The technical analysis, which contains the data markers and large pivot points for Brent Oil, gold, silver and copper which are traded on the spot by the 9th April 2011:
If you have any questions or comments about this technical analysis of commodities, please feel free to respond below.
By Jeff Clark, BIG GOLD
There have been numerous reports of bullion shortages in many parts around the world, along with rising premiums. And the two explanations - we're running out of gold! and, it's just a manufacturing bottleneck - are at odds with one another. So, who's right?
First, the data. The following has been reported since New Year's eve horn-blowers were put away:
Report from China: "…premiums for gold bars jumped to their highest level in two years."A director at Cheong Gold Dealers in Hong Kong: "I don't have any gold." Premiums are very high. "Some say they have no stocks on hand."A dealer in Singapore: "There's a sudden surge in demand." Demand from China is very strong and they are paying very high premiums. "Refiners can't meet the demand."World Gold Council report: "…gold imports by India likely reached a record last year due to increased investment demand." "Imports will probably be the highest for India in its history."Nigel Moffatt, treasurer of the Perth Mint: "…demand for gold bullion has been unrelenting since gold dropped below $1,400 an ounce." At the moment demand is such that we cannot meet all the enquiries we are getting. "Demand for our coins and medallions is strong, but the biggest demand is coming from banks and traders looking for kilo bars."Eric Sprott, chief investment officer of Sprott Asset Management, after having difficulty locating enough bullion for their new silver fund: "Frankly, we are concerned about the illiquidity in the physical silver market." "We believe the delays involved in the delivery of physical silver to the Trust highlight the disconnect that exists between the paper and physical markets for silver."2010 gold Buffalo corners are largely unavailable from dealers.Sales of silver Eagles set a new record in January - by the 19th of the month. Already, 4.6 million coins have been sold, an all-time high since the corner's monthly release in 1986.Based it this data alone, you might come to the conclusion that yes, we're running low on bullion supply. But most industry execs I spoke to insist this is a "bottleneck" issue: current demand is greater than current stock on hand, or is coming in faster than mints can produce. In other words, it's a manufacturing issue, not a supply deficit. A Treasury rep said as much.
You'll recall from 2008 how supply was difficult to come by and premiums were roughly double what they are now. Some think it will be "lesson learned" this time around; mints now know how to prepare for another spike in demand. Many have added workers, shifts, and facilities. The U.S. Mint stopped producing the less popular corners and now focuses on those that are most in demand.
To a large extent, I believe the bottleneck argument is exactly what's happening. It's no different than the store that sells old-fashioned wooden rocking chairs suddenly getting swamped with customers when an antique dealer declares they'll be valuable collectibles in the future. Collectors rush to buy, and the store doesn't have enough chairs rocking in its warehouse. But they're not running out of wood. And they'll likely be better prepared when they hear the dealer is coming out with a book.
It's true there's only so much gold coming to market every year (total 2010 supply is estimated to have been about 115 million ounces), but in the big picture, there's been enough. It's also true that orders from the 2008 rush were eventually filled. However, I think the "bottleneck" and "we're out running" arguments miss the point, because they both focus on supply.
Demand is what I'm concerned about. Now try this data:
According to International Strategy and Investment Group, gold ownership currently represents 0.6% of total financial assets. If it rose to just 1.2% - still less than half its 1980 level - it would require an additional 917.1 million ounces, or 16% of aggregate gold worldwide. This amount is equal to about 10 years of current overall production.Investment demand represented 53% of all gold demand in 1979; Today, it represents just 32%. Corner demand represented 37% of all demand in 1979; Today it's less than 14%.Gold and gold mining stocks represented 26% of all global assets in 1981 (high inflation), and 20% in 1932 (high both). Today, gold and gold mining shares represent about 1% of global assets.The market cap of the entire gold industry is about the size of Microsoft, is less than Exxon Mobil, and is 10 times smaller than the banking industry. The whole of the silver industry is smaller than Starbucks.Silver mine production is insufficient to meet current demand. The only way silver needs are fulfilled is from scrap coming to market. Miners don't produce enough on their own.There are approximately 40% more right now than there are ounces of gold that earthlings have ever been mined. That includes every ounce used in jewelry, electronics, and dental. Further, if every ounce of supply last year were made into corners and bars for investment purchase, it would amount to less than two one-hundredths of an ounce, or about half a gram, for every man, woman, and child on earth. This means 0.018% of the global population - about one in every 55 people - could buy a one-ounce gold corner this year.Yes, there is a bottleneck. The purpose with this recent spike in demand, it appears some mints still aren can't equipped to keep up. Are we nearing a tipping point where in spite of the increased efficiency and preparedness, requests from buyers will outweigh supply available? Imagine demand continuing to accelerate, and you can see where this might be headed. I think this is the side of the equation to watch.
Andy Schectman of bullion dealer Miles Franklin told me last summer that, "Based on what I know it's my opinion that if 5% of this country put 5% of their money into gold, there would be nothing left tomorrow morning." In other words, even if supply is sufficient at present, what happens if demand, say, double, as the above data show is possible?
Right now in North America you can still get bullion, but we're clearly on a path where demand could overwhelm the system, making purchases very difficult. When that point arrives, many investors will wish they hadn't ain't worried so much about price.
Guess Doug Casey is right about the future value of the dollar: zero. Imagine how high inflation would rocket in such a scenario.
Bottleneck, meet desperation.
[The Chinese and other governments are gobbling up gold as fast as they can, adding vast amounts to their already wide holdings.] Because they know something many mainstream investors don't: the U.S. dollar is on its last leg. [To find out how to protect yourself - and to profit - watch this free video.]
The concept of leverage in commodity trading has a largely similar to that achieved stock trading and odds.
Initial margins on raw materials are generally much lower as a percentage of the value of the contract, futures contract actions.
It is not uncommon to see margins starting at 3%, with a range up to 15% and this is what generates significant leverage when trading commodities.
Get free INO Trading alerts when you subscribe to our free Newsletter universe merchandise here. Simply fill out the simple form below. Is as easy as 1-2-3!So it is not surprising that many traders of raw potential get excited about the ability to control large futures contracts with a small deposit or investment of capital.
For example, let's say that the initial margin for a customer to third parties is $ 12,500 to trade of light, sweet crude oil on NYMEX.
So with crude oil around $ 100 and given that a contract represents 1,000 barrels, the merchant would control $ 100,000 of crude for the margin above. In other words leverage here is 12.5% or roughly 8 to 1.
Let s say that a trader decides to go long on December 8, when crude oil is $ 100, then you should be expecting the price to rise from this point.
A week later, for example, let s that the recent $ 700 bn Paulson rescue plan seems to be easing anxiety in financial markets and contribute to some recovery in confidence and economic activity.
The markets were more bullish on crude oil as they believe that demand will pick up again with this growing confidence.
There is also the approach of winter and OPEC announces that it will maintain its production levels unchanged.
All these factors, for example, this would cause the price of West Texas Intermediate crude oil on NYMEX futures to rise to $ 115.
At that point our dealer is sitting on a crude oil futures contract on December 8, with a value of:
$ 115 x 1000 = $ 115,000 barrels
If you would now decide, after a week in the market, to liquidate that position, she would have generated a profit of $ 15,000 (115,000 100,000) (excluding transaction costs).
So, just putting up $ 12,500 she has used the power of leverage in trade of raw materials to disable such contract decision in a gain of $ 15,000 within a week. This is a return on capital (ROC) by 120% in 7 days.
This is the power of leverage in trade of raw materials, a gain of 120% to merchant, although the price of crude oil went up to 15%.
What happens if the market goes the other way?
Remember, however, if the oil market did not react favorably to the Paulson plan, crude oil futures may have dived, let s say $ 92.50 compared to the same period of 7 days.
Now our commodity trader that went along the crude is not so happy. Of course, the other on the market that provides the crude oil to fall can go short oil, and would be happy at this point.
Why? Because the account is making a loss and she is likely to receive a margin call to restore the margin maintenance. If you have decided to cut its losses and liquidate its position, the result will be:
Buy 1,000 barrels (1 contract) @ $ 100 = 100000; Sell 1000 barrels @ $ 92.50 = $ 92,500 loss = $ 7,500
Here the merchant made a loss of $ 7500 and this entails a reduction of 60% of the original capital (initial margin) when the price of crude oil fell only 7.5%.
In this case is the power of leverage in trade of raw materials, only this time she created a loss of principal.
Clearly, the combination of derivatives and leveraging can make spectacular profits but equally important losses if the market goes the opposite way to the trader's position.
Leveraging can make the ride more volatile as exaggerates small movements in price action when the value of futures contracts.
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by Adam Hewison's book
(President INO.com)
One of the easiest ways to determine the trend in the new year is simply connect the dots.
In this five minute video, I explain how you can connect the dots in each market to determine its trend. Will show three examples of dots.
1. how to determine a downtrend.
2. how to determine an uptrend.
3. how to determine when a market is making a change of direction.
One of the key components I look for is how a market closes on a Friday or the last trading day of the week.
This is when traders have to decide what to do with their positions.
It also tells you with a high degree of probability that the market is headed for the next week.
I learned this trade secret on the floor of the Exchange in Chicago and is one that I would like to share with you today.
I feel that this technique has a lot of validity, particularly in the light of today's volatile markets.
Enjoy the video here!
We can see a pattern head-and-shoulders on the daily chart of copper. This pattern often show that the price cannot continue to go to the previous direction and we must reverse the trend. In this chart we can see that copper was not able to rise above the level of "head" ($ 10,160) and stalled at the level of "shoulders" ($ 9,784). The green line shows the target ($ 8,066) where you will break below neckline ($ 9,114). This is derived by subtracting the amount in the pattern of the lower level. The technical analysis shows that the copper in the short term, even if the industrial metal seems attractive. Click image to enlarge to a full-size screenshot:
If you have any questions or comments about this pattern chart for copper, please feel free to respond below.
by Shane
(UK)
While President Obama signed the $ 787 billion stimulus package dollars, economic worries weighed on crude oil prices, which fell nearly seven percent on Tuesday.
NYMEX Light crude shed $ 2.57 to $ 34.94 a barrel on Tuesday, meanwhile, London Brent crude was $ 2.24 lower to $ 41.04.
It seems that a number of analysts is worried about the specter of deflation, as demand for factory continues to fall, the real estate market continues to sink and unemployment increases by about 15 million Americans now work.
According to data from the DoE, crude oil inventories are now about 350.8 million barrels, which is at the top of the range for this time of year.
After suffering a shock of huge demand, with prices falling from the top of last July to about $ 147 to $ 35 today, the crude oil market is looking to see what further action will OPEC.
The oil producers ' cartel said on many occasions, pointing at a price of about $ 70 per barrel and announced cuts of about 4 million barrels per day.
The Saudi Arabia expressed concern that its economy may grow may suffer if crude prices remain at current levels and do not approach their preferred plan of approximately $ 70 per barrel.
There is always a matter of compliance within Opec and we need to see if all its members have continued the agreed reductions in Conference-Vienna and Oran last October and December respectively.
Despite the cuts agreed the price of oil still seems to be falling and there is also speculation that Opec might have to seek a further cut of say 1. 5 to 2 million barrels per day.
It was only a couple of weeks ago that there were amazing contango profits to be made by the purchase of crude oil and store the physical commodity tankers and anchoring these off.
Even with the cost of leasing and insurance there were useful in a phase of more than $ 12 per barrel, and when you consider that these carriers can hold a million or two barrels, i.e. serious money.
Now, however, these contango large profits have gone into and the spread between futures and spot prices is only about $ 2-$ 3 per barrel.
Although these stocks are issued by tankers, supply closer by Opec cuts should see prices firming in the coming months.
Yet while the lower price of crude is a reflection of weakening global economic growth, this seems to be useful to some of the emerging markets, where Governments to subsidize the price of crude oil.
To subscribe to our free e-mail newsletter from the universe of raw materials, just go here. Is as easy as 1-2-3!
Relative strength index (RSI) is a momentum technical indicator developed by Welles Wilder, used in the trade of raw materials.
As with most indicators, RDI works in conjunction with other performance measurements to help improve the interpretation of action for the price of a commodity traded fund or ETF, for example.
As this indicator to achieve this result?
Get free INO Trading alerts when you subscribe to our free Newsletter universe merchandise here. Simply fill out the simple form below. Is as easy as 1-2-3!These are the need for a constant, constant bandwidth, which is used to compare price movements and media smoothing up and down movement of prices.
For example, if there was a volatile, edgy up or down move saying a week ago (online momentum a day, for example) this can cause big shifts in momentum even though today's prices are relatively constant.
This can lead to give a false signal about the prices. It may be that different raw materials may have different levels to be oversold or overbought.
So how do you make sense of the data?
This is where the RSI enters, helping to smooth the excess movement, creating a constant interval from 0 to 100.
What is the formula RSI?
RSI = 100 [100/(1 + RS)]
Where RS = average of days near upper divided from those days of closed lower over the time interval.
Imagine a graph where the vertical scale is from 0 to 100.
As a rule the goods would be considered overbought levels at around 70% and oversold levels in about 30% of the brand.
So, for example, if the price goes below 30%, it is fair to say that the goods in question is oversold.
Looking back to the summer of 2008, many commentators would likely concur, for example, that the crude oil was about $ 147 in overbought area, and that having fallen to about $ 90, which had reached oversold levels.
The norm is to use an interval of 14 days for RSI, but may be useful to experiment with different intervals.
A commodity trader will clear signs that a bearish (falling) or a bullish trend (increasing) occur using this trading technique.
Other tools and techniques to compliment use CSR business support and resistance, candlestick, the moving average and Fibonacci levels.
The key point to remember in the trade of raw materials is to use the relative strength index as a guide in conjunction with other measures, when after the price action and trying to decide on when to enter or exit the market.
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Gann time factor
Learning to trade in raw materials
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Welcome on our website, Commodity Trading today, which we hope you will find informative and useful, any area of raw materials is of interest to you.
With an important impact on our economy in the world, and in recent years the use of raw materials has captured the attention of more people.
Click here to contribute your article
The mainstream media now focus on the challenges to future generations as reserves are depleting global crude oil and the increase in emerging nations like China and India demand due to rise inexorably.
Whether it's copper and iron ore used in new infrastructure or unleaded petrol for cars to millions of cars or the need for more rice and soybeans to feed a growing population in the world, focusing on commodity trading will continue to grow.
We decided to invite some regular writers article contributions to the site and we encourage others to submit articles on this vast universe of raw materials.
Meet our current partners:
William Davies , is a former researcher who has worked for a major international oil company and now contributes today articles on developments in global commodity markets. He writes on the area of crude oil and natural gas and other hydrocarbons derived commodities.
Elena morozova is a graduate engineer who has experience working in the mining industry in Khazakhstan. Now she writes as a guest today on developments in Commodity Trading in precious and base metals commodities within the universe.
Marianna gomes studied agricultural sciences and comes from a background of farming in his native Argentina. She is interested in current trends in agricultural raw materials and soft and writes articles for Commodity Trading today.
You have a great article from raw material to share your experience in trading, or trading software or systems? Share here!
When you contribute your article, you'll get a link to your website or blog)
What they said other visitorsClick below to see the contributions of other visitors of this page ...
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NEW YORK, NY January 2009
Merchandise talent LLC, an executive search.
Disclaimer
This site is for information and educational purposes only. Trading in derivatives involves the potential for substantial loss of capital. You are strongly advised to seek professional advice from your financial advisor before committing funds to trading of derivatives and the like.
United States Government required Disclaimer-Commodity Futures Trading Commission Futures and options trading has large potential rewards, but also large potential risks.
You must be aware of the risks and be willing to accept for investing in futures and options markets.
Don't trade with money you can't afford to lose. This is neither a solicitation nor an offer to buy/sell futures or options. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this website.
Past performance of any trading system or methodology is not necessarily indicative of future results.
Return to Commodity Trading today by who we are
Because the idea of investing in gold seems to be a good strategy for a growing number of people who may never have thought earlier exposure to raw materials or real assets?
We know from ancient times that the yellow metal has had a special charm, but what exactly are the reasons for investing in gold is considered a good way to allocate some of your assets?
After all, you can t carry a bar of gold bullion and around in your Pocket if you offered some gold coins, when the payment for a new car or buying some properties, you would throw the salesperson in confusion.
Get free INO Trading alerts when you subscribe to our free Newsletter universe merchandise here. Simply fill out the simple form below. Is as easy as 1-2-3!So gold is not ideal as currency for everyday transactions, and given that normal is stored as 400 bar ingot oz Troy, it does not at first seem to be a practical investment.
But let s look at why gold has advantages compared to other asset classes in which traders expect to make profits and investors for capital growth and preserve their wealth.
Periods of economic uncertainty and geopolitical
Throughout history, people have turned to precious metals like gold and silver, because it is difficult to manipulate them in the same way that paper currencies can be manipulated.
When you think of investing in gold bullion, let's say you're doing to preserve your wealth and maintain purchasing power, when we face exceptional world events and uncertain.
The price of gold rose sharply in January 1980, soon after the Soviet Union invaded Afghanistan because of the uncertainty about how it could affect the activities and the global economy.
Gold is seen as an insurance policy, it is universally accepted and there is no risk of the counter party.
A hedge against inflation
Look how the Federal Reserve was forced to pump billions more dollars in the US paper financial system as a bank after another was on the verge of collapse.
In fact, the day when Bear Stearns was allowed to go to the wall, the price of gold hit its all-time high of $ 1.011 a Troy ounce in March 2008.
Suffice to say that every minute of every day the Government spends over $ 16,000 more than back in tax revenue.
And this is first of all the latest turmoil and enormous financial stimulus package proposed by President-elect Obama, along with the billions earmarked for u.s. auto industry seeking congressional approval.
Gold is seen as a hedge against inflation in the long term as its supply is finite, and relatively limited because it must be extracted, which is the main source of the metal.
This contrast with the money supply of paper money, as the US dollar that central banks can expand easily.
Studies that go back as far as the 18th century show that the purchasing power in the long term is best preserved by investing in gold. Consider that in this long period, an increase of 1 percent in the United States prices led to a 1 percent increase in the price of gold dollar.
Hedge against the u.s. dollar
Many traders and investors see as gold and other commodities can be used as a hedge against the weakness of the dollar.
And all the different classes of commodities, gold is the best, since it has a coefficient of correlation between 0.4 and 0.6.
The closer to-1 more an asset moves in the opposite direction to its reference, while + 1 means that moves very much in line with the activity.
Gold, a low volatility of raw materials
A study looking at how volatile commodities can be found that gold was less volatile, with a value of 15 per cent from the average, while base metals, zinc, nickel and lead and crude oil have been shown to be very volatile to about 35 percent.
In the long term is less volatile than a broad portfolio of international equities.
One of the reasons for the relatively low volatility of gold is that there is a good geographical spread of mining production and reserves, compared to other products such as oil that is concentrated in the Middle East.
In this way is less vulnerable to occasional surging caused by geopolitical tensions.
A means to diversify portfolios
In recent years increasingly pension and mutual funds have added to their portfolios to increase diversification in particular gold and raw materials.
Because the price of the metal does not physically move positively or negatively compared to the main asset classes, you took this strategic decision to invest in gold.
Portfolio managers are able to increase the rate of return of a diversified portfolio, including a small percentage of gold, say between 2 to 4 percent of its total activities. Other related articles:
Gold exchange traded fund, exposure to liquid gold
Supplying Gold Mining as the primary source
Gold in backwardation
There are many ways to commodity traders and investors to consider gaining exposure to gold. They could use the path of paper that includes gold futures or certificates or perhaps using an exchange traded fund (or ETF), which are owned by someone else.
Alternatively, you could choose to invest in shares of gold mining, physical gold (including gold coins and bars), or bullion banks trade the services of a private guardian of ingots.
If you're thinking of looking more closely at the merits of gold and whatever route you choose, you are advised to seek professional financial advice and check the personal tax implications of your decision.
One thing is certain, however, given the profound changes in the global economy, more and more people are now looking at the merits of investing in gold to preserve their capital.
Return to invest in precious metals from investing in gold
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by Marin Katusa, Chief Energy Strategist, Casey Research The Canadian Geothermal Energy Association (CanGEA) is a pretty active group. It regularly hosts networking and news events for its members, who range from scientists to industry reps. One meeting that grabbed our eye took us to Toronto in October, ready to sniff around the Geothermal Investment Forum.
CanGEA members worldwide operate approximately 20% of global geothermal capacity and have a reported 3,377 MW in reserves and resources. So when these fellows convene, the formal presentations and hallway exchanges offer some significant insight and even a competitive edge for investing in this sector.
To begin, geothermal is still the forgotten renewable and, compared with fossil fuels, has a long road to becoming a household word in the markets. The industry faces a series of challenges to be taken as a serious and viable alternative to the energy king, fossil fuels. Here’s a summary of strengths and weaknesses that came up at the forum:
One of geothermal's biggest hurdles is obtaining further subsidies in an environment where all the generating technologies are competing for the same dollars. Many don’t know that the fossil fuels as well as renewables are subsidized by governments in the form of grants and loans, fiscal incentives such as tax credits, and other support in addition to infrastructure.
As you’ll see below, the per-unit basis for fossil-fuel subsidies is low:
Government policy and subsidies is essential for private investment in the geothermal sector. Greater recognition would be a huge catalyst for this industry.
Another Must for Investment: Reporting Standards
One of CanGEA’s main achievements is creating a Canadian geothermal code for reporting public information. Similar to the mining and oil/gas sectors, this self-regulation standardizes mechanisms and presentation of data. The idea is not only to make it easier for investors to evaluate projects and companies but to foster confidence to invest in the sector at all.
The standards provide a minimum set of requirements for the public reporting of exploration results, geothermal resources, and geothermal reserves. The result of a committee set up two years ago, compliance with the code is voluntary until 2011. At that point it’ll become a requirement for CanGEA membership.
The code pertains to both public and private geothermal assets. Key principles are:
Transparency: to provide sufficient information that is clear and unambiguous.Materiality: to present all relevant information that investors would reasonably require and expect to be made available to make a reasonable investment decision.Competence: to ensure the reporting is done by a qualified person based on experience and knowledge. “Qualified” means at least five years’ relevant experience, professional registration with an association with a governing code of ethics, and CanGEA membership.So far, it works something like this:
Then there’s the reserves side, which considers factors such as accessibility and economic feasibility of the resources. Accordingly, probable reserves is when deliverability has been demonstrated, and proved reserves is when production wells have started or been completed and deliverability has been demonstrated.
Companies would follow this structure for a variety of documents: quarterly and annual reports, reports required by the Canadian securities exchanges and or by the law, company website information, information releases, and environmental statements, technical papers, and so on.
CanGEA is proud of the code, and rightfully so. Geothermal exploration is a high-risk activity, and raising confidence and reducing unknowns will improve the industry’s prospects for attracting capital. The only other country to have a geothermal code is Australia, which has a considerably smaller total market capitalization of geothermal companies than Canada.
The code has been submitted to the International Energy Agency (IEA) and the International Geothermal Association for review and endorsement.
The Take-Home Message
What we came away with confirmed our own analysis: that the geothermal sector faces a fair amount of challenges, as well as a variety of them. In the balance, however, the positives far outweigh the negatives.
We even heard some argue that the geothermal sector is where the oil sector was in the 1950s and is poised for a large bull run. We wouldn’t wax that enthusiastic ourselves, but two drivers are indeed true. First, the potential for energy production in the ground is significant, and second, increasing innovation is leading to better exploration techniques and drilling capabilities.
Subsequently, although there are high capital costs right now, we expect solid returns on equity in the long term. Exploration and drilling accounts for approximately 36% of the total capital costs, and as technology improves, this risk will decline.
In short, don’t look to the geothermal sector for get-rich-quick schemes. Consider yourself instead as getting in on the ground floor of some promising growth.
[With oil rising again, the energy sector is set to boom in 2011 – whether it’s oil & exploration companies or the industries, like nuclear and renewables, that benefit from high oil prices. And now you can get complete coverage of the resource exploration sector for one low price: Subscribe to Casey’s Energy Report ... Details here.]
Ed. note: I am a Casey Energy Report subscriber and affiliate.
is a bull market all over the place in "the other yellow metal." (Source: StockCharts.com)URA was a new kid on the scene at the time - but seemed to be a reasonable proxy for playing this market radioactive bull:URA begins just trade in early November, we have a limited sample of historical results. But until now, the ETF has trended in tandem with the uranium spot price, as planned. With its unreasonable 0.69% management fee, I can see no casual why it should not serve as a reasonable proxy for the action of the price of stocks of uranium in the broad sense.And Miss good old Cameco - which is an important part of URA - movement too, to a maximum of three years.
Multi-year highs in energy should be purchased, always and everywhere. Then, I expect to pick up a few URA for my portfolio later this week.What will happen to the U.S. economy and the dollar in the near term? Will inflation increase dramatically? What is the outlook for gold, and where should you put your money? BIG GOLD asked a world-class panel of economists, authors, and investment advisors what they expect for the future. Caution: strong opinions ahead...
Jim Rogers is a self-made billionaire, author of the best-sellers Adventure Capitalist and Investment Biker, and a sought-after financial commentator. He was a co-founder of the Quantum Fund, a successful hedge fund, and creator of the Rogers International Commodities Index (RICI).
Bill Bonner is the president and founder of Agora, Inc., a worldwide publisher of financial advice and opinions. He is also the author of the Internet-based Daily Reckoning and a regular columnist in MoneyWeek magazine.
Peter Schiff is CEO of Euro Pacific Precious Metals (www.europacmetals.com) and host of the daily radio show The Peter Schiff Show (www.schiffradio.com). He is the author of the economic parable How an Economy Grows and Why It Crashes and the recent financial bestseller The Little Book of Bull Moves: Updated and Expanded. He’s a frequent guest on CNBC, Fox Business, and is quoted often in print media.
Jeffrey Christian is managing director of CPM Group (www.cpmgroup.com) and a prominent analyst on precious metals and commodities markets. CPM Group produces comprehensive yearbooks on gold, silver, and platinum group metals, and provides a wide range of consulting services. Jeffrey published Commodities Rising, an investors’ guide to commodities, in 2006.
Walter J. "John" Williams, private consulting economist and “economic whistleblower,” has been working with Fortune 500 companies for 30 years. His newsletter Shadow Government Statistics (shadowstats.com) provides in-depth analysis of the government’s “creative” economic reporting practices.
Steve Henningsen is chief investment strategist and partner at The Wealth Conservancy in Boulder, CO, assisting clients interested in wealth preservation. Current assets under management exceed $200 million.
Frank Trotter is an executive vice president of EverBank and a founding partner of EverBank.com, a national branchless bank that was acquired by the current EverBank in 2002. He received an M.B.A. from Washington University and has over 30 years experience in the banking industry.
Dr. Krassimir Petrov is an Austrian economist and holds a Ph.D. in economics from Ohio State University. He was assistant professor in economics at the American University in Bulgaria, then an associate professor in finance at Prince Sultan University in Riyadh, Saudi Arabia. He is currently an associate professor at Ahlia University in Manama, Bahrain. He’s been a contributing editor for Agora Financial and Casey Research.
Bob Hoye is chief financial strategist of Institutional Advisors and writes Pivotal Events, a weekly market overview. His articles have been published by Barron’s, Financial Post, Financial Times, and National Post.
BIG GOLD: A lot of economists, including the government, believe the worst is behind us economically. Do you agree? If not, what should we be on the lookout for in 2011?
Jim Rogers: It is better for those getting all the government largesse, but the overall situation is worse. More currency turmoil. State and local problems, plus pension problems.
Bill Bonner: None of the problems that caused the crises in Europe and America have been resolved. They have been delayed and expanded by more debt and more money printing and will lead to more and worse crises. Deleveraging takes time. 2011 will, most likely, be a transition year... not unlike 2010. But the risk is that one of these latent crises will become an active crisis.
Peter Schiff: To me, it's like watching someone walk into the same sliding glass door again and again. Wall Street must know by now that large infusions of liquidity from the Fed spur present consumption at the expense of investment for the future. We are an indebted family going out for an expensive meal to celebrate getting approved for a new credit card. It might feel good (at the time), but we're still simply delaying the inevitable.
Jeffrey Christian: We believe the worst is behind us economically, in the short term. The recession ended in late 2009, and 2010 saw U.S. economic growth in line with what CPM had expected, but higher than the more pessimistic consensus had been. In 2011 we expect continued expansion. We think some economists and observers are too enthusiastic about economic prospects right now.
For the U.S. in 2011, we are looking for real GDP of 2.5% - 2.8%, inflation to remain low, and for the economy to avoid deflation. Interest rates are expected to start rising, perhaps significantly in the second half of 2011. The dollar is expected to be volatile, rising somewhat against the euro but continuing to weaken against the Canadian and Australian dollars, the rupee, yuan, rand, and other currencies.
European sovereign debt issues will continue to plague financial markets, but market reactions will be less severe than they were regarding Greece in April 2010.
John Williams: An intensifying economic downturn – what formally will be viewed as the second dip of a double-dip depression – already has started to unfold. The problem with the economy remains structural, where household income is not growing fast enough to beat inflation, and where debt expansion – encouraged for many years by the Fed as a way to get around the economic growth problems inherent from a lack of income growth – generally is not available, as a result of the systemic solvency crisis. Accordingly, individual consumers, who account for more than 70% GDP, do not have the ability, and increasingly lack the willingness, to fuel the needed growth in consumption on which the U.S. economy is so dependent.
Steve Henningsen: The governments worldwide (I don’t pay much attention to economists) want us to believe that the worst is behind us because the financial system is built upon the foundation of trust and confidence. Both of these were battered badly when it was shown that much of the world’s prosperity over the past few decades was simply a mirage that, once dispersed, left behind only debt with no means of future production. Now they want us to believe that they fixed the problem via more debt.
What I will be watching for this year is sovereign and U.S. municipal debt corpses floating to the surface sometime in the months ahead.
Frank Trotter: Right now I have a somewhat dark but not dismal outlook. I think that over 2011, we will continue to experience a Jimmy Carter-style malaise that combines continuing high unemployment, tentative business investment, rising prices, low housing numbers when looked at on an absolute basis, and creeping interest rates.
As a very large mortgage servicer, we are not seeing significant improvements in payment patterns that would indicate the worst is fully behind us, and with mortgage rates moving upward, we see less ability for current mortgage holders to refinance and reduce payments.
Krassimir Petrov: No, the worst is yet to come. No structural changes have been made, no problems have been fixed. Printing money, a.k.a. Quantitative Easing, is a quick fix that has postponed the problem, yet also made it a lot worse. I would say that we are still in the early stages of the crisis and have another 4-8 years to go.
Bob Hoye: The worst of the post-bubble economic adversity is not behind us.
BG: Price inflation is creeping up, but the enormous amount of money printing hasn't really hit the system yet. Does that happen in 2011, further down the road, or not at all?
Jim Rogers: It is happening. The U.S. and CNBC lie about it. Most other countries do not lie and acknowledge it is worsening.
Bill Bonner: Most likely, substantial consumer price inflation will not show up in 2011. The explosion of money printing is being contained by the bomb squad of deleveraging. That will probably continue in 2011. But not forever.
Peter Schiff: 2010 was the year that China began cutting back its Treasury purchases in favor of gold, hard assets, and emerging market currencies. The Fed has stepped in as a major purchaser of Treasuries. This represents a new phase on the path to dollar collapse, and it will manifest in 2011 in the form of more "unexplainable" inflation – as we are now seeing in the prices of everything from corn to gasoline.
Jeffrey Christian: We are now beginning to see some increases in monetary aggregates, suggesting that some of the monetary accommodations are beginning to filter into the economy. We expect this trend to accelerate over the course of 2011. This will bring some increase in inflation, but we expect the major manifestation will be through higher U.S. Treasury interest rates as the Fed and Treasury seek to sell bonds to sterilize the inflationary implications of the monetary easing and to finance ongoing massive federal deficits.
John Williams: The problems of the money creation will become increasingly obvious in exchange-rate weakness of the U.S. dollar. Related upside pricing pressure already is being seen on dollar-denominated commodities such as oil. There is high risk of consumer prices rising rapidly before year-end 2011, setting the stage for a hyperinflation. The outside date for the onset of a U.S. hyperinflation is 2014.
Steve Henningsen: My guess is further down the road, as the deleveraging cycle continues with deflationary-housing winds in our face and the banks still hoarding money like my 9-year-old daughter stockpiles American Girl doll paraphernalia. I still expect inflation to continue in areas such as energy, bread, circuses, and whatever else provides sustenance to the Romans – I mean people.
Frank Trotter: Most research has shown that over time the increase in money supply is not a short-term economic stimulus, but rather has a moderate effect in the 18- to 36-month range. In addition, this theory contends that a growth in the monetary base – which is what has happened so far – only increases economic activity when accompanied by a decent multiplier; this is not occurring. The real risk is that with rising rates and continued soft economy, the Fed will feel obliged to continue to QE3, QE4, and so on, all of which may have a significant inflationary impact.
I am more concerned about general price inflation here in the U.S. and the potential it has to reduce global growth.
Krassimir Petrov: This is a tough one. I would have thought that price inflation would have been raging by now, but this is obviously not the case. I have the feeling that 2011 will be a repeat of early 2008, with commodity prices (CRB) making new all-time highs. A falling dollar will trigger a rush into commodities as a hedge against inflation. I am really tempted to make a totally outrageous forecast that oil could make a run for $200 as QE3 unleashes another dollar scare, or maybe even a dollar crisis.
Bob Hoye: Massive "printing" has been widely publicized and is "in the market."
BG: The U.S. dollar ended 2010 about where it started; does it resume its downtrend in 2011, or are fears about its demise overblown?
Jim Rogers: No, but further down the road.
Bill Bonner: No opinion. But there is more risk in the dollar than potential reward.
Peter Schiff: It's hard to pinpoint exactly when the dollar will collapse, but it will take a miracle to avoid that outcome in the near term. It really depends on when the creditors of the United States realize that they are not going to get their principal returned to them in real terms, but rather in grossly devalued dollars. We have already seen the average duration of U.S. Treasury debt drop below that of Greece. No one wants to buy a 30-year bond with negative real interest rates as far as the eye can see.
Jeffrey Christian: We expect the dollar to be volatile against most currencies in 2011, but that its demise has been prematurely predicted. The dollar may move sideways to slightly higher against the euro, yen, and pound, while continuing to deteriorate against the Canadian and Australian dollars, the rupee, yuan, rand, and other emerging economy currencies.
John Williams: There remains high risk of a dollar selling panic unfolding in the year ahead, as the U.S. economy tanks anew, as the Fed continuously expands its easing, and as dollar holders dump the U.S. currency and dollar-denominated paper assets. Such would be a precursor to the inflation problem.
Steve Henningsen: Similar to my thoughts last year, I still believe the dollar is headed down long-term, but it could bounce around over the next year. If sovereign debts become a problem again, like I think they will later this year, then everyone will go running back to “Mother Dollar” once again for one last hug before she lies back down on her sickbed.
Frank Trotter: As the economy waffles and the global investing community's attention is drawn from one crisis to the next, I expect the U.S. dollar to bounce up and down in the current range. After that, however, my analysis suggests that measured by the key factors of fiscal and monetary policy, combined with a significant trade deficit, the U.S. does not look as good as our major trading partners, and I thus expect the dollar to decline, perhaps significantly, in the intermediate term. Big geopolitical events may accelerate this or create a flight to U.S. dollar quality, so hold on to your hats.
Krassimir Petrov: I think the dollar resumes lower. I expect QE3 and QE4 – a dollar-printing fest that will eventually sink the dollar. Sure, all fiat currencies are in deep trouble and prone to overprinting, but the reserve status of the dollar actually makes it more vulnerable now. Whether the dollar sinks against other currencies is a fool's game not worth playing. It is like being in the hospital, where all patients are suffering from cancer, and trying to guess who will feel best at the end of next year, or trying to guess who will succumb first. That's why it is so much safer to play the dollar against gold.
Bob Hoye: Fears of the dollar's demise have been widely discussed and are "in the market." The dollar, itself, will not be repudiated – just the mavens that have been "managing" it.
BG: Gold has risen 10 years in a row, so some are calling it a bubble, yet it's roughly $1,000 below its inflation-adjusted high. What's your outlook for the metal in 2011?
Jim Rogers: It is hardly a “bubble” when very few own it still. Who knows? Overdue for a correction, but who knows?
Bill Bonner: The smart money is in gold. It will stay in gold until the bull market that began 10 years ago finally reaches its peak. It is extremely unlikely that the top will come in 2011; it's probably years in the future. In the meantime, gold is bound to have a losing year or two. Don't worry about it. Buy gold. Be happy.
Peter Schiff: The funny thing about a bubble is that when it's real, no one can see it. The same commentators who were blind to the tech bubble, the housing bubble, and now the Treasury bubble are quick to call gold a bubble. The truth is that many of them have a personal aversion to gold because they directly benefit from our fiat money system. Goldman Sachs was paid 100 cents on the dollar in the AIG bailout, which never would have happened in a gold-based system. It's a lot easier to print a billion paper dollars than dig up a million ounces of gold.
Gold will continue to climb in 2011 as the currency war continues and investors continue to seek stability. Unless there is a major sea change in the way the U.S. does business, I think the gold trade is a safe one.
Jeffrey Christian: A price of $1,550 is possible, although given the enormous investor buying pressure, prices could spike to almost anywhere. After that, we expect prices to fall back, initially to around $1,340 or $1,380. We expect gold prices to stay above $1,280 or so for most of 2011, and to average around $1,369 for the full year.
John Williams: As the U.S. dollar increasingly is debased, and where gold tends to preserve the purchasing power of the dollars invested in it, the upside to gold in the year ahead is open-ended, restricted only by any limits to the massive downside potential for the U.S. dollar. Any intermittent gold price volatility, extreme or otherwise, will be short-lived. There is no bubble – only increasing weakness in the U.S. dollar – with the gold price fundamentally headed much higher in the years ahead.
Steve Henningsen: I believe gold will once again prove the bubble-boys wrong and end the year positive (I have no idea by how much and don’t really care). However, I think this year will be more volatile and that Gold Bugs better remain seated on the precious metals express or they might get squished.
Frank Trotter: I still think that with price inflation on the rise and big political events occurring, there may be room to continue to rise. If stock markets take off, then there will be a reduction in appreciation or even a significant decline, but based on the factors I mentioned above, I don't see that as highly likely.
Krassimir Petrov: Gold still has outstanding fundamentals. I believe that over the course of 2010, the fundamentals have strengthened significantly: (1) "No Exit [Strategy] for Ben" as he unleashed QE2, and will likely unleash QE3, QE4, etc., (2) no more central bank selling of gold, (3) more central banks become buyers of gold, and (4) trial balloons for a global gold-backed currency.
I have no idea how people could even claim that gold is in a bubble – barely 1 out of 100 people have any idea about investing in gold. During the real estate bubble, every second person was involved in it. Maria "Money Honey" Bartiromo has yet to report from the COMEX gold pits; gold fund managers and analysts have yet to obtain rock-star status; and glamorous models are not yet dating the gold guys. Who is the Henry Blodget [co-host of Tech Ticker] of the gold sector, do we have one yet?
Yes, gold will eventually become a bubble, but that feels 5-8 years away.
Bob Hoye: In 2011, gold's real price will resume its uptrend.
BG: What's your best investment advice for 2011?
Jim Rogers: Buy the rmb [renminbi, the Chinese currency].
Bill Bonner: We are in a period much like the period following WWI, in which the great debts and losses of the war had to be reckoned with. It is an era of great risk. The U.S. faces many of the same challenges faced by Germany and England after WWI. Like England, it has huge debts. It is a waning imperial power. And it has the world's reserve currency. And like Germany, it is attempting to fix its problems by printing more money. This is not a good time to be long either U.S. stocks or U.S. bonds.
Peter Schiff: Don't be suckered into the idea that recovery is just around the corner. The current climate is like living in a hurricane or earthquake zone; it's important to stay vigilant because you never know when disaster will strike. Physical gold is the financial equivalent of a flashlight, first-aid kit, and store of canned goods. It's a basic way to protect yourself from any eventuality. From there, if you're looking for returns, there are plenty of foreign markets with strong fundamentals, as well as commodities that feed those markets.
Investing in the U.S. is now driven largely by force of habit. It's a habit you should resolve to break.
Jeffrey Christian: Do not invest based on what you believe, but on what you know. Gold is a market, like other markets. It rises and falls. You probably want to stay long gold on a long-term basis, but may want to cull the weaker gold assets from your portfolio in the first quarter, and put some hedges in place to protect a long-term core long gold position against the potential of significant price weakness over the next two years or so. Such a period of weakness would be an excellent time to add to one’s gold assets.
John Williams: As an economist, I look for the U.S. dollar ultimately to lose virtually all of its current purchasing power. Accordingly, for those living in a U.S. dollar-denominated world, it would make sense to move to preserve wealth and assets over the long-term. Physical gold is a primary hedge (as is silver). Holding some stronger currencies outside the U.S. dollar, as well as having some assets outside the United States, also may make sense.
Steve Henningsen: Dramamine (for volatile markets), a stash of cash (for potential investment opportunities), and move some of your assets offshore if you haven’t already.
Frank Trotter: My advice is first to look at the other side of your balance sheet – the liability and risk equation – before seeking out absolute gains. What are your goals, what resources do you already have to meet those goals, and what events (health, income stream, upheavals) might impact these risks? Place some assets to hedge these risks directly, then look to diversify globally into markets with higher growth potential than we see here at home, and that may balance your global purchasing power risk. Almost like a religion, we have had the phrase "Stocks are the only legitimate hedge against inflation" beaten into our heads. I say, look at assets that define inflation like commodities and currencies and evaluate where these fit into your risk portfolio.
Krassimir Petrov: Last year I recommended silver, and I would stick to silver again, despite the phenomenal run in 2010. Then it gets tricky. I usually don't recommend diversification, but now I would again recommend a broad portfolio of commodities. Investing in 2011 should be easy: stay out of real estate, out of bonds, out of fiat currencies, and out of stocks; stay fully invested in commodities, overweight gold and silver.
What to watch in 2011: stay focused on the sovereign debt crisis and bond yields. Spiking yields will trigger the next stage of the crisis.
Bob Hoye: Once past the early part of 2011, the best returns are likely to be obtained from the junior gold exploration sector.
[These world-class experts are right to bank on gold and silver – because the U.S. dollar keeps losing more and more of its value. Watch this eye-opening video on how China and Russia are plotting to dump the dollar… why you should be worried… and what to do about it.]
Inaugurated in February 1993, the Dalian commodity exchange is one of the four stock market in China, and is now the agricultural commodities largest mall in the country.
An exchange of merchandise of self-regulated, non profit, Dalian during the last fifteen years has built a strong brand and reputation as a reliable market for managing discovery and price risk.
Despite the recent economic slowdown, the long-term trend is for strong growth and expansion of the Chinese economy where the demand for agricultural products will continue to grow strongly. Get free INO Trading alerts when you subscribe to our free Newsletter universe merchandise here. Simply fill out the simple form below. Is as easy as 1-2-3!
Against a background of positive, Dalian Commodity Exchange is well positioned to ride this wave and established itself as an important agricultural futures trading centre in the far East.
As the demographic trend in the global economy points to a much higher population in the coming decades, the pressure on the agricultural and livestock will be immense and so also the possibility for them to grasp.
Dalian Commodity Exchange has set its vision by orienting itself in three ways, namely towards the world market and the future.
Within this overarching vision, Dalian has a unique objective to become a fully functioning market that makes a significant and substantial contribution to economic development in China.
Sees itself as this substantially from leading worldwide through the use of setting their own price and offering a high quality service.
This ambitious commodity futures exchange sees itself achieve its overall objective by securing two basic objectives.
First, to grow out from being just an agricultural commodities futures exchange to one who has the complete range of futures contracts available.
The other change as the target is to grow from an exchange of regional agricultural success for an exchange of main futures full of national and international.
At the time that Dalian Commodity Exchange is the second largest corn futures in the world after the CBOT, so this gives a measure of the ambition of this organization.
While Dalian will be competitive with the Shanghai Futures Exchange and Zhengzhou Commodity Exchange, has ambitions to be up there with major world commodity exchanges like NYMEX, ICE and CME.
Is already a member of the Futures Industry Association and UK Futures and options Association.
Cooperation agreements have been signed with more than 10 overseas trade of raw materials to work toward the development of new markets and share information.
While he has ambitions to introduce non-agricultural products and be influential as a global commodity, Trade Center, has already built a strong base of basic agricultural products and able to offer this experience to others going forward.
Agricultural Commodities listed Dalian Commodity Exchange include:
Undoubtedly exchanging expands will seek to introduce new products available for futures trading.
With the world economy after receiving a shock following the credit crunch and systemic weaknesses in the global financial architecture, commodities seem to be about the only uncompromising asset classes available for traders and investors to look for appropriate opportunities.
Given the impact of de-leverage for agricultural enterprises, as well as other, many farmers are facing difficulties in obtaining financing to replace old equipment or for the purchase of basic materials such as seeds and fertilizers.
The dynamic yet point to long-term shortage in agricultural raw materials, as well as others and so the likelihood of continued strong demand, the demand-supply balance will be under pressure and therefore the trend should be for the future raw material prices to harden going forward.
Against a backdrop of pressure on food and the expanding world population, prospects are encouraging Dalian Commodity Exchange in particular and other emerging agricultural exchanges in General.
Return to trade of goods from Dalian Commodity Exchange
Return to Commodity Trading today
The technical analysis, which contains the data markers and large pivot points for Brent Oil, gold, silver and copper which are traded in the spot market: 2nd April 2011
If you have any questions or comments about this technical analysis of commodities, please feel free to respond below.
Ed Steer, editor of the daily bulletin gold & silver free and long-standing Member GATA, believes that the money will go to the Moon and soon. Read his explanation why this is the case, and how you can benefit from this huge stimulus by reading its report, The Case for $60 Silver.
William Davies
(UK)
American Petroleum Institute (API) is an American trade group representing the industries of petroleum and natural gas.
Members of the API may vary from large corporations such as Exxon oil multinationals to small independent producers or distributors, from different sectors of the oil industry.
As someone who can look at the raw commodity trading perspective, may very well be eager to learn what information you make available API on a regular basis.
An important example is the data that API releases on inventory of energy on a weekly basis. This information is normally issued at the same time as data from the US Energy Information Administration (EIA), but will soon be available a day earlier.
From 27 January the API energy data released on Tuesday, followed by the EIA on Wednesday.
One of the primary market benchmark products to be influenced by these data is the key light Nymex, the price of sweet crude oil futures.
This indicator also referred to as West Texas Intermediate (WTI) plays an important role in setting the mood and trend among operators of the raw materials in oil markets, along with ICE Brent crude traded on ICE Futures Europe.
While commodity traders will take advantage of a commodity trading system choice as part of their technical analysis, these data by contributing to the overall evaluation on the basis of an analysis of where you direct the world oil market.
The API has other key roles, as is the "official" press of petroleum activities, an interface with the public to help achieve the objectives of the organization.
The Group also represents members at all levels of Government through the use of extensive lobbying, acting for the members in legal issues affecting the industry and its operations.
In addition to having a key input into the educational process through conferences and symposia, API Sets benchmarks for manufacturers of equipment used in industry, as well as certification for the health, safety and environmental requirements.
Expert investor and guest author David Galland weighs in today with his recommendations on asset allocation in these crazy times...
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Gold Stocks in a Failing Fiat Currency
By David Galland, Managing Director, Casey Research As the U.S. dollar takes a nosedive and precious metals gain more and more attention from individual investors, the number of questions and concerns is increasing as well. The following reader email addressed to Casey Research is representative of so many inquiries that we decided to provide an in-depth response that may prove instructional to others as well.
I have been agonizing about getting metal after dumping paper metal I held and was reading the Daily Dispatch looking for investment clues. I was pondering the ratios of thirds that you mentioned in a recent Dispatch and the pursuing of metal stocks when an issue occurred to me that was not mentioned.
On the one hand, you discuss the dollar trap of investors running from one currency to another, away from the dollar and back to it. I fear that the dollar is doomed as are other fiat currencies, and time is getting short. So the question that came to mind is, what happens if one is invested in metal stocks or any vehicle that is denominated in a fiat currency, and that currency goes bust, blotto?
What value does that investment retain? Does it become a total loss? Redefined into the currency of the locality that operations are in? Converted into some other New World Order monetary unit, SDR's or nationalization of any regional assets by the locals? Is this impossible to plan for?
I realize I am probably speculating on a subject that can only be determined by psychics and crystal balls, or those with a sixth sense on the subject, but it is an issue I have not heard anyone ponder, except those who only beat the drum for physical metals.
If I allocate away from physical into speculative investments denominated in fiat in the ratios you suggest, it might provide an additional boost if one’s timing is impeccable. But weighing that against being trapped in a depreciating currency unit, along with the possibility of physical metal becoming unobtainium, it does not seem to be a prudent decision.
I would appreciate a further explanation for your ratios, and does the ratio vary with total personal asset amount? Is your ratio determined by finances or politics?
Chet
Here at Casey Research, our current rule of thumb suggests a portfolio allocation of approximately one-third in precious metals and related investments; one-third in cash (spread among several currencies), and one-third in “other” – namely deep-value stocks, energy, emerging market investments, etc. These ratios are meant entirely as a general guideline, as everyone’s circumstances will be different.
The concept is that the one-third dedicated to a mix of physical precious metals and stocks (the mix determined by risk tolerance) will offer you “insurance” against further currency debasement as well as some very attractive upside potential… with the amount of the upside determined by the amount of risk you are willing to take on.
Which is to say, with the true Mania Phase of the precious metals markets still ahead of us, the micro-cap junior resource explorers still hold the potential for explosive profits. But they require being able to hang in there through periods of extreme volatility. Moving down the risk/reward scale, the larger producers will provide very handsome upside, but without the risk of being “trapped” in a thinly traded junior. And finally, for the precious metals component of the portfolio, the amount you hold in physical metals should be viewed as a core holding of “good” money.
The one-third dedicated to cash reduces overall volatility and gives you ammo to jump on new opportunities. By spreading the money across a number of better-managed currencies, as well as your native currency for general expenses and liquidity, your currency portfolio can preserve value better than a “red or black” bet on a single currency such as the U.S. dollar or euro.
Our subscribers have done well with the “resource” currencies of the Canadian dollar and the Norwegian krone. In time, as the purchasing power of the fiat currencies begin to decline, we’ll be looking to reduce this segment of the portfolio.
The final one-third is something of a catch-all, where we opportunistically follow some key themes such as energy, food, inverse interest rates, foreign real estate, and so forth.
Again, that particular allocation is necessarily general – with some focusing more heavily on the precious metals, others on the cash component, and others on more traditional stocks.
Now, as to the part of Chet’s question dealing with “what happens if one is invested in metal stocks or any vehicle that is denominated in a fiat currency, and that currency goes bust, blotto?”
To answer that, I adroitly hand the baton over to Terry Coxon, one of our Casey economists and editors.
Here’s Terry…
Not to worry. You may be confusing “denominated in” with “quoted in.”
Every bond and every CD is denominated in a particular currency, which means that what it promises to pay you is a certain number of units of the currency. A U.S. Treasury bond, for example, promises you a certain number of U.S. dollars. An investment’s denomination is part of the investment’s character.
In most cases, an investment is quoted in a particular currency. Prices of U.S. Treasury bonds, to use the same example, are customarily quoted in U.S. dollars. But that is only a matter of customary practice. You could, if you found it convenient, quote the price of a U.S. Treasury bond in Swiss francs. For all I know, there are people in Zurich who do just that.
That’s the difference between denominated in and quoted in. The denomination is inherent in the investment. The currency used for price quotes is a matter of convention and can change.
By convention, stocks trading in New York are quoted in U.S. dollars, stocks trading in London are quoted in pence, and stocks trading in Tokyo are quoted in yen. Notably, some stocks are quoted in more than one currency, such as Canadian stocks that trade both in Canada and in the U.S. – a demonstration that the currency used for quoting a stock’s price is a matter of choice and not something inherent in the investment.
So in what currency is a common stock denominated? No currency at all. A share of common stock doesn’t promise to pay you a certain number of units of a particular currency. Instead, it promises to pay you a pro-rata portion of whatever money or other property the company distributes as a dividend. If all paper currencies lose all value, successful gold mining companies will still own their properties and can still operate profitably. But when they pay dividends, they won’t be paying out dollars or any other paper currency. They will be paying out whatever has replaced the paper currencies – perhaps gold itself.
Carefully chosen gold stocks won’t evaporate when paper currencies do. They will rise in value.----
Ed. note: I am a Big Gold subscriber and affiliate.
by Elena Morozova
(UK)
The question is often asked is whether investing in gold is an antidote to this mega economic crisis that has gripped the global economy.
In reality he had invested in gold in January 2000 and held up well until now (nearly nine years) would be sitting on a gain of more than 90 percent.
What a contrast with invest a similar amount of your capital in deposits or stocks and shares or cash.
While the Dow Jones industrial average lost about a third of its value during this period from January 2000, S & P crashed by 48 percent and the NASDAQ gave up a whooping 72 percent.
Meanwhile, putting your capital in cash funds with interest accrued would have returned just over 30 percent.
But if you discount the fall of 20 percent of the value of the dollar, the value in money out just shy of 10 percent.
And so where is gold headed now?
Well, more than a year out of a decade see how gold has gained more than 90 percent, but now going forward in the short term is easy to predict exactly where the yellow metal will in these difficult economic times.
Will surge more than 900 dollars from its current level of about $ 860 or will trade a sideband between $ 750 and $ 930 or even correct back support levels around $ 600 to $ 650.
There may be another political crisis in the Middle East or further significant deterioration of the American economy that I would like to see more money seeking protection in gold.
We must also note carefully how during a couple of weeks at the end of 2008 the market saw unusual condition gold in backwardation when the cash price for gold is immediate delivery exceeds that for futures gold a few months off.
If the US Federal Reserve begins quantitative easing-or the printing of money by another term-then held physical gold could be seen as a hedge against inflation that follows such action.
In the long term, what is the Outlook for gold?
Many observers point out that gold is the only real money on the planet, which is the most robust, reliable coin to contain the long term if you want to preserve your capital and purchasing power.
Gold is a liquid investment and yet it is relatively short compared to the unlimited number of paper money, when printing to go forward. One billion dollars can become a trillion, and so on.
This really matter?
Well, all over the world central banks are printing money or fiat paper as if there's no tomorrow. In fact, their hands are tied, and so have very little option but to continue to "oil the wheels of the economy.
How many trillions of dollars do you think that the Fed will print in 2009? And what about the European Central Bank, how many euros extra will it issues? And that the Bank of Japan and China?
This is a slow process and the impact will not be seen and heard tomorrow, nor next week or in six months. But some time after this process of increasing the volume of paper money in the system is the creation of a volcano of inflation.
Of course, for now, deflation (falling prices) is on everyone's lips, and truly is public enemy number 1, as companies go bankrupt and jobs are lost.
But over time as the economy recovers from this deflationary hangover and banks start lending again, there will be tons of paper money, low value, going to feed the markets.
That's when real assets such as commodities and gold certainly will be back in their element. The period of inflation will be a boom for the sector now deflated, and those who hold Gold should be rewarded.
While most of the economic difficulties to date was in the private sector, that soon we will see how Governments around the world will be struggling. Sure, some like Iceland have been affected very strongly.
Just take the United States of America. There are the national debt of $ 10 billion, the 700 million dollars, President Obama fiscal stimulus of $ 1.2 billion and trillion obligations of assistance and social security.
How the Government can respond to these obligations trillions of dollars?
One way is to promise to do so as it does on the actual dollar note.The second way is through taxation, with tax revenue to pay the debt in the future.
But, given the amounts involved, how realistic is this? Bond markets are reporting that they are not convinced that it is possible, as we see bond prices retreating in recent days.
It seems that perhaps the only thing that can be done both for Governments around the world allow debts to be reduced by a surge in inflation by printing more money.
And when this happens, all those paper dollars or euros they will lose their value, their purchasing power.
But all this gold will retain its value while everywhere devalues paper money. These are the lessons of history over the centuries, as gold has held its value.
So as we enter into stormy waters ahead for the global economy, you could do a lot worse than take a closer look at investing in gold.
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by David Phillips
(Commodity Trading today)
CRB index or indicator was born in 1957, and seems to have accurately predicted the soaring inflation and deflation cycles each and sin.
Adam Hewison's book of INO.com uses CRB Index as its main indicator of cyclical trends lead to large. If you're thinking of investing in commodities or commodity related stocks that index should watch this very carefully.
A look back at the data shows that in the last half century, the CRB index showed some significant moves both upward and more recently the disadvantage.
I agree with Adam that this is probably the indicator that traders should keep an eye on.
If you are someone who trades stock or commodity futures and are eager to better understand the trends of world trade, then this is the indicator to watch.
After the tenth revision of the index, has been renamed Reuters Jefferies CRB Index (NYBOT_CR).
Now you can easily keep track of all the days this indicator using MarketClub and get more information about this commodity index market Club Trader's Blog.
I put the list of markets that are included in the RJ/CRB index as implemented in the 2005 revision: 19
Metals: flat, aluminum, copper, gold, nickel silver
Energies: crude oil, petroleum, natural gas, unleaded gas heating
Cereals: maize, soya, wheat
Food & fibre: cacao, coffee, cotton, orange juice, sugar
Livestock: lean hogs, cattle, live
Take a few minutes to watch this short video below and see how it can benefit from this indicator.
There is no fee and there is no registration required.
Every success in your training,
David
http://crbindex.commoditycrunch.com
