Gold is plunging - or is there still good news?


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This Gold Report was compiled to those investors who lost a lot of money with their gold investments. People are desperate to get out of gold to avoid further losses. There are a lot of sell-offs from individuals, mutual funds, Hedge Funds, and organizations. Is there another way to invest in Gold?. I have tried to give different assessments, and to make a point where to invest in gold.
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Gold is plunging - or is there still good news?

  1. 1. Gold Knowledge & Tips by Pierre A PienaarGold Is Plunging -- or is therestill Good News?Dear Reader,There is so much confusion, those that panic, and those that are buying gold. Others,short-sell as well. I feel sorry for those who lost money the last couple of days, but really,we must start learning from our mistakes.Shares are paper money, You need something physical, solid to have real value. Again,as I said before, you should learn from it: “Do what they do, not what they say”. Thethey are the Big guys holding gold, like the Moguls from Russia, India, China, USA,Canada, Germany, Switzerland, and many others, and throw the various central banksinto this bag you sit with the most gold reserves. They wont part of their gold so easy.People are selling gold at a frantic pace, why, because some “experts” tell them goldloses it’s value. The Gold does not lose it’s value, but the USD becoming weaker orstronger. Currently the dollar is strong because of the printing money, Keep the dollarhigh, gold lower, and then we can buy more gold. There are thousands of sellers, but to
  2. 2. sell something, somebody has to buy, and those that buy are big Governments,speculators, big investors, and Central Banks.The following articles are for you to read thoroughly and then act on it.In an article: Precious Metals Prices: THE BATTLE OF THEORY AND REALITYBy Al Doyle on April 16, 2013 11:06 AM I wish to use a very important point that makethe difference between paper and solid investors: “Anyone with even a marginal interestin precious metals is aware of the brutal beatdown in gold and silver spot prices over thepast four days. From its April 12 London close of $1535.50, gold fell off the cliff to $1395,with an even lower close of $1352.60 in New York.Silver was a case of “second verse, same as the first.” The April 15 London close of$23.54 on April 15 represents a $3.86 decline from the April 12 figure of $27.40. It wasworse in New York, with silver finishing the day below $23.As anyone who tried to check web sites for bullion sellers will attest, the public caught onto falling spot prices in a big way. Six attempts to view the Silvertowne web site werecompletely unsuccessful. So what caused this one-day plunge? Were precious metalsinvestors dumping their holdings by the boxful? Not a chance.”A veteran of the bullion trade, Degler advised buyers not to place excessive faith in spotprices.“There are two markets – paper and physical,” he said. “”Guys pushing buttons areselling naked shorts, or or metal they don’t have. The chickens will come home to rooston paper trading. The bounce back will be big.”I advise you to read this article in full: Precious Metals Prices: THE BATTLE OF THEORYAND REALITYGold market development organization the World Gold Council has argued thatgovernments should consider using gold to back bond issues, and last monthcommissioned a poll that found 91% of Italian business leaders and 85% of citizensagree that the country’s gold reserves should play a part in economic recovery.--Gold Is Plunging -- Which Commodities Are Joining It?
  3. 3. Gold falls as much as 2.7%; investors flee* Gold to revisit low of $1,321.35 -technicalsAapril 17, 2013By: Street AuthorityAlthough the U.S. stock market has generated a healthy glow this year,the commodity complex appears to be entering into a growling bear market. Justconsider these stats:After a sharp drop on April 15, gold has plunged nearly 20% since the year began andnearly 30% since hitting an all-time high of around $1,900 per ounce in the autumnof 2011.West Texas crude oil has slipped from $97 per barrel to $87 in just the past twoweeks.Copper has slid roughly 12% this year and is off roughly 27% since the summer of2011 peak.If aluminum breaches the 80 cents per pound mark (its currently at 82 cents),it will see its lowest levels since the summer of 2009.Unless these commodities quickly stabilize, they will all start to breakkey resistance levels and head even lower. Yet its unwise to lump all commoditiestogether, and the factors affecting one of them is quite distinct from all others.The sliding yellow metalPerhaps the most vulnerable commodity of all is gold, which has no supply-and-demandmechanisms to help establish a fair value.The price of gold has always been basedpurely on sentiment, mostly as aperceived hedge against eventuallyruinousinflation.Yet an April 10 report by Goldman Sachshas led even the most avid gold bulls toquestion their inflation-protecting stance.
  4. 4. Goldmans analysts took note of the fact that as the recent crisis in Cyprus unfolded,gold prices barely budged, which stands "in sharp contrast to the larger USD gold movesobserved during the last quarter of 2011, when fears that Greece would leave the euroarea were at their highest," Goldmans analysts note.The key conclusion: The notion that gold is a valued hedge in these complex economictimes is no longer applicable. And its time for gold to start trading on the fundamentaldynamics of supply and demand. Although Goldmans analysts see gold remaining above$1,400 this year, they expect the yellow metal to move below $1,300 next year. Theirlong-term forecast for gold: $1,200 an ounce.Why that price?"Inflation expectations remain well anchored, and our economists expect subduedinflationary pressures in coming years," Goldmans analysts say.They figure $1,200 an ounce for gold is fair value if inflation remains tame. And goldinvestors are now realizing that the longer it takes for any inflation to appear, the lesspatience even the most avid inflation hawks will have to stick with this trade. So theexodus in gold is a sign that some investors are heading for the exits before even moredo so.Central banks are still buying gold and have accelerated their purchases during the pastthree months. Goldmans analysts say that trend will continue, but they figure goldwould likely move even lower than their forecast of $1,200 per ounce were it not for thecentral banks purchases. On the other hand, consumer demand for gold in China andIndia appears to be slumping, which is why gold has been hit especially hard in the pastfew trading sessions."Gold investments are increasingly looking like a bubble ... and long-term investors willlook to book their profits in the current market environment," said Mohit Khamboj,president of the India-based Bombay Bullion Association, in an interview with theThe Wall Street Journal.The fact that many gold producers, such as Barrick Gold (NYSE: ABX), are beset bytheir own company-specific mining problems right now just adds pain to gold investors.
  5. 5. What about other commodities?The simultaneous sell-off in other commodities may be somewhat coincidental. The pricedrops in oil, copper, aluminum and other commodities is more closely tied to globaleconomic demand, especially from China. In this column from late March, I noted thatweak economic data in China thus far in 2013 appears to be driving the commodity sell-off. Chinas gross domestic product grew a reported 7.7% in the first quarter, below theconsensus forecast of 8%. And as long as the possibility remains that theChinese economy will slow yet further in current quarters, commodity prices could keepfalling.Thats the view of Citigroups economists, who just lowered their price forecasts forseveral commodities. For example, they see copper sliding to $3.07 per ounce by nextyear (from a recent $3.24), which would be the lowest level in nearly three years.And whereas Citis economists expected to see aluminum prices rebound to 99 cents perpound in 2014, theyve just revised that figure to 88 cents.Still, these are the kinds of commodities you need to keep tracking, because lower pricescounterintuitively set the stage for the next bull market in commodities. For example,consider iron ore.Iron ore surged from $60 per metric ton in the summer of 2008 to nearly $190 per tonin February 2011, thanks to firming global demand in places like China and the UnitedStates. Trouble is, iron-ore producers took note of the firming prices and aggressively
  6. 6. boosted their mining activities. It soon became clear that too much supply was headingto the market, and iron ore prices slumped below $100 per ton by the summer of 2012.That led major producers such as Cliffs Natural Resources (NYSE: CLF), Vale(NYSE: VALE) and others to start cutting back on their production plans. As a result ofreduced supply forecasts, iron ore prices have rallied by roughly 40% since last summer,to around $140 per ton.Weve seen a similar supply-induced relief rally in natural gas during the past year aswell.Action to Take -- And thats precisely the dynamic you will see play out with othercommodity producers. Todays pain will bring supply discipline, and as supply falls to --or even below -- the levels of demand, then the stage will be set for the next commodityupturn. Were not there yet, but it pays to track the production plans of the topproducers of copper, aluminum and other key commodities. Although analysts arebracing for a prolonged slump, theyll change their tune as soon as they see a change inproduction.Risks to Consider: Trying to bottom-fish these commodities can be perilous. The globaleconomy remains unhealthy, and China and the United States in particular could start tofeel the gravitational pull of weakness in Europe and elsewhere.
  7. 7. More Accurate than Warren Buffett?Warren Buffett has beat the market 5 of the past 9 years. Since we started publishingour annual report, weve beat the market 7 of the past 9 years. And were poised to do itagain in 2013. One of our picks has raised dividends 463% since 2004. Another hasreturned 117% in just over 4 years. Click here for more about these stocks and evensome ticker symbols.Articlesource: Gold InvestmentWhen did Wall Street "market" gold...?IS IT the end for the bull market in gold? asks Daily Reckoning founder Bill Bonner.Everybody says so. Heres The New York Pocatello, Idaho, the tiny golden treasure of Jon Norstog has dwindled, too. A$29,000 investment that Mr Norstog made in 2011 is now worth about $17,000, a loss of42 percent."I thought if worst came to worst and the government brought down the world economy,I would still have something that was worth something," Mr Norstog, 67, says of hisforay into gold.Gold, pride of Croesus and store of wealth since time immemorial, has turned out to bea very bad investment of late. A mere two years after its price raced to a nominal high,gold is sinking — fast. Its price has fallen 17 percent since late 2011. Wednesday wasanother bad day for gold: the price of bullion dropped $28 to $1,558 an ounce.And this was before gold tumbled on Friday.We can barely stop laughing.This sad sack investor thought he would make money by putting $29,000 into goldstocks.
  8. 8. Ha ha ha...wrong on all counts. He thought gold was an investment... he thought anamateur speculator could make money in gold stocks... and The New York Times thoughthe was an investor.And now, The New York Times thinks gold is going down. Why? Lets let the NYT tell us:Now, things are looking up for the economy and, as a result, down for gold. On top ofthat, concern that the loose monetary policy at Federal Reserve might set off inflation —a prospect that drove investors to gold — have so far proved to be unfounded.And so Wall Street is growing increasingly bearish on gold, an investment that banksand others had deftly marketed to the masses only a few years ago,Ha you remember Wall Street deftly marketing gold a few years ago? Show usthe ads! Give us the brokers phone logs! Prove it!The fact is, the masses never got anywhere near gold. Not even close. Most people havenever seen a gold coin... and few are as reckless as the aforementioned Mr Norstog.Most are even more reckless! Theyll wait for gold to hit $2,000... or $3,000 before theybuy.Which is why we think were nowhere close to the top. Wall Street never marketed gold,deftly...or any other way. Not even in its usual greedy, heavy handed fashion. And themasses never bought it.Just the opposite. As the price of gold rose, we saw ads in the paper soliciting people toSELL gold. The masses held gold parties... in which they sold their golden heirlooms atpreposterously low prices.And about those reports telling us that money printing by central banks would causetrouble...they have so far proven unfounded. Well stay tuned!And get this. More good news:On Wednesday, Goldman Sachs became the latest big bank to predict further declines,forecasting that the price of gold would sink to $1,390 within a year, down 11 percentfrom where it traded on Wednesday. Société Générale of France last week issued areport titled, "The End of the Gold Era," which said the price should fall to $1,375 by theend of the year and could keep falling for years.
  9. 9. Why good news? Because the more bearish on gold Wall Street becomes, the more therubes and pumpkins sell. The more they sell...the cheaper it is for the smart money tobuy.Yes, dear reader, we hope Goldman and SocGen are right. Wed like to see the gold pricecrash down lower.First, because this would mark a real correction in the bull market. Its been going on for12 years without a serious correction. Not a healthy situation. Wed like to get thecorrection out of the way...shaking out the Johnnies-come-lately and the two-bitspeculators. Then, the final stage in the bull market could begin.Second, because it gives us a chance to buy more. Because no matter what noise youhear in the press or in the street, central bankers are far more reckless than Mr Norstog.The monetary authorities are convinced that they can revive sluggish economies byprinting money...and theyll continue printing until all Hell breaks loose.Then, when the dust settles...when pounds, Pesos, Yen, Euros and Dollars have all beenbeaten and bruised...there will be one money still standing tall. That will be gold.Bill Bonner, 16 Apr 13Bill Bonner is founder and owner of Agora Inc., one of Americas largest consumernewsletter publishers. Editor of free The Daily Reckoning email – now read by more than500,000 worldwide – he is also the author of three best-selling investment books, mostrecently Mobs, Messiahs & Markets (John Wiley, 2007).Why Some People Hate Gold - 18 April 2013Golds price drop has been greeted with glee in some quarters...
  10. 10. GOLDS swoon has triggered a good deal of schadenfreude, some subtle, some lessso, writes Ingolf Eide for the Cobden Centre.Its hardly a surprise after eleven years of gains and often tiresome crowing from itsmore partisan supporters. Question is, apart from the emotional satisfaction of puttingthe boot in, are these critics justified?Their complaints seem to revolve around four principal themes:1. Gold isnt an investment. It produces no income and should therefore, at best, beregarded as a trade.2. It cant be valued properly. With no income, and no shortage of existing stocks,the bull case is entirely reliant on an unending supply of greater fools.3. Golds supporters are true believers, more akin to members of a cult than rationaleconomic actors.4. In any case, its way too volatile to ever be a proper currency, even if that weretheoretically possible or desirable. All the fools who bought the "gold is money"pitch are going to get buried.Well, maybe.In any case, lets consider them one by one.1. No argument: gold isnt an investment. If its anything (monetarily speaking), itsbase money, or currency. To believe otherwise is a category error. Most serious goldbulls understand that even if the word "investment" is sometimes bandied aboutcarelessly.Whether "trade" is the right descriptive term is a bit trickier. For some, it certainly is. Forothers, however, those who categorise gold as money, its a precautionary holding, likelyto do tolerably well if most other things financial are going down the tubes.2. Can gold be valued properly? Seems more like a zen koan than a question with aclear answer, doesnt it? At one level, the critics are undoubtedly right: with no incomestream and superabundant existing stocks, gold is entirely at the mercy of perceptions.Still, its also true that greater fools have shown up with reassuring regularity for the lastfew thousand years. Is that likely to change any time soon? Were probably each obligedto answer that question individually. And to accept the consequences.
  11. 11. By the way, while gold doesnt yield anything, nor does physical currency. To earnanything on either, you have to lend them out.3. Its certainly true that theres a sizeable subspecies of goldbugs who are cultlike inthe intensity of their beliefs. They have their demons, their gods, their sacred texts, andsee this crisis as the final scene in a battle between good and evil. Gold for them is asymbolic lightning rod, not to be subjected to dispassionate analysis, much less ridicule.Thing is, stripped of this emotional baggage (which is in any case rooted in politics andoften religion), their monetary beliefs arent without foundation.There is, after all, a long history of gold as money. Not as the reflection of some quasi-religious belief, but as a matter of cool, pragmatic, bottom-up agreement. Its what themarkets chose and for all its intermittent problems, the (real) gold standard worked wellfor a long time. Even today central banks all have gold on their radar screens(unaccountably or otherwise) and quite a few are busy acquiring more. Indeed, much ofthe non-Western world continues to view gold as real money.Foolish? Perhaps, although I dont think so. In any case, ignoring that possiblyuncomfortable fact is even more foolish. After all, right now these are the guys and galswith the savings.4. And yes, it does fluctuate, sometimes a lot. Its hardly alone though, is it? USstocks fell 23% in one day in 1987 and some 30% in a few weeks in 2008; the yentumbled 18% in under a week in 1998. And so on.Did this lead to their dismissal as an asset class? Of course not. These things sometimeshappen in markets where speculation has run rife. When the stars then align and playersfrom every time frame suddenly find themselves on the same side of the market, weirdstuff happens. Sensible people understand that and form their views accordingly.Certainly, drawing far reaching conclusions from such structural aberrations is plainfoolishness.Time alone will provide the answers to most of these vexing issues. Wed probably bewisest to pay no more attention to the (often amusing) fulminations of the more extremecritics than to those of their targets.So, has gold bottomed?
  12. 12. Well, nobody knows of course. Short-term, it depends on whether the weak hands arefinally out. FWIW, I think most of them probably are. Longer term, what matters are thepolicies governments and central banks run in years to come. If fiscal and monetaryprudence took centre stage, gold would almost certainly go into a long-term nominalbear market. If, as seems to me more likely, the current activist extravagance persists,or intensifies, then the nominal (and probably real) upside still beckons, perhaps witheven greater volatility. And, quite possibly, for years to come. We may as yet have onlyseen Act I.In any case, caveat emptor.Cobden Centre, 18 Apr 13Built on anti-Corn Law radical Richard Cobdens vision that "Peace will come to earthwhen the people have more to do with each other and governments less," theCobdenCentre promotes sound scholarship on honest money and free trade. Chaired by TobyBaxendale, founder of the Hayek Visiting Teaching Fellowship Program at the LondonSchool of Economics, the Cobden Centre brings together economists, businesspeople andfinance professionals to better help these ideas influence policy.Gold, Shale Oil and the Rise of the Dow - 18 April 2013US shale oil could enable the Fed to print for longer...
  13. 13. FINANCIAL HISTORY is marked with times when populations took collective leave oftheir senses and succumbed to delusions of ever-expanding wealth,writes Gary Dorschat of rampant speculation have been enthralled by the introduction of newtechnologies, that are used to justify pumping-up market valuations – not just for thepresent, but also for the near future, and far over the horizon as well. Quite often, thenew found wealth is nothing more than a mirage. The wild enthusiasm for the stockmarket is often overtaken by speculative froth and emotional mania. As such,spectacular rallies deliver massive gains for one generation of lucky investors, but alsocreate massive overvaluations that plague the next generation.In the case of central banks, they usually ignore stock market bubbles that expand as aresult of liquidity conditions that have been "too easy for too long." In todays markets,central bankers in England, Japan, and the US have jettisoned the principles of freemarkets, and instead, are working overtime at the behest of the ruling politicians, toartificially inflate the value of their local equity markets – deploying unorthodox toolssuch as massive liquidity injections and locking borrowing costs near zero%."The tools we have involve affecting financial asset prices, to the extent that consumersfeel wealthier, theyll feel more disposed to spend," Fed chief Ben Bernanke explained.Never mind that 82% of US-listed equities are owned by just 10% of the US population.The Feds theory of "trickle down" economics – that is to say, inflating the money supplyin order to inflate the stock market, will somehow enrich the lives of greater society – isnothing more than a pipedream at best, or rather an act of purposeful deceit at itsworst."By this means government may secretly and unobserved, confiscate the wealth of thepeople and not one man in a million will detect the theft. And while the processimpoverishes many, it actually enriches some," observed John Maynard Keynes, in 1920.In other words, the US central banks policy is strictly designed to enrich the fortunes ofthe ultra-wealthy.Last week, the Dow Jones Industrials soared to as high as 14,850, its highest level inhistory. The Dows four year advance "has prompted plenty of catcalls and profoundskepticism about whether equities have gone too far, too fast in what is the least-lovedbull market in history." Moreover, the rally highlights the vast disconnect between thebleak economic and social conditions facing working people and the staggering rise in
  14. 14. corporate profits, inflated stock and bond prices, and the rapidly rising wealth of thecorporate – financial elite in the US and around the world.Even as national and international bodies have issued one dismal report on the globaleconomy after another, the US-bankers and CEOs have celebrated ever-rising stockvalues. The rise in corporate profits is chiefly the result of an unrelenting drive to lowerworkers wages and benefits, while ratcheting up workers output.Nowadays, there is widespread understanding that the Feds ultra-easy money policies(dubbed QE) have gotten a lot of bang for the buck. By increasing the quantity of thehigh-octane MZM money supply in circulation, by $1.1 trillion since the start of 2012, theFed was able to engineer a powerful rally – increasing the market value of the shares
  15. 15. listed on the NYSE and Nasdaq by $3.7 trillion. Today, the value of the US-stock marketstands at a record $20.5 trillion in April, and it would require a steady stream of QE-injections into the future to support todays lofty valuations, and to lift the stock marketinto higher ground.Yet at the same time, gold bugs are licking their wounds, and asking why the vastmoney printing operations of the bank of Japan and the Fed arent have the samebeneficial effect on the price of gold or silver. Instead, to the extreme contrary – theprice of gold suddenly collapsed in recent days, suffering its worst rout in 30 years. The"Black April" Crash of the gold market comes on the heels of a 19-month roller coasterride, in which the price of the yellow metal swung widely, but eventually landed at theborder line of bear market territory at $1,560 /oz. However, once this key horizontal lineof support was penetrated – huge sell orders kicked-in. The gold market was suddenlythrust into a panicked free-fall, spiraling 13% lower until finding support at $1,320 /oz,where bargain hunters emerged.Still, there were advance warning signs of trouble for the gold market. Since mid-November, the market value of the Dow Jones Industrials – compared to the price ofgold (the Dow-to-Gold ratio), was moving steadily higher. Traders figure the best way toprofit from the Feds QE schemes, is through purchasing US stock market index futuresand ETFs. Today, one share of the Dow Jones Industrials can fetch 10.7-ounces of gold,compared with only 7.35-ounes last November. Given that the Dow peaked at 42 ouncesof gold in 1999, theres still plenty of room for the Dow to regain lost ground against theyellow metal.When speaking of the Dow-to-Gold ratio – no matter which way the wind blows on WallStreet, the Dow is likely to gain further ground compared to the price of gold. One bigadvantage that the US stock market has over the precious metals is the widespreadperception that the Fed will always ride to the rescue of Wall Street whenever risky betsgo sour – dubbed the "Bernanke Put". Yet theres another underlying dynamic at workthat might explain why the Dow is soaring while at the same time, the price of gold isunable to sustain a sizeable rally and worse yet – sliding sharply lower. There is a newtechnology at work in the global economy that might explain these diverging trends.
  16. 16. In the view of the Global Money Trends newsletter, the "Shale Oil" Revolution – still in itsinfancy, might be the catalyst thats fueling the Dows spectacular gains versus the priceof gold, and more than just another mirage. Two new innovative technologies – calledhorizontal drilling and "fracking" – can provide the US economy with an abundant sourceof relatively cheap energy for decades to come. As such, the Shale Oil Revolution has thepotential to hold down the US inflation rate, and at the same time, enable the Fed tocontinue printing money for longer periods of time, thus inflating equity prices.US oil output has already risen for four straight years, and last year was the biggestsingle-year gain since 1951.The boom has surprised even the experts. The EnergyDepartment forecasts that US production of crude and other liquid hydrocarbons, whichincludes bio-fuels, will average 11.4 million barrels per day (bpd) this year. That wouldbe a record for the US and just below Saudi Arabias output of 11.6 million barrels.Citibank forecasts US production could reach 13 million to 15 million bpd by 2020,helping to make North America "the new Middle East." Increased drilling is fueling aneconomic boom in states such as North Dakota, Oklahoma, Wyoming, Montana andTexas, all of which have unemployment rates far below the national average of 7.6%.The major factor driving domestic production higher is a newfound ability to squeeze oilout of rock once thought too difficult and expensive to tap. Drillers have learned to drill
  17. 17. horizontally into long, thin seams of shale and other rock that holds oil, instead ofsearching for rare underground pools of hydrocarbons that have accumulated overmillions of years. To free the oil and gas from the rock, drillers crack it open by pumpingwater, sand and chemicals into the ground at high pressure, a process is known ashydraulic fracturing, or "fracking," that has unlocked enormous reserves of shale oil andnatural gas.Production from US shale formations is expected to grow from 1.6 million bpd this yearto 4.2 million bpd by 2020, according to Wood Mackenzie. That means these newformations will yield more oil by 2020 than major oil suppliers such as Iran and Canadaproduce today. Given that US oil output had been in decline for more than two decades,this is a remarkable turn of events. And in another stunning turnaround, by the end ofthis year, US crude oil imports will be lower than at any time since 1992, at 41% ofconsumption. The US imported nearly 60% of the oil it burned in 2006, meaning the UScould soon become a net exporter of energy.Should the potential of "fracking" materialize, it could have the most significant long-term impact on oil prices of any supply event in recent decades. Until recently, thegrowth in US shale oil output wasnt sufficient to meaningfully weaken global oil prices.However, its had a notable impact on long-term price expectations. For instance, thefutures price of North Sea Brent, for delivery in December 2018, has been holding fairly
  18. 18. stable at around $92/barrel (bbl) for much of the past year, and closed at $90.16 /barrelon April 16. Thats about $10 /barrel below the current spot market price at $100 /barrel.This inverted price curve signals that traders expect a gradual erosion of oil prices overthe next five years, regardless of the amount of paper money that central bankers areprinting under their QE schemes. The inverted price curve also differs considerably frommost of the prior decade when the back end of the oil market closely followed spot priceshigher. In 2008, in particular, the five-year forward price of oil rallied to $140 per barrelas the front hit $140, because no new supply source was evident to anchor expectations.Since the first week of February however, the price of Brent crude oil has been tumblingfrom as high as $119 per barrel to as low as $98 /barrel on April 15. Likewise, the slidein crude oil prices chipped away at the underpinnings of the gold market. The apparenttrigger for golds stunning collapse of roughly $230 /oz to $1,330 /oz was a warning byGoldman Sachs, which predicted on April 10 that gold would tumble towards $1,350 /ozsometime in 2014. But in todays world of lightning fast computerized trading, what GSexpected to happen over the next 12 months, was instead condensed into just a fewdays. Combined with sharp declines for the prices of base metals, gasoline andagricultural commodities, such as corn and sugar, the baseline of support for the goldmarket became un-hinged.Even central banks were caught wrong footed by golds downward spiral. Last year,central banks were net buyers of 532 tonnes of gold – their largest investment since themid-1960s. Before the 2008 financial crisis, central banks were net sellers of 400-to-500-tonnes a year. In December, Russia added 20 tonnes to raise its gold reserves to958 tonnes, propelling the country up two places to sixth in the world gold holdingrankings. Over the last decade Russias central bank acquired 570 tonnes of gold, andnow makes up 10% of the Kremlins foreign currency reserves. In November, Koreaupped its gold holdings by 14 tonnes to 84 tonnes. Still, traders watch the economies ofChina and India – the top consumers of gold, generating 55% of global jewelry demandand 49% of global demand.
  19. 19. News that Chinas economy grew by +7.7% in the first quarter, far less than its double-digit pace in the past three decades, pummeled commodity markets, especially industrialraw materials, such as aluminum, crude oil, copper, and rubber. China is the worlds topconsumer of nearly all major commodities in its race to build factories, offices and roads,voraciously consuming everything from copper to coal. Thus, a slowdown in Chineseeconomic growth, together with the deepening recession in the Eurozone, led to a hugebuild-up of unsold supplies of commodities in Shanghai warehouses, including those forcopper, and rubber.Traders have deep doubts about the credibility of Chinas economic statistics. Part of thereliability problem is Beijings near-total control over economic numbers, in some casesmeaning an outright ban on all others collecting competing data. Chinas economic datais now coming under even greater scrutiny, since Chinas growing clout in the global
  20. 20. economy, means that its reporting of key data can roil global commodity and equitymarkets.Still, traders can observe the price of key industrial commodities trading at the ShanghaiFutures Exchange, and the size of unsold inventories, to draw more reliable appraisals ofthe health of the Chinese factory sector. On April 15, the price of natural rubber,dropped by more than -5%, skidding to 19,520 Yuan per ton, coming under pressurefrom a -10% slump in Tokyo rubber prices to ¥249 /kg.Inventories of rubber in top importers China and Japan are at multi-year highs anddemand from the automobile sector, the major rubber-consuming industry, is slumping.This suggests that Chinese and Japanese rubber users may choose to use up existinginventories in coming months rather than continue importing.The sharp slide in rubber prices is all the more remarkable, considering that Thailand,the worlds biggest producer and exporter of natural rubber, together with Malaysia andIndonesia agreed last year to cut exports by 300,000-tons between October and March.The three nations account for 70% of the worlds exports of natural rubber. Aluminumprices fell to their lowest level in 3-½-years, tracking falls across base metals tumblingto $1,818 /ton.If commodities prices continue to drop much below current levels, some high-costproducers would start losing money, forcing them to shut down production. Moreover,base metal miners and shale oil producers could respond to the drop in prices bycurtailing their expansion projects. For example, analysts estimate that the highest costCanadian heavy-oil producers need US Light crude to be trading at least at $85 a barrelto cover their costs, triggering talk in the market of imminent output cuts. In due course,lower capital outlays would translate into less supply growth, and eventually lift priceshigher.
  21. 21. Until then, the Fed and other G7 central banks are sitting in the drivers seat, enjoyingthe renewed slide in commodity prices and subdued inflation pressures. Meanwhile, themeltdown in the gold market, -21% year-to-date (y-t-d) has sent shockwaves throughthe commodity markets. So far this year alone, silver is -28% lower, platinum is -10%lower, copper fell to its lowest level in 1-½ years, and is -11% lower, while aluminum hita 3-½-year low. Unleaded gasoline plunged 45-cents /gallon from a month ago to $2.76/gallon today. Wheat is -11% lower, and sugar is -8.8% lower, and Arabica coffee fell to$1.34 /lb, a three-year low.Weighed down by an across the board sell-off, the Rogers Intl Commodity Index (RICIX),is -5.6% lower today, compared with a year ago. The RICIX remains mired in negativeterritory, despite the doubled barreled money printing binges by the Bank of Japan andthe Fed, thats expected to pump as much as $2 trillion of freshly printed paper currencyinto the world markets in the year ahead. Instead, the deepening economic recession inthe Eurozone, the worlds largest trading bloc, and stalling economies in Canada andRussia is trumping the effects of QE, and weakening the demand for industrialcommodities.Although a majority of analysts profess to be wary of a dangerous bubble thats brewingin the in G7 bond markets – the Fed has successfully enforced its policy of "Financial
  22. 22. Repression," with purchases of $45 billion per month of US T-notes. Offered at a yield at2.88% today, the Treasurys 30-year bond is yielding -25-basis points less than a yearago. The Fed is simply following the blueprints of the Bank of Japan. Although the US T-bond market is a ticking time bomb that could explode at any time, for now, the Fed isdoing a masterful job of rigging the T-bond market at ultra-low yields, a job that is madea lot easier because of "fracking." In turn, Americas transformation into an energyexporter is expected to enable the Dow Jones Industrials and the Transportation index tosignificantly outperform the gold market – no matter which way the winds blow – in theyears ahead.Gary Dorsch, 18 Apr 13GARY DORSCH is editor of the Global Money Trends newsletter. He worked as chieffinancial futures analyst for three clearing firms on the trading floor of the ChicagoMercantile Exchange before moving to the US and foreign equities trading desk ofCharles Schwab and Co.There he traded across 45 different exchanges, including Australia, Canada, Japan, HongKong, the Eurozone, London, Toronto, South Africa, Mexico and New Zealand. Withextensive experience of forex, US high grade and corporate junk bonds, foreigngovernment bonds, gold stocks, ADRs, a wide range of US equities and options as wellas Canadian oil trusts, he wrote from 2000 to Sept. 05 a weekly newsletter, ForeignCurrency Trends, for Charles Schwabs Global Investment department.Today Mr Dorsch is the editor of the website, an outstanding source oftechnical and fundamental analysis of the global investment markets.Trade smart, not with GreedPierre A PienaarBlog:
  23. 23. Pierre A Pienaar retired in 2011 from business.I would like to share my passion, my interests, knowledge & experiences in Forex,Options, Gold Investments, Futures, Stocks, Binary Options, Economics, StampCollection, Sports, Gardening, Reading, Photography, and PoliticsSubstantial risk of lossThere is a substantial risk of loss of stocks, forex, commodities, futures, options,and foreign equities are substantial.You should therefore carefully consider whether such trading is suitable for youin light of your financial condition. You should read, understand, and considerthe Risk Disclosure Statement that is provided by your broker before youconsider trading.