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REMINDER: All investment, economics, and finance related material now appears at the new IaconoResearch.com. For the time being at least, this has become a personal blog covering a variety of mostly unrelated topics.

Clearing Up Buffett’s Misconceptions On Gold

On February 15, 2012, in Commodities, Our Culture, by Tim

Like many gold investors, I’ve grown increasingly tired of listening to what Warren Buffett has to say about the yellow metal in recent years, but his latest comments do offer something valuable. It is another timely reminder that conventional wisdom here in the U.S. is decidedly “anti-gold,” and that many investors will never, ever understand (or care) why gold has been one of the very best performing asset classes for more than a decade (many of them never even bother to try).

In many ways, this is a classic case of cognitive dissonance, a condition that I normally summarize as “rejecting out of hand or going to great lengths to construct weak/invalid arguments against beliefs that are inconsistent with other strongly held views”.

In short, for many to believe that there is a valid investment case to be made for gold, they must grapple with other uncomfortable possibilities, such as the idea that the world’s monetary system is unsustainable over the long run and that, perhaps, many assets have been mispriced for decades now due to actions taken by central banks and other policymakers, and that this was a major cause of the ongoing financial crisis.

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

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Lamest Negative Gold Commentary Ever

On February 15, 2012, in Commodities, Uncategorized, by Tim

Some have come to expect the folks at the Wall Street Journal’s MarketBeat blog to be dismissive of ‘Ol Yeller, but this offering from the WSJ Real Time Economics Blog has got to be one of – if not THE – weakest negative commentaries on gold that I’ve ever read.

It was as if they weren’t even trying… The two comments were better than the post itself:

rfs wrote:
Another uninformed idiot babbles on about gold price as if the writer actually owns any gold!!!! Gold and silver over the past 10 years have been one of the worlds best investments and some twerp is going to make the call on it !!!!!

GAB wrote :
one does not have to own gold to make an analysis. India arranging payments to iran using gold is a bullish event. news from china on gold is most bullish. further central bank buys will be bullish. always bearish is the ability of the bullion banks to manipulate the price lower, especially during times of the trade day when volume is the lightest.

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There’s Gold in Them Weddings

On February 14, 2012, in Asia, Commodities, by Tim

I’ve read stories about the role of gold in Indian weddings for years now, but this 60 Minutes segment the other day put the matter into a little better context, though it would have been nice if they’d focused more on the weddings of ordinary people rather than focusing so much on how the fabulously wealthy conduct theirs.

One thing is certain – those Indians are crazy about their gold. Even at $1,700 an ounce. They’re also crazy about arranged marriages – I knew the percentage was high, but was kind of surprised to hear the figure at 75 percent. What’s the divorce rate there?

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China: The Gold Market Elephant in the Room

On February 13, 2012, in Asia, Commodities, by Tim

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

Despite CME Group (Chicago Mercantile Exchange) lowering margin rates for futures accounts, a stronger trade-weighted dollar spurred by safe haven buying due to Greece’s latest sovereign debt troubles sent precious metals prices sharply lower on Friday.

Before the late-week sell-off, the gold price had tested the previous week’s multi-month high while silver reached a fresh three-month high as China continues to be the most important story for precious metals markets in 2012, speculation growing about how much gold their central bank is buying and how high retail gold and silver sales will rise this year.

For the week, the gold price fell almost four dollars, from $1,725.90 an ounce to $1,722.10, as the silver price dropped eight cents– from $33.67 an ounce to $33.59. The yellow metal is now up 9.9 percent for the year, but down 10.4 percent from its 2011 high, and silver has risen 20.6 percent in 2012, down 32.1 percent from its peak last spring.

Despite its “safe haven” reputation, over the short-term, gold continues to move with other risk assets when investors become skittish and seek safety in the U.S. dollar and U.S. Treasuries, almost exclusively. Such was the case on Friday, as elected officials in Greece resigned their posts in protest of austerity measures that they thought went too far, imperiling the next $170 billion in bailout money needed to avoid a debt default next month that would plunge the area into chaos.

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

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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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