Kerr’s Catalysts for Gold Gains

Release Date: 
Friday, May 9, 2014

Gold and Silver Prices

Gold prices staged an early rally Friday amid escalating tensions between Ukraine and Russia, but were still on track for a second straight week of losses. “Ukraine's political crisis has lent support to precious metals prices in recent months, as some traders worried about a potential escalation in tensions between Kiev and Moscow and sought the perceived safety of gold and silver. Some investors prefer to hold precious metals over other havens because their value isn't linked to a country or government and prices could fare better if a geopolitical conflict flares up…Russian troops carried out military exercises, including near Ukraine, on Thursday and Mr. Putin on Friday came to Sevastopol to participate in Victory Day celebrations on his first official visit to Crimea since Russia's annexation of the region.” (“Gold Edges Higher on Ukraine Worries,” Wall Street Journal, 5/9/14.)

Gold finished the week down $10.50, at $1,291.10. Silver prices closed at $19.26, down $0.30.

Kerr’s Catalysts for Gold Gains

Kevin Kerr, editor of CommodityConfidential.com and other financial websites, discussed his drivers for gold with MarketWatch.

“‘Not taking a long position in gold is somewhat foolish at this stage,’ he said. (A long position is essentially a bet that prices will go higher.)…According to Kerr, other catalysts for gold gains include: The economic debacle and non-stop money-printing has ‘run amuck,’ and with resources getting tighter and tighter, there is going to be more ‘fiat (paper) currency sloshing around.’ So consumers will need more of that paper money to buy more real things, he said, referring to the situation as hyperinflation. One solution to hyperinflation is to switch to a non-fiat form of money, and one of the oldest currencies in the world is gold, Kerr said.

“At the same time, the Chinese ‘cherish gold as the premier symbol of wealth and store of value,’ and they’re buying the metal ‘hand over fist. If you’re worried about the U.S. economy, we suggest you buy gold…And if you’re not worried about the Chinese economy, buy gold.’” (“Kevin Kerr: Not buying gold now is ‘somewhat foolish’,” MarketWatch, 5/6/14.)

Gold’s Move East Signaled by Dubai Refinery

The Khaleej Times, the second largest English language newspaper in the UAE, reported on the continuing phenomenon of gold moving from the West to the East, along with a new gold refinery to accommodate demand.

“In the desert on the outskirts of Dubai, one of the world's biggest gold refineries is under construction. When completed next year, it will help to alter the balance of power in the global gold industry. Growth in demand for the precious metal is shifting east, to Asia's fast-growing economies. But key industry activities such as refining and clearing — matching investors' buy and sell orders — remain dominated by Europe and the United States. The $60 million refinery being built by Kaloti Precious Metals in Dubai is part of efforts to change that pattern, as is a plan by the Dubai Gold and Commodities Exchange to introduce a spot gold contract this June. ‘Dubai is already a top global centre for gold trading,’ Tarek El Mdaka, chief executive of Kaloti Precious Metals, said in an interview. ‘The refinery is part of the next stage, making Dubai a top centre for physical gold refining and clearing.’” (“Gold industry shifts east as Dubai plans huge refinery, spot contract,” Khaleej Times, 5/6/14.)

Fed Chair Yellen Notes Areas of Potential Risk

Federal Reserve Chair Janet Yellen spoke before Congress on Wednesday, citing areas of potential risk to the U.S. economic recovery.

“In testimony to Congress, Fed Chair Janet Yellen repeated her stance that the economy was still in need of lots of support given the ‘considerable slack’ in the labor market. While she offered few new clues on the direction of interest rates, Yellen broke ground in outlining the risks facing the economic recovery. Her mention of geopolitical tensions as a ‘prominent risk’ suggested the Fed was worried the Ukrainian conflict could weigh on the U.S. economy, while her assessment of housing signaled the sector's slowdown was also a gnawing concern. ‘The recent flattening in housing activity could prove more protracted than currently expected,’ Yellen cautioned. In general, her testimony to the Joint Economic Committee underscored the Fed's commitment to keeping benchmark overnight interest rates near zero for some time to come.” (“Yellen cites housing, geopolitical tensions as economic risks,” Reuters, 5/7/14.)

Goldline’s Express IRA℠ Program

Many Goldline clients choose to include precious metals as part of their retirement planning especially during times of economic crisis and uncertainty.* Goldline’s Express IRA℠ allows clients to acquire precious metals on their schedule; they no longer have to wait for your self-directed IRA to be funded before getting started.

Goldline's Express IRA℠ not only provides clients with the ability to diversify their IRA on an expedited basis, clients can also qualify for Goldline's ground-breaking Two-Way Price Guarantee Program℠ when they acquire $10,000 or more of our exclusive bullion coins. When an Express IRA purchase qualifies for Goldline's Two-Way Price Guarantee Program℠, clients are protected on short-term upside and downside market movement: they can either call to reprice their coins if the selling price falls (up to a maximum of 28 days depending on the size of the purchase) or, if the selling price of the coins increase during the qualifying period, clients can call Goldline to acquire additional coins at the original selling price.

Goldline provides a wrap-up of the week's precious metals news along with important commentary on the American Advisor Week in Review audio program. Listen to the show below:

*Federal IRA tax laws are complex and may change from year to year. Goldline believes it is appropriate to have 5%-20% of retirement portfolio allocated to precious metals. Other individuals and institutions may recommend different percentages. As with any investment, you should consult your tax advisor before making a decision regarding precious metals IRA investments.

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†This material has been prepared for private use. Although the information in this commentary has been obtained from sources believed to be reliable, Goldline does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice.

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