The Goldwatcher

  

  

Support for strong gold and commodity prices:

Key commodity  prices including,  among others,  gold, silver, copper and oil rose yesterday following the release of data confirming China’s growth surge. Imports surged by almost 56% and exports by 17.7%.  Both were higher than markets expected. The euro also rose to $1.4515 from $1.4414. yesterday

Gold was trading this morning at $1156.70 after peaking yesterday at $1163 and responding to a weaker $ and strong economic data from China.

High gold prices for 2009 were forecast in the LBMA analysts competition published last January.  At the end of 2009 actual gold prices outcomes for the year were a high of $1213 , a low $750 and and average of $972. The following table published by the LBMA * with 2009 forecasts illustrates how close the analysts  with the highest forecasts were to actual results. * Note added 16th January - Content in the LBMA link quoted above has been changed to display some 2010 forecasts. The most bullish of these forecasts have very high targets. The forercasts will be reviewed when the LBMA publication is complete.

Obama’s war and domestic issues:

When President Obama took office last January he inherited both an unholy economic mess and failed wars in Iraq and Afghanistan.  His administration has addressed issues with committment and energy. Achievements include avoiding another great depression.  But he still faces daunting challenges. Among the most daunting is Afghanistan where his additional 30,000 troop committment supports the view that Afghanistan is  now Obama’s war.  His critical domestic issues include weak employment data that weigh on sentiment for the $ and prospects for economic recovery - and of course his multi $1,000,000,000,000 deficits forecast for the years ahead.

When gold prices make sense:

A November 5th 2009 Goldwatcher  posting ’Are Goldrush Prices Making Sense’ commented  that renewed central bank interest,  evidenced by The Central Bank of India’s  $6.7 billion purchase of 200 tons of gold from the IMF at $1045 per ounce,  supported a positive view on gold price prospects. The IMF/India transaction,  with a margin of about 5% either way,  was the basis for the view taken in November.

In the light of developments since December the margin either way could be wider. 10% or,  at a push,  even 15% depending on newsflow. Higher price expectations will also follow news adverse for the $, economic, domestic or geo-political security.

Lower price expectations will follow if the IMF eventually sells the remaining 200 tonnes of gold it has on offer at a much lower price than India paid. Or if, in spite of much grandstanding about sales of a few tonnes here and there, the IMF  can’t sell at all at a good price.

Caveat emptor: 

Lower gold price expectations will also follow when US interest rates rise.  Realistic interest rates will make gold less interesting than it is now as a speculation. It’s also worth keeping in mind that the dollar is not necessarily ‘kaput’ as some commentators are asserting.

Indeed An FT comment yesterday makes the point that ‘the dollar is hardly expensive. On a trade-weighted basis it is three-quarters of its average level since 1980 and, using purchasing power parity, the dollar is about 15 per cent undervalued against the euro. Be careful turning your back on the greenback.’

Note added 16th January : Insightful  S&P analysis on  gold prices and the 2010  global economy with useful chart

Opinions and advice:

Readers, particluarly those who have not yet read The Goldwatcher,  are reminded that this blog is not an advisory service. Opinions expressed are not intended as investment advice and should not be treated or used as investment advice

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Opinions and advice:

I would like to remind readers, particluarly those who have not yet read The Goldwatcher,  this blog is not an advisory service. Opinions expressed are not intended as investment advice and should not be treated or used as investment advice.

President Obama’s multi $1,000,000,000,000 debt horizons:

Just seeing the array of noughts in a trillion dollar sum should be enough for most of us to recognise we haven’t the training to relate to such a gigantic number.

But, to accomodate borrowing requirement to the end of 2010,  President Obama’s administration  sought permission  from Congress last month to raise the U.S. national debt ceiling by about $1,800,000,000,000. 

To prevent the United States  from defaulting on committments Congress agreed an urgent interim  increase  of $290 billion and thereby raised the debt ceiling to about $12,400,000,000,000. This will only cover borrowing requirements to the the end of February  Further debate will follow in Congress this month along with debate on funding requirements for  extended troop committments in  Afghanistan. Congress may raise the roof this time round before they raise the ceiling again. 

The Afghanistan debacle:

Afghanistan prospects keep getting worse.  Now,  not only has President Obama made further extensive troop committments to the war but,  following the attempted Christmas day mass murder in the Amsterdam to Detroit flight and associated security myopia,  it’s obvious  the case for fighting terrorists in Afghanistan instead of in the US is unsupportable. The terrorist menace knows no boundaries. Security systems are still flawed.

In a New York Times op-ed jihad.com published ten days before Christmas,  the columnist Thomas Friedman explains the ’Virtual Afghanistan’ threat. ‘Let’s not fool ourselves,’ he writes ‘Whatever threat the real Afghanistan poses to U.S. national security, the “Virtual Afghanistan” now poses just as big a threat. The Virtual Afghanistan is the network of hundreds of jihadist Web sites that inspire, train, educate and recruit young Muslims to engage in jihad against America and the West. Whatever surge we do in the real Afghanistan has no chance of being a self-sustaining success, unless there is a parallel surge — by Arab and Muslim political and religious leaders — against those who promote violent jihadism on the ground in Muslim lands and online in the Virtual Afghanistan.’ Keep in mind also the economic jihad  - ‘topple the economy and you topple the Crusaders.’

Gold, Afghanistan, debts and deficits.

Gold prospects will be reviewed in the light of events as they unfold. In previous postings I have commented that, in my opinion,  prices in the range $1000 to $1100 make sense.  Am still reading and reviewing commentary from sources referenced in The  Goldwatcher and other credible commentators on recent developments. When I have worked  my way through the material,  will file a posting updating analysis and previous comments. 

CLICK HERE FOR KITCO GOLD PRICES AND ANALYSIS

CLICK HERE FOR REALTIME MULTICURRENCY GOLD PRICES  

TO BUY THE GOLDWATCHER CLICK HERE