The Bullion Buzz eNewsletter – January 26, 2010
"Every time hyperinflation rips through an economy, the middle class gets completely wiped out. It is very alarming to watch the purchasing power of an entire life savings reduced to that of a few pennies. Those savings represent years of real labor, real time, effort and sacrifice exchanged for corruptible pieces of paper that politicians and bankers can destroy at whim."
-- Congressman Ron Paul
Precious Trio: Gold, Platinum and Silver – All Will Shine
“We’ve long trumpeted gold as our top overall investment pick. But this doesn’t mean you should ignore those other precious metals, platinum and silver – which during periods of inflation and economic growth will likely outshine even the Midas metal,” writes Leeb. Gold isn’t the only precious metal, and while so far this decade gold has surged more than the others, this could change. Leeb has been urging investors to buy gold for years and it remains one of his top picks, offering protection against deflation and inflation alike. In this comprehensive report, which includes articles from other writers such as the Aden sisters and David Chapman, Leeb draws attention to platinum and silver as well. They will be must-have investments as we move into the next decade. In fact, because of their capital industrial applications, during periods of global growth and rising inflation they will likely outperform gold, while the yellow metal will shine during the deflationary bouts that almost certainly lie ahead. One factor making all three metals “precious” is their relative scarcity – far less is mined per year than is true of more common metals like copper and zinc. But metal prices, like all prices, reflect demand as well as supply. And demand, particularly for gold, rises when economic events make people lose faith in paper currencies. Today, there are plenty of reasons for such a loss of faith.
What’s Driving the Gold and Silver Prices Now?
The gold market changed dramatically in 2009 and, thanks to GFMS, the evidence is there to prove it. The main features of these changes are: Mine production was up by 6% in 2009; supply of gold scrap was up by 27%; jewelry demand was down by 23%; world investment jumped from 885 tonnes to 1820 tonnes, a year-on-year gain of 105%. These are the cold, hard facts, but Phillips wonders about the spirit in the gold and silver markets. This is what counts, because it points out the direction for the future of the gold price. He discusses mine production (it will fall in 2010, as the major reserves of the world are depleted and new discoveries are rare); gold scrap supply (last year’s rising scrap sales were due to record prices; holders used to lower prices sold to buyers who believe that prices will hold or rise, a healthy change in the fundamental structure of gold investors); jewelry (in the West, demand for gold jewelry drops as gold prices rise; in India, where jewelry is a form of investment, demand has begun to rise); investment (overall investment demand rose 105% in 2009 as investors sought inflation protection, a safe haven and a reserve asset). In addition, official gold sales by central banks have ground to a near halt, with many countries purchasing gold in 2009. Herr Weber, president of Germany’s Bundesbank aptly described this new appetite for gold when he said, in defense of Germany’s retention of their gold reserves, “Gold acts as a useful counter to the swings of the dollar”. So central bank demand, potentially the greatest and influential demand for gold, has swung vigorously from seller to buyer at a time when the supply of gold is not sufficient to satisfy the demand. Expect central banks to buy gold as and when they can, favouring large purchases in particular, in the days to come. In so doing they are telling us something and telling us loudly: that the current monetary system needs to have solid support from gold.
Read more synopsis like this on Gold, Economy, Investment and more by reading this week's edition of the BullionBuzz: http://www.bmgbullion.com/document/663