Mar 31, 2007 ~ *latest news*
By David Bradshaw ~ email
Editor, Real Money Perspectives ~ FREE weekly email
Stories of interest ~ Special reports
* 7 Major Forces Driving Gold Coins -Sp. Offer
* The stock is dead, long live commodities, says Rogers -FA
* Commodities in middle of rare 'super-cycle' -IFA
* Iran could trigger $100 oil -MW
* Stocks Fall on Bernanke Inflation Remark -AP
* On Housing, �Worst Is Yet To Come' -NYS
* Iran could try UK sailors -FT
* Why $2,000 gold is logical -Editor
* Six reasons why gold bull still healthy -Adens
* In Gold Coins We Trust -Editor
* Experts Agree: $1,000 Gold Ahead -Sp Offer
***** Today's :60 "Golden Minute" *****
* Gold prices rose Friday as tension between Iran and the international community over 15 captured British military personnel continued, pushing oil prices to a six-month high.
* Gold closed in NY up $2.40 to $663.30/oz., silver rose $.02 to $13.32/oz. Both gold and silver ended the week up over 1 percent. Gold is now up 9.5 percent since the 1/5/07 low, silver is up 10 percent in the first quarter of 2007.
"The combination of heightened Middle East tension, the effect on the oil market, and the continued poor performance by the dollar still favor an upside breakout for gold," said James Moore, metals analyst at TheBullionDesk.com.
"The rise of gold and the fall of the dollar are issuing strong warning signals that the Fed is veering into uncharted territory, a territory that would be labeled off limits if it were on a ski slope. The slippery slope entered may cause havoc in asset prices ranging from equities to fixed income to real estate," writes Axel Merk in The Merk Perspective.
* "My conservative expectation is that gold will end the year decisively above $700/oz., which equates to at least a 15% gain for the year. However, we cannot rule out various economic wild cards, such as Iran or a spike in oil prices, which could send gold soaring above $800 an ounce or more at any point," said Craig R. Smith, in an interview this week.
* "Commodities should be on every investor�s wish lists as the sector is in the middle of a �super cycle� that occurs only once every 50 years, according to BlackRock Merrill Lynch.
* Crude oil prices inched below $66 a barrel Friday, as mounting tensions between Iran and the U.K. ignited concerns about supply disruptions in the Persian Gulf. Crude for May delivery was down $.18, to $65.85 a barrel on the New York Mercantile Exchange.
* U.S. stocks finished a volatile session on a mixed note Friday, mirroring a likewise volatile and mixed performance for the first quarter, with the Dow now down about 1 percent for the year so far, while other stock proxies hold on to meager gains.
Stocks fell this week after Fed chief Ben Bernanke expressed concern inflation remains "uncomfortably high." Investors had hoped that weaker growth would soon push the Fed closer to cutting interest rates. "Housing has dug a hole for stocks," said Peter Cardillo to MW.
* The dollar rose against the euro and yen Friday, after a report showing a revised GDP in the fourth quarter from 2.2% to 2.5%. Consumer confidence dropped for the first time in five months amid heightened concerns about the housing market which weighed on the dollar.
The Fed announced its decision to leave interest rates unchanged in March, saying "Recent indicators have been mixed and the adjustment in the housing sector is ongoing. Recent readings on core inflation have been somewhat elevated. Although inflation pressures seem likely to moderate over time, the high level of resource utilization has the potential to sustain those pressures."
"Inflation failing to moderate indicates new worries on inflation from the Fed," said Peter Spina, chief investment strategist at GoldSeek.com.
"Real estate prices will go down 40-50 percent in bubble areas. There will be massive defaults. This time it'll be worse because we haven't had this kind of speculative buying in U.S. history," says Jim Rogers.
"A recession and a meltdown in the mortgage market could easily give you a 25 to 30 percent plunge in the major indices - the S&P 500, the Nasdaq composite, and the Dow. Birds of a feather who have been shot fall together," said Pace University's Professor Robert H. Parks to The Journal News.
"I recommend an age-old strategy to offset market volatility and insure your nest egg never crashes to the ground, as stocks and paper currencies are prone to during turbulent times. Owning some of history's indestructible shiny yellow metal, gold, can also help make your portfolio indestructible today," says Craig R. Smith.
For example, so far the global stock market sell-off has wiped out 2007 U.S. stock gains, but gold, which provided investors with instant liquidity worldwide, is still up over 9% since 1-5-07 low, and 23% in 2006," says Mr. Smith.
"The drivers for gold look set to support firm prices over the year ahead. We believe that the next sustainable rally phase will successfully challenge and exceed the existing highs at $728," said analysts Ray Hanson and Robert Sluymer of RBC Capital Markets.
"The dollar has been crushed," said Marc Chandler, global head of currency strategy at Brown Brothers Harriman. "The fear of a hard-landing in the U.S. seems to be gathering force."
"All of the markets have been volatile and the precious metals have not been an exception. These markets, however, remain bullish. Despite the recent downward corrections, the major trends are up. With the dollar now in a renewed declined, this will continue to keep upward pressure on gold, write The Adens.
"Gold analytics, charts and quantitative models are showing bullish patterns. In the past these kinds of patterns in gold, in spite of disinflation and deflation, have preceded a massive rise in gold through panic buying and a nasty meltdown-type collapse in the financial markets," opines IndiaDaily.
"Gold remains well below the price it would be trading if government-led gold cartel wasn�t regularly intervening to keep gold as low as it can. The volatility in the stock market and growing nervousness about asset quality of sub-prime mortgages is another reason to own gold," says James Turk of Goldmoney.com.
"If your outgo is higher than your income, your upkeep will be your downfall. Like the 80-year-old woman who borrowed her way into home disownership, so are millions of American homeowners. They, too, think they have a perpetual ATM machine: their homes. They also think they have a backup ATM machine: the U.S. government," reports Dr. Gary North at LewRockwell.com.
"What should investors do? Instead of buying the dips and moving into riskier assets, they should sell into the rebound that will now unfold. The only risk to this strategy is that markets might recover swiftly and reach temporary new highs. However, it will merely be a climb to a higher diving board from which the plunge will be even deeper, says Marc Faber to TIME.
"Imagine losing 69 percent of your stock's equity in just one day. That's what happened to New Century Financial Corp. Most investors like safety. Running across financial minefields looking for value can be dangerous. One has to wonder how many other New Century type stocks are still out there in the market?", added Smith.
2007 Golden Trends...
This is a rare gold buying opportunity, as every major correction in gold prices has been since 2001. Since the last major gold correction (9-11-06 sell-off) gold has risen over 8 percent from $590 to last Friday's close of $640.
Gold corrections have all been flashing green lights, saying "go!" this a healthy bull market, which rids itself of over-speculation quite regularly. In contrast, U.S. stocks rose over 1,400 days without even a 3-4 percent correction, until last week. It's time to make a choice -- to "Ride the Right Bull"!
"The Swiss strategy of diversification indicates now is the time to buy gold, oil and bonds while waiting for the market to tell us if this is a trade-driven sell-off or an overdue stock market correction from the rampant speculation of the last four years," said Craig Smith.
"Gold is headed toward $1,000/oz. and is still a great bargain under $650/oz. As this gold bull bucks up and down it seeks to shake off uncommitted, short-term investors and speculators, offering long-term investors yet another opportunity to participate in this ongoing secular bull market," says Craig R. Smith.
Experts say the global stock market rout triggered the recent gold sell-off as investors cashed out bullion holdings to cover margin calls. Others analysts say major speculative funds are selling and withdrawing from exchange traded gold funds.
"South African gold production fell by 7.5 percent in 2006, its lowest level in 84 years, as lower grades were mined because of higher gold prices, according to the Chamber of Mines.
Investor sentiment remains bullish on gold so far in 2007 as precious metals continue to outperform the major stock indexes for the sixth consecutive year.
"With the pullback in so many markets, it is fair to say that the gold and silver pullback is not about gold and silver," said Julian Phillips, an analyst at GoldForecaster.com. "These falls [have more] to do with short-term traders perceptions and technical selling."
"If anything, the sell-off in Chinese stocks will increase demand for gold," said James Turk, founder of GoldMoney.com. "As investors in China get burned with stocks, they will shy away from speculative stuff, and opt for the security that gold offers," reported Mr. Turk to Bloomberg,
"You don't have to be a bear these days to take a shine to the yellow metal. I think there's room for gold in everyone's portfolio... but I thought I'd do some homework to make sure that my next foray into precious metals proves more rewarding then the last one," writes Igor Greenwald at Smartmoney.com. [Ed. Note: Learn before you earn!]
"We are about witness the largest upleg of the gold bull, which will make the gains of the dotcom boom seem like minor blips on the radar. The bullish indicators are all lighting up and we are forecasting some fireworks on the horizon," reports Jason Hamlin at goldstockbull.com.
"Gold has no agenda, no allegiance and functions as honest money in a world of lies, corruption, overstatement and spin. $700 to $705 might well be a place certain interests will try and block gold, but their only hope is for momentary success. $761 is yanking at gold from the front with great power. $887.50, a break above $1000 and $1650 are putting their grip on the royal metal as well," writes Jim Sinclair of JSmineset.com.
"Gold's recent rally might be an indication that the Fed and Bernanke are losing credibility and that the Fed is all talk and no action," said Peter Schiff, president of Euro Pacific Capital to MW. "The Fed is afraid of raising interest rates, but it can't let the market know that. Gold's saying we don't believe you. The Fed wants to maintain the illusion that they're going to raise rates, because the economy can't stand it," Schiff said.
Recently investors cheered soothing words from Fed Chairman Ben Bernanke on inflation, easing concerns that the Fed might hike interest rates later this year.
"What is the price of gold warning us of?" CNBC asked Peter Schiff of Europac on Thursday. Mr. Schiff said rising gold is a sign of a loss of international confidence in the U.S dollar and also warning of a major decline in stock prices, sighting that the "Dow/Gold ratio" has fallen from 44-to-1 back in 1999 to 19-to-1 today.
The Dow theorist Richard Russell says the Dow/Gold ratio will eventually fall to 1-to-1. "The reversal of this huge rise in the ratio will be a major decline, a decline to the point where the Dow again might buy only 1 ounce of gold or even less. This will require either a huge rise in gold or a massive decline in the Dow - or probably both."
"The gold market has been and will remain restrained like a magnificent bull with numerous gigantic reins, hardly rampaging, but surely towing the gaggle of central bankers uphill. Since the currency system is unfixable, and debt must accelerate, the gold bull will breathe endless life, since the alternative is a rampaging recession aggravated by debt default and asset deflation," says Jim Willie editor of the HAT TRICK LETTER.
"Our current financial condition is worse than is widely understood", reported U.S. Comptroller David Walker to Congress Tuesday. "Our current fiscal path is both imprudent and unsustainable. Improvements in information and processes are needed and can help. Meeting our long-term fiscal challenge will require (1) significant entitlement reform; (2) reprioritizing and constraining other spending programs; and (3) more revenues--hopefully through a reformed tax system. This will take bipartisan cooperation and compromise." Full Report pdf
Fed Chairman Ben Bernanke said recently the U.S. government may face a "fiscal crisis" in the coming decades should it fail to deal with the rising costs of Social Security, Medicare and Medicaid programs. "If early and meaningful action is not taken, the U.S. economy could be seriously weakened, with future generations bearing much of the cost," Bernanke said.
"The Bank Credit Analyst (BCA) has identified four pillars cementing the case for a long-term bull market in gold bullion; global liquidity, rising investor demand, central bank buying and Chinese/Indian gold demand," reports Mineweb.
"What we are witnessing are two worldviews on gold. U.S. traders are in 'la-la land' and are bearish on gold and bullish on paper. The rest of the world is bullish on gold and bearish on the U.S. dollar," said Ned Schmidt, editor of the Value View Gold Report.
"In the next few months, we could get a severe correction in all asset markets," Marc Faber told Bloomberg TV, but "The price of gold will continue to go up and probably very substantially."
In 2006 Faber told Bloomberg, "A vicious drop in the Dow coupled with a vicious rise in gold, possibly pushing gold to an astounding $2,000, $3,000 or even $6,000 an an ounce." (Read Who Sees Four-Digit Gold?). February 2007 STORIES
Recent stories of interest...
* Abusive Lending, Fraud Fueled Subprime Loan Crisis, US Comptroller Says -BL
* Gold gains as Fed stands pat -MW
* WAKE UP CALL: U.S. Heading For Financial Trouble -CBS
* Top Forecaster Sees Year Without Rate Increases -USAT
* Major US mortgage lenders that have croaked -I-O-M
* Houses cheaper than cars in Detroit -Reuters
* Top investor sees U.S. property crash -Reuters
* Senate Weighs Aid to 2.2 M Subprime Borrowers -BL
* Gold indicates serious financial meltdown -IndiaDaily
* Your Home Isn't the Nest Egg You May Think -WSJ
* 9/11 Mastermind Confesses -AP ... Transcript
* Feds say family has no claim to 1933 'double eagles'
* New foreclosures at record high -MW
* Crisis Looms in Mortgage Market -NYT
* China Forming Fund to Invest $1 T Reserves
* Rising Subprime Mortgage Defaults Add Unsold Homes -BL
* U.S. mint "In God We Trust" missing on new $1..."fetching $50/ea" -AP
* $720 Gold in Two Months -James Turk
* Greenspan sees 33% chance of U.S. recession -Reuters
* It isn't only the economy, stupid -Economist
* The market sell-off of '07? -Editor
* Muslimland: 'The unhappiest place on earth' -WND
* Stocks Post Worst Week in Over 4 Years -AP
* Gold sentiment infected by shaky stock markets -Reuters
* Goldman, Merrill Almost `Junk,' Their Own Traders Say -BL
* Frenzied trading takes its toll on markets -FT
* New-home sales plunge 16.6% in January -MW
* Bad Data Spur Investor Doubts -BL
* Stocks `Overbought and Vulnerable' -BL TV
* U.S. stocks dive on China jitters -MW
* Why the dollar is in trouble -CRS
* You Don't Have to Fret Doom to Like Gold Now -SM
* Greenspan fears recession in 2007 -CNN
* Central banks cutting dollar holdings -BL
* China goes for gold in new year -ChinaEN
* Gold market 'inextricably changed' -MiningMx
ABOUT THE EDITOR
David M. Bradshaw is Editor of Real Money Perspectives, a daily financial/market news digest. In 2001, he published REDISCOVERING GOLD IN THE 21ST CENTURY and has been an economic commentator since 1987, as producer/co-host of "World Economic Perspectives" radio show. In 2005, he released a new CD, "WHAT'S YOUR WORLDVIEW?" from his 24-hour series, "THE BIG PICTURE." MORE at MIF... Personal note: Youngest daughter Braida Zoe (age 3) swims, loves animals, music, dancing, reading, hiking, trampolining and collecting things. Shown with mom, Micki, and dad (me).
DISCLAIMER: All of the provided information is believed to be accurate, however errors are possible. The opinions in the Commentary section do not necessarily reflect the opinions of Swiss America. Past performance of any investment is no guarantee of future performance. All investments have risk.