Jim Kingsland
FOXBusiness

Gold could go well above $1,000 an ounce in the next couple of years, according to some people bullish on the metal, who say China could boost the yellow metal’s price significantly if it takes the policy actions one of its research officials is advocating.

A Chinese academic with ties to the Chinese Communist Party says the People’s Republic should buy more gold and diversify its nearly $2 trillion in foreign exchange reserves away from U.S. Treasurys.

Li Lianhzong, director of the economic bureau at the party’s China Central Policy Research Office, made the comments at a forum in Beijing that also covered the broader topic of China’s currency on the world financial stage.

Li was cited by Dow Jones Newswires as saying China needs to increase the value of its foreign exchange reserves — the source “from which we create our fortune.”

U.S. land and energy products should be at the top of China’s shopping list, according to Li, who also says China should be accumulating more gold to hedge against the risk of a falling dollar which would diminish the value of its U.S. Treasury holdings.

Similar comments about gold were made at the forum, further heightening speculation that China has been a big buyer of gold, keeping the metal above the $900 an ounce level.

To Scott Travers, coin dealer and author of The Coin Collector’s Survival Manual, the Chinese comments come as no surprise. To him, it’s just one of several bullish factors that he expects will propel the yellow metal to new highs.

“I am completely and absolutely convinced that despite short-term gyrations, gold will shoot through $1,000 an ounce and continue going straight up.”

Travers continued, “when gold does hit $1,000 this time around — and it will — there will likely be no turning back, so I foresee $1,500 to $2,000 gold by early 2011.”

He characterizes pullbacks in gold as “gifts”and says, “the gold naysayers just don’t get it.”

At the heart of the matter, says Travers, is the state of the dollar, which he expects will weaken as the U.S. government is forced to sell more debt to fund annual federal deficits in excess of $2 trillion.

It’s the gloomy outlook for the dollar that has China on guard against risk in its holdings of Treasurys and more loudly suggesting the need for a new international reserve currency.

The Chinese academic, Li, told the forum in Bejing that the Chinese currency, the yuan, should be given an equal 20% weighting with the dollar, euro, pound sterling and yen in an International Monetary fund basket of currencies.

The U.S. dollar with a 44% weighting presently dominates the basket known as Special Drawing Rights currencies, or SDRs. Li would like to see the yuan added to the basket next year when the SDR basket comes up for review.

Li’s remarks are seen as a signal that China will continue to pursue a new world reserve currency other than the dollar.
That, says Travers, will result in opportunity for investors in gold, a commodity denominated in dollars. As dollars weaken, he says, gold and other metals will rise. Travers says the world will eventually come to grips with the reality that gold and silver are the only real money.

Some are not as bullish on gold’s prospects.

John Nadler, senior analyst of precious metals company Kitco says over the next several months gold’s range will likely “remain between $680 and the $980 area.

He says it’s been a “struggle” for the gold bulls at the four digit level and that the “onous is on them to prove if we’re in the midst of a hypercyle for gold”

“Despite the Armageddonish headlines, the sky ended up not falling and the dollar retains its reserve currency status.”
Nadler believes the talk of a the need for a new world reserve currency is merely “jawboning by the Chinese.”

Longer term, Nadler says the jury is still out on whether gold can go deep into four-digit territory. For gold to move to $3,000 to $4,000 an ounce, Nadler says “Kim Jong il would have to go nuts” with his nuclear weapons.

Peter Schiff
Jun 26, 2009

Misguided government policies have already dealt vicious body blows to our economy, but that hasn’t stopped politicians this week from launching two new kicks to the groin: a national health insurance plan and a carbon emissions regulation system called “cap and trade.” Even if these plans could achieve their desired ends, which is highly unlikely, I would have hoped Washington would refrain from throwing more monkey wrenches into the economy until it shows some signs of resurgence. The last thing we need right now is to further encumber our economy with higher taxes and additional regulations.

The meteoric rise in health care costs, which has become an unending nightmare for U.S. businesses and consumers, is not an accident. This painful condition has arisen from excess government involvement in the system, tax provisions that encourage the over-utilization of health insurance, and government support of an out-of-control malpractice industry. Rather than allowing more bad policy to drive health care costs further upward, we should be looking at ways to allow market forces to reign them back in.

If left alone, the free market drives quality up and costs down. Government programs produce the opposite result. Despite the president’s claim that a federal plan will bring costs down, there is no historical precedent for such faith.

Simply providing more widespread health insurance, as the Obama plan offers, is not a solution. In fact, it will aggravate the problem. Since consumers no longer pay for routine medical expenses out of pocket, comprehensive health insurance creates a moral hazard for both patients and doctors. To maximize the value of the health insurance “benefit,” most workers opt for low deductibles and co-pays. Therefore, doctors learn that their patients are not concerned with the cost of care, and so they are free to bill insurance companies at the maximum allowable rates.

Given our current tax code, the simplest way to bring down medical costs would be to fully tax health care benefits as wages and simultaneously increase the personal deduction by an amount significant enough to neutralize the effect of the tax increase. This would do two things. First, the uninsured would get a huge pay increase, enabling them to buy reasonably priced catastrophic policies. Second, those currently insured could opt out of expensive employer-provided plans, trading premiums for extra wages, then buy a more economical plan. The savings would go right into their pockets.

The bottom line is that aggregate medical costs will never come down unless services are rationed more wisely. Rather than being used as a pre-payment plan for routine care, insurance should only cover unpredictable, catastrophic costs.

As a comparison, homeowners often carry fire insurance, but seldom maintenance insurance. You buy fire insurance to guard against a catastrophic loss, which is a low probability but high cost event. As a result, fire insurance is relatively affordable, since premiums paid by all those homeowners whose houses do not burn down more than pay for the losses on those few whose houses do.

On the other hand, no one carries home maintenance insurance to pay for a clogged drain or broken garage door. If insurance paid for the plumber visit every time a toilet overflowed, we would now have a plumbing crisis, and Congress would be looking to reign in runaway plumbing bills with “national plumbing insurance.”

In his press conference, President Obama claimed that government insurance would not drive private providers out of business. This is absurd. As the government provider will not have to produce a profit or accurately account for its contingent liabilities, it will provide insurance on an actuarially unsound basis. With taxpayer subsidies, the government provider can run losses indefinitely. If private insurers did this, they would either be shut down or go bankrupt. Therefore, the cost of government provided health insurance will not be confined to the premiums paid, but will include the taxpayers’ bill to continually bail out the government provider.

When Medicare was first proposed back in 1966, it cost $3 billion per year, and the projection was for inflation-adjusted annual costs to rise to $12 billion by 1990. The actual cost in 1990 was $107 billion, and the 2009 estimate is a staggering $408 billion! So much for government estimates on health care.

As if this were not bad enough, today the House votes on “cap and trade” legislation. Disguised as an environmental bill, this proposal would merely be another gigantic tax. The lion’s share of the new revenue is already committed to politically connected special interests that will reap windfalls at everyone else’s expense. To make matters worse, the bill before Congress amounts to a blank slate, with the EPA empowered to draft the details in any manner they see fit. If Congress is going to shoot the economy in the knee, they should at least be required to pull the trigger themselves.

“Cap and trade” will do nothing to reduce pollution, yet it will drive up production costs throughout the economy – rendering us even less globally competitive than we are today. In addition to the huge cost of paying the tax, its enforcement involves the creation of an entire new bureaucracy, the costs of which will be borne by American consumers in the form of higher prices.

Years of reckless borrowing and spending have left us in a gigantic hole. Getting out of it requires that we make the most effective use of all available resources. We need labor and capital to operate as efficiently as possible so we can save and produce our way back to prosperity. Unfortunately, national health insurance and “cap and trade” are two steps in the wrong direction. Rather than getting us out of this hole, they will merely cave in the walls around us.

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For a more in depth analysis of our financial problems and the inherent dangers they pose for the U.S. economy and U.S. dollar denominated investments, read my latest book “The Little Book of Bull Moves in Bear Markets.” Click here to buy it now.

For a look back at how I predicted the current crisis, read my 2007 bestseller “Crash Proof: How to Profit from the Coming Economic Collapse.” Click here to buy a copy today.

More importantly, don’t wait for reality to set in. Protect your wealth and preserve your purchasing power before it’s too late. Discover the best way to buy gold at www.goldyoucanfold.com, download my free research report on the powerful case for investing in foreign equities available at www.researchreportone.com, and subscribe to my free, on-line investment newsletter.

Gold closed slightly higher on Friday as it consolidates above the 10-day moving average crossing at .9327 signaling that a short-term low has been posted. Profit taking tempered early gains and the low-range close sets the stage for a steady to lower opening on Monday. Stochastics and the RSI have turned bullish signaling that sideways to higher prices are possible near-term. Closes above the 20-day moving average crossing at 948.30 are needed to confirm that a short-term low has been posted. If August renews this month’s decline, the reaction low crossing at 882.00 is the next downside target. First resistance is the 20-day moving average crossing at 948.30. Second resistance is today’s high crossing at 949.00. First support is Tuesday’s low crossing at 913.20. Second support is the reaction low crossing at 882.00.

Courtesy of Business Insider

Nathan Lewis, a money manager and gold investor, has got a fun and scary mystery in the gold world.

Over at HuffPo he cobbles together some very circumstantial evidence to suggest that something may be amiss at the Comex gold depository, which holds customers’ gold bars for a small monthly fee. He notes that each 100oz. bar has its own serial number, indicating its owner and where the bar comes from.

But:

Jim Sinclair of jsmineset.com, a legendary gold trader, reported that some of his contacts have told him that, when they request to withdraw their 100oz. bars from the Comex depositories, they have not received the proper indicted bars. They received a bar, but not one with the correct serial number or weight.

Why not? One possibility is that an honest mistake was made. The high demand recently has apparently kept the depository workers very busy. Wall Street veterans recall that delivery errors were chronic in the days of paper share certificates.

Another possibility is that the bar indicated on the warehouse receipt does not actually exist. The implications of that are rather dire.

Indeed.

So why does Lewis fear the latter?

This would not be so troubling if there were not already a series of very odd things happening down at the Comex. Delivery delays have been chronic. This could be a symptom of an overworked staff. Or, it could be a purposeful stalling tactic. In any case, it should not take weeks and possibly even months, and sometimes dozen of inquiries, to get the gold you already own out of the warehouse.

The Comex itself, however, has been reporting that business at the warehouse is very slow. The daily reports of warehouse movements show almost nothing happening, day after day. So which is it, busy or not busy?

He goes on with more glints of evidence, including some suspicious transactions at Deutsche Bank that were not recorded by anyone else. We really have no idea whether it’s legitimate or not, and for the moment, we don’t desire going down the rabbit hole of gold bug global monetary conspiracies. It’s much easier to just take the blue pill with this stuff.

That being said, it all speaks to the problem with gold as a currency. It’s got expensive carrying costs, and there’s a massive trust problem. Unless you actually have the gold underneath your mattress, you have to trust the party on the other end to hold it and account for it, and then deliver it when armageddon comes, and your gold coins are supposed to make you king.

So you can bet on gold, and hope one day for your windfall, but in the meantime, you’re paying a rather high price for this insurance, while stories like these are sure to give you ulcers.

(Reuters) – Gold prices edged above $940 to a one-week high on Friday as firmer oil prices supported bullion’s appeal as a potential hedge against oil-led inflation.

The precious metal has gained about 1 percent this week after touching a six-week low on Tuesday, a point traders said was a consolidation level.

Gold’s upside may be tested next week as sentiment has improved, with the dollar losing its upward momentum and commodities rising, while there are still fears that inflation will continue, traders said.

“There is some bullish sentiment in the market and prices may move higher next week,” said a Hong Kong-based banker.

“The dollar is weakening while commodities are rising, and there are some worries that interest rates may rise. Inflation concerns could push up gold,” the banker said.

Spot gold rose to a high of $942.60 per ounce, up 0.4 percent from New York’s notional Thursday close of $938.55, and its highest since June 18.

It traded at $941.40 at 0550 GMT.

Gold prices turned around after falling to a low of $912.90 on Tuesday, their lowest in six weeks, suggesting the market has confirmed a floor for now, the manager said.

U.S. gold futures for August delivery rose 0.3 percent to $942.10 per ounce, compared with Thursday’s settlement of $939.50 on the COMEX division of the New York Mercantile Exchange.

Gold closed higher on Thursday due to short covering and above the 10-day moving average crossing at .9325 signaling that a short-term low has been posted. The high-range close sets the stage for a steady to higher opening on Friday.

Stochastics and the RSI are oversold and are turning bullish hinting that a low might be in or is near. Closes above the 20-day moving average crossing at 950.20 would signal that a short-term low has been posted. If August extends this month’s decline, the reaction low crossing at 882.00 is the next downside target.

First resistance is Wednesday’s high crossing at 944.40. Second resistance is the 20-day moving average crossing at 950.20. First support is Tuesday’s low crossing at 913.20. Second support is the reaction low crossing at 882.00.

“Should we buy gold or U.S. Treasuries? The U.S. is printing dollars on a massive scale, and in view of that trend, according to the laws of economics, there is no doubt that the dollar will fall. So gold should be a better choice,” said Li Lianzhong, who heads China’s economic policy research office to CNBC.

(Reuters) – Gold climbed on Thursday, rising above $939 per ounce as investors found support from indications by the U.S. Federal Reserve that it was in no hurry to raise borrowing costs from ultra-low levels.

Spot gold stood at $934 per ounce at 8:48 a.m. EDT, up from $931.10 quoted late in New York on Wednesday. The metal briefly hit a high of $939.05 earlier in the session.

The precious metal, viewed as a hedge against risk, has moved some way off Monday’s low of $912.90, garnering support above $930 per ounce as long-term expectations of a slow economic recovery were mostly unchanged after the Fed’s remarks.

The Fed’s statement, released late on Wednesday, painted a cautiously favorable picture of the U.S. economy but offered no hint of changes to its program of quantitative easing.

“The fact that going forward (the Fed) is keeping rates as they are and sticking with quantitative easing is supportive for gold,” said James Moore, an analyst at the TheBullionDesk.com.

“But physical demand is still very slow and there are still quite a lot of speculative longs in the market and we are in a position where we need to flush some of those out,” he added.

Low U.S. interest rates are seen as bearish for the dollar from a yield perspective, raising the appeal of dollar-denominated gold for non-U.S. investors.

Gold pared gains briefly, while the dollar strengthened, after data showed the U.S. economy shrank slightly less in early 2009 than previously thought.

But bullion resumed earlier gains, with other more bearish economic data showing the number of U.S. workers filing new claims for jobless benefits unexpectedly rose last week.

Analysts said gold was testing higher levels after bouncing off a low near $915 earlier in the week, with higher oil prices, currently nearing $70 a barrel, giving support to long-term inflation expectations.

“Technically speaking (gold) looks a little better than it has in the last few days — it’s trying to break upward now out of a downward trending channel,” said Tom Kendall, an analyst at Mitsubishi. “If we close above $940, gold would look positive in terms of breaking out of this general downward formation.”

SPDR HOLDINGS STABLE

U.S. gold futures for August delivery slipped slightly to $933.50 an ounce.

Earlier on Thursday the head of the economic department of the Communist Party policy research office in China said the country should buy more gold, and that purchasing land in the United States was a better option for China than buying U.S. treasuries.

Gold was slightly lower overnight as it consolidates some of Wednesday’s rally. Stochastics and the RSI are turning bullish hinting that a short-term lower might be in or is near. Closes above the 20-day moving average crossing at 949.90 would confirm that a short-term low has been posted. If August extends this month’s decline, the reaction low crossing at 882.00 is the next downside target. First resistance is Wednesday’s high crossing at 944.40. Second resistance is the 20-day moving average crossing at 949.90. First support is Tuesday’s low crossing at 913.20. Second support is the reaction low crossing at 882.00.