Monthly Archives: March 2011

China May Match India as World’s Biggest Gold Consumer on Investor Demand

China May Match India as World’s Biggest Gold Consumer on Investor Demand

By Madelene Pearson – Mar 23, 2011 3:21 AM ET

Francisco Blanch, global head of commodities research at Bank of America-Merrill Lynch

Chinese consumption of gold may climb to rival that of India, the top user, as investors buy the metal as a store of value, said GFMS Ltd. and INTL FCStone.

Demand in China, the world’s second-biggest economy, almost tripled to 580 metric tons last year from 206 tons in 2001, data from the producer-funded World Gold Council show. Use in India may slump 5 percent to 26 percent this year from 963 tons in 2010, Morgan Stanley said in a report yesterday.

Bullion soared to a record $1,444.95 an ounce on March 7 and rallied 30 percent last year for a 10th annual gain as investors sought to preserve their wealth against inflation, Middle East unrest and currency debasement. Consumer prices in China climbed 4.9 percent in February from a year ago, exceeding the government’s 4 percent goal for the full year.

“The level of interest in gold as an asset class is just amazing,” Jeffrey Rhodes, global head of precious metals with INTL FCStone in Dubai, said in an interview. “There is potential for China to catch up to India.”

Protests partly linked to record food costs erupted across North Africa and the Middle East this year, spurring conflict in Libya and toppling leaders in Tunisia and Egypt. The unrest pushed crude oil above $100 a barrel, increasing concern that global inflation would accelerate.

Purchases by China increased to 200 tons in the first two months of 2011, according to UBS AG (UBSN) on March 1. The nation imported more than 300 tons last year, People’s Bank of China Vice Governor Yi Gang said in Beijing Feb. 26.

Property, Cars

“We’re seeing healthy demand” this year, Wang Lixin, China general manager at the World Gold Council, said yesterday. “Investors continue to find gold an attractive investment because of government restrictions on other big-ticket investments such as property and cars.”

Lion Fund Management Co., the first such vehicle in China to invest in gold-backed exchange-traded products overseas, received approval to as much as double its fund raising, media affairs manager Yang Zi said on March 7.

The company had raised more than 3.2 billion yuan ($483 million) for the fund, using up the $500 million initial quota from the State Administration of Foreign Exchange, a company statement said on Jan. 11. Gold investment in China may gain 40 percent to 50 percent this year, the council said Feb. 17.

Cultural Imperative

Immediate-delivery gold was little changed at $1,429.26 an ounce at 3:19 p.m. in Singapore today and has advanced 29 percent in the past year. India and China represent 40 percent of world consumption, according to council data.

“In India a huge amount of demand is a cultural and social imperative; you have to buy gold for the dowry and the wedding and that is something hard-wired into Indian society,” Paul Walker, chief executive officer of industry researcher GFMS, said in an interview from London. In China, the imperative around weddings “is less hard-wired,” he said.

India’s total demand exceeded China’s by 383.5 tons last year, narrowing from 496.5 tons in 2001, council data show.

“There’s absolutely no reason not to believe that at some juncture Chinese demand might go above that of India,” he said. FCStone’s Rhodes said demand in China and India could converge in the next five years.

China displaced South Africa as the world’s biggest gold producer in 2007.

Japan’s Crisis: an Investing Opportunity for the Stout-Hearted

This author, whose article was originally posted in Daily Finance, sees a market rebound in the future, and cautions investors not to focus on the negative news being broadcast worldwide. Rather, he says, remember that “when there’s gloom and doom in the air, there’s also opportunity.” Do you agree with his argument that now is the time to buy, or do you think his optimism about the future of the economy and world markets is a bit misguided? Leave us a comment at the bottom of the page and let us know.

Inside Wall Street: Japan Crisis Is a Buying Opportunity for the Stout-Hearted

By GENE MARCIAL Posted 6:30 AM 03/17/11
Don’t panic. That’s the first thing to keep in mind as the headlines shout that the global economic risk from Japan’s nuclear crisis is rising.Understandably, investors are running scared. The violent force of the earthquake and tsunami that devastated parts of Japan and raised the specter of a nuclear crisis could easily spell more trouble down the road for the global economy. Indeed, warnings now abound of a more turbulent and depressed market ahead.

The decline in global equity prices that started on Feb. 18 and got “exacerbated on March 15 by the fear of a worst-case scenario unfolding in Japanese nuclear power plants still needs to play itself out, and will have further to run,” cautions Sam Stovall, chief investment strategist at Standard & Poor’s.

That makes sense. But let’s not forget: When there’s gloom and doom in the air, there’s also opportunity — a rare chance to jump on stocks whose prices have been quickly pulled down due to panic among jittery traders. In spite of the market’s current sharp decline, nothing fundamental suggests the end for equities has begun, as some commentators are now starting to proclaim.

Crisis Will Keep Fed on Accommodative Course

When the market rebounds — and it definitely will — it will be with a forceful kick that should equal the market’s snap back after 9/11, and could conceivably catapult the Dow Jones industrial average back to the all-time high of 14,164.53 it hit on Oct. 9, 2007. The Dow closed on Wednesday at 11,613.30, down 242.12 or 2.04%.

In the meantime, investors should keep cool and calm. Look at the situation this way: The U.S. economic recovery is in full stride, and this shock to the Japanese economy can only result in more encouragement for the Fed Chief Ben Bernanke to make sure the U.S. economic recovery doesn’t stall, which will mean continuing the Fed’s policy of accommodation and loose money.

“S&P’s Equity Strategy thinks the U.S. Federal Reserve Board will conclude that low short-term interest rates will help combat the global uncertainty,” says S&P’s Stovall. What’s more, he adds, the Fed’s recent statements on the state of the economy “may even increase speculation of a third round of quantitative easing, which would likely aid commodity and equity prices.”

Splashy events such as the crisis in Japan or the turmoil in the Middle East invariably distract investors away from the gains the economy has achieved in the past year and a half. In times of geopolitical conflicts abroad and acute emergencies, technical analysts who follow the charts reigning supreme in assessing what’s really happening to the equity and bond markets. But investors should pay more attention to the improving market fundamentals: Corporate earnings continue to be strong and the rebounding economy is gaining strength.

Technical analysts, who are skilled at assessing what may lie ahead based on past market trends and patterns, tend to fuel even more of what’s already happening. When the market is in full decline, as it is these days, they tend to become more bearish and warn of how much lower it could go. The same thing happens when the market is on the upswing: They tend to calculate how much more upside there is. That’s why wise investors should combine both fundamental and technical analysis in probing the market’s motions.

An Oversold Scenario Developing

The first thing investors should do when the rest of the investing world is losing its clarity amid utter confusion is to draw up a list of the specific stocks they’d want to buy at bargain prices. Jump in as the Dow or S&P 500 head south. But make sure you have studied the fundamentals of those companies and the technical behavoirs of their stocks before pulling the buy trigger.

Right now, we know the market could still go lower, and that’s when more opportunities should be seized by investors. Hopefully, they’ve already taken profits from the stocks that advanced during the bull market. Proceeds from those sales can fund their purchase of those now under-priced stocks.

Alec Young, analyst at Standard & Poor’s international equity strategist, believes an “oversold” scenario may be developing in the international markets — and the Japanese market in particular — which could be exploited by short-term traders looking to take advantage of the falling prices.

In the U.S. equity market, “we recommend sticking with more cyclical sectors, as a recovery from this pullback would likely benefit those stocks and groups that were hit the hardest,” says S&P’s Stovall.

This Too Shall Pass

Investors should not lose track of what’s important: the resilience of the U.S. economy. When investors refocus on this and away from what’s happening in Japan and the Middle East, the shares of companies involved in the recovery, like those cyclical stocks, will be the market’s front-runners once again.

Even before the massive disaster engulfed Japan, the markets were already showing signs of wariness and weariness. Not a few market analysts had been predicting a significant market downturn after a year of massive gains for equities. Obviously, the triple calamities of earthquake, tsunami and nuclear crisis in Japan were not being factored into any analyst’s equations.

What should be in the equation as we look at markets now is that this, too, shall pass. Investors with the stomach for the ride should play the coming market rebound.

See full article from DailyFinance: http://srph.it/gAwz8R

Utah Considers Return to Gold, Silver Coins

Although the U.S. stopped using gold coins as legal currency about 80 years ago, it seems that the precious metal is now poised to make a comeback.

(Original article from Fox News)

Utah Considers Return to Gold, Silver Coins

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The Utah House was to vote as early as Thursday on legislation that would recognize gold and silver coins issued by the federal government as legal currency in the state.”

It’s been nearly 80 years since the U.S. stopped using gold coins as legal currency, and nearly 40 since the world abandoned the gold standard, but the precious metal could be making a comeback in the United States — beginning in Utah.

The Utah House was to vote as early as Thursday on legislation that would recognize gold and silver coins issued by the federal government as legal currency in the state. The coins would not replace the current paper currency but would be used and accepted voluntarily as an alternative.

The legislation, which has 12 co-sponsors, would let Utahans pay their taxes with gold and also calls for a committee to study alternative currencies for the state. It would also exempt the sale of gold from the state capital gains tax.

The bill cleared a state legislative committee on Wednesday, the first of 13 similar bills in statehouses across the country to do so. If the bill clears the House, it would have to pass the Senate before the governor could sign it into law.

Attorney and Tea Party activist Larry Hilton, author of the original bill, said he doesn’t foresee any roadblocks.

“There’s enough uneasiness going on in the economy to trigger people to feel that, hey, having a little Plan B, kind of a backup system, is not a bad idea,” he told FoxNews.com.

The U.S. used some version of the gold standard from 1873 until 1933, when President Franklin D. Roosevelt outlawed the private ownership of gold amid the Great Depression. An international monetary system based on a gold-exchange standard continued until 1971 when President Richard Nixon stopped the U.S. from redeeming dollars for gold altogether.

Critics of the gold standard say it limits countries’ control over its monetary policy and leaves them vulnerable to financial shocks, such as the Great Depression. But supporters argue that the current financial system’s dependence on the Federal Reserve exposes the value of U.S. money to the threat of inflation.

Rep. Ron Paul, a longtime critic of the Federal Reserve who has called on a return to the gold standard, has praised Hilton’s efforts.

“Efforts such as yours in states around the country highlight the importantance of returning to sound money,” Paul wrote in a letter to Hilton. “Even if such efforts fail to achieve legislative success on their first try, their importance lies in bringing to the public’s attention the problem of the ever-weakening dollar and the necessity of returning to a sound monetary system.”

Hilton said the bill before the House doesn’t go as far as his original draft, which was more sweeping, including recognizing more than just U.S. minted coins and more details on specific tax treatment. But he said he’s willing to take it step-by step.

He also said he’s not pushing to restore the gold standard in the U.S.

Federal Reserve Chairman Ben Bernanke this week dismissed the notion of the gold standard returning to the U.S.

“It did deliver price stability over long periods of time, but over shorter periods of time it caused wide swings in prices related to changes in demand or supply of gold,” he told the Senate Banking Committee. “So I don’t think it’s a panacea.”

Bernanke also said that gold couldn’t return as the world standard because there’s not enough gold in the world to effectively support the U.S. money supply.

Hilton said he’s taking a positive approach to the issue.

“This is not an anti-dollar issue at all,” he said. “We want to strengthen the dollar. We think by introducing gold and silver of our nation’s history, by injecting that into the debate is very healthy for our policymakers.”

Jeff Bell, a policy director for the Washington-based American Principles in Action (APPIA), which helped shape the Utah bill, told FoxNews.com that passage of the bill would send a message to Washington and other states.

“People sense that in the era of quantitative easing and zero interest rates, something has gone haywire with our monetary policy. But people are afraid to say it,” said Bell, who was an adviser to Ronald Reagan’s 1976 and 1980 presidential campaigns. “If one state recognizes gold as a valid currency, I think it would embolden people not just in other states but in Washington.”

Bell credited Tea Party activists for advancing the legislation this far. Rep. Brad Galvez, who introduced the legislation, is a freshman legislator backed by the Tea Party.

“Saying we now recognize gold as money is a big step forward,” he said.

Twelve other states have offered similar proposals: Georgia, Montana, Missouri, Colorado, Indiana, Iowa, New Hampshire, South Carolina, Tennessee, Washington, Vermont and Oklahoma.

Buy Gold Before It Soars to $2,000

Jim Cramer explains why investors would be wise to stock up on gold now. Read on…

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Jim Cramer: Buy Gold Before It Soars to $2,000

Wednesday, 02 Mar 2011 09:38 AM

By Dan Weil

Stocks struggled Tuesday, while oil soared. But not to worry, says CNBC’s Jim Cramer, investors have a way out of this – buy gold, especially before it soars to $2,000.

“I can’t emphasize enough that gold is your antidote here to what’s going on,” he says.

Jim Cramer

“What’s interesting is this is really the first genuine deviation day where the oil companies are just getting killed,” he said Tuesday.

It feels like 2008, when the surge in oil prices pushed oil stocks down, Cramer says. “This is the nightmare scenario that the bears have been looking for.”

“Gold is extraordinarily poised to be able to go up better than every other asset in the world,” he says.

With interest rates low and stocks starting to drop, gold is “exactly what you should be in,” Cramer says. “I think you can see $1,550 (an ounce) very quickly and $2,000 within the next 18 months. I think between 10 and 20 percent of your portfolio should be gold.”

In terms of gold mining companies, Cramer favors Goldcorp because of its lower production costs.

Spot gold was bid at $1,432.90 an ounce early Wednesday, down from $1,433.70 late in New York on Tuesday, having peaked that day at an all-time high of $1,434.65.

Others are bullish too. “Spreading tensions in the Middle East have prompted gold safe-haven buying,” Mark Pervan, an analyst at ANZ Banking Group, wrote in a report obtained by Bloomberg.

Rising oil prices have “fueled concerns over inflation and rising costs, boosting gold’s inflation hedge appeal.”