Monthly Archives: December 2010

Four Approaches to Gold Investment

While precious metals have certainly proven to be a worthwhile investment no matter the strength of the economy, recently the discussion surrounding the best ways of managing and profiting from gold investing has been particularly closely examined.

In an article shared by the Gold and Silver Blog, the Wall St. Journal examined four gold investment strategies and reported on its findings. Each strategy chosen has been used with a level of success by a well-known investor. Enjoy the article, and feel free to weigh in with your own opinions and experiences!

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Four Approaches To Gold Investment

December 27, 2010

In its quest to determine the best way to make money from investing in gold, the Wall Street Journal recently took an in depth look at four different gold investment strategies. Each was represented by a preeminent investor, one whose method has seen some success recently.

Here’s what they had to say:

1. The first investor was John Paulson, who made his money by anticipating the economic crisis and acting accordingly. His current method of gold investment is to buy shares of large mining and exploration companies. The idea at work here, according to Paulson, is that “if gold prices do well, the miners will do even better . . . the higher gold prices go, the more miners can profit from potential and existing projects.” The downside here is that mining for gold is an expensive proposition, so the miners must make enough money to cover that expense before turning a profit.

2. The next investor discussed was billionaire Thomas Kaplan. He is focusing his investment funds on junior miners rather than the big mining companies that Paulson is currently interested in. His argument? These smaller companies are “sitting on valuable assets . . . providing the greatest leverage to a bull market.” He believes that these junior miners have a greater potential to go along with their greater risk.

3. The third investor, John Burbank prefers a different route. He focuses his attention on gold bar investment. Since the bars are an actual physical investment, he believes that they are more likely to return his investment than shares and contracts. According to Burbank, “If investors become concerned that shares and futures contracts aren’t fully backed by physical gold, or if inflation surges, they may begin to demand delivery of the metal, sending the price of physical gold soaring.”

4. The final investor, David Einhorn is also interested in bars, but in addition, he chooses to invest in exchange trade funds that own gold miners. He has also purchased call options or gold futures, which require a relatively small investment to control a large gold position.

Consumer Sentiment and Spending Make Small Gains

The outlook for the U.S. economy continues to be more positive during the 4th quarter of 2010, analysts say. For the 5th month in a row in November, new jobless claims were down 3,000 to a seasonally adjusted 420,000, according to the Labor Department. This decrease points to Americans’ increased optimism concerning the job market. Furthermore, while the economy is hardly recovering in leaps and bounds, the rise of the consumer sentiment’s index to 74.5 is proof that there is some improvement underway.

In addition to decreased jobless claims, Americans are returning to buying a little more. Economists watch consumer sentiment so closely because it is tied to how much people are willing to spend; during the 4th quarter, sentiment has matched spending, with both seeing small increases. New home sales have increased 5.5% to a seasonally adjusted 290,000 unit annual rate. Stock prices are rising slightly, debt is going down slightly, and some reports indicate that consumers are even dipping into their savings to fund purchases.

Online retail spending also saw a boost this year; so far, it is up 12% this holiday season. Last year, Americans spent about $25.3 billion online, compared to $28.4 billion this year (report by ComScore). Likewise, online spending for last weekend compared to the same weekend the year before was also higher; it jumped about 17%, and accounted for about $5.5 billion in sales. This amount has also set a new record for top week of online spending. A good indicator for positive consumer sentiment can be seen in ComScore’s observation that jewelry/luxury goods/accessories was the top growing online retail subcategory in November, with leading sites visited including Bradford Exchange and Coach. Furthermore, ‘Free Shipping Day’ (December 17th) was the biggest spending day in online history. As consumers feel a little more stable in their economic situation, they are more willing to spend money on non-essentials.

As noted by Joseph Lazzaro for Daily Finance, the last piece missing in the economic equation is job growth. This area, he notes, “is one of the last indicators to turn positive in a big way.” With continued decline in unemployment rates, and increased economic optimism, consumer sentiment and buying could increase in the coming year.

Wa She Wong Collection Tops $10.7 Million

December 3-4 marked the occasion of a very special auction in Hong Kong: the Wa She Wong Collection of Chinese and Other Asian Coins was presented by Ponterio & Associates, and featured 1,107 lots. Total sales reached $10.7 million, with many lots selling for many times their originally estimated value. About 300 bidders were competing for the chance to own a piece of the highly coveted collection.

Many of the coins in the Wa She Wong collection were not released into general circulation, and others were never included in major exhibits.

For example, one extremely important coin was the rare “Flying Dragon,” lot 311. The coin is a Szechuan 30 Cash struck in copper, and sold for $460,000. The 1890 Kwantung Mint Specimen Set (lot 220) was historically prestigious, representing the first Chinese silver coinage minted with modern machinery. The collection was originally estimated at $300,000, but was realized at an incredible $718,750.

Other examples include lot 3’s 1920 “Yuan Shi Kai” Dollar struck in gold, realized at $138,000, and lot 130’s 1844 Changchow Military Rotation dollar, realized at $103,500.

Additional collection pieces will be offered at Ponterio & Associates’ upcoming August 2011 Hong Kong sale.

For more information:

www.bowersandmerena.com
Coinnews.net

Gold Still Has Plenty of Room to Run

Good afternoon to all our readers!

For this week’s post, we want to share an insightful article we think you’ll appreciate. Dr. Steve Sjuggerud discusses gold’s future possibilities and successes in this articled titled “The Latest Evidence Higher Highs Are Ahead for Gold.” We hope you’ll enjoy it, and please feel free to add a comment at the bottom of the post with your own opinions or reactions.

The Latest Evidence Higher Highs Are Ahead for Gold

By Dr. Steve Sjuggerud
Tuesday, December 7, 2010

“Gold has no use,” a fellow speaker told the crowd Thursday night. “Our firm doesn’t recommend gold. It has no industrial use. We can’t value it.”

I laughed to myself…

We were at a meeting for about 100 local businesspeople. And while the asset manager talked about how useless gold is, I thought, My readers haven’t worried about gold’s industrial uses… They’ve simply pocketed hundreds of percent profits.

I’ve been telling my readers to buy gold since 2002. I’ve gotten them into gold coins and gold stocks – including my biggest winner, Seabridge Gold (for a 995% gain).

This asset manager on the stage has probably told his customers “gold has no industrial use” for a decade. He probably told them to buy and hold stocks instead. In that decade, gold has soared from $300 an ounce to $1,400. Meanwhile, stocks have lost money.

There was one other speaker there… He was from a mainstream bank. And he agreed with the other guy. He added, “Our firm recommends you have up to 8% of your financial assets in alternative assets, including hedge funds and commodities.”

Then this speaker proudly explained how he talks his customers out of gold…

“Whenever a customer expresses an interest in gold, we try to figure out why… Because there are much better things you can own in every case. If they’re afraid of inflation, for example, I show them that stocks do better than gold in inflation.”

I just kept my mouth shut.

If these guys have had their heads in the sand for 10 years, nothing I could say would change that.

Look, I know the bear case for gold. I know it doesn’t pay dividends or grow like a company. I know it doesn’t pay interest like a government bond. I know it’s not useful for industry. And I know it’s more cumbersome than a debit card when you just want to buy a gallon of milk. I know it’s not a true inflation hedge. I know, I know, I know.

But one more thing became clear to me after hearing these “mainstream” asset managers…

Gold is still a “fringe” asset. Clearly, it makes bankers cringe. Not only do they not recommend it, they talk their customers out of it.

I didn’t realize mainstream bankers and asset managers still had such a distaste for gold. To me, this means gold still has plenty of room to run.

Gold can certainly have a severe correction from here. But “big money” investors (and governments like China and India) now view gold as another form of currency – a store of value. That means the sky is the limit for the price of gold, whether it has any industrial use or not!

Is the price of gold at “nosebleed” heights? Yes, based on history.

But if gold is now being thought of as the new alternative currency, it could still go much higher. And as long as mainstream bankers hold it with such disdain, it can keep going up.

Don’t sell your gold at these prices… The mainstream still doesn’t own gold. Astoundingly, it’s still not “popular” yet.

So sit tight… Corrections will surely happen. While the price of gold might seem high today, there are higher highs ahead.

Good investing,

Steve

Commemorative Coins Minted for Newly Engaged Royal Couple

Since news of Prince William’s engagement to Kate Middleton became public, at least three mints are preparing to create their own commeorative engagement coins in honor of the royal couple. The Royal Australian Mint, and two UK Mints, the Royal Mint and the Pobjoy Mint, all plan to mint special edition coins.

First to be unveiled are the cupro nickel and sterling silver coins issued by the Pobjoy Mint. They depict the Royal Family’s home, Buckingham Palace, along with the mark “W&K.”

Although not completed, the Royal Mint confirms its intention to produce a £5 Alderny coin in honor of the newly engaged couple. According to the Royal Mint, production for the two coins is already under way.

The Royal Australian Mint said in an official announcement that it welcomed “the honor and responsibility to produce the official Australian coin celebrating the engagement of Prince William and Miss Catherine Middleton.” Design and release date will be forthcoming.

The couple is set to wed on April 29, 2011.