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Gold Bear Makes Case for Gold

Release Date: 
Friday, August 23, 2013

Gold and Silver Prices:

Gold prices saw a sharp rise on Friday on a falling dollar, ending the week near $1,400 per ounce. Silver prices also rose as it breached $24 per ounce. Gold closed the week up $20.60, at $1,398.80. Silver closed the week at $24.18, rising $0.82.

Gold Bear Makes Case for Gold

Jeff Reaves, a financial journalist and self-proclaimed gold bear, made an “intellectual” case for owning gold in a recent MarketWatch commentary.

“[I]t was surprisingly easy to make the case that gold will go higher…after briefly touching a low under $1,200 an ounce in June, gold has shown that there certainly are buyers out there right now. And that’s what’s most meaningful. The fact that the precious metal has rebounded over 12% in about two months is, absurdly, the strongest case for why it could move higher…

“Thanks to low prices, gold volume by weight hit the highest level in five years…WGC also notes that demand for bars and coins was also up 56% year-over-year in the second quarter…

“The fact that central banks worldwide continue to buy up gold to add to reserves despite the recent volatility is proof that they believe the asset has an important role to play as a safe haven…the fact gold continues to have an appeal with central banks even after the recent crash is telling…Silver has soared about 15% in just a few weeks, outpacing gold. Some argue that this is a sign that a gold rally is in the works since historically silver’s outperformance tends to foretell a rise in gold, too…

“Gold has pushed significantly above its 50-day moving average, and seems to have found a bit of a floor in the mid-$1,300 range according to whatever technical analysis you’re running on the charts. In the short- to medium-term that implies at worst stability and at best a bit of upside.”  (“Who’s the bigger fool when it comes to gold?” MarketWatch, 8/19/13)

Next Weeks May Be “Explosive” for Gold: Brecht

Analyst Kira Brecht wrote that gold prices may rise sharply in the coming weeks.  “The next few weeks could be explosive for gold. If the Fed doesn't taper in September there will be "disappointment" registered in the U.S. dollar. Greenback weakness would in turn be bullish for gold. Also, on the horizon over the next few months lies a series of U.S. fiscal challenges including the debt ceiling, the budget and continuing resolution issues. These all could potentially provide bullish fodder for gold…Near term, there are a series of minor resistance ceilings for traders to monitor including psychological resistance at $1,400, the early June peak at $1,426—that is the gateway to a retest of the $1,490/1,500 level in the days and weeks ahead.” (“The Next Few Weeks Could Be Explosive For Gold,” Kitco News, 8/19/13.)

CNN Money: Gold Hit Bottom In June; “Poised to Rocket Higher”

Money manager and financial commentary writer Bill Fleckenstein wrote in CNN Money that gold prices likely hit bottom in June.and are preparing to move significantly higher. 

“I feel strongly that June 30 was most likely the low for gold and the miners. But the problem with gold is that it is just a price. It isn't like a business, where you can track such things as balance sheet items, sales, margins, channel activity, competitors and suppliers to get a very strong feeling that something important has changed or that the time to act in a big way is now -- long or short. About the closest thing we have to a timely, nearly unequivocal fundamental fact is that gold has been in backwardation for 30 business days. This should never happen -- and has happened only rarely, briefly in 1999 and 2008 -- because it should just get arbitraged away.

“The fact that the market hasn't reverted to contango suggests there isn't enough metal around in New York or London (at current prices) to allow that to happen. A potential conclusion is that there is such huge demand versus supply at current prices that the price should not be able to go lower (and stay there). If that's true, it would argue in favor of the idea that the lows in June were ‘it’ and that this tightness, combined with the short position and prior liquidation, means that prices are poised to rocket higher at some point soon.”  (“Valuing the invaluable,” CNN Money, 8/16/13)

McEwan Mining CEO Sees Bounce Back of Gold Prices

Forbes asked McEwan Mining’s CEO, Rob McEwan, what precipitated gold’s consolidation. Mr. McEwan explained that Cyprus’s plan to sell gold to pay for its massive debt was a critical factor.

“When the news that Cyprus was going to sell some its gold assets to cover its debt, the market got nervous believing other weak European economies would also be forced to sell their sizeable gold holdings.  Then when the big banks [like Goldman Sachs] recommended selling and shorting gold soon thereafter, it accelerated the selling.

Mr. McEwan went on to explain why current government policies are bullish for gold. “Take a step back from this and ask: “What’s really changed here?”  The problems of Cyprus aren’t gone. They’re just obscured.  Moreover, Cyprus’ issues hint at far larger financial problems within the European Union. The politicians and bureaucrats don’t want you to focus on look these problems. Rather their actions are designed to entice you to spend your money on risky assets and consumption.

“A dangerous policy shift has occurred.  We now have governments willing to seize their citizen’s assets.  We now have currency controls on the table which we haven’t seen since the late 1960s/early 70s.  We have continued debasement of currencies.  And the economies of the western world remain stagnant despite enormous monetary stimulation.  All these facts to me are bullish for gold and make me believe the price of gold will bounce back relatively soon.” (“Rob McEwen Interview: On Gold Prices, Gold Miners And Bitcoin,” Forbes, 8/20/13.)

Fed’s FOMC Minutes Reveal No Set Time for Taper

The minutes from the Federal Reserve’s July FOMC meeting failed to provide a timetable for scaling back the current $85 billion monthly asset purchases. The minutes did indicate a consensus to begin “tapering” the asset purchases sometime this year provided the economy continues to improve. (“Fed says taper on track by the end of the year,” MarketWatch, 8/21/13)

Silver Coin Sales on Pace for Record

Dick Peterson, director of the U.S. Mint, said sales of American Eagle silver bullion coins are  on track for record sales this year.  “We sold a total of 39,868,500 American Eagle silver bullion coins in 2011. That was our record for a single calendar year. Year to date, we have accepted orders for a total of 31,046,000 ounces (pieces) of American Eagle silver bullion coins…If present demand continues and our weekly allocations of between 800,000 to 900,000 coins remains constant, we’ll set a new record for sales in 2013.” (“U.S. Mint:  On Track To Set New Sales Record For American Eagle Silver Bullion Coins,” Kitco News, 8/19/13)

Two-Way Price Guarantee Program

For a limited time, Goldline has expanded its industry leading Price Guarantee Program to provide its clients with both upside and downside protection, with a qualifying purchase of Goldline's exclusive, limited production gold and silver coins.

If the selling price of your coins falls, you can reprice your coins at the new lower price. For example, if you purchase $1,400 of gold and the price of gold decreases to $1,300 during the qualifying time period, you may contact Goldline to reprice your original order at the lower $1,300 price. 

If the selling price of your coins increases, you can purchase additional coins at the original lower price.  For example, if you purchase gold at $1,300 per ounce and the price of gold increases to $1,400 during the qualifying time period, you may place a second order at the original $1,300 price. 

Conditions and limits apply so call Goldline now to learn more about this special offer.

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.

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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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