Author Archive: GoldMoney

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The case for gold is still strong

| May 12, 2012 | Articles: Insights

With another sell-off in precious metals leaving gold below $1,600, there is of course much talk in the media about the “death of the gold bull market”. But have the fundamentals really changed? Or is this now a chance to buy gold at a more attractive price? The truth is that no recent news supports the case for the end of the gold bull market, and little evidence to support the idea that the financial system is on the mend. The elections in France and Greece have increased eurozone instability, and will likely encourage further efforts from the European Central Bank to weaken the euro, in an effort to appease socialist critics […]

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Austerity drive causing new Euro rifts

The market sell-off continued yesterday, with European political uncertainty continuing to dominate headlines. Spain has nationalised the crippled lender Bankia, while Greece is moving closer to fresh elections, as politicians in Athens fail to agree on the formation of a new coalition government. German European Central Bank member Joerg Asmussen has stated bluntly that “Greece must know that there is no alternative to the agreed to restructuring arrangement, if it wants to stay a member of the eurozone”, but the Greek people want it both ways: on the one hand they are strongly in favour of staying in the eurozone, but at the same time, bitterly opposed to Brussels’ austerity drive. Germany […]

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Market sell-off testing gold bulls

Another tough day for precious metals yesterday, with gold, silver, platinum and palladium hit hard by hedge funds’ flight from equities and commodities. Concerns that Greece is on the verge of being forced out of the euro – combined with a surge in 10-year Spanish bonds back above the 6% “danger” mark – continues to drive traders into the “warm” embrace of US Treasuries. The front-month Comex gold contract settled at $1,604 – its lowest settlement for four months – with a further decline into the $1,580s during Asian trading this morning. The price seems to have stabilised somewhat over the last few hours, and there are surely enough willing […]

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Gold prices fall as traders run to the dollar

The fallout from the weekend’s European elections continues, with leftist politicians in Greece now attempting to form a new “anti-austerity” coalition government, with one radical-left leaders stating that “the people of Europe can no longer be reconciled with the bailouts of barbarism.” France’s new president Francois Hollande is still insisting that “austerity can no longer be the only option”, but Berlin remains unmoved. Spain also declared yesterday that it is preparing a bank bailout – a risky political venture considering that the Spanish unemployment rate is close to an eye-watering 25% of the workforce. It’s no exaggeration to say that such economic conditions, as in Greece, carry potentially revolutionary political implications. The […]

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Why gold money?

| May 7, 2012 | Articles: Insights

Recently Rob McEwen of McEwen Mining Co. and Michael Crofton of Philadelphia Trust discussed the pros and cons of the gold standard. In this debate, Mr McEwen made an excellent case for gold as “the ultimate currency”. He argued that using gold as currency could help restore fiscal discipline in governments; and that, in essence, it already is the world’s reserve currency. Conversely, Mr Crofton stated all the typical arguments against the gold standard: that there is not enough gold in the world for everyone; that it would prevent the authorities from controlling the monetary system; that it would hinder the government’s debt financing, etc. Here are some of my responses to […]

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Keynesian vs Austrian debate hotting up

| May 5, 2012 | Articles: Insights

Last week, an Austrian-School economist, Robert Wenzel, gave a speech to the New York Federal Reserve, and separately Bloomberg hosted a television debate between Ron Paul, who is running for the Republican Presidential nomination, and Professor Paul Krugman, one of the foremost advocates of Keynesian economic policy. The debate between advocates of big government and small government is beginning to move into the media. It is not so much a question of who wins the debate: rather it is that the minority Austrian view is being noted by a few economists at the Fed, and that Krugman, who last year turned down an opportunity to debate economics with Robert Murphy of the […]

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ECB rate decision pressures gold

The European Central Bank’s decision yesterday to leave interest rates unchanged at 1% pushed more traders out of commodities, with precious metals coming under more selling pressure following the news. Gold is now floating around $1,630 while silver has fallen just below $30 – an area however where we should see strong bids coming in for the white metal. Likewise, gold should encounter strong buying support below $1,650, though a lot depends on the latest US nonfarm payrolls report due out today. A disappointing number will encourage speculation that Helicopter Ben and the Federal Reserve will engage in more quantitative easing; but a stronger number will dampen such expectations, and could pile […]

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Gold premium over platinum increases

In recent weeks the platinum price has been clearly underperforming in relation to gold, with gold now more than $100 more expensive than platinum. According to the latest report from the German precious metals trading group Heraeus, in recent weeks platinum long positions at futures markets have dropped more than 30%. In early trading today platinum dropped below important support at $1,540 per troy ounce – a sign that the current sell-off might not be finished. Despite this bearish data, India’s Bullion Market Association expects platinum imports into India to increase by as much as 50% – or 20 to 22 tonnes. This rapid increase in platinum imports could be due to […]

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Eurozone breakup: how would this affect precious metals?

| May 4, 2012 | Articles: Insights

As funding pressures and economic distress increase in Spain, talk of a potential breakup of the eurozone has returned. There has been debate as to whether this would be a deflationary or inflationary event, and how it would affect the precious metals markets. In the event of a breakup, investors need to be prepared for a period of extreme volatility, characterised by chaotic trading conditions in all markets. Similar to 2008 a financial shock such as the failure of the eurozone would likely be met by trading that is more characteristic of panic/liquidation decision-making than fundamentally sound trading. Remember that after the collapse of Lehman Brothers gold traded almost as […]

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Missouri politicians aim to simplify use of gold as money

Missouri is the latest US state that is trying to follow Utah’s example by allowing physical gold and silver to be used as legal tender. According to the Constitution, gold and silver coins – such as the American Gold and Silver Eagle – should be accepted as legal tender in all of the US, but of course this has long since ceased to apply in practice. But now some members of the Missouri House of Representatives are working on simplifying the payment process with precious metals, and are hoping to introduce special gold and silver accounts for all monetary transactions done in the state. This plan is similar to a law passed […]

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The myth of riskless debt

| April 22, 2012 | Articles: Insights

Much has been learned from the ongoing financial debacle that has been painfully rattling the world’s financial structure in recent years. Foremost among these valuable lessons is the realisation that all financial assets have risks. Even the bonds of many sovereign nations are being called into question, and rightly so. Though often deemed to be “riskless” because of a country’s ability to extract tax from its citizens, logic tells us that nothing in life is risk-free. This conclusion can also be reached by even a cursory reading of monetary history, or in a more meaningful and instructive way, just by closely observing financial events in recent years. Unquestionably, sovereign bonds have risks. […]

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Syrian regime selling gold

Bashar al-Assad’s Syrian regime is under increasing financial pressure as the economic sanctions imposed by western states and some Arab nations are hurting the country. According to Western diplomatic sources, the Syrian government is desperately selling its foreign currency reserves and the country’s gold treasures to the highest bidder. Unsurprisingly, many have attacked these sales, and accuse Assad of throwing away the country’s heritage in an effort to stay in power. According to Western diplomatic sources, the gold bars stored at the Central Bank of Syria are being sold at a great discount to their true worth, with al-Assad’s regime using the proceeds to continue fighting rebels. In October last year […]

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Gold consolidation continues

Another quiet day for precious metals yesterday. Gold continues to face resistance at and around $1,650, while silver remains holed below $32. The most actively traded Comex gold contract, June, settled 0.7% lower at $1,639.60. US Mint sales figures for gold coins during Q1 show 210,500 ounces were sold – down 30% from 299,500 in the same period last year. Together with increases in the Comex silver stock and the drop off in gold and silver futures open interest, it’s reasonable to conclude that the froth seen in these markets during last spring and summer has well and truly evaporated. This is no bad thing for the long-term vitality of either market. The fundamentals […]

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Mixed messages from silver sector

Silver has repeatedly tested support at $31.50 per ounce, and the supply situation at the physical silver markets remains tense owing to high industrial demand. However, silver reserves at the New York Comex have reached their highest level in a decade, indicative of a drop off in investor demand. Annual silver production stands at around 700 million ounces, while demand is running at 1 billion ounces annually; recycling provides the other 300 million ounces. Many industries cannot do without silver, given the metal’s unique physical and chemical qualities, and the recent global economic slowdown has hardly affected industrial silver demand. However demand for investment silver has slackened somewhat in recent […]

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