Tuesday, December 27, 2005

China's Gold Reserve

"Some economists have been appealing to the State Administration of Foreign Exchange to expand China's gold reserve after the Renminbi appreciation in a bid to reduce the country's reliance on the greenback." reports Chen Feng in an article titled China faces dilemma on expanding gold reserve, published on the Official Chinese Government Portal. (gov.cn)

Chen Feng reports, Teng Tai, an economist of China Galaxy Securities Company said "China should increase its gold reserve from 600 tons to about 2,500 tons in a short term and to 3,000 tons in a long term to cope with the versatile exchange rate risks... Too little gold reserve would pose threat not only to China, but also to the global monetary system."

Chen Feng points out china's gold reserve was reported at 600 tonnes at the end of June 2005. Which is only about 1.4 percent of China's total foreign exchange reserve, based on figures from the International Monetary Fund (IMF).

Many countries and organizations have gold reserves of more than 1,000 tonnes, including the United States, Germany, France, Italy, Switzerland and the IMF. See World Gold Holdings report at the World Gold Council.

The current global gold supply is 2500 tonnes per year. If China was to buy 1900 tonnes of gold in the short term, this would drive the price of gold much higher.

If China's gold reserves were to increase to 2,500 tons, it would make China the world's fifth-biggest holder of gold, behind the U.S., Germany, the International Monetary Fund and France. It is now the 10th- largest holder, according to the World Gold Council.

Even a modest increase in its gold holdings, for example to 5 percent of the value of its total reserves, would translate to extra bullion demand of 2,340 tons, or 67 percent of annual global consumption, Bloomberg.com reports Credit Suisse analyst Michael Slifirski said.

This announcement comes after the Russian Central Bank said it would double its gold reserves from 5% to 10%. See Russian Central Bank Gold Reserves to Double.

However, this announcement to increase the Chinese gold reserve by 1900 tonnes is nearly four times as big as Russia saying it will accumulate 500 tonnes.

Bill Murphy of Lemetropolecafe.com had this to say regarding the comments on gov.cn about China's gold reserves.

"Veteran Café members will also remember my relaying to you from South Africa, on my visits there in 2001, that the Chinese were scouring that country to secure gold supply.

One thing for sure, the Chinese are not going to make smoke like this without ALREADY securing a fair amount of supply through intermediaries. There is no way the Chinese could buy anywhere near that amount of gold without sending the gold price bonkers. The market is already in a 1500+ tonne supply/demand deficit per year. The tiny gold market cannot handle anything close to what is discussed in the article … not remotely close at prices below $600 an ounce.

Whatever has been done as far as Chinese gold buying is concerned, or is still to come (which should be considerable), all this central bank talk of gold buying has to have The Gold Cartel freaked out. The way the GATA camp sees it, they are short more than 10,000 tonnes and cannot get it back without driving the price sharply higher. What we have here is set up for a gold buying panic in the near future and for our long-awaited gold derivatives neutron bomb to go off."

Sunday, December 25, 2005

2006 Gold Price Predictions & Forecasts

James Turk, the founder of GoldMoney.com, and expert on gold was on Canadian Television this week predicting the gold price would hit US$600 in the first quarter of 2006, and US$900 before the end of 2006.

Bill Murphy of GATA.org (Gold Anti-Trust Action Committee), predicts the gold price will reach US$1,000 an ounce by the end of 2006.

When considering these gold price predictions for 2006 it is worth keeping in mind that in today's $ based on inflation gold would have to hit $2200US to be equal with the all time high of $875 reached in 1981.

Newmont Mining's President Pierre Lassonde has publicly declared he expects prices to be around $525 in January 2006. Newmont's president said gold "may rise to more than $1,000 an ounce in the next five to seven years as demand growth driven by Asia outstrips global supply."

Now for some Top Financial Firms Gold Price Predictions for 2006

The main stream media seems to let these "Top" Financial Firms get their predictions for the gold price wrong time and time again without saying anything. Lets see how they go in 2006, considering the gold price recently hit $540 US.

UBS raised its 2006 forecast for gold to $520. UBS said in a report in the Australian Investment Review "Gold's fundamentals also look stronger than previously expected, as supply and demand fundamentals and investment demand all appear stronger than previously anticipated."

Merrill Lynch has upgraded its gold price forecasts by 19% to US$525/oz in calendar 2006, as reported by Reuters in an article titled Gold seen marching into 2006 with fanfare,

Maquarie has increased its gold price forecast by around 8% to US$516/oz. for 2006, as reported in the Australasian Investment Review, in an article titeled, Macquarie Upgrades Commodities Prices (Again).

J.P. Morgan Securities have lifted its long-term gold price forecast to $500 an ounce from $450, with an average price of $558 in 2006, as reported by Reuters in an article titled Gold seen marching into 2006 with fanfare

Barclays Capital expects the gold price to average Dollars 465 in 2006 before falling to Dollars 450 in 2007 and Dollars 440 in 2008. Kevin Norrish, head of commodities research at Barclays Capital, said "We don't believe the current rally is sustainable. There is no shortage of gold and we don't see any evidence that central banks are going to start increasing the amount of gold in their reserves."

Stephen Briggs, economist at SG Corporate and Investment Banking, has forecast average prices at $515 in 2006 and $550 an ounce in 2007, as reported by Reuters in an article titled Gold seen marching into 2006 with fanfare

Kevin DeMeritt of goldcentral.com provides more gold price predictions for 2006.

Please post your own gold price predictions and forecasts for 2006 as a comment below.

Friday, December 23, 2005

Gold Price Suppression Scheme

The Gold Anti-Trust Action Committee has just released a Trailer for Gold Rush 21, a historic conference exposing the manipulation of the gold market.

Chris Powell, Secretary/Treasurer of the Gold Anti-Trust Action Committee said
"GATA is confident that the DVD will have a powerful impact on the gold market and other markets. We're also hopeful that it will either break the gold price suppression scheme or drive the central banks and their accomplices into the open, where their tactics will become prohibitively destructive."

You can view a trailer for the DVD here:

Gold Rush 21

Wednesday, December 21, 2005

When will the Gold Price Really Increase? - Part 2

The day will come sooner or later when the global investment funds estimated at $46 Trillion will try to move into the gold market, which is estimated to be valued at a only a tiny fraction of that amount. This event has been described by many as

Trying to force Niagara falls though a garden hose!

Back in April this year Jim Puplava of FinancialSense.com when talking about global investment funds moving into gold, said on his weekly internet radio show "If 5% of that money moves into gold there will be 20% to 30% moves up in the gold price in one day! But you have to be in it to win it." You can read more of Jim Puplava's Gold Price Forecasts in Part 1, When will the Gold Price move UP!

The Day the Gold Price really increases may be coming some time in the next 3 years.

A recent survey by Barclays Capital found investors were planning to significantly raise their exposure to commodities over the next three years. Almost 70 per cent of the Barclays Capital survey respondents expected to increase their exposure to commodities to 5 per cent or more of their portfolio.

Monty Guild who writes on Jim Sinclair's Mine Set has confirmed this survey with his own research in an article titled Massive Reallocation of Funds Into Gold and says "In conversations over recent weeks, my contacts have said that they plan to put 5% of their massive pension fund, mutual fund and hedge fund assets into gold."

Monty Guild said "Now 5% of $46 trillion is $2.3 trillion and 1% of $46 trillion is $460 billion. If the amount of gold shares purchased over the next three years equals even $460 billion it will cause the total value of all listed gold shares to skyrocket."

A recent article titled Why gold can go higher and higher, by Paul Tustain who is Director of www.BullionVault.com, puts this massive investment in gold into perspective.

Paul Tustain says
"Even now if all the gold ever produced on Earth were formed into a single cube its edge would be less than 20 metres - 2 metres shorter than a tennis court. That 20 metre cube of gold would weigh about 140,000 tonnes and each tonne is worth about 16,000,000 dollars. So all the gold in the world is currently valued at $2.2 trillion."

Of course not all of that gold is for sale or can be traded. A massive 75% of estimated physical gold is fabricated into gold jewellery. An enormous 7-12% of the worlds gold is owned by peasant farmers in India, who mostly keep it in the form of gold coins and bars. Do you think they will be selling it any time soon to the world's investment funds?

The Day the Gold Price really increases is fast approaching now that the gold price has passed $500US. James Turk of goldmoney.com points out in a recent commentary, many investors would have been waiting for the gold price to pass $500 as a signal that this gold bull market is real and that it is time to invest.

Global currency traders who are responsible for trillions of dollars in capital will also be realising that gold is increasing not only against the US Dollar, but against all national currencies!

How much of your own portfolio should be invested in gold coins and gold bullion?

The question you should be asking yourself is "Is a 5% investment in gold enough for my own portfolio to protect myself and my family?". Nelson Hultberg points out in his recent article Controlling Gold Over Time

"five and ten percent of one's portfolio seem to be way too low if things are really as bad as the analysts make out. If they really believe that the dollar is going to crash big time, then why would any analyst advocate only 5%-10% of one's wealth in gold and silver? This is one of those mystifying irrationalities that circulates among the "experts" without any justification."

"5%-10% portion of one's portfolio in precious metals seems like nothing but a pittance, terribly inadequate for the future that is staring us in the face. Analysts that recommend such a minimal percentage are not serving their readers very well in this writer's opinion."

So what percentage should you invest in gold coins and gold bullion? This would vary according to your temperament and other budget expenses. But as Hultber points out, it should certainly be far greater than the amounts conventionally recommended.

Don't wait for $2.6 trillion of global investment funds to flow into gold. The time to move at least 5% of your savings into gold coins and bullion, is right now! Sub $500 gold prices will seem like a steal in the years to come. For more info on buying gold coins and gold bullion visit our How to Buy Gold articles.

Monday, December 19, 2005

No Way Out - System Doomed to Hyperinflation

Here is the conclusion to John Williams' Shadow Government Statistics review of the 2005 Treasury GAAP accounting report:
"No Way Out -- System Doomed to Hyperinflation

The regular, annual $3.5 trillion shortfall in government operations cannot be covered by Uncle Sam; the situation has deteriorated beyond any hope of a solution within the existing system. Raise taxes? Even a 100% personal income tax would leave a deficit. Cut spending? Spending cuts that would bring government fiscal conditions into some semblance of order would be so draconian as to be beyond any political possibility in today's environment. What remains inevitable -- only a matter of time -- is a national bankruptcy.

Such circumstances in the past -- though no nation on earth has ever come close to experiencing the level of fiscal and financial fraud now being perpetrated on the American people -- typically have been "cured" by revving up the printing presses and creating excessive quantities of money. The end result is a monetary collapse in a hyperinflation, with the currency becoming worthless.

In times of hyperinflation, gold coins are a store of value which can not be printed out of existence. For more information on buying gold coins and gold bullion visit our section: How to Buy Gold

Sunday, December 18, 2005

Don't Buy Gold on Margin!

As we enter what many are calling the second leg of the gold bull market we can expect very sharp movements up and down in the gold price, such as the recent run up to $540 and then the quick retreat back to $500 support level. This type of movement in the gold price is normal in a gold bull market and was experienced in the bull market of the early 1980's.

Should you be concerned about these sharp movements in the gold price?

As long as you DON'T BUY GOLD ON MARGIN, then no, you have nothing to worry about.

Here are two views as to why you shouldn't buy gold on margin. The first is from Richard Russell who only buys gold coins and doesn't trade gold. The second is from Jim Sinclair who trades gold and also buys gold coins.

Richard Russell's view on gold has been posted by James Turk at goldmoney.com. James Turk speaks very highly of Richard Russell and in particular his track record on forecasting financial markets that have been published for the last 30 years in his Dow Theory Letters.

Richard Russell says "I don't buy gold futures. I don't buy gold on margin. I don't buy gold puts or calls. I don't trade gold. Therefore, when gold ran up to $540 on December 12th, I didn't get excited. And then when gold dropped to just above $500 yesterday I didn't get depressed. You see, on a daily or even weekly or monthly basis, I don't give a damn where gold goes. I don't care because I'm holding gold in terms of years, not months or weeks or days. And I own it outright. I don't own it the way half of America own their homes -- namely, on (mortgage) margin."

Read the entire news letter here.

Jim Sinclair whose website is jsmineset.com also has a similar view about buying gold on margin:

"For your sake -- DO NOT SELL INTO WEAKNESS -- unless you have committed the zero tolerance gold offense of margining yourself into a weak hand. Anyone other than a professional with 46 years of experience that trades futures on anything above a 50% margin is a world-class TURKEY waiting to have his/her feathers plucked by the pros.

The floor traders in this zero-sum game make a living by taking away your living. Your game is to play the market as investors, as aggressive investors by selling into strength and buying into weakness. Never, ever put yourself where many are today -- in total terror, caused by the margin clerk. Never, ever meet a margin call, because that nuisance, the margin clerk, is in reality your best financial friend. When he/she says send money -- don't. Just leave the table."

Source: jsmineset.com

If you really want to profit from the gold bull market, simply spend 10% of your money each month buying gold coins and gold bullion, or if they are too expensive buy silver ounce coins or rounds.

Don't concern yourself with the fluctuations in the gold price along the way, as the gold price is going much higher, and you will look back in a few years time and realise that it makes little difference if you buy gold coins at $500, $540 or even $750, you will still make amazing profits and you can sleep at night knowing that your gold investment isn't going to disappear due to a margin call when the gold price drops back a little during one of the inevitably up and down movements to come during this gold bull market.

Friday, December 16, 2005

Gold Price going to $3000 to $5000 in 4 years

GATA Chairman Bill Murphy was on television today in Canada. He appeared on "Business Morning with Jim O'Connell" on "Report on Business Television", a cable channel based in Toronto that is seen across Canada and around the world via the Internet.

Mr Murphy explains the gold price manipulation that he and GATA believe has been taking place and predicts the gold price is going to $1000 next year and $3000 to $5000 in the next three to four years.

You can watch the interview online at the ROB-TV Internet archive here:


Look for Bill Murphy's segment at 11:40 a.m.

You may also find an interview with David Chapman, investment advisor & technical strategist for Union Securities interesting. He is predicting that the gold price will go to $850.

Look for David Chapman's segment at 3:33pm

Update: 22 December 2005

These videos are no longer available on the ROB TV archive. We are locating these videos and will place a link to them here as soon as possible.

In the mean time take a look at GATA's Trailer of the Gold Rush 21 historic conference on the long-term manipulation of the gold market:

Gold Rush 21 - Conference on the Gold Price Suppression Scheme

Dow Gold Ratio could put Gold at $100,000

If Mr. Bernanke does what he believes in - namely that asset deflation has to be avoided at all cost and, therefore, massively prints money, no matter where the Dow will be in future, at 36,000, 40,000, or at 100,000, as some pundits predicted in their in 1999 published books (of course shortly before the market tumbled), you will be able to buy the Dow with ounce of gold worth either $36,000, $40,000 or $100,000

Writes Dr Marc Faber in his article on the Dow Gold Ratio, Buy gold to hedge the US Dollar downside risk, published on ameinfo.com (Middle East Finance and Economy.

And you were worried because the gold price dropped below $500 for the third time in 24 years this week.

Dr Marc Faber is a highly respected investment advisor and fund manager. Dr Faber is the author of The Gloom Boom & Doom Report which highlights unusual investment opportunities, and is the author of several books including, "Tomorrows Gold - Asia's Age of Discovery", which highlights future investment opportunities around the world. "Tomorrows Gold" was on Amazons's best seller list for several weeks.

Here is a short section of Dr Faber's Bio, which provides a track record of his financial forecasts:

Famous for his approach to investing, Marc Faber does not run with the bulls or bait the bears but steers his own course through the maelstrom of international finance markets. In 1987 he warned his clients to cash out before Black Monday on Wall Street. He made them handsome profits by forecasting the burst in the Japanese Bubble in 1990. He correctly predicted the collapse in US gaming stocks in 1993; and he foresaw the Asia-Pacific financial crisis of 1997/98 and the resulting global volatility.

Dr Faber, believes that at some point in future, investors will lose faith in the value of US dollar denominated bonds and in the US dollar. At such time he believes, investors will drive US interest rates much higher resulting in tumbling bond prices and rush into anything but US assets such as equities and bonds.

Dr Faber said "This does not mean that all US dollar assets will collapse in nominal terms, but they could collapse against a 'hard currency' such as gold or possibly against non-US dollar currencies, provided foreign central banks pursue tighter monetary policies than the US. This, however, is an issue about which we cannot really be certain, as all central bankers have a propensity 'to print money'. Therefore, I feel that asset prices will tend to depreciate against the only currencies for which the supply is limited - gold, silver, and platinum."

Dr Faber points out the continued decline in the Dow/Gold ratio from a high of 45 to its current level of 20. The Dow Gold Ratio is the number of ounces of gold that is required to buy one Dow Jones.

Dr Faber said " What is, however, interesting is that despite the stock market's rebound since October 2002, the Dow/Gold ratio has continued to decline. Simply put for the holder of gold - the world's only honest currency, since it cannot be printed by some dishonest central banker - the Dow, although it increased in value in dollar terms, has continued to decline in gold terms with the result that, today, it 'only' takes 20 ounces of gold to buy one Dow Jones Industrial Average."

Dr Faber predicts in the future it will take only one ounce of gold to buy the dow jones.

James Turk of GoldMoney.com has also pointed out this same point in a recent commentary Don't Get Excited About Dow 11,000 where he said:

"Even though stocks may be rising when we look at their prices in terms of dollars, they are falling when we look at prices in terms of gold. In gold terms, stock prices have been falling since July 1999, six months before the DJIA peaked in dollar terms. As the purchasing power of gold has climbed since then, stocks have become cheaper."

Gold should top $1000 within two years!

Gold should top $1,000 within two years on its way to between $3,000 and $5,000, Bill Murphy of GATA.ORG was reported as saying in an article by The Globe and Mail in Toronto on Friday.

GATA believes that the U.S. Federal Reserve Board for years leased out large amounts of gold in paper certificates to suppress the gold price, thus bolstering the U.S. dollar as a reserve currency. GATA says the masterminds were Alan Greenspan, outgoing Fed chairman, and major U.S. financial institutions.

GATA says the U.S. Gold Reserve in Fort Knox does not have enough bullion on hand to meet its paper obligations. With the gold price rising and supply squeezed, the need to cover short positions with real gold will create a giant gold price increase -- and a potential crisis.

Murphy says "Russia, along with China and Saudi Arabia, have led the upsurge in demand for gold that has overwhelmed the U.S.-based cartel, he observed." For more info see our article Russian Central Bank Gold Sales Double

Source: The Globe and Mail.
By Gordon Pitts