounce to $33.67. The gold price is now up 10.2 percent for the year, but down 10.3 percent from its 2011 high, and silver has risen 20.8 percent in 2012, down 32.0 percent from its peak last spring.

We’ll find out soon enough if Friday’s sell-off was anything more than a one-day event.

Clearly, there have been many good reasons for the price of precious metals to head higher over the last month – demand from China, loosening monetary policy by central banks, and increased gold purchases by central banks topping that list – and many technical analysts have been shocked by the ease which previous resistance levels have so quickly been surpassed and now function as support. Up until Friday, technical factors were unquestionably positive, but, with the late-week reversal, some now argue that the metals have come too far, too fast and the Friday correction will continue.

[To continue reading this story, please visit Seeking Alpha.]

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Some of the Many Unintended Consequences of the Ongoing North Dakota Oil Boom

On January 30, 2012, in Commodities, Economy, by Tim

From last week, a series of interviews at Bloomberg with government officials in and around the North Dakota oil boom region where the influx of out-of-state workers is stressing government services, infrastructure, housing, and other things.

We’re only about an eight hour drive from that area and, as a result, we hear quite a bit of the local news that doesn’t make it to the network news broadcasts including two separate instances of locals being murdered by men attracted to the area and, for whatever reason, choosing an alternative path than driving a truck for an oil company.

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“Golden Ben Bernanke” – Five Years Later

On January 29, 2012, in Commodities, by Tim

In writing this week’s issue of the Weekend Update for the investment site  Iacono Research (BTW – a brand new combined blog/investment website is coming next month), I got to thinking again about how good Ben Bernanke has been for the gold price over the years and, in the process, found this item at the old blog that carried the following chart.

The funniest thing about it are the prices – only three digits with a lower scale of $280!

I’ve long referred to the Fed Chief as “Golden Ben Bernanke” and, after last week’s FOMC meeting and what it did for the gold price, it looks he’ll cement that reputation this year.

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Stocks More Volatile than Gold?

On January 26, 2012, in Commodities, by Tim

Here’s another gold chart that is sure to get under the skin of investment advisers who have refused to add a little of the yellow metal to their clients’ portfolios during its 11-year run that, based on the month of January, looks to be headed for number 12.

From the World Gold Council’s latest commentary on gold as an investment comes the chart below showing that U.S. stocks were much more volatile than gold in recent years.

This Commodity Online story about central bank bullion buying is worth a look as well. I remember hearing about Mexico buying a lot of the stuff last year but didn’t know they managed to garner the top spot with nearly a 100 tonne increase.

Of course, we’ll probably find out in a few years that China bought much more than that in 2011, central bank officials there wary about telling the rest of the world about their purchases lest the price rise too fast before they’re done buying.

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India, Iran, Oil, and Gold

On January 25, 2012, in Commodities, by Tim

The Iran oil embargo and freeze of its central bank assets approved by Europe the other day has had an interesting unintended consequence – and not just another threat by Iran to block the Strait of Hormuz. According to this Debka report, India has agreed to pay for Iranian oil with gold instead of U.S. dollars and China is expected to follow suit.

So far, there has been no official confirmation of this story and, at the moment, I’d have to agree with this commentary at Commodity Online that it’s probably best viewed as a rumor, but, if both India and China do intend to pay for their $25 billion per year in oil purchases from Iran with the yellow metal, that could result in a lot of gold being mobilized.

Of course that wouldn’t necessarily mean that the gold price will rise. India could simply exchange their currency for gold, transfer ownership of the gold to Iran in exchange for oil, and then Iran could exchange that gold for whatever currency they desire, having no net effect on gold demand. But, it certainly won’t hurt the gold price and will surely further diminish the reserve currency status of the U.S. dollar.

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Gold: Where it comes from, where it goes

On January 24, 2012, in Commodities, by Tim

Here’s another one of those infographics, this one on the subject of the shiny yellow metal from the folks at Trustable Gold, and it provides a pretty good summary of where the barbarous relic comes from and the many forms of investment it takes (click to enlarge).

The Gold Tree Infographic

What’s interesting about the bottom half of the chart is that the world’s number one gold producer – China – has a relatively small amount of identified underground gold reserves. If investment demand continues to increase, we might just run out of the stuff.

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