Category Archives: Outside Commentaries

Gold is back in the spotlight this week with the news that Germany’s central bank is going to begin repatriating its gold held in the US and France. Germany – the only nation in the EU that seems concerned about fiscal responsibility – has the second largest gold reserves in the world after the US. All of this has got some people wondering just how trustworthy central banks are nowadays, as well as what this could mean for the future of the yellow metal. Check out Adam English’s commentary on Wealth Wire:

“So far, the 1,536 tonnes of gold the Fed holds for Germany, worth over $80 billion at spot prices, has only been backed up by personal assurances. Now the Fed will have to prove its demands for blind faith were at least partially justified as 768 tonnes are removed over the next several years.

All the Germans originally wanted was basic verification and inspection of their property. Perhaps if the Fed was more accomodating, there never would have been pressure on the Bundesbank to explain why it allowed the situation to persist as Fed to keep their gold off-limits.”

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In case you haven’t been watching the news, it’s pretty clear that the Federal Reserve and central banks all over the world are in the pockets of politicians. Stephen King, an economist with HSBC, published a recent commentary examining this problem:

“There are less obvious effects that also warrant greater scrutiny. Quantitative easing may make it easier for governments to raise funds cheaply; but, by increasing the net present value of pension funds’ future liabilities, it creates problems for those funds already running deficits. That, in turn, means either bigger pension contributions for workers; lower prospective pension benefits; or, in the case of some public sector pensions, tax increases or spending cuts to make the numbers add up. Meanwhile, some of the biggest beneficiaries of QE are those already asset-rich and relatively old who prefer to sit on their windfall gains rather than spend them.

Put another way, monetary policy is doing more to redistribute income and wealth than to trigger a rebound in economic activity. Central bankers are making decisions that are more political than economic.”

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The London Bullion Market Association just released their 2013 precious metals price forecast. While it’s not as bullish as some expert opinions, the LBMA does project more than a 5% increase in the gold price, and even better for silver and platinum. Looks like precious metals will remain safe haven assets in a time of runaway quantitative easing and a looming sovereign debt crisis.

Read the LBMA Precious Petals Forecast Summary Here

Take the time to read the Silver Institute’s “Outlook for Industrial Silver Demand,” prepared by Thomson Reuters GFMS, and released late last year. With everyone talking about gold, little attention has been given to silver’s bullish future. The report notes that industrial silver demand will grow to new highs in the next few years, in spite of a global economic downturn.

Click Here to Learn More About Industrial Silver Production

While the older generation of politicians and central bankers seem intent on spending the United States into insolvency, perhaps the younger generations can learn from the past. Travis N. Taylor published an op/ed in the Washington Times this week calling on 18-29 year-olds to support a return to the gold standard:

“Although the federal government’s gross inability to balance a checkbook is a cause of great concern, it remains true that “all politics is local.” Few people can pay attention to Washington’s “fiscal cliff” when they are struggling to provide for the well-being of their family.

Millennials must encourage the return to a precious-metals-backed monetary system. Regardless of difficult-to-understand technical terms, there is plenty of empirical evidence that a departure from the gold standard has shattered our monetary system. The United States officially ended the gold-backed dollar standard in 1971. This offers a bright line of distinction for examining the issue. The 40 years since that time have borne witness to prices on everyday goods that are radically higher than during the previous four decades.”

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Gold’s poor performance in the past week has triggered a flood of commentaries declaring that gold peaked back in 2011 and that prices may plummet next year. Don’t be fooled – there is plenty of evidence that gold still has a bright future. Tim Iacono published an interesting article on Seeking Alpha yesterday debunking the naysayers:

“Since the gold price failed to advance after the Federal Reserve’s latest stimulus measure last week, that is, the one where the central bank raised its open-ended money printing effort to a cool $1 trillion per year, an increasing number of calls have been heard with the same refrain – the secular gold bull market is over.

Earlier in the month, it was investment bank Goldman Sachs who said that prices may rise back up above $1,800 an ounce next year but that last year’s high at just over $1,900 an ounce or a similar high next year will go down in the history books as the end of the long-running bull market.”

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Metals Analyst Kira Brecht published an incisive commentary on Kitco yesterday on the long-term gold trend, examining the relationship between gold and the quantitative easing of central banks:

“But, what will it take to kill the long-term bull market in gold? Listen up folks and listen good. There is nothing on the near or medium term horizon that could kill the long-term bull market in gold.

Why? The answer is quite simple and lies in the hands of global central banks, with their pedals still pressed to the floor with unusual and historic monetary policy accommodation and easing.”

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