Author Archive: GoldMoney

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EU treaty talk calms markets

EU treaty talk calms markets

Precious metals had a quiet day yesterday, with gold and silver both consolidating following Friday’s rally. Gold continues to face resistance at $1,625, while $28.50 remains a point of selling pressure for silver – as has been the case now for the best part of the last month. James Turk sums up Friday’s gold and silver strength in a new King World News interview: “even though stock markets around the world the past few weeks have generally been in a nosedive, gold, silver and the mining shares are climbing higher. Independent strength like this is normally very bullish, and it bodes well for the precious metals and mining shares in the […]

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Bear-market growl grows louder

Bear-market growl grows louder

The last 24 hours have been brutal for stocks, commodities and the euro, with news that depositors yanked close to €100 billion out of Spanish banks in the first three months of the year – the fastest drawdown since Spanish records began in 1990. The Italian unemployment rate is now above 10%, and European Central Bank chief Mario Draghi is warning that the eurozone is “unsustainable”. US Q1 GDP growth was revised down from 2.2% to 1.9%, emphasising that the US economy is once again slowing, while claims on unemployment benefits increased by 13,000 when economists had expected no increase. To top it all off, data this morning shows UK […]

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European debt woes push dollar higher

“Spexit” – short for a Spanish exit from the eurozone – is the new word leaping of the tongues of market analysts, with investor attention centred on problems in the Spanish banking sector. Though the European Union has offered Spain more time to sort out its budget problems, news that Madrid will have to fund the Bankia bailout by selling more government bonds sent Spanish and Italian bond yields shooting higher yesterday, with Spanish 10-year debt hitting 6.65% and equivalent Italian debt climbing 15 basis points to 6.02%. Economists regard the 7% mark as a critical threshold as far as borrowing is concerned – Greece, Portugal and Ireland all received […]

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Gold reserves as collateral

| May 31, 2012 | Articles: Insights

Yesterday’s big news as far as gold was concerned was a Telegraph report stating that Germany could be about to get into the “cash for gold” business in a big way. Angela Merkel is said to be increasingly favourable to the idea of countries pooling a portion of their sovereign debt into a redemption fund, with the eurozone then taking on a collective obligation to honour this debt. Member states would be obliged to pledge gold and currency reserves as collateral in case they are unable to make good on their obligations. This so-called “European Redemption Pact” gets around German courts’ constitutional objections to “Eurobonds”. It would also allow PIIGS governments to […]

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Paper gold pitfalls

| May 29, 2012 | Articles: Insights

Last year’s disastrous collapse of MF Global has impacted financial markets around the world in many ways. Given that it was one of the largest brokers of leveraged products, it is no surprise that this area has felt the full force of MF Global’s collapse. For example, futures trading volume on US exchanges has dropped noticeably, mainly for two reasons. First, MF Global customers who are still waiting for their money to be returned are not trading. Second, customers of other brokers have understandably become worried about the safety of their money and withdrawn funds from those firms, which has reduced their capacity to trade. Gold has not been spared […]

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Gold signals trouble ahead

Gold signals trouble ahead

Precious metals are still struggling to gain ground in the face of persistent fears about the eurozone and the threat of a 2008-style market meltdown. The CFTC’s latest Commitments of Traders Reports for the gold and silver futures market in America shows managed money (read: hedge funds, commodity trading advisors, etc) holding their largest short positions in these markets since September 2008. Is The Great Crash coming? The GotGoldReport comments, however, that if recent history is any guide these large short positions are more often that not an indicator that we are getting close to a bottom, as the chart below suggests: Gold remains trapped in a range between $1,550 and $1,600, after failing […]

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Gold rally bumps into resistance

Last week was a week of two halves as far as precious metals were concerned. The first half a dire one for bulls, but the second seeing new buyers tempted into the market, with Thursday’s impressive gold rally setting the stage for a recovery back above $1,600. Silver is still trading around $28.50, with $30 a key short-term target for silver bulls. Growth assets such as stocks and industrial commodities have risen slightly in trading this morning, with Brent crude finding its way back above $107.50 a barrel, while copper has rallied (0.76%) since midnight GMT. In contrast to usual risk-on trading patterns, however, the euro has fallen slightly against […]

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Philly Fed survey boosts gold

The gold price has bounced back in some fashion over the last 24 hours, hurtling back above $1,550 and now probing the $1,600 mark. Silver is also on a tear and is back trading around $28.50. One swallow doesn’t make a summer, however, and given the continuing eurozone tensions – which now include confirmation that the European Union is working on an emergency plan to handle a Greek exit from the euro – these gains could be lost on a short-term basis if we see another bout of US dollar buying. Precious metals were helped higher by news from the Federal Reserve Bank of Philadelphia, confirming that US business activity is slowing […]

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Currency collapse dynamics

| May 20, 2012 | Articles: Insights

The reason we accept paper money as a store of value is habit. This habit has its origins in history, when banks took our gold as deposit and issued paper receipts for it. The gold has gone, but the paper with its habitual value remains, and we accept it without question. The only backing is a vague government promise. There is no sound theoretical basis for why unbacked government-issued money should retain a store of value: it depends for its value on a market-based acceptance of financial credibility. So it follows that if a government loses all financial credibility in markets, its paper becomes worthless. This is confirmed by experience […]

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Ghanaian government causing headache for gold & silver mining companies

Ghana is one of the most resource-rich countries in West Africa, and is especially well-endowed as far as gold is concerned. After the abolition of apartheid, South African mining companies in particular started expanding all over the continent. In the last decade exploration companies and gold producers as well as supply companies have invested a total of US$6.5 billion in Ghana. But efforts on the part of governments across the continent to extract more taxes from mining companies have also been increasing – with worrying implications for many businesses. Concerns have centred on Zimbabwe and South Africa – in the former the government forced foreign investors to transfer their shares […]

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Greek bank run fears growing

Greek bank run fears growing

With the economic situation in Greece becoming more fraught by the day, The Wall Street Journal reports that Greek depositors withdrew 700 million euros from the country’s banks on Monday, with fears growing of a widespread bank run. The chart below (courtesy of The Big Picture blog) shows the huge draw down in domestic deposits over the last two years: Precious metals are still being pummelled by hedge funds’ “risk off” trades. Gold has now broken down below $1,550, while silver is trading below $28 and looking likely to test support just above $26. The euro has sunk to $1.27, while the US 10-Year Note is yielding just 1.77%. The yield on German […]

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Nepalese currency under pressure

Gold priced in Nepalese rupees hit a new record high per troy ounce earlier this month, at 56,000 Nepalese rupees per tola. After neighbouring India recently announced a rise in its gold import taxes from 2 to 4%, the Nepalese government had no choice but to raise its own gold import taxes in response, in order to avoid smuggling activities at its borders. The small Himalayan state is often forced to make political and economic adjustments depending on policy in Delhi. So gold import taxes have climbed from 1,750 to 2,680 Nepalese rupees. Sales of gold jewellery dropped in response. However, continuing weakness in the Indian and Nepalese rupees is helping […]

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The Great Crash of 2012?

| May 12, 2012 | Articles: Insights

Deflation fears are once again becoming the dominant emotion in the minds of traders, with banking difficulties on both sides of the Atlantic and continuing weakness in precious metals and commodities. News that the China Investment Corporation – China’s biggest sovereign wealth fund – no longer wants to buy European sovereign debt has only added to the sense of unease. The euro continued losing ground against the dollar yesterday, and though it has rallied this morning, looks like it could test the $1.29 mark sooner rather than later. Corn, copper and Brent crude also sustained further losses, with news of a boost in OPEC production adding to the downward pressure […]

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Gold bugs will be vindicated

In recent weeks, while the eurozone has suffered escalating levels of systemic stress in government bond markets and its banking system, the gold price has fallen under $1,600. One would have thought that – but for the occasional fat-finger trade – gold would rise in all this instability, not fall. Putting aside short-term considerations, the simple reason has to be that the investment establishment, which has bought into the bond market bubble, does not believe that gold is any longer an alternative to paper money. We can understand why they think this. Though the Keynesian vs Austrian economic debate is attracting increasing attention, financial services companies recruit economists who have been trained in the […]

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