Published:
Thursday, 10 May 2012 | 11:40 AM ET

By: Antonia
van de Velde
CNBC.com Deputy News
Editor

Following disappointing economic data from the United States and more volatility from elections in
Europe, demand for gold will remain resilient, and the
precious metal will not lose its appeal as the currency of last resort, Goldman
Sachs said Thursday.

Goldman said it was sticking by its bullish forecasts, and said the precious metal
could still hit $1,840 within six months.

“We believe it is too early for the US dollar to reclaim this status [of flight-to-safety asset], as the
original U.S. dollar concerns have not disappeared,” Goldman analysts wrote in
a note to clients.

Despite the turmoil in Europe and weak employment data in the U.S., gold has not acted as a
safe haven in recent days. Spot gold fell to its weakest level since early
January on Wednesday. It is currently trading around $1,597 an ounce.

Barclays analyst Suki Cooper told CNBC that gold has struggled because of the physical market. “It has proved to be much more fragile than it had last year. Last year, we saw the two key
buyers, India and China, continuously coming in to support those dips,” she
said.

But like Goldman Sachs, she still thinks the macro backdrop is gold-favorable.

“Despite this recent pullback, which has brought into question gold’s status as the currency of last resort,
we believe that the case for higher gold prices remains in place,” Goldman
said.

It added that weaker U.S. growth, renewed European sovereign risks and resilient physical demand all
pointed to higher gold prices.

Several events could trigger a sharp inflow into gold, according to Goldman.

It cited further declines in consensus expectations for U.S economic growth, which remain above its own
economists’ forecast of 2 percent for 2012, as a first trigger.

Additional monetary easing at the June 19-20 Federal Reserve meeting and rising concerns in the wake of the Greek and French elections could also move gold prices higher.

Goldman also pointed to the potential for strong Indian gold buying following the withdrawal of an excise
tax on precious-metal jewelry there.

“The weakness in the rupee has meant that the local price has been quite elevated. … There is some pent-up demand there. … We would expect that demand to improve in the year,” Cooper
said.

Goldman said that until such catalysts materialized, it expected gold to continue to trade “with a lack of
conviction and remain well correlated to the broad based US dollar.”

Tuesday, 01 May 2012 07:23 AM

By Greg Brown

As Europe teeters on the brink of a fresh round of recessions — which Spain and the
United Kingdom already have entered — few appreciate the role hard assets such
as gold have played behind the scenes, says James Rickards, a New York hedge fund
manager and author of “Currency Wars: The Making of the Next Global Crisis.”

The cynic’s version of the Golden Rule goes like this: “He who has the gold,
makes the rules.”

But, as Rickards explains in a recent column for U.S. News & World Report, for
the folks at the International Monetary Fund (IMF) that’s exactly how it seems
to work.

Take Brazil and Belgium. The big South American economy is among a growing chorus of
emerging nations, including behemoth China, whose leaders openly wonder why
Brussels has such sway at the fund.

Brazil is five times the size of Belgium, economically speaking, as Rickards
explains. History and tradition might seem to be reasonable excuses, but
there’s more to it, he says.

In short, gold matters: The major monetary systems might scoff at the idea of
gold as a currency, yet they hold large amounts of it just in case, which
Rickards argues is telling. Tiny Belgium, for instance, holds 225 tons, vs.
just 33 tons in Brazil.

In fact, large economies sit on massive amounts of this supposedly
“unimportant” metal asset. The IMF itself is the third-largest hoarder of the
metal in the world, behind the United States and Germany. The eurozone
countries hold more than 10,000 tons combined, Rickards points out.

“This is more than the United States and more than Brazil, India, China, and
Russia combined,” Rickards explains. “Paper currencies issued by Brazil and
China that are backed by scant gold reserves are just paper. But currencies
such as the dollar and the euro that are potentially backed by huge gold
reserves are something more.”

Even the IMF has a currency that can be backed by gold, called Special Drawing
Rights. This non-country currency has been suggested (by none other than U.S.
Treasury Secretary Tim Geithner) as an alternative to the U.S. dollar — should
a second reserve currency suddenly become necessary.

“Despite decades of disparagement by mainstream economists gold is still the
hidden hand of international finance. This is something that no finance
minister or central banker will admit publicly because the implications for the
leveraged paper money world are daunting,” Rickards continues.

“Yet actions and facts speak more loudly than words. Gold still determines who
runs the system and who does not. China and Brazil will get their IMF votes —
once they get their gold.”

© 2012 Moneynews. All rights reserved.

Sunday, 29 Apr 2012 02:40 PM

By Forrest Jones

Americans feel gold is the safest long-term investment out there, a Gallup survey finds.

Gold beat out four other types of investments perceived as the best long-term
choice out there, with 28 percent choosing it today.

Real estate followed in second place, with 20 percent seeing it as the best
long-term investment.

Savings accounts and CDs tied with stocks/mutual funds at 19 percent.

Bonds trailed at 8 percent.

“Investing in gold has gained in popularity in recent years as low
interest rates have made traditional savings instruments less attractive, and
instability in the stock and real estate markets has undermined the mass appeal
of those options,” Gallup reports.

“Meanwhile, the rising trajectory of the price of gold over the past
several years apparently offers more of the returns and stability investors
seek.”

Gold prices are currently trading over $1,660 an ounce, down from peaking
around $1,924 an ounce in late 2011 but well above $300 an ounce from just over
a decade ago.

Weak gross domestic product growth figures and a sluggish jobs market are
fueling talk the Federal Reserve will stimulate the economy in a way to
encourage investment and hiring that weakens the dollar as a side effect.

Such a policy, officially known as quantitative easing but dubbed by critics as
printing money out of thin air, would send gold’s price rising.

Uncertainty in Europe also is likely to push gold higher, as calls for the
European Central Bank to simulate the economy there grow as well.

European countries have adopted austerity measures such as tax hikes and
spending cuts to right their debt-ridden economies, but many feel such harsh
fiscal measures aren’t working on their own.

“If you look at what’s happening in Europe, they keep talking about
austerity,” says Matthew Bishop, a co-author of In Gold We Trust?,
according to CNBC.

“The long way out of this is we’re going to get some inflation and we’re
going to see gold go from being a specialist investment to being something
which the public as a whole starts to buy, and that’s when the price will
really shoot up.”

© 2012 Moneynews. All rights
reserved.

By Eric McWhinnie

4/16/2012

The International Monetary Fund recently said that it expects commodity
prices to fall this year as the global economy remains weak. In the
organization’s World Economic Outlook, it said, “Sizable downside risks to
global growth also pose risks of further downward adjustment in commodity
prices.” The ongoing European debt crisis is slowing creeping back into focus
as Spain faces rising interest rates. While safe-havens in the current
financial system are limited, the IMF recognizes gold as an option for
investors seeking portfolio protection.

On Monday, fears about a weakening Spanish economy and its ability to
finance its debt pushed the yield on the Spanish 10-year bond above 6 percent.
It is the highest level on the 10-year bond since the European Central Bank
launched its first Long Term Refinancing Operation last year. Concerns also
spilled over into Italy, where bond yields increased to 5.65 percent. “If the
price action is any indicator, Spain will find itself under more pressure over
the next few weeks,” explained a debt trader in London, according to the WSJ.
The trader goes on to explain, “As we have seen before in Greece and Italy,
once 10-year bond yields cross 6 percent, people start to get nervous pretty
quickly.”

Spain, the euro zone’s fourth largest economy, is scheduled to sell bonds at
an auction this Thursday. The sale will be closely watched as any weakness in
the auction will spark more insolvency fears. Although Spain and Italy are
currently in the spotlight, insolvency issues plague the entire globe. In fact,
Egan Jones downgraded the United States credit rating from AA+ to AA with a
negative outlook earlier this month. Egan Jones said, “Without some structural
changes soon, restoring credit quality will become increasingly difficult.
Yields on 10-year Treasury notes have fallen to their lowest since early
February 2010 with the Federal Reserve’s aggressive purchases of US Treasuries.
A concern is the rise in interest rates placing higher pressure on the US’s
credit quality.”

The global credit crisis is diminishing safe-haven options left and right. According to the IMF’s
Global Financial Stability Report, the number of sovereigns whose debt is
perceived as a safe-haven could decline by $9 trillion within four years,
representing a 16 percent decrease. The IMF believes high rated government
securities make up the bulk of safe-haven options at $33.2 trillion. However,
the fund also recognizes gold as a safe-haven at $8.4 trillion, representing 11
percent of outstanding amounts of marketable safe assets.  As the
financial crisis continues to unfold, investors will be forced to seek true
safe-havens that do not carry counter-party risk, such as gold and silver. This
rising demand for these safe-havens will continue to support precious metal
prices and the current bull market. The IMF report states, “In the future,
there will be rising demand for safe assets, but fewer of them will be
available, increasing the price for safety in global markets.  In
principle, investors evaluate all assets based on their intrinsic
characteristics.” When it comes to bonds based on fiat currencies, intrinsic
characteristics will leave investors low on value.

Wednesday, 04 Apr 2012 08:15 AM

By Julie Crawshaw

Harvard economist and former Reagan economic adviser Martin Feldstein says the huge
expansion of U.S. liquidity could drive up inflation unless it’s carefully
managed.

“The large volume of reserves, together with the liquidity created by
quantitative easing and Operation Twist, makes that risk greater,” Feldstein
writes in the Business Standard.

“It will take skill – as well as political courage – for the Fed to avoid the rise in inflation that the
existing liquidity has created.”

That risk is real, but not inevitable, says Feldstein, because the relationship between the
reserves held at the Fed and the subsequent stock of money and credit is no
longer what it used to be.

“The explosion of reserves has not fuelled inflation yet, and the large
volume of reserves could in principle be reversed later,” Feldstein says.
“But reversing that liquidity may be politically difficult, as well as
technically challenging.”

Anyone concerned about inflation has to focus on the volume of reserves being
created by the Fed, Feldstein notes.

“Traditionally, the volume of bank deposits that constitute the broad money
supply has increased in proportion to the amount of reserves that the
commercial banks had available,” he says. “Increases in the stock of money have
generally led, over multiyear periods, to increases in the price level.”

“Therefore, faster growth of reserves led to faster growth of the money
supply—and on to a higher rate of inflation. The Fed in effect controlled—or
sometimes failed to control—inflation by limiting the rate of growth of
reserves.”

Bloomberg reports that most economists don’t think Fed officials will change
their interest-rate policy at their next meeting on April 24-25 and will ease
credit only if the economy slows further.

© 2012 Moneynews. All rights reserved

By David Skarica

In the trading days after this week’s Fed statement, there was a steep sell-off in
gold and bonds.

The reason is because bonds are the asset class the Fed has been buying.
Quantitative Easing, or QE, is seen as money printing that dilutes the dollar
and is good for gold.

Now in the long run, QE isn’t why gold has been going up in price. It has been
rising because of deficits that are too large and the ultimate decline of the
U.S. dollar as the world’s reserve currency.  However, on recent news that
the economy has been pretty good, gold and the bonds were sold off as some
investors no longer think another round of QE is on the horizon.

However, the numbers say differently. In 1997, the national debt was below $5
trillion and interest payments on the debt were about $250 billion. In the most
recent fiscal year, the national debt has tripled to more than $15 trillion yet
interest payments are lower at $178 billion a year.

This is due to ultralow interest rates, where the government can borrow at
one-year at under 1 percent and at 10 years at just more than 2 percent (rates
were more than triple this level 15 years ago).

If we had the same interest rates as 1997 today, we would have about $800
billion a year in interest payments. This would add $500 billion to the
deficit, making it more than $1.6 trillion overnight — not to mention the
slowing of the economy this would cause.

Therefore, the only thing holding this ship afloat is ultralow interest rates.

This is why QE, or the printing of money to buy debt, won’t end. There is no
other way the federal government can operate or pay for itself.

For example, ever since Operation Twist was put into action (and the Fed moved
into buying the long end of the bond market), it is estimated that the Fed has
purchased 86 percent of 10-year bonds issued in that period.

China is actually slowly their purchases of Treasurys. Japan recently started
to buy Chinese bonds to diversify out of the dollar. Therefore, as the $15
trillion debt is rolled over, the only way that the government can pay for it
is by printing money to buy its own debt.

Therefore, forget all the so-called good economic news. The government will
have to continue to print and print and print for the foreseeable future.

Source: 
Moneynews, March 16, 2012

Thursday, 15 Mar 2012 08:27 AM

By Dan Weil

Silver has started the year off with a bang, rising 15 percent to $31.80 an ounce, and
it has plenty further to go, says Michael Purves, chief market strategist at
BGC Financial.

“We may be setting up for something more powerful. We could see $50 later this
year,” he tells Yahoo. That would represent a climb of 57 percent from
current levels. Silver hit a record high just below $50 last April.

Continued central bank easing and industrial supply/demand factors will act as
the catalysts for silver’s surge, Purves says. “What really drives silver is
the hard money issue and industrial demand,” he says.

“Both of those arguments look very strong. Silver miners can’t increase
production, and a lot of recycled silver is out of the environment, because so
much of that came from analog photography, which is an endangered species.”

Silver also represents a way to play gold, Purves says. The two metals often
move in the same direction, but silver with more intensity.

“Silver is a poor man’s gold, and it’s also very volatile,” Purves
says. “I think a lot of that volatility will be skewed to the
upside.”

Last week’s options data showed traders are the most bullish they have been in
16 months on the iShares Silver Trust exchange-traded fund.

“There’s optimism among silver call [option] buyers,” Donald Selkin,
the market strategist at National Securities, tells Bloomberg.

2012 Moneynews. All rights
reserved.

By Debarati Roy – Mar 14, 2012 6:57 AM CTWed Mar 14 11:57:00 GMT
2012

Gold is poised for a 21 percent gain in 2012, extending its bull
market to 12 consecutive years, as investors hoard record amounts and central
banks expand reserves for the first time in a generation.

Bullion may rise to $1,897 an ounce in New York by Dec. 31 from
$1,566.80 at the end of 2011, based on the average of 14 respondents in a
survey at the Bloomberg Link Precious Metals Conference yesterday in New York.
The rally that began in 2001 is the longest since at least 1920 in London,
including a 10 percent gain last year.

Demand has strengthened as Europe seeks to contain its debt
crisis, China’s economic expansion slows, and governments from the U.S. to the
U.K. keep interest rates at all-time lows to shore up growth. Central banks
have been net buyers for three straight years, the longest stretch since 1973,
World Gold Council data show. Holdings (.GLDTONS) in exchange-traded funds
backed by the metal reached a record 2,410.2 metric tons yesterday, data
compiled by Bloomberg show.

“There are significant shifts going on in the world,”said Martin
Murenbeeld, the 67-year-old chief economist at Toronto-based DundeeWealth Inc.,
which manages about $100 billion in the Dynamic Mutual Funds. “Gold has become
an investment, an asset class, and over time, we are only going to be building
it up. The central banks are holding gold because they are not sure if the euro
will remain five years later.”

Gold futures already rallied 5.8 percent this year to $1,657.30
on the Comex in New York. That compares with a 9.7 percent jump in the Standard
& Poor’s GSCI Spot Index of 24 commodities, and a 12 percent appreciation
in the MSCI All-Country World Index of equities. Treasuries lost 0.9 percent, a
Bank of America Corp. index shows.

Low Rates

The Federal Reserve has kept U.S. borrowing costs at a record
low near zero percent and conducted two rounds of asset purchases, or so-called
quantitative easing, in a bid to boost growth, fueling demand for gold as a
hedge against inflation and a drop in the value of the dollar. Yesterday, the
Fed said in a statement that the labor market was improving.

Portugal is raising taxes and cutting spending to meet the terms
of its 78 billion-euro ($102 billion) aid plan from the European Union and the
International Monetary Fund after it followed Ireland and Greece in seeking a
bailout last year. Last week, Greece pushed through the biggest sovereign
restructuring in history.

“Gold is the ultimate downside protection,” Rachel Benepe, who
helps manage $3.5 billion, including 17 percent in gold bullion, at the First
Eagle Gold Fund in New York, said at the conference. “The future is uncertain,
and we have no idea how we’re going to get through with this situation. That’s
why we own gold.”

Monetary Policy

Part of the metal’s rally has been fueled by expectations that
central banks will take additional steps to spur economic growth. Francisco
Blanch, the head of commodity research at Bank of America Merrill Lynch Global
Research, said at the conference that gold would reach $2,000 this year as the
Fed seeks to add an additional $800 billion of monetary stimulus.

Later in the day, the U.S. central bank raised its assessment of
the economy, eroding prospects for more stimulus. Prices fell as much as 2.2
percent.

“People buy gold for benefits of diversification and hope it
does not do well,” Jeffrey Nichols, a senior economic adviser to Rosland
Capital LLC, said at the conference.

Gold futures for April delivery declined 0.3 percent yesterday,
falling for the second straight session. Prices fell 3.2 percent this month,
while the dollar jumped 1.9 percent. The precious metal remains below its
record of $1,923.70, reached on Sept. 6.

Institutional Holders

The rate of growth in gold holdings by institutional and private
investors has declined in the last few months, according to Christoph Eibl, a
founding partner of Zug, Switzerland-based Tiberius Asset Management AG.

“It is not a messiah,” Eibl said. “Be opportunistic and invest
in gold. Eventually, trust will come over to the fiat currency.”

* Negative real rates remain central driver

* Fed’s QE has doubled gold price

* Central bank, investment and jewellery demand ongoing

By Amanda Cooper

LONDON, March 1
(Reuters) – Gold can still make new highs this year, even as the Federal
Reserve shows no sign of continuing market-sweetening bond purchases and the
European Central Bank hints it won’t supply any more half-trillion euro sugar
rushes.

Gold lost nearly 5 percent on Wednesday in its biggest-one day fall since mid-December after Fed
Chairman Ben Bernanke issued a downbeat assessment of the U.S. economy, but did
not spell out that there would be more quantitative easing, the anchoring of
bond yields through government debt purchases.

The ECB, which has loaned over a trillion euros in two roughly equal-sized portions of low-rate,
highly-attractive cheap cash to commercial banks to encourage lending and avert
recession in the euro zone, has warned the financial sector not to get hooked
on these offerings.

Low interest rates and ample liquidity provide a favourable backdrop for gold, which can thus
compete more effectively for investor cash against stocks, bonds or currencies
that bear yields or dividends that can be eroded by loose policy.

Gold has doubled in price since the Fed embarked on its $2.5 trillion bond-buying spree in late
2008 and is still up 10 percent so far this year around $1,720.00 an ounce,
further underpinned by the U.S. central bank’s commitment to leave rates
unchanged until at least late 2014.

So the risk of losing this central bank liquidity fix has unsettled the markets, but investors
and analysts say low rates, stubborn inflation, along with central bank
purchases and emerging market demand for the metal will sustain the gold bull.

“What is more important with regards to gold is real interest rates are negative and this is
the key issue that we have to look at. (A switch in ) this factor will probably
signal the end of the bull market in gold and our view is that we are still
some way from this point because inflation is a problem and interest rates are
very low,” Richard Davis, a portfolio manager at BlackRock, the world’s
largest asset manager, said.

“There is a good inverse correlation between real interest rates and returns on gold
bullion. Once interest rates get to +4-5 percent, then the annualised return on
bullion goes -10 to -15 percent per annum,” he said, adding: “In
theory, you could argue is less QE is bearish for gold in isolation but there
are many other factors there that are positive for gold.”

Real interest rates, which factor in the rate of inflation, are negative in 12 out of 20 of
the world’s richest nations and are most negative in the United States and the
United Kingdom, both of which have employed QE to boost their economies and
have near zero nominal interest rates.

Real U.S. interest rates are -2.75 percent, compared to the G7 average of -1.76 percent and
compared with a G20 average of -0.26 percent. Beyond the G7, the other members
of the G20 have an average real rate of interest of 0.44 percent.

“There is quite a distinct possibility that we will see highs above $1,900. It won’t take
it a lot to get back to those levels and I certainly wouldn’t be surprised to
see gold going to a new high and going to $2,000,” Davis said, adding this
was not BlackRock’s own forecast for the price.

DUAL DOLLAR THREAT

The U.S. dollar has posed a dual threat to gold in the last six months. Firstly, it has been a more
compelling safe haven for investors seeking an alternative to the euro and
secondly, its inverse relation to gold means its own fluctuations will have more
relevance for the bullion price than fluctuations in investor risk appetite.

“We are at a point where Fed policy is becoming much less bullish (for gold), but I don’t
think it’s outright bearish,” Michael Lewis, an analyst at Deutsche Bank
said.

“It just removes what was a quite powerful tailwind for gold but we still have a very
low interest rate environment, even though the liquidity injections are
disappearing,” he said, adding that his bank’s view remained bullish for
gold, particularly from the second half of this year.”

Deutsche Bank, among other things, expects to see job creation slow in the United States,
which would drag on the dollar and boost gold, especially if a pick up in
inflation drives real interest rates even lower.

Anne-Laure Tremblay, a precious metals strategist at BNP Paribas, said with, or without
QE, real rates would remain negative in the United States and elsewhere this
year and Bernanke’s lack of explicit signal for more money-printing would not
spell the end of gold’s 11-year rally.

“It’s not a game-changer. The absence of another round of QE in the U.S. would definitely
be a bit less positive for gold, but it would not materially affect gold’s
upward trend,” she said.

“We assume that gold prices will peak when the Federal Reserve and other central banks
begin a monetary tightening cycle.”

©
Thomson Reuters 2012 All rights reserved

By Dan Weil

Gold prices gained 10 percent last year and have jumped another 10 percent so far this
year.

Many analysts attribute the rise to central banks, saying their accommodative
monetary policies have debased currencies, pushing investors to the precious
metal.

But many investors may not realize that central banks are buying gold
themselves, playing a major role in the metal’s rally.

Just five years ago, jewelry accounted for two-thirds of gold demand. Last
year, it represented less than half, according to the World Gold Council, The
Wall Street Journal reports.

That demand has shifted partly to investors. Demand for physical gold and
exchange-traded funds surged 9.4 million ounces between 2009 and 2011. That
more than made up for the 6.6-million-ounce plunge in jewelry demand.

But most of that demand came in 2009. Gold flow into ETFs slipped in 2011.

Enter the central banks, especially those in emerging markets. They have
stepped in to snap up available gold supply, buying 11.7 million ounces last
year.

So gold bulls should thank central banks twice – once for pursing policies that
boost the precious metal’s price, and once for purchasing it themselves.

Many investors, including hedge fund legend John Paulson, expect further gains
by gold.

“By the time inflation becomes evident, gold will probably have moved, which
implies that now is the time to build a position in gold,” he writes in a
letter to investors obtained by Bloomberg.

© Moneynews. All rights reserved.

THE GOLD REPORT  13 February 2012

PUBLISHER of The Grandich
Letter, Peter Grandich, predicts the Gold Price
will hit $2350 per ounce. In this interview with The Gold Report  he
shares his reasons…

The Gold Report: Going back to your time as a fund manager in the ’80s on Wall Street, how
does what was happening then compare with what is happening now?

Peter Grandich: It’s dramatically different. The biggest change is that the game is
stacked against the average investor more so than at any other time. For
example, the mortgage debacle a few years ago was equivalent to all the big car
companies manufacturing cars that they knew were going to crash and buying life
insurance on the people that they sold the cars to knowing that they would die
so they could collect on both ends. That’s what the financial institutions did.
Those people are still in charge of the game. I take exception when I hear
people talking as if the game is fair and the average person has a reasonable
chance.

TGR: One revelation in your
book is that your struggles led you to a belief in Christianity. Does your
spiritual life influence your investment decisions?

Peter Grandich: Yes. There’s far less chance of me pushing the envelope and touching the
gray area—or even going into the red area.

TGR: Another theme in the
book is about being wrong and accepting that as an investor. Could you talk
about the psychological pitfalls of investing?

Peter Grandich: I could write a book about losing. The ultimate crime of investing is not
being wrong. The crime is staying wrong and that happens to a lot of investors.
They institute the worst investment strategy and simply hope things will
change. Hope is a wonderful spiritual strategy but a very bad investment
strategy.

The majority of investors usually can withstand the
financial risk that they’re taking, but greatly underestimate the mental
anguish that can come from the downside of what their investments or
speculations/gambling will bring. Wall Street created the word “speculating”
so that it doesn’t have to use the word “gambling,” but it’s
gambling. You have to be prepared to lose part or all your money when you
gamble and I don’t think most investors are. They think of the best possible
scenario and never think of the worst.

Most investors don’t operate with a real plan either.
That’s why they lose over time because they don’t have a written strategy and
instead choose emotions and day-to-day, seat-of-their-pants thinking.

TGR: At the Cambridge
House investment conference in Vancouver, you said that you don’t look fondly
upon the economic outlook for the US, but you remain bullish on some foreign
markets, especially China. China’s markets lack transparency and even some
Chinese companies listed on North American markets have proven to be less than
trustworthy. Are you sending investors into the lion’s den?

Peter Grandich: It’s foolhardy to think that the US is the safest place and China’s the
worst place to invest in equities. There’s no question that China’s going
through some growing pains. But there are also shady things that go on here in
the US that don’t get reported or are twisted.

It’s no longer a question of if China will become the
world’s largest economic power, but when. To not have exposure to Chinese
equities over the next several years would be like not getting exposure to US
equities during our greatest growth in markets from the ’50s–’90s. And right
behind China will follow India. If we don’t have exposure to China and India
and the companies that do business there over the long term, we’re
shortchanging ourselves.

TGR: You expect the US
Dollar to weaken once attention shifts away from the troubled Euro. At that
point, do you expect gold to have a sizeable run?

Peter Grandich: I have called this the mother of all gold bull markets. I don’t think we’ll
see a bull market like this again in our lifetime. However, it’s also been the
most stealth bull market. North Americans, and particularly Americans, have
shown little or no participation, yet the Gold Price
has increased five to six fold. All the fundamentals remain in place: central
banks have gone from big sellers to net buyers and major producers don’t
forward sell much anymore.

The news that the Fed plans to continue flooding the
system with cheap paper is just another example of why gold’s path of least
resistance is to the upside. I believe an all-time high, not just a nominal
high, but adjusted for inflation, could reach $2,350–2,500/ounce (oz).

The mother of all gold bull markets remains intact. The
bears have once again been bloodied and they’ll go into hiding until we go
through $2,000/oz and then they’ll come out again. Then the media will flock to
them to tell us for the 19th time why gold has topped out.

TGR: Thanks for sharing
your forecast.

06 February 2012, 9:16 a.m.

By Kitco News

By Forrest Jones

Gold may have dropped 21 percent in the fourth quarter of 2011 but such corrections,
albeit scary, are normal for assets experiencing long periods of strong gains
made bumpy by speculators, experts say.

Gold is already up five percent in the new year, compared to a 3.9 percent
return for the S&P 500 index, and despite the plunges late last year, gold
finished 2011 up 10 percent.

Stocks were largely flat last year.

“In my view, gold is still very much in a super bull market,” says
Alan Newman, who has long recommended the metal in his CrossCurrents
newsletter, CNBC reports.

“Last year’s activity was quite normal for a super bull market, in which
corrections are supposed to be scary.”

Gold tends to drop in January, falling 8 percent in January 2011 and 12 percent
in two weeks at the end of 2009.

In 2011, it came in December as investors wanted it off their books.

Still, analysts at global financial institution Goldman Sachs say gold will
climb in 2012 as will copper and oil.

“The economic data and outlook beyond Europe in the U.S. and Asia has been
improving, shifting demand risks to the upside,” Goldman says in a report,
according to Bloomberg.

“We view gold and copper as providing the best value opportunities
relative to our view of fundamentals in 2012.”

Loose monetary policies in the U.S. and around the world have flooded the
global financial system with paper currencies, and it will take time to mop up
all that liquidity.

Weaker paper currencies — the dollar especially — often sends gold rising.

“The balance sheets of the Federal Reserve and ECB have never been greater
and both will continue to increase in size,” says Peter Boockvar of Miller
Tabak, CNBC adds.

“The Bank of Japan, the Bank of England and the Swiss National Bank
continue to print large amounts of money. As long as ‘print and inflate’ is
policy this bull market in gold will continue.”

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