Investment Contrarians

Price of Gold

Gold bullion is pure, physical gold that can be bought or sold as an investment. Gold bullion is 99.9% pure gold. The price of gold is quoted in ounces. From a low of $252.00 per ounce on June 21, 1999, to a recent high of just under $1,924 an ounce in September 2011, the price of gold has had a strong move up over the past decade. Many hold gold as an alternative to fiat (paper) money. As countries continue to run policies that are detrimental to their currencies, investors seeking protection from paper money invest in gold. This increased demand then drives up the price of gold.


Silver in Meltdown Mode; Is It a Buy?

By for Investment Contrarians | Aug 2, 2012

In early 2011, silver was the toast of the town, as speculators ran up the price to the $50.00 an ounce level on speculation that the world economies would continue to expand. But, straddled with the eurozone debt crunch and slowing in Europe and China, silver quickly fell.

The price of the white metal has steadily declined over the past 15 months. As you can see on the chart, the upward move in prices leading up to $50.00 was overextended and vulnerable to selling pressure that drove the metal to just above its multi-year lows.

 silver ticker chart

Chart courtesy of www.StockCharts.com

The long-term chart of cash silver from 2003 shows the metal managing to trade above its 50-day moving average (MA) at around $25.00. The price is currently stuck below its 50-day MA of $27.76, as well as its 100-day MA and 200-day MA of $29.31 and $30.81, respectively.

Since May, trading has been lackluster. There is decent downside support around $25.00 on the bottom end and just over $35.00 on the top end based on technical analysis.

Silver is down 15.6% since the start of the year and is underperforming gold.

Yet, over the past 20 years, silver has largely outperformed gold, as shown in the following chart that indicates returns to July 1, 2012.

 

silver gold chart 2 aug 2012

 

If the metal can hold, we could soon see another rally back above $30.00 towards $35.00. Of course, this would depend on the global economies picking up.

I would rather be in gold, which is used mainly as a hedge against risk and for jewelry.

Silver is used in numerous industrial and electronic applications; … Read More


This Key Currency’s Affecting Gold Prices

By for Investment Contrarians | Jun 26, 2012

Gold has been extremely volatile this year, with many underlying forces disturbing its flow. With the European crisis continuing, the rush of foreign funds into the U.S. dollar has placed more pressure on the price of gold. This is due to the price of gold being quoted in U.S. dollars; if the dollar moves up, all things being equal, downward pressure will be placed on the price of gold. However, another currency to watch is the Indian rupee. The reason is that Indian buyers historically are large consumers of gold. As the rupee declines in value, it makes the price of gold that much more expensive. Currently the Indian rupee continues to tumble to record lows against the U.S. dollar. Even the Central Bank of India has tried to stem the drop in the rupee to very limited effect.

This rush into U.S. dollars is coming partly based on the Federal Reserve’s lack of new monetary policy initiatives last week, strengthening the U.S. dollar and putting downward pressure on the price of gold. The Indian economy itself has been quite the weak, with quarterly growth of 5.3% for the first quarter being among the slowest growth rates in the last decade.

Not only is the entire Indian economy weakening, but many Indian companies have also always borrowed funds in foreign currencies. These foreign-currency bonds are now deeply hurting the issuing companies, as they now have to pay a far higher amount. As the Indian rupee decreases, repayments increase, which is now causing such a burden that many companies are defaulting on their foreign-currency debt. This will raise warning flags for … Read More