Light at the End of the Tunnel for Gold

...With governments lacking courage for fiscal discipline, I expect that interest rates will remain in negative territory for a long time. Central bankers will continue to keep the printing presses warm as policies aren’t expected to change. I believe this will keep the Fear Trade buying gold throughout 2013. In addition, emerging market central banks have been diversifying into gold. Net official sector purchases of 425 tons year-to-date is a drastic difference compared to only a few years ago when central banks were net sellers of the precious metal. Only recently, UBS reported that in November, Russia purchased nearly 3 tons of gold and Brazil bought almost 15 tons. Iraq—a notable new buyer—bought 25 tons from August through October. Given that this is the country’s first increase since the early 2000s, “having a new buyer in the central bank space and especially from a new region is an important development,” says UBS. While the Love Trade has been subdued this year, we see light at the end of the tunnel, not a train. One recent development is the increase in mutual fund flows of $32 billion into emerging markets since the announcement of the third round of quantitative easing (QE) in the U.S. This appears to be a powerful precursor for a stronger 2013, which would reignite the Love Trade in China and India. To see the full article click here

Gold Bullion Receives Positive Preliminary Economic Assessment for Granada, Proceeding to Preliminary Feasibility Study

Gold Bullion Receives Positive Preliminary Economic Assessment for Granada, Proceeding to Preliminary Feasibility Study VANCOUVER, Dec. 21, 2012 /CNW/ - Gold Bullion Development Corp. (TSX.V: GBB) (OTCPINK: GBBFF) (the "Company" or "Gold Bullion") is pleased to announce the first economic estimates for its Granada gold property located on the prolific Cadillac trend in northwestern Quebec, 5 km south of the city of Rouyn-Noranda. The proposed combination of an open pit and underground operation has the potential to move Gold Bullion into gold production at the approximate rate of 102,000 ounces of gold per year. The Preliminary Economic Assessment (PEA) was prepared by SGS Canada Inc. - SGS Geostat business unit. The PEA is based on the measured, indicated and inferred gold resource estimation provided by SGS Geostat that was press released on November 15th 2012 in accordance with National Instrument 43-101 Standards of Disclosure for Mineral Projects as defined by "NI 43-101" regulations. PEA highlights are summarized below: Assumptions Gold Price (US$/oz) - 3 years trailing average 1,470 Canadian $ to US$ rate 1.0:1.0 Mineral Resources (recovered ounces) Underground Resources (1) 387,000 Open pit Resources (2) 739,000 Mine Parameters Mill feed coming from underground mine (tonnes per day) 1,000 Mill feed coming from open-pit mine (tonnes per day) 6,500 Combined mill feed (tonnes per day) 7,500 Mine plan tonnage (tonnes) 26,400,000 Underground Mine plan mill feed grade (grams/tonne) 3.51 Open-pit Mine plan mill feed grade (grams/tonne) 1.07 Open-pit waste-to-ore ratio 5.91 Estimated gold recovery (%) 94.10 Total gold recovered (ounces) 1,126,000 Pre-production period (years) 2.00 Mine life (years) 11.00 Average annual gold production (ounces) 102,000 Costs Pre-production capital ($) 259,000,000 Average Underground cash cost per ounce (US$/oz) 1,205 Average Open-pit cash cost per ounce (US$/oz) 985 Financial Return Payback from start of production (years) 6.80 Internal Rate of Return (before tax) 10.4% Net present value, pre tax, 5.5% discount ($ disc.) 74,300,000 (All dollar figures expressed in Canadian dollars, except where indicated) Resource category Tonnes Grade (g/t) U/G(1) Measured 18,000 2.79 Indicated 1,018,000 3.74 Inferred 2,635,000 3.42 Open-pit(2) Measured 20,485,000 1.05 Indicated 2,178,000 1.27 Inferred 112,000 0.78 Note: The above chart is presenting the resource as diluted material, mineral resources that are not mineral reserves and do not have demonstrated economic viability. At the prevailing gold price on December 19th, 2012 of US$1,650 per ounce and a Canadian to U.S. dollar exchange rate of 1.00, Gold Bullion has determined that the pre-tax NPV increases to $217.8 million at a 5.50% discount rate while pre-tax IRR increases to 18.8% with payback time reduced to 4.8 years (using the same mine plan). The study was prepared as a stand-alone project, relating solely to the mineral resources deposit at Granada, and accordingly does not take into account the previously outlined potential at depth disclosed on November 26th, 2012 since it is not mineral resources. Additional work is therefore required to convert the portion of potential into mineral resources. The Scoping Study mentioned herein is a preliminary evaluation inclusive of inferred mineral resources that are too geologically speculative to infer economical considerations that would classify them into mineral reserves. It is therefore uncertain that this preliminary evaluation results in the expected outcome. The complete technical report will be filed on the Company's website (www.GoldBullionDevelopmentCorp.com) and on SEDAR (www.sedar.com) in the next 45 days. "We are very pleased to release the Preliminary Economic Assessment study on the Granada gold deposit" stated Frank J. Basa, P. Eng., President and Chief Executive Officer. "Due to the dedication and diligence of Gold Bullion's technical team and consultants, we have been able to deliver this study within just four years of developing the property and are proud to see Gold Bullion progress as a potential emerging producer of gold in the near term, creating shareholder value through successful exploration and development while continuing to seek out other worthwhile opportunities for growth." The delivery of the Scoping (PEA) Study completes the first stage of Gold Bullion's Continuous Development Program at Granada, aimed at advancing the Granada Project to commercial production, by demonstrating an economic, environmental and social gain, while simultaneously mitigating the technical, financial, and environmental risks of the Project. As mineral resources could be affected by permitting and social acceptance issues, Gold Bullion plans to hold meetings with various stakeholder groups prior to the completion of the Pre-Feasibility Study and will either be incorporating those views and recommendations into the study or retaining as recommendations to be addressed in the possible final Feasibility Study. Claude Duplessis, Eng., Gaston Gagnon, Eng. and Jonathan Gagné, Eng. are acting as the qualified persons (QP) for Gold Bullion Development Corp. in compliance with National Instrument 43-101 and have reviewed the technical contents of this press release. About Gold Bullion Development Corp. Gold Bullion Development Corp. is a TSX Venture-listed junior natural resource company focusing on the exploration and development of its Granada Property near Rouyn-Noranda, Québec. Additional information on the Company's Granada gold property is available by visiting the website at www.GoldBullionDevelopmentCorp.com and on SEDAR.com. "Frank J. Basa" Frank J. Basa, P.Eng. President and Chief Executive Officer Neither the TSX Venture Exchange nor its Regulation Service Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release. This news release may contain forward-looking statements including but not limited to comments regarding the timing and content of upcoming work programs, geological interpretations, receipt of property titles, potential mineral recovery processes, etc. Forward-looking statements address future events and conditions and therefore, involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated in such statements. SOURCE: Gold Bullion Development Corp. Frank J. Basa, P.Eng., President and CEO at 1-514-397-4000 Source: Canada Newswire (December 21, 2012 - 10:20 AM EST)

How Gold Miners Can Leverage the Price of Gold

...The upside to gold stocks is that investors historically have received a 2-to-1 leverage by owning gold equities instead of the commodity... ...We believe that effective management can help miners gain more leverage over the metal for their shareholders. Picture the gold price as a pulley with gold company executives applying force on one side of a rope. The more disciplined and successful the management, the bigger the potential boost in gold equity returns. The muscle that gold miners can use to increase their “multiplier effect” for shareholders is three-fold: grow production volume, expand margins or optimize capital, you want to keep showing that you can increase the return on the mine and that you can increase the cash flow available for shareholders at a particular gold price... full article here

India to promote 'Paper Gold' to curb climbing imports

Asia's third largest economy India is trying everything now to stop excessive gold imports, accounted for the high current account deficit of the country. More and more gold based schemes were being planned by government to encourage investors to join schemes without investing in the physical commodity. According to India's Mid-Year Economic Analysis tabled in Parliament Monday, gold-backed products will help the investor enjoy benefits of investment in the metal without investing in the physical commodity. India is considering schemes like gold deposits, accumulation plans, gold-linked accounts and pension products to curb demand for the precious metal. The report said "Now gold backed financial instruments in the form of modified gold deposits and gold accumulation plans, besides gold-linked accounts and pension products linked with the precious metal are some measures being considered to reduce the attraction of a direct investment in bullion and jewellery in the domestic market and check a substantial rise in imports," However, gold-linked investments would have to be monitored to see whether the overall demand for the metal actually falls, it added. The Finance Ministry's Chief Economic Advisor Raghuram Rajan told reporters: "We are worried about gold imports. It is an unproductive instrument. The way to curb holding of gold is to create more attractive financial instruments. "Some gold linked instruments have been talked about by the RBI but potentially there could be other financial instruments to attract investment." Thecurrent account deficit(CAD), which occurs when a country's total imports are greater than total exports, has been rising on the back of record trade deficits, which in October jumped to a 12-year high of $ 21 billion on the back of rising oil and gold imports. The Reserve Bank has unveiled a slew of curbs on gold purchase and financing as imports touched a record high last year, pushing up the current account deficit to a historic high of 4.2 per cent in the year. In the 2011-12 fiscal, India's gold imports stood at $ 60 billion and the quantum of import was 1,067 tonnes. A Finance Ministry official said the imports have shown signs of moderation and that gives the government hope that the CAD will be lower this fiscal. The current account deficit (CAD), which occurs when a country's total imports are greater than total exports, has been rising on the back of record trade deficits, which in October jumped to a 12-year high of USD 21 billion on the back of rising oil and gold imports. In the April-June quarter of the current fiscal, however, gold imports had contracted by 18.4 per cent year-on-year to Rs 71,912 crore ($ 13 billion). Gold imports into the country has risen considerably in the last three-four years. View article here

The Fed — And The Best Time To Buy Gold…

Sometimes you don’t have to drop a quarter to see the monkey dance. Yesterday’s announcement from Federal Reserve Chairman Ben Bernanke caught us all off guard. Instead of the ho-hum, “we’re going to keep buying bonds for infinity” – we actually got a rather strange, out-of-the-blue declaration. Today I want to take a look at the details (in as quick a manner as possible) and see what this means for our economy, our currency and, of course, our old pal gold. With gold, I also want to share the perfect time to buy… But first, let’s analyze the Fed’s latest dance. In short, the Fed will continue its monthly asset purchase totaling $85 billion (a combo of bond purchases and mortgage-backed security purchases.) But here’s the kicker, the Fed will continue its monetary monkeyshines until “the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee’s 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored.” Ha! We traded one arbitrary, wand-waving set of monetary policy in for another. You and I would be hard-pressed to figure out which made-up government statistic we should follow – in other words, whose word is more reliable, the Fed number-crunchers that make whimsical monetary judgments, or the BLS number-crunchers that change the rules to the unemployment and inflation calculations at will? Either way, dear reader, you me and the monkey are stuck using the same paper dollars. Paper which, I don’t need to remind you, continually loses its purchasing power. Dollars in your pocket not buying what they used to? Let’s discuss… The World Is Catching On: U.S. Cash Is Cheap With each turn of the calendar month, the U.S. dollar loses its value. That is, with more stimulus hitting the market – to the tune of $85 billion a month – there are more dollars flooding the market. With more dollars hitting the market, each dollar loses its par value. I see this….you see this…and you better believe dollar-holders, like China, see it. Indeed, China is getting increasingly antsy when it comes to their large stash of U.S. dollars. And unless you’ve been hiding under a rock, you know that China has been doing whatever it can to diversify out of the dollar. You name it, China buys it. Energy resources like oil, coal and natural gas – to keep the houses heated, the lights on and the vehicle wheels spinning. China also buys building-block resources like iron ore and copper. Heck, China buys so many of these resources that it builds towns that no one lives in! [If you get a chance google “china ghost town” and you’ll see what I mean.] China is also in the sneaky business of hording precious metals. With the writing on the wall about the U.S. dollar – and Ben Bernanke re-emphasizing that text with every announcement – China looks to gold to preserve its purchase power. But China isn’t the only kid on the block doing this. It’s a global, precious metal trend that you’ll want to keep an eye on. Indeed, a lot of other emerging market players are, well, emerging in the gold market. Nations like South Korea, the Philippines, Kazakhstan, Ukraine – along with big players Brazil, Russia and India – have been ramping up gold purchases. In fact, according to the World Gold Council, central banks for the first three quarters of the year purchased over 370 tons of gold. With a little boost in the year end numbers we could see purchases totaling over 500 tons in 2012. That’s a lot of central bank buying, up over 10% from last year. Listening to what we squawk about here day-to-day, you’ll see that this central bank action portends the larger trend of wealth protection. Many emerging markets use the U.S. dollar as their de facto reserve (they don’t call the U.S. dollar the world reserve currency for nothing, eh?) So in an attempt to protect their nations purchase power, emerging markets are loading up on the de facto wealth protector: gold! Gold Protects Wealth – When Should You Buy It? The central bank buying spree portends a larger trend, which we squawk about here often: to protect your wealth with gold. Stated simply: you can’t print gold. So when Ben Bernanke and the Fed reduce the value of the dollar by printing as many billions as they choose, you can rest assure that they (or anyone) can’t create gold out of thin air. That’s why gold and silver, as a currency, have withstood the test of time. After all, gold is “the once and future money!” So is now the time to load up the truck? Well, instead of just running out and grabbing gold with both hands, we should take a detailed look at the best places to buy gold. View the article here

How Average Joe can save himself…and America

Jan Skoyles takes a look at how the decision to buy gold bullion and considering gold investment might be the best way for citizens of the US and UK to protest against politically motivated economic decisions which ultimately they bear the brunt of. Joe Biden went to Costco to fight for them. Obama visited a toy factory to speak out in support of them and House Minority Whip Steny Hoyer referred to them as hostages, kidnapped by the Republicans’ demands. Who am I talking about? The middle-classes. It seems they can’t fight their own battles anymore and instead represent a much favoured toy in this fiscal tug-of-war. Why are they being fought over? Because they’re the 90% who will suffer if the 1 Jan tax increases are allowed to go ahead. They’re the ones with the most to lose; too rich to sit in the governments’ cotton-wool cradle, but too poor to flee the country when it all goes kaput. They’re sitting ducks, who haven’t quite clicked onto who and what really caused the financial crisis. They suffered the most in the financial crisis, thanks to the housing crisis and high levels of personal debt. Between 2001 and 2007, according to a study by Edward N. Wolff, the middle classes owed 61 cents for each dollar of their wealth, a 50% increase from 2001. Yet they still believe in the American Dream, fed to them straight from Washington. They’re following a dream sold to them long before they were born, believing they can better themselves and their democratic country and elected government will help them do it. But this is rarely the case now. A recent study, by Wolff, found between 2007 and 2010 the median net worth of U.S. households fell by 47% i.e. their wealth went ‘poof!’ and disappeared. Even when incomes appear to be increasing, this is rarely the case in practice. Not only has the value of their possessions also gone AWOL but, as the most recent US census found real incomes remain the same as they were in the early 1970s. When the middle classes do eventually realise that the American Dream has moved nowhere since the 1970s and how much the government have been creaming off them in the longest daylight robbery ever seen, will they revolt? The chances are pretty slim I suspect. Every day I sit and discuss with people why more people aren’t getting really angry about what’s going on – the theft of savings, income and living standards declining. Is it because they haven’t realised yet or because they’re sheeple? Just following whoever’s barking the loudest and not making them think on their own. ..or worse, lying to them. Here in the UK, a recent survey showed 94% of those polled believed the UK government were working hard to slash the debt. They’re not, they’re increasing it. When it comes to the fiscal cliff in the US– we all know what‘s going to happen – a compromise. Everyone will compromise. Everyone that is except the people who are actually affected by it. They’ll just continue taking the beating they’ve been getting for the past few years, and why not? As Bill Bonner explained the other day – the further governments go, the further the voters expect them to go. But what happens when the government can’t go any further, what then? We can now see a near-global perspective when it comes to dealing with this crisis: fake it and print it. This is unlikely to change in the foreseeable future. In every election in the socialist Western world, the middle classes appear torn over the desire to protect themselves and the need to provide a safety net for those who have less than themselves and are really suffering right now. Someone needs to remind everyone around today that the ability to look after oneself and your sovereignty is a precious commodity, and one which is being rapidly lost and devalued by those who no longer care for it. I’m convinced however that once the middle-classes wake-up and realise the daylight robbery which is happening in front of their very eyes, they will be a formidable force. In the 1923 book The Irresistible Movement of Democracy, Jeremy Bentham’s work to educate the middle-classes during a campaign for parliamentary reform, is described. ‘[Bentham] instituted a school of thought and criticism which aimed to awaken the middle and intellectual classes to the need of reform. It taught the middle-classes that good government rests upon the basis of the sovereignty of the people.’ History shows that great change comes about when the people, those middle classes, rally together to educate themselves and campaign against government. Stop the Duke, Go for Gold! Is a story John Butler, of Amphora Capital, told me a while back which has played on my mind ever since. It’s a story of middle-classes fighting back at politicians, their weapon? Gold. In protest to the Duke of Wellington’s overturning of a majority Parliament (on the King’s orders), a campaign was started by the middle classes in May 1832, after a long and hard-fought fight against the Duke. Posters appeared overnight in the middle of London calling for people to ‘Stop the Duke! Go for Gold!’ in response the people drew $1.5 million in gold from the Bank of England. In June 1832 the Reform Bill received Royal Assent, the people had won. They had won by taking their money – gold – out of the hands of those who were abusing their sovereignty. Like all successful strategies, this can easily be replicated today. As is often said on this site, gold investment is not only your way of protecting your wealth from government policies but also from those who decide you no longer have the right to decide what happens to your money. Just over 70% of the American people hold savings accounts, so over two-thirds of the population are losing money thanks to negative real interest rates. It also means over two-thirds of the Americans are helping to prop up the US banking system – which in turn is supported by the Federal Reserve who are printing away not giving a thought to the US people’s savings and standards of living. The Occupy movement, whilst well intentioned will not work. Intelligent, covert protest by the middle-classes is what will make our governments sit up and pay attention. It’s our job to now tell people that good government rests on our own sovereignty and the most effective way to protest is to buy gold. Here is the link

The Gold Market Seen Through a Glass Darkly

...In December 2012, it is clear the bankers drew a ‘line in the sand’ in September 2011 to prevent another rapid ascent in the price of gold. To some, this ‘line in the sand’ presents a major barrier to gold’s advance. But, in reality, the bankers’ line in the sand represents the bankers’ desperate last ditch attempt to prevent the inevitable from happening. The systemic distress that drove gold’s 27 % rise between July and September to $1900 has not abated although the lower price of gold would imply otherwise. The present price of gold below $1800 is due solely to central bank emergency measures to contain the price of gold and China’s reluctance to let gold rise too far too fast before China can buy as much gold as possible before the next economic crisis. 2013: GOLD WAITS FOR THE END OF THE BANKERS’ CONFIDENCE GAME Speculation abounds as to the trigger event that will set off gold’s vertical ascent. It could be the collapse of the global derivatives market or a credit event such as Credit-Anstalt’s collapse in 1931, the Austrian bank owned by the Rothschilds or perhaps Japan’s inevitable descent into the deflationary conflagration it has resisted since 1990. It could be any number of events or causes. It could be triggered by a black swan event, a geopolitical crisis or a natural disaster on the level of the earthquake that struck off the coast of Japan in March 2011. Whatever the trigger, in the end the banker’s 300 hundred year-old con game will collapse from a simple lack of confidence. Read the full article here

FED Keeps Pumping

Just watching Bernake speak and highlights that I see Holding interest rates at near 0. New round of stimulus launched. How can Gold not skyrocket anytime soon?

Gold prices rise ahead of Fed news

Gold prices rose in Europe on Wednesday ahead of a Federal Reserve monetary policy statement due later in the day, at which the US central bank is expected to announce more stimulus measures to support the country's economy. Analysts say the Fed, which ends a two-day policy meeting later on Wednesday, is likely to unveil monthly debt purchases of $45 billion, which will come on top of mortgage bond buying of $40 billion a month the bank started in September. Further easing measures would likely support gold by stoking inflation fears and maintaining pressure on long-term interest rates, the opportunity cost of holding non-yielding bullion. Spot gold was up 0.2 percent at $1,713.12 an ounce at 12:22 SA time, while US gold futures for December delivery were up $5.10 an ounce at $1,714.70. “If the Fed comes out and says it is going to put $45 billion into long term Treasuries, on the face of it that is good for gold,” David Govett, head of precious metals at Marex Spectron, said. “However, I think a lot of that concept is priced into the market already. You'll see an initial blip... we could see gold rally up to $1,725, $1,730. If they say they are going to increase the amount, gold will rally further. “However, if they don't do it, or they decrease the amount, I think gold is vulnerable on the downside,” he said. By Reuters Financial markets traded sideways ahead of the announcement, with the dollar little changed against the euro and European shares steady after a sharp three-week rally as investors anticipated more Fed stimulus. “For us, the most important precondition for gold gains is loose monetary policy,” UBS said in a note. “We don't think gold has priced in a sizeable expansion in the Fed's balance sheet beyond current levels, but we do think that quantitative easing will again loom large in the first half of 2013. This overrides many other potential gold drivers.” ETF HOLDINGS RETREAT Reuters data showed holdings of gold exchange-traded funds retreated on Tuesday, with both London-based ETF Securities and New York's SPDR Gold Trust reporting outflows. Holdings of products tracked by Reuters fell 108,000 ounces. China, the world's biggest gold miner, produced 34.6 tonnes of gold in October, bringing total output over the first 10 months of the year to 322.8 tonnes, up 11 percent from a year ago, a government department said on Wednesday. Among other precious metals, silver was up 0.4 percent at $33.07 an ounce, tracking gold. Spot platinum was down 0.1 percent at $1,631.50 an ounce, while spot palladium was up 0.2 percent at $690.80 an ounce. The gold/platinum ratio, which measures the number of platinum ounces needed to buy an ounce of gold, fell to a two-month low on Wednesday at 1.05, and platinum narrowed its historically unusual discount to gold to around $75, well below its average this year of $122. Platinum and palladium have outperformed in recent months, rising nearly 8 percent and 19 percent respectively since late October, with the autocatalyst metals benefiting from a brighter economic outlook in China and the United States. The planned launch of a physical platinum and palladium fund by Sprott also underpinned sentiment, traders said. Sprott, which already manages physical gold and silver ETFs, plans to sell 35 million units, each worth $10, which will be split into equal halves to buy physical platinum and palladium, it said in a filing this month. The trust could buy more than 107,000 ounces of platinum and 253,000 ounces of palladium, raising the amount of metals held by ETFs by 7 and 14 percent respectively, Reuters calculations showed. - Reuters

Renewed Interest in Gold as a Financial Asset

You may be among those investors who had the opportunity, but did not seize it, to buy gold cheap in the early 2000s. You may also be willing, but hesitant, to do so at current prices, while still desiring the "anti-crash insurance" it represents. However, you should be aware that the yellow metal is increasingly valued as a reserve asset, which will tend to push the price up, independently of all other factors. Due to new regulations, you may also have to bid in the future alongside financial institutions, including several banks, to acquire it. Read the article on 321gold here

Dollar’s weakness may cap gains in Gold

CHENNAI: Hopes of the US Federal Reserve Bank announcing more stimulus measures to boost economy could drive gold higher on Tuesday. However, the dollar’s weakness against a basket of major currencies could cap gains. Economists say that the US Fed will announce purchase of bonds worth $ 45 billion after its meeting on Tuesday and Wednesday. This would mean pumping money in the US economy to improve employment prospects. This uncertainty over economy will force investors to shift to haven commodities such as gold. In early trade in Singapore, spot gold ruled steady at $ 1,710.70 an ounce, while gold futures were quoted at $ 1,713. In the domestic market on Monday, gold for jewellery (99.5 purity) increased to Rs 31,205 for 10 gm, while pure gold (99.9 purity) advanced to Rs 31,340. In the forex market, the dollar was down against the yen and euro in view of the speculation of US stimulus measures. Any weakness in the dollar will make imports cheaper. India depends on imports to meet its demand for commodities such as gold, crude oil and vegetable oils. Expectations that the US Department of Agriculture will come up with data showing lower inventories drove soyabean higher on Chicago Board of Trade (CBOT). Export enquiries also aided the uptrend. See the full article on msn here

Precious Metals Update – Intermediate Low at Hand

From financialsense.com Precious metal investors have had a rough year with gold stocks down double-digits while gold is set to log another positive year. Gold stocks bottomed this summer as is their custom, but rather than rallying into the end of the year they’ve hit another rough patch and have given back much of their fall rally. However, the overbought condition in gold stocks leading into October has been worked off and it appears we may be seeing another intermediate low. The big caveat is the obvious fiscal cliff situation where politicians may drive the whole market down as they did with last year’s debt ceiling fiasco. Politics aside, we still have the setup of an intermediate low and gold stocks may begin to show signs of strength in the weeks ahead. From Overbought to Oversold The big fall rally that saw the NYSE Gold Bugs Index (HUI) rally nearly 40% in a span of two months produced a pretty overbought condition. Our Gold Stock indicator nearly hit an extreme overbought reading near 1.0 but has since returned back to near -1.0, a level that often marks significant intermediate lows. Another view of the HUI is its rate of change (ROC) over various time frames. The 20 day ROC is great at finding short term lows while a 60d ROC is better at identifying intermediate lows. As seen below, both the 20d ROC and the 60d ROC are near their lower extremes, indicating that not only may a short term bottom have formed but also an intermediate one.

Silver gains favor as an investment asset

Last month, Thomson Reuters GFMS said investment demand will likely be the prime driver of the silver price this year. The precious-metals consultancy forecast that implied net investment would jump 82 million ounces to 234 million in 2012 from 2011, even as demand for silver in industrial applications is expected to fall nearly 28 million ounces Read the full atricle on marketwatch here.

DITCHING BEFORE THE FISCAL CLIFF

From Peter Schiff: Turn on the TV and this is what you'll hear: The US budget is heading for a fiscal cliff. If a deal isn't reaching in Congress by the end of this year, a combination of automatic tax hikes and budget cuts will sink America into economic depression. There is no escape. Of course, my readers know that the fiscal cliff is merely an example of the piper having to be paid. The problem isn't the bill, but that we ran it up so high in the first place. Any deal to avoid the cliff by borrowing even more money may allow the piper to keep playing a while longer, but when the music finally stops, the next fiscal cliff will be that much larger. My readers also know that there are several ways for investors to avoid the cliff altogether. Perhaps the most secure is buying precious metals. However, given what we know, it may seem confusing that the spot prices of gold and silver have been moving sideways. However, these headline prices have largely concealed a more important indicator: physical bullion sales are booming.

An Under-the-Radar Rally The figures are astounding. For US Gold Eagle coins, mint sales are up some 150% from the QE3 announcement on September 13th. Despite what the spot prices show, there has been a tremendous surge in people buying physical gold. But why hasn't this translated into higher spot prices? It seems clear that the spot prices of both gold and silver are being driven right now by a large pool of institutional capital moving into and out of instruments like commodity ETFs. The movements have been predictable: When there is a sign of a deal coming out of Washington, the spot prices move up. If negotiations are faltering, there is instead a major selloff. Physical bullion investors are a different breed. We are in this market for the long haul. When I increase my physical gold and silver holdings, I do it because I see the long-term fundamental picture for the US getting worse. Getting a Read on the Bullion Bull While the ETF speculators are trying to anticipate the market's - and each other's - immediate reaction to whatever 11th hour deal is struck, I believe physical bullion investors are sending a clear signal: this whole debate is out of order. A J.P. Morgan study concluded that 82% of the hit to GDP if we go over the fiscal cliff would be related to tax increases, not spending cuts. And if the legislators reach a deal? It will only result in more tax increases and much fewer spending cuts. These guys just don't get it. Looking back to the debt ceiling debate of August 2011, we saw big movements into physical gold there as well. What investors are concluding as they hear these grand debates is that whatever the result, the budget, the dollar, and the taxpayer will lose. They are deciding to get off this runaway train. Because the real fiscal cliff isn't coming on December 31st - it is coming when there is a global flight from the US dollar.

The Real Fiscal Cliff The Democrats are complaining that the fiscal cliff imposes too steep demands on those who receive entitlements. Republicans are trying to protect the military budget. What no one seems to want to address is what happens as foreign creditors increasingly decide to stop financing this bonanza. To a large extent, this is already happening. China has already become a net-seller of Treasuries and is diverting more of its reserves into gold. The Chinese government recently approved banks holding gold as a reserve asset and made it easier for banks to trade gold amongst themselves. While Japan and other Keynes-drunk governments have filled some of the gap with increased purchases, a supermajority of new issues are being bought directly by the Fed. That was the idea behind QE3 Plus, as described in last month's commentary. Because of the acute trauma in Europe and certain institutional mandates to hold Treasuries, much of this new inflation is being absorbed. This has caused what may be the most dangerous of situations. It has allowed the inflationists to paint people like me as the boy who cried wolf. It seems to them that no matter how irresponsible Congress and the Fed are, we are immune from economic consequences. In reality, all this money printing is like pulling back a spring. Pent up inflationary forces are building, and when they are unleashed, the debate will be over faster than they can say "oops." The Only Way to Win Is Not to Play Those buying into physical gold and silver see this inevitability and are getting prepared. We believe there is no sense playing Russian roulette with our savings. Every time Washington raises that debt ceiling or announces another stimulus, it's like one more click of the trigger. When the global markets finally wrap their heads around the scale of US insolvency, the response will be as fierce as it is rapid. In such a once-in-a-century scenario, physical gold and silver are among the few assets without counterparty risk. From the looks of the physical bullion sales charts, I'm not the only investor who has figured this out.

Gold And The Fiscal Cliff

As we roll into December, the clock is ticking on the time bomb that is the fiscal cliff. For the most part, markets seem confident that Congress will either reach an agreement or come up with some kind of measure to buy them more time to debate. But recent talks seem to be going nowhere, and many investors are starting to get worried. One of the most talked about assets in relation to the cliff is gold. Some feel as if the precious metal will soar to new highs in the coming weeks, while others think that the commodity will fall along with everything else. Either way, it appears as though the yellow metal will be a pivotal point to watch in the coming weeks. View the rest of the article here.

Bracing for the Extinction of 500 Juniors or an Entire Institution?

Seriously scary for anyone invested in the gold junior market. I just am not entirely sure as to where to go from here. As always as an investor in these speculative plays you have to know who you are investing in but this could really be ugly for many of these plays. There just is not enough money going into them, and there is no doubt many will disappear. Read the whole article here

Goldman Calls The End Of The Great Gold Bull Market

When you are a Goldbug like me this is music to your ears. You know the big boys are under a lot of pressure to keep the gold prices in check when they come out with statements like this. Won't last for long. View the full article here:

The world's commodity supercycle is far from dead

Studies by the World Bank covering two centuries of data sketch a pattern of 10-year supercycles, followed by a slide for the next 20 years or so as excess investment leads to a flood of supply. The long bear market can be cruel for those hanging onto to resource stocks, convinced that the rebound must be nigh.

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