You are on page 1of 27

GOLD N SILVER PRICE HIKES!!

SUBMITTED BY: APURVA GUPTA

GOLD FACTFILE

GOLD FACTFILE
Gold is an element that can only be founded and cannot be manufactured. Till date, total of 165,000 tonnes have been mined. Approx 60% of gold mined becomes jewellery. 100 million people worldwide depend on gold mining for their livelihood. Lowest Gold price was in 2001 around $250. Highest Gold price is $1500 approx in present.

Reasons for increase in gold price


An under supply of newly - mined gold. The real possibility of Asian countries buying whatever gold the European Central Banks dish up. Gold is a "de facto currency" and therefore not subject to demand deficiencies caused by world wide economic slowdowns. It's a natural hedge against the US dollar.

Reasons for increase in gold price!!


Interest rate and gold prices are co-related.
Coming out of a depression or long deep recession people will start saving and increase the rate at which they save. Then there will come a point when they will start to decrease their savings rate and increase their consumption rate usually because the purchasing power of their savings is going down so that there is less incentive to save. They may as well start buying stuff that has real value now rather than wait till later when it will be more expensive. Increasing interest rates correlate with a gold price increase.

Increase caused due to Libya!!


In addition to oil prices, other commodity that jumped due to crisis of Libya is gold. This precious metal prices jumped to 1% became U.S. $ 1,400 per ounce. Investors are competing to divert their investment to a safe place from inflation like gold. On the Spot market, gold prices jumped to U.S. $ 1,503.8 per ounce as per 22 April 2011 market.

Why go for gold???


1. Gold Returning To Historic Role As Money The role of gold in society was summed up by J.P. Morgan in 1912 when the renowned financier stated that Gold is money and nothing else

Why go for gold???


2. Collapse of U.S. Dollar Inevitable The U.S. dollar is the worlds reserve currency and thus anchors the worlds monetary system. Unfortunately, by virtually any measurement we look at, the United States is beyond the point of no return with respect to its financial position. Imbedded federal government debt of nearly $13 trillion, unfunded future liabilities in Medicare, social security, etc. well in excess of $50 trillion and a current budget deficit of over 10% of GDP virtually ensures ongoing massive monetary debasement.

When the near bankruptcy of the majority of the fifty states in the union is factored in, the situation looks even more dire.

Why go for gold???


3. No Other World Currencies Offer Refuge The current travails of the European Union are well advertised. The recent pledge of nearly $1 trillion in potential bailout money by Euro zone members and the IMF in the wake of Greeces problems, coupled with the fear of contagion throughout southern Europe, effectively disqualifies the Euro from serious consideration. Japan had tsunami that effected it and even it has rapidly aging population and embedded government debt that already exceeds 200% of GDP. Even China, that paragon of all things financial and economic, is suspect. As the result of its bank lending spree in 2009, the country is dealing with considerable overcapacity, an emerging inflation issue and a potential bad debt crisis in its banking system.

Why go for gold???


4. Massive Deficits and Quantitative Easing May Ultimately Result In Hyperinflation As the result of the global financial crisis which enveloped the world between late 2007 and early 2009, the worlds governments were forced to step in and bail out the financial sector while propping up overall demand in the face of the collapse in the private sector. Thus, the frightening term hyperinflation is now being heard with increasing frequency.

Why go for gold???

Why go for gold???


5. True Impact Of Malign Side Of Derivatives Has Yet To Express Itself Remarkably, the notional value of derivatives has continued to grow, both throughout the global financial crisis and during the ensuing recovery period. The fact that derivatives played a major role in the financial meltdown seems to have been conveniently forgotten. Attempts to regulate OTC derivatives, which Congressional committees have been warned are ticking time bombs and financial weapons of mass destruction, surprisingly continue to meet resistance. The fact that many derivatives are essentially worthless but are being carried on the books as marked to model is creating an extremely distorted picture of the health of the financial sector. 6. Investment Demand For Gold Is Rapidly Accelerating Despite the fact that gold has been rising steadily for ten years and sophisticated investors are climbing aboard to protect themselves from the ravages of monetary debasement, conventional institutions and the average citizen remain largely unaware of golds utility. When the next leg of the global financial crisis arrives and stocks and bonds come under severe pressure, investment demand for gold could potentially rise exponentially. To facilitate this demand, new gold investment vehicles are being created including the very well received Sprott Physical Gold Trust. 7. Growing Recognition That Many Paper Gold Products Are Not Backed By Gold At the March CFTC hearing with respect to position limits on gold and silver on the Comex, Jeffrey Christian of CPM Metals, advertised on his firms website as an expert on precious metals, openly acknowledged that transactions on the London Bullion Market Association (L.B.M.A.) are minimally backed by available physical gold. Given that the L.B.M.A. has long been regarded as the exchange where physical gold is transacted, that qualifies as a remarkable admission. Investors should also have strong reservations about gold ETFs, gold pooled accounts and gold certificates where the gold is unallocated and thus not specifically accounted for.

Why go for gold???


8. Mine Supply Is Not Anticipated To Rise For Several Years, If At All Despite gold prices surging from a low of $252 per ounce in 1999 to over $1,200 recently, mine production has been eroding for nearly a decade. This suggests that mine supply is insensitive to higher gold prices, a fact confirmed in the 70s when mine supply actually fell as gold made its historic rise from $35 per ounce to $850. Aaron Regent, the head of the worlds largest gold company, Barrick Gold, was quoted at a conference in late 2009 lamenting the state of the gold mining business. He went so far as to suggest that global gold production was in terminal decline despite record prices and the Herculean efforts by mining companies to discover new ore bodies in remote areas. He actually alluded to peak gold by implying that production has already reached levels that cant be exceeded, an expression that is now commonplace in the oil industry. 9. Central Banks Running Short of The Gold Necessary To Keep Market In Equilibrium The western central banks, who have supplied massive quantities of gold to the market over the past fifteen years, both to meet burgeoning demand and to suppress the price, are running dangerously short. Their activities were reminiscent of the late 60s when central banks expended over 100 million ounces in an ultimately failed attempt to hold gold at $35 per ounce. We believe that this time they have disposed of far more gold and did so clandestinely, employing swaps, leases and opaque accounting. This eras central bankers have obviously learned nothing from the past but are clearly considerably more desperate due to the dramatically worse situation on the financial and economic fronts. It is telling that the annual selling quotas under the European Central Bank Agreement are 400 tonnes per annum and the banks, after meeting their past quotas for years, are selling nothing.

Why go for gold???


10. Increasing Likelihood Of Accelerating Purchases Of Gold By Asian Central Banks The enormous concentration of U.S. dollars in the reserves of a number of Asian central banks in conjunction with low gold exposure virtually ensures that they will be more aggressive purchasers of gold in the future. Russia and China have already revealed their intentions and India may have stolen a march on everyone when it announced late last year that it had purchased 200 tonnes of the well advertised IMF sale. What appears to be a huge swing from collective heavy selling by the central bank community to net accumulation is going to have an extremely salutary impact on the gold price. 11. Increasing Skepticism About U.S. Gold Reserves The U.S. has long been the worlds largest gold holder with a current reported position of 8,133 tonnes (over $300 billion worth). However, there have been recurrent rumors that the U.S. has mobilized an unknown portion of their gold reserves via swaps to facilitate leasing, a key component in the gold price suppression scheme. The absence of any outside audit of the reserves since the 1950s and the Feds current intransigence towards being subjected to an audit only heighten suspicions that the U.S. does not have nearly as much gold as they claim. 12. Large Short Positions Despite dramatic de-hedging by the gold producers, whose original excessive hedging was ostensibly the reason for the proliferation of gold derivatives, the notional value of OTC gold derivatives still remains elevated. This suggests either a major legitimate bet against the secular trend of the gold price or ongoing nefarious activity (i.e. price suppression by the usual suspects). The existence of large concentrated short positions on the Comex held by a few bullion banks makes it reasonable to assume that it is the latter. If the longs were to ever call for delivery, the shorts position would be extremely problematic due to the increasing physical shortage of gold.

Why go for gold???


13. Increasing Recognition That Gold Price Has Been Seriously Suppressed More and more members of the financial establishment have been forced to concede that gold has been subjected to constant price management by western governments, their central banks and their bullion bank surrogates. The increasingly egregious activities in this area are forcing any thoughtful person to acknowledge what is occurring. The work of the Gold Anti-Trust Action Committee (GATA), which has been remarkably accurate over the past ten years, is finally receiving belated acknowledgment following years of being studiously ignored. The extent of the suppression has been so great that it virtually guarantees a far greater upward explosion in the gold price than would otherwise have occurred. 14. Suppression Causing Extreme Undervaluation Of Gold Measured by any number of metrics (gold price in relation to the staggering amount of money and credit that has been created over the past several decades, golds extreme undervaluation relative to platinum, the gold producers pathetic returns on capital at the current price, etc.), gold is far behind where we believe it should be. If gold had merely kept up with the reported rate of U.S. inflation since its peak price in 1980, it would presently be trading in excess of $2,300 per ounce. 15. The Relatively Small Size Of The Gold Market In the past, golds small market footprint has actually been a negative because it more easily facilitated the price suppression activity. This is about to change, however, as gold becomes the asset of choice for more and more investors for all the aforementioned reasons. All the gold mined since the beginning of time is worth less than $6 trillion currently and the total capitalization of all the worlds gold stocks barely exceeds that of Wal-Mart. This pales in comparison to the amount of paper money that could seek refuge in the worlds eternal money.

Why go for gold???


16. Gold Is In An Established Powerful Bull Market Gold is in the tenth year of a powerful bull market since it double bottomed at just over $250 per ounce in early 2001. It is most definitely a stealth bull market as the sentiment remains remarkably subdued, a fact illustrated by an extensive worldwide poll conducted by Commodities Online in the spring of 2010 that revealed that 93% of the respondents expected the gold price to fall. Gold has been climbing a classic wall of worry, a climb made steeper by the stout resistance of the anti-gold cartel and the constant negative propaganda emanating from its mainstream apologists. 17. Gold Has Endured Gold is indestructible, possesses a high value-to-weight ratio (which makes it easy to store and transport), is not anyones liability, can be easily hidden (which has been a considerable attribute in the past) and, most importantly, has provided protection against the destruction of wealth for centuries.

Latest news as on 22 april!!


The price of gold increased for a third straight week, as a weak dollar and concerns about global debt levels induced investors to trade in the precious metal in order to hedge their investments against possible losses. The market closed for the Easter holidays on Thursday with gold future for June delivery priced at USD $ 1503.80 an ounce, increasing by 0.33 percent. Silver touched its highest price level in 31 years at USD $ 46.07 an ounce. The depreciation of the dollar, coupled with rising concerns about sovereign-debt of the USA, were the major reasons which led to the price hike. The dollar depreciated against a basket of six other currencies to its lowest level since August 2008, due to fears that the Fed would not increase interest rates. Also, this week, Standard & Poor revised its debt outlook for the USA from stable to negative. Although trading in gold remained thin throughout the week due to the Easter holidays in Europe and the US, gold prices still remained high and are expected to remain so in the upcoming weeks as well.

SILVER FACTFILE!!!

SILVER FACTFILE!!
Silver is also an element that can only be founded and cannot be manufactured. Silver is used in jewellery making, industries for several uses. Lowest Silver price was in 2006 around $5 per ounce . Highest Silver price is $47 approx in present April 2011.

Reasons for silver price increase!!


1. The U.S. dollar has lost 20% of its purchasing power just since 2000 and 30% since 1990. 70% of that decline has been since 1978, when the mandate for the Fed was changed to a dual mandate of both price stability and full employment. Since the Federal Reserve was created in 1913, the USD has lost 95% of its purchasing power. When you compare the appreciation in precious metals to the dollar in those same time frames, those facts alone should convince you that you need significant exposure to the sector in order to protect your wealth.
Central banks for decades have been selling off their reserves of silver to meet excess demand, which has kept prices artificially low. That has made mining unprofitable for so long there is a shortage of mined capacity developing over the next few years.

2.

3.

4.

5.

6.

The majority of silver mined is used for consumption in industrial uses; therefore, unlike gold, most silver is consumed very quickly instead of hoarded. Silver is therefore a precious metal with a store of value quality like gold, but it is also primarily an industrial metal, which gives it an inherent useful value in growth industries like cell phones, computers and chemicals. Since 1980, the above-ground available gold stores have increased 600%, while above-ground available silver stores have been reduced 90% during the same time frame. The historical gold to silver ratio is approximately 15 to 1. The current gold to silver ratio is 38. In other words, it takes 38 ounces of silver to equal the value of one ounce of gold. We think the gold/silver ratio will return to approximately 20 to 1, which would, just by itself, make silver worth approximately $72.50 at today's gold price. Since World War II, the U.S. government has sold over five billion ounces of silver and currently has no reported stores. It probably has one for the military, but won't release that information -- and it wouldn't be that significant, anyway.

Reasons for silver price increase!!

Reasons for silver price increase!!


7. The Silver ETFs (mainly SLV) have democratized precious metals investing to the average investor, who know doesn't have to worry about delivery and storage. Most importantly, this has made it easy for retirement and tax deferred accounts to purchase and hold silver much more easily. This increase in demand from new investors is removing almost 30% of current production. Today the physically backed silver ETFs hold over 50% of the deliverable bars of silver off the market. That is a positive as long as investors continue adding to their holdings. Surprisingly, silver investors -even during the panic of 2008 and even amidst a 50% decline in the price of silver -- actually added to their positions. The ETF has opened investing significantly in silver to institutional investors to acquire a significant position in silver over time without going through the futures markets. These are the players who control dollar amounts in the hundreds of billions. While there are no easily verifiable statistics, new physical mined supply has not met actual demand for years. This excess demand has been met with central banks selling around the globe and industry recycling. A significant silver mine needs tens of millions of dollars (in some cases hundreds of millions) in capital to just get started, and could take easily about three to five years before any significant production to begin.

8. 9. 10.

11.

Most mined silver is not from silver mines but is a by-product of mining for other minerals such as gold, copper, lead and zinc. Therefore it is not the primary focus of new investment in the mining sector. In fact, only 30% of newly mined silver comes from mines devoted primarily to silver. There are not that many places that can sustain primary silver mining. Since silver is such a unique element with so many unique properties, the chance of a silver substitute by other discoveries is very, very low. It hasn't happened in thousands of years. In a precious metals bull market, silver consistently over the long-term outperforms gold. Since October 2001, silver has increased in price from approximately $4 to a recent high of $31, which is an approximate 775% gain. During that same approximate time period, gold went from $265 to a recent high of $1430 for an approximate gain of 540%. So silver outperformed gold by 235% in the same time period. In 1980, silver briefly traded at $50; in today's equivalent inflation-adjusted prices, that would be at least $130. This time, participation by investors will be global. In 1980, only investors from North America, Europe and the Middle East were involved in the last big precious metals bull market. Now there are hundreds of millions of new potential investors in the same countries, but most importantly also in China, India and the former Soviet Union. This bull market will be global in nature, which will make it that much more explosive to the upside. Silver has literally hundreds of uses industrially in today's modern economy -- from computers, tablet computers, smart phones, cell phones, DVDs, mirrored glass, solar power, health care, wound care, and water filtration, to being used as a catalyst in many chemical reactions to produce many products, including plastics.

Reasons for silver price increase!!

12. 13.

14. 15.

16.

17.

Gold is a precious metal only for investment and jewelry, with little industrial use. While gold is more scarce than silver -- and easier for central banks to invest in because of the large dollar amounts involved, due to its relative higher price -- silver is the average person's gold because the denomination is affordable and viewed as relatively undervalued. Silver is the average investor's preferred metal when gold prices arethan $1000 per ounce. When the price of gold becomes higher, s ilver becomes a greater substitute investment for gold due to its lower cost and similar qualities. Silver is more volatile in price than gold. That is a positive in a bull market where prices are increasing. Obviously, it can be a negative in the opposite bear market. Volatility can be an advantage to traders, but fair warning: Silver, like natural gas, is very, very difficult to trade. China, which is a significant producer of silver and used to export a significant percentage of its, has now significantly limited exports and ended tax rebates given to exporters of silver. China has now become a large net importer of silver even while beingone of the largest producers. It is believed that China is purchasing and storing large quantities of both gold and silver. China's objective is to make its currency the new reserve for the world, so it can diversify out of the consistently declining U.S. dollar. China's Premier just called the USD as a world reserve currency a "a product of the past," so its goal has been made clear to anyone listening ... and become very obvious of late. To make the Chinese currency different from all other fiat currencies in the world -- and to give major trading partners more confidence in it -- it will be backed by a reserve of gold and silver.

Reasons for silver price increase!!

18. 19. 20. 21. 22. 23. 24.

25.

26.

27. 28. 29.

30.

As gold prices increase, investors are forced to migrate to the more affordable silver, especially in India and China. India just relaxed import tariffs on gold and silver. China is encouraging its citizens to own gold and silver. China just recently allowed citizens to invest in gold ETFs, and a silver one is coming soon. China has used silver as a currency for thousands of years except since 1933, so it is used to it as a medium of exchange and store of value. We do not believe the conspiracy theories you read about JP Morgan (JPM) and HSBC (HBC) having massive short positions in the silver futures market and are manipulating the price of silver lower for their own benefit. However, we do think those massive positions are actually done on behalf of China and are used to simultaneously go long and short silver futures. This is a very complicated way to purchase large quantities of silver and taking delivery of that silver upon expiration, without driving up the price as much as if it openly purchased the silver in the open market. The losses it takes on the short side add to its cost over just purchasing it outright at the spot price. However, to the Chinese, that extra expense is less of a cost than driving up the price by buying it openly, with the added benefit of confusing silver traders and investors. The total monetary supply in circulation and in the form of debt is over 10 times as large as in 1980. The United States Federal Reserve has for 25 years now been more irresponsible than in the previous 72 years combined, since the Fed was created with the creation of new debt and currency in circulation. The Federal Reserve will have taken the monetary supply from $800 billion in 2008 to $3.8 trillion by the end of Quantitative Easing Two by this summer. That is a 475% increase in the money supply, which must lead to significant inflation and the corresponding destruction of existing savings. The only reason it hasn't yet is the lack of confidence, the hoarding of cash and the low velocity of money currently. It is a matter of "when," not "if" inflation will occur. When economies of major societies use fiat money backed by nothing, precious metals eventually revalue themselves to account for all the extra currency printed and unsecured credit card debt created over time. This occurs when savers realize the value of savings is being destroyed and they race to preserve any value they have left. This can happen slowly over time, or very quickly -- but it always eventually happens.

Reasons for silver price increase!!

Reasons for silver price increase!!


31. 32. Precious metals will be the fifth and final financial bubble in the next three to five years. First was the Internet and technology stock market bubble, then real estate, then an overall economy and worldwide credit bubble, then U.S. Treasuries. Finally, a lack of confidence in the currency and solvency will lead to the most spectacular transfer of wealth yet, with a bubble in precious metals prices. You must be on the right side of this move and have the patience for it to unfold or you will be slaughtered. Former Federal Reserve Chairman Alan Greenspan was not the "Maestro" and the best central banker ever. He was the most irresponsible since John Law in France. In fact, we believe he modeled his monetary policy after Law, who convinced France to decouple its currency from any backing by precious metals, constantly expand the money supply to create an illusion of prosperity, and create asset bubbles in stock and real estate markets. Current Federal Reserve Chairman Ben Bernanke is a devoted Keynesian economist who is incapable of getting our economy to operate efficiently again, and was Greenspan's second in command during the 1990s. He, like Greenspan and most economists, is wrong about 90% of the time about both current conditions and future predictions for the economy. Deregulation in financial markets and the eternal ethic of greed by Wall Street and major money center banks are destroying the fabric and the functioning of the United States economy, its workers, savers and the country itself. The U.S. has a hopelessly corrupt political system that -- even after the worst financial crisis since the Depression -- can't re-regulate the financial sector or heal the economy. Not to mention that our deficit spending is now reaching dangerous levels never imagined previously, and there is no political will or market discipline to stop it presently or in the near future.

33.

34. 35.