Global Property Bubble Starting to Deflate Right around the world some of the premier cities for real estate investment are flashing red warning signals that the global property price run up facilitated by central banks dropping interest rates through the floor and printing trillions in extra currency units is approaching its end. In cities […]
Buying Gold in Ireland
Gold is the one most precious metal that can be kept for years and still is valuable. It maintains its quality regardless of the environment it is kept. And people seek it no matter what time period you live in. Why not get yourself with some genuine gold coins or gold bars today. At Goldbank, we are offering you the chance of a lifetime to get for yourself these precious metals in Ireland. And at long last secure your financial future. Our prices are very competitive and they change all the time. Meaning, all the prices you will see are live, and they change at an interval of 20 seconds. This is to help the customer to get the very latest market gold price.
You don’t need to be an expert in Gold in order to get a good bargain here at Goldbank. This is because we make sure that we reveal and explain to you all the details considering the gold that we offer so that you will know exactly what to buy. Customer satisfaction is our highest priority. And we always deliver quality gold at affordable prices. We offer gold in two categories; gold bars and gold coins.
Gold bars are melted pure gold that has been cooled into bar-like shapes. These bars come in different weight, the heavier the bar the more expensive. Some people fear that the larger the gold bar the harder it will be to resell, but as much as this may be true to some degree, you can always find a buyer for your gold bar. Get yourself some gold bars today.
1oz Gold Bar – All our bars are pure 24 carat gold, brand new and manufactured by LBMA approved refiners including Valcambi, Pamp Umicore etc.
100g Gold Bar – All our bars are pure 24 carat gold, brand new and manufactured by LBMA approved refiners including Valcambi, Pamp Umicore etc
1 kg Gold Bar – All our bars are pure 24 carat gold, brand new and manufactured by LBMA approved refiners including Umicore, Metalor & Heraeus.
Pure gold coins are rare and special because they are not being made anymore. Therefore, when you acquire some gold coins, you not only have the allure of gold to charm your potential buyer, but also the allure of history. The buyer will be charmed with the idea that the gold coin in his hand could have been used by kings and empires back in ancient times. Get yourself some gold coins today!
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.
- 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.
- A level of 80:1 has been breached as many times and for longer periods in the same timeframe.
- 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.
- In 2011 the GS ratio approached 30:1 this suggests that silver was overshooting to the upside according to the 113 year average.
- Right now as of May 2013 the Gold Silver ratio is over 60, this indicates a silver overshoot to the downside.
- It’s important to consider the fact there is less than ten times the quantity of silver mined vs. gold annually.
- More than 30 times the quantity of silver is purchased for investment vs. that of gold.
- Silver is more important industrially than gold and is often used in a non-recyclable manner.
- Central banks, perhaps the biggest players in the worldwide physical market hold and are accumulating gold not silver. Central banks clearly consider gold to be more important as a reserve asset than silver.
- The peak of the GS ratio was 100:1 in the very early 1990’s and the trough was 14:1 in the very early 1980’s. These extremes were within a decade of each other, and corresponded to the relevant bull and bear market emphasising silver ‘s extreme reactions to the prevailing market conditions.
It is important to recognise that although we are currently in the midst of a significant price correction in both gold and silver, the 12 year average for both metals shows we are most definitely in a precious metals bull market, When it comes to deciding which metal is better for you personally, the ratio is a useful guide but open to interpretation. The facts suggest a ratio of over 50 favours silver but be conscious that silver is an extremely volatile metal with often wild over and under shoots.
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?
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 gold coin, 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.
More worrying than this is the effect on the US debt market – rates in the bond market started to rise as soon as the taper began to be mentioned. No private buyers want to be in the train wreck that is the US debt market if the biggest buyer in town, the Federal Reserve is trying to pull out – without their monthly purchases keeping bond prices up and rates down the private market will act as all markets should and try to find the correct price for US debt – that means much lower bond prices and much higher yields until private buyers are satisfied they are being adequately compensated for purchasing US debt – which contrary to popular comment, is not risk free. If the US government has to go cap in hand to the private debt markets the US government will quickly be exposed as being insolvent – never mind the US housing market, this is the elephant in the room and Fed needs to keep him hidden as long as possible.
Housing and US government debt alone are two issues enough to make any taper from the Federal Reserve extremely unlikely – once a government or central bank starts down this money printing track they quickly find there is almost no way out. But there are other problems too – the employment situation in the US appears to paint a far too rosy picture, something Bernanke himself admitted when he pointed out that huge numbers of people seem to have dropped out of the workforce entirely in the last year, meaning they are no longer counted in the unemployment numbers thus the 7.4% unemployment percentage is unrealistically low. Even with those jobs which were created the majority were part time service industry jobs (thank you Obamacare!) rather than high quality well paid full time positions in manufacturing etc.
The stock markets have had a great year, but if the Feds actions this month tell us anything, it’s that the general economy, 5 years after the crash of 2008 is still in a precarious position. Without the Federal Reserve’s intervention in the mortgage backed security market there would be no housing recovery and without that who would really consider the US to be on the way back? But if stocks and housing keep going up while nothing else in the economy suggests they should be, it’s evidence that these two sectors are again going into dangerous territory and without ongoing QE from the Fed they would again be heading for burst bubble territory. The debt collector came knocking on the Feds door in 2008 and Bernanke shut the door and told everyone to keep quiet so maybe he’d go away – this week Bernanke risked a peek out side that same door again and found the debt collector was still sitting there waiting for his payment. The spectre of a deflationary depression looms large in the Fed’s thinking even as Bernanke approaches the end of his term – this is the biggest guarantee that we are on the road to endless QE.
Although both gold and silver have been in a correction since September last year and the stock market has moved forward strongly in this last year, the shaky foundation on which the stock market has advanced suggests that when the stock market falters gold and silver could be set for a strong rebound as the investment market realises it has overestimated the strength of the US economy by a wide margin. At the moment everyone, including the Fed, seems to have forgotten that it is not possible to re-inflate old bubbles and keep them inflated. I would expect that everyone is going to get a good dose of economic realism on this same topic. The only way real estate and stocks are going to avoid a nasty pullback at this point is an ever increasing commitment to QE (never mind an actual taper) and an acceleration in inflation – but even in that scenario both real estate and stocks will lose comparative value to other asset classes such as gold and silver. The parallels between this period and the pullback in gold and silver in 1975 and 1976 are illuminating – gold was off 50% in that 2 year period but from the end of 1976 to 1980 it went up a further 500%. History doesn’t necessarily repeat but if often rhymes.
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!
Strong evidence is emerging that both China and Japan are backing away from US debt in advance of any tapering from the Federal Reserve. The simple truth here is that without the Federal Reserve persevering in its purchases of mortgage backed securities and money printing there will be scant support for US treasuries at current yields. If the Federal Reserve does taper it risks allowing yields to explode and pushing the US government into a Greek style crisis within 6 months. With yields rising and stocks falling while metals rose this is the market sending out yet another early warning to Bernanke – the US economy, housing, stocks and bonds all depend totally on easy money and near zero interest rates. Without the Fed’s MBS purchases over the last year where would the property market be now in the US? And without a stabilisation in housing who would think there was any strength in the American economy?
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