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ECB starts money printing March 2015

ECB launches QE March 2015

Mario Draghi launched the European answer to the Federal Reserves money printing of the last few years when he announced in January that the ECB would be pumping 60 billion a month of newly printed Euros into the Eurozone in an effort to head off deflation and cheapen the euro currency at the expense of the dollar and the yen.

It seems that central banks around the world are currently playing a game of musical chairs where everyone gets a chance to cheapen their currency against the others for a period and then another bank gets a turn. Now the Federal reserve has stopped money printing for the time being it’s the Euro and the Yen which are being treated like confetti. Already the Euro is trading at decade long lows against the dollar and gold has taken advantage to move upward against the Euro.

Last year gold rose approx. 11% in euro terms with a high for the year of approx. €984. This year gold has already broken above €1150 thanks to a strong run up in January and then pulled back to the €1055 area once the Greek debt situation was put on the long finger. At present (March 05) gold is moving back up and presently sits at €1094. The outlook for gold in 2015 is rather more supportive of higher gold prices than it has been in the last 2 years due to renewed money printing.

The new year started with a bang with the Swiss Central Bank deciding(being forced) to decouple the Swiss Franc from the Euro when it became obvious that Draghi will print as much Euro paper as necessary to generate inflation. The markets were perhaps surprised when Draghi finally stopping talking and started acting on money printing. The US has spent the last several years printing and as a consequence the American economy looks more robust than any other developed economy at the moment. But this American comparative strength is deceptive, by printing dollars the Fed cheapened US currency against that of its trading partners, particularly the EU, thus making US goods and services cheaper for non US consumers and US consumers alike and propping up the US growth rates at the direct expense of the EU and Japan as well as other less developed regions.

Now that this trick is working in reverse expect to see direct consequences in the US with more and more disappointing figures for exports, house sales, income growth etc. As the American economy continues to weaken under this strain it will be interesting to see how the Fed manages expectations around interest rate increases. A rate increase would need to be based on the US economy strengthening further from 2014 not slowing down, as we are suggesting will happen. If interest rates were to increase the effects on an already weakening housing market could be dramatic. We feel the Fed will not deliver on higher interest rates this year and would suggest that investors keep in mind that current dollar strength is based around the rate hike scenario projected for this year.

The Greek bailout situation looks set to run and run as the Greek economy is simply unable to serve the debt levels it already has. The Greek economy is significantly less productive than northern European economies and simply cannot produce enough activity and taxes to service debt in excess of 315 billion euros. The obvious solution is a greek exit from the Euro so enough drachmas can be printed to pay off this debt in devalued currency and let Greece move on. Instead it’s being anchored to a currency which it cannot control and it stays under a debt burden it cannot service. This saga will roll and roll until eventually Greece exits the Euro and/or defaults on its debt. Many suggest the issue here is that Greece must be kept in line paying its debt and not default so as not to threaten the Euro. We would suggest that the issue is much bigger. If a developed western economy can default on its sovereign debt that would invite the markets to cast a sceptical eye over the debt levels of all sovereigns. Imagine the consequences if the markets started to treat heavily indebted countries like Spain, Italy and the US as default risks? Interest rates would climb and this could make current US debt levels unaffordable to a US administration that is actually insolvent but has the saving grace of being able to print dollars, unlike the Greeks. There are a number of ways the sovereign debt issue can play out, but all of them involve higher gold prices.

US property market shows signs of weakness April 2014

Faltering US housing market April 2014

Six years after the collapse of 2008 there is a real sense of optimism among analysts that the US economy is finally shrugging off the effects of that collapse with real estate and stock market gains being the Fed’s chosen workhorses to drive the US economy forward. But some conflicting data seem to suggest that instead of accelerating the US economy is still simply flatlining with after more than half a decade of unprecendented monetary stimulus.

A big worry for the Federal Reserve (and any balanced individual who wants to see what the data is really indicating about the US economy) is the latest housing data. There are now real indications that the US housing market is going down again just when the US economy is supposedly picking up steam. Purchases of new houses fell 14.5% from February and mortgage applications have dropped off by 19% from 12 months previously. This is a real wake up call for the Federal Reserve as this indicates weakening demand at the very time the economic growth is supposed to accelerate. And these numbers have emerged in what is usually the busiest season for real estate. It’s worth noting also that new home sales fell by a similar volume in the months prior to the 2008 crash.

So what’s going on with real estate? Both housing and stocks have had a couple of good years based on the Federal Reserve’s money printing leading to targeted inflation in both of these asset classes. Perhaps the outlook is more clouded now that the Fed is attempting to taper, but they are still printing to the tune of 55 billion dollars a month (which by anything other than the standard of the last few years is Alice in Wonderland material!). Despite this wave of money housing is softening? Part of the answer seems to sit with investor activity – big real estate investors like Blackstone have been key to driving up house prices in the last two years as their access to the newly printed money was much greater than that of owner occupiers. But these investor groups have been pulling back sharply as prices have risen and many seem to feel current prices are no longer so attractive. Mortgage interest rates are rising and this is causing a reduction in investor activity across the real estate space.

Based on this it could be argued that investor activity alone has been disguising the weak state of the housing market. Now we are emerging into an environment where we will rely on owner occupiers to sustain and drive up prices and that is going to give a much clearer picture of economic strength in the US – and the early signs are not promising. Affordability is way down and owner occupiers are even more sensitive than investors to rising mortgage rates and also face a tight credit market. Add a weakening housing market to a stock market which will struggle in the face of Fed tightening and you have the recipe for real difficulties in the 12 months ahead. As it has in the last 6 years the US economy is again likely to disappoint the economic pundits who expect a pickup in growth. The US economy historically has a recession every 4 to 6 years and its starting to look like we’re bang on target for another one in the same time frame – before we’ve even escaped the effects of the last downturn. What will the Federal Reserve do this time?

2014 to be a better year for gold prices

In US dollar terms gold fell 28% in 2013 and in Euro terms gold topped out in September 2012 at just over €1380 before falling back to the €900 area by December 2013. Silver did even worse and while it has been as high as €34 euro in 2011 by the end of 2013 it was breaking below the €15 level. All of this has happened while the Federal Reserve was fully engaged in QE3 and pumping billions a month in government debt and mortgage backed securities.

In contrast to the poor performance of gold and silver in 2013 the stock markets had a great year and the US property market showed real signs of life. Both of these markets relied almost entirely on the Federal Reserve’s money printing to make headway however, as Bernanke felt that driving momentum in property and stocks was key to US economic recovery. Ironically precious metals got hammered as the Fed’s QE program drove investors to follow momentum in equities and real estate. Furthermore, analysts pointed out that a taper was coming at the end of 2013 and this compounded poor sentiment in the metals markets.

But since the start of 2014 when the Fed has actually started the tapering process equity markets have stalled and metals prices have moved up quite strongly. The economic data over the December January timeframe has been generally below expectations and this has been explained away as a result of poor weather conditions. However we believe that the US economy is set once again to underperform dramatically over 2014 as the Fed tries to reduce QE and that the current weakness is not just a temporary blip. Since we believe that money printing was the prime driver in equity prices last year we also predict that equity markets will go nowhere this year as the Fed tries to bring its balance sheet under some control through the taper process.

If the stock market stalls out this year then we also expect to see some weakness in property prices in the US as a consequence of the attempted taper. General weakness in the US economy will be more difficult to explain away as spring approaches (doubtless many manufactured explanations will be made however!) and this lack of momentum on the general economy, stocks and property is likely to swing the pendulum of momentum back in favour of the metals. Unless a ‘black swan’ emerges gold and silver are likely to make consistent progress back to higher levels and erase much of the losses from last year. However if a ‘black swan’ event was to occur (e.g meltdown in derivatives markets…) gold and silver could both move rapidly past their previous highs in this cycle.

10 key points about gold

1.- It costs 7.8c to create a C note(100 USD bill), 2 grams of gold(spot price roughly $80) costs roughly $75 to mine.

2.- US national debt is increasing by between 1/2 and 1 trillion USD annually.

3.- Annual gold production for the past few years has averaged 2500 tonnes. 1 metric ton is 32150 troy ounces, equalling 80,375000 troy ounces or 99 billion USD, a relatively trivial amount in comparison with the debt numbers in point 2 above!

4.- 1 trillion USD(1000 billion) is over 10 ten times annual gold production.

5.- China is the number one gold producing country at roughly 320,000kg of gold annually, South Africa was consistently number 1 until recently, it currently sits at number 4.

6.- South Africa, once the powerhouse of global gold output is fading fast, the major mines in RSA are depleting so fast that they are 2 miles underground in dangerous conditions, analysts say that once the mining stops in these mines it will not be cost efficient to re-open many of them. Estimates say RSA gold mines are 75% mined.

7.- The Krugerrand, the worlds number 1 gold coin come under such a squeeze this year(with the price drop in 2013 causing a huge surge in demand)that the rand refinery upped premiums and a billion dollar purchase of scrap gold was made in USA by an un-named RSA corporation. South Africa has never before imported gold on this scale.

8.- More than 1/3 of annual gold production is via scrap and recycling, this source is coming under significant pressure as it is diminishing significantly, scrap tonnage is down year on year for the the last few years, although the price drop has influenced this, the general consensus amoung scrap dealers is that the supply is just not there.

9.- Gold is subject to the law of diminshing returns similar to oil(i.e it becomes more expensive to mine the same oz in a location over time),however gold mining is more labour intensive than oil drilling, it is also harder to estimate quantity on location and often yields disappoint more so than with oil.

10.-If there is one country that understands the value of gold it is China, they have risen to number 1 gold producer worldwide, while dramatically increasing annual purchases and inflows via Hong Kong in particular. Whilst China's holding are still less than the USA, there is an increasing realisation that the US does not have/own all the gold it reputes to. China on the other hand significantly down plays its holdings, its production and its inflows. He who holds the gold holds the power!

Fed fails to taper - implications for gold and silver

Last week the Federal Reserve announced to a surprised financial community that there would be no reduction in money printing this month. The markets had priced in a 5 to 10 billion reduction in the Fed’s 85 billion USD a month of QE which has been channelled into mortgage backed securities and US treasuries to support the US housing and government debt markets and thus keep interest rates at abnormally low levels. Since there has been such a strong drum roll of media commentary about the apparently improving prospects for the US economy and Bernanke has been talking about reducing QE for the last few months there was a consensus on wall street that the the Federal Reserve would act to taper in September.

This didn’t happen as Bernanke acknowledged that economic data was not firm enough to suggest the US economy could move forward without its sugar high of 85 billion every month. Bernanke is dead right in his assessment. Without the 85 billion, interest rates would accelerate their move higher – a trend which began as soon as the taper talk began to emanate from the Fed. This would quickly cause cracks and a new more spectacular collapse in the housing sector as mortgages become completely unaffordable for new buyers and house owners with large mortgages are forced to default on their loans. Given the already bad data on loan defaults for homeowners it’s clear that housing is one of the most vulnerable sectors when interest rates start to rise. And rise they will – nothing goes on forever and the lowest rates in history will not continue indefinitely.

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Bond yields up, gold and silver up and stocks down...

Exciting price moves for silver and gold

Both silver and gold pushed up strongly in the last few days with Thursday the 15th August being notable as silver moved up 70 cents from 16.50 euro to the 17.20 area. This is hugely interesting because the silver price has been anchored down around the 15.00 euro area for most of the summer and just 2 weeks ago it was down to 14.80 as the Fed issued new commentary regarding tapering. In our opinion this is just an opening salvo from stocks bonds and metals as all three asset classes flash red warning lights over the strength of the US economy and its trajectory minus massive bond purchases from the Federal Reserve.

With positive new jobs data yesterday in the US the market hammered stocks and bonds downward as yields on US treasuries continued to rise. All this while gold and particularly silver had one of their best days of the year in terms of price movement. The talking heads on CNBC and Bloomberg attributed the metals strong performance to disturbances in Egypt where they bothered to note it at all. But it is our belief that the metals strong showing yesterday had nothing do with the middle east and everything to do with the market warning the Federal Reserve not to get off the QE tightrope. If the Fed allows the free market to set the proper interest rates for US debt there is a crisis looming that will make the issues in the Eurozone look like a cakewalk!

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Is the Gold Bull Market Over?

For those who are disillusioned by the recent downturn in the price of gold and silver, it is worth re-visiting the fundamentals of what exactly has been driving the current bull market.

Ask yourself the 13 questions below and then ask yourself is the perceived bull market decline based on a change in the facts or on simple sentiment:

1. Are the PIIGs reduced their debt burdens? Or have they increased further since recent crises?

2. Does the US bond market look healthy or does it look like a 30 year bubble ready to bust?

3. Are western consumers debt burdens dealt with?

4. Are real interest rates positive or negative?

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The Gold Silver Ratio

When investors are deciding to buy gold or buy silver, one of the key gauges is the Gold Silver ratio. However this ratio is open to interpretation, where should gold be in relation to silver exactly?

In other words how many troy ounces of silver are equal one troy ounce of gold? Ultimately the ratio can never be exact, as determining factors are constantly changing. However the following facts may be of use to investors when they attempt to decide where the ratio should be or when one metal is over/under valued against the other.

1. Many silver bugs say the ratio could and indeed should be 16:1. This level has only been reached 3 times for brief periods, in the last 113 years.

2.A level of 80:1 has been breached as many times and for longer periods in the same timeframe.

3.The average GS ratio for the 20th century was 47:1 and the GS ratio since then has been slightly higher than 50:1. This equates to a rough average of 50:1 over the last 113 years.

4. In 2011 the GS ratio approached 30:1 this suggests that silver was overshooting to the upside according to the 113 year average.

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Great reasons to invest in silver after recent price falls

Silver bullion

1. Recently the spot price has fallen yet the mining cost has increased by almost 10% in the last 2 years.

2.Spot prices have fallen yet refiners and dealers margins have both increased substantially signifying supply pressures as retail demand increases.

3.Refiners cannot keep pace with the increased demand every silver price drop brings, it is clear there is a divergence between paper and physical markets. Buyers realise the value when a paper sell off allows them to buy physical product at a cheaper rate.

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Gold price drop offers buying opportunity

The recent hard falls in the price of gold and silver, where hundreds of tonnes of paper gold were sold onto the markets over 2 days on Friday the 12th and Monday the 15th of April dropped the price of gold to nearly 1000 euro an oz by close of business that Monday. Given the slow sideways to negative price movement of the metals for the preceding six months this perhaps represented a final capitulation by professional traders and ETF’s in gold.

What has been so interesting about all of this is the response of individual investors to this dramatic price fall – the period since this price fall has seen the busiest period of the year for most bullion dealers (including ourselves). Supply shortages have developed across the supply chain as customers flooded back into the metals markets to pick up bargains in gold and silver coins and bars. This has been evident worldwide but perhaps most spectacularly in Asia where Chinese and Indian buyers have been falling over themselves to take advantage of this ‘firesale’ in the metals.

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How to spot counterfeit gold coins

Many new buyers of gold coins worry as to the authenticity of their purchase. Obviously the lack of familiarity with gold coins can leave new buyers more vulnerable to fake coins. Firstly fake coins are not that common but they do exist and a buyer needs to be able to detect one.

Buyers need to aware of the fact that Gold is extremely dense, it is the 7th most dense metal, and the other 6 with the exception of platinum are unsuitable for the production of coinage. Platinum is a different colour and rarer than gold, so it is often more expensive than gold.

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22 or 24 carat gold bullion?

When it comes to purchasing gold coins investors are often split between buying 22k and 24k coins.

Firstly to those who are unfamiliar with the terminology carat simply means simply a level of purity for gold alloys, the purity is measured as 24 times the purity by mass. In lay terms 24 carat is 99.99% gold (none or minimal alloy) and 22 carat is 91.66% (22 parts gold and 2 parts alloy). Understanding this leads to the question why use an alloy? The primary reason is due to gold’s inherent softness, pure gold is extremely soft and malleable, in jewellery or coinage this is often unsuitable. Unsuitable because coins in distribution are susceptible to wear and tear, the alloy toughens the coin and copper is much harder. The alloy(typically copper but sometimes silver) that is added changes the colour of the coin, copper adds a red-ish brown colour(as evidenced in the Krugerrand) and silver being a less dominant colour softens the gold colour(as evidenced in the American eagle).

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Concerned at the fall in the gold price?

Since September 2012 to date the gold price has gone from 1384 euro all the way down to the sub 1200 euro area now (22cd Feb). Today an ounce of gold costs 1195.44 euro and we’ve seen gold tumble down in roughly 20 euro increments every few months. At the same time the Dow Jones index has rallied since the 15 November 2012 from a low of 12496 to 13946 today – that’s a rise of almost 1500 points or more than 10%.

Accompanying the stock market rise in the last 6 months we seen a rise in bullish sentiment among financial commentators and analysts so along with metals, treasuries have suffered as investors look for ‘risk on’ higher yield investments. This is all predicated on the idea that the US economy is racing out of recession and there are blue skies ahead. However when the herd all rushes to one side of the room a degree of scepticism should be employed. There are some serious problems with the idea of a resurgent US economy unfortunately. One of those factors (which everyone is trying to explain away) is that US GDP actually shrank in Q4 2012 by -0.1% the first time we’ve had negative reading since Q1 2009.

Areas such as housing which have shown resurgent strength are also the areas where the Federal Reserve has been most directly involved – who believes US housing would be showing any pricing strength without the Fed’s QE3 monthly 40 billion dollar purchases of mortgage backed securities? This is a problem, because what happens when the Fed tries to ease back on these purchases? A real free market would continue to drive down real estate prices until they represented outstanding value for investors and this would allow prices to reach a stable equilibrium – but the Feds actions are encouraging the banks to begin writing more mortgages and more business than would be the case in a true free market potentially creating even more problems down the line. Unless of course the Fed is committed to QE forever but that will lead to a crisis in either the currency markets (dollar collapse) or the bond markets (international investors lose confidence in Treasuries). There is no way out of this trap.

If you ignore factors such as negative GDP numbers last quarter or artificially propped up housing market you might well conclude the present stock market rally is built on rock solid foundations but it is worth considering that perhaps the Fed’s money printing has something to do with the run up? Also ask yourself if 14000 dollars (Dow Jones now) today buys you more than 10000 dollars (Dow Jones 2000) in 2000 (the end of the greatest bull market in stocks in history). The answer (no!) tells you that, at best stocks have been trading sideways for 13 years – that looks more like a great bear market a la the 1970’s than the any sort of bull market from history! Based on the current economic fundamentals it seems clear that the half year run up in stocks that we’ve seen since November, is, at the very least, standing on some shaky foundations. That has coincided with a period of weakening metals prices. However the fundamental factors driving gold and silver to outperform stocks and property for the last decade remain very firmly in place. With sentiment so firmly against the metals this is a great time to pick up bargains. Metals may well go lower from here but as soon as sentiment in the stock market is shocked into realising the US economy is still mired in excessive debt with a wobbling currency the markets are likely to reverse in a big way. What will happen to the price of gold and silver then? Draw your own conclusions and base your investment decisions on fundamentals, not on sentiment!

Should you be concerned at the fall in the gold price?

 

Should you buy Gold Coins or Gold Bars?

Buyers are often unsure whether to buy coins or bars when it comes to investing in gold. Firstly people need to be aware that they are investing in gold not the coin or bar, coins or bars are simply different forms of the same product. That is not to say they are exactly the same value, there are advantages and disadvantages to both, but for the average investor who is unaware of these it is worth pointing them out.

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10 Reasons to buy Gold now...

  1. The bubble in government debt is showing signs of bursting – look at the performance of US treasuries since the start of 2013 – yields are rising which is an ominous development for overstretched and over indebted nations in the west
  2. Gold has outperformed almost all other assets over the last decade (apart from silver!!) and the factors which powered that outperformance (money printing, low interest rates, unsustainable debt etc) all look stronger now than they were back in 2000
  3. The Dow Gold ratio typically tops out at 1 to 1 at the end of a gold bull market. Look at the example of the deflationary 1930’s and the end of the gold bull market in 1980 – both times gold and Dow Jones index were valued equally in dollar terms. Today that ratio is 8.38 –(Dow 13992.40 and Gold 1667.80 dollars) suggesting this gold bull market has a long way to go.
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Silver price prospects in 2013..

Silver rose 6.4% against the euro in 2012 rising from 21.38 on the 1st January 2012 to 22.75 by the 31st December 2012. In the decade up to the end of 2011 the average price performance for silver against the euro was 19.3% increase per annum so 2012 ranks as a very modestly positive year for silver prices. In dollar terms the silver price averaged gains of 22.3% in the decade up to the start of 2012 and from January to December last year the silver price in dollars was up by 8.3% from 27.70 to 30.00 dollars. So last year was very unremarkable in terms of precious metals.

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Gold Sovereigns are money...

Sovereigns

buy gold coinsThe Gold Sovereign truly is money. Whenever I try to explain to people that the Euro, the Dollar, the Yen and all paper currencies are not money, I usually get a bewildered look. In the simplest of terms Money must serve two basic principles, firstly it must be a medium of exchange and secondly it must be a store of value over time. Immediately it’s obvious then that currencies are not money, as they clearly are not a store of value over time. The most practical example of why gold is money can be seen with the gold sovereign.

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10 Reasons to Buy Silver now...

  1. Silver is undervalued relative to gold – one ounce of gold currently buys 53.2 ounces of silver and the normal historical average is about 17 ounces of silver to 1 ounce of gold
  2. Silver has underperformed gold since April 2011. Every period of underperformance in the silver price has been followed by a significant period of outperformance of silver versus gold in this 11 year bull market in the metals for example the silver price dropped 19.5% in euro terms in 2008 but bounced back in 2009 (up 44%) and 2010 (up 91%)
  3. Every down year in the silver price has been followed by at least one and usually 2 or 3 strong up years – 2011 was a rare down year, 2012 looks set to be a solid up year and the likelihood is that 2013 will be a very strong up year in the silver price
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QE3 arrives...

By Shane Carroll - Goldbank.ie

Ben Bernanke announced the latest round of Quantitative Easing in the United States yesterday.  This will involve buying 40 billion dollars of mortgage debt every month in an effort to force some life back into the housing and construction sectors. This an open ended program tied to improvements in the unemployment rate. The implication here is that this program could continue indefinitely with all the attendant dangers an open ended money printing program carries. The policy of near zero interest rates has been extended until mid 2015 – this will mean interest rates will have been hovering near zero for 7 years by that stage.

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Investors seek out safe havens...

Shane Carroll - Goldbank.ie

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 The last several months have seen the gold price shoot from 1020 euro up to an all time high of 1375 euro this weekend. Given that last year’s all time high in euros was 1070 and the first six months of 2011 were spent in a trading range of 1000 to 1070 euro this is an extremely strong performance over the summer months. The pattern for metals is periods of strength followed by weakness and vice versa and gold seems to searching for an opportunity to correct at the present time but  the constant stream of bad news is preventing any correction from gathering strength.  Every time the price has moved down in the last 3 weeks the dips have been met by strong buying of  physical product which has driven the bears into hiding...

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Why Gold Makes Sense as an Investment

By Shane Carroll - investoronline.ie

There are plenty of professional ‘bubble spotters’ in the market these days proclaiming a gold bubble. But there are some things these commentators seem to miss. The first and most obvious thing to point out is that, tadalafil although gold is an investment , cheap it can also be regarded as money...
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Where to now for the Gold Bull?

By Shane Carroll – Goldbank.ie

We are 10 years into a precious metals bull market which has seen gold go from under $300 an oz at the end of the stock market bubble in 1999 and 2000 to over $1500 dollars today. In the same time frame the Dow Jones has gone from 11722 on January 14th 2000 to 12084 on June 20th 2011. Impressive. Gold’s rise has been steady but not meteoric.

mexican50peso

Against the euro the gains over the last decade have averaged 14% per annum and against the dollar those gains have been slightly higher at over 18%.But after a decade of good returns on gold and silver is it time for investors to exit the market ? Lets have a closer look at the factors in the years ahead that are likely to drive the gold price...

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A New Gold Standard?

By Shane Carroll / Goldbank.ie

Robert Zoellick Head of the World Bank since 2007 has called for a discussion on a new Gold Standard in an article in the Financial Times this week. Since 1971 when the US effectively declared bankruptcy by ending the Bretton Woods peg between the dollar and gold ($35 dollars equalled 1oz gold) the global financial system has been a floating currencies system based on a paper dollar as the global reserve currency.

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Great Reasons To Buy Gold

By Shane Carroll | Goldbank.ie

1. Ireland's economy.

Soaring unemployment, unsustainable debt and a government unwilling to take the action needed to help Ireland recover.

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Is the gold price a 'bubble'?

By Goldbank.ie

Over the last ten years gold has risen from $270 an ounce to over $1200 an ounce. This has fueled fears of another asset price bubble like those in equities in the late 1990's and property in this decade. Both of those asset classes suffered severe price falls subsequently, and housing is still falling in real and nominal terms and stocks have fallen consistently in value in real terms and sporadically in nominal terms in the last decade. A Dow Jones Index hovering around 10000 today does not have the same value as a 10000 level in the year 2000 (because the dollar's value is so much less today).

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