Saturday, February 22, 2014
Bad news is good news this week.
Newly appointed Federal Reserve Chair Janet Yellen has said she'd step in at any signs of economic discomfort with more quantitative easing. Perhaps that's why gold is up to more than $1,300 an ounce.
The Market Vectors Gold Miners Fund (GDX) – which holds many of the market's largest gold-mining stocks – is up 25% so far this year.
According to S&A Short Report editor Jeff Clark, we could see a further correction in gold stocks before the bulls take hold again. In his Direct Line real-time blog for S&A Short Report subscribers, Jeff wrote:
But the long-term bull market for gold is still on... Gold stocks are still way down from their peak. And lots of money is waiting to enter the sector. In a private e-mail, S&A Resource Report editor Matt Badiali explained how private-equity firms are getting into the game...
Matt said these funds are "circling the carcass" of the mining industry. And these executives know which assets are the best to acquire.
According to Matt, private-equity funds are in the mix, too... Bloomberg reports that private-equity groups put up $9 billion over the past 18 months to invest in mining assets.
Some mining companies have enough cash to execute deals. But Matt says he expects to see private-equity funds get more active in the next few months. "Acquired at the right price, many of these mines will be excellent businesses for years to come," he said.
A few more bullish notes on gold...
Hedge funds raised bullish bets on gold to a three-month high last week... The net-long position rose 17% to 69,291 futures and options in the week ended February 11, according to data from the U.S. Commodity Futures Trading Commission (CFTC).
Also, investment bank Citi released a recent report predicting gold could hit $1,685 an ounce, based on technicals.
And China is still buying...
According to the latest data from the gold-industry trade association World Gold Council (WGC), China overtook India as the world's largest buyer last year. China's demand for gold bars, coins, and jewelry soared 32% to a record high in 2013.
And China should be able to sustain the No. 1 spot...
"China is 10 years behind India in terms of deregulation and growth of demand," Marcus Grubb, WGC's managing director of investment strategy said. "Given last year was such a strong year, it will be hard to equal that again in 2014, [but] the stock of gold in China is less than half of that in India, so we think there's plenty more room to grow."
It was illegal for Chinese citizens to own gold up until 2002. Now, they are buying and storing gold as affluence increases. From the Wall Street Journal:
Also, the Industrial & Commercial Bank of China, China's largest bank by assets, said trading volume in precious metals increased 22% in the first three quarters of 2013 year-over-year to 1.07 trillion yuan ($176.6 billion). And sales of gold bars are at their highest level in four years.
We've long known China and its citizens have been buying up every bit of gold they can get their hands on... And they took advantage of last year's price weakness to accumulate even more. We're seeing a massive transference of wealth and power from West to East.
There's no doubt China is nervous about the United States' unsustainable debt load... After all, China holds nearly $4 trillion in reserves. And 60% of that is in U.S. Treasurys. But China can't simply dump its Treasurys... It would hurt them as much as it would hurt us.
That's why the country is vacuuming up the world's gold... We believe they have a secret plan behind their actions (something the Chinese government would never admit). Matt explained what he thinks the Chinese are preparing to do with all this gold in a special presentation. Click here to learn more...
Date Range:2/13/2014 to 2/20/2014
Date Range:2/13/2014 to 2/20/2014