Bank Analyst & Commentator Opinions
Last Update : November 5, 2009
Information has been redacted from the articles as they originally appeared and some information has been bolded for
emphasis.
DJ AL'S EMPORIUM: Gold Glitters Because
Central Bankers Do Not
By Al Lewis
Bloomberg.com
November 5, 2009
I wish I had an ounce of gold for every time somebody told me an ounce of gold was a dumb thing to buy.
I wish I had listened to Pierre Lassonde.
I first wrote about Lassonde in August 2003 when gold prices soared to a then-unthinkable $375 an ounce.
Lassonde told me he had 60% of his liquid assets invested in the precious metal and claimed it had nowhere to go but up. By up, he meant, $500, $1,000 and then maybe even $6,500 an ounce.
"One thing I know for sure is that gold is going to have three zeros after the first number," he said. "I just don't know how big that number is going to be."
Some of my colleagues, sources and readers, scoffed as I touted this bold speculation.
Lassonde was then president of Denver, Colo.,-based Newmont Mining Corp. (NEM), one of the world's largest gold companies...
In 2005, when gold had safely crossed the $500 mark, as Lassonde predicted, I wrote about him again. And I still heard from naysayers....
This week, gold hit record highs again, nearing $1,100 an ounce.
The run-up came on news that India's central bank bought 200 metric tons for $6.7 billion from the International Monetary Fund. China, flush with U.S. dollars, also has been stocking up on gold.
Lassonde, who is now chairman and the largest shareholder of a Toronto-based royalty company, Franco-Nevada Corp. (FNV.T), says India's move highlights a critical shift. This year is the first in decades when more gold will be purchased for financial reasons than for jewelry.
"The naysayers haven't clued in," Lassonde said Wednesday. "People are buying gold as a financial instrument. And they think it's a better instrument than the U.S. dollar, or the euro, or the pound or any other currency."
The IMF, as it sold the gold to India, warned of an asset bubble in everything from real estate to precious metals. All that money printed to shore up the banks is looking for something to buy.
"This is a hard-asset cycle," said Lassonde, referring to commodities like oil and precious metals vs. financial assets. "The cycle still has five to 10 years to go. ... Don't bet against the cycle."
Central banks around the world are becoming net buyers, as opposed to net sellers, of gold, perhaps setting a new floor for gold prices in a once unthinkable range....
"People are coming to realize that gold isn't the barbarous relic people thought it was," Russell Ball, chief financial officer of Newmont, told me Wednesday. "With the collapse of Lehman Brothers ... we saw triple-A-rated debt become worthless over a very short time frame. Now we're seeing high-net worth individuals ... put a significant portion of their portfolios into gold."
Lassonde has been sharing his good fortune, giving away about $65 million over the years to the arts and education, and founding The Pierre Lassonde Entrepreneur Center at the University of Utah....
So where does Lassonde think gold will go from here?
He believes it will settle when the Dow Jones Industrial Average and the price of gold are at a 1-to-1 ratio. It's currently trading at roughly a 10-1 ratio. So how much will Dow fall vs. gold rise to meet this prophecy?
"That's the unanswered question," Lassonde said.
India's recent move may be a sign of things to come. China will eventually tire of buying oh-so- many U.S. Treasuries and shift toward buying more gold.
"The Chinese have this incredible ability to turn things into mania," Lassonde said. "If China develops a mania for gold ... we'll see prices we cannot even imagine."
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Be Prepared for the Worst
The large-scale government intervention in the economy is going to end badly.
By Ron Paul
Forbes Magazine
November 16, 2009
...A false recovery is under way. I am reminded of the outlook in 1930, when the experts were certain that the worst of the Depression was over and that recovery was just around the corner. The economy and stock market seemed to be recovering, and there was optimism that the recession, like many of those before it, would be over in a year or less. Instead, the interventionist policies of Hoover and Roosevelt caused the Depression to worsen, and the Dow Jones industrial average did not recover to 1929 levels until 1954. I fear that our stimulus and bailout programs have already done too much to prevent the economy from recovering in a natural manner and will result in yet another asset bubble.
... Rather than allow the market to correct itself and clear away the worst excesses of the boom period, the Federal Reserve and the U.S. Treasury colluded to put taxpayers on the hook for trillions of dollars. Those banks and financial institutions that took on the largest risks and performed worst were rewarded with billions in taxpayer dollars, allowing them to survive and compete with their better-managed peers...
What is more likely happening is a repeat of the Great Depression. We might have up to a year or so of an economy growing just slightly above stagnation, followed by a drop in growth worse than anything we have seen in the past two years. As the housing market fails to return to any sense of normalcy, commercial real estate begins to collapse and manufacturers produce goods that cannot be purchased by debt-strapped consumers, the economy will falter. That will go on until we come to our senses and end this wasteful government spending....
As for Treasury debt, the Chinese and other foreign investors are more and more reluctant to buy it, denominated as it is in depreciating dollars. The only remaining option is to have the Fed create new money out of thin air. This is inflation. Higher prices lead to a devalued dollar and a lower standard of living for Americans. The Fed has already overseen a 95% loss in the dollar's purchasing power since 1913. If we do not stop this profligate spending soon, we risk hyperinflation and seeing a 95% devaluation every year...
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Could China Propel Gold to $2,000?
By Erik Bethel
Seeking Alpha
September 15, 2009
Last week Alan Greenspan noted that "Rising prices of precious metals and other commodities are an indication of a very early stage of an endeavor to move away from paper currencies."
In other words, people are buying gold as a hedge against inflation....
...Over the past six months Beijing has made a series of moves to protect itself against a dollar devaluation. In a recent "BRIC Summit" in Russia several months ago, Chinese leaders came out strongly in favor of a new reserve currency to replace the dollar...
As recently as 2002, the private ownership of gold was prohibited in China. You could be jailed if caught with any in your possession. Beginning in 2009, in a stunning about-face, the central government removed all restrictions...
It truly is as simple as can be, because every bank sells gold and silver bullion bars in four different sizes to individuals. (Try to find the same the next time you make the trek down to Wells Fargo.)...
Thus China, which only yesterday was the lowest per-capita consumer of gold in the world, is bidding to become the biggest...
All this suggests a mania in the making, and only in the formative stage. Imagine if hundreds of millions of new consumers climb on that particular bandwagon...
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$5,000/oz gold? Rob McEwen says it's coming in 2014 or 2015
By Dorothy Kosich
Mineweb
September 15, 2009
In a
presentation to the Denver Gold Group on U.S. Gold Monday, McEwen was somewhat
subdued as he only briefly mentioned he thought gold could hit $5,000 an ounce
before the end of the gold cycle. As this reporter scrambled for
a clarification of his remarks in a brief interview, McEwen stuck by his
prognostication, forecasting the end of the gold cycle would occur either on
2014 or 2015....
As the
years roll by, McEwen's legendary penchant for marketing to the max remains
intact as he offered audience members trillion dollar notes as an impromptu
raffle prize at the conclusion of his talk.
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The Gold Stock Technician
Frank Barbera, Editor
August 18, 2009
Simply put, we believe that the US Dollar is very close to an important price breakdown, and that as a result, mining stocks, and precious metals prices are very close to the beginning of a major advance. While would be quick to acknowledge that in the very short term prices can continue to ‘fluctuate', and indeed there could still be a bit more residual downside action left over, -- on the whole, we are not that worried about prices beginning any kind of sustained decline. Instead, we believe that over the next 5 to 7 days, prices will finish off a major low, if they haven't already seen that low, and will begin to move up in what should be a very powerful, multi week advance. In our view, Gold is getting ready to break out above $1,000, and could then stay above $1,000 as far as the eye can see.
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Why Gold Investing is Crucial
By Brent Lichtman
International Business Times
August 10, 2009
Gold investing is going to be the only investing in a short while. Wait just a minute, you exclaim! What in the world are you talking about? How could gold investing be the only investing? That makes no sense at all! Well, the answer to that question may seem like it doesn't come from this world, and that is partly correct. The world as we know it is about to change and gold investing is going to become the only investing!
The U.S. Dollar is being destroyed by the government and the Federal Reserve. The policy that the Fed has introduced, quantitative easing, is going to insure inflation in the the years ahead and for years to come. Gold will be the beneficiary of this misguided policy and that is why gold investing will be the only investing for the next couple of years.
Gold is real money, real wealth. The reason that gold is real wealth is because it is in limited supply, in great demand and it cost a lot to coax it out of the ground. In essence it is the anti-fiat currency. It is the direct opposite of everything that paper money is. Fiat currencies are printed for next to nothing and they can be expanded on a whim. Governments can do whatever they want with paper money and pass the consequences on to the taxpayer with out calling it a tax increase. The best of both worlds for the bloated ever expanding government. This is one more reason why, soon, gold investing will be the only investing.
Now is the time to be gold investing, because the dollars that are put into gold now will come back triple fold. Physical gold, coins and gold bullion, are your security blanket that will keep you warm when things get cold out there. Investing in gold stocks allows you to leverage your money and go for the moon shot when the dollar really takes a dive!
Most people are never willing to see the dramatic changes that are on the horizon, but rather prefer to live in the world of it can't happen here. Those that venture into the world of gold investing and stay the course, will reap substantial rewards in the very near future. In the old days the standard was to have 10 percent of your portfolio in precious metals... It is always wise to remember that the trend is your friend, and right now the trend is changing to gold investing!
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Pimco Says Dollar to Weaken as Reserve Status Erodes (Update4)
By Garfield Reynolds and Wes Goodman
Bloomberg
August 19, 2009
Pacific Investment Management Co., the world's biggest manager of bond funds, said the dollar will weaken as the U.S. pumps "massive" amounts of money into the economy.
... Curtis A. Mewbourne, a Pimco portfolio manager, wrote in a report on the company's Web site. The greenback is losing its status as the world's reserve currency, he said....
"While we have not yet reached the point where a new global reserve currency will arise, we are clearly seeing a loss of status for the U.S. dollar as a store of value even in the absence of a single viable alternative," Mewbourne wrote....
China's central bank renewed its call for a new global currency in June and said the International Monetary Fund should manage more of members'foreign-exchange reserves. Russian President Dmitry Medvedev last month illustrated his call for a supranational currency by producing a sample coin after a summit of the Group of Eight nations.
Mewbourne joins investor Jim Rogers, who said last year that he was shifting all his assets out of dollars and buying Chinese yuan because the Fed eroded the value of the U.S. currency. The dollar is losing its status as the world's reserve currency, said Rogers, who is the author of books on investing including "Hot Commodities."
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China's Central Bank Renews Call for New World Reserve Currency
Bloomberg.com
June 27, 2009
China's central bank renewed its call for a new global currency and said the
International Monetary Fund should manage more of members'foreign-exchange reserves, triggering a decline in the U.S. dollar.
"To avoid the inherent deficiencies of using sovereign currencies for reserves, there's a need to create an international reserve currency that's delinked from sovereign nations," the People's Bank of China said in its 2008 review released yesterday. The IMF should expand the functions of its unit of account, Special Drawing Rights, the report said.
The restatement of Governor Zhou Xiaochuan's proposal in March added to speculation that China will diversify its currency reserves, the world's largest at more than $1.95 trillion. Chinese investors, the biggest foreign owners of U.S. Treasuries, cut holdings by $4.4 billion in April to $763.5 billion after Premier Wen Jiabao expressed concern about the value of dollar assets. That reduction came a month after China boosted its holdings
by $23.7 billion to a record....
IMF First Deputy Managing Director John Lipsky said on June 6 it's possible to take the "revolutionary" step of making SDRs a reserve currency over time.
SDRs were created by the IMF in 1969 to support the Bretton Woods exchange-rate system that collapsed in 1971. They act as a unit of account rather than a currency. The cash is disbursed in proportion to the money each member nation pays into the fund.
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Medvedev Shows Off Sample Coin of New 'World Currency' at G-8
By Lyubov Pronina
Bloomberg.com
July 10, 2009
Russian President Dmitry Medvedev illustrated his call for a supranational currency to replace the dollar by pulling from his pocket a sample coin of a "united future world currency."
"Here it is," Medvedev told reporters today in L’Aquila, Italy, after a summit of the Group of Eight nations. "You can see it and touch it."
The coin, which bears the words "unity in diversity," was minted in Belgium and presented to the heads of G-8 delegations, Medvedev said.
The question of a supranational currency "concerns everyone now, even the mints," Medvedev said. The test coin "means they’re getting ready. I think it’s a good sign that we understand how interdependent we are."
Medvedev has repeatedly called for creating a mix of regional reserve currencies as part of the drive to address the global financial crisis, while questioning the U.S. dollar’s future as a global reserve currency. Russia’s proposals for the G-20 meeting in London in April included the creation of a supranational currency.
This is a sample coin as shown on the www.futureworldcurrency website.
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COMEX traders predict gold at $1,600 by December
Courtesy: www.oxfoonline.com
Commodity Online
July 9, 2009
Here are 10 compelling reasons why gold is going to do well this year.
The Stimulus Effect: Including $1 trillion in cash infusions, the stimulus plan will pump $9.7 trillion into the economy, according to Bloomberg. As the Globe & Mail reports flatly, "Many believe that the monetary stimulus efforts will cause a spike in inflation," driving gold higher.
COMEX Traders Predict $1,600 Gold... by December: If gold trades at or above $1,600 by December, some 100,000 call option contracts will be "in the money." Big-money players Goldman Sachs and JPMorgan are reportedly helping to drive the action, ahead of a huge purchase of gold futures contracts.
"Big Money" Inflows: In 2008, NYC-based hedge fund Paulson & Co's flagship fund returned 37%, as the world markets burned. Paulson's bullish on gold, big time, including the Mar. 17 purchase of 39.9 million shares of AngloGold, worth $1.28 billion. Other major hedge funds are piling into gold, too, including Eton Park Capital, Green light Capital and Hayman Advisors.
China's Doubling Down! China just revealed that it has doubled its gold holdings to 1,054 tons. Yet that still only equals 1.6% of its overall reserves. As China moves out of U.S. Treasuries and into gold, this will help fuel the next leg of the run-up.
Demand Building across the Board: Worldwide demand for gold jumped by $29.7 billion in the first quarter, a 36% bolt, according to the World Gold Council. Demand for gold ETFs (Exchange Traded Funds) rocketed 540%... another trigger for the coming gold boom.
The Paper Dollar's 30% Drop: Since 2001, the U.S. Dollar Index has tanked 30%... while gold has risen 300%. With all the downward pressure on the dollar, and inflation on the way, this trend is about to pick up steam.
Gold/Dow Ratio Signals $8,000 Gold: During major gold bull markets (and corresponding equity bears), gold and the Dow converge at a 1-to-1 ratio. During the last gold bull, the Dow sank to 850 and gold rose to $850. The Dow is now over 8,000... But even if it fell to 4,000, we could see $4,000 gold before this bull run is over!
U.S. Treasury Dept. Signals $5,468 Gold: Currently, the U.S. government holds about 286.9 million ounces of gold. It has printed about $1.569 trillion worth of paper dollars. If each dollar were backed by gold, that would put the price at $5,468.80 an ounce.
Riding the "Commodity Super Cycle": Jim Rogers expects the Commodity Super Cycle to drive commodity prices higher for another eight years... including gold. And he's stockpiling the yellow metal by the day. Every pullback, says Rogers, is another buying opportunity. Considering he's been dead right on every major trend of the past 40 years, we wouldn't bet against him.
Historic Model Predicts $6,214 Gold: During the last gold bull, the yellow metal ran from $35 an ounce to $850, a 24-fold increase. This bull started with gold at $255.95, meaning that if historic trends hold, the price target would be $6,214 an ounce.
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Why China wants to buy $93 billion worth of gold
CommodityOnline
March 1, 2009
...In China, investors have been rushing to gold following the crash of global markets....
According to analysts, gold can be a very good product for holding its value. But the risks for paper gold and gold futures are nearly 10 times bigger than real gold investment. Buying gold related stocks can also be a risky move.
"Gold is a very solid asset. Buying physical gold does have advantages compared with other investments. Investments in gold-backed financial products and paper gold should be left up to the professionals," says Mark Robinson, a bullion analyst based in Dubai.
According to Robinson, gold investment in China is starting to look like a crowded marketplace. It's being boosted by the rising prices and market demand. And the unpleasant performance of the US stock market, low expectations for the US dollar, as well as investors' concerns over the banking crisis have also pushed up people's need for gold....
...China has nearly $2 trillion in surplus reserves. Beijing's piggy bank is overflowing with money. In fact, at nearly $2 trillion, China has the largest foreign reserves of any country in the history of the planet.
Whereas Washington now has nearly $11.4 trillion in debts, not counting the contingent liabilities of the real estate crisis....
But, over the next few years China is essentially going to corner the world's gold market.
Beijing knows that the dollar's status as a reserve currency is soon going to be history. Just like the pound sterling lost its status as the world's reserve currency in the early 20th century.
And authorities in Beijing also believe that as China rapidly progresses toward superpower economic status, the yuan should be a world-class, stable medium of exchange.
They envision the yuan as a major international currency some day, with as much (or more) status than the US dollar. That's why they're going to back the yuan with gold.
Plus, there's another reason for Beijing to buy more gold as part of China's piggy bank. China has an estimated $1.3 trillion invested in dollar-denominated investments. They can't get out of the dollar quickly. It would destroy the US economy which would have a direct negative impact on China.
So the smart thing to do: Hedge and diversify existing dollar holdings with gold....
Just to up its reserves to 5% in gold, Beijing would have to purchase $93 billion worth of bullion. That could easily send the yellow metal skyrocketing to more than $2,000 an ounce.
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