21 Sept 2012

“How High Can Gold Go?” "There Is No Telling" James Grant Tells CNBC

Today’s AM fix was USD 1,773.75, EUR 1,361.28, GBP 1,089.19 per ounce.
Yesterday’s AM fix was USD 1,760.00, EUR 1,360.33 and GBP
1,088.03 per ounce.
Gold fell $2.10 or 0.12% in New York yesterday and closed at $1,768.40. Silver dropped to $34.084 in London, but rallied back higher later in the session and finished with a gain of 0.03%.

Gold is slightly higher today and is being supported by investor concerns not just about ‘stimulus’ but about “open ended” QE or ‘QE to infinity’.

Gold and silver have this week consolidated on their recent sharp gains which is a healthy development as there were concerns that the markets were getting ahead of themselves.

 


Currency Ranked Returns - (Bloomberg)

Gold has been hovering near $1,775/oz a 6 ½ month high seen after the US Federal Reserve launched QE3 and vowed to keep borrowing costs low until 2015, fuelling global demand for gold, which benefits from a low and negative interest rate environment.

Deutsche Bank has reported that their high net worth private clients have expressed an increasing interest in owning gold in order to protect their wealth from the growing risk of inflation (see Newswire).

Thursday’s US manufacturing figures showed the sector suffered its weakest quarter in 3 years.

Gold Tick (17/09/2012-Today) - Bloomberg

The recent renewed appetite for gold and silver has shot the precious metal backed funds to their highest levels in a year.  SPDR Gold Trust, the world's largest gold ETF, said its holdings had hit 1,308.41 tonnes.  Holdings in iShares Silver Trust, the world's biggest silver ETF, climbed to an 11-month high of 9,940.66 tonnes.
XAU/EUR Exchange Rate Daily, 17/09/12-Today - (Bloomberg)

Gold is consolidating near record highs in the euro and is less than 1% below the record intraday high from just over a year ago on September 9th 2011.

One of the most astute financial analysts in the world, Jim Grant, founder of highly respected Grant's Interest Rate Observer, was asked by Maria Bartiromo on CNBC yesterday “how high can gold go”? Grant responded that "there is no telling."

Grant was asked about the stock market and where to invest today and asked if “you want to get in front of this train?”

He responded by advocating “security analysis” and said that he thinks that that is “where an investment in gold and silver comes in”.

Grant said the following:

“Central banks around the world are bound and determined -- either through actions or words to debase their currency. They're telling us”
XAU/GBP Exchange Rate Daily, 17/09/12-Today - (Bloomberg)

When asked how high gold could go, Grant astutely noted that:

“The nice thing about gold, it has no PE multiple. There’s no telling.
Gold is a speculative -- it earns no yields, gold is a speculation on an anticipated macro economic outcome. That macro economic outcome being the systematic debasement of currencies by the central banks.

They've done QE 3, right? The economy appears not to be in the best of health. Why wouldn't they do QE 4? What intellectual argument do they have against doing it again and again and again?

That's one of the risks, right? Well, it's open ended already. Maybe they'd need it, because we know it's open ended. They can save the paper in the press release”.
With regard to hard assets such real estate and gold, Grant said:

“There is an argument to be made that you want to be buying hard assets like gold, like real estate ... that's not a bad way to hedge against the currency”.
The interview ends on a funny but sadly telling note when the “Money Honey” Bartiromo says that she knows that Federal Reserve Chairman, “Bernanke knows you have been so critical. What is his answer to you, when you raise these points?”James Grant said:
“We don't talk any more.


Ron Paul named Grant as his likely candidate for Chairman of the Federal Reserve to replace Ben Bernanke whose term expires in 2014.

The interview is a must watch and can be seen
here.
Cross Currency Table – (Bloomberg)

NEWSWIRE
(Bloomberg) -- Indian Physical Gold Demand ‘Encouraging of Late,’ UBS Says
Indian demand for physical gold has been “encouraging of late” with flows this week heading for the biggest since mid-July, UBS AG said in a report.

“Volumes aren’t huge, but it’s clear that demand is quick to emerge on local price pullbacks,” the bank said.

(Bloomberg) -- Russian Gold Holdings Fall to 30 Million Troy Ounces in August
Russia’s central bank decreased its gold holdings to 30.0 million troy ounces as of Sept. 1, from 30.1 million troy ounces a month earlier, according to a statement published on its website yesterday.
The stockpile was valued at $49.7 billion at the end of last month, Bank Rossii said in the statement.

(Bloomberg) -- Gold Targeted by Wealthy Amid Stimulus, Deutsche Bank Unit Says
More so-called high-net-worth individuals are seeking physical gold to protect their wealth from the risk of inflation after central banks boosted stimulus, according to Deutsche Bank AG’s asset and wealth-management unit.

Mark Smallwood, head of Asia-Pacific wealth-management solutions, commented in an interview from Guilin, China, yesterday with gold trading near the highest level since February after Japan’s central bank followed the U.S. in expanding asset purchases to boost economic growth. Spot gold was at $1,770.90 an ounce today.
NEWS

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