Ukraine Turmoil Boosting Gold Prices, But Should We Buy?

Gold prices are a funny thing, the more turmoil and uncertainty there is in the world, the higher the value goes. Gold is considered a 'safe haven' investment. For thousands of years, and from civilization to civilization, gold has retained monetary value. So if you're worried about the zombie apocalypse, or Russia taking over the world - gold should be your investment of choice (or guns I suppose). That being said, as a US based investor, should I be running to buy gold because of something going on thousands of miles away? Can I make some money investing in gold right now?

At the end of the day, we're investors, right? If there is an opportunity to make a good return, then it's at least worth looking at.

So, is there truly an opportunity to make money investing in Gold today? I'm not convinced, but let's do some quick internet searches and see what some of the 'Gold Investment Experts' have to say.

When you start doing research about why you should buy gold, interestingly enough, most of the commentary happens to be from companies that sell gold - that, and the doomsday publications that try to get you to pay for their investment newsletters. Typically that's not a good sign, but I carried on, and this is what I found:

Forbes - 3 Reasons To Buy Gold Now
Money Morning - 1,600 Reasons To Buy Gold Now (Just in case 3 wasn't enough)
WSJ - The Case For Gold

Okay, now for the other side of the argument:

DoughRoller - 6 Reasons Gold Is A Terrible Investment
MarketWatch - Why Buffett Thinks Investing In Gold Is Stupid
USA Today - Gold: The Investment Dog That's Not Hunting

Personally I'm still not convinced gold is the investment for me. The fact that it doesn't generate any income, has limited commercial use beyond jewelry, and is really expensive, are all pretty big turn offs. At the same time, I feel like I should have at least a small portion of my portfolio invested in precious metals and other commodities. After looking at some other precious metals options, I did come across one that seemed pretty intriguing.

If I'm going to start buying precious metals, that precious metal is going to be silver. Silver might not get as big a boost in value as gold when the world goes crazy, but it does get some. The kicker for me, though, is that silver has so many more practical applications. Gold is basically used for jewelry, and that's it. Silver is still used in jewelry, but it has a ton of other applications as well.

Silver is used in all sorts of manufacturing, including computers, smartphones and televisions, among many others. In addition to being one of the best conductors of electricity, silver also has antibiotic properties that make it vital to the medical industry. The more I learn about silver, the more interested I become. Gold might not be for me, but if I decide to diversify some of my portfolio into precious metals, it's good to know there is another option out there.

This guest post was contributed by Sam Jenkins.

This guest article does not represent the views or opinions of NuWire Investor, or any of its subsidiaries.

Experts Say Gold Down, Not Out

Precious metals prices have been slowly trailing off for months, which is a sharp turn for what was once a bull market for gold and silver. Investment firms are downgrading their forecasts and the Federal Reserve is printing money left and right, and the combined effect has been hard on investor sentiment. One expert believes the metals can rally, however, especially if a trend toward inflation becomes evident. Actual inflation is admittedly unlikely in the near term, but if the money printing appears that it may cause inflation it could be followed by renewed interest in gold and silver. For more on this continue reading the following article from Iacano Research. 

It’s no secret that precious metals have disappointed many investors in recent months after prices failed to move higher following the announcement of more money printing by the Federal Reserve late last year.

So far in 2013, gold and silver have moved steadily lower based in large part on the idea that despite the central bank creating $85 billion per month in new money, inflation is not a near-term threat (and maybe not even a long-term concern).

In recent weeks, investment banks have been falling over themselves in an attempt to downgrade their precious metals price forecasts sooner and farther than their competitors and this has helped to sour sentiment. Also, record outflows from gold ETFs such as the SPDR Gold Shares (GLD) have added to the selling pressure.

Based on what you might read in the mainstream financial media these days, you may as well stick a fork in the secular gold bull market because it’s all but done (and maybe silver too), but there’s a very good argument to be made for why that is not so.

In short, now that the latest round of Fed money printing is causing the monetary base to grow, higher inflation is likely to follow. Then, perhaps suddenly, investors and traders will flock back to precious metals.

Allow me to explain.

[To continue reading this article, please visit Seeking Alpha.]

eBay Silver Sales Outpacing Gold

Alix Steel, analyst for TheStreet.com, discusses the movement of gold and silver investment coins on eBay. A lack in investor confidence has raised interest in putting money into physical commodities like gold and silver; however, silver coin sales have been outpacing gold on eBay since 2007. Steel believes it is due to the accessibility of the investment in terms of pricing as well as the ease of acquiring it for close to spot price through online markets. She warns, however, that investors should be cautious of eBay vendors and only trust those with high ratings and a long history of transactions. For more on this continue reading the following article from The Prudent Investor.

In for the physical? Check out ebay. Sales of silver coins have been outpacing gold coin sales since 2007, according to ebay data. Alix Steel from TheStreet.com tells us further that only in the last quarter silver coin sales doubled again in volume.

This is reflected on the ebay USA website: Silver coin offers are roughly double the number of gold offers.

24hGold.com has a most handy tool to compare ebay prices and premiums above the pure metal value. Click here for gold coins and here for silver coins and remember that numismatic coins were exempt from confiscation in the Great Depression.

VIDEO: Alix Steel from TheStreet.com confirmed the white-hot silver market with other coin dealers.

Bullion coins are not doing bad either: At the time of writing a one ounce gold eagle was bid at $1,625 or 3.6% above spot.

A last note of caution: Only buy from sellers with a spotless transaction record and at least 100 ebay recommendations.

This blog post was republished with permission from The Prudent Investor.

Silver Sees Another Interesting Day

The silver price approached $50 an ounce and then fell back dramatically indicating that there could be future fireworks sparking. Read more in this full post by The Mess That Greenspan Made.

Let’s see… Trading volume for the iShares Silver Trust ETF (NYSE:SLV) reached a stunning 189 million shares yesterday (seven times that of the QQQ ETF) and options trading reached similar lofty heights as the silver price approached $50 an ounce and then fell back, all in dramatic fashion. After hours it was disclosed that the “tonnes in the trust” at SLV reached a new record high at 11,390 tonnes after a massive 240 tonne addition.

It could be another interesting day ahead for the metal. Then again, markets may want to rest up a bit before tomorrow’s big press conference with Fed Chief Ben Bernanke, after which there may be some even bigger fireworks.

This article was republished with permission from The Mess That Greenspan Made.

Is silver unstoppable?

Silver surged today by more than a dollar and shows no signs of slowing. Is it unstoppable? Read more in this post by The Mess That Greenspan Made.

It looks like the silver price just won’t be stopped, earlier today surging by more than a dollar and breaching the $42 an ounce mark to “a fresh 31-year high”, a phrase that may finally be replaced with simply “a record high” in another week or two based on the 1980 high for the silver price of about $48 an ounce and its current trajectory.

As this is written, it stands almost alone in the commodities sector with gains for the day. I can’t help but share the thoughts of Mitsui Precious Metals analyst David Jollie who, last week, commented "There are good fundamental reasons supporting silver. What is difficult to know is the difference between those, and a normal investment flow, and an investment flow that is driven by the price."

This blog was republished with permission from The Mess That Greenspan Made.

Silver Getting Long Overdue Correction?

Silver, along with most other precious metals, has been riding a nice wave of late, however, all good things eventually come to an end. While Silver's run is probably not done yet, according to Tim Iacono, the metal was long overdue for a correction. For more on this, read the following blog post from The Mess That Greenspan Made.

Today’s action in the silver market (down almost $1 an ounce as this is written) will do little other than reinforce the recent trend for the “tonnes in the trust” at the world’s most popular silver ETF – the iShares Silver Trust (NYSE:SLV) – that is now almost 350 tonnes lighter than it was on the first day of the year.

Of course, this comes after 1,135 tonnes of silver were added in the fourth quarter with more than 1,700 tonnes entering the trust during the second half of 2010, so, thus far the exodus of metal has made only a small dent in the fund’s 10,575 tonne holdings.

This also comes at a time of record demand for silver coins at the U.S. Mint and exceptionally strong physical demand from Asia. The metal is long overdue for a good correction and it looks like one may now be underway.

Full Disclosure: Author was Long SLV at time of writing

This article was republished with permission from The Mess That Greenspan Made.

One Investors Strategy For The New Year

Are you trying to figure out what to invest in this year? Well Toni Straka from Prudent Investor, knows what his investment portfolio will be made up of in 2011. Read the following post to learn more about Straka's strategies and predictions for the new year.

BONDS: The 20-year interest rate downtrend reversed in 4Q10: Short all government bonds (and hope your counter party will remain solvent.)

Rising rates will become the tightening noose for all debtors. Mortgage holders may find comfort by switching to fixed rate contracts as far out as possible.

SHARES: As inflation heats up, go long energy, food stocks (and convert ensuing profits into gold.) Underweight consumer (durables) products in a cool economic environment, short debt-laden financials, especially the "dumb money" insurance sector.

DERIVATIVES: Stay away from all OTC instruments as your contract will ultimately only be worth as much as your counter party can pay. Square all derivatives in disguise like ETFs.

COMMODITIES: Buy silver as it is still 70% away from its nominal high seen in 1980 and has a dual use as money and industrial resource. Take profits once gold:silver ratio has descended to 1:30 and reenter after technical consolidation. All other commodities have reversed and have overshot the mean by now.

CURRENCIES: Buy the real stuff - gold. All other fiat currencies are just a claim on some central bank counter party and historically they have all wrecked their product via inflation in the last 300 years.

Once you have done this handful of trades, turn off the charts, lean back, contemplate the world and check back here in January 2012.

This post was republished with permission from The Prudent Investor.

Why Silver Could Present A Terrific Buying Opportunity

While gold is getting a lot of the attention these days, it could be silver that presents a terrific buying opportunity. Because silver is used as an industrial metal, a further decline by the global economy could hurt silver in the short-term but the global trend of currency debasement should help silver over the long-term. See the following post from Daily Wealth.

It was smartest thing on silver I've heard in a long time…

Not surprisingly, Chris Weber said it.

For those of you unfamiliar with Chris Weber, he's as close to an investment oracle as you'll ever find. For 39 years, since age 16, Chris has made his living as an investor. To live this sort of life, you have to be a contrarian… you have to be willing to think and do unpopular things. Chris did just that when he told readers of his Global Opportunities Report:

If the Chinese economy falters, then it is very possible that commodities will fall as well, since China has been a huge market for them.

I think gold will do better than silver under this scenario, because gold is viewed as a monetary commodity by all the major players, whereas silver is viewed as an industrial metal as well as a monetary one. In a contracting economy, silver may fall. That doesn't mean I'm going to rush to sell my silver, it means that I am prepared to see silver fall.

This sort of thing drives people who hold gold and silver nuts. There's a reason gold has been used as money for thousands of years. It's easy to get attached to. And many gold and silver owners are very emotionally attached to their gold and silver holdings… much more so than, say, someone who owns 100 shares of Microsoft. Telling them gold or silver could decline in price is like saying their children are ugly.

Chris, like me, believes the price of silver is going to be higher years from now. Governments are in a long-term trend of debasing their currencies, which will send the price of "real assets" like silver much higher. But despite Chris' bullishness, he doesn't stick his head in the sand and ignore things that might differ from his thesis.

After all, even the strongest bull markets can trend sideways, or lower, for many months… even years. And a weakening of the global economy could hurt silver because it's heavily used in industry.

For a picture of how "hurt" silver could get in a correction – and where I expect will be a spectacular buy point – take a look at this three-year chart of silver:



Note that if you take out the crazy price action produced by the late 2008 credit crisis, you'll see that buyers tend to support silver when it trades for $11 to $12 per ounce. Silver bounced down to this area in August 2008, April 2009, and July 2009. Each time, silver stopped falling.

I believe this is the price where smart, rich investors step in to buy millions of dollars worth of silver for their "crisis portfolios." I know several extremely wealthy investors who have this area pegged as a place to buy lots of silver. They see it as the bargain price.

They know a global debasement of currencies will eventually push gold and silver higher… which will overwhelm any short-term considerations. And $12 silver is a cheap way to hedge the rest of your portfolio against currency crisis.

I'm sure Chris' comments generated some negative feedback from hard-core gold and silver fans. I'm sure this essay will generate some, too. But as investors, we always have to consider the potential risks to our holdings, rather than blindly focusing on the potential rewards. You have to be prepared to see your silver holdings decline in value.

And while I'm bullish on silver, I agree with Chris. If the magical economic recovery the U.S. and Chinese governments have engineered doesn't pan out, it could temporarily depress the price of silver…. Even down to $11 an ounce. And as you can see, this would present a terrific buying opportunity for silver bullion and silver stocks.

This article has been republished from Daily Wealth, a contrarian investment analysis site.

Chinese Investment In Silver Could Push Up Prices

Now that Chinese citizens are not only allowed to invest in silver, but encouraged to, there is reason to believe that this could push up silver values. The Chinese are savvy investors and are skeptical of the security of American dollars, which may mean a shift to greater investment in precious metals like silver and gold. The following article from Daily Wealth explains why an increase in Chinese demand for silver can have a significant impact on prices.

Two years ago on August 21, China's government allowed its citizens to invest in an entirely new asset. It allowed them to invest in Hong Kong-listed stocks.

Hong Kong is a special region of China. It's one of the most dynamic, capitalistic places on Earth. The move from the government was a move toward "investment freedom" for the Chinese people.

On that day, Hong Kong's benchmark stock index rose 8.74%. Over the next two and a half months, it skyrocketed from 11,000 to over 20,000. It was a chapter in a story that you should get used to over the coming years: When the Chinese decide to invest in something, it causes giant ripples across the world.

This sort of situation is starting to happen again: This time it's happening in precious metals... especially silver.

The Chinese have a centuries-old affinity with silver. It began in the 1500s with the explosion of trade with Mexico via the Spanish galleons. These sailing ships were the super-tankers of their age. They made one voyage per year, carrying tea, silks, and spices from Asia to Mexico. The ships returned to Asia with gold and silver. After the Chinese threw off imperial rule in 1912, the country used silver money. Today, the Chinese word for "bank" means, "silver movement."

And now that China is becoming one of the richest, most dynamic capitalistic countries on Earth, this story is about to take a modern twist. The Chinese want silver again.

Thanks to a decade of wealth accumulated by regular Chinese citizens, there is plenty of cash to chase good investments. As the famed global investor Jim Rogers points out, these people are the best capitalists in the world. They are great savers. Chinese people want their money to work for them... so they invest.

I recently watched a China Central Television piece on gold investing... According to the program, there are some 400 million households in China, with an average ownership of about 0.1 ounces of gold. The average gold ownership in most emerging countries works out to about 1 ounce per household. The Chinese are beginning to make up that gap. From 2006 to 2007, domestic demand for gold rose 60% to around 700,000 ounces. Experts continue to urge citizens to put 3% to 5% of their net worth in precious metals.

Chinese government statistics show the average urban Chinese household has about $1,300 in disposable income to invest. While that doesn't seem like much, when you add up all those households, there's about $36 billion that could move into the next big investment opportunity – precious metals.

The government is now actively encouraging its citizens to buy gold and silver. They recently unveiled silver bullion for investing (you can see the video here). The premise is that gold was 50 times more expensive than silver in 2007... but is now 70 times more expensive.

The government is promoting silver bullion as an investment for regular citizens. And remember, a bunch of Chinese students laughed at U.S. Treasury Secretary Tim Geithner this year when he claimed the dollar was safe. The Chinese know the value of real assets... real money like gold and silver.

What does this mean for silver prices? It's impossible to say. But here's a little math that interests me. According to the Silver Institute, demand for silver in 2008 (for industry, jewelry, and investing) was 832 million ounces. At today's price, that's an $11.5 billion market... or about 1/3 the capital available in China alone.

The most important thing to understand about this situation is the Chinese people become freer every time the government loosens up a restriction. These people couldn't legally buy silver bars before. Now, they can. They're becoming richer... and they will continue to do so for decades.

Add this to a world already waking up to the grand currency debasement you've read about in DailyWealth (like here and here), and you have a recipe for the continuation of the big bull market in silver and other precious metals.

This post has been republished from Daily Wealth, an investment analysis and advice site.

How To Profit From Silver

Silver, like gold, is a highly volatile investment with wild swings in value. However if you believe that inflation, or even hyperinflation is likely, then silver may be a good commodity to consider right now. Brian Hunt from Money Morning discusses why silver is a compelling investment right now and how you can profit from it.

Late last month, one world’s greatest speculative profit plays made an important breakout move.

This speculative investment is the tiny group of mining stocks that operate as pure plays on the price of silver.

If investment assets were all patients in a mental ward, bonds would be the guy who sits silently in the corner and stares out the window. Stocks would be the guy who wanders the hall and mumbles to himself. And silver would be the guy they keep in the padded room all day.

And with good reason.

As the chart that follow shows us, silver prices are subject to fast, wild swings - up or down. You see, silver trades a little like a precious metal, meaning that it moves wildly when people get worried about a market crash or inflation. But silver is also an industrial metal, so it can trade up or down in line with changes in global manufacturing activity.



Okay, so you now know that silver can move crazily. Now realize the firms that focus on silver mining are pure madness. Their profit margins and asset values fluctuate with more volatility than silver itself. Take one of the largest and best-known silver companies, Silver Standard Resources Inc. (Nasdaq: SSRI).



When the global credit crunch hit last year, Silver Standard saw its share price plunge from $42 to less than $8 - a drop of more than 75% in just three months. But after investors warmed back up to mining stocks, it took the same amount of time to nearly triple in value.

And that brings us back to the present day.

Just last month, Silver Standard saw its shares blast to a fresh nine-month high. The global economy is getting "less bad" - and the aggressive bailout plans that are being rolled out throughout the world have most smart people scared to death of inflation. That’s driving the price of "real assets" - like silver - to the moon.

So the next time you’re looking around for an "inflation trade," consider going long on a company like Silver Standard - or taking a position in the iShares Silver Trust Exchange Traded Fund (ETF) (NYSE: SLV).

If the government’s “funny-money” scheme turns out badly, these positions have a long history of providing gigantic gains in virtually no time at all.

This article has been reposted from Money Morning. You can view the article on Money Morning's investment news website here.

Gold And Silver Update

Last week we saw some big news come out of China regarding gold, and investors are paying close attention. China almost doubled their gold reserves, and after a stretch of falling prices, this news sent prices up. For more on this, read the following post from Tim Iacono.

Big news for the precious metals markets came from China last week when the Xinhua News Agency published comments made by Hu Xiaolian, head of the State Administration of Foreign Exchange, indicating that China's gold reserves had increased by 454 tonnes since 2003. Apparently, they were required to report the new total to the IMF and made a public disclosure at the same time, however, it is not at all clear why there were no previous updates in recent years.

This almost doubled their previous reserve total of 600 tonnes and vaulted China into sixth place on the World Gold Council's list of official gold holdings as noted in this item last week. With almost $2 trillion in foreign exchange reserves and an increasingly vocal dislike of the U.S. dollar in recent months, this big gain comes as no surprise to most analysts, however, the magnitude of the increase in dollar terms was mostly overlooked in media reports.

This addition amounts to only $13 billion - less than one percent of their foreign exchange reserves - and boosts their "percent of reserves held as gold" from 0.9 percent to just 1.6 percent. The "rule of thumb" for western central banks is a stockpile of 15 percent, about ten times the new total, and most analysts expect thousands more tonnes to be purchased.

Prices for both gold and silver were buoyed by the news late in the week but, after two months of mostly lower prices, the metals were due for a rebound. For the week, the price of gold rose five percent to end at $913 an ounce and spot silver surged nine percent to close at $12.89 an ounce.

As a result of this move back up above the $880 level, buy indicators for both gold positions in the model portfolio - Gold Bullion and the SPDR Gold Shares ETF (GLD) - have been changed from green back to yellow.

It will be important to keep an eye on the world's most popular gold ETF since, for the first time this year, metal recently exited their vaults as shown to the right. Inventory has declined by 23.2 tonnes since April 16th after an impressive addition of almost 350 tonnes since the first of the year.
Interestingly, mainstream financial media outlets such as Reuters and Bloomberg now routinely report changes in GLD inventory in their gold reports and also compare their stockpile to official country holdings around the world, something that I've been doing for years. In fact, I remember being disappointed early last year about not being mentioned in an article in the Wall Street Journal after a reporter called to follow up on one of my articles about the GLD inventory passing China's official holdings of 600 tonnes.

It's was ironic to see these two items in the news together last week.

Buying in India has supported the gold price in recent days as the world's most price-sensitive buyers have been on strike for most of the year, only appearing when sub-$900 an ounce prices were to be had as Monday's important Akshaya Tritiya festival neared. This is one of the four most important days of the year for Hindus and is considered an auspicious day for buying long-term assets such as gold, a legend stating that any venture begun on Akshaya Tritiya will bring prosperity.

The recent surge in enthusiasm for the gold price, while welcome, should be tempered by the knowledge that, according to GFMS, about 500 tonnes of scrap gold entered the market during the first quarter of 2009. This is the equivalent of an entire year's worth of scrap metal and exceeds the record 469 tonnes added to gold ETFs around the world over the same period. While I'm sure that prices for precious metals will go much higher at some point, making such a move in the near term will be difficult absent another flight to safety, something that is now looking more likely than it did a few weeks ago.

This post can also be viewed on themessthatgreenspanmade.blogspot.com.

Silver ETFs Continue To Grow

Silver prices have been going up and down, and up and down, but what has continued to steadily increase is the amount of silver being help inside the Silver ETFs. This means that despite the volatility, investors still see silver as a great investment opportunity and are funneling more money into the metal. Commodity investment expert and well known blogger Tim Iacono, takes a closer look at the recent Silver ETF data in his blog post below.

Like its big golden brother, the iShares Silver Shares ETF (NyseArca:SLV) is now regularly making new all-time highs, the latest move coming yesterday with the addition of 199 tonnes. This brings the net gain to 550 tonnes so far in 2009.

The price of physical versus paper forms of precious metals was a hot topic over the weekend at the Cambridge House Investment Conference. The shortage of coins and small bars last year combined with the fact that both of the major ETFs continued to add inventory as prices fell just adds to the discussion, however, not always in an entirely productive way.

Louis James of Casey Research was one of the more level-headed panel participants acknowledging that, while the physical market is a relatively small part of the overall bullion market, recent developments will have an outsized, long-term impact on investor psychology and the market in general.

Full Disclosure: Tim Iacono is Long SLV

This post can also be viewed on themessthatgreenspanmade.blogspot.com.

As The Price Of Gold Rises, What Is An Oscar Worth?

With the price of gold sky high right now, how valuable are those Oscars that got passed out yesterday?

According to The Seattle Times, each Oscar Statuette cost $500 this year, up from $400 last year. In only one year the price jumped $100, or 25 percent! That is pretty amazing, and it goes to show how bad inflation is getting, especially for materials. Each Oscar, according to The Seattle Times, is made from pewter that is plated in successive layers of copper, nickel, silver and gold, and then lacquered and buffed. The price of gold itself has jumped around 40 percent in the last year.

Those who think that $500 isn’t much to pay for an Oscar might be disappointed to know that they can’t be bought. There are strict rules forbidding their sales, and Oscar winners sign contracts guaranteeing that they won’t sell their own award. If they were to break that contract, they would probably fetch more than $500 on the black market, but instead of investing in Oscars, one might want to consider the materials that make up an Oscar.

Even though it seems that silver and gold are at ridiculous highs right now, I think there is more room to grow. Considering the rate at which the Fed is inflating the monetary supply, gold and silver are practically a must for investors right now.