The Rise of Gold

Gold is at USD$1680/Oz now

2011-08-04T07:53:00.000-07:00

Gold is at USD$1680/Oz now. I am happy cause I bought it cheap at USD400/Oz. But it does not reflect well on the overall world economy. Euro zone mired in debt, US just lift its debt ceiling to borrow more money to cover its old debt...not good...

Sell to close my SLV and UGL call options to take profits.

2011-07-22T00:05:00.000-07:00

Sell to close my SLV and UGL call options to take profits. Buy to Open put option for SLV with target expiry date at 16 Sept. This is to expect a drop in silver price once the GOP and Democrats come to short terms agreement on debt ceiling/cutting program. However, in longer term, gold and silver price will continue to go up until the public is convince that USA and EU has managed to resolved their debt problem. Also, expect the FED to declare more money printing (QE3). They have to do this as this is the only way to boost the stock market and job market temporary to help Obama to win his next election. Will buy SLV and UGL call options again after mid Aug 2011.

On Gold

2011-07-20T20:04:00.000-07:00

Robert Barone
Posted Jul 20, 2011
Is the price of gold too high? Too low? Is it in bubble territory, ready to drop rapidly? Think about what bubbles are – you know there is a bubble when everyone is trying to participate. For example, during the dot.com bubble, my tennis pro was buying and selling options several times per day! I knew we were in a bubble. I even told him so. And, during the housing bubble, all of the chatter at cocktail parties was about flipping houses as a side business. I knew we were in a bubble (just didn’t know how frothy it really was!) People say to me all of the time when I talk about gold: “I would love to own gold, but its price is just too high.” Hmm! Too high relative to what?

The price of gold certainly can be fickle. After all, unlike other commodities that are essential inputs into some vital process (e.g. the production of energy or food), besides some very minor industrial applications, gold really has few practical uses (jewelry and art excepted). There is nothing intrinsic in gold to give it value. There is no cash dividend or earnings. It goes up and down in value at the whims of investor demand.

Gold does have three characteristics that make it unique: 1) it is rare and hard to find (all the world’s gold is estimated to fit into two Olympic sized swimming pools); 2) it doesn’t change form – all of the gold ever mined is still with us as gold; 3) it cannot be “produced” via the combination of other materials. Thus, its supply is well defined and increases very slowly and at great expense. Thus, it is perfect as a medium of exchange or a store of value.

We all know what makes the demand for gold go up – distrust in fiat currencies, and government deficits resulting in paper money printing. And that, of course, is why gold is rising in value today. As long as that goes on, the price of gold will keep on rising. So, what could happen to make it fall in value? I have listed several things below which could happen – I will let you be the judge of their likelihood:

The U.S. and the rest of the developed world (Europe) stop running fiscal deficits and stop printing money. There is an immediate opportunity for this to begin in the U.S. if the GOP and Obama Administration can agree on significant spending cutbacks. This means entitlement reform.
The U.S. economy magically finds its feet and its growth rate increases such that the unemployment rate begins to rapidly fall without additional monetary or fiscal stimulus. Interest rates would be rising too.
As a subset of the above, housing prices find their bottom and begin to rise with home sales and new home construction picking up.
The dollar reverses is slide as the premier world reserve currency and becomes demanded because of its intrinsic strength, not just because it is better than all of the other bad alternative currencies (e.g., the Euro). (This requires fiscal and monetary discipline and a reduction in both public and private debt loads.)

As long as gold is viewed as the ultimate monetary unit, its value will increase (decrease) with the debasement (strength) of the fiat currencies.

It is time to buy more gold now!

2011-07-19T20:42:00.000-07:00

Gold price has drop back to USD$1590/oz. This is the perfect time to buy. Don't miss this opportunity as it will not last for long. Same goes for Silver too.

The Head Of The World's Biggest Hedge Fund Sees "Economic Collapse" Due To Money Printing By Early 2013

2011-07-19T20:39:00.000-07:00

As part of its most recent issue The New Yorker has released a must read interview with Ray Dalio - head of the world's biggest hedge fund, Bridgewater. Dalio's fund, which according to some may now be as large as $80 billion, continues to outperform even in this problematic environment, indicating that unlike various other managers who shall remain nameless, and whose wealth is built up almost exclusively on one trade (and that belonging to someone else in the first place), Dalio, despite rumors that he is preparing to leave his current position and is actively seeking a replacement, is still keenly able to adapt to changing macro conditions.
Which is why his warning about future rounds of QE, which he sees as a certainty, should be heeded. Especially since it conforms 100% with the warnings of Zero Hedge - Dalio believes that future inevitable money printing will "lead to a collapse in currencies and bond markets." Dalio is even kind enough to give a time frame. "I think late 2012 or early 2013 is going to be another very difficult period." He is, to say the least, quite diplomatic.

From the full interview:

Dalio believes that some heavily indebted countries, including the United States, will eventually opt for printing money as a way to deal with their debts, which will lead to a collapse in their currency and in their bond markets. “There hasn’t been a case in history where they haven’t eventually printed money and devalued their currency,” he said. Other developed countries, particularly those tied to the euro and thus to the European Central Bank, don’t have the option of printing money and are destined to undergo “classic depressions,” Dalio said. The recent deal to avoid an immediate debt default by Greece didn’t alter his pessimistic view. “People concentrate on the particular thing of the moment, and they forget the larger underlying forces,” he said. “That’s what got us into the debt crisis. It’s just today, today.”

Dalio’s assessment sounded alarmingly plausible. But when one plays the global financial markets a thorough economic analysis is only the first stage of the game. At least as important is getting the timing right. I asked Dalio when all this would start to come together. “I think late 2012 or early 2013 is going to be another very difficult period,” he said.

Translation: enjoy your -0.002% Bills and paying uncle Sam to hold your money while you can.

ETF Securities: Gold Hits Record Highs: Futures Positioning Still Below 1-Year Avg

2011-07-18T22:25:00.000-07:00

Gold not only topped $1,600 for the first time ever but has set record highs against other currencies, including the euro and British pound, analysts with ETF Securities point out. “U.S. and EU government officials continue to struggle to find solutions to their respective sovereign debt-problems, driving investors into perceived safe havens,” ETF Securities says. Analysts say that futures positioning by speculators, who are heavily long, rose 29% in the last reporting week but nevertheless remains slightly below the one-year average.

Gold prices extend gains to record high above $1,600/oz

2011-07-18T01:56:00.000-07:00

(Reuters) - Gold prices extended gains in Europe on Monday to hit a new record high at $1,600.40 an ounce as investors spooked by the euro zone debt crisis and the threat of a U.S. default bought into the metal as a haven from risk.
Spot gold was up 0.45 percent at $1,600.10 an ounce at 0837 GMT. Silver also rose, tracking gold, to its highest since early May at $40.15 an ounce.
(Reporting by Jan Harvey)

Gold price is going to break the USD$1600 mark!

2011-07-18T01:50:00.000-07:00

Gold price at all time high of USD$1599 now. Silver price has gone above USD$40.

I am long SLV and UGL call options.

Uncertainty regarding the outlook for European and U.S. debt has most participants in Kitco News’ Gold Survey expecting higher prices for the yellow metal this week.
In the Kitco News Gold Survey, out of 34 participants, 22 responded this week. Of those 22 participants, 15 see prices up, while three see prices down and four see prices sideways or unchanged. Market participants include bullion dealers, investment banks, futures traders and technical chart analysts.
Many said with the market making record highs this week, to near $1,600 an ounce, gold could build on the upward momentum, especially as sovereign debt risk for southern-tier European nations is at the forefront of the news cycle. Ongoing negotiations to lift the U.S. debt ceiling ahead of the Aug. 2 deadline also add to the safe-haven allure of gold.

Gold price at all time high!

2011-07-16T01:18:00.000-07:00

Gold is at USD$1594 per oz now. I remember when I first bought it 5 years plus ago, it was about USD$400/oz..QE3 (Quantitative Easing 3 or Money printing round 3) is coming. This will lead to higher gold/silver price, higher commodities price, higher oil price, higher agriculture produce price, which leads to higher inflation, which leads to unhappy citizens which leads to riots which leads to.....

Gold Price Poise to Go Up

2011-01-10T06:32:00.000-08:00

Gold is currently at USD$1371. It is poise to go up again due to the many debt problem in Europe and USA. The PIGS economies in Europe is having serious debt problem and the US is looking to increase its debt limit again to above USD$14.3 trillion. Its current debt stands at USD$13.95 trillion! As long as the debt problem exist and the money printing don't stop, gold will continue to go higher. Take this opportunity to buy more!

How High Will Gold Go in 2011?

2011-01-08T06:30:00.000-08:00

By Jeff Clark, BIG GOLD

After stellar years for both gold and silver, what prices will precious metals hit in 2011? Here's an analysis based strictly on their price behavior in the current bull market.

First, take a look at the annual percentage gains that gold has registered since 2001 (based on London PM Fix closings):

Excluding 2001, the average gain is 20.4%. Tossing out the additional weak years of '04 and '08, the average advance is 24.8%.

So we can make some projections based on what it's done over the past 10 years. From the 12-31-10 closing price of $1,421.60, if gold matched…

* The average rise this decade, the price would hit $1,711.60

* The average rise excluding the three weak years = $1,774.15

* Last year's gain = $1,858.03

* The largest advance to date (2007) = $1,875.09

But what if global economic circumstances continue to deteriorate? What if worldwide price inflation kicks in? And what if government efforts at currency debasement get more abusive? If Doug Casey is right, a mania in all things gold lies ahead – what if that begins in 2011? Here's what price levels could be reached based on the following percentage gains.

* 35% = $1,919.16

* 40% = $1,990.24

* 45% = $2,061.32

* 50% = $2,132.40

* 1979's gain of 125.7% = $3,208.55

It thus seems reasonable to expect gold to surpass $1,800 this year, as well as reach a potentially higher level since the factors pushing on the price could become more pronounced.

Here's a look at silver.

As you can see, silver had its biggest advance in 2010. The average of the decade, again excluding 2001, was 27.5%. And also tossing out the '08 decline, the average gain is 34.3%. So, from the 12-31-10 closing price of $30.91, if silver matched...

* The average rise this decade, the price would hit $39.41

* The average gain excluding 2008 = $41.51

* Last year's advance = $56.22

* The 1979 gain of 267.5% = $113.59

So, $50 silver seems perfectly attainable this year. And that's without monetary conditions worsening.

It's titillating to ponder these advances for gold and silver, especially when you consider we might be getting close to the mania. And if we are, that should do wonderful things to our gold and silver stocks, too.

I would add one caution: the odds are high that there will be a significant correction before gold begins its march to these price levels. In every year but two ('02 and '06), gold fell below its prior-year close before heading higher. And here's something to watch for: in every year but one ('08), those lows occurred by May.

In other words, a buying opportunity may be dead ahead. And if you buy on the next correction, your gains on the year could be higher than the annual advance.

Gold Price Update

2011-01-07T08:35:00.000-08:00

In my last post at 7 March 2010, gold was at USD$1134, an all time high at that time. Since then it has move to above USD$1400. It has drop a bit to USD$1372 now. I notice a lot of people has started to say that it will crash now. But does the US government resolve its debt problem of 14 trillion dollars? The answer is NO. In fact it is planning to raise more debt to cover the existing debt by asking the Congress to lift the debt limit of 14.3 trillion to an even higher amount. Gold will continue to rise as long as the US and Euro keep printing money. Buy it now to protect your wealth. This is my sincere advice.

Gold at USD$1134

2010-03-07T00:33:00.000-08:00

Have not post for quite a while. Gold is now at USD$1134. An all time high. But there are still a lot of doubters out there. Remember, my friends, gold was at USD$850 in 1980s. If you factored in the inflation, its current price should be much higher. Buy gold coins and keep it. Don't be cheated by the government and bankers. When hyper-inflation strike, the value of your paper money will drop significantly. Be wise, buy gold now when it is still cheap. Everytime men printed massive of money, the money will be destroyed. It happens to the chinese' "flying money" in Yuan Dynasty, to the French's assignats after the French Revolution, to German's currency after World War 1, it will happen to USD now and the impact will be world-wide..

Gold break all time high of USD$850

2008-01-03T01:22:00.000-08:00

Gold is USD$864 now. US sub-prime problem + high oil price + drop in US dollar value = higher gold price. USD$1000 by March is no dream.

Happy New Year

2008-01-01T00:52:00.000-08:00

Happy new year for those of you who own gold. If you still don't, do it now when it is still time before the FED steal all your money (in reduce purchasing power and rising price)!

Gold is USD$838 Today

2007-12-30T06:09:00.000-08:00

For those of you who have not bought gold. DO IT NOW!!
Yes, especially for those of your who live in USA! Save your wealth. It is earn with blood and sweat. Don't let the FED cheat you of your wealth with the over issuing of US dollars.

Gold Forecast for 2008

2007-12-30T06:07:00.000-08:00

by Michael J. Kosares

In a December 2004 interview with the Wall Street Journal, I predicted $525 for gold's high in 2005. It hit that $525 level the following December. For 2006, once again in a Wall Street Journal interview, I predicted a "breakout year" for gold with a top price of $760. Its actual breakout high came earlier in the year than I had anticipated (in May) and a bit lower than I had predicted -- in the $730 range (intraday Comex). In January, 2007, when gold was trading in the $625 range, in a forecast published in a NewsGroup Market Update through our USAGOLD website, I made $715 my minimum upside target and suggested that gold could hit the $800 level, or go as high as $875 if tensions escalated in the Persian Gulf; or if the quid pro quo with China broke down; or if the new Congress proved as anti-market as advertised; or if we got some surprises. Gold hit $840 in November and is trading at the $810 level as this is written.

Before I delve into where I think gold might find itself during the course of the upcoming year, let me revisit briefly the market drivers I listed in the 2007 prediction. Both the Persian Gulf and China did play direct roles in the price of gold in 2007. First, the Persian Gulf was a source of continued tensions which drove the price of oil from the low $60s per barrel to nearly $100. Second, the quid pro quo between China and United States did undergo some revision even if it didn't break down. Namely, China did begin to shed some of its dollar reserves. As a direct result, it did play a key role in running up commodity prices from copper to wheat and crude oil. What has really spooked the gold market though, and the biggest surprise of all, was the one no one saw coming - the credit crisis. Of my potential market drivers, the one that proved to be a non-starter was the anti-market Democratic Congress which proved itself too disorganized to truly pose a threat to the economy, the American people or itself.

2008 Gold Price Prediction

So what about 2008?

In 2008, my minimum target is $925 based upon a continuation of the trends already in place and mentioned above.

We could, however, see a spike to between $975 and $1025 if, in addition,

1. The credit crisis escalates and the central banks are forced to inject substantially more "liquidity" into the financial system than anticipated; or

2. If tensions escalate to red alert status in the Middle East, or if a decline in U.S. presence in Iraq rekindles religious tensions, the bombings and violence in general (with the consequent effect on relations with Iran); or

3. Suppy problems escalate in the physical gold market causing a gold crunch; or

4. If we get another major surprise like we did with the credit crisis in 2007 (Yes, something else could crawl from under the rock);

Note: There could be a sharp mid-year correction in the gold price, if we get a strong run-up from the $810 level in the early months of 2008. However, I believe, in the wake of such a run-up, support is likely to come in the current range or just below. Conversely, we could get an out-of-the-box price spike should we see three or more of the events mentioned above converge with their full ill-effect upon the economy and financial markets. These are indeed dangerous times, more dangerous than at any time since the gold bull market began.
gold portfolio

Reflections in a golden eye

I would be remiss as a commentator on the gold scene if I neglected to mention the rehabilitation gold has experienced in the public consciousness, not just in the United States but on a global basis. Gold is moving into the mainstream as an evergreen portfolio item, and this will prove to be a very important market development as we move into 2008. To some extent, this rehabilitation has been by default. Washington and Wall Street simultaneously have suffered declines in the public perception for well-known reasons - a situation from which gold has directly profited. The real benefits to this change of thinking have yet to be realized, and are likely to play out over the long term. As investors make the connection between central bank money creation globally and its ultimate result, price inflation, so too they will make the connection between gold ownership and portfolio safety. It used to be that the same tone set in New York's gold market on a daily basis was the tone that carried through to overseas trading for the rest of the day. That scenario has changed dramatically. Now, it is not unusual to see gold begin a strong move in Asia overnight only to be carried over to the New York session. This role reversal suggests a global undercurrent in the gold market that wasn't present even a year ago, and should be taken into consideration by all gold investors. There is now genuine worldwide competition for the available gold supply.

Some might say I am pressing my luck by publishing a prediction for the 2008 gold market after calling the gold price in the three previous years, and I truly did consider, and mentioned to friends, clients and staff, that this year I might rest on my laurels. However, the trends which have pushed gold to the levels we have all enjoyed over the past several years are even more firmly in place now than they were at any time since 2004. Thus, I am emboldened and find myself in my traditional place this time of year. . . .out on the limb.

***As always, anyone who trades on these predictions does so at their own risk. There is as much chance I will be proven wrong as right. Those who are buying gold for long term asset preservation, though, pretty much view the prediction game for its entertainment value.

Last, consider this:

Given the perspective of 100 years from now, analysts might very well find currency inflation the common source for the rise in both the Dow and gold during their respective up-cycles. If currency inflation could take the Dow from 800 to 11,750 during its bull market, why couldn't it take gold from its $270 starting point to $4050? If gold were to achieve a price of $4050, it will have matched the roughly 1500% appreciation of the stock market during its bull phase. That makes the current price an attractive entry level.

Michael J. Kosares

Gold settled at $700

2007-09-08T00:44:00.000-07:00

Just checked this morning. Gold price has settled at $700. With the subprime problem and the rumours of China dumping US treasury notes, gold price is bound to rise more. When China dump their reserve in dollars but not converting it to Euros and other paper assets, what will they replace the reserve on??? The answer start with "G" and it beat paper money every single time in history of money.

Gold break USD$700!

2007-09-07T08:21:00.000-07:00

Gold price is USD$703 at this moment. The highest since May 2006..It will go higher..

Nathan Mayer Rothschild's Gold

2007-09-07T00:33:00.000-07:00

"I only know of two men who really understand the true value of gold, an obscure clerk in the basement vault of the Banque de Paris and one of the directors of the Bank of England. Unfortunately, they disagree," remarked Nathan Mayer Rothschild, the former owner and operator of England's Royal Mint Refinery, and the primary gold agent to the Bank of England in the early 1800's.

When the Bank of England's gold reserve was drained by the costs of the Napoleonic wars, down to 235,000 ounces (£1 million) against note issue liabilities of £15.5 million, it was Nathan who sent secret shipments of gold and silver to Wellington's army in Europe and financed the defeat of Napoleon. In 1825, it was Nathan who rescued the Bank of England and prevented the collapse of the entire British banking system, after a run on gold caused the collapse of 145 banks.

In 1919, the Bank of England, determined to restore London as the main gold market, reached an agreement with seven South African mining houses to ship their gold to London for refining, after which it would be sold through NM Rothschild at the best price obtainable, giving the London market and the Bullion Brokers a chance to bid.

The London Gold Fix was set at the London merchant bank NM Rothschild, from Sept 1919 until April 2004. NM Rothschild had profound influence at the London Bullion Market, where trading volume was 42 million ounces of gold per day (more than twice South Africa's annual gold production), including dealings in physical, leased, and forward sales.

The Rothschild empire helped to establish and finance oil giant Royal Dutch Shell, cemented De Beer's control of the world's diamonds, and following World War II, invested in vast areas of resource rich properties in Canada, and in base metals giant Rio Tinto. Legend has it, that the Rothschild fortune measures in the trillions of dollars. Rothschild's huge stash of gold and natural resource shares is tailor made for the day when the public wakes up to the fraud of fiat currency.

Gold Could Reach $3,736.13 Per Ounce

2007-05-02T06:56:00.000-07:00

From 1982 to 2000, the Dow Jones Industrial Average went from a bottom of 776.92 to a peak of 11722.98. This represents an annual compound return of 16.8% over the course of 17 years and 5 months. Ironically this rate of return is almost identical to the annual rate of return gold is delivering in its current bull market run. If we say for argument sake that the gold bull market lasts the same amount of time as the previous run in the DJIA from 1982 to 2000, we can project a gold price of $3,736.13 per ounce of gold by 2016.

Gold bottomed at $252.80 on July 20, 1999. 6.81 years later on May 12, 2006 gold peaked at $725 per ounce. This represents an annual rate of return of 16.7% which is only .1% off from what we determined the DJIA’s annual rate of return during its bull run from 1982 to 2000. Based upon the 16.7% annual rate of return this is how we came up with the $3,736.13 per ounce figure by 2016. This is actually a conservative figure considering that the last phase of the past two bull markets both the 1970’s precious metals bull and the DJIA bull from 1982 to 2000 ended in mania. The general public entered the markets which meant there were no more buyers and subsequently the long term bulls ended. We could very well see the same thing happen at the end of this bull market in precious metals. It would not be out of the realm of possibility to see gold go up to $5,000 or $10,000 in such a situation. I believe this to be a possibility considering that unlike the 1970’s we have China and India as factors as well as a chronically devaluing USD thanks to our friends at the Federal Reserve.

Using this same analysis we can also roughly determine a peak in gold for 2007. Based upon a 16.7% rate of return compounded for 8 years we arrive at a gold price of $869.64 sometime this year.

This might seem a bit high but considering the lack of interest in the precious metal markets at this moment in time, I don’t believe that to be the case. I still consider this a good time to buy gold and gold stocks simply because of the perceived lack of interest by general market participants. If we examine the traffic ranking of Kitco’s web site which is by far the most visited precious metals site on the Internet, we can see that traffic has bottomed out since the May 2006 peak. What’s even more interesting about this is the gold price isn’t too far off from that May 2006 peak and if we use Kitco’s web site traffic ranking as an indicator, the public has little interest in gold right now. As far as I’m concerned this means we still have a buying opportunity at current levels.

One ratio I follow religiously to determine if gold stocks are fairly priced in relation to the price of gold is the gold to XAU ratio. Amazingly, the gold to XAU ratio is currently at 4.81 which means that gold stocks are still cheap compared to the price of gold. That might seem hard to believe considering the recent run up in both gold and gold stocks, but when gold retraced back to $640 we believed that the market was vastly over sold. At that time the gold to XAU ratio was at 5.00 which I personally have never seen in the past few years that I’ve followed that ratio. That marked a strong buy signal for gold stocks and since that point in time we have seen a surge in gold mining stocks.

On a short term basis I do believe that we will be seeing some more resistance around the $700 level simply because of the market psychology involved with round numbers. We will also likely encounter resistance at the May 2006 peak. Once gold successfully breaks these levels we should see it make a move much higher. If we don’t hit our 2007 price target of $869.64 based off of our analysis, we should definitely see the gold price hit that mark in 2008.

Gold Rise, Dollar Drop and E-Gold is being targeted.

2007-05-01T02:51:00.000-07:00

I used to be able to exchange US$1 for 3.8 Malaysian ringgit 6 months ago, but now I can only get 3.42 ringgit. Gold meantime has risen from USD$250 3 years ago to USD$680 range today. Something is wrong with US financial condition. Too much of money is being printed maybe is one of the reason. US government now has started their witch hunt on e-gold to prevent it to go main stream, as it can really threathen the main stream banking system, which rely on issueing paper money. Dear visitor to this blog, buy more gold to protect yourself from financial disaster. I am no expert, but from historical data, paper money always failed and those who hold gold has a better chance to survive. Here is the full statement from e-gold regarding the government witchhunt against them:

-----------------------------------------------------------

e-gold® Founder Denies Criminal Charges
April 30, 2007
Melbourne, FL

On April 24, 2007, a Federal Grand Jury handed down an indictment charging e-gold Ltd., Gold & Silver Reserve, Inc., and the Directors of both companies with money laundering, operating an unlicensed money transmitter business, and conspiracies to commit both offenses.

Dr. Douglas Jackson, Chairman and Founder of e-gold, speaking on behalf of his fellow Directors and both companies vigorously denies the charges, taking particular exception to the allegations that either company ever turned a blind eye to payments for child pornography or for the sale of stolen identity and credit card information.

Dr. Jackson states, "With regard to child pornography, the government knows full well that their allegations are false, yet they highlight these irresponsible and purposely damaging statements in order to demonize e-gold in the eyes of the public. During the Inquisition, accusations of witchcraft and heresy were used to sanctify torture and seizures of property. In post 9-11 America, child porn and terrorism serve as the denunciations of choice. e-gold, however, as a matter of incontrovertible fact, is the most effective of all online payment systems in detecting and interdicting abuse of its system for child pornography related payments. e-gold Ltd. is a founding member of the National Center for Missing and Exploited Children's (NCMEC) Financial Coalition to Eliminate Child Pornography. e-gold is the only member institution to demonstrate with hard, auditable data a dramatic reduction of such payments to virtually zero, while billions of child porn dollars continue to flow through other (heavily regulated) payment systems. [Most members, that is, all the banks and credit card associations are utterly unable to even provide an estimate of the volume of such payments processed by their systems. eBay's PayPal subsidiary, who may have the ability to make such a determination, has refused to do so and has indicated they destroy payment records after two years.] What is worse, until August 2005 when NCMEC courageously broke ranks with US law enforcement agencies and began directly notifying e-gold of criminal sites via the CyberTipline, component agencies of the US Department of Justice purposely concealed their knowledge of child pornography abuses from e-gold's investigators, subordinating actual crime fighting to a policy agenda designed to dirty up e-gold."

In December 2005, the Secret Service (USSS) deceived a Federal Magistrate judge with bogus testimony in order to obtain search and seizure warrants authorizing the government to seize the US bank accounts of Gold & Silver Reserve, Inc. The seizure, which netted the government about $ 0.8 million, was designed to put e-gold out of business without due process, since G&SR serves as the contractual Operator of the e-gold system. At a subsequent emergency hearing, the government made no effort to defend their (sealed) allegations of lurid criminality, falling back to a position that their action was warranted because of a licensure issue. At the hearing, G&SR described its ongoing dialog with the Department of Treasury, initiated by formal request of the company in Spring 2005, to determine a possible basis for regulating the company's activities, since it was patently clear to competent authorities that G&SR's exchange service was not encompassed within any existing regulatory rubric [subsequently re-confirmed by experts at the Federal Reserve]. The US Attorney for the District of Columbia, responsible for the prosecution, was completely unaware of this orderly proceeding, as well as Treasury reports issued the same week that acknowledged e-gold as an innovation not meeting definitions of a money services business or a money transmitter.

Since this time, the government has been confronted with overwhelming evidence that the USSS had made a horrible mistake in its attack on the e-gold system and its repeated defamatory claims in the media that e-gold is anonymous, untraceable, and inaccessible to US law enforcement. They have concealed the fact that Dr. Jackson had personally arranged to come to USSS headquarters to train the USSS cybercrime squad in December 2004 (along with agents of the UK's National High Tech Crime Unit, and the Australian Federal Police) on advanced techniques, particularly in the area of efficient interaction with e-gold's in-house investigative staff, but was prevented when senior USSS management learned of the initiative and forbade the training on the grounds of a policy declaring e-gold as their designated boogey man.

The Department of Justice has had to determine whether to continue to stand behind their component agency. Their decision to close ranks has directly resulted in a gross misallocation of resources, with the result that vicious criminals who might have been brought to justice remain at large. An example of this is the Shadowcrew investigation, hyped by the USSS as a major success in disrupting international credit card thieves. The USSS did not subpoena records from e-gold at any time in their investigation, or engage with e-gold's superb in-house investigative staff, with the result that the sophisticated hierarchy of the ring was unmolested and probably strengthened while the USSS hauled in the low hanging fruit, "a dime a dozen and relatively easy to track down and pop".

Similarly, there is compelling evidence that the international cartel of commercial vendors of child pornography continues to operate because the FBI Innocent Images Unit and Special Agents within the Immigration and Customs Enforcement Agency have been forbidden to follow investigative protocols developed by Dr. Jackson, apparently for fear of further belying the party line that e-gold is itself a nefarious operation.

With regard to allegations of money laundering, Dr. Jackson notes "G&SR's online exchange service, OmniPay, has for years followed stringent customer identification procedures and an absolute policy of only accepting money payments by bank wire. If bank wires aren’t already "clean" then what is? Furthermore, e-gold Ltd. can scarcely be construed as a money launderer since it does not accept money payments from anyone in any form and has never owned a single dollar, yen, euro or any other brand of legacy money. As far as the possibility of a criminal successfully obfuscating a money trail, e-gold is a closed system. The only way to obtain e-gold is by receiving a transfer from someone who already has some. e-gold is also the only payment system accessible by the public that maintains a permanent record of all transfers."

On April 27, 2007, the government served seizure warrants on G&SR ordering it to freeze, liquidate and turn over to the government the operating e-gold accounts of G&SR and e-gold Ltd. The value seized, about $762 thousand worth of e-gold from e-gold Ltd. and about $736 thousand worth of e-gold from G&SR [on top of the $0.8 million seized from G&SR in 2005, and the approximately $1 million spent by G&SR so far in its defense] constitutes the bulk of the liquid assets of both companies. Perplexingly, a post-indictment restraining order states "Nothing in the provisions of this restraining order shall be construed as limiting the e-gold operation's ability to use its existing funds to satisfy requests from its customers to exchange e-gold into national currency, or its ability to sell precious metals to accomplish the same once approval has been obtained." Having taken virtually the entire operating funds of G&SR and e-gold Ltd., that is, the e-gold in both companies' own e-gold accounts, it is unclear if the government has even a basic grasp of the operations it has been investigating for three years at a taxpayer expense in the millions.

The most remarkable element of the restraining order is that the US government deputizes e-gold with plenipotentiary powers to act as judge, jury and executioner against any account user e-gold itself has deemed to be a criminal: "It is further ordered that upon receipt of this order the defendants are required to freeze, that is, not conduct or allow any further transactions in e-gold accounts that the e-gold operation itself has identified as being used for criminal activity". Although not accompanied by an outright letter of marque, this commission (the financial equivalent to double ought status?) would appear to be an acknowledgement that e-gold's 'Know Your Customer' prowess far exceeds that of any regulated financial institution, who would be obliged to rely on court orders or other legal writs to determine if freezing an account is warranted.

Concurrent with this latest attempt to knock e-gold Ltd. and G&SR out of business and thereby effectively deny them due process, the government also attacked other prominent exchange services that deal in e-gold; IceGold, The Bullion Exchange, Gitgold, Denver Gold Exchange, AnyGoldNow, and Gold Pouch Express, plus a sophisticated and secure alternative payment system called "1MDC". All of the listed exchange services also follow stringent Customer Identification Programs congruent with what would be required of a currency exchange business, if the law supported such a classification. Two of the services, IceGold and AnyGoldNow, are located in Europe and deal primarily with non-US customers. As a direct and immediate result of the seizures, these companies, all of who had built a reputation for honoring their obligations to customers in a timely fashion, have been disrupted, and, at least in the case of Gitgold, checks to customers issued in fulfillment of exchanges have bounced. This is a repeat of what happened to G&SR as a direct result of the 2005 seizure, when over 200 checks to customers bounced and refunds had to be sorted out with severely crippled liquidity and without a US bank account.

It must not be overlooked that the search warrant obtained by misrepresentations before a magistrate judge in 2005 resulted in the government helping themselves to the financial records of hundreds of thousands of American citizens [plus citizens of virtually every other country] who had not been accused of any wrongdoing. Since the initial raid, the prosecutor has caused the Grand Jury to order complete dumps of the e-gold data base on three additional occasions.

This case has nothing to do with criminal activity, at least not on the part of e-gold Ltd., G&SR, the named individuals or these other exchange services of high reputation. It is about a Department of Justice that is out of control, cognizant of having made a horrible mistake but determined at all costs to preserve its turf. In a meeting at the US Attorney's office in Washington on December 29, 2006, a Chief Assistant US Attorney told us that the United States knew we weren't "bad guys" and that the United States had no interest in sending any of us to prison or causing e-gold to go out of business. This was in virtually the same breath as proposing that the current defendants plead guilty to Federal felony charges.

The plain fact is that the repeated statements and actions of the government since 2001, especially the USSS, are directly responsible for crippling e-gold's ability to market its service to mainstream businesses and consumers, slowing [but fortunately not stopping] e-gold's continuous development of advanced anti-crime capabilities, subordinating US law enforcement's cybercrime fighting efforts to the forlorn hope of destroying e-gold, driving market share to non-US based alternative payment systems and making the US law enforcement community the laughingstock of competent cybercrime fighting agencies worldwide because of its obstinate inability to back down from the USSS's longstanding e-gold vendetta.

All inquiries should be directed to the law offices of:

http://www.fuerstlaw.com/

Gold's Performance During Recessions

2007-04-11T23:38:00.000-07:00

Much has been made recently about gold's use as a hedge against poor stock market returns. Unfortunately, this strategy has some holes in it. While it is true that gold tends to perform in the opposite direction as stocks during secular markets, it tends to perform similarly to stocks during shorter cyclical time periods.

From 1966-1982, when the S&P 500 did nothing, gold went from $35/oz. to over $800/oz. During this secular commodity bull market, stocks certainly performed in opposition to gold. However, when breaking down these 16 years into shorter time frames, it is noteworthy to understand when gold made its biggest runs. Between 1970-1973, the stock market performed decently well, while the gold market performed very well. However, in the 1973-1974 time frame, both markets took a strong beating, with the S&P losing some 40% and the gold market being cut in half. Once the carnage was complete, both markets recovered in late 1974, and began rising in conjugation once again. Stocks rose a little, while gold rose another 800%. While their rise certainly was not symmetric in nature, it is important to understand that both the gold and US stock markets rose and fell in tandem. After 16 years, the sum total of all that those cyclical markets showed gold up 2000% with the S&P unchanged.

Something similar is likely to occur during this commodity super cycle, and in fact, it has already begun. Gold's rise from late 2002 to today is far superior to the overall market's returns. However, when the US market falls, and the economy follows suit, it will likely bring the gold market down with it. This not only makes sense fundamentally, but is backed up by historical precedence. In Gorton and Rouwenhorst's paper published in 2004, gold's performance since 1959 mirrored the performance of stocks during any given part of the economic cycle. Gorton and Rouwenhorst showed that the early recessionary period was the worst time frame for both stocks and gold, while both sectors performed very well during the late recessionary period.

For those investors wanting a hedge against stock market volatility, gold may not necessarily be the right investment. Gold's performance is highly correlated with the stock market's performance during cyclical 3-5 year periods, and better hedges exist, such as agricultural futures or even TIPS (Inflation protected bonds. Yes, the government lies about inflation, but at least it provides some hedge). Passive investors willing to ride out the storm for 10-15 years may find gold to be an excellent market hedge. Until then, however, expect gold and stocks to rise and fall in tandem.

China Should Buy More Gold: Newspaper

2006-05-24T01:25:00.000-07:00

China should buy more gold with its foreign exchange reserves, an official newspaper said.

China should buy more gold with its foreign exchange reserves, an official newspaper said in a commentary on Monday.

The China Securities Journal said gold accounted for only 1.3 percent of China's foreign currency reserves, which hit a world record $875.1 billion at the end of March.

In rich countries, by contrast, gold makes up 50 percent to 60 percent of reserves, it said.

Worries about the momentum of the U.S. economy; fears among financial experts that the dollar is on a long-term depreciating trend; doubts that the euro can replace the dollar as a major reserve currency; and concern that overseas demand for U.S. Treasury securities is drying up -- except on the part of China -- were all reasons why China should buy more gold, the paper said.

Against this background, gold was playing a much more important role in the global monetary system, it said.

"It would be a wise step for China to appropriately increase its gold reserves," said the China Securities Journal, which is owned by Xinhua, the state news agency.

It cited Russia and South Korea as examples of countries that had switched part of their reserves out of dollars and into gold.

The paper recalled a recent recommendation by an expert at the Beijing Gold Economy Development Research Centre that China should quadruple its gold reserves to 2,500 tonnes from 600 tonnes now.

"China should raise its gold reserves so those reserves can account for 3 percent to 5 percent of the foreign exchange reserves, instead of current 1.3 percent," the China Gold newspaper on May 9 quoted Liu Shanen as telling a conference.

Gold Mining Stocks and the Current Sell Off in the Metals

2006-05-16T02:51:00.000-07:00

This is not the final blow off for gold but could be a major consolidation and pullback that could last from two months to two years (like 1974-76).
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Gold mining dehedging will be a stabilizing factor for gold as many companies try and close out horrible hedge book positions and cover. This will be a strong influence to halt any major price declines.
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Since all the metals are getting hit hard at the same time, this appears to be big fund action and now momentum players will follow and exit.
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If there is any central bank that wanted to add some gold to the kitty without upsetting their colleagues they will show up in the next few weeks or months.
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The gold correction should be looked at from two basic global technical aspects.
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1) Using a base of approx. $400 gold for all of 2004, one could expect a 33% retrenchment of the move to $700. 33% of this $300 move would be $100. So a target here would be $600 gold.
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2) Using the shorter term base of 2006 (Jan-March of approx $570) then the move to $700 would be $130 and using a short term 50% retrenchment (due to the short term nature ) would be $65 or a target of $635. These numbers work for traders as well as jewelry buyers in Asia and India. So a $600-635 price target may be reasonable.
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The major move in gold will occur years from now when inflation is everywhere and at very high levels (8-12%) and people from China, France, the U.S. and other countries are stampeding into gold. The last few years are only the first leg of gold catching up with toothpaste, donuts and coffee. The big move is coming later.
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Major mining companies are in acquisition mode and this is a long term bullish sign as these players are extremely conservative and rarely speculate (as opposed to small exploration companies) ABX taking over PDG. Teck-Cominco merger and now Teck-Cominco going after Inco. There are others. They know the supply-demand equation for the metals is long term very favorable.
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The dollar needed a rest from its 8% sell off in the last 10 weeks and is rallying. Gold is responding to this. The other base metal sell offs are more likely to respond to other factors and that is why this coordinated selling is most likely fund driven and many funds are new to this arena... so expect plenty of volatility.
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50-day moving averages will probably bring in some support. I would suggest that long term investors in this sector protect profits, raise some cash and remain at least 60% invested as we are still in a bull market in the precious metals. But caution is advised. All metals are very pricey. The easy stuff is over.
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A hard look at 1974-76 would be a smart thing to do. This was a tough time for gold and the mining shares but it was only a rest from the 1968-73 run up and a prelude to the blast off from 1976 to 1980. This may be a re-run.
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Remember gold mining stocks that can mine gold at $250 gold or lower make fortunes at even $500 gold... so don't throw out the baby with the bath water just because a much-needed correction is now showing up.