Losing Faith in Gold From Ghana to Vancouver Proves Rout – Bloomberg 08-13-13

Salient to Investors:

Gold’s swift fall has ravaged livelihoods around the world, while investors who lost big are shifting assets elsewhere and scaling back retirement plans. The market value of the world’s gold mining companies is down $271 billion since the September 2011 peak of $486 billion. Gold hit $850 on Jan. 21, 1980, or the equivalent of more than $2,400 today after inflation and did not top $850 again until 2008.

Michael Aronstein at Marketfield Asset Mgmt said the giant, decade-long rally will not be repeated, at least in my lifetime.

ABN Amro predicts the price will average $1,000 in 2014 and $840 in 2015 because a stronger US economy will limit gold’s appeal.

Edward Lashinski at RBC Capital Markets said the foundation for gold has eroded, and capital is better deployed in other enterprises that actually see a return.

William Fleckenstein said people own gold because they do not trust the central banks and the price will be much, much higher within 5 years and stocks will crash again. Fleckenstein wrote that the Fed caused repeated asset bubbles with artificially low interest rates.

Seasoned forecasters say gold’s future price is hard to predict because it is driven more by sentiment than standard measures of supply and demand. Gold bulls cite the surge in jewelry buying and 9 consecutive quarters of net buying from central banks. Bears say the banks often buy at the wrong time.

Ronald Wildmann at Basinvest said gold is still a bubble.

Morningstar said 2,273 US-based mutual funds, or 32 percent of the funds it tracks, have an exposure to gold bullion, mining or exploration.

Kevin Telmer at Artisanal Gold Council said the gold boom rippled out to as many as 10 million gold miners and 50 million others who sell them merchandise or services- people switching from farming could expand their earnings as much as fivefold.

In April, Societe Generale declared the end of the gold era. Goldman Sachs predicts $1,050 by the end of 2014.

The median Vancouver mine exploration company has $325,000, enough to last less than 5 months. The largest mining companies argue they can weather gold’s decline by cutting overhead costs, paring exploration and writing down assets acquired during the boom.

Daniele Donahoe at Rinehart Wealth Management said with the advent of ETFs people have been able to become somewhat of their own worst enemy.

John Reade at Paulson & Co. said the long-term trend of increasing demand for gold in lieu of paper is intact.

Bruce Zimmerman at Utimco said gold represents less than 4 percent of assets, encompasses 5 to 6 percent of our thoughts and discussion but generates 99 percent of our publicity. Zimmerman is not selling because, given easing monetary policy, there is a scenario where financial assets essentially become devalued.

Jim Hille at At TCU Endowment prefers oil and gas royalties, which produce income, as gold does nothing for your payout needs every year.

Nick Holland at Gold Fields said the industry is not sustainable at $1,230 an ounce, and we need at least $1,500 an ounce to sustain this industry in any reasonable form.

Read the full article at  http://www.bloomberg.com/news/2013-08-13/losing-faith-in-gold-from-ghana-to-vancouver-proves-rout.html

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Gold miners have a difficult time ahead – Jim Rogers blog 07-16-13

Salient to Investors:

Jim rogers writes:

  • Gold miners have a very difficult time ahead of them.
  • One study determined that more money has been lost in gold mining shares than any other industry in America including airlines and railroads.

Read the full article at  http://www.jimrogers.info/2013/07/gold-miners-have-difficult-time-ahead.html

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Special Gold Report for July 8, 2013. Jim Rogers Interview – National Forex 07-07-13

Salient to Investors:

Jim Rogers says:

  • Avoid gold mining stocks because miners face stiff competition, and there are now many easier ways to own gold – coins, ETFs, ETNs, futures.
  • Gold will bottom in 2014 or 2015 because eventually prices below the cost of production will cause tightness in supply and push prices higher, but commodities can stay below the cost of production for years and it takes a long time for people to believe they have to close their mines, which is expensive.
  • All the people saying the commodities super cycle is over never saw the bull market coming.  Bull markets climb a wall of worry and we certainly have a wall of worry and skepticism, which is good. In 1987, 1989, 1990, 1994, 1997, and 1998 stocks collapsed and everybody was convinced their bull market was over – but it was not.
  • There are no major sources of new supply coming on stream. Most commodities don’t have massive new supply yet. Agriculture inventories are the lowest in 40 years because consumption keeps rising faster than production. There is not enough new supply to cause the bull market to end other than a temporary consolidation.
  • Most bull markets have lasted for nearly a couple of decades or more. If economies slow down, Bernanke and his friends are going to print a lot more money – the wrong thing to do but all they know how to do.

Read the full article at http://nationalforex.com/2013/07/07/special-gold-report-for-july-8-2013-jim-rogers-interview/

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Gold Rebounds With Silver After Slumping to Cheapest Since 2010 – Bloomberg 06-20-13

Salient to Investors:

Gold’s 14-day relative strength index was below the level that indicates a rebound may be imminent.

Jeffrey Christian at CPM said it is too soon to predict if a buying frenzy will be repeated because the enthusiastic buyers in April have become more cautious, though says the worst of the decline is behind.

One ounce of gold bought as much as 65.4626 ounces of silver, the most since August 2010, as investors lost faith in a store of value with ties to economic growth.

Le Yukun at BOC Intl (China) said the gold miners are vulnerable to a price drop because every 10 percent drop in bullion is likely to reduce profits at Chinese gold miners by over 20 percent on average.

Read the full article at http://www.bloomberg.com/news/2013-06-21/gold-extends-drop-for-fifth-day-to-cheapest-since-september-2010.html

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Paulson Sold Gold Miners, Bought Family Dollar in Quarter – Bloomberg 05-15-13

Salient to Investors:

John Paulson lowered stakes in gold miners in Q1 and added shares of companies that stand to benefit from a stronger economy.

Paulson has done well investing in companies undergoing mergers or restructurings, but his big bets in the past 2 years on macroeconomic developments have undermined that performance.

Paulson & Co said gold is taking a pause in a long-term upward trend, and continued global central bank printing will drive demand for gold as an alternative currency to paper currencies.

Read the full article at http://www.bloomberg.com/news/2013-05-16/paulson-sold-gold-miners-bought-family-dollar-in-quarter.html

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Billionaires Are Buying Gold, Should You? – Investopedia 12-19-12

Salient to Investors:

Billionaire hedge fund managers have been heavily buying gold. John Paulson has been accumulating gold and gold mining stocks at a fevered pace. George Soros, Louis Moore Bacon, Julian Robertson et al have been buying gold, mining equities and ETPs. Bill Gross at Pimco has urged investors to buy precious metals.

George Soros says the global economy is in worse shape than during the Great Depression and riots on the streets of American cities are inevitable.

The explosion of stimulus across the world, currency debasement and slowing developing market growth should push gold higher.

Warren Buffett says buying gold is nonsense and that the sell-off in stocks due to the fiscal cliff is a buying opportunity.

Read the full article at http://www.investopedia.com/stock-analysis/2012/billionaires-are-buying-gold-should-you-gld-au-phys-vig-gtu1219.aspx#axzz2FlPdhSHz.

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Gold CEOs Told to Fix Slump as Investors Prove Restless – Bloomberg 12-12-12

Salient to Investors:

Gold producer shares head for the first back-to-back annual drop since 1998 despite gold’s 12 years of gains because of failure to control expenses – the average cost to extract an ounce of gold by the largest miners rose 23 percent to $584.70 in 2011 versus a drop of 12 percent to the lowest since 2007 for silver.

Gold companies face competition from gold-backed ETPs. Money managers have increased stakes in physical gold, pressured executives to resign, or shifted into silver. Direct holdings of gold has more than tripled in five years. George Soros raised his stake in gold ETPs in Q3 2012 by 49 percent from Q2.

John Wong at CQS has increased his silver holdings and said a lack of capital discipline is the biggest issue – management has relied on gold prices to bail them out.

Evy Hambro at BlackRock said the poor performance is due to an appalling track record of value destruction by management.

Markus Bachmann at Craton Capital Precious Metal Fund said the costs are too high and the returns not good enough, but sees the cost inflation being contained and a healthier industry in 2013.

The median analysts expects gold to rise to $1,850 in 2013.

Read the full article at http://www.bloomberg.com/news/2012-12-12/gold-ceos-told-to-fix-slump-as-investors-prove-restless.html

Bond Investor Gundlach Buys Stocks, Sees ‘Kaboom’ Ahead – Bloomberg 11-29-12

Salient to Investors:

Jeffrey Gundlach at DoubleLine Capital says:

  • The first phase of the coming debacle was the 27-year buildup of corporate, personal and sovereign debt to 2008.
  • The third phase will be deeply indebted countries and companies defaulting sometime after 2013.
  • Buy gemstones, art and commercial real estate and other hard assets.
  • Chinese companies, US natural gas producers and gold-miners are bargains.
  • His Total Return Bond Fund is 78 percent in low duration residential mortgage-backed securities including the low duration nonguaranteeds, which Philip Barach at DoubleLine said would have few defaults if higher interest rates meant the economy was improving and housing prices recovering. Sarah Bush at Morningstar cautioned on July 18 about the use of volatile mortgage-backed derivatives such as inverse floaters.
  • No country will default in 2013. However, Japan is running out of policy tools.
  • Inflation could rise by 2 percent if the Fed buys more government debt.
  • Obama will not be able to reach an accord with Congress to make significant cuts in the deficit. Tax hikes on the wealthy won’t bring in enough to have a significant impact and politicians won’t cut entitlement programs much because the public overwhelmingly supports them.
  • There will be no grand compromise on the fiscal cliff if an agreement isn’t reached by January, so expects politicians to push the deficit issues into 2013 and beyond. Obama won’t give on anything, and the Republicans won’t roll over.
  • There are opportunities in emerging-markets equities, particularly in China.
  • Demographics in some emerging markets will support their sustained growth. Developed nations will have fewer than 3 workers for every retiree by 2025 versus 6 to 7 for Brazil, India and Mexico.
  • US companies don’t have much potential for growth.
  • Gold-miners and natural gas producers are cheap.
  • Apple will struggle to reach its earnings potential without an innovator like Steve Jobs at the helm.
  • Investing in natural gas is similar to buying gold in 1997.

Jeffrey Sherman at DoubleLine said Chinese stocks make up the majority of the 6.7% of international equity holdings in his fund.

Luz Padilla at DoubleLine said the only reason asset prices are up is because of all the liquidity in the system, but this could turn very quickly.

Larry Fink at BlackRock says the US banking system is in good shape and the large supply of natural gas in the US will create jobs, and is long-term very bullish on the US.

Richard Pildes at NYU said the constitutionality of Congress creating independent agencies like the Fed has been long settled.

Read the full article at http://www.bloomberg.com/news/2012-11-30/bond-investor-gundlach-buys-stocks-sees-kaboom-ahead.html

U.S. Stocks Fall Amid Concern Over Stimulus Efforts – Bloomberg 09-25-12

Salient to Investors:

Malcolm Polley at Stewart Capital said things won’t improve as fast as people think, and Fed’s actions won’t lead to higher growth.

FRB of Philadelphia President Charles Plosser said this months new bond buying by the Fed won’t boost growth or hiring and may jeopardize Fed credibility.

The Dow is 5.3 percent from its record high, S&P 500 is 8.6 percent from its record high.

Burt White at LPL Financial said economic numbers are decent, with housing healing a real boost to confidence.

Jim Chanos at Kynikos Associates said Apple stock is too high, prefers Microsoft as a hedge against shorting Hewlett-Packard .

Tanya Jakusconek at Scotia Capital on September 20 said gold-mining stocks should start to outperform bullion as capital-spending cutbacks lead to greater cash flow for many producers.

Read the full article at http://www.bloomberg.com/news/2012-09-25/u-s-stock-futures-little-changed-before-sentiment-report.html