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Gold May Rise Over 20%

Release Date: 
Friday, October 11, 2013

Gold and Silver Prices:

Gold prices fell sharply this week despite Washington’s continued gridlock on government funding and the debt ceiling and President Obama’s nomination of Janet Yellen to replace departing Fed Chair Ben Bernanke. Gold shed $38.00, closing at $1,274.20. Silver prices were down $0.40, closing at $21.44.

Gold May Rise Over 20% In Next Months: Sean Hyman

Financial newsletter editor Sean Hyman told CNBC this week that he anticipates gold will rise as much as 20% in the coming months: "Gold is having a traditional pull-back and I think we will have another run up to the $1,500, $1,600 level in the next one or two or three months…[Federal Reserve Vice—Chair, and nominee for the next Chairman, Janet] Yellen will have the same concepts as [current Fed Chairman Ben] Bernanke. So money will continue to be printed, the economy stimulated and interest rates kept low as possible and that's going to stimulate inflation, be good for commodities and bad for the dollar.” (“Gold bull: 20% rally coming for bullion,” CNBC, 10/9/13)

Fed Chair Nominee Signals Continued QE

On Wednesday, President Barrack Obama nominated Federal Reserve Vice—Chair Janet Yellen to replace outgoing Chairman Ben Bernanke. Several commentators wrote that Ms. Yellen will likely continue, if not expand, the Federal Reserve’s commitment to loose monetary policy and quantitative easing.

The Telegraph’s Ambrose Evans-Pritchard offered this commentary on the nomination.  “We now know where we stand. Janet Yellen is to take over the US Federal Reserve, the world's monetary hegemon, the master of all our lives.  The Fed will be looser for longer. The FOMC will continue to print money until the US economy creates enough jobs to reignite wage pressures and inflation, regardless of asset bubbles, or collateral damage along the way…There is little doubt that the she is a dove in today's circumstances. She tracks jobs. Her lodestar is the “non-accelerating inflation rate of unemployment" (NAIRU). When the rate is above NAIRU, she is a dove: when below, she is a hawk.  My guess is that we are still a very, very long way for NAIRU...The next chairman of the Fed is going to track the labour participation rate. Money will stay loose. Markets have been spared again.” (“Rejoice: the Yellen Fed will print money forever to create jobs,” The Telegraph, 10/9/13)

Jim Rickards, senior managing director at Tangent Capital, shared his thoughts on the new nominee, [Yellen is] “more of a hardshell believer in the benefits of monetary easing.”  Adding that the current Vice—Chair would be likely to have leanings toward, “'We need to print money, we’ve got to have some goals, we’re gonna keep printing money until we hit those goals.'” (“Rickards on Fed & Yellen: Here Comes the ‘Helicopter Money’,” Yahoo Finance, 10/10/13)

Saxo:  Gold Could Benefit from Continued Economic Weakness

Ole Hansen, head of commodity strategy for Saxo Bank, told Kitco News he sees several factors which are bullish for gold. “In its report, Saxo bank said that a struggling labor market coupled with weaker growth will force the Fed to continue its quantitative easing measures and even possibly expand them.  Hansen added that this scenario would also be bullish for gold, but the precious metal might not have a clear path higher. Weak growth would affect equity markets but he said the downside would be limited as the ‘wall of money will still be in place.’” (“Gold Prices Could See Boost As Economic Weakness Builds in Q4—Saxo Bank,” Kitco News, 10/28/13)

IMF Warns Financial System Remains Unsafe

The International Monetary Fund issued its Global Financial Stability Report warning that “the world’s financial system is still not as safe as it should be five years after the fall of investment bank Lehman Brothers.” “In their ‘Global Financial Stability Report’ released today, the IMF said the primary challenge will be in managing the side effects after the eventual withdrawal of accommodative monetary policy in the United States. Such a transition, including the benefits of a stronger U.S. economy, should help limit financial stability risks associated with an extended period of low interest rates. But managing a smooth transition could prove challenging, as investors adjust portfolios for a new regime with higher interest rates and greater uncertainty in the bond markets once the Fed exits.” (“IMF Warns: World Financial System Not Safe,” Forbes, 10/9/13)

Consumer Confidence Falls

Gallup’s recent survey found a dramatic drop in consumer confidence. “Americans’ confidence in the economy has tumbled more since the government shutdown began a week ago than in any week since the global financial crisis started in September 2008, according to Gallup’s daily survey.  Gallup’s economic confidence index fell 12 points to -34, the polling organization said Tuesday. The 2008 drop was 15 points, to -56, in the week after Lehman Brothers filed for bankruptcy.

“‘While the economy is, in many respects, stronger than it was during the 2011 debt-ceiling crisis, the current budget debate and government shutdown clearly show that partisan brinksmanship and the uncertainty it causes on Wall Street can negatively affect consumer confidence,’ Gallup’s Alyssa Brown wrote. ‘Thus, Congress’ inability to reach a compromise to end the government shutdown and raise the debt ceiling could negatively affect U.S. stock prices, America’s credit rating, and, ultimately, the nation’s economic recovery.’” (“Economic Confidence Posts Fastest Drop Since 2008 Crisis,” Wall Street Journal, 10/8/13)

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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