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Fear Index update August 2012: Speeding up

| August 29, 2012 | Articles: Insights
Fear Index update August 2012: Speeding up

Despite the pause in monetary stimulus and the huge expectations built up over QE3, the truth is that US money supply continues to grow at a healthy pace, proving that the supposedly “sterilised” Operation Twist is still inflationary. US July M3, as calculated by shadowstats.com, is over $14.6 trillion, well on its way to reaching $15 trillion this year. The US national debt stands close to $16 trillion – it being a signature of our current debt-based money system that total debt always exceeds total money supply, as when the central bank creates money out of thin air it simultaneously creates an equivalent amount of debt plus interest. Anybody who understands […]

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The purpose of market intervention

| August 27, 2012 | Articles: Insights
The purpose of market intervention

Interventions in markets by governments and central banks are routine and we take them for granted. No one questions them, but they can create dangerous distortions. Their reason for intervening is to take price determination away from markets and consumers. The authorities and big business do not like leaving prices to free markets because prices are subjective: in other words, prices are decided by the desires of the consumer and not the cost of production. This is the central plank in the Austrian School’s explanation of economic theory in free markets, and it therefore follows that what consumers actually want and at what price must in turn determine prices through […]

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Euro hopes boost gold and silver prices

Euro hopes boost gold and silver prices

Hopes for a further crisis response by the European Central Bank (ECB) cheered the markets yesterday, with a declining dollar giving support to rallies in commodities and precious metals prices. Though discounted and criticised by the German Bundesbank, the market continues to be optimistic that the ECB will soon act to cap peripheral bond yields. These hopes might in part be attributed to the growing dissent between the Bundesbank and the ECB, as it is looking increasingly likely that the Bundesbank would be left standing when push comes to shove. A clear hint could be seen in the publically voiced support for the ECB’s bond purchases by the German member […]

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African Barrick takeover talk cheers gold bulls

African Barrick takeover talk cheers gold bulls

Gold and silver have crept quietly higher over the course of the last week, with growing signs of a shift in investor sentiment away from perceived safe havens towards growth or “risk” assets. The yield on the 10-Year US Treasury Note has been a notable indicator of this, moving from around 1.4% in late July all the way to 1.8% today. This is still below the yields seen in March, but the rapidity of the rise (coupled with the US dollar’s continuing struggle to gain momentum) suggests that markets could be in for a bullish spell. Inflation expectations are also rising, which should tempt speculators back into the commodities sector. This should […]

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Looking for a silver lining

Looking for a silver lining

Investing in precious metals hasn’t been much of a fun ride lately. In late April of 2011, silver spiked to its still standing nominal high of $50, last reached over 30 years ago, back in 1980. Afterwards it plunged to about $32, before recovering to around $44 in September. At this time gold – which wasn’t nearly hit as hard in May and rallied to a new high of $1,920 in September – was up for the hammer drop and fell by 20% to $1,530. Expectedly, silver had to be dragged down with gold and got smashed to the $26 level for an almost 50% correction from its April highs. […]

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HSBC predicts gold rally to $1,900+ by year-end

| August 7, 2012 | Articles: General
HSBC predicts gold rally to $1,900+ by year-end

There are increasing signs that Spanish Prime Minister Mariano Rajoy appears amenable to a European-Union bailout for Spain, despite the fact that this would mean to all intents and purposes relinquishing his government’s remaining fiscal sovereignty to Brussels. The FT’s David Gardner notes that Rajoy’s government has “the feel of a government approaching the end of its terms” – despite being a majority administration that’s only been in power for seven months. Gardner’s article quotes a former editor of El Pais who expresses concern at the PM’s inability to articulate a viable recovery plan: “one sometimes gets the impression that Rajoy speaks in public as if he was addressing a parish where the internet has […]

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Luzi Stamm: Champion of a new Swiss gold initiative

| August 3, 2012 | Articles: Experts Talk
Luzi Stamm: Champion of a new Swiss gold initiative

Luzi Stamm was first elected to the Swiss National Council, representing the FDP (Liberal Democrats), in 1989. In 2001, as a result of debates over possible European Union membership for Switzerland, Mr Stamm changed parties – establishing his new political home at the SVP (Swiss People’s Party). During elections to the National Council in 2007 he was the second most voted for politician in his canton of Aargau, and was re-elected as National Councillor. Now Mr Stamm and three other members of the Swiss National Council have started a signature campaign aimed at repatriating the portion of official Swiss gold reserves that are held outside Switzerland. The “gold initiative” (its […]

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Pressure and energy building in gold market

Pressure and energy building in gold market

Gold and silver had solid finishes to the end of last week, with the yellow metal posting another positive weekly run – settling at $1,621, at the top end of the channel in which it has been trading for close to three months now. Silver had a wild session, starting around $27.50 before gaining around 30 cents, then losing 40 cents in one crazy hour of selling early afternoon, before recouping some of these losses on rumours of fresh liquidity injections from the European Central Bank, to close the week just shy of $27.70. Eric De Groot has some good new technical analysis of the gold price. As his charts […]

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QE delay risks turning Fed into a political football

QE delay risks turning Fed into a political football

Another Ben Bernanke performance in front of the US Senate momentarily caught the attention of financial markets yesterday, up until the point when it became clear that the Fed wouldn’t be liquoring up the joint with more QE just yet. Despite the litany of bad economic stats in the US over the last three months or so, Bernanke noted that “we haven’t really come to a specific choice at this point” (regarding more stimulus), though he commented that “we are looking for ways to address the weakness in the economy should more action be needed.” Over at The Big Picture blog, Peter Boockvar summed up the state of play regarding the […]

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Conventional techniques for precious metal quality assessment

| July 17, 2012 | Articles: Insights
Conventional techniques for precious metal quality assessment

Historically, inspection of gold quality has mostly involved chemical analysis to determine purity, using techniques such as fire assay[1]. But as this is a wholly destructive technique, there are obvious disadvantages. More recently minimally or non-destructive techniques such as mass spectrometry [1] or X-ray fluorescence [2,3], and even low temperature photoluminescence [4] have been used. These approaches may also be applied to other precious metals such as silver and platinum. These can provide relatively rapid inspection with negligible damage to the material, because they probe only the outer surface and rely on the assumption that the material is homogeneous. The problem here is that large regions of impurity – even […]

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Old gold often erroneously sold below market price

| July 12, 2012 | Articles: Insights
Old gold often erroneously sold below market price

Lately financial media have been describing how resourceful gold buyers are taking advantage of many of their clients’ lack of gold knowledge. In most cases, these clients are elderly and retired people who wish to sell their gold and silver jewellery for extra income. Experts are warning that these sellers should be cautious not to sell their jewellery at too low a price. In the face of today’s hostile financial environment, selling one’s silverware has turned into a necessity for some people. Many households own gold and silver jewellery, as well as silverware or coin collections. Buyers have their eyes set on these utensils – which have often been carelessly […]

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There is no exit plan

| July 12, 2012 | Articles: Insights

There was an interesting note from Agora Financial a few weeks ago raising the following question. If Operation Twist and the previous QE programmes were successful, then why is there a need for more? And if they were not successful, then why are they are there going to be more of them? While the current status of major global currencies is already cause for concern, what’s even more disconcerting is the style of analysis being used by central banks. The crisis began in 2008 and was met with unprecedented amounts of liquidity and easing. Central bankers remain convinced that this is the correct strategy and continue to apply this medicine. […]

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When bailouts don’t work

| July 9, 2012 | Articles: Insights
When bailouts don’t work

Sometimes bailouts do not achieve what is intended, which is one reason they should be avoided. The people of Iceland apparently have some discerning insight into this basic financial reality. When a financial collapse over three years ago sent their economy into a tailspin, Icelanders were given a chance to vote on whether they should impose more debt on themselves in order to bail out insolvent banks. The Icelanders decided to reject the proposed debt burden and the accompanying draconian austerity that would be required. As it turns out, they chose wisely. Happily, Iceland’s economy is back on its feet. As the BBC reported a few months ago: “Iceland is […]

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German debt problems

German debt problems

Somewhat counterintuitive action in the precious metals markets yesterday, with gold and silver coming under selling pressure despite news of easing from a trio of major central banks. As expected, the Bank of England announced a further £50 billion of quantitative easing yesterday (the UK’s own “QE3”), which will bring the BoE’s total QE since 2008 to £375bn. Elsewhere, the European Central Bank and the People’s Bank of China cut interest rates. The ECB cut its short-term lending rate to a record low of 0.75% – down from 1.0% – while the PBC announced a 0.31 percentage-point cut in its one-year yuan-lending rate, to 6% (which seems like a crazily […]

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