It's a tad puzzling that gold hasn't busted into new highs, despite enough catalysts to move a herd of stubborn mules. But that's the hand we're dealt right now. We cannot get up from the table until the game reaches its conclusion. Besides, I believe the stall in prices is giving us one last window to purchase before prices break once and for all into greater levels for this cycle.
At least that's how a number of prominent investors and institutions are viewing the price action right now. Here's a sampling of this year's "gold bugs" and what they've been performing about precious metals lately.
Jim Rogers, billionaire and cofounder of the Soros Quantum Fund, publicly stated last month that he plans to "sell federal debt and purchase more gold and silver."
George Soros elevated his investment in GLD by a whopping 49% last quarter, to 1.32 million shares. His stake is now worth over $221 million. Many investors do not realize that he also placed call choices on GDX worth $9 million. Probably the most logical explanation is the fact that he thinks gold equities are undervalued and that there's big money to be made in them inside a year. Rare Coins, Silver Coins, Gold Coins >> http://www.silver-
Marc Faber mocks these claiming gold is in a bubble. "It's nowhere close to that stage," he says. As well as although he's currently sitting on an enormous gain, he will not take any profits. Why? "I maintain a picture of Mr. Bernanke in my toilet, and every time I consider selling my gold, I look at it and I know better!"
Brent Johnson, a San Francisco hedge-fund manager, believed in gold so much that he started his own gold fund, Santiago Capital, earlier this year. His latest video points out that there have been "278 global easing moves in the last 14 months." How does somebody not own gold in that type of atmosphere?
Don Coxe, a highly respected global commodities strategist, stated at the Denver Gold Forum that "now is the best climate I have ever noticed for an increase in gold prices." He told fund managers, mining analysts, and mining executives to prepare for considerably higher gold prices and thus greater gold-mining-
Jeffrey Gundlach, cofounder of DoubleLine Capital, predicts that deeply indebted nations and businesses will default sometime following 2013. Central banks might forestall these defaults by pumping even more money in to the economy - but at the risk of higher inflation in coming years. He recommends buying hard assets including gold, and also "gold-mining companies because we think about them to become bargains."
Rob McEwen, CEO of McEwen Mining and founder of Goldcorp, is buying precious metals because he believes gold will someday hit $5,000 and silver $200.
This really is only a handful of individual investors who have produced current news with their bullion purchasing. Institutions, governments, and others are participating.
The South Korean central bank added 14 tonnes (approximately 450,000 troy ounces) of gold in November, and now holds six times more than back in June of 2011. "Gold is a physical, safe asset, and allows us to deal with changes in the international monetary atmosphere more successfully,"
Brazil purchased 18.9 tonnes (607,650 ounces) in September and October alone. It will likely buy more, since gold still accounts for only 0.8% of its reserves.
Turkey imported 4.2 tonnes (135,000 ounces) of gold in November. It has bought 117.2 tonnes (3.7 million ounces) so far this year, almost double last year's purchases.
Central banks around the world bought a total of 351.8 tonnes of gold (11.3 million ounces) in the first nine months of 2012, up 2% from a year ago.
Even Argentina added 7 tonnes last year (225,000 ounces), and Colombia 2.3 tonnes (almost 74,000 ounces).
And obviously there is China. While absolutely nothing official has been announced by its central bank, its imports and buying routines are mind-boggling.
This information suggest in and of themselves that dips in the gold price are likely being purchased - and will continue to be bought - by central banks. They're not exactly short-term traders. Remember, central banks were net sellers as recently as 2009, so this reversal will most likely play out for years.
There is some government interference, but no slump in demand in India. This trend will continue and might even strengthen when inflation starts making front-page headlines.
Germany. A precious-metals group recently reported that Germans are increasingly buying gold because of fears about economic uncertainty, and that a third of citizens are now thinking about gold as part of their investments. "There has been a substantial increase in demand in recent months because of worry about actions taken from the European Central Bank and US Federal Reserve, as the two central banks seek to counter the euro zone crisis and slow US financial growth."
Morgan Stanley's favored metal exposure for 2013 is gold, though the business expects silver to outperform it. The bank stated that it believes "nothing has altered with gold's basic thesis: QE 3 (and 4...) and comparable commitments in the ECB and BoJ; low nominal and negative real interest rates; ongoing geopolitical risk in the Middle East; and mine supply problems."
ScotiaMocatta stated that it will "not be shocked to determine prices reach $2,200/oz." Why? "One of the primary reasons we're nonetheless bullish is because of the mess the Western world is in. Europe features a debt problem that's proving all but not possible to solve, and all efforts to date have revolved around throwing more money in the issue to prevent the monetary method from breaking down... that ought to be cause enough to become bullish."
Deutsche Bank released a new report essentially declaring that gold is money. "We see gold as an officially recognized type of cash for one main reason: it's widely held by most of the world's larger central banks as a component of reserves. We would go further, nevertheless, and argue that gold might be characterized as 'good' money, as opposed to 'bad' money which could be represented by many of today's fiat currencies."
Bank of America Merrill Lynch says gold will hit at least $2,000 from the end of 2013.
JP Morgan now accepts physical gold as collateral.
Another supply of demand from banks could be the recent change in Basel III regulations. If you haven't read about it, gold could get promoted to Tier 1 status, which means it would be considered a "zero-percent risk weighted item."
Eric Sprott lately wrote, "If the Basel Committee decides to grant gold a favorable liquidity profile below its proposed Basel III framework, it will open the door for gold to compete with cash and government bonds on bank balance sheets - and provide banks with an asset that really has the chance to appreciate. Given that US Treasury bonds pay little to no yield these days, if offered the choice between the 'liquidity trifecta' of cash, government bonds or gold to meet Basel III liquidity requirements, why wouldn't a bank select gold?"
None of these parties think the gold bull marketplace is over, or the price too high. They recognize the implications of a globe floating on fiat currencies, and that government "solutions" to debt and deficit spending will significantly - perhaps catastrophically - dilute the value of currencies, the fallout of which has however to materialize. As for me, I think that the longer the malaise continues, the more most likely the breakout would be to be each sudden and dramatic.
We can all speculate about when the next leg up for gold will kick in, but the point for now would be to take advantage of the weakness, like many of these gold bugs are doing. When the price breaks out of its trading range, are you really certain you won't wished you'd purchased a lot more? How High Will Silver Go? Learn More >> http://www.silver-