Gold headed for $10,000 by 2012

Arnold Bock
www.resourceinvestor.com

No wishful thinking here! As I see it gold is going to a parabolic top of $10,000 by 2012 for very good reasons - sovereign debt defaults, bankruptcies of “too big to fail" banks and other financial entities, currency inflation and devaluations - which will all contribute to rampant price inflation.

Not surprisingly, I have company in that view:

Money manager, Peter Schiff, told Business Week recently that, "Gold could reach $5,000 to $10,000 per ounce in the next 5 to 10 years" and highly respected economist David Rosenberg is of the opinion that "There is no doubt that gold can easily double from here."

The causes:

1. History is No Guide
   Gold has only been trading freely since President Nixon's 1971 decision to deny gold to the French and others attempting to repatriate their paper dollars for the metal. As such, there has been a scant forty years of gold production and trading since it was detached from supporting paper money. This period has also been marked by substantially higher monetary and price inflation as well as currency devaluation.
2. Market Manipulation
   The Commodity Futures Trading Commission (CFTC) recently held a major hearing which blew the doors off bullion metals futures trading markets in terms of what was revealed publicly. I predict this public hearing will be viewed in the period ahead as the precious metals price liberation event of the decade. It is commonly known that JP Morgan Chase is the major player in commodities futures markets trading. Not only do they take massive naked short positions (betting that prices will fall), they do it with large substantial leverage. What isn't as well known though is that Chase acts as the agent for the Federal Reserve Board and other central banks in "managing" the markets on their behalf. Central banks want "orderly" precious metals markets and prices and currencies which don't gyrate wildly. Only then can they achieve stealth inflation in their monetary policy which is so beneficial in servicing debt. It also makes for good (meaning effective) politics.
3. Insufficient Physical Inventories
   While it is normal for traders to roll their expiring contracts over into new paper trades, some traders accept cash in settlement rather than the metal. To the amazement of everyone, the recent hearing of the CFTC -- specifically Jeffrey Christian’s comments -- inadvertently confirmed that there is little bullion in storage at the London Metal Exchange or New York's Comex to back the metals trading. He justified this fact by noting that only one ounce of one hundred traded is paid out in physical metal. This revelation confirmed a much worse reality than even critics, such as the Gold Anti-Trust Action Committee (GATA), had expected. It seems that the Asian and Mid East buyers and owners of bullion have been removing gold from their dealers’ vaults and are taking it "home" thus leaving much less than previously thought in the London, New York and Toronto vaults.
   
   In addition to what looks like a production peak in the gold mining industry (production has fallen in five of the last eight years), central banks have for the first time recently become net purchasers (having bought more gold last year -- 425 tons -- than at any time since 1964). The single largest purchasers of metal these days, other than central banks, are the bullion ETFs (exchange traded funds) which ostensibly have their metal inventories in vaults. These relatively new investment vehicles, unfortunately, are not transparent in their business practices. Regular audits by reputable accounting firms and allocated and segregated bullion inventories stored in reputable vaults are opaque at best. This begs the question: “Do the large ETF bullion funds actually have the metal they purport to own, or is their inventory more the 'paper gold' variety in which bullion trading exchanges seem to specialize?"

The effect:

1. The revelations, outlined above, that there is insufficient physical inventory to meet new investment demand for ownership and delivery of physical bullion, is about to blow the price lid skyward.
2. As public awareness of sovereign debt mounts, it will drive home the reality of mounting government insolvency.
3. Confidence in currencies will wilt commensurately.
4. Investment demand for real gold and real money as a safe haven investment will expand exponentially.
5. These events should take place from mid 2011 through 2012 and extend further out toward 2015 before demand is satiated.
6. The dramatic price increases in gold and silver will at that point also satisfy the unstated desire of central banks and politicians to devalue their currencies in order to assist them in meeting their debt and unfunded liabilities.

After the 2008/2009 crash, governments bailed out their failing financial institutions and investment banks through a variety of innovative measures. The next time round most governments will not be in a position to do so -- again. Even more troubling, the IMF (International Monetary Fund) will not be capable of rescuing the increasing number of insolvent governments and their financial institutions.

You may think my aforementioned views are crazy or perhaps just that my imagination is way out of hand or, at best, that I don’t have access to the appropriate reality checks. Be that as it may, I am increasingly confident that the consequences of fragile sovereign debt, precious metals market manipulation, insufficient physical supply, and the need for a safe haven investment refuge, will drive precious metals bullion and mining stock to unimagined heights.

The circumstances immediately ahead are largely unprecedented. History is therefore only marginally useful as our guide to the future price of precious metals. We are now in genuinely unchartered territory.

Get yourself positioned to take advantage of this event of a lifetime. Protect your assets from the next and more serious leg of the 'Greater Depression' directly ahead. Get a running start NOW on growing your future wealth

Aurumania Gold Track Bike Crystal Edition

Aurumania, a Scandinavian bicycle company, has created a very limited edition track bike that is completely covered in 24-karat gold and decorated with 600 Swarovski crystals. It is quite possibly one of the most expensive bikes in existence, worth a grand total of almost $117,000. The exclusive bike company includes a 10-year no-questions-asked guarantee should you somehow mess this baby up while you show it off to your less than rich friends.

And hey, since you’re buying such an expensive bike, the company might as well deliver it personally to you anywhere on the planet with white-glove service. Oh, they do. Wow. Maybe, just maybe, this bike is worth the huge price tag.

If for whatever reason you cannot afford this beautiful bike, maybe you might be able to afford the lesser non-crystallized version. Still decked out in gold, the standard Aurumania gold track bike is only just over $30,500. The company also sells a gold-plated wall-mount for your bike so that you can keep it out of reach of poor, oily fingers. However, the bike rack will cost you over $7300, which alone is enough to get you several very, very, very nice non-gold, non-crystallized bicycles. It’s your money though, so do what you want with it.

Read more at http://www.doobybrain.com/2008/09/25/aurumania-gold-track-bike-crystal-edition/

Why Are Silver Sales Soaring?

Jeff Clark, Senior Editor, Casey's Gold & Resource Report

The U.S. Mint just reported another record, but this time it wasn't for gold. The Mint sold more Silver Eagles in March and in the first quarter of the year than ever before. A total of 9,023,500 American Silver Eagles were purchased in Q110, the highest amount since the coin debuted in 1986.

While this is certainly bullish, there's something potentially more potent developing in the background. Namely, how this matches up with U.S. silver production. Like gold, the U.S. Mint only manufactures Eagles from domestic production. And U.S. mine production for silver is about 40 million ounces. In other words, we just reached the point where virtually all U.S. silver production is going toward the manufacturing of Silver Eagles.

Yikes.

This is especially explosive when you consider that roughly 40% of all silver is used for industrial applications, 30% for jewelry, 20% for photography and other uses, and only 5% or so for coins and medals.

To be sure, mine production is not the only source of silver. In 2009, approximately 52.9 million ounces were recovered from various sources of scrap. Further, the U.S. imported a net of about 112.5 million ounces last year. (Dependence on foreign oil? How about dependence on foreign silver!) So it's not like there's a worry there won't be enough silver to produce the Eagle you want next month.

Still, why so much buying? The silver price ended the quarter up 15.5% from its February 4 low - but it was basically flat for the quarter, up a measly 1.9%. We tend to see buyers clamoring for product when the price takes off, so the jump in demand wasn't due to screaming headlines about soaring prices.

I have a theory.

For some time, silver has been known as the "poor man's gold." Meaning, silver demand tends to increase when gold gets too "expensive." The gold price has stubbornly stayed above $1,000 for over six months now and spent much of that time above $1,100. You'd be lucky to pay less than $1,200 right now for a one-ounce coin (after premiums), an amount most workers can't pluck out of their back pocket. But Joe Sixpack just might grab a "twelve-pack" of silver.

What would perhaps lend evidence to my theory is if gold sales were down in the face of these higher silver sales.

The U.S. Mint reported a decline in gold bullion sales of 20.8% this past quarter vs. the same quarter in 2009. Further, other world mints have seen sharp declines in gold bullion coin sales as well: the Austrian Mint reported an 80% drop in sales for the first two months of the year and the Royal British Mint a 50% decline in gold coin production for the first quarter.

What's even more dramatic is the difference in the dollar value of the sales. Gold Eagle sales in the U.S. dropped $10,263,500 from a year earlier - but Silver Eagle sales increased by $61,855,290. So, not only did silver sales make up the drop in gold sales, they exceeded them by $51,591,790.

Is the rush into "poor man's gold" underway?

Why the answer to that question is significant is that a shift toward silver for this reason could signal we're inching closer to the greater masses getting involved in the precious metals arena. And that - for those of us who've been invested for awhile now - would be music to the ears. Because when they start getting involved, the mania will be underway, and from that point forward, it's game on.

I'm not saying the mania is starting, and I actually think we could see another sell-off before things take off for good. Gold could dip to $1,000 and maybe even $950, with silver going to the $14-$15 range. But as clues like these begin to build up, we'll know we're getting closer. (And any drop to those ranges would clearly be a major buying opportunity.)

Everyone talks about gold, myself included, but a meaningful portion of one's precious metals portfolio should be devoted to silver. The market is tiny, making the price potentially explosive. Remember that in the '70s bull market gold advanced over 700%, but silver soared over 1,400%. Don't be a "poor man" by ignoring gold's shiny cousin.

Silver Coins

For those who have been collecting Silver Coins, I am suggesting that you read through the SilverCoinReview. It gives some insights of the Silver Coins in the market and how to make more with Silver Coins.

Silver Coins has always been second to Gold. With the current situation, Silver Coins should be the next THING. People should keep more Silver Coins.

Just visit SilverCoinReview and read more.

Investors like China and Japan continue to switch out of dollars and into gold

By David Levenstein

Many market commentators argue that investing in gold is a waste of time especially since it does not pay interest and remains inert. This statement is very misleading. The issue of interest has no relevance. No one has ever invested in gold in order to receive interest. While gold is a precious metal as well as being a form of global currency, it is also a commodity. And, the reason why investors buy commodities is not for an annual dividend payment, but for a return on their investment that occurs as the price of the commodity appreciates. (I have not heard analysts say don't buy corn because it doesn't pay an interest). And, in many instances this rate of appreciation can be truly spectacular giving investors massive returns.

It should also be noted that gold is unique as an asset class as its value is influenced by many factors. And, like other asset classes, the price does not go up in a straight line. What amazes me is when gold goes through periods of consolidation certain analysts immediately denigrate it as an investment. Yes, there are going to be times when other forms of investments will out perform gold, but as the major trend in gold still remains firmly upwards, we must not allow these short-term periods to cloud our long-term judgment.

Like central banks that hold a portion of their reserves in gold, individual investors should do the same and allocate a portion of their funds to this precious metal. In fact, practically most countries hold a portion of their reserves in gold. All developed countries hold gold in their reserves while most of the developing countries also have a small holding of the yellow metal. As at the end of February 2010, some one hundred countries held gold in their reserves.

According to the World Gold Council (WGC), central banks added the most gold to their reserves since 1964 last year amid the longest rally in bullion prices in at least nine decades. Combined holdings rose 425.4 metric tons to 30,116.9 tons, an increase worth $13.3 billion at last year's average price, according to the (WGC). India, Russia and China said last year they added to reserves. The expansion was the first since 1988. Central banks, holding about 18 percent of all gold ever mined, are expanding their holdings for the first time in a generation as investors in exchange-traded funds amass bullion as an alternative to currencies. Holdings in the SPDR Gold Trust, the biggest ETF backed by the metal, are at 1,115.5 tons, more than the holdings of Switzerland.

Many of these central banks also hold currencies and US Treasuries in their reserves. But, what has been interesting is recently, some of these countries have been reducing their holdings of their US Treasuries while they have added to their gold holdings.

Last Monday, the US Treasury Department said that China's holdings dipped by $5.8 billion to $889 billion in January compared to December. Japan, the second largest foreign holder of U.S. government debt, also trimmed its holdings but by a much smaller $300 million to $765.4 billion. A month ago, Treasury initially reported that China had cut its holdings so sharply that it had lost its top spot as America's largest foreign creditor, a position it had held since its holdings overtook Japan in September 2008. However, 10 days later, Treasury released its annual update of the figures. The revised data showed that China, while reducing its holdings, still retained the top spot.

While China and Japan decreased their holdings, oil exporting countries boosted their holdings to $218.4 billion, up from $207.4 billion in December, and holdings of Treasury securities in Great Britain rose to $206 billion, up from $178.1 billion.

Economists say that unless foreign demand for U.S. Treasury debt remains strong the interest rates that the government has to pay for that debt could rise sharply, making the U.S. deficit picture look even worse. Rising rates for government debt would also put upward pressure on private debt, sending borrowing costs up for U.S. businesses and consumers adding another risk to the U.S. economy as it struggles to emerge from the worst recession since the 1930s.

Last week the Euro remained under pressure especially after Mr. Papandreou, the Prime Minister of Greece, basically threatened the EU and warned that if Greece could not sell its bonds and the EU would not come to his rescue, they may have to go to the International Monetary Fund and get some help. So the saga of Greece's debt problems continues. During the week, sterling rebounded strongly on the back of the stronger than expected job market data. The Dollar index dropped further to as low as 79.52 which represents a 38.2% retracement of 76.60 to 81.34.

Using the Dinar & Dirham

by The Islamic Mint

Gold and silver are the most stable currency the world has ever seen

From the beginning of Islam until today, the value of the Islamic bimetallic currency has remained surprisingly stable in relation to basic consumable goods:

A chicken at the time of the Prophet, salla'llahu alaihi wa sallam, cost one dirham; today, 1,400 years later, a chicken costs approximately one dirham.

In 1,400 years inflation is zero.

Could we say the same about the dollar or any other paper currency in the last 25 years?

In the long term the bimetallic currency has proved to be the most stable currency the world has ever seen. It has survived, despite all the attempts by governments to transform it into a symbolic currency by imposing a nominal value different from its weight.

Reliability

Gold cannot be inflated by printing more of it; it cannot be devalued by government decree, and unlike paper currency it is an asset which does not depend upon anybody's promise to pay.

Portability and anonymity of gold are both important, but the most significant fact is that gold is an asset that is no-one else´s liability.

All forms of paper assets: bonds, shares, and even bank deposits, are promises to repay money borrowed. Their value is dependent upon the investor's belief that the promise will be fulfilled. As junk bonds and the Mexican peso have illustrated, a questionable promise soon loses value.

Gold is not like this. A piece of gold is independent of the financial system, and its worth is underwritten by 5,000 years of human experience.

What are the Dinar & Dirham

by The Islamic Mint


According to Islamic Law...

The Islamic Dinar is a specific weight of 22k gold (917.) equivalent to 4.25 grams.

The Islamic Dirham is a specific weight of pure silver equivalent to 3.0 grams.

Umar Ibn al-Khattab established the known standard relationship between them based on their weights: "7 dinars must be equivalent to 10 dirhams."

"The Revelation undertook to mention them and attached many judgements to them, for example zakat, marriage, and hudud, etc., therefore within the Revelation they have to have a reality and specific measure for assessment [of zakat, etc.] upon which its judgements may be based rather than on the non-shari'i [other coins].

Know that there is consensus [ijma] since the beginning of Islam and the age of the Companions and the Followers that the dirham of the shari'ah is that of which ten weigh seven mithqals [weight of the dinar] of gold. . . The weight of a mithqal of gold is seventy-two grains of barley, so that the dirham which is seven-tenths of it is fifty and two-fifths grains. All these measurements are firmly established by consensus." Ibn Khaldun, Al-Muqaddimah

How are the Islamic dinar used?

1.- The Islamic Dinar can be used to save because they are wealth in themselves.

2.- They are used to pay zakat and dowry as they are requisite within Islamic Law.

3.- They are used to buy and sell since they are a legitimate medium of exchange.