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-- Posted Tuesday, 4 February 2003 | Digg This Article
April Gold: Close = $379.9, +8.3
Headline: New contract HIGHS as gold hits highest level since late 1996! The tension regarding Iraq is being reflected in gold prices, not to mention the US dollar, equities and energies. The US dollar took another nosedive and equities joined the bearish party. After all, who wants to be long stocks right now? There weren’t any fresh developments on the geopolitical front to coax gold higher; it rallied based on the accumulation of tension and the anticipation of Powell’s UN address. Powell is to unveil evidence that proves Iraq has violated the security resolution, and possibly reveal ties between Iraq and Al Qaeda. The rift of tension across the geopolitical landscape remains deep, and with few investment alternatives in the limelight, gold has attracted newfound attention this year. In the recent Forbes article, “The Case for Gold”, by James Grant, there is a compelling argument in favor of gold ownership. Here are a few excerpts from Mr. Grant:
”The metal will do well in a time when inflation is heading up and short-term interest rates are negative. Don't be misled by those who say commodity prices will stay low.
I say (danger) it's advancing. Nominal interest rates are low, government bond buyers are complacent and central banks are easy. Much to the dismay of finance ministries in Japan and Europe, the dollar exchange rate is falling against the yen and the euro. This is not because the Fed is objectively tight. For the first time in a decade the "real" federal funds rate is negative (i.e., a 1.25% funds rate minus the 2.4% year-over-year gain in the December consumer price index is a negative 1.15%).
Ben S. Bernanke, one of Alan Greenspan's new hires at the Federal Reserve Board, reminded a Washington audience in November that the Fed has a marvelous invention for fighting deflation. This device is called a "printing press," said Bernanke, one of America's foremost monetary economists. With it the government can "produce as many U.S. dollars as it wishes, at essentially no cost.
On Jan. 9 an auction of ten-year Japanese government bonds was 18.6 times oversubscribed, although their coupon was only 0.9%. For perspective, Haruhiko Kuroda, one of the top contenders to take over the governorship of the Bank of Japan when the job becomes vacant in March, has pledged to print enough yen to push his nation's inflation rate to 3%. And nobody believes him.
I believe him, and I believe Bernanke…”
On that same bullish note, there is another terrific article in Forbes, “Gold Bugs Look to History” by Robert Lenzner, in which a comparison with gold and equity prices are evaluated: (If you’d like the full copy of these articles let me know)…
“Christopher Wood, emerging markets analyst for CLSA, a unit of Credit Lyonnais, who supplied us with the numbers, believes strongly that "gold is at the very beginning of a multiyear bull market that will take the yellow metal many times higher than its present level." The reason Wood gives: "Gold is the only real hedge against the massive financial excesses that still prevail in the western world."
Over the last month or so we’ve been looking at the $400 area as a target, and now we’re not too far off. The bears are simply overwhelmed with too many bullish variables, especially the issue of Iraq. In fact, until the war on terror and the issue with Iraq quiets down a bit, it’s not likely consumer confidence will strengthen enough to bring new life to stocks. Therefore, gold remains one of the few viable alternatives. Do your best to ride the trend, but always manage risk and protect profits. Be sure to watch TradeScope daily for order adjustments on those April calls that have appreciated SIX times in value! Remember, futures and options offer much flexibility as one can just as easily be short or long any market. Each contract/option = 100 ounces, a $1 move in a futures contract = $100. Contact me anytime to discuss strategies to fit your needs.
To open an account and receive trading recommendations on gold futures or options contracts (also stock indices, energies, currencies, etc.), or to use PaperTrader Online contact me at erik@altavest.com. Visit www.altavest.com to request a Free Starter Kit. Keep in mind that there is risk of loss in all trading.
March Silver: Close = $491.8, +8.3-cents
We’ve been anticipating a run to the 500 area for several weeks, and now we’re getting another stab at it. With gold providing the catalyst the silver market did nothing but pad the pockets of bulls. There are some who are purporting that a silver/gold spread is in order because silver is undervalued in relation to gold. Well, maybe and maybe not, after all, what is “undervalued? And, isn’t the marketplace the mechanism which establishes value, not our notions, wishes or interpretations? There has been a lack of fresh internal fundamental news for some time, action has been led by gold. Silver recently hit a recent 7-month high and is perhaps building steam for another break into fresh high ground above 500 barrier. The market remains in an uptrend, but still lags behind gold, mostly because it’s an industrial metal stuck in the middle of a muddling economy. Always maintain your perspective by keeping an eye on daily, weekly and monthly charts as opposed to intra-day charts. Each contract/option = 5,000 ounces, a 1-cent move in a futures contract = $50. Contact me anytime to discuss strategies to fit your needs.
To open an account and receive trading recommendations on silver futures or options contracts (also stock indices, energies, currencies, etc.), or to use PaperTrader Online contact me at erik@altavest.com. Visit www.altavest.com to request a Free Starter Kit. Keep in mind that there is risk of loss in all trading.
-- Posted Tuesday, 4 February 2003 | Digg This Article
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