Daily Gains Letter

precious metal


Looking for a Good Gold Play? Here’s What to Watch For

By for Daily Gains Letter | Sep 8, 2014

Looking for a Good Gold PlayI have not talked about gold for some time, as there has been no reason to get excited about the yellow metal. Yes, it’s shiny, but it doesn’t appear to be sparkling at this time.

After the gold bugs got excited about the opportunities in the precious metal, pushing prices to above $1,300 following the onset of geopolitical issues in both Ukraine and the Middle East, the aftermath has been dull.

As I said back in June, the only reason I would trade gold would be to buy on weakness near $1,200 as the fundamentals, in my view, are irrelevant at this time. Gold still seems to be more of a geopolitical trade. (See “How to Make Quick Profits in Gold at This Time.”)

Look, there’s no big buying from India; China is buying, but it is simply not enough to sway the global supply/demand balance in favor of the yellow precious metal.

Gold Bugs Index Chart

Chart courtesy of www.StockCharts.com

Consider the fact that the greenback has been edging higher, with the U.S. dollar index at its highest level in more than a year. This move makes the dollar-denominated gold more expensive for foreigners, who have traditionally been major purchasers. The end result is a letdown in demand for the yellow metal.

In my view, gold is simply a trade on the geopolitical risk, as there’s really no major reason to want to buy at this juncture, given the market’s underlying fundamentals.

The gold bugs clearly don’t want to hear this, but I believe that unless the situation in Ukraine or the Middle East worsens, prices could head lower, towards $1,225 or even … Read More


How to Make Quick Profits in Gold at This Time

By for Daily Gains Letter | Jun 30, 2014

Where the Investment Opportunity Lies in Gold Right NowA few weeks ago, I suggested that gold prices could likely head higher should the situation in Iraq escalate into a bigger conflict that brings in Iran and the United States.

In my view, gold is simply a geopolitical trade at this time, contingent upon what happens in Iraq. There’s also the situation in Ukraine. At this time, though, it appears as though President Putin has no interest in escalating the conflict and making the country vulnerable to more economic sanctions.

When I last wrote on the precious metal, spot gold was trading at $1,276 an ounce. The yellow metal managed to edge higher to $1,324, prior to the current stalling on the chart. If you bought any of the SPDR Gold Shares (NYSEArca/GLD) exchange-traded fund (ETF), I would suggest you take the money at this time.

Gold-Spot Price Chart

Chart courtesy of www.StockCharts.com

Now, gold could easily surge if Iraq loses control of the country, but I truly don’t believe this will be allowed to happen by the United States and Iran. After spending more than a decade in Iraq and a trillion dollars trying to reform the country, there’s simply too much at stake to lose.

Assuming the advancement by ISIS is eventually eliminated, gold would surely lose its safe haven premium that is priced into the current value. We could, in this case, see prices fall back down below $1,300 an ounce, based on my technical analysis.

I also keep hearing about the massive buying of gold from India and China, yet I truly feel this is overblown at this time. The two countries are the biggest purchasers of the … Read More


Two More Reasons to Be Bullish on Gold

By for Daily Gains Letter | Mar 27, 2014

Bullish on GoldEarlier in the year, gold bullion prices were going higher, and we heard the skeptics say, “They will decline. Don’t buy the precious metal; it’s useless.” They turned out to be very wrong. Now, gold bullion prices are seeing a minute pullback. With this, we are once again hearing the same thing: ditch gold and buy something else has become the mantra.

Sadly, those who say don’t buy the precious metal are too focused on the short-term fluctuations and are completely forgetting the long-term picture.

I am bullish on the yellow metal. My reasons are very simple. We see demand for gold bullion increasing—it will come from the central banks and individuals and it will eventually cause disruption in the supply.

Those who are saying gold bullion is useless so don’t buy it are the same cynics who said buyers will eventually run out. Instead, we continue to see an increasing number of buyers.

Consider this: Iraq’s central bank bought 36 metric tons of gold bullion in March. This was the biggest purchase by the country in three years. The gold bullion was worth $1.5 billion. (Source: Salman, R. and Harvey, J., “Iraq’s central bank bought 36 T of gold in March,” Reuters, March 25, 2014.)

Certainly, the purchase made by the central bank of Iraq isn’t huge, but it shows that the demand for gold bullion by central banks is still present. It is also very interesting to note that the reason the gold bullion was purchased was due to the bank’s attempt to stabilize the country’s currency, the dinar.

Going back a little further, in 2013, central banks … Read More


Global Risks Creating Opportunities in This Precious Metal

By for Daily Gains Letter | Mar 27, 2014

Precious MetalWhile the stock market has been struggling this year, under the radar, gold has been moving higher.

The tense stand-off in Crimea is clearly adding some support to gold, as an outbreak there could drive the precious metal much higher in the short term.

The geopolitical risk also includes the tensions between Israel and Iran in the Middle East.

On the fundamental side, we have China continuing to amass significant positions in physical gold, as the country looks to diversify its massive $3.0 trillion in reserves away from U.S. bonds. Buying in India has stalled, but the country continues to be the world’s largest market for the precious metal.

The one major supportive variable that’s missing is inflation, which is a proven driver of gold prices. The reality is that inflation is benign in the United States, along with much of Europe and Asia.

With gold currently holding just above $1,300 an ounce, the precious metal is at a crux. Stabilization in Crimea would remove some of the risk discounted into the price, but I doubt this will happen in the immediate future, as Russia has set the process to annex Crimea from Ukraine.

We know that the contested move by Russia doesn’t sit well with the United States or the United Nations, yet I really do not see Russia backing away for now. That is unless the economic sanctions put forth on Russia intensify and begin to send the Russian economy into a downward spiral.

But until we see a resolution in the stand-off, I expect gold prices will continue to incorporate some risk discounted into the price.

In … Read More


Should You Be Prepared for a Bullish Run in Gold Bullion?

By for Daily Gains Letter | Mar 26, 2014

Bullish Run in Gold BullionAfter 12 years, gold bullion’s glorious bull run ended with a thud in 2013, retracing 30% and locking in the biggest annual decline since 1981. Many speculate that gold bullion prices melted in 2013 as investors tried to figure out when the Federal Reserve was going to be cutting its generous $85.0-billion monthly bond purchases.

Investors lean toward gold bullion and other precious metals as a hedge against both a weak U.S. dollar and inflation. A tapering of the Federal Reserve’s monetary policy suggests that the U.S. economy is getting stronger. While there was no real sign of sustained economic strength in 2013, just the idea that the Federal Reserve would have to start tapering at some point was enough to send gold bullion prices lower.

That coupled with a strong—but misguided—run on the S&P 500 also helped push gold bullion prices lower. I say “misguided” because quarter after quarter, more and more companies on the S&P 500 revised their earnings guidance lower. At the same time, companies masked their weak earnings and revenues with cost-cutting measures and near-record-high share repurchase programs.

That came to a crushing halt at the beginning of 2014, when the Bureau of Labor Statistics reported abysmal January payroll figures. Instead of adding the forecasted 196,000 jobs—the U.S. economy added just 74,000.

Weak January payroll data coupled with political tension in Ukraine helped send gold bullion prices higher. Between the beginning of January and the middle of March, gold bullion prices rebounded, climbing 15% year-to-date to around $1,390 per ounce.

The bullish run in gold bullion didn’t stop the bears from warning investors to avoid the … Read More


The Chart That Will Make You Bullish on Gold

By for Daily Gains Letter | Mar 19, 2014

Bullish on GoldSince the beginning of the year, gold bullion has gained a significant amount of attention. The precious metal has increased about 14% in value and has become one of the best-performing asset classes. Key stock indices, on the other hand, are down.

With this rise in gold bullion prices, we see an increasing amount of pessimism. In 2013, we heard the metal was a slam-dunk sale. Now, the warnings are a little tamer, but we are told $1,200-an-ounce gold bullion is very possible. The mining companies that have increased in value will see a pullback.

Before going into further detail, please look at the chart of daily gold bullion prices below.

Gold - Spot Price (EOD) Chart

Chart courtesy of www.StockCharts.com

As I have written about in these pages before, I am bullish on gold mainly because of one fundamental reason: the demand for the yellow metal is much higher and constraints to its supply are increasing.

But this isn’t all. When I look at the charts, my bullish convictions for higher gold bullion prices become stronger.

Ask any technical analyst; they will tell you to treat the trend as your friend, follow it until it breaks. Since late 2012, gold bullion prices were trending in a downtrend (black line on the chart above). This changed. In June of 2013, we saw the precious metal’s prices decline below $1,200, and then in December, they tested those levels again. As this happened, there was one phenomenon no one talked about: there was no follow-through—meaning gold bullion prices never declined below their lows. Instead, there was a formation of the chart pattern called the “double bottom.” In February … Read More


Three Reasons to Buy Gold Now

By for Daily Gains Letter | Mar 12, 2014

Buy Gold NowWhen it comes to gold bullion prices, despite their mere 10% climb since the beginning of 2012, I wouldn’t be at all surprised to see gold bullion prices increase even further. With this, companies producing or looking for the precious metal are still presenting a great buying opportunity.

Let me explain…

We see demand for gold bullion continues to increase, and at the same time, supply constraints are slowly starting to show. This is something I have been talking about for some time now and at the very core, it is the perfect recipe for higher gold bullion prices ahead.

In 2013, we learned that the Indian government and the central banks have been working together to curb the demand for gold bullion in that country. This was a concern to many because India was the biggest consumer of the precious metal at that time. As a result of this, emotions took over, and we saw massive selling. A little-known fact that never made the mainstream: though the official demand for gold bullion declined, smuggling the precious metal into the country became the next big thing.

According to the World Gold Council (WGC), smuggled gold bullion in the country amounted to 150–200 tonnes in 2013. The WGC also predicts that if the restrictions imposed by India’s government remain in place, then it wouldn’t be a surprise to see an increase in the amount of gold bullion smuggled into the country. (Source: “UPDATE 1-Gold smuggling in India likely to rise if curbs stay-WGC,” Reuters, February 18, 2014.)

But this is just the tip of the iceberg.

We see uncertainty in the … Read More


What I Learned at the World’s Biggest Mining & Exploration Convention

By for Daily Gains Letter | Mar 6, 2014

World’s Biggest Mining & Exploration ConventionThis week, I went to one of the world’s biggest mining and exploration conventions, which was hosted by the Prospectors and Developers Association of Canada (PDAC) and was held in Toronto. There were hundreds of gold mining and exploration companies showcasing their projects and making their case for how they could be the next big investment.

Saying the very least, it was an interesting experience.

From time to time, I go to conventions like the one I went to a couple days ago. I go to gauge the sentiment of those who are very close to the industry, to see where gold bullion prices might go next.

This week, at the convention, I found that gold exploration and production firms, analysts, and even those who sell mining equipment are skeptical about where gold bullion prices are heading next.

Let me explain…

Over the day at the convention, I spoke to many different companies that produce or explore gold bullion. The majority of them said something along the lines of, “The markets are tough these days,” or “Funding is difficult to get… We are cutting our exploration budget and not going ahead with further expansion.”

Analysts who look at companies involved in the gold bullion sectors weren’t very optimistic, either. Remember when gold bullion prices were reaching their highs? At that time, you would hear calls for the precious metal prices to go higher than $3,000 or even $5,000 an ounce.

This isn’t the case anymore. The negativity is intense. Analysts said something along the lines of, “At the very core, exploration companies and producers won’t increase in value unless gold … Read More


Five Ways to Preserve Your Wealth as Key Stock Indices Decline

By for Daily Gains Letter | Feb 28, 2014

Key Stock IndicesThe key stock indices continue to make new highs. Each day, there’s someone on the TV saying how we are going higher. Some are estimating key stock indices will do much better this year than last. No matter where you look, the opinion seems to be the same: buy stocks and your portfolio will do great. With all this happening, investors must remember one very important lesson that the stock market has taught us over and over again: a rising tide lifts all boats, but tides come and go.

Let me explain…

As key stock indices are going higher, investors’ portfolios may look great. Their return may be exuberant, but they shouldn’t forget that markets tend to move in waves. The conditions may look rosy now, but eventually, it all turns. Key stock indices are known to have corrections—minor or steep.

When the times are good on the key stock indices, such as now, long-term investors have to keep market corrections and sell-offs in mind.

Generally, when the key stock indices turn, investors turn towards government bonds. This is mainly because they move in the opposite direction of the stock market. Investors can protect their assets when key stock indices decline by going heavyweight on exchange-traded funds (ETFs), like PIMCO Total Return ETF (NYSEArca/BOND)—this ETF, like many others, invests in bonds with different maturities. Investors may even consider ETFs like iShares TIPS Bond (NYSEArca/TIP), which invests in the inflation-protected bonds issued by the U.S. Treasury.

Another way investors can protect their portfolio in the case that key stock indices sell off is through gold bullion. The yellow shiny metal has … Read More


Why I Recently Turned Bullish on Gold Mining Stocks

By for Daily Gains Letter | Feb 14, 2014

Gold Mining StocksA friend of mine asked me the other day about the best way to build a long-term investment strategy. This is a great question, but it’s also one of the most difficult ones to answer.

Obviously, different people have various goals and objectives, especially when it comes to risks. For me, the way I put together an investment strategy is by looking to buy things when they are on sale, including stocks.

Over the past couple of months, if you’ve been following my articles, you’ve likely noticed that I’ve started to become quite bullish on gold mining stocks. This is the classic investment strategy of buying when most people are selling. When you consider the current sentiment, it’s clear that gold mining stocks haven’t experienced this much negativity in years.

Of course, you can’t simply have an investment strategy to buy any random stock or sector when it goes down; that’s doomed to fail. At some point, for the investment strategy to work, there must be some fundamental strength over the long term.

We all know about the pain felt by most gold mining stocks. But don’t forget: the market is a forward-looking mechanism. Your investment strategy should not focus on what’s happening today, but what is likely to occur over the next several quarters and even years.

Why did I recently become bullish on gold mining stocks?

I believe part of the reason for the significant weakness in the precious metal, especially in December, was due to institutions continuing to play the trends. You have to remember that large funds are measured by their performance (yearly and quarterly), and … Read More


Two Reasons to Consider Gold Investments Right Now

By for Daily Gains Letter | Feb 12, 2014

Gold Investments“Why would someone be bullish on gold right now? Stocks have the momentum. Let me warn: you will be better off buying stocks than buying gold bullion.” These were the “wise” words of my good old friend Mr. Speculator, when I met him over the weekend.

Not too long ago, he was afraid about what would happen to his stock position. Now, his opinion has changed. Mr. Speculator thinks key stock indices will hit new highs and gold bullion—which provides safety against the backdrop of a weak economy—will go down further. He said, “It will be a bad year for gold investors.”

Mr. Speculator may be right about the key stock indices. The momentum on the stock market is significantly noticeable. We see buyers come in and buy after every decline. This can continue, but you have to keep in mind that the fundamentals are becoming weak. This can be troublesome and could create a massive sell-off very quickly.

On gold, however, I completely disagree.

I have been bullish on gold bullion for some time, and my main argument has to do with the demand and supply of the precious metal. I see demand for gold bullion increasing, while the supply side is being threatened due to low prices.

We are seeing China become the biggest consumer of gold bullion. It was India before, but the government and the central bank of the country are working very hard to curb the demand for the yellow shiny metal. According to the China Gold Association, in 2013, the total precious metal consumption in the country increased by 41% to 1,176.4 tonnes. This … Read More


Gold: Slam-Dunk Sell or Trade of the Year?

By for Daily Gains Letter | Jan 23, 2014

Gold: Slam-Dunk SellDemand for gold bullion remains high. Each day there’s a new piece of information that continues to attest to this phenomenon. With this, I remain bullish on the yellow shiny metal. But one thing should be noted: I am not saying the bottom has been placed in, but that all the indicators are suggesting a bottom may be in the making.

From a fundamental point of view, the basic factors of price—supply and demand—suggest gold prices may be going higher (which I have said before). Demand is increasing.

We are seeing massive demand for gold bullion from countries like Turkey. According to the Istanbul Gold Exchange, Turkey imported 302.3 tons of gold bullion in 2013. This was more than double what it imported in 2012 and the highest amount since 1995. (Source: Larkin, N., “Turkey’s Silver Imports Surge to Most Since 1999 as Prices Slide,” Bloomberg, January 2, 2014.)

Pakistan is seeing massive imports of gold bullion into the country. As a result, the Economic Coordination Committee (ECC) of the Cabinet has imposed a ban of 30 days on gold bullion imports to Pakistan. This is the second time the country has taken such a step. The first time it imposed a ban on gold bullion imports was in July of 2013. (Source: “ECC imposes 30-day ban on gold import,” The Nation, January 21, 2014.)

The demand for gold bullion from India and China has shown great resilience in the past year, and I wouldn’t be surprised to see it continue. With the Chinese New Year fast approaching—a time when gold bullion is purchased by consumers as gift and good … Read More


Will 2013’s Worst-Performing Metal Rebound in 2014?

By for Daily Gains Letter | Jan 9, 2014

Metal Rebound in 2014The year 2013 was not kind to gold; the yellow metal closed the year down about 28%—its biggest annual drop in three decades. But in spite of the awful year for gold, it wasn’t the worst-performing metal in 2013. That dubious distinction goes to silver.

On the heels of quantitative easing, a devaluation of the dollar, and inflation, safe haven investors were expecting silver prices to trade in the $30.00–$50.00-an-ounce range. Sadly for these investors, that did not come to fruition.

After starting 2013 at $30.00 an ounce, the white metal finished the year around $19.50 an ounce—an annual loss of 36%. The dismal year is even more cringe-worthy when you consider silver recorded an average price of $31.15 in 2012—the second-highest on record.

Silver prices tanked in mid-April on the back of gold’s violent descent. Gold prices plummeted (in part) on the rumored sale of gold reserves in Cyprus. This decline occurred despite the demand for physical gold remaining strong in India and China. This point is important because, together, these two countries account for more than half of the annual demand for gold.

Still, silver prices fell in step with gold and then continued to slip lower over the ensuing months after the Federal Reserve hinted it might begin to taper its $85.0-billion-per-month easy money policy.

While analysts are divided as to how silver will perform in 2014 (some of them are calling for a range of $19.00–$26.00 an ounce and others are suggesting $30.00–$34.00 an ounce), the year will present investors with some solid opportunities.

For starters, the recently announced pullback in quantitative easing from $85.0 billion … Read More


Update: My 2014 Gold Outlook

By for Daily Gains Letter | Jan 7, 2014

Gold OutlookIn 2013, gold prices saw the worst tumble in a few decades. This decline in prices caused many to panic, and the negativity towards the yellow metal increased significantly. As we begin 2014, this sentiment seems to be holding on. It’s not uncommon to hear analysts or investors say how gold bullion isn’t worth holding and that there are better opportunities.

However, I’ve been bullish on gold for some time, and I stand by my bullishness. The main reason for my take on the precious metal comes down to the most basic factors that determine price—supply and demand. I continue to see a declining supply and increasing demand. Keeping all else the same, this is the perfect recipe for higher prices ahead.

On the demand side, we are seeing buying from countries across the globe. This was something that was said to have slowed when the gold bullion prices were going down back in April of 2013 and then again in June of 2013.

Australia’s Perth Mint reported sales of gold bullion coins and bars increased by 41% in 2013 compared to a year ago. The Mint sold 754,635 ounces of gold bullion in 2013 compared to 533,333 ounces in 2012. (Source: Sedgman, P., “Perth Mint Gold Sales Surge 41% in 2013 on Worst Rout Since 1981,” Bloomberg, January 2, 2013.)

At the U.S. Mint, the increase in sales of gold bullion coins has been similar to that of Australia’s. The U.S. Mint, for the entire year of 2013, sold 856,500 ounces of gold bullion in American Eagle coins. This was 13% higher compared to the same period a year … Read More


A New Year’s Resolution in Gold Bullion?

By for Daily Gains Letter | Jan 7, 2014

Gold BullionDid gold make a New Year’s resolution? If it happened to set its sights on 2014 being better than 2013, then that might not be too hard to accomplish. For gold bugs, 2013 was abysmal. Gold bullion prices ended the year down about 28%—the biggest annual drop in more than 30 years.

Gold bullion prices experienced an unprecedented run-up after the tragic events of September 11, 2001 and soared higher in 2008 as the global economy teetered on the brink of a recession. Investors’ justifiable fears of economic turmoil and inflation sent them running to gold bullion and gold mining stocks to hedge against this economic uncertainty. Between September 2001 and September 2011, gold prices soared more than 560%.

But since then, gold prices have lost their lustre. And in June of this year, the precious metal hit a three-year low of $1,179 an ounce after the Federal Reserve hinted it would begin to taper its generous $85.0-billion-per-month quantitative easing policy. Investors took this as a sign that the U.S. economy was on solid footing.

Gold bullion prices remained weak near the end of the year after the Federal Reserve announced on December 18 that it would begin to reduce its monthly bond buying program to $75.0 billion a month starting in January. Gold bullion ended the year at $1,202.

2013 will be remembered as the year when (misguided) economic optimism helped lift the Dow Jones Industrial Average by 26%, the S&P 500 by almost 30%, and the NASDAQ by 34%. In 2013, that same optimism also shaved off half of the value of gold mining stocks.

But it could … Read More


Two Factors Suggest Problems in Gold Market Will Get Bigger?

By for Daily Gains Letter | Dec 6, 2013

Gold Market Will GetGold bullion prices are taking a big hit. The precious metal continues to slide lower, and sits at the lowest level since July; negativity towards it is exuberant. There’s a significant amount of noise that says gold bullion prices will go much lower, and those who are against it can be found saying that it’s not worth the investment—those who are bullish on the precious metal are ridiculed.

As I have said before, I continue to be bullish on gold bullion prices going forward. It is certainly difficult to take this stance, but the odds are stacking higher with this notion; time will be the better judge.

One of the factors that affect prices is the supply. At the end of the day, gold bullion prices—or the price of any other commodity or stock for that matter—are very dependent on the supply. If there’s an abundance of the commodity, you’ll see prices go lower; if the supply is dismal, one can expect prices to go higher. This is Economics 101.

I see constraints to the supply of gold bullion going forward, with demand remaining robust.

One way to assess the future supply of gold bullion is to look at the exploration costs of gold mining companies. At their very core, increasing or decreasing exploration costs tell us if there will be more production. As it stands, we see companies reducing their exploration costs, meaning they are not as active in looking for more gold bullion.

Consider Yamana Gold Inc. (NYSE/AUY). In the first nine months of this year, the exploration and evaluation costs at this company totaled $83.9 million. In … Read More


Why It “Won’t Be Different” This Time Around

By for Daily Gains Letter | Nov 26, 2013

U.S. Dollar Trade ContinueBuy the U.S. dollar, because it’s going to gain strength going forward, or so say the mainstream. The reasoning behind this investment strategy is very simple: the central banks of major economic hubs are working to devalue their currencies. As a result, there will be a rush to buy the U.S. dollar—it’s proven to be safe in the past. Just look at Japan, for example; it continues to be in favor of printing, which is why you should sell the Japanese yen. The European Central Bank (ECB) has hinted it might go ahead with quantitative easing—sell the euro. Others, like Australia, have already lowered their interest rates, and while they haven’t started printing yet, but say they are open to it—sell the Australian dollar.

In the short run, these investment strategies may be viable. In fact, since late October, we have been seeing the U.S. dollar gain strength compared to other major currencies. Please look at the chart below of the U.S. dollar index.

US Dollar Index Chart

Chart courtesy of www.StockCharts.com

I question if this strategy of buying the U.S. dollar is going to be profitable in the long run. Those who are looking at the fundamentals of the U.S. dollar from a long-term perceptive will agree with me that they are looking very bleak.

First, the printing continues. We heard from the Federal Reserve that it will continue to print U.S. dollars in exchange for government bonds and mortgage-backed securities (MBS). Sadly, what many don’t realize is that even if the central bank says it will taper, it simply means it will be printing, just at a slower pace. What this printing … Read More


Losing Faith in Gold? Read This Before You Sell

By for Daily Gains Letter | Nov 25, 2013

Faith in Gold“The sky is falling, sell;” “It’s useless, run away;” “There’s going to be deflation, so it won’t serve any purpose to your portfolio”—these are a few of the ways gold bullion is being described these days. The yellow metal is facing scrutiny, and those looking for it are gasping for air.

Looking at all this negativity, should you lose trust in gold and sell, like the mainstream says?

The scrutiny against gold bullion is significant, but I remain bullish on the metal in the long run. As it stands, I don’t see demand declining, and as the prices remain suppressed, I expect the supply to decrease.

When gold bullion prices slid lower, we started to hear that the buyers would run for the exits, but we still don’t see that happening; as a matter of fact, more consumers are jumping in to buy the precious metal.

The nations that are known as the biggest consumers of gold bullion are still buying. According to the World Gold Council, in the third quarter of 2013, gold bullion jewelry demand in China was 164 tonnes, an increase of 29% from the same period in 2012. In India, the demand for gold bullion remains robust; for the first nine months of this year, the demand for gold bullion was higher than the previous year by 19%, despite the government and central bank working together to curb the demand. (Source: “Gold continues its journey from West to East as buoyant consumer markets balance investment outflows,” World Gold Council web site, November 14, 2013.)

“Consistent with the first two quarters of 2013, the global gold market … Read More


Three Bullish Reasons to Renew Your Trust in Gold

By for Daily Gains Letter | Nov 15, 2013

Trust in GoldGold has gained a significant amount of negative attention lately, being called a “slam-dunk sell” not too long ago. While the bears have their reasons, I continue to be bullish on the shiny yellow metal for a few reasons of my own.

First of all, central banks around the world are continuously printing or using easy monetary policies to spur growth in their respective countries—these policies are rigorous and extraordinary, to say the least. For example, the central bank of Australia has lowered its benchmark interest rates by more than 40% since the beginning of 2012. The cash rate in the country stood at 4.25% in early 2012, and now it sits at 2.5%. (Source: “Cash Rate Target: Interest Rate Changes,” Reserve Bank of Australia web site, last accessed November 12, 2013.)

Similarly, not too long ago, we heard a surprising announcement from the European Central Bank: it cut interest rates to their lowest level after the eurozone’s economic health didn’t show signs of improvement.

On the printing front, the Federal Reserve continues to be at the forefront. The central bank is still printing $85.0 billion a month and buying U.S. bonds and mortgage-backed securities. Note that we hear gold bullion is going down in value these days because the Federal Reserve will be tapering quantitative easing. Sadly, they forget that tapering still means more printing, just at a slower pace.

Secondly, the demand for gold bullion continues to increase. We have seen mints across the global economy sell a record amount of gold bullion coins, consumers rush to buy the precious metal, and nations that are thought to be … Read More


Time to Rethink Your Gold Investments?

By for Daily Gains Letter | Nov 11, 2013

Rethink Your Gold InvestmentsIs it time to rethink your gold investments? This question is being asked by those who have held on to their investments as the prices of the precious metal have come down significantly. It wasn’t too long ago when gold bullion prices soared beyond $1,900 an ounce; this year, they are facing scrutiny. Gold bullion prices witnessed plunges in April and June, and now sit close to $1,300—down more than 31% from their peak.

This decline in gold bullion prices has caused concern, and I completely understand why. For example, gold miners’ share prices have collapsed—both senior miners and exploration companies.

With this in mind; I certainly think it’s time to rethink the gold investments that investors hold in their portfolio.

Before going into any details, let me make this very clear: I continue to be bullish on gold bullion prices ahead. I see the most basic principles of economics, supply and demand, are at play; gold bullion is seeing increased buying worldwide, while supply becomes anemic every day that the prices remain stressed.

The reason for rethinking gold investments is due to the basic portfolio management principle that things can change very quickly and investors have to change with them. Investors have to keep in mind that the deeper the losses get, the harder it is to break even. For example, if an investment has come down 50%, it will have to go up 100% just to break even.

Let’s face it: some gold producers have come down significantly and exchange-traded funds (ETFs), which provide leverage to gold bullion prices, have tumbled downward, too.

If investors hold gold producers … Read More


Why You Should Remain Bullish on Gold

By for Daily Gains Letter | Oct 18, 2013

Bullish on GoldIn 2008, when the key stock indices started to plummet after Lehman Brothers fell, there was uncertainty across the board. There was too much noise, and the direction of key stock indices was very unpredictable. The bottom was not placed until March of 2009.

Fast-forwarding to today, we have one market that’s seeing something similar: gold. Gold bullion isn’t liked by many these days, to say the least; it’s not uncommon to hear something along the lines of how the store of value doesn’t hold value itself anymore. The gold bears love what’s happening in the gold bullion market, and will take any chance they get to talk against it.

That said, I remain bullish on the shiny yellow metal.

My argument remains the same, and it’s very simple: the demand for gold bullion is increasing, and with prices remaining suppressed, the supply will decline. The basic rules of economics are at play here.

Where’s the demand coming from?

In April, when the price of gold bullion dropped on speculation that the easy money will be out of the system and the Federal Reserve will start to normalize its monetary policy—we’re still waiting to see it happen—there was speculation that gold bullion buyers would eventually run out. It was believed they would stop buying the precious metal once the prices remained in stress for some time.

They were wrong; we actually have been seeing buyers still in the market.

One of the buyers of gold bullion is the central banks, and I closely watch what they do. This is because they are big buyers and can affect the price of … Read More


Debt Ceiling Debates Pushing Central Banks Toward Financial Independence

By for Daily Gains Letter | Oct 10, 2013

Financial IndependenceI realize gold is out of favor right now, but there are just too many technical and fundamental indicators pointing to the upside. With the yellow precious metal currently trading near a three-year-plus low, one has to wonder if now is a good time to get involved.

While gold prices recently dipped below the 50-day moving average, they have been finding support on the back of the U.S. government shutdown and impending debt ceiling showdown.

Gold prices were up earlier this week as the U.S. government shutdown barreled into its second week with no end in sight. Astute investors have turned their backs on the U.S. dollar in favor of the yellow precious metal, a global, borderless currency that acts as a store of value.

Granted, Federal Reserve chairman Ben Bernanke claims he doesn’t understand gold prices. But that hasn’t prevented other central banks around the world from adding it to their coffers.

Central banks, which own roughly 18% of the world’s gold supply, are expected to increase their reserves of the precious metal in 2013 by as much as 350 tons, valued at about $15.0 billion. In 2012, central banks from around the world purchased 535 tons of the yellow precious metal, the most since 1964.

Gold may be trading down more than 20% year-to-date, but between July and September, it posted its strongest quarterly gains in a year. Why is the precious metal re-emerging? Oddly enough, it has nothing to do with the Federal Reserve’s $85.0-billion-per -month monetary policy; rather, it’s the idea that the world’s strongest economy and holder of the reserve currency could default on its … Read More


Why I Remain Bullish on Gold

By for Daily Gains Letter | Oct 3, 2013

Bullish on GoldI am bullish on gold bullion. My convictions are very simple: central banks in the global economy are going to buy more of it. Their perspective towards the yellow shiny metal seems to be changing. As a result, the demand will increase, and with prices remaining suppressed, the supply will decline.

What we have seen is that central banks around the global economy have become buyers of gold bullion. In the recent past, we have seen central banks from countries like Russia, Turkey, and Kazakhstan add the yellow precious metal to their reserves. In the second quarter of this year, central banks throughout the global economy added 71 tonnes of gold bullion to their reserves. (Source: “Consumer demand for gold up 53% in Q2 2013 led by strong growth in China and India,” World Gold Council web site, August 15, 2013.)

Those who already hold gold bullion in their reserves are holding onto it. For example, there were rumors about the Italian central bank selling its gold bullion for the sake of economic growth in the country. It turns out that the bank is staying firm on its take on the precious metal.

At the London Bullion Market Association’s annual conference, the director general of the Italian central bank, Salvatore Rossi, said that “Not only does it have the vital characteristic of allowing diversification, in particular when financial markets are highly integrated, in addition it is unique among assets in that it is not issued by any government or central bank, so its value cannot be influenced by political decisions or by the solvency of any institution.” (Source: Harvey, J. … Read More


A Bullish Case for the “Other” Precious Metal

By for Daily Gains Letter | Sep 20, 2013

Precious MetalSilver has been one of my favorite precious metals. One of the reasons I like the white metal is because not only is it used as a store of value, but it also has industrial uses. With that said, this shouldn’t suggest that I don’t like gold. The yellow metal has its own place; it provides a hedge against inflation and uncertainty. Silver, however, I see as having much more potential than gold when it comes to percentage change.

Putting it simply, for silver to increase 100% in value, it will have to go to $40.00, considering the current price is $20.00. For gold to go up by the same degree, it will have to increase to $2,700; it can get there, but it will be a very rigorous battle.

We are currently seeing the demand for silver increase, just like we did with gold. This shouldn’t go unnoticed by investors.

Since the beginning of this year, we have seen the Indian government working together with the country’s central bank to curb the demand for gold bullion. We were told that “it was impacting the country’s trade accounts.”

India has since imposed higher taxes and tariffs. As a result of this, a new trend emerged, with the demand for white precious metal increasing in the country that prides itself as the biggest consumer of gold. Silver imports from April to July in India increased 258.65% to 857 tonnes, compared to 239 tonnes in the period a year ago. (Source: Mishra, P., “July silver imports highest in 5 years,” The Times of India web site, August 2, 2013.)

Looking at the … Read More


Poverty Rate Reveals Just How Little the Fed’s Helping Main Street

By for Daily Gains Letter | Sep 19, 2013

Poverty Rate RevealsAfter five years of pumping trillions into the U.S. economy, the average American really is no better off than before the Federal Reserve initiated its unprecedented economic stimulus efforts. This is in spite of Federal Reserve chairman Ben Bernanke’s claims that the Fed’s efforts at encouraging U.S. economic growth are helping Main Street more than Wall Street.

Bernanke may claim to be focused on helping the average American, but the U.S. economic numbers suggest his steely gaze is trained elsewhere. For example, even though unemployment numbers improved from 7.4% in July to 7.3% in August, the vast majority of those jobs were created in low-wage-paying industries. On top of that, more and more have given up looking for work and are no longer considered unemployed, so they’re removed from the equation. Voila, better numbers.

What about housing prices? While a slightly improving U.S. economy has lifted housing prices 13% over the last year and a half, they’re still down 25% from their 2007 pre-Great Recession highs. It’s also important to remember that any increase on the back of an improving U.S. economy, while a welcome sign, is only on paper.

At the same time, 7.1 million homes, or 14.5% of all residential properties with a mortgage, still have negative equity. Of the 41.5 million residential properties with positive equity, one quarter (10.3 million) have less than 20% equity. Borrowers with less than 20% equity could have a difficult time getting new financing. Interestingly, 1.7 million residential properties have less than five percent equity, meaning they are at risk of negative equity if the markets turn and home prices slide. (Source: … Read More


Silver a More Profitable Investment Than Gold This Year?

By for Daily Gains Letter | Sep 9, 2013

zulfi09092013

Gold bullion gets a lot of attention in the financial media and economists talk about it regularly. Sadly, another precious metal, silver, isn’t usually a topic of discussion. This metal moves in line with gold bullion, and for investors, it can serve as an alternative to owning the shiny yellow metal.

When gold bullion prices started to tumble in late April and then declined even further in June, silver prices did the same. Please look at the chart below of silver and gold prices. The golden line represents the spot price of one ounce of gold bullion, and the red and green line represents silver prices per ounce.

Just like gold found support at the $1,175 area, silver prices found support at around the $19.00 level. Since then, they have been on the rise, having roughly increased more than 23%; gold prices are up about 18%.

Where are silver prices headed next?

Looking at it percentage-wise, silver has the ability to outperform gold prices.

Silver Chart
Chart courtesy of www.StockCharts.com

To give you some idea about what I mean, consider this: for gold prices to go up 50% from the current level of around $1,400, they will have to increase $700.00; to get there, it can take a long time and a lot of buying. Now, for silver to increase 50%, from the current level of around $23.50, it will have to go up by $11.75 to $35.25. This sounds attainable because the silver prices have seen that level; for gold bullion, $2,100 would be in uncharted territory.

Here’s why I think silver has the potential to increase.

The demand for silver … Read More


Gold Keeps Rising: Time to Drop Your Bearish View on the Yellow Metal?

By for Daily Gains Letter | Aug 29, 2013

290813_DL_zulfiqarI will be the first one to agree that it’s very difficult, if not impossible, to price gold bullion. Unlike stocks or bonds, it doesn’t provide investors with income or necessarily have an interest rate. Sadly, just for this reason, the yellow metal gets a lot of scrutiny. We saw what happened to gold prices not too long ago: they were slammed on the notion that the precious metal doesn’t have any use in a portfolio anymore, and it seemed as if no one knew where the precious metal would find support.

Now, a couple of months after the sell-off, the price of gold bullion is up about 20% from its lows around the $1,175 area.

Looking at all this, one must wonder: what’s really next for gold bullion? Is the bull market that began in 2001 over, or do gold bullion prices still have some room to grow?

Gold -Spot Price Chart

Chart courtesy of www.StockCharts.com

When I look at gold bullion prices, I tend to focus on the supply and demand side.

Looking at the demand side of gold bullion, it seems robust. As the prices were falling, there was a significant amount of concern that the consumers will eventually diminish in numbers.

We did not see this phenomenon occur. Consumers stayed; as a matter of fact, they rushed to buy more. Keep in mind that earlier in the second quarter of this year, gold bullion prices had a significant downturn. By the logic presented, buyers should have diminished by the end of the quarter.

Consider this: the Word Gold Council (WGC) reported that the demand for gold bullion in China during … Read More


Why It Doesn’t Matter Where Gold’s Headed, Opportunities Still Abound

By for Daily Gains Letter | Aug 20, 2013

Gold’s Up: Should You Add It or Short It?Between September 2012 and July 2013, gold wasn’t so much on a roller coaster ride as a steep descent, losing almost 35% of its value. During the first half of 2013, it fell almost 30%, hitting an intra-day low on June 28 of $1,179.40.

But it’s been a different story since then. Increased demand for physical gold and lower supply have helped the price of gold jump almost 15%, soaring past its 50-day moving average and hitting a two-ish-month high near $1,370 an ounce. Over that same time period, gold miners have gone up 35%.

Basic economics pointed to a rebound in the price of gold. During the second quarter of 2013, consumer demand for physical gold surged 53%, while total supply slipped six percent. Naturally, one would expect the price of gold to increase, but it didn’t; the price fell 35%.

According to the World Gold Council “Gold Demand Trends” report, gold’s second-quarter descent was due to speculators selling paper gold, rather than a decline in demand for actual physical gold. (Source: “Consumer demand for gold up 53% in Q2 2013 led by strong growth in China and India,” World Gold Council web site, August 15, 2013.)

With some analysts predicting the price of gold will head higher, many investors are asking how high. In the near term, some expect gold purchases by the manufacturing trade to increase ahead of the holiday season and harvest festivals.

Economist and gold bug Eric Sprott thinks the price of gold will double from its June 28 bottom, touching $ 2,400 an ounce by next summer. The gold bull market is also expected … Read More


Where the Real Opportunity in the Gold Market Is

By for Daily Gains Letter | Aug 16, 2013

Real Opportunity in the Gold MarketThe direction the price of gold bullion is headed is heavily debated these days. Those who are bearish continue to say the shiny yellow metal has no space in an investor’s portfolio. They argue that the price action we have seen in the gold bullion market since the beginning of the year, especially the sell-offs in April and June, were just a few minor sell-off episodes. We are headed much lower than $1,000.

When it comes to the price of gold bullion going forward, I have to distance myself from the bears. I cannot predict where gold prices will bottom or where will they top, but what I see is certainly worth noting. Both the fundamentals and the technicals of gold bullion are showing the presence of bullish sentiment.

At the very basic level, the demand for gold bullion is increasing, and it is very evident. Take sales of gold bullion coins at the U.S. Mint, for example. For the first seven months of 2013, the demand was higher by 82% compared to the same period a year ago. The U.S. Mint sold 679,500 gold bullion coins in total, compared to only 374,000 in the previous year. (Source: “Bullion Sales/Mintage Figures,” U.S. Mint, last accessed August 14, 2013.)

Demand for the precious metal in China is robust and continues to increase. Consider this: according to the Chinese Gold Association, in 2012, 460 tonnes of gold bullion were consumed in the Chinese economy; this year, the number has increased to 706.36 tonnes. If the demand remains, China may very well become the biggest consumer of gold bullion in the world (it’s … Read More


Why Negativity Toward Gold Bullion Isn’t Affecting Physical Demand

By for Daily Gains Letter | Jul 30, 2013

gold bullion pricesGold bullion prices fell below $1,200 an ounce by the end of June; now, they are trading above $1,300, down from well above $1,600 in January. Looking at this price action in the gold bullion market, investors are asking if the recent surge after making lows is just a rally based on short covering—investors who were short-closing their positions—or if it’s due to fundamental reasons.

I stand in the camp that believes the rise in gold bullion prices we are seeing is due to fundamental reasons. That said, the sell-off we witnessed in the precious metal prices could take some time to recover.

In spite of the negativity and the notion that gold bullion isn’t useful in one’s portfolio, the physical demand continues to increase. Keep in mind that those who buy gold in physical form tend to have a long-term focus, compared to those in the paper market, who are there to speculate.

We are seeing demand increase here in the U.S. economy. For example, look at the demand for gold bullion coins sold at the U.S. Mint; Richard Peterson, acting director of the U.S. Mint, described it as “unprecedented.” (Source: Mason, J., “U.S. bullion coin demand still at ‘unprecedented’ levels: Mint,” Reuters, last accessed July 29, 2013.) But in the Far East, the demand is much higher.

Consider this: UBS AG (NYSE/UBS), one of the biggest gold-dealing banks in the global economy and based in Switzerland, announced that it will start to store gold bullion in Asia—specifically Singapore—for the first time.

What are the reasons for this move? “Notwithstanding the drop in gold prices, we are still receiving … Read More


These Signs Point to a Bullish Season for This Precious Metal

By for Daily Gains Letter | Jul 22, 2013

Bullish Season for This Precious MetalGold is making a comeback after having lost 21.5% of its value since the beginning of the year. Since the start of July, the precious metal has climbed almost 10%—trading near $1,275 per ounce.

The price of the yellow precious metal began its turnaround in late June after Federal Reserve chairman Ben Bernanke said the central bank would consider tapering its monthly $85.0-billion purchase of Treasury and mortgage-backed security bonds by the end of the year. On top of that, the Federal Reserve said it might even completely end its quantitative easing policies in 2014.

On Wednesday, July 17, gold prices edged higher after Bernanke calmed the storm he created, telling investors that the quantitative easing policies could, depending on the economy, stay in place for longer than expected.

Even though the economy has been improving at a moderate rate, Bernanke said, those improvements have been overshadowed by the national unemployment rate, which stands at a stubbornly high 7.6% (along with a 14.3% underemployment rate).

For investors, that means the era of easy money is going to continue into the near future—and money will continue to pour into the markets. On Thursday, the day after the Fed spoke, the Dow Jones Industrial Average and the S&P 500 rose to all-time intraday highs.

Not to be left out of the party, gold climbed more than one percent, hitting a one-month high of $1,299 per ounce.

Even after the Federal Reserve–inspired euphoria on Wall Street fades, there might be additional reasons for investors to keep their eyes on gold equities and related exchange-traded funds (ETFs).

According to Thackray’s 2013 Investor’s Guide: How … Read More


Gold Slides Lower—Time to Sell It All?

By for Daily Gains Letter | Jun 18, 2013

Gold Slides Lower—Time to Sell It AllGold has gained a significant amount of attention since the price plunged from trading just below $1,600 an ounce in mid-April to now hovering close to $1,400. It’s very common to hear someone in the financial media say how the yellow metal has no use in their portfolio and, most importantly, that the prices won’t go any higher. Some have even called the price plunge a sign of the bubble bursting.

My take on the issue is that while there’s no doubt that the prices have gone down from their highs, investors who are in the world of investing for the long term need to think on a bigger scale. If declining prices are the sole reason for investors to say gold is useless for their portfolio, then I beg to ask what the 2008–2009 stock market sell-off suggested; that investors shouldn’t hold stocks? Just look at the chart below, which shows gold prices sliding lower:

Gold Price Chart

Chart courtesy of www.StockCharts.com

The truth is that gold can be healthy for a portfolio over a long period of time. Remember that just like stocks, gold prices fluctuate.

Now, can the plunge in gold prices that started in April continue?

In spite of the decline in gold prices, the fundamentals for the precious metal remain strong. The demand is still there; as a matter of fact, it seems to be skyrocketing.

Consider the behavior of central banks as the prices have fallen.

“Overall, gold prices coming down is giving an opportunity to various central banks across the world to improve on their holdings,” said Ajith Nivard Cabraal, governor of the Central Bank of … Read More


Top Three Places for Bears and Bulls to Invest in Gold

By for Daily Gains Letter | May 24, 2013

Top Three Places for Bears and Bulls to Invest in GoldAfter a decade of consecutive gains, it looks like gold’s reign as the precious metal darling could be in jeopardy. Between early 2002 and September 2011, the price of gold soared over 590% to an all-time high of $1,923.70. Since then, gold has lost some of its luster, down almost 18% since the beginning of the year and more than 28% since the record-highs posted in September 2011.

During the first quarter of 2013, demand for gold slipped 13% year-over-year. On the paper front, investors sold 177 tonnes of gold (or six percent of global demand) through exchange-traded funds (ETFs) worth approximately $9.3 billion. (Source: “Global demand for gold jewellery up 12% in Q1 2013 driven by significant increases in India and China,” World Gold Council web site, May 16, 2013.)

But it wasn’t all bad news. Total jewelry demand was up 12% year-over-year. China led the way, up 19% at a record 185 tonnes. Demand in the Middle East and India was up 15%, respectively, and demand in the U.S. increased for the first time since 2005, climbing six percent.

Sales of gold bars and coins were also up in the first quarter. Sales increased 22% in China and 52% in India; in the U.S., sales jumped 43%. Central banks continued to increase their holdings, purchasing in excess of 100 tonnes for the seventh consecutive quarter.

ETFs may be liquidating their holdings, but the average person on the street isn’t—and neither are central banks. Even though sales of bars and coins, jewelry, and the technology sector make up about 80% of the market, the total demand for gold each … Read More