Gold prices settled at a new record high yesterday, as unrest in
North Africa and the Middle East pushed the safe haven currency to
$1,435/oz. Silver surged to new 30-year record nominal highs at
$34.74/oz. Prices surged in dollars and all major currencies and look
set to reach record highs in other currencies.
Given the continuing strong fundamentals and the concerns of
geopolitical instability spreading to Saudi Arabia and other autocratic
oil producing nations, gold and silver look set to challenge $1,500/oz
and $40/oz in the coming weeks.
Gold’s all time record nominal high yesterday was barely reported in
most of the mainstream business and financial press today - slightly
more online but there was little or no coverage in print.
This is an indication that gold and silver remain far from the
“bubbles” that some have suggested. Speculative manias and bubbles are
characterised by mass participation and widespread enthusiasm and
“irrational exuberance” by all sectors of society including the media
and particularly the retail investor and the “man in the street”.
As seen today, this is clearly not the case at the moment as there
continues to be little or no reporting (let alone analysis) about gold
and silver – even when they reach record nominal highs.
While the specialist financial press such as Bloomberg, Reuters. Dow
Jones, the Wall Street Journal and the Financial Times did report the
record highs; it was unreported in the mainstream press in most western
In the UK and Ireland, none of the main papers (including the Times
of London, The Guardian, the Daily Telegraph, The Irish Times, the Irish
Independent, and the Irish Examiner) reported the record highs.
The Financial Times print edition reported the news with one sentence
saying that “concerns were underlined by gold rising to a three-month
high”. In fairness to the Financial Times, they do report on the gold
market far more than most media outlets.
The media’s continuing non-coverage of gold and silver is a clear
indication of the lack of animal spirits in the sector. It is proof, if
any were needed, that the mainstream media and the man on the street
remains far from bullish on gold and silver.
Indeed, recent years and recent months have seen many so called
“experts” warning about the dangers of the gold “bubble”. They have been
proven badly wrong and it would be interesting to read a story about
how wrong they got it.
The majority of investors and savers in the western world do not know
what gold bullion is and could not tell you the price of an ounce of
gold or silver in dollars – let alone in pounds, euros or other local
The majority are unaware of the huge developments in the gold markets
(only reported by specialist financial press) such as China’s emergence
as one of the largest buyers of gold in the world (see news and our video below) and the fact that central banks and astute hedge funds are some of the largest buyers of gold in the world today.
A bubble only takes place when entire societies , including many - if
not the majority - of journalists and media become convinced that you
“cannot go wrong” with a certain speculation or investment and it is a
risk free way of making returns.
This leads to gushing reportage and commentary about the “sure thing”
that is a certain stock, bond, commodity or property market. It is
characterised by widespread commentary and a belief not just in the
financial press but in the mainstream media (day time radio and
television etc) that one must speculate or “invest” by buying a certain
security or asset class – whether that be tulip bulbs, Nasdaq, Apple or
property in London.
Greed and buying motivated to make a profit or quick buck becomes
widespread. This has not happened in the bullion markets as the majority
of bullion buying has been safe haven buying for wealth preservation
purposes rather than accumulation.
Concerns about a bubble in gold may be justified when it reaches its
inflation adjusted high of $2,300/oz. Similarly with silver, concerns
about a bubble may be justified when it reaches its inflation adjusted
high of $130/oz.
Concerns about a bubble in gold will be justified when gold is
covered in a regular manner in not just the specialist press but also in
the mainstream. When vested interests selling gold regularly appear in
mainstream media advising people to but all their money into gold
because it is a sure thing, it will be time to become very cautious
about the sector.
Near the top of the gold market (when the price is likely trading at
thousands of dollars, euros and pounds per ounce) we are likely to see
front pages in the business press (such as Fortune, Business Week etc)
devoted to gold and snappy front page positive headlines about how “Gold
is King”, “Why Gold is a Must” etc.
When that happens it will be time to be wary of the gold bubble and reduce allocations to gold and silver.
The lackluster, negligent media coverage of gold’s record highs yesterday suggests that we are a long way from there yet.
(Bloomberg) -- Silver Climbs to $34.795 in London, Highest Since March 1980
Silver for immediate delivery climbed to $34.795 an ounce at 11:43 a.m. in London, the highest price since March 6, 1980.
(FT) -- Gold touches all-time high
Gold hit an all-time high and oil surged higher after the US
said it was moving military resources to the Mediterranean heightening
fears of a full-blown war in the Middle East.
The US said it was moving marines and two warships into the
Mediterranean on Tuesday night amid growing international pressure on
Muammer Gaddafi, the Libyan leader, to stand aside.
Spot bullion rose 1.5 per cent to a record $1,432.10 a troy ounce,
surpassing the peak of $1,430.95 hit in December. ICE April Brent rose
3.2 per cent to $115.56 a barrel, the highest since a spike on Thursday
that took the global oil pricing benchmark to within cents of $120.
“Guns and oil are a bullish mixture anywhere in the Middle East and
north Africa,” said Michael Wittner, head of oil research at Société
Générale in New York.
Gold prices have jumped 9.5 per cent from a low of $1,308 in January, as
investors have become increasingly jittery over escalating political
unrest in the Middle East.
At the same time, silver has risen 30 per cent from its January lows, on Tuesday hitting a 30-year high of $34.59 a troy ounce.
Some investors trimmed their gold positions in January, believing a
rosier outlook for the US economy would boost returns on other assets.
Traders said the switch in broader market sentiment triggered by the
political uncertainty in the Middle East had driven investors back to
the precious metals.
“The buying has accelerated, both institutional and individual,” said
James Steel, precious metals strategist at HSBC. “The geopolitical
thermostat has not fallen. The situation in Libya really is almost the
worst of all worlds for markets because there’s no clear winner.”
At the same time, the jump in oil prices – up $20 since January – has
raised concerns of rising inflation, increasing demand for precious
metals as a means of wealth preservation.
The oil market is not only concerned about the loss of production in
Libya, but also the spread of unrest to other oil-rich countries in the
Middle East, particularly Saudi Arabia. Protests in Bahrain, Oman,
Yemen, Iraq and Jordan mean that most of Saudi Arabia’s neighbours have
been affected by the turmoil in the region.
Opposition groups in the country, the world’s top oil exporter and
holder of the majority of the spare production capacity, have called for
a “day of rage” to be held on March 11.
(Bloomberg) -- Copper May Slump on Mideast Unrest as Gold Surges, UBS Says
Copper, corn and rubber may tumble in the next six months, while gold
climbs to a record $1,500 an ounce as turmoil in the Middle East boosts
oil, fuels inflation and weakens Chinese raw-material demand, according
to UBS AG.
(Bloomberg) -- Gold Buying in China Climbs on Inflation Concern, UBS Says
Gold purchases in China, the world’s largest producer, climbed to 200
metric tons in the first two months of 2011 as faster inflation boosted
consumer demand, according to UBS AG, which said the price may gain to
“China is the big buyer,” Peter Hickson, global commodities
strategist at Switzerland’s largest bank, said by phone yesterday,
without giving a comparable figure for 2010. The estimate for the
two-month period compares with full-year consumer demand from China of
579.5 tons for last year, according to the World Gold Council, a
Bullion, which rallied 30 percent last year, surged to a record
yesterday as uprisings in the Middle East, quickening inflation and
currency debasement boosted global demand. China’s consumer prices rose
4.9 percent in January from a year earlier, exceeding policy makers’ 4
percent ceiling for a fourth month.
“Chinese interest is huge,” said Peter Tse, Hong Kong- based head of
precious metals at Bank of Nova Scotia. “Demand for physical gold and
imports has increased substantially” due to the Lunar New Year holiday,
Tse said today, referring to the week-long break that began Feb. 2.
Immediate-delivery gold was at $1,429.05 an ounce at 5:08 p.m. in
Singapore compared with yesterday’s peak of $1,434.93. Yuan-denominated
bullion rose 0.5 percent to 303.58 yuan ($46.19) a gram in Shanghai,
approaching the record 314 yuan, set Nov. 9.
‘Gold Is Attractive’
“Gold is attractive,” Hickson said. “The more the market becomes
concerned about inflation or concerns about unrest in Africa, more and
more people will look to gold.” The price may rise to $1,500 an ounce in
the next six months, said Hong Kong- based Hickson, who’s worked for
UBS since 1996.
Blackstone Group LP’s Byron Wien said in January that gold may rise
to more than $1,600 this year “as investors across the world place more
of their assets in something they consider ‘real’.” The price may reach
$1,600 this year, Wayne Atwell, a managing director at Casimir Capital
LP said the same month.
Protests partly linked to record food prices have erupted across
North Africa and the Middle East this year, toppling leaders in Tunisia
and Egypt and boosting oil prices. Libyan rebels braced for renewed
clashes today with forces loyal to leader Muammar Qaddafi. Iranian
protesters have clashed with security forces in Tehran, Al Arabiya
Gold investment in China, the largest buyer of the precious metal
after India, may gain 40 percent to 50 percent this year amid a lack of
alternatives, Wang Lixin, China representative for the World Gold
Council, said last month. He called that forecast a “conservative
Bars and Coins
China’s investment demand in 2010 jumped 70 percent to 179.9 tons,
surpassing Germany and the U.S., as buyers sought out bars and coins,
the London-based industry group said. Consumption by the jewelry sector
rose to a record 399.7 tons, it said. China imported more than 300 tons
last year, People’s Bank of China Vice Governor Yi Gang said on Feb. 26
China may be the “next big buyer” of gold, driven by institutional
and retail demand, Credit Suisse Group AG analyst Tom Kendall said in
Cape Town on Feb. 7. “If you’re sitting there in China with money in a
deposit account, you’re losing between 1-2 percent a year through
inflation,” Kendall said.
The boom in gold demand in China is driven by concern about inflation
pressure and the poor performance of alternative investments, the
producer-funded council has said. Premier Wen Jiabao pledged on Feb. 27
to boost food supplies to hold down costs, and to tackle surging
Spooked by Inflation
Jewelers at shopping malls across Beijing are witnessing a gold rush as
residents spooked by inflation look to protect their money, the China
Daily reported on Feb. 28.
Statistics from Beijing Caibai, the city’s largest jewelry store,
show sales of gold and other jewelry have totaled about 4 billion yuan
so far this year, a 70 percent increase from a year ago, the report
China displaced South Africa as the world’s biggest gold producer in
2007. Imports through last October rose almost fivefold to 209 tons from
the total shipped in the previous year, according to the Shanghai Gold
Exchange. Mine output reached a record 340 tons last year, the China
Gold Association has said.
The Industrial and Commercial Bank of China Ltd., the world’s biggest
lender by market value, started physical-gold linked savings accounts
in December with the World Gold Council. Account openings have surpassed
1 million, with more than 12 tons of gold stored on behalf of
investors, it has said.
(Wall Street Journal) -- India Spot Silver Hits Record High
The spot price of silver in Mumbai rose Tuesday to an all-time
high of 51,005 rupees ($1,127) a kilogram, the Bombay Bullion
Association said, tracking firm ...
(BBC) -- Gold price hits record high on Libya unrest
The price of gold has hit a record high as investors worry
about the political turmoil in Libya and spreading tensions across the
The price on the London Bullion Market jumped more than $14 to
$1,434.50 an ounce, topping the previous mark of $1,431.25, set in
Gold is traditionally seen as a haven for investors in times of uncertainty.
Unrest across the Middle East and North Africa fuelled a 6% rise in gold prices during February.
Analysts said that the political problems were pushing oil prices
higher and fanning concerns about inflation and slower global economic
"What gold needed was a catalyst, and it found it in the form of
tensions that are surfacing in the Middle East and rising oil prices,"
said Mark Luschini from the brokerage Janney Montgomery Scott.
Mr Luschini added that investors saw gold giving them greater protection from inflationary pressures and political instability.
On the New York Comex exchange, the price of gold reached $1,434.40, a record for that market, before pulling back slightly.
Meanwhile oil prices, which have also been on the up since unrest
broke out in North Africa and the Middle East, rose again on Tuesday.
In London, Brent crude rose 4.2% to $116.46, while US light, sweet crude rose 3.7% to $100.52.