Is it all just a Ponzi scheme?

By: Eric Sprott & David Franklin

In our May/June Markets at a Glance, “The Solution…is the Problem”, we discussed how much debt the US government would need to issue in order to balance the budget for fiscal 2009. We calculated they would need to sell $2.041 trillion in new debt – or almost three times the new debt that was issued in fiscal 2008. As a thought experiment, we separated all the various US Treasury owners and asked our readers whether each group could afford to increase their 2009 treasury purchases by 200%. In the end, we surmised that most groups couldn’t, and prepared our readers for the worst.

Almost seven months later, however, nothing particularly bad has happened on the US debt front. There have been no failed auctions, no sovereign defaults, no downgrades of debt and no significant increase in rates…not so much as a hiccup in the treasury market. Knowing what we discussed this past June, we have to ask how it all went so smoothly. After all – it was pretty obvious there wasn’t enough buying power to satisfy the auctions under ‘normal’ circumstances.

Read more

Gold is the Decade’s Best Performer

SAN ANTONIO (U.S. GLOBAL INVESTORS) – Happy holidays wishes to all, with a special season’s greetings to the permanent gold skeptics.

The decade that ends Thursday is on track to be the worst in recorded history for the U.S. stock market – worse than all of the many boom-and-bust cycles of the 19^th century, worse than the Great Depression-era 1930s, worse than the recession-plagued 1970s.

The S&P 500 opened the decade at 1,469.25 on January 3, 2000. When the market closed on Christmas Eve, the S&P 500 stood at 1,125.46 – with four trading days left in the decade, the index’s annual performance over that span is negative 2.6 percent.  The Dow Jones Industrials has lost about 1 percent per year over the same period, and the Nasdaq Composite is down a whopping 5.9 percent annually. When adjusted for inflation, the 10-year returns for these indices are even lower.

Read More

Adjusted for Inflation, Dow’s Gains Are Puny

Many investors realize that stocks have been among the worst investments of the past decade. But they may not realize quite how bad the decade was, because most people forget about the effects of inflation.

Despite its 2009 rebound, the Dow Jones Industrial Average today stands at just 10520.10, no higher than in 1999. And that is without counting consumer-price inflation. In 1999 dollars, the Dow is only at about 8200 and would have to rise another 28% or so to return to 1999 levels. Using today’s dollars and starting at 10520.10, the Dow would have to surpass 13460 to get back to its 1999 level in real, inflation-adjusted terms.

Read More

Year-End Gold Rush for Beijing Residents

Gold jewelry sales jumped more than 30 percent over the weekend in Beijing, as bargain shoppers swarmed the city’s major jewelry stores on year-end promotions.

In a collective sales campaign after international gold prices fell, stores including Caibai, Gongmei, and China Gold reduced the pure gold’s price by as much as 9 yuan per gram, with more Christmas-themed jewelry designs for shoppers to choose from.

According to the Beijing Morning Post, China National Gold has doubled its sales to 40 kilograms per day. Caibai, the largest gold store in China, reported 30 percent more business than last year over the weekend after it dropped the price from 278 yuan to 269 yuan per gram.

Read More

Asia Central Bankers Say It With Gold

Strong dollar equals falling gold price, right? Except, perhaps, when Asia’s central bankers are involved.  Three-quarters of the region’s $5 trillion in foreign-exchange holdings are parked in U.S. dollars. A desire to diversify away from the greenback, though, has become evident. The dollar’s share in reserve accumulation dropped to less than 30% in the third quarter, Barclays Capital estimates.

Admittedly, knowing exactly what is in central-bank reserves takes guesswork, but analysts think most diversification in 2009 favored the euro.  Recently, gold has turned up as a second alternative. The Reserve Bank of India stirred markets when it revealed it purchased 200 tons of gold from the International Monetary Fund in October, increasing gold’s share of central bank reserves to 6.4% from 3.6%.

Read More

Still bullish on gold – $1500 in 2010 and $2000-$3000 longer term

Specialist gold analyst Jeff Nichols, is still bullish on gold despite the recent price correction and would not be surprised to see $1500 gold next year and higher levels to come.

Author: Jeffrey Nichols

Gold has enjoyed a long and enviable climb, rising some 380 percent from a cyclical low near $255 an ounce in April 2001 to an all-time high just over $1,225 early this month.  Nevertheless, the bull market in gold has a long way to go – both in magnitude and direction. 

Looking ahead to 2010, don’t be surprised to see gold trade at $1,500 or higher sometime during the New Year.  And that’s not all:  I’ve been telling clients that the yellow metal’s price will continue its long-term upswing for at least a few more years, very likely reaching $2,000 an ounce . . . and possibly hitting $3,000 or more before the gold price cycle begins its next long-term cyclical “bear” phase. 

Read more

Gold rises 1.5% as U.S. dollar falters

Greenback dips, easing from three-month highs

Humeyra Pamuk

Thursday, December 24, 2009

London — Gold prices rallied more than 1.5 per cent on Thursday to above $1,100 an ounce as the dollar lost ground and on the back of robust investment flows betting on higher bullion prices.

Other precious metals took their cue from gold’s strength with both palladium and platinum rallying to their highest in about a week at $375 an ounce and $1,4560.50 an ounce respectively.

Spot gold was at $1,104.05 an ounce by 1035 GMT, versus $1,087 an ounce late in New York on Wednesday. Bullion tumbled to a seven-week low of $1,074.10 an ounce earlier this week.

Analysts said the price moves were partly exaggerated due to low liquidity because of the Christmas holiday period, but the fundamentals which sent gold to an all-time high of $1,226.10 an ounce in early December were also still in place.

Read more

Silver Dragon Terminates Agreement to Sell Erbahuo Mine

In a press release, Silver Dragon Resources Inc. (OTCBB: SDRG) announced the termination of its previously announced definitive agreement to sell its 70% equity interest in the Erbahuo polymetallic project in China and its 70% ownership in the Chinese subsidiary, Chifeng Silver Dragon Resources & Technologies, Ltd.  In lieu of selling the mine, Silver Dragon will implement an alternative strategic plan which includes a 2010 listing on a major Canadian stock exchange.

Under the original signed definitive agreement the Chinese investor committed to pay Silver Dragon a deposit of RMB 1.8 million, or ~US$260,000 within three business days after signing the definitive agreement, with the balance of RMB 4.2 million, or ~US$622,000 due upon Chinese Ministry of Commerce approval. 

Read More

Dejour Bolsters Board of Directors at 2009 Annual General Meeting

Renews Shareholder Rights Plan, Adopts new Stock Option Plan and Augments Capital Structure

VANCOUVER, Dec 22, 2009 (BUSINESS WIRE) —

Dejour Enterprises Ltd. (NYSE-AMEX: DEJ / TSX: DEJ) is pleased to announce the election of Mr. Stephen R. Mut, M.Sc. Environmental Eng. and Mr. Darren Devine, LLB as new members of the Dejour Board of Directors. Re-elected at the AGM are Mr. Harrison Blacker M.Sc. M.Eng., Mr. Craig Sturrock LLM QC, Mr. Richard Patricio LLB, Mr. H. Robert Holmes and Mr. Robert L. Hodgkinson.

Mr. Mut will also serve as Co-Chair of the Board of Directors. Steve has been a Special Assistant to the CEO and COO for the past 7 months. He brings to the company extensive experience. Most recently he served as CEO of the Shell Unconventional Resources unit of Shell Exploration and Production Company. Before retiring from Shell in mid 2009, Mr. Mut led the team responsible for research and development of a new enhanced oil recovery method in northwestern Colorado’s oil shale resources known as The Mahogany Research Project, field-testing the technical and environmental viability of Shell’s in situ (in ground) process.

Read more

Successful Exploration Investing: Interview with Brent Cook

No drill results? No worries. Good geology, good management, a good cash position and a good stock price are good enough to coax renowned exploration analyst (and geologist) Brent Cook into buying junior prospect generators and explorers. He finds his sweet spot being near the top of the batting order. If he waits for drill results to confirm what he expects them to reveal, he may miss the best time to buy. With year-over-year returns on his Exploration Insights portfolio averaging 80%—and one superstar at 10 times that!—Brent’s clearly hit a few homers with his strategy. But in this exclusive interview, he cautions Gold Report readers against believing everything you read and hear. He says, “It’s really, really critical to evaluate what a company’s telling you.”When we chatted in August, you were looking at a gold price in the $900 neighborhood, indicating that fear of another financial disaster was driving gold prices. Since then, gold broke through $1,200 and has now corrected down to about $1,120. Is fear still the driving factor or has the dynamic changed?

The Gold Report: When we chatted in August, you were looking at a gold price in the $900 neighborhood, indicating that fear of another financial disaster was driving gold prices. Since then, gold broke through $1,200 and has now corrected down to about $1,120. Is fear still the driving factor or has the dynamic changed?

Brent Cook: I was probably wrong in my assessment at the time. I didn’t take into account the amount of liquidity—money being pumped into the system. I think what is driving gold now and drove it up through $1,200 is greed much more than fear. In my view, gold has become part of the global asset bubble—which includes foreign real estate, stock markets and base metals. So it’s actually greed that’s been driving gold, at least over the past few months.

TGR: How long can greed support a rally?

BC: It’s all tied to the dollar carry trade and the irrational actions of the crowds. You can borrow U.S. dollars at essentially negative rates and invest it in any other asset. Fund managers and bankers are just piling into whatever is hot, and that includes gold. The problem is that new participants in the gold market really don’t view gold as an alternative to the U.S. dollar and don’t fear fiat currencies as many of us do. They don’t believe gold is money; it’s just another asset to pile into with the crowd.

I am concerned about what happens if the dollar carry trade gets reversed and/or if the Fed jacks up interest rates. Then we’d see gold come crashing down and maybe the market as well. Except for the U.S. dollar, this has been an extremely positive year for almost anyone investing in the markets.

TGR: So you’re looking at the asset managers piling into gold as the “flavor of the month” lately. Would the Fed have to raise interest rates for asset mangers to tire of gold and just dump it on the market?