Bullion Extracts...

Here we will from time to time post articles that we find interesting and important about anything relevant to investing in gold and sliver bullion or products. When inclusions are sourced from other parties we will acknowledge those authors and/or provide links to that information.

Gold Confiscation 2006 REPORT - Oct 21, 2009

compass GoldTo understand how a gold confiscation might be possible...

 

 

World Gold Council reveals Market Oulook for 2019

 

January 1, 2019

Reade highlighted that while gold is currently trading at less than two-thirds of its all-time high, it’s now a very good time to consider the role of gold in a portfolio. He concluded: “As a high quality, liquid asset, with the potential to deliver strong returns, and as an effective diversifier that works particularly well when other assets fall sharply, gold is historically proven to enhance the long-term performance of investment portfolios.”

The World Gold Council expects key factors which drove gold in the second half of 2018 to continue to hold sway over the market in 2019.

In his report the organisation’s Chief Market Strategist John Reade analysed 2018 and noted that the gold price generally trended down from mid-April, before reaching a plateau at $1,160 per ounce in August as the dollar strengthened.

The Federal Bank steadily ramped interest rates while other central banks kept policy accommodative. The US economy was boosted by President Trump’s tax cuts while bullish investor sentiment pushed US stocks higher. However, by October risk in emerging economies started to spill over to developed markets. Global stocks were sold off, led by US tech companies, resulting in short-covering in gold and its price rising comfortably above $1,200 per ounce.

Looking ahead to next year Reade commented: “Physical buyers, whether they are in China or India, which together make up half of consumer demand for gold, should be solid, bolstered by good growth in these two important economies. Technology demand, which has grown steadily over the last eight quarters, should continue to perform well as the world becomes ever-more connected digitally. 

“Central banks, whose collective buying has been one of the standout positive surprises this year, are widely expected to continue to buy gold next year and it’s possible that additional central banks will join the list of buyers, as seen in 2018.  All of these sources of demand are not only relevant to gold’s performance next year, but also underpin its long-term performance.”

The report also stated the most important component for near-term price performance will be linked to the activity of investors - whether driven by strategic or tactical reasons. Reade said: “These investment flows, stemming primarily from the US and European markets and with China becoming increasingly important, will likely be driven by macro-economic factors such as perceptions of risk, and the direction of interest rates, as well as by momentum and positioning in the gold market - especially in the US.

“If US stocks recover from their current bout of weakness and if the economy continues to out-perform the other major economies, the dollar may remain strong and gold may struggle to push significantly higher. But if US growth slows, as the sugar rush from the tax-cuts passes or if trade wars or tighter monetary policy create further drag, then investors may continue to seek gold. Further, if the economic slowdown is rapid or if risk assets fall sharply, investment flows into gold could match those seen during the 2008-2009 financial crisis.”

By Daniel Brightmore Dec 6, 2018

 

In the New Year 2019 - Can you dig it ? A Golden Opportunity

 

January 1, 2019

Amid all the share market chaos of the past several months, there's one vehicle that has developed a remarkably orderly, and classically bullish pattern. It's not an investment that we normally think of as orderly. In fact, you may not think of it as an investment at all. Some Wall Street pros ignore it. Some recommend it only as a hedge against catastrophe, although I'm not sure that idea holds water.

By now you have probably guessed what it is. It's the real money of the ancients, the shiny yellow metal, that many, perhaps even you, still believe is the only real money. Of course, it's gold. Now some doubt that gold has any monetary purpose for us as individuals any more. 

Clearly central banks think it does because they hold tons of that stuff in their vaults and some central banks have been on programs to acquire more of the stuff.

If it's good for those at the top end of town, why wouldn't it be good for you ?

Adapted from Lee Adler extract Dec 31, 2018

 

Gold Mid Year Outlook 2018

 

July 18, 2018

The first half of 2018 proved quite eventful for financial markets. Stocks experienced a few pullbacks during the first quarter as geopolitical tensions rose but have been generally trading upward since the start of Q2. This was especially true in the US and Asia, where tech stocks captured most of the growth. So far, investors seemed to have shrugged off the escalating trade war rhetoric between the US and many of its trading partners or, at least, discounting the effect it may have on long-term economic growth.

Gold has thus far moved in the opposite way. Its price rose by more than 4% in the first few months of the year, only to finish June down by the same amount. This downward trend has continued in July as gold dropped almost an additional percentage point. But while gold’s volatility spiked in February and April, it has been moving in a relatively low range since. Gold’s performance has been driven by a combination of factors. Three stand out:

  • A strengthening US dollar
  • Higher investor threshold for headline risk
  • Soft physical Gold demand in first quarter 2018

At the same time, gold’s price momentum and investor positioning in derivatives markets has accelerated its descent. We believe, however, that there may be reasons to be more optimistic on the second half.

From World Gold Council

 

Gold Outlook 2017: Gold and Silver investors will look mighty Smart

 

January 12, 2017

I think that, here at the start of 2017, we're on the cusp of a good strong bull run for both metals. This is the perfect time to lay into ample supplies of gold and silver.

After a frustrating second half of 2016, I see several undeniable reasons why demand will tighten up and prices for both of these popular investments will begin to surge. I'm going to show where I think gold and silver will go in the short term and give you four reasons why I think precious metals investors could have an even better year than they think. I believe we've seen the bottom, and the future prospects look bright, so let's take a look at my price forecast. Metal Bears Are Running Out of Excuses This hasn't always happened in the past, but the price of gold in 2016 suffered as a direct result of the market's reaction to a hike in the fed funds rate. For instance, in just the two hours following the Fed's Dec. 14 decision, gold plunged $19. You can put this down largely to a lack of surprise at the Fed's decision. Remember, rate hike certainty was running at greater than 90% this December. Compare that to the previous rate hike, in December 2015, when the markets pegged the odds of that rate hike at just 50%. So it's simple: When the markets are surprised, they run for gold, thanks to its legendary status as a hedge. The silver picture is similar. Its slide started in the summer of 2016 after hitting a yearly high of $20.59. Skittish traders sold and sold some more, fearing it would go lower in a kind of self-fulfilling prophecy. Trump's unexpected victory in the November election didn't do silver and gold any favors. The U.S. Dollar Index's (DXY) meteoric rise since November has created some short-term resistance for the white metal, since, like gold, it directly competes with the dollar. But like I said, the odds are very strong that we've seen the bottom of this metal correction. Indeed, we've already seen a steep pullback in "smart money" shorts, in other words, gold and silver producers who bet on futures to protect their downside. Since July, gold producers alone have pruned their short positions from 340,000 back to 155,000, as of Dec. 5. That drop of 54% in just six months indicates bearish metals sentiment is running on fumes. And now the stage is set for both gold and silver to move considerably higher in the new year.Here's why…

Gold & Silver Catalyst No. 1: The "Surprise" Metal Demand No One Predicted

There's an interesting element to the demand picture, one that's not being talked about. It is, of course, India. The world's largest democracy is a huge consumer of precious metals for all sorts of cultural and economic reasons. And it turns out that India had a surprise of its own on Nov. 8. That was the day Prime Minister Narendra Modi's government essentially demonetized two of the most popular, widely circulated denominations of the rupee, the Rs500 and Rs1000 notes, as part of an all-out blitz on India's so-called "black money," counterfeiting, and ill-gotten gains from corruption. The news sent the country into a confused frenzy that's only recently died down, with long, rambunctious lines at ATMs and banks. I think the situation in India will be a huge source of "surprise" demand for gold and even silver well into 2017, as Indians expand their voracious appetite for gold and begin to buy up silver. Indeed, silver imports to India have been rising right alongside gold for the past few years. And now rumors abound that the Indian government will restrict the amount of gold individuals can own, which will only push the metal-buying public – hundreds and hundreds of millions of people – into silver, as well.Most of the catalysts I see are shaping up much, much closer to home, though.

Gold & Silver Catalyst No. 2: The Strong, Expensive Dollar – for Now

It seems counterintuitive to consider an appreciating dollar as a profit catalyst for precious metals. After all, as I mentioned, the dollar's strength has contributed to gold and silver's decline recently. But… there have been many periods where the complete opposite has happened. In the 1970s, for example, the Federal Reserve, set rates soaring to levels unthinkable by Janet Yellen's standards. They routinely topped 5% over the course of the decade, hitting 13% during Arthur Burns' tenure in 1974 and 15.55% in 1979 during Paul Volcker's day. All this was done in a less-than-totally-successful attempt to shore up the dollar and crush the inflation and high unemployment that vexed the Fed throughout the decade. And yet, through all of this, gold enjoyed a kind of "Golden Age," with gold starting the 1980s around 24 times more valuable, per ounce, than it had been in 1970. And the run continued through the 1980s. That was a bull market of epic proportions – the mother of and benchmark for all secular metals bulls.Certainly in 2017, I don't expect a strong dollar to do any harm to the price of gold. That said, I don't think the dollar will stay all that strong for much longer. Which brings me to the next catalyst.

Gold & Silver Catalyst No. 3: Rising Inflation (and a Weaker Dollar) in the Future

Higher bond yields, the incoming Administration's spending plans, and a heating-up economy all signal higher inflation. Right now, the fed funds rate is 0.5%, while inflation is running at 1.7%. That means the the real interest rate is -1.2%. And, as we've seen, when inflation outpaces interest rates, gold does better, largely because it's seen as a hedge against inflation and an alternative to the dollar. How to do we know higher inflation is coming? It's being telegraphed. Trump has announced his desire to weaken the dollar to boost exports by making U.S. goods cheaper. His proposed trillion-dollar spend on infrastructure, largely paid for by tax cuts and debt, will also put the brakes on the dollar. It should spur economic growth and inflation.Once inflation reaches a "tipping point" in the mind of the public, who perceive that we're in an inflationary cycle and run out and pile into gold as a hedge – another self-fulfilling prophecy. I'm anticipating this will be a strong factor in about six months' time, as we get into the summer of 2017.

Gold & Silver Catalyst No. 4: Rising Industrial Demand for Metals

Both gold and silver are a good store of value, but they're also used more and more, in heavier and heavier amounts, by industry, especially high-tech and medical applications, everything from dentistry to computers, GPS receivers, solar panels, batteries, semiconductors, and even nuclear reactors all use silver, gold, or some combination of the two. There is growth right now virtually across the board in these industries – strong growth – that's only going to get stronger in the new year. I can't imagine demand would slacken under these circumstances. All this bodes very well for gold and silver investors in 2017, so let's take a look at how high I believe these metals can go in the short term.Fair warning: I'm extremely bullish.

My 2017 Gold and Silver Price Targets

For all these reasons, I think we have every reason to believe we've seen the bottom of the past six months' correction, and that gold and silver are likely to turn right around and go on a bit of a tear in the first quarter of the year. The yellow metal is sitting just below $1,190 per ounce right now, with support at $1,172. It's looking actively bullish right now, which serves as further evidence that the bottom is behind us. I think we could see gold hit between $1,250 and $1,280 in the first quarter, and it's not unreasonable to expect $1,400 farther into 2017. So gold looks good, but silver looks even better. Those "smart money" shorts had decreased some 31% between August and December of last year, a bullish sign. The current gold/silver ratio is trending down; it sits at just above 71, meaning it takes 71 ounces of silver to equal the value of an ounce of gold. This makes silver rather inexpensive relative to gold. I'm expecting silver to reach the $19 range in the first quarter of 2017, and $22 in the second. The price may even move to $24 if the Indian demand picture proves as strong in reality as it appears to be.By Peter Krauth – Resource Specialist

 

Gold Brexit - What does it mean for Bullion ?

 

25th June 2016

British voters have voted in favor of an exit from the European Union, which sent the pound plummeting and prices for safe-haven assets like gold soaring. The assumption is that a withdrawal from the EU could ultimately result in a recession for Britain that may even spread globally.

 

Gold prices surged from just over $1,250 an ounce to $1,336 an ounce in under two hours. The price of silver also jumped to nearly $18 an ounce. Meanwhile, the U.S. dollar also saw significant gains against the British pound and other currencies. These movements confirm that both gold and the U.S. dollar are still seen as safe-haven assets against other world currencies.

 

The volatility following the Brexit vote also reflects how an emotionally driven market can send prices for safe-haven assets wild. A 7% surge in gold prices in such a short period of time is a near historic move. Those of you who remember the last day of the great gold bull market of the 1970s know the price of gold shot up 11% in under 24 hours.

 

For now, Britain is still part of the EU, even after the vote. The process of actually leaving the EU will take years. And it could still be blocked, overturned, or even revisited later with another public vote. Absolutely anything is still possible. So the Brexit referendum does nothing other than fan the flames of fear.

 

Gold is well known as a safe haven. But the greenback is less thought of as a safe-haven asset by Americans. Nevertheless, the dollar is the world's main reserve currency, and all raw commodities tend to get traded and priced in U.S. dollars. So the dollar is used by many as a safe-haven asset against other currencies. But, of course, this doesn't change the fact that gold remains the ultimate safe haven against all fiat currencies, including the U.S. dollar.

by Luke Burgess

 

 

No need to Panic even in a slump - Gold will rebound

27th September 2011

 

Dear Investor,

As you know, the world lurched further into turmoil over the weekend.

Some of you have asked me why - if gold is a safe haven - why has the USD price fallen?

It's a good question - and one I wanted to answer for you today, because this has massive implications for your investment portfolio. But I'll get to that in a moment.

Gold is supposed to go UP, isn't it?

But it didn't:


That's not a great picture. But wait...

Don't forget the exchange rate effect.

Because if you look at the chart in Aussie dollars, the effect has been muted seriously.

 

When I woke up Monday morning I read this quote from a commentator in the Sydney Morning Herald:

So, the claims by the internet chatroom gold bugs out there that the wall of worry snaking its way around the world meant gold was headed off to more than $US2000 an ounce, if not $US2500 an ounce, are all a sudden looking seriously dumb.

I really wish we'd managed to get Brett Le Brocque over to educate him.


At the end of this, I'll be asking you to make a decision about who is making more sense to you. I'll also summarise my thoughts in 10 points, so if you are pressed for time, you can go there now!

What happened to gold?

Headlines like this don't make pretty reading.

 
 

If you are holding gold as part of an Australian portfolio, you have been buffered somewhat by the fall in our currency. (We’ll get to currencies in a second).

What is going on with gold?

As we always say, even in a strong bull run, it's stairs up, elevator down. 

So we are never that surprised to see corrections.

And while everyone focuses on the short term, have a look at the longer term history.

 
 

The global markets are a complex beast, so I can't claim to know every in and out. However in my view there are two main reasons for this correction.

First, the Chicago Mercantile Exchange, has raised its margin requirements on gold by a LOT. Secondly, the USD strengthened relative to the Euro.

The CME (the world's largest futures and options provider) has announced it will be raising its margin requirements for gold by 21% by close of business, Monday 26 September (US east coast time).

Why does this matter?

Because all week the big global funds have been faced with a choice - borrow more to cover the new margin levels or to sell gold to keep within the new limits.

CME has a number of motivations for increasing its margin requirements, and I wish I had time to go into them here. But one possible motivation is to keep some of the building heat out of the market so that their trading volumes are more sustainable.

Anyway regardless of their motivations, fact is, when margin requirements go UP, then lots of funds SELL.

 
 

The second reason comes down to relativities...

Relative movement of USD vs EUR

This reason for the gold price fall is a bit simpler. It's simply that there was SO MUCH BAD NEWS about the Euro zone, so much reason to be concerned, that the USD actually rose against the Euro.

Don't forget, all currency and forex discussions are relative. So as the prospects of the Euro fell, the USD strengthened, and also forex traders parked some cash in the USD.

This pushed the USD up, and gold came down relative to the currency, exactly as you would expect.

When you add this effect to the CME margin decision, the movement on gold is pretty much as you would expect. In the short term.

I wouldn't call it a bubble bursting. But then again, I've never argued that gold is in a bubble.

This brings me to my final argument today. Have the fundamentals changed?

Have the fundamentals changed?

The first point I want to make is one that should be drummed into everyone:

In USD terms, Gold is not falling - the USD is rising.

In other words, gold is money. And the currencies are bouncing around gold, not the other way round.

For thousands of years, gold has had a strong ability to protect buying power. It has never been about making money (and certainly not dividends). So when governments around the world are in a massive debt crisis and printing unmentionable amounts of paper (fiat) currency, it is to be expected that the price of gold, as expressed in the currencies, will rock around a fair bit.

It doesn't mean the fundamentals are changing. In fact, it is probably (in my view) the opposite.

So, I ask you as a thinking investor: Do YOU think anything has changed?

  • Is Europe in a better place? Or is it looking more disastrous by the day?
  • Has the US solved its massive debt problem? Or is the political situation making things harder?
  • Is gold still a safe haven? Or has the nature of gold as money changed suddenly after 5,000 years?


I think you know where I am coming from here...

To me, gold is looking as important as it has ever been. And I don't mind telling you I am not just saying that and doing something else - I am personally investing in gold and plan to hold on until I see signs of fundamental change in the global economy.

Once again my lawyers insist I remind you that this letter is my view not investment advice, and I am certainly not giving you personal advice. This commentary is designed to let you know what I think is going on, so you can make more informed decisions (they're educational). Get good advice, and make informed decisions.

Speaking of decisions, there are 4 things you can do today: Hold, Buy, Sell or Freeze.

You have 4 choices anytime when gold and silver prices Drop :


1. Hold
You are happy with the amount of precious metals in your portfolio because you are playing a smart, well-thought-out long term investment strategy.

2. Sell
You think gold is in a bit of a bubble and will come back a lot in your currency dollar terms (or you think your currency is going to bounce back) - so you think it would be a good time to get out before a further price fall.

3. Buy
You think this pullback is another opportunity to buy bullion at a lower price, and top up your portfolio with physical metal. Perhaps you feel, with all the economic jitters, that ultimately more people will again turn to gold and silver.

4. Freeze
You have no idea what to do, so - like many investors - you freeze and wait for the market to do what it likes to you.

But that said, I think ALL of these positions are reasonable except number 4. Freeze. Freezing is not a strategy, it is panic. If you are HOLDING, that's different. I tip my hat to you. But if you are not moving simply from confusion or a lack of information, you are at the mercy of the market. If this is you, please get off the fence. Thaw yourself with information and expert advice. And make a decision.

Conclusion

My views in summary are:

  • Gold has fallen in price in USD terms
  • Gold is back to prices of mid August in AUD terms
  • Gold priced in currencies which will wiggle around because of global currencies moving against each other
  • The CME has just ratcheted up its margin requirements on gold by 21% - ouch.
  • You'd expect gold to correct under these circumstances.
  • The global economy is still in a world of pain - no fundamentals have changed
  • I do not personally feel that gold is in a bubble, nor has it burst
  • You should actively choose between HOLD, BUY or SELL. Just don't FREEZE.
  • Keep arming yourself with information - the mainstream media know less than you do about precious metals.

 

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