-- Posted Tuesday, 28 February 2006 | Digg This Article
Gold continues to strengthen & it is interesting that demand seems to continue to be primarily driven by large institutions. The average mainstream individual investor just has not even noticed gold’s increased popularity & continues to sit on the sidelines.
That’s OK.
Gold will continue higher in the coming years & if it takes a long while for everyone to become firmly on board then that means this gold bull market will last that much longer…a very great deal longer. And what does the venerable gold guru, John Doody, say about gold’s price action so far for 2006?
John Doody – “We thought it would take longer to reach our $550/oz target for 2006.” “But suddenly, here we are above $550…” http://www.goldstockanalyst.com/sample/Feb06.pdf
And getting back to the institutional demand which is driving gold higher read well the material below.
“…the overall up trend in price driven in no small part by the increase in institutional investment demand.” “Meanwhile the potential for increased institutional investment could be massive. Institutions such as pension funds are listening to the arguments for gold…” “There is, therefore, a whole new constituency out there that has yet to be fully tapped.” “For 2005 as a whole, identifiable investment demand was 600 tonnes, a 26% rise on the previous year.” “In value terms, all categories of demand registered double-digit increases and demand was thus strong enough to absorb a 15% increase in gold supply and a 9% increase in the price. ETFs and similar products were the stars in the firmament; these grew by 53% in tonnage terms and 67% in dollar terms. Inflows reached 203 tonnes in this sector of which StreetTRACKS accounted for 168 tonnes or 83%.” “This year has begun in a similar pattern to the end of 2005, with price volatility enhancing institutional demand; the inflows into Exchange Traded Funds and similar products exceeded 100 tonnes in the firs six weeks of the year.”
http://www.mineweb.net/sections/gold_silver/915247.htm
Briefly changing the subject the following text below is interesting as it is related to the hot story making the news circuit regarding the agreed on multi billion dollar sale of six U.S. Ports to the United Arab Emirates.
“…U.S. Rep. Ted Poe, R-Humble, said he is concerned about Texas ports where military cargo is handled by London-based Peninsular and Oriental, the company to be purchased by the UAE's Dubai Ports World.” "They (Arabs) would have access to every manifest regarding shipping, all cargo going out, what's on it, where it's going and all incoming shipping coming back to the port." “Rep. Solomon Ortiz, D-Corpus Christi, said he too is concerned about military shipments handled by a UAE government-owned company.” http://www.breitbart.com/news/2006/02/22/D8FUI39O2.html
Well, I guess what the content above proves is that a dollar will always buy anything…including U.S. common sense. The Chinese own the Panama Canal so I suppose it is only fitting for the Arab world to now own & control American ports.
Richard Daughty - “…the total debt of the United States is now at $8.248 trillion, which is $8,248 billion, which is $8,248,000 million, which is enough to make instant millionaires out of 2.8% of the population of the country! We owe, as a taxpaying nation, enough money to create instant millionaires out of almost 1 in 30 people in the country!” http://www.kitco.com/ind/Daughty/feb222006.html
And more timely & interesting news shaping our economic future?
Richard Daughty - “Foreign holdings of U.S debt deposited at the Federal Reserve zoomed up by another $12.644 billion last week. This is strangely at odds with the news that Net Foreign Purchase of Securities fell to $56.6 billion in December, from $91.6 billion in November of last year. This is a drop of $35 billion, or, in percentage terms, 38%.” http://www.kitco.com/ind/Daughty/feb222006.html
And what will become of all those foreign purchased U.S. dollars?
Richard Daughty - “But foreigners soaking up almost thirteen freaking billions of dollars in one week helps explain why money supplies around the world are exploding. And that unholy thing means that when there is massive inflation in the money supply like this, then you will soon see inflation in the prices of some things, then inflation in the prices of a lot of things, and eventually in all things.” http://www.kitco.com/ind/Daughty/feb222006.html
In the following text below Paul van Eeden FINALLY answers the long awaited question of what direction the gold price is headed in.
Paul van Eeden – “I have been asked many times during the past two weeks what I thought the gold price would do in the short term. Will it go up? Will it go down? The answer is “Yes…” “The gold price will go both up and down, but that is not what you wanted to know. However, I also have a question: What does it matter whether the gold price goes up or down in the short term?” http://www.kitco.com/ind/VanEeden/feb172006.html
And what Paul is addressing is the fact that really we should not be too concerned with the short term wild price swings of the gold price because the trend has already established a pattern & that pattern is for higher gold prices still.
Paul van Eeden – “Perhaps you just want reassurance that the upward trend will resume and that you’ll make bags of money if you hold onto your gold investments. I cannot give you that reassurance, nor can anyone else. But, as I mentioned last week, my belief is that the gold price is going higher and so I am not concerned.”
And Paul sums up the question very well in his statement below.
Paul van Eeden – “If I think that we will see $1000 an ounce in the next few years it really does not matter to me what the gold price is next week, or next month.”
And while the price of gold continues to climb family incomes decline.
“Average family incomes fell in the USA from 2001 to 2004, pulled down by a sluggish recovery from the downturn and the sharp stock market drop, the Federal Reserve said Thursday. The decline — the first since 1989-92 — was accompanied by the smallest increase in net worth in that period.”
http://www.usatoday.com/money/economy/income/2006-02-23-fed-incomes_x.htm
But do you want to know what interesting phenomenon occurs when we see a retrenchment in the gold price? Read below.
"…as we see gold drop, we also see it turn and then move higher twice as fast," said Kerr, who also edits Global Resources Trader, a newsletter service of MarketWatch, publisher of this report.”
http://www.marketwatch.com/News/Story/Story.aspx?guid=%7BFC127E01%2D6E93%2D4438%2DBC36%2D60F6B8A45EEF%7D&siteid=google
Do you need further confirmation that we are in a long term bull market for gold? Read the text below & listen to what respected Merrill Lynch has to say.
“Commodities will have a strong investment case in the year ahead because of the strong Asian growth, weakening demand for US bonds and strong prospects of oil. Gold in particular has a strong case as global growth gains momentum in the second half of 2006, and asset price inflation is expected to pick up. This suggests 2006 will be good year for gold, and commodities in general,” said Michael Hartnett, Chief Global Emerging Market Strategist, Merrill Lynch.” http://www.khaleejtimes.com/DisplayArticle.asp?xfile=data/business/2006/February/business_February236.xml§ion=business&col=
And more?
“The medium term weakness of [the] dollar alone makes gold a strong investment case,” said Gerard Lyons, Chief Economist and Group Head of Research, Standard Chartered.” http://www.khaleejtimes.com/DisplayArticle.asp?xfile=data/business/2006/February/business_February236.xml§ion=business&col
And remember the title to our article was centered around the fact that as Institutional Investors continue to drive gold higher & higher gold will continue to move - “Higher TWICE as Fast!”
“Gold is now considered as a part of a diversified portfolio more than ever by institutional investors. Recently, Goldman Sachs has included gold as one of its top investment products for 2006.” http://www.khaleejtimes.com/DisplayArticle.asp?xfile=data/business/2006/February/business_February236.xml§ion=business&col
Gold is becoming the central component & core of every institutional portfolio.
“Why gold now?” “Gold forms a part of any portfolio, as it is not positively correlated to other asset classes like equity, bonds, and real estate on a long-term basis.” “The price of Gold and other asset classes tend to move in opposite direction. This augurs extremely well, when the prime consideration is risk reduction in the portfolio.” http://www.khaleejtimes.com/DisplayArticle.asp?xfile=data/business/2006/February/business_February236.xml§ion=business&col
And how much gold is recommended for your portfolio as a MINIMUM?
“As a rule of thumb, it is believed that an individual’s investment portfolio should contain from 5 per cent to 30 per cent of gold based on life cycle asset allocation and risk reward preferences of the investor.” http://www.khaleejtimes.com/DisplayArticle.asp?xfile=data/business/2006/February/business_February236.xml§ion=business&col
And gold can be the life saver in your portfolio when the general market direction declines.
“Portfolios containing gold are considered to be less risky, based on ‘event risk’ philosophy of investment. According to this, in the event of an economic crisis when all asset classes normally fall sharply in unison, the fall in gold however, is not as steep. During the 1987 stock market crash, Gold proved to be the most effective way of raising cash to meet immediate needs.” http://www.khaleejtimes.com/DisplayArticle.asp?xfile=data/business/2006/February/business_February236.xml§ion=business&col
And gold is here to STAY!
“With increasing fund interest in commodities as an asset class vis-à-vis bonds and equities, gold has definitely become the flavour of the market and is here to stay.” http://www.khaleejtimes.com/DisplayArticle.asp?xfile=data/business/2006/February/business_February236.xml§ion=business&col=
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Comments? Thanks for coming by & please do come back.
3-3-2006
David N. Vaughn
Gold Letter, Inc.
David4054@charter.net
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-- Posted Tuesday, 28 February 2006 | Digg This Article
