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Experts Weigh In on Gold

Release Date: 
Friday, December 6, 2013

Gold and Silver Prices

Gold and silver prices lost ground this week amid positive U.S. economic data.  “Gold prices sold off and hit a five-month low in the wake of a modestly stronger-than-expected U.S. employment report…This week’s U.S. data economic data has been mostly upbeat and has fallen into the camp that reckons the Fed will act to ‘taper’ its monthly bond-buying program policy sooner rather than later.”  (“A.M. Kitco Metals Roundup: Gold Sinks To 5-Mo. Low In Wake Of Upbeat U.S. Jobs Data, But Then Quickly Recovers,” Kitco News, 12/6/13)

Gold closed the week at $1,231.70, down $21.30. Silver prices fell $0.49, closing at $19.64.

Experts Weigh In on Gold at Conference

Mineweb’s Lawrence Williams was in attendance at the Mines and Money Conference in London this week.  Williams reported on several keynote speakers’ presentations as well as the panel discussion.

“Tocqueville Gold Fund manager John Hathaway…didn’t feel that U.S. Fed tapering would take place at all – or if it did it would only be at a small trial level and the effects on the markets would be so horrendous that the taper would be reversed at the first possible opportunity. He also expressed puzzlement over the recent bearish performance of gold given that in his view all the macro fundamentals would seem positive for gold.”

“In a panel discussion which followed Hathaway’s presentation, many of the same arguments were put forward…Ross Norman drew attention to the huge flows of gold from West to East noting that a few years ago Asian demand accounted for about 46% of global annual gold output. Now China and India probably between them account for over 80% - possibly more if some analyses of China’s gold imports and consumption are correct. And mine production isn’t really rising – miners are running hard to stand still with little in the way of major new mines in the pipeline as older operations continue to run out of steam.”

“All this points to a reversal in the recent gold price trend ahead…Which brings us back to John Hathaway…he seriously recommends taking up physical gold as the principal protector against what he sees as likely serious mayhem in the Capital Markets with governments perhaps needing to take ‘Orwellian’ measures to try and keep matters under control.”  (“Bull market or bear market – where does gold stand now?” Mineweb, 12/5/13)

Gold Production Costs Near Spot Price

Metals Focus, one of the world’s leading precious metals consultancies, discussed gold production costs in its weekly publication. Metals Focus found productions costs dropped approximately 17% to $1013 per ounce. However, the consultancy firm was unsure whether such a decrease was sustainable: “It remains to be seen to what extent these represent genuine, sustainable savings, as distinct from deferral of expenditure. Furthermore, expenditure on sustaining exploration and project study costs in Q3.13 fell by 40% y-o-y. If this trend of reduced investment continues it will undoubtedly impact future gold production.”

Metal Focus’s finding is especially notable given the current gold spot price is nearing the cost of producing one ounce of gold (and, if the recent 17% is not genuine, almost equals current spot prices). If mining companies are unable to produce gold at a reasonable profit, exploration and production will be curtailed, thereby affecting future gold prices.

Eveillard:  Gold Will Become “Substitute Currency”

Jean-Marie Eveillard, senior advisor for First Eagle Funds, gave his thoughts on the gold market in an interview with King World News. 

“I believe that if I’m right, and the Neo-Keynesian medicine continues not to work, although they can continue with their QE, even at the Fed they know that quantitative easing cannot go on forever.  So at some point something will have to give.  That’s the point where investors will change their attitudes and move to gold…gold will become the substitute currency.  People will say, ‘I don’t want the yen, dollar, or the euro because they are all engaged in a race to the bottom.’  Yes, then gold will become the substitute currency.  Gold will be money again.  In a sense it never stopped, but 40 years ago the politicians decided that we were going to operate on the basis of a pure paper money system.  But I can assure you that the history of pure paper money systems is not inspiring.” (“There Are Absolutely Terrifying Risks Facing Global Markets,” King World News, 12/3/13)

Chinese Yuan Passes Euro as 2nd Most Used Currency

“China’s yuan overtook the euro to become the second-most used currency in global trade finance in 2013, according to the Society for Worldwide Interbank Financial Telecommunication…International use of the yuan is increasing as China opens up its capital markets. In the first nine months of this year, about 17 percent of China’s global trade was settled in the currency, compared with less than 1 percent in 2009, according to Deutsche Bank AG.” (“Yuan Passes Euro as 2nd-Most Used Trade-Finance Currency,” Bloomberg, 12/3/13)

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 a 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. Click here to listen.

*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.

You should review Goldine's Account Agreement along with our risk disclosure booklet, Coin Facts for Investors and Collectors to Consider ®, prior to making your purchase. Goldline has a spread or price difference between our selling price, called the "ask", and our buy-back price, called the "bid". That spread varies depending on coin or bar you acquire. Spreads on 1 oz bullion coins, 90% silver dimes and quarters, and one ounce and larger bullion bars are 13%. All other coins have a spread of 28%. There is also a 1% liquidation fee when you sell your coins back to Goldline. The market must go up enough to overcome this spread before an actual profit is achieved. Precious metals and rare coins can increase or decrease in value. Past performance does not guarantee future results. Coins are a long-term, three- to five-year, preferably five- to ten-year investment. We believe precious metals are suitable for 5% to 20% of the average investment portfolio though others may recommend a different percentage.

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