City A.M.'s front page headline this morning: Gold Rush - I will not be the only person to wonder if this is a contrary indicator, at least for the short term. Here is today's online article, without the printed edition's Gold Rush headline appearing on a large, coloured picture of a gold bar covering 80% of the page width, above another picture showing many more gold bars:
Gold touches a fresh high of $1,518.6 per troy ounce
Prices for silver and diamonds also near record highs
THE PRICE of gold surged to yet another all-time high yesterday as growing fears over a weaker dollar sent investors scrambling for the safest asset class of all.
Gold hit an unprecedented $1,518.6 per troy ounce in morning trading yesterday.?It eventually fell back to $1,507, although some traders predict it will hit $1,600 by the end of the year.
Silver also surged, with spot prices reaching $49.82 an ounce - close to the all-time high of $50.35 recorded in January 1980.?It eventually fell back to $47.09.
The greenback has come under heavy selling pressure ahead of this week's Federal Open Market Committee, with markets expecting chairman Ben?Bernanke to reiterate his commitment to easy money.
Long-standing gold bug Jim Grant, the founder and editor of Grant's Interest Rate Observer, said he was expecting a third round of quantitative easing in the US, which would propel gold to new highs.
The greenback also slid against commodity currencies, diving to a 29-year low of A$0.9291 versus the Australian dollar and a three-year low of C$0.9503 versus the Canadian loonie.
Analysts blamed the buck's unpopularity on the Federal Reserve's ongoing inflationary monetary policy, anxieties about US government debt and suggestions that China is moving to limit its exposure to the greenback.
BNP Paribas' Ray Attrill said "it's a weak dollar story". "We don't see any imminent reversal unless Mr Bernanke has got a rabbit to pull out the hat," he added, referring to the Fed's interest rate-setting decision.
Economists say that sky-high precious metals prices are here to stay as desperate investors rush towards perceived "safe havens" to escape the damaging effects of inflation.
The market has also been influenced by fears that China is planning several new investment funds to diversify its $3 trillion foreign reserves holdings, much of which is in dollars.
Diamonds are also reckoned to have reached record highs on the back of slowing production and increased demand from China and India, while WTI crude oil rose to over $113 a barrel due to ongoing fears about political turmoil in the Middle East.
My view - City A.M. It is a good paper, run by a very smart editor - Allister Heath. However in reporting news items, I have often pointed out that front page financial headlines are mirrors, reflecting what we have been doing. Veteran subscribers know that when reports on any of their favourite markets move from the middle pages to the front page, a reaction is usually imminent.
What next for the precious metals sector, which Fullermoney has described for nearly a decade as being in a secular bull market?
This detailed item continues in the Subscriber's Area.
Email of the day (1) - On silver:
"I hope that the long weekend will give you a chance to get rid of that bout of flu.
"I would like to discuss chart theory against silver's upward acceleration referred to in your comment and audio yesterday [Ed: last Thursday].
"I know that such acceleration is usually a trend ending characteristic and understandably so - e.g. company profits can only grow so much whereas the market will realise that the forward p/e ratio after a steep rise is just too demanding, or if corn or soybeans have a substantial price appreciation that farmers will just plant more of that commodity thereby offsetting any shortage. But I wonder if this is really about to happen to silver.
"At the current rate of drawdown warehouse stocks will be depleted within weeks and a squeeze may result, leading possibly to a Comex default, especially if some longs demand physical delivery. Apparently there are no other material stocks of silver, the US and Chinese Governments having sold their holdings. Further, according to reports, JP Morgan and HSBC are currently holding a +/- US$40b short position (of which about $30b is a
loss) growing at the rate of $1b per $1 rise in the silver price, which will need to be covered. Then the gold/silver ratio is reverting to its long term mean of 10 - 15, but still has a long way to go (can you post a chart on this please).
"Silver must rank as a Fullermoney theme where rising demand meets inelastic supply. Some supply might come from scrap and some selling by weaker holders of the Silver Trust, but silver is produced mainly as a by-product and mine supply is inelastic. Equally, silver tends to be used in minute quantities in a large range of products where a rise in the silver price is unlikely to be of any major consequence to the product's total cost so is unlikely to be substituted (assuming that it could be). So it is hard to see any material change in the demand/supply situation in the short term.
"Whilst some pull-back and consolidation in the silver price could be expected after such a good rise, is it likely to be so significant (in depth and time) that long term holders, such as myself, should run for the exit at this stage or could it be shallow so that such holders should just ride out any storm that might be on the horizon? Could silver be a special case as far as chart theory is concerned?
"Your comments would most appreciated as always."
My comment - Well done for seizing your opportunities in the markets and thanks for a very interesting email, certain to be of interest to many subscribers. I also commend you for your diligence in researching and understanding the silver story.
This item continues in the Subscriber's Area.
Email of the day (2) - On a great quote:
"I found the following in today's free email newsletter, Cabot Wealth Advisory, and I thought it poignant:
On this very day in 1931, for example, Coolidge [Calvin Coolidge, U.S. President, 1923-29] wrote:
"Contemporary opinion is usually too critical and misdirected. In the perspective of history many of our present seeming imperfections will disappear and the qualities of our society and government will be more apparent. Before becoming entirely discouraged and hastily deciding everything has so deteriorated that confidence is no longer warranted, it would be well to read some former opinions. Discouraging conclusions are not new. They have continually been expressed even by the able and the thoughtful from the foundation of our republic. As judicially minded a man as Chancellor Kent wrote in 1845, 'I think we have at Washington the meanest man, malignant, party hacks and tools that ever were doomed to curse a republic.' Yet the country not only survived, but the government of that day is now conceded to have included some of our most brilliant statesmen.
"Sometimes the whole body of the Congress falls into disfavor because of the actions of a few members. The blame lies with the voters who elect undesirable persons. When elected, other members have to work with them.
"This republic has a good government. The future undoubtedly will judge this period as a time when the country met its difficulties remarkably well."
"Coolidge's philosophy is aptly summarized in his famous remark during a 1925 address to the American Society of Newspaper Editors: "After all, the chief business of the American people is business." And despite today's political turmoil and the recent recession, businesses are in good shape.
"I'm registered to attend the Fraser Management CONTRARY OPINION FORUM. I'm excited about my attendance and I look forward to seeing/hearing you there."
My comment - It is a splendid quote and I hope that Calvin Coolidge's concluding sentence will prove as apt in this century.
I maintain that the USA's problems are self-inflicted. That is certainly a wake-up call but it also means that American's can resolve their own problems.
US multinational companies are mostly in very good shape, as you point out and we have often commented. They remain a Fullermoney secular theme. There is also the real possibility of energy independence for the USA within 12 to 15 years, as Fullermoney has forecast. Needless to say, that would be transformative.
Meanwhile, how does the USA address its economic problems and what choices need to be made? To answer this, leaders and decision makers have to understand the current financial situation more fully so that sensible choices can be made.
This KPCB presentation - USA Inc. - is both detailed and highly informative. I have not yet read all the way through it - there are 468 slides - but I have seen enough to commend it to you.
I am delighted that you will also be attending the Contrary Opinion Forum in October.
My personal portfolio: Profits taken on a leading trade; a trade increased; two new trades opened; a former trade partially reopened - Details and charts are in the Subscriber's Area.
Email of the day (3) - On the Audios:
"I hope you're having a great family Easter and NOT looking at the screens. After your comments on the silver acceleration I also started watching them yesterday (being also long gold), but rapidly came to the conclusion that the liquidity was so tiny and the spreads so large, that any dealings that day were completely irrelevant.
"As always I enjoy every audio hugely, and really appreciate that you struggle on even when you are recovering from flu etc.. I just want to make a suggestion regarding your not infrequent comments about your voice . Firstly it never bothers US at all if it is scratchy or if you cough! We listen to the content and to your tone, which never fail.
"But since it seems to bother YOU a bit, I have often wondered why your IT department can't supply you with a program for making the audios that includes a pause button, that you can just click on when you need to cough or have a drink of water? Then your listeners would never even know that there had been a pause.
"Just a thought."
My comment - Thank you for this thoughtful email regarding my deplorable vocal shortcomings.
Decades ago, when doing some recording before the website Audio existed, I did have a pause button but it left an irritating click each time it was used. Also, it too easily became a crutch. Nevertheless, I will look into this as the technology will surely have improved, even if the presenter has not.
Please note - Eoin is away on his seminar tour of Singapore and Australia but will be back on Wednesday 11th May.