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Sunday, February 15, 2009

Gold ETFs Acquiring Record Tons of Gold

SPDR Gold Trust GLD.PGLD.A, also known as GLD, asserts the gold bullion it owns has risen by over 100 tons to 970.57 tons recently, which marked the largest weekly increase in the history of the gold-backed exchange-traded fund.

SPDR Gold Trust, the world's largest gold-backed ETF, said its holdings rose nearly 5percent on to record levels. Gold prices surged, implying significant buying.

Investors who are expecting years of inflation and worldwide economic volatility are pouring money into securities backed by gold bullion, helping turn what has been a safe haven into a mainstream asset class.

GLD is now the second biggest U.S. ETF, with market value of $27.5 billion, which ranks it behind only the popular SPDR S&P 500. GLD owns at this time more gold bullion than the entire government of Japan, according to the World Gold Council.

Another big gold ETF player, COMEX Gold Trust IAU.P, said its holdings also rose to a record high 70 tons.

Gold ETFs are listed on stock exchanges and offer investors exposure in bullion without having to take physical delivery. Sponsors of the funds buy a matching amount of physical gold and keep it in bank vaults.

The extraordinary rally in bullion originates from the inflationary expectation arising from the U.S. government's misguided borrowing of over $2 trillion to finance a bank rescue plan and to enact a pathetic package to stimulate the world's biggest economy in efforts to reverse a global slowdown.

While there was recent talk about a shortage of physical gold bullion as more investors turned to gold as a safe haven, that doesn't seem to be the case, as some say there are not any problems at all for gold ETF authorized dealers to acquire gold bars to create new shares.

The existing low yield of currencies and U.S. Treasury bonds because of stimulus plans by central banks made gold - which produces no interest - more attractive to investors.

Friday, February 6, 2009

Gold Surging on Fear Says Barrick

According to Barrick Gold Corp. Chairman Peter Munk an “unpleasant and frightening” trend of investors buying gold as protection against uncertainty in world markets may help push the metal over $1,000 an ounce. It don't think there's any doubt gold will surge past $1,000 an ounce in 2009.

Munk, founder of Toronto-based Barrick, the world’s largest gold producer, said he has received an increasing number of calls from wealthy investors looking for ways to buy bullion. While that is positive for the metal market, it is a “sad part of a civilized society,” Munk said.

“That’s not where you want to be, it’s alarming,” he said today in an interview from Davos, Switzerland, where he is attending the World Economic Forum. “Do I personally believe gold will break through $1,000? It’s not a question of if, it’s a question of how soon.”

The strong demand is being mirrored among professional investors whose funds are buying gold and shares of the companies that produce it. That helped the metal to its eighth straight annual gain last year and has driven a rally in gold stocks in recent months. Gold miners including Newmont Mining Corp. and Yamana Gold Inc. are taking advantage of the trend to raise cash, with new equity worth more than $2 billion sold since November.

Barrick Gold rose C$3.16, or 7.2 percent, to C$47.14 at 4:26 p.m. in Toronto Stock Exchange trading. The shares climbed 7 percent last year, outperforming a 29 percent decline in the 16-company Philadelphia Gold & Silver Index.

‘Counterweight’ to Currencies

Gold is a “the obvious counterweight” to currencies, Munk said. The metal has reached record levels in Indian rupees and Russian rubles, among others, as investors outside the U.S. demonstrate a greater affinity to buy the metal as a hedge against currency declines, he said.

“Americans were brought up to believe in the dollar, with some justification, and it is the Germans and Russians and Indians that never trusted their currency,” Munk said. “Today, it’s a situation where people also have concerns about the dollar paper currency.”

Gold futures jumped to a record $1,033.90 an ounce in New York on March 17 as the dollar slid toward a record low against the euro and bank losses increased. Some investors buy the precious metal as a hedge against inflation and a haven from financial turmoil.

Greenlight Buying up Gold Mining Stocks

Greenlight Capital Inc., the $5.1 billion hedge fund based in New York, said earlier in the month it was buying gold and gold- mining stocks for the first time ever as a hedge against the Federal Reserve’s attempts to revive the U.S. economy by devaluing the dollar.

“Our guess is that if the chairman of the Fed is determined to debase the currency, he will succeed,” Greenlight said in a Jan. 20 letter to clients. “Our instinct is that gold will do well either way: deflation will lead to further steps to debase the currency, while inflation speaks for itself.”

Eight years of gains for the metal is the longest winning stretch of the 19 commodities tracked by the Reuters/Jefferies CRB Index.

Gold futures for April delivery rose $16.50, or 1.9 percent, to $906.50 an ounce today on the New York Mercantile Exchange.

As mentioned, it's a matter of if when gold rises above $1,000 an ounce this year as Barrick Gold Corp. Chairman Peter Munk asserts. The fall of the U.S. dollar will contribute to this as well.

Thursday, February 5, 2009

Gold Investors Seeking Haven and Profits

Now that much of the forced liquidation seems to have left the market, gold is starting to perform like the haven of safety usually has in tough economic times, and gold investors and regular investors are flooding to the market to not only be safe, but make some money from gold and its rising prices. Consequently, the U.S. dollar is starting to act like it really is with its poor underlying fundamentals, which had been hidden by the forced liquidation period pushing up its value as funds and companies sought to raise desperately needed capital.

Gold investors should be able to put their money into any well run gold producer this year and do well, along with investing in gold futures, which will continue to run up. Other gold investments set to do well will be gold ETFs, which with the larger companies are saying they're having no problem acquiring the needed gold to line up with investors' demand.

On the other hand, some gold coin sellers have said with some coins they're having trouble meeting specific demand, saying they have waiting lists into the weeks. Either way, gold in general will continue to perform strongly in safety and price, and gold investments won't disappoint this year in any way.

Even though gold was one of the better performers last year, the temporary resurgence of the U.S. dollar kept it from moving upwards when it should have been. That performance is about to rise again for gold, consistent with its usual consistency and price increase.

The huge amount of money pushed in the stimulus packages are starting to concern investors - as it should - and they see the U.S. dollar will start to gradually collapse under the mighty force of the fiat money printing press, which is the only way it will be able to be paid off. But that will lead to inflationary pressures, which will again push traders and investors toward gold.

What remains to be determined is how long it will take, not whether the time arrives. But either way, gold is going to break out again this year, and most analysts are forming a consensus that gold will push past the $1,000 barrier before 2009 is finished. And I think they're right.

Inflation is being held in check from the fact that people have stopped buying things or traveling much, holding down energy prices for now. That will change as the general economic struggles improve some, but then inflation will surge forward, which will benefit gold prices and gold traders and investors as well. Gold futures will continue to rise for some time to come, even if it's a bumpy ride at times.

The current record for gold is at $1,030.80 an ounce, recorded in March 2008, and that has a real possibility of being broken this year, depending of course on the pace the economy falters and havens of safety diminish.

Goldman Sachs (GS) has even increased its forecast for gold prices to reach the $1,000 an ounce range within a short three months, saying the demand for safety is increasing far beyond what it thought it would. Formerly they thought it reach only about $700 an ounce.

Every possible way of buying gold is in demand, from holding it physically, to futures contracts to investing in exchange-traded funds (ETFs). All of it is being brought about from safety and inflation risks in the market.

Physical gold has been in huge demand as the unbelievable and unprecedented and foolish bailouts have committed the government to far more money than it has to spend, and could virtually destroy the value of the U.S. dollar and bring it to be a very weak currency, the reason for the migration toward owning gold coins, which in a number of cases is taking longer and longer to fulfill orders.

Some of the gold producers from North America that have been recently upgraded by UBS because of gold as a haven of safety are UBS upgraded Agnico Eagle Mines (AEMO) (AEM), Barrick
Gold (ABX) (ABX.TO), Eldorado Gold Corp (ELD.TO), Newmont Mining (NEM) and Goldcorp Inc (GG) (G.TO) to "buy" from "neutral."

For Centerra Gold (CG.TO) and Franco-Nevada (FNV.TO) UBS retained its buy rating and target prices for the gold companies.

Moving quickly to take advantage of the volatile market, the largest gold-backed exchange-traded fund, the SPDR Gold Trust said its current gold inventory is at its highest levels, now standing at 859.49 tons. A huge increase in just a couple of days from 6.12 tons of gold it held on February 2.

One interesting factor in the overall gold picture is whether Barack Obama will get his almost $900 billion economic stimulus package passed. If he does, gold should skyrocket, if he doesn't, it should climb based on fundamentals alone, but it may not rise nearly as projected with the stimulus plan factored into the prices. The gold bulls would be slower to move it up, although there aren't many safe places to put their money regardless. The stimulus package would just make it happen much quicker, as a sense of urgency would settle in.

There's no doubt that gold futures and most other companies and ETFs related to gold will rise with it in 2009. With few havens of safety left, gold, and its cousin silver should flourish during these tough economic times, and gold investors will flourish with them.

Monday, February 2, 2009

Gold | Yamana Gold - Fulfill Promise in 2009?

With the price of gold assured to go up in 2009, many investors are giving a close look at gold mining companies as a significant part of their investment portfolio. To that end, Yamana Gold is being reconsidered again for 2009, after disappointing investors in 2008.

Many thought Yamana Gold was the darkhorse of the sector, and had tremendous upside potential in 2008. Conseqently it plunged in value to under $4 a share, as gold was under pressure from forced liquidation and copper prices plunged as well.

That's probably the chief challenge in 2009 for the company, as they look at cutting their exposure to copper resources to 19 percent, down from the 36 percent of the company exposure to copper in 2008.

As far as its commercial gold equivalent ounce goes, Yamana Gold is looking to increase by 36 percent to 1.35 M oz GEO in 2009. A number of investors believe this year could be a solid one for the precious metals company, looking for prices to almost double for the year. That could definitely happen for the gold company, considering the real possibility that gold prices could rocket up this year.

Yamana Gold stock should move along with that gold price increase, assuming managing their exposure to copper is successfully implemented.

Another key factor for all mining companies has been the lowering of operational costs as energy prices have fallen to levels not seen for some time. If those costs continue to stay down, it could help all mining companies, including Yamana.

One thing that will bear watching will be the commissioning risk the company is exposed to at its mining site in Gualcamayo in Argentina, along with its Sao Vincente mining site in Brazil. Silver production and prices will also be a major contributor to the success of the company in 2009. If gold prices go tremendously high, it could not only bring up the price of silver with it, but override it altogether through its successful surge, whether silver performs well or not.

I expect that silver prices could by percentage even outperform gold in 2009, and so will rather be a positive impact on the company rather than a negative. Hopefully they'll produce enough to make a big difference.

With a number of the long-term pipelines shut down or scaled back, the acquisition by AngloGold Ashanti of a 33.33 percent stake in the Boddington Mine joint venture could put pressure on Yamana and other gold mining companies to go into consolidation mode to shore up the losses connected to their gold pipeline reductions.

Gold stocks overall should be up for 2009, and Yamana Gold will participate successfully in the upwards move.

Again, as operational costs for gold mining companies decrease while the price of gold increases, this should be one of the better years for the gold industry in some time. Gold investors should enjoy a lot of positive perks and success too.

So with gold and metals extraction costs declining, and gold companies pretty much operating at lean levels, 2009 will be a banner year for the quality gold companies.

Yamana Gold is positioned to take full advantage of theis climate, and lessoning their exposure to copper while keeping operating costs low, should lead them to a great year.

Many people thought last year was going to be a breakout year for Yamana, but forces like forced liquidation and deleveraging kept them - like most gold mining companies and gold futures - from advancing in the way they should have.

This year is much more predictable as forced liquidation seems to be unwound to a large degree in a way that hedge funds should increase investment in gold and gold-related companies and products as gold futures once again become the place of safety investors looking for a financial haven expect.

What was expected by many of Yamana Gold in 2008, should be experienced by gold investors in 2009.