Thoughts on Markets

Thursday, February 11, 2010

Gold & Silver Up a Bit Today - 1500 Gold is 2010???

The action in the metals is very strange and does not appear to be normal market activity even with the program trading by investors and funds. The encouraging aspect is that when the drops in price appear, buying increases significantly as if there are many on the side lines who take advantage of the lower prices. The prices spring back rapidly much of the time. This may indicate that there is a great demand seeking to get in at lower prices. Is this the compressed spring which will eventually force much higher prices? We will have to wait and see about that as the market reveals the future to us. There are predictions of gold at 1500 an ounce this year. Is that correct? Could be, but I do not know. I do believe that there will be a time for that.

Bernanke has hinted of rising interest rates, but has not indicated the date that this will occur. We should note, as the Daily Pfennig indicated this morning, that higher interest rates would lower the value of the trash mortgages that the Federal Reserve has purchased from the banks and make them even more difficult to market when that time comes. Remember that the value of bonds and other fixed interest debt instruments is inverse to the changes in interest rates. Rates down, market value up. Rates up, market value down. So is the Federal Reserve now willing to raise interest rates. I think not! The interest rates on the resent 10 year Treasury auction were up slightly to make the sale. Buyers demanded higher interest.

From MineWeb.com:

India getting back into gold buying mode as prices fall

Initial estimates suggest that Indian gold imports in January were the strongest for three months and sharply higher than a year ago.

Author: Lawrence Williams
Posted: Wednesday , 10 Feb 2010

LONDON -

Last year was pretty disastrous one in terms of Indian gold purchases, but already there has been quite a pick-up this year and there are indications, although this is a very early stage, that the country may be moving back to the global No.1 gold purchasing nation, a position which was usurped by China in 2009. Read it HERE.

India has historically been a consumer of gold - one of the largest in the world. The pick up this year is encouraging.

From MineWeb.com:

Gold's decade-long bull run may be in jeopardy from rising interest rates

Analysts see some notable headwinds for investors in gold in the medium term - with potential increases in interest rates one of the biggest

Posted: Wednesday , 10 Feb 2010

LONDON (Reuters) -

Gold's decade-long bull run may plateau in the medium term as a rise in U.S. interest rates from record lows makes prices vulnerable to a dollar recovery and weaker investment demand. Read it HERE.

I do not believe that higher interest rates will be a negative on gold. Gold is going through period of shake out for the general masses. They always buy in at the higher prices and can not stand the heat as prices or hit from time to time. Therefore, they get out as losers when the prices drop. Richard Russell is correct when he counts his precious metals in ounces and does not value them in terms of current dollars. We should do the same. Even all of our mining shares should not be dumped with each drop in price. Too often, the price will continue to rise to the extent that we will feel locked out and not be able to cash in on the gold rush when it comes. We must learn to be patient.

From MineWeb.com:

DRDGOLD returns to profit

South Africa's fourth biggest gold miner attributed the improvement in earnings to a 4% rise in production and lower operating costs

Posted: Thursday , 11 Feb 2010

JOHANNESBURG (Reuters) -

South Africa's fourth biggest gold producer, DRDGOLD Ltd (DRDJ.J), reported a 4 percent rise in gold production for the quarter to end-December and a return to profit owing to lower operating costs. The company, a mid-tier, unhedged gold producer, said output in the second quarter rose to 59,866 ounces. Revenue for the quarter increased by 12 percent to 499.6 million rand ($65.11 million) due to the higher output and a 12 percent increase in the average rand gold price of 268,302 rand/kilogram. Read it HERE.

Good news for DROOY. That is really great. This has been one of my favorites for several years. It is a good company which has gone through several challenges in the last year or so.

From GATA.com:

Midas touch lost? Paulson hits hurdles in gold fund

By Gregory Zuckerman
The Wall Street Journal
Wednesday, February 10, 2010

It took John Paulson months to convince investors that housing would crumble.

Now it's taking him a while to get them excited about gold, his latest passion.

When Mr. Paulson's Paulson & Co. late last year announced it was starting a hedge fund to make a big gold bet, many on Wall Street expected investors to line up. Paulson & Co. scored about $20 billion in profits in 2007 and 2008 wagering against subprime mortgages and financial companies. It then bought financial shares last year to add more gains.

Some gold traders expected Mr. Paulson's new fund, launched Jan. 1, to raise billions of dollars and even help push gold higher when it started buying this year. Read it HERE.

From Market-Ticker.Denninger.net:

Are you sitting down?

(You can read the Freddie Mac report HERE.)

You had better be on this one!

McLean, VA – Freddie Mac (NYSE: FRE) announced today that it will purchase substantially all 120 days or more delinquent mortgage loans from the company's related fixed-rate and adjustable-rate (ARM) mortgage Participation Certificate (PC) securities.

What this means is that all the defaulted loans in these packages that Freddie bought up, bundled up and then puked out into the marketplace are coming home.

To Freddie.

Well, at least initially.

But now, every one of these loan files is going to get the fine-tooth-comb treatment. And believe me, there's gonna be a lot of lice found in there, along with more than a few cockroaches.

This is going to be a problem folks, because those loans in which reps and warranties (that is, the promises made to Freddie by the banks when they were sold to them) were breached due to a material falsehood of some sort will be, as a matter of fiduciary responsibility, puked back onto the bank involved. Read it HERE.

Miners from Scottrade.com Take particular notice of the green in the percent change column:

Currencies from Kitco.com:

Some Prices: FVITF 2.12; SVM 5.83; BYDDF 7.80; DOW off 4 to 10038; Gold up 5.10 to 1076.10; Silver up 0.05 to 15.21.

Remember that King Jesus is in control of all and we are to rest and know that He is God of all. He always does His fathers will as an example for us and always works for the eventual good of His people.


Best to each, Doug

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