Month: July 2013

By OilPrice.com

So much for the lessons of Fukushima. Never mind oil spills, the Russian Federation is preparing an energy initiative that, if it has problems, will inject nuclear material into the maritime environment.

Speaking to reporters at the 6th International Naval Show in St. Petersburg, Baltiskii Zavod shipyard general director Aleksandr Voznesenskii said that the Russian Federation’s first floating nuclear power plant “should be operational by 2016.”

Baltiysky Zavod is Russia’s biggest shipbuilding complex. According to Voznesenskii, the “Academician Lomonosov” FNPP will be the first vessel belonging to the new line of floating nuclear power plants that can provide energy, heat and water to remote and arid areas of the country, with mass production scheduled for the near future.

The “Academician Lomonosov’s” technology is based on the USSR’s construction of nuclear-powered icebreakers. The Russian media is speculating that the FNPPS will first be used in remote areas of the northeastern Arctic Russia and the Far East, as these regions currently suffer from a lack of energy, slowing their development. Each 21,000 ton vessel will have two “modified KLT-40 naval propulsion reactors” that will provide up to 70 megawatts of electricity or 300 megawatts of heat, sufficient for a city with a population of 200,000 people. Additionally, the floating NPPs can provide water desalination services capable of supplying up to 240,000 cubic meters of fresh water per day.

Perhaps referring to Soviet-era nuclear icebreakers is not such a hot idea, at least for those with historical memories.

Launched in 1957, the Lenin, the USSR’s first nuclear powered icebreaker, was powered by three OK-150 reactors. In February 1965, there was a loss of coolant incident, and some of the fuel elements melted or deformed inside reactor number two. The debris was removed and stored for two years, and subsequently dumped in Tsivolki Bay near Novaia Zemlia two years later. The second accident was a cooling system leak, which occurred in 1967, shortly after refueling.
Not a reassuring development for the Soviet Arctic environment.

“Academician Lomonosov’s” keel was laid in April 2007 at the Sevmash shipyard in Severodvinsk on the White Sea, but the project was subsequently transferred to the Baltiskii Zavod. The “Academician Lomonosov’s” 21,500 ton hull was subsequently launched in 2010, although construction work was frozen in mid-2011because of bankruptcy proceedings against the shipyard. The company was subsequently acquired by state-owned United Shipbuilding Corporation and Rosenergoatom signed a new contract with the Baltiskii Zavod for the “Academician Lomonosov’s” completion. The “Academician Lomonosov” has 69 crew and specialists. Ominously, the “Academician Lomonosov” has no engines, so it needs to be towed. The vessel is equipped with two modified KLT-40 reactors.

But, not to worry.

The Baltiskii Zavod shipyard stressed that The “Academician Lomonosov” and its successors are all designed with a safety margin exceeding all possible threats which makes its nuclear reactors invulnerable to tsunamis and other natural disasters and the ships meet all the requirements of the International Atomic Energy Agency (IAEA) and do not pose a threat to the environment. The factory further states that 15 nations, including China, Indonesia, Malaysia, Algeria, Namibia and Argentina have already expressed interest in buying floating nuclear power plant.

The “Academician Lomonosov”will be sent to Vilyuchinsk, Kamchatka for operational testing. Rosatom then aims to construct seven more FNPPs by 2015, with four of them likely to be located on the northern coast of Siberia’s Yakutia. Other Arctic areas provisionally scheduled to receive FNPPs include port cities along the Russian Federation’s arctic coastal Northern Sea Route and Pevek in Chukotka. An added benefit of the FNPP as envisaged in Moscow is that the provision of nuclear power to the Arctic and Far East will free up more oil and natural gas for foreign export, allowing the Russian federation to generate additional hard currency.

Tow cables snap, Arctic conditions can be unpredictable, ships sink. As the ocean is the common heritage of humanity, perhaps the international community might evince a tad more interest in this project.

Source: http://oilprice.com/Alternative-Energy/Nuclear-Power/Chernobyl-at-Sea-Russia-Building-Floating-Nuclear-Power-Plants.html

By. John C.K. Daly of Oilprice.com

London Gold Market Report
from Adrian Ash
BullionVault
Wednesday, 17 July 08:05 EST

The PRICE of GOLD held steady around $1285 per ounce Wednesday morning in London, trading unchanged for the week so far ahead of a key speech from US Federal Reserve chairman Ben Bernanke.

 Giving semi-annual testimony to Congress on the direction of monetary policy, Bernanke was widely expected to clarify recent comments on reducing the Fed’s $85 billion in monthly bond purchases through its quantitative easing program.

 “We continue to consolidate in a $1270-1300 range” for gold bullion, says a note from Swiss refinery and finance group MKS, “in the lead up to Wednesday’s Congressional address.”

 “The last 3 daily candles,” says Scotia Mocatta’s technical note, “can be characterized as ‘spinning tops’ which have a low range from open to close, and are a sign of indecision in the market.”

 Longer-term, gold is “seen remaining under pressure,” says fellow London market-maker Societe Generale’s latest Commodity iWatch, “on expectations of Fed tapering, rising [interest] rates, stronger US Dollar and investor selling.”

 The Dollar held steady early Wednesday against the Euro, but dropped 1.5¢ vs. the British Pound after minutes from the Bank of England’s latest policy meeting showed a unanimous vote under new governor Mark Carney to keep rates and asset purchase plans unchanged.

 That knocked the price of gold for UK investors back to a 3-session low of £844 per ounce – down 1.6% from Tuesday’s near 4-week highs.

 “The Fed’s bifurcated message [on rates and QE] will continue,” Bloomberg today quotes Barclays’ senior US economist Michael Gapen.

 “Their outlook is for an environment where we can start tapering — so a hawkish tone on tapering switching to a dovish tone on rate hikes.”

 “The unwinding [of QE] needs to be carefully phased, planned, communicated,” said International Monetary Fund chief Christine Lagarde at a central-bank conference in Bucharest on Tuesday.

 Policy makers should play a “much more subtle game,” she said. Because after proving “a massive positive” for the global economy, the effect of removing QE “remains to be seen.”

 Voting policy-maker Esther George – president of the Kansas City Fed – said to Fox Business on Tuesday that starting to reduce QE could likely begin “going into 2014.”

 Meantime in Asia today, premiums for physical gold over and above international benchmark prices held strong, Reuters reports.

 Hong Kong premiums held near $5 per ounce, while dealers in Tokyo blamed a growing shortage of supplies for Japan’s $2 premium.

 Chinese prices for immediate delivery of gold eased back, however, with the premium over benchmark London settlement dropping to $25 per ounce on the Shanghai Gold Exchange, down from last week’s $30 level.

 In India, in contrast – the world’s No.1 consumer nation – “Demand [for gold] will be less as there are so many restrictions on import of raw materials,” says Haresh Soni, chairman of the All India Gem & Jewellery Trade Federation.

 “A lot of buying took place in April and May. Investment demand is also weak.”

 Silver prices were little changed with gold in London trade Wednesday morning, holding in a tight range around $19.90 per ounce.

 Other commodities were also unchanged. Major government bond prices slipped, however, nudging 10-year US Treasury yields up to 2.55%.

 With longer interest rates rising as tapering talk continues, short-term rates remain held at zero, and the gap between 2-year and 10-year Treasury yields has widened since May to the highest level since summer 2011.

 So while “it seems as though the Fed is considering tightening with the ‘taper’ talk,” writes Gary Tanashian in his Notes from the Rabbit Hole, “in reality it is laying the groundwork for the next phase of the ongoing inflation operation.”

Adrian Ash

BullionVault

Gold price chart, no delay | Buy gold online

Adrian Ash is head of research at BullionVault, the secure, low-cost gold and silver market for private investors online, where you can buy gold and silver in Zurich, Switzerland for just 0.5% commission.

(c) BullionVault 2013

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

U.S. Dollar Under Pressure

EURUSD – The EURUSD Trying to Develop Increase

Despite the absence of any fundamental factors supporting the single currency increase, being in pair with the U.S. dollar it is confidently consolidating above the 30th figure, in fact, it is already close to the 31st one. On the daily timeframe, the Parabolic SAR is below the price chart maintaining a positive outlook on the technical prospects of the pair, but on the 4-hour, despite the current strengthening, the Parabolic is above the price chart – this raises some doubts about the bulls’ ability to develop an upward trend. However, the breakdown of the high near the 32nd figure dispel all doubts and the EURUSD will increase to 1.3264. The loss of 1.3000 would mean the downtrend resumption.

GBPUSD – The GBPUSD May Increase to 1.5300

The GBPUSD was decreasing yesterday, but the support near 1.5040 didn’t cope with its task, and the pair is now trying to develop its growth towards 1.5200. In general, it seems that the pair has formed the basis and may soon test the resistance at the 53rd figure on the daily chart, where the 100-day and 50-day moving averages are running. The breakthrough of this level would cause further development of the uptrend. On the 4-hour timeframe, the British pound attempts to break above the 100-day MA, but the Parabolic SAR is above the price chart, which casts doubt on the current increase. The loss of 1.5040-1.5000 would return negative sentiment to the markets, and the current low of 1.4813 would be under pressure put by the bears again.

USDCHF – The USDCHF Stays at Support 0.9477

The USDCHF is kept from decreasing by the USDCHF, which attempted to increase yesterday, but having faced the resistance at 0.9533, it was forced to retreat to the support of 0.9477, which is trading near it at the moment. On the 4-hour timeframe, the USDCHF is below the 95th figure and 100-day moving average, but the Parabolic SAR, being below the price chart hasn’t confirmed the the downward momentum in the pair. In turn, on the daily timeframe, the Parabolic is above the price chart, but the dollar is trading above the 100-day moving average, which takes place at the level of 0.9443. The decrease lower, would confirm the downtrend, and the increase above 0.9555 would indicate the renewed upward movement.

USDJPY – The USDJPY Fails to Increase Above 100.49

The USDJPY increased to 100.49 yesterday. There it was sold, and the dollar was forced to retreat to the 99.70 support area, where it is trying to form the interim basis. If it succeeds, then the pair will increase to 100.49-100.68. The breakthrough of 100.68 would strengthen the upward momentum. In favor of this development speaks the Parabolic SAR located below the price chart. But on the daily timeframe, it is still located above the chart, and thus the pair still may test the 98.67 support. The drop below would confirm the downward correction.

provided by IAFT

By www.CentralBankNews.info     Central banks stepped up their pace of monetary easing in May and June as 26 banks slashed policy rates 31 times by a total of 1736 basis points, taking advantage of the general decline in worldwide inflation to counter a slowdown in global economic growth.
    But the threat of inflation is never far from the surface with five central banks (Brazil, Indonesia, Gambia, Ghana and Zambia) raising rates by 350 basis points in May and 450 points in June, a sharp jump from average monthly rate hikes of just over 40 points in the first four months of the year – a likely harbinger of a rise in global monetary policy rates in the second half of this year.
    Despite the aggressive pace of rate cuts – 15 in June and 16 in May, up from an monthly average of eight cuts from January through April – the net reduction in policy rates was tempered by the fact that the average rate cut was 56 basis points in those two months compared with an average rate rise of 114.
    Central banks tend to raise their rates in bigger increments than when they cut rates, just as inflation tends to rise steeply at first – typically in response to some external shock – and then gradually subsides as interest rates are raised.
    The end result of the 38 rate changes in May and June was that the average Global Monetary Policy Rate (GMPR) remained steady at 5.65 percent in end-June and end-May, down from 5.77 in April, 5.85 percent in January and an average 6.2 percent in 2012 among the 90 central banks covered by Central Bank News.
    While central banks’ response to slower growth was the main reason for lower rates, the dominant theme in May was clearly financial markets’ and central banks’ reaction to the Bank of Japan’s launch of a new round of quantitative easing in April.
   The accelerated decline in the yen not only made Japanese exporters more competitive against other Asian exporters, but there were also fears that the BOJ’s easy money would lead to capital inflows into higher-yielding currencies, posing a risk of unsustainable asset bubbles.
    Four of the 16 rate cuts in May – Australia, South Korea, Thailand and Israel’s two cuts – were explicitly linked to worries over the dampening impact on growth from strong exchange rates.
    The 16 rate cuts in May totaled 809 basis points while three rate rises amounted to rate rises of 350 basis points for a net reduction of 459 basis points.
   But without much official warning, the U.S. Federal Reserve in late May and June announced a possible wind-down of its quantitative easing later this year, triggering a sharp reversal of capital flows.
    Practically overnight, central banks’ concern over strong currencies and asset bubbles turned into a worry over the dampening effect of higher interest rates on growth and a boost to inflation from higher import prices triggered by a fall in currencies.
    But the statements by Federal Reserve Chairman Ben Bernanke on May 22 merely accelerated a shift that quietly had begun a few months earlier.
    A massive selloff in commodities in mid-April was the first sign that major investors and hedge funds were positioning themselves for slower growth in emerging markets. The steady improvement in U.S. labour markets – the jobless rate fell to its lowest rate in April since December 2008 – seems to have convinced investors that the tide was turning and the U.S. economy was finally on the mend.
   Figures this week showed that private investors – considered to be hedge funds – sold $39.2 billion of U.S. Treasuries in May, probably taking profits ahead of the sharp price fall in May and June. Emerging market currencies also started their descent in early May as capital suddenly started flowing out, according to IIF and EPFR data.
    So far, only Indonesia has responded to the pressure on its rupiah, and the accompanying rise in inflation, from the outflow of capital with a rate hike.
    However, given the worldwide impact of changes in U.S. monetary policy on the entire spectrum of financial assets, it is probably only a question of time before other central banks in emerging markets will follow suit.
    Even without the fall in the rupiah from the earlier-than-expected move by the Federal Reserve, the Bank of Indonesia would probably have raised rates in response to higher fuel prices and inflationary pressures from the government’s long-awaited removal of subsidies.
    The 15 rate cuts in June totaled 926 basis points while the three rate rises totaled 450 points for a net reduction of 476 points.

By www.CentralBankNews.info Here’s today’s Central Bank News’ link list, click through if you missed the previous link list. The list comprises news about central banks that is not covered by Central Bank News. The list is updated during the day with the latest developments so readers don’t miss any important news.

By Profit Confidential

I told you so.

According to the National Bureau of Statistics, the Chinese economy grew at an annual pace of 7.5% in the second quarter of this year from a year earlier—down from 7.7% in the first quarter. (Source: Bloomberg, July 15, 2013.)

Regular readers of Profit Confidential shouldn’t be surprised by that; I have warned about the slowing of the Chinese economy many times in these pages, and I continue to expect more weakness ahead. In fact, what we have seen so far might just be the tip of the iceberg.

While some might say that 7.5% is a decent amount of growth when comparing it to the gross domestic product (GDP) growth in countries like the United States, for the Chinese economy, it’s embarrassing. It’s well below its historical average growth rate.

And that’s not all. Earlier this year, the Chinese government set a target for GDP growth of 7.5% for 2013 and an even seven percent through to 2015—so what we are witnessing now is here to stay for some time.

Keep in mind that the International Monetary Fund (IMF) expects the Chinese economy to grow 7.8% this year—that’s a lowered expectation from April. And The Goldman Sachs Group, Inc. (NYSE/GS) and other major banks, like HSBC Holdings Plc (NYSE/HBC) and Barclays PLC (NYSE/BCS), have all reduced their forecasts for the Chinese economy. They expect China’s GDP to grow 7.4% this year—the worst growth rate for the Chinese economy since 1990.

What many don’t realize is that a slowdown of the Chinese economy has many global consequences. It will send ripple effects into the global economy. More problems will emerge in the short term as the second-biggest economy in the world slows.

Consider Australia, for example. In recent years, its economy has benefited significantly by exporting raw material to the Chinese economy. Now, the tides are changing, and Australia’s GDP might be in trouble. Australian Prime Minister Kevin Rudd said: “The truth is that the China resources boom is over.” The unemployment rate in Australia has reached a four-year high of 5.7%. (Source: “China Slump Ripples Globally,” Wall Street Journal, July 15, 2013.)

And Australia isn’t the only economy affected by slow GDP growth in the Chinese economy. Here’s what the Deputy President of AgriSA—a farmers’ association in South Africa—said of China: “We are more and more dependent on how their stomachs turn when they get out of bed in the morning.” (Source: Ibid.) Any more slowdown in the Chinese economy will result in a greater impact on South Africa’s economy as well.

Of course, we in North America are no different. Any slowdown of the Chinese economy would result in significant problems for the U.S. economy as well. For example, we export airplanes and computer goods to the Chinese economy. Slow demand from China will yield lower profits for companies in those and many other industries.

I still see too much optimism in the markets as the problems from the slowing Chinese economy are starting to creep up to the surface. As it stands, the key stock indices are rising because many investors apparently think bad news is good news.

I remain skeptical of the performance of the key stock indices as GDP in China is slowing, countries around the global economy are facing an anemic economic future, and the U.S. economy continues to be in a period of dismal growth.

Article by profitconfidential.com

By Profit Confidential

The current market action will soon turn to selling. I’ve come to that conclusion because what the current stock market is doing is really not normal, and a correction will certainly come.

I’m not saying the end is near. In fact, I feel there are more gains to come, but the ride will likely be bumpy and riddled with risk.

When I objectively evaluate the market, I see many stocks, even those that have horrible fundamentals, rising to levels that just don’t make any sense to me.

I’m actually perplexed. The higher market trading has proven to be much more sustainable than I thought it would be at the end of the first quarter. You can thank the Federal Reserve for a boost in your 401(k).

The new records set last Wednesday by the S&P 500 and the Dow Jones Industrial Average were really not warranted. Or at least not yet, unless the economic recovery picks up and corporate America delivers strong revenue and earnings growth and not the diluted results that have kept Wall Street happy.

Because of the Street’s reduced expectations, I would expect companies to report some blow-away quarters. We will see for sure when the earnings parade picks up starting this week. Don’t just settle for an inline or slightly better-than-expected quarter. If there’s any real growth, you’ll see much more.

And then there’s the housing sector, which will be in the limelight tomorrow when the housing starts and building permits readings for June are released. We saw some stalling in the housing sector in May, so it will be interesting to see if the housing sector continues to stall or renew its growth.

Then there are the home prices across the nation. The S&P Case-Shiller Home Price Index has been on a nice rally since early 2012 as reflected in the following chart:

Chart courtesy of www.StockCharts.com

Despite the steady rise, home prices continue to be well below their peak in 2006, which, of course, was driven by easy money and the subprime mortgage fiasco in the housing sector, when the banks were lending out money to anyone and everyone who wanted a house.

The housing sector has improved since then, but there’s still some froth in the current housing market, given the advance as shown in the chart below:

Chart courtesy of www.StockCharts.com

Note the recent upside gap as indicated by the blue oval in the chart of the SPDR S&P Homebuilders Index above. It appears housing sector stocks want to push higher after the correction in May and June, but I really do expect to see resistance, based on my technical analysis. I still feel the best gains in the housing sector are behind us for now.

At these current levels, I would be a seller in the housing sector—not a buyer.

Article by profitconfidential.com

By Profit Confidential

Two important banks just reported very solid numbers. That’s important because the financials are a very significant stock market sector that contributes tremendously to investor sentiment and the overall tone for trading action in the capital markets.

Wells Fargo & Company (WFC) beat the Street with a 19% gain in quarterly earnings. The company is the fourth-largest U.S. bank by assets and controls almost 30% of the U.S. mortgage market.

The company’s diluted earnings per share (EPS) grew for the 14th consecutive quarter. Second-quarter earnings were a record $5.5 billion, or $0.98 per diluted share, compared to $4.6 billion, or $0.82 per diluted share, in the second quarter of 2012; second-quarter 2013 earnings are also up from $5.2 billion, or $0.92 per diluted share, in the first quarter.

First-half earnings were a record $10.7 billion, or $1.90 per share, up from $8.9 billion, or $1.57 per share, in the first half of 2012.

Compared to the second quarter of last year, company management cited growth in loans, deposits, and net interest income, and an improvement in credit quality.

Also reporting very good numbers was JPMorgan Chase & Co. (JPM). The company announced second-quarter earnings of $6.5 billion, way up from $5.0 billion in the comparable quarter last year.

EPS grew 32% to $1.60, up from $1.21 in the second quarter of 2012. Total net revenues were $25.2 billion, up solidly from $22.2 billion comparatively.

The company’s total assets under management grew 10% to $2.2 trillion, while total loan balances rose to a record $86.0 billion.

The company also boosted its quarterly dividend payment to $0.38 a share, up from the previous $0.30 a share. JPMorgan handedly beat Wall Street consensus.

The company’s CEO, Jamie Dimon, cited “broad-based signs that the U.S. economy is improving” as the reason for its Wall Street-consensus victory.

But quarterly comparables can be somewhat misleading when it comes to the financial sector. In JPMorgan’s case, the company was forced to increase its loss estimate due to a bad trade in the second quarter of 2012, thereby reducing that quarter’s earnings.

But the company’s latest revenue growth was surprisingly solid.

Individuals may not be enthused about the big banks doing well, but their financial strength is a very important part of confidence in the global capital markets. Their revenue and earnings growth is a reflection of economic conditions, both for Main Street and Wall Street. Improvement in loan losses is also a positive development.

With strength in financials comes greater certainty for the stock market. Good numbers from Wells Fargo and JPMorgan most certainly help to legitimize the stock market’s recent run-up. (See “Corporate Earnings Weakness Should Send You to These Equities.”)

As more earnings pour in, I think it is increasingly likely that the broader market will consolidate on positive results. The main market indices have come a long way already.

With the numbers, company outlooks are critical. Most corporations and Wall Street earnings estimates are weighted to the bottom half of the year, and the market will be looking at company outlooks to reassure this expectation.

Article by profitconfidential.com

By Profit Confidential

The Chicago Board Options Exchange (CBOE) Market Volatility Index—better known as the “VIX” or even the “fear gauge”—sits just above 14. That means investors are continuing to ignore stock market risks and, in the process, are actually assuming even more risk.

All you have to do to see how much risk there is in the stock market is to take a look and see which areas are faring the best.

We are seeing some rotation into higher-risk assets like small-cap, growth, and technology issues. As long as the potential return is high, investors appear willing to assume the risk.

The NASDAQ 100, for instance, closed at a multiyear high of 3,530.76 last Wednesday, easily surpassing its previous multiyear high of 3,502.12 nearly two months ago.

Small-cap stocks have been the life of the party this year, with the Russell 2000 up by more than 20% and achieving three consecutive record-highs at over 1,000.

It’s becoming evident that investors just aren’t scared of risk right now. Even the warning from the Federal Reserve at its June meeting failed to sour the mood, although the stock market did correct by about four percent after the news of an upcoming reduction in bond buying.

When I look at the current situation, I see even greater risk in China and Europe. I also view the future of the U.S. economy as lackluster. And that means the Fed may hold off cutting back on its asset-purchase program for now.

The reality is that this stock market is obsessed with assuming risk in hopes of making some great returns. Investors don’t appear to be able to control themselves, afraid to miss out on any potential gains to come.

While the current euphoric situation reminds me a bit of the Wall Street party in 1999 and early 2000, just before the technology implosion, it’s not quite as crazy. The upward push in the stock market is actually quite orderly compared to those wild days.

But, of course, the investment environment was a whole lot different back in 2000. The federal funds rate stood at 6.24% in 2000, while certificates of deposit (CDs) returned 5.09% over six months and 5.46% over a year. Since there were options in the bond market in 2000, the massive run-up in the stock market looks even more amazing.

Today, the federal funds rate is nearly non-existent at 0.10%, while CDs yield about 0.65% for six months and an even one percent for one year. I’m sure not running to the bank and depositing my money anytime soon. You can understand why the shift to the stock market and higher-risk assets is still happening.

So enjoy the ride. At some point on the horizon, the party will begin to wind down, but now is not the time; in spite of the risk, there’s no real alternative to the stock market. (Read “Why Dow Jones 30,000 Will Become Reality; But What You Should Know First.”)

Article by profitconfidential.com

By Profit Confidential

Back in late 2011, I created a widely circulated video that included six predictions. I hit it on the head with five of those predictions. But the winners are not what are important to my readers today; it’s the prediction I didn’t get right that’s vital now

Back then, I said the U.S. dollar was “dead” and wouldn’t go anywhere. I pointed out that if it were not for the continued crisis in the eurozone, the greenback would fall flat on its face. The dollar hasn’t gone anywhere since. And if it were not for investors taking their money out of European banks and moving them into U.S. dollars, our dollar could have collapsed.

My second prediction back then was that the euro would decline in value. And it has. Prediction three was that both interest rates and inflation would rise. The yield on the 10-year U.S. Treasury has risen about 50% since then. As for inflation, if we calculate it the way the Consumer Price Index (CPI) was calculated when Jimmy Carter was president, it would be almost three times the rate the government tells us it is today.

I compared the rally in stocks that started in 2009 to the period following the 1929 stock market crash (1934 to 1937) and warned that stock prices would eventually follow the same fate they did after the “fake” stock market rally that followed the 1929 crash. I still have that opinion today.

What I got wrong in my “Critical Warning Number Six” was my prediction on gold bullion—and I believe that equates to a bigger opportunity for my readers today.

At the end of 2011, gold bullion was selling at $1,550 an ounce. Today, gold bullion prices sit at $1,280. So what’s happened to gold bullion, and what do you do if you bought gold stocks?

If you are into gold coins, you know the premium on them is at the highest level in memory. Demand for gold coins is going through the roof. Meanwhile, central banks are buying gold bullion at the quickest pace in years. Germany wants the gold bullion it keeps at the U.S. Fed back, but it can’t get it. So with all this demand, why have gold bullion prices fallen?

Yes, I’ve heard all the conspiracy theories that the Federal Reserve and major banks want gold bullion prices depressed. But I have no real first-hand proof of that. I’ve heard the manipulation accusations, but again I have no proof.

As a 30-year student of the markets and as an investor, I do know prices of any investment do not march straight up during a bull market. Nor do they go straight down during a bear market.

I started telling my readers to accumulate gold bullion-related investments when gold bullion traded under $300.00 an ounce (2001). Since then, gold bullion prices moved up to as high as $1,900 an ounce. The mid-point between those two numbers is $1,100.

If gold bullion prices fell decisively below $1,100 an ounce, I’d be worried. But in the light of all the demand for gold coins from the retail public and the gold bullion demand from the central banks, I’m not worried about gold. In fact, I see today’s current, depressed gold prices as a huge opportunity for investors to dollar cost average down with their gold investments. I know that’s exactly what I’m doing.

Years from now, I believe we will look back to 2013 and the low prices of gold stocks and say, “I should have bought more gold stocks back then.”

Michael’s Personal Notes:

Mark my words—gold bullion has a great future ahead.

As the prices for gold bullion face severe headwinds in the short term, the fundamentals are getting stronger. The most important sign that makes me believe it is that central banks continue to buy more in spite of a sharp decline.

It’s not mentioned in the mainstream media very often, but central banks from countries like Russia, Turkey, and others have been continuously adding gold bullion to their reserves.

I wouldn’t be surprised to see these countries continue to buy even more as their currencies—their primary holdings—continue to become prone to wild swings. Have you seen the charts of the U.S. dollar, Japanese yen, Canadian dollar, and euro lately?

Consider this: From January 2011 to May 2013, the Russian central bank purchased gold in 22 of 25 months. Altogether, the Russian central bank has purchased 207.4 tons of gold bullion. (Source: World Gold Council web site, July 2013.)

The central bank of Turkey, which became a buyer in October 2011, has added 329.2 tons of gold bullion to its balance sheet for 16 of the 20 months since then. The central bank of Turkey has started to use gold as collateral. (Source: Ibid.)

Dear reader, you must keep in mind that central banks are very conservative investors and try to preserve their wealth. If they continue to buy gold bullion as the prices come down, it only tells me one thing—they like the precious metal’s future prospects.

As I always say, and it is very well documented in these pages, the central banks will never say when they are going to buy, but their actions are speaking louder than their words. Central banks have turned into net buyers as a whole—and have been buying large amounts quarter after quarter.

This shouldn’t go unnoticed because it’s significant—those who wanted to get rid of gold bullion will soon be running back to it.

It is unprecedented for a commodity to have a bull run like gold bullion has experienced over the last 12 years. I see the current decline as just another buying opportunity—a predictable and very normal part of the economy’s nature.

We are seeing many irrational sellers and speculators putting pressures on gold bullion prices, but what I do notice is that selling has calmed, and the remarks from the Federal Reserve have caused shorts some pain.

Article by profitconfidential.com