Gold prices could rise to as high as $1,300 an ounce in the near-term as inflation concerns and the likelihood of continuing dollar weakness draws buyers.

Gold set a record Wednesday, building on this month’s rally.

The nearby November contract rose $12.10 to $1,114, after setting an intraday record of $1,117.60 on the Comex division of the New York Mercantile Exchange. Most-active December gold also rose $12.10, to $1,114.60. Spot gold hit $1,118.70.

The November gold contract has risen nearly 7.2% this month and is up 26% for the year.

The dollar is likely to remain weak as long as U.S. interest rates remain low, making gold an attractive alternative to paper currency.

Source: WSJ

On Tuesday, gold settled at $983.20 a troy ounce, up 0.5%, and is now just 2% shy of its all-time high of $1,003.20 scored in March 2008.

Among the main drivers is the decline in the U.S. dollar — a result, many analysts say, of a conviction that the global economy is on the path to recovery, thanks to central banks’ stimulus efforts. Dollar-denominated commodities like gold typically rise when the dollar falls, as producers ask for higher prices and consumers outside the U.S. buy more. While the dollar has dropped 9% since mid-April, gold has gained 13%.

By CAROLYN CUI

Gold is proving to be some banks’ silver lining.

Precious-metals trading is typically a small part of banking operations, especially compared to their larger bond and equity desks. But as writedowns, withering trading volumes and limited deal flow have become the norm, any glimmer of revenue helps.

“Throughout my 14-year career in gold, I have never been busier,” UBS AG’s global metals strategist John Reade said on a conference call Friday with clients. He said he’d been “nearly overwhelmed” by inquiries from clients looking to gain exposure to gold.

UBS, HSBC Holdings PLC, and Scotiabank in Canada are among a handful of financial institutions that have maintained a significant bullion business, physically handling gold bars kept behind vaults. Most banks have scaled back or abandoned this line of work, because gold prices were so depressed during the 1980s and 1990s.

While many banks have left the bullion business, others, such as UBS, HSBC and Scotiabank, have recently profited from trading in precious metals. Here, gold bullion of 1,000, 500, 250 and 50 grams.

Banks generally make money selling bullion bars and related financial instruments, while also collecting a small fee for housing actual bullion bars for other investors.

Over the last four months gold has risen nearly 32%, though it fell last week, closing Friday at $929.80 per troy ounce.

Scotiabank reported a 38% revenue increase in its precious metal trading to a record $160 million in the year ending Oct. 31. For the first fiscal quarter, its precious-metal business scored record revenue again, says Richard Maskobi, managing director at ScotiaMocatta, the precious-metal division. Early this month, the bank pointed to strong results of precious metals trading as a key factor in its 1% net income gain for the quarter.

UBS, which had a tough 2008, has recently exited most of its commodities operations, selling its agricultural business and Canadian commodity desk to J.P. Morgan Chase & Co. and its base-metals, oil and U.S. energy businesses to Barclays PLC.

But it kept its precious-metals desk, seen as integral to the Swiss bank’s position as a global wealth manager, according to someone familiar with the bank’s thinking. Precious metals trading revenue at UBS has been affected by tightening credit, but “to a lesser extent” than other businesses, the bank said in its annual report.

Rising appetite for bullion-backed exchange-traded funds has also proved a boon. The SPDR Gold Shares has attracted $7.4 billion in the first two months this year, 20 times its inflow same period last year. The $31 billion fund, sponsored by the World Gold Council, an industry group for gold miners, has brought revenues to its custodian HSBC as well as and State Street Corp., which markets the fund.

The fund was launched in late 2004 as an effort to market the yellow metal to investors. Now it is the second-largest ETF, trailing only an ETF tracking the S&P 500 index fund.

Last year, HSBC collected $12.3 million from the fund at the year-end, according to regulatory filings. State Street received $25.5 million for its marketing work, the fund’s filing show. Both are expected to see a bigger payout this year, as the fund has already grown 43% in assets from the end of 2008.

Gold has also delivered revenue to futures and options exchanges, which benefit when trading volumes rise. Gold futures trading jumped 53.1% in 2008 over a year earlier at the New York Mercantile Exchange, according to the Futures Industry Association.

In India, Multi Commodity Exchange saw its gold futures volume soar 84.4% last year. The Philadelphia Stock Exchange, now part of the Nasdaq OMX Group, saw a 34.2% increase in trading volume last year, partly due to the successful launch of options traded on the SPDR Gold Shares.

Write to Carolyn Cui at carolyn.cui@wsj.com

Source: WSJ

A hundred-ounce gold bar, when you hold it in your hand, is surprisingly small and even more surprisingly heavy. It’s somewhat longer and fatter than a Hershey bar, but it weighs six-plus pounds—as much as your old calculus textbook. Its color is unforgettable. Pure gold is gold. It’s not like your wedding ring or your grandmother’s bracelet. It’s a deep, dense yellow, the way the ocean is deep blue, and it sparkles. You can understand at last why the Bible says the streets of heaven are paved with it.

On the day I held the gold bar in my hand, it was worth nearly $100,000. My companion—an established, accomplished, affluent businessman of retirement age—had bought it as a hedge against the sinking Dow and his fear that Obama’s stimulus package will inevitably trigger wild inflation. We had picked it up in the basement of an HSBC bank branch in midtown Manhattan. When I handed it back to him, he put it in his briefcase. We went upstairs, past guards, through metal doors. Out on the street, we said goodbye and I watched him go, a tall, thin man carrying a $100,000 briefcase. He doesn’t want me to tell you his name—or, really, anything about him—because he’s keeping the gold in a safe in his basement. His friends, he says, are doing the same thing. “There is an increase in the number of wise, reasonable, well-read, well-intentioned people who are buying some gold and putting it aside,” says Dennis Gartman, editor of The Gartman Letter, a daily analysis of financial news.

John Wynocker, a hydraulics inspector, lives in Cincinnati and has been buying gold and silver coins and bars for 15 years, but since the passage of Obama’s stimulus bill, he has been motivated to buy more. He is hiding the precious metal in places where not even he can find it, he jokes. Are you burying it? I ask. “Perhaps,” he says. “Our country is so far in debt, it’s staggering. I’d like to retire someday. What else am I going to do to protect myself?”

Is this madness? Here is a respectable and buttoned-down suburbanite, behaving like an end-of-the world paranoiac. Here is Wynocker, a working man, trying to get a grip on his own financial future with a shovel. The price of gold is near an alltime high—it topped $1,000 an ounce on March 13—yet the number of Americans who are taking delivery of gold coins and bars is rising. According to the World Gold Council, Americans bought 600 tons of gold bars and coins in 2008, a 42 percent increase over 2007. That’s not as much as in Europe, where gold mania has become epidemic—but significant given the metal’s high price. An uptick in the U.S. economy, and buyers are likely to find they’ve been part of a giant, golden bubble.

But analysts say that if stock markets continue to spin out of control and real-estate values continue to sink, more people will want to take shelter in an investment with a reputation for being safe, reliable and not dependent on governments for its value. “Back in November, when the credit crisis really started getting out of hand, people started to pull the trigger on gold,” says Scott Thomas, president of American Precious Metals Exchange. “It’s primarily moms and pops, people who have seen their 401(k)s deteriorate over time.” Bullish investment advisers, meanwhile, are hyping gold, some promising that it will reach as high as $2,300 an ounce. “We say, ‘Panic now. Avoid the rush’,” jokes Addison Wiggin, who publishes the online financial newsletter The Daily Reckoning.

There are, traditionally, two kinds of gold investors: speculators and hoarders. The first group trades on the futures market, which establishes the price of gold. The money they make—or lose—usually has nothing to do with taking possession of gold: like most modern-day investments, their gold acquisitions are blips on a computer screen. Hoarders are different. They buy gold, the real stuff, and save it for a rainy day. Hoarders have always existed, but their numbers increase during financial crises. To generate liquidity during the Depression, President Franklin Roosevelt outlawed hoarding in 1933. He demanded that everyone who owned gold coins (except collectibles) or bars turn them in and receive $20-plus an ounce in exchange. That law was rescinded in 1975, and since then retailers that sell actual, physical gold to individuals have jumped in.

Their business models vary, but all gold retailers charge a premium over the spot price and all will deliver it where you want it—usually through the U.S. mail. The mail? I asked Michael Maroney, who is vice president of sales for the Newport Beach, Calif.–based retailer Monex, as I imagined my own postal carrier slipping a gold bar in my apartment’s group boxes. The post office offers low insurance rates on precious metals, Maroney explains. “We can never tell you when you’re going to get it, but it doesn’t disappear.”

The last time gold sales spiked so dramatically was the year before Y2K, when Armageddon-minded Americans stashed gold—along with guns and cans of beans—in their basements and backyards. Keeping a lot of gold in your house makes you a target, it’s costly to insure and, once stolen, gold, which is easy to melt and recast as something else, becomes nearly impossible to retrieve. That’s why Nick Bruyer, the president of First Federal Coin, says he always recommends “a safe-deposit box in a good bank.” Nevertheless, the mentality of gold hoarders is that they want it close by; in an emergency, they don’t trust the banks. Sales at Cannon Safe were up 43 percent in 2008, and CEO Aaron Baker estimates that 30 percent of new safe buyers are holding precious metals. The company is developing a new ad campaign—”The bank that never closes. You’re Cannon safe”—and hopes it will appear on billboards near Wall Street soon.

In times of stress, gold’s unique properties and its long history as a valuable asset make it an appealing buy. Gold is gold, its boosters say. Its monetary value may rise and fall, but its intrinsic value remains constant. Gold-industry people like to give this illustration: in the Middle Ages, a one-ounce gold piece bought a full suit of men’s clothes. Today, a one-ounce gold piece—about $950 —buys a full suit of men’s clothes. The ballast it provides, then, is both psychological and financial. “It looks like the sun and reflects terrifically,” says Robert Hoge, a curator at the American Numismatic Society. “It can be beaten into dust or foil; it can be drawn into a wire that’s the finest of any substance known. It is relatively soft and can be melted at a low temperature.” Hoge pauses. “Even birds pick up glittering attractive objects.”

At least since the sixth century B.C., when King Croesus of Lydia (of “richer than Croesus” fame) decided to melt gold lumps into standard shapes and weights, gold money has been spent, traded, hoarded—and valued above all other coins. For much of modern history, government currencies were backed by gold, an economic practice (known as the “gold standard”) meant to limit inflation. But there’s a rational aspect to buying gold now. Historically, the price of gold has been inversely correlated to fluctuations in the dollar; that’s why it is seen as the ultimate inflation hedge. “Gold,” says Jon Nadler, the bearish gold analyst for Kitco, “is life insurance for the rest of your portfolio.”

Nadler knows whereof he speaks. When he fled communist Romania in 1972, “my clothing was full of four-ducat and one-ducat coins.” He has dipped into that stash three times in his life: once to leave Romania; once to buy a small piece of property; and once, more recently, when his older son was accepted at Harvard: “I thought, OK, here it is.” In North America, where democratic governments and financial markets generally function, the idea that a person might have to flee with hard assets is still considered somewhat freakish. But to refugees of real cataclysms, whether the Holocaust or the civil war in Rwanda, owning hard assets to trade or barter is not only sensible, it can save your life. “That’s why people see gold as the currency of ages,” Nadler says.

Geoff Farnham is clear-eyed about his investment in gold. It’s a hedge, not a love affair. A retired software engineer from California, he started collecting gold when he inherited some rare coins from an uncle, but over the past year he’s bought a lot more. He now has 15 percent of his portfolio in gold coins, he says, which he keeps in a safe-deposit box. He has never seen the attraction of gloating over his gold, like Gollum over his “precious.” “It’s just metal in the end,” he says. “It’s not as thrilling as I thought it would be.” At the same time, Farnham believes that all gold bugs—regardless of who they are—at some level fear the worst. “There is a survivalist element to buying gold. Period. I think that’s why my uncle had the gold in the first place. I would hate to see the day when you need it.”

There’s the rub. In the event of global collapse and inflation, in a world in which paper currency is worthless, what good will gold actually do? How do you take your gold bar to the 7-Eleven and buy a gallon of milk? Mark Albarian, chief executive of Santa Monica, Calif.–based Goldline, says that when dollars are worthless, a gold bar will buy a whole lot of dollars, which you can then use to go buy milk. “We buy gold in case the unimaginable happens,” he says. James Turk, who runs a company called GoldMoney, takes this doomsday scene one step further: in a financial calamity, entrepreneurs will emerge who will melt and mold your gold into coins or exchange it for a currency that does have value.

Nadler shakes his head. First of all, it’s disingenuous of the owners of gold retailers to stoke fears of systemic collapse for their own gain, he says (though he works for a retailer himself). Second, there are reasons to be optimistic. “Things tend to go in cycles; ingenuity, resourcefulness and human resolve solve problems. There’s fresh management in the White House, really determined to address the immediate problem.” In any event, Nadler says, gold bars and coins won’t save your life in an apocalypse. “I say you’re better off with Cipro and bullets on that day.” Gold, he cautions, is at an all-time high—and we’ve seen what happens when too many people buy high. The best thing to do, says Nadler, is buy a little gold—”for your last airplane ticket to Fiji if you have to go”—and hope the price goes down. If gold goes down, your 401(k) will likely go back up—and you won’t have to dig for treasure in your own backyard.

With Jessica Ramirez

Source: Newsweek From the magazine issue dated Mar 16, 2009

By GREGORY ZUCKERMAN

Large investors, including some who anticipated troubles for the housing and financial sectors, have been buying gold, concerned that moves by governments to shovel money at problem areas could cripple leading currencies.

Firms such as Eton Park Capital Management LP, Greenlight Capital Inc., Hayman Advisors LP and Paulson & Co. have been ramping up gold exposure in recent months, according to investors in the funds. Blue Ridge Capital Holdings LLC and Highfields Capital Management LP also have been recent buyers, according to public filings about their year-end holdings. Those two firms couldn’t be reached for comment Sunday.

Some of these funds have become among the largest holders of gold exchange-traded funds, such as the SPDR Gold Shares ETF, while also buying gold futures contracts, swaps and even physical bars of the yellow metal.

For years, gold fans often were fast-moving traders and so-called gold bugs, a crowd of bears ever-convinced that the underpinnings of global economies and markets were set to crumble and inflation about to soar. Gold has disappointed some investors because it hasn’t been a home-run investment despite recent financial ills.

The recent purchases of gold by the hedge-fund investors, some of whom have top records, suggests they are coming to share deep worries about the health of global economies and how ongoing problems are being addressed.

Kyle Bass, who runs Hayman, a firm that earned millions of dollars betting against risky subprime home mortgages, is now buying gold. “Confidence in governmental and cenral bank leadership … is plummetting worldwide,” Mr. Bass wrote his investors recently. “As a result, we believe people will look to “old fashioned” stores of value. Indeed, investors have already begun moving into precious metals. We expect this will continue.”

Since 1971, the dollar has been backed not by gold but by faith in the U.S. government. Though they worry about the dollar, some of the investors buying gold are even more concerned about European currencies.

John Paulson’s eponymous firm, which reaped $15 billion in 2007 betting against subprime mortgages and added more profits last year, is beefing up its gold holdings. Last week, it told clients it will offer its investors a new share class denominated in gold.

Gold is the largest investment in the portfolio of Greenlight, led by David Einhorn, who has bought exchange-traded funds holding gold as well as gold futures contracts, according to a person familiar to the matter.

Some of those buying gold predict nations will default on their debt, as they spend money to help stabilize their economies. The spending could lead to a burst of inflation, at least eventually, some say, which could help gold rise in price. But even deflation, or falling prices, could bolster gold, which usually does a good job storing value, the bulls say. Others simply see gold as a better alternative to crumbling stocks, corporate bonds and Treasurys with super-slim yields.

Still, gold isn’t an investment that produces any kind of cash flow, like a share of a company or a fixed-income investment, and consumer demand for gold-related products is down amid the global economic downturn. Those factors have long reduced its attractiveness to many investors.

Though gold has been a robust performer of late, hitting $1,000 an ounce recently before closing at $942 an ounce on Friday, it has been stuck in a range of $700 to $1,000 an ounce for much of the past few years. That raises questions about the potential for upside, especially if stocks regain their footing. If gold can preserve value at a time when most other investments drop, that in itself could reward bulls, of course.

Write to Gregory Zuckerman at gregory.zuckerman@wsj.com

Source: WSJ

Director Moy opened the exhibit to the public which consisted of three display cases similar to those seen in the Mint booth at the ANA show in Baltimore this July. The first two display cases contained test UHR strikes at various tonnages, two plaster sculptures of the obverse and reverse of the UHR design:

The third case contained 11 actual, production 2009 Ultra High Relief Gold Double Eagle coins that were among the first to come off the presses.

Director Moy noted that about 29,000 of the coins were ready and that 43,000 had been ordered in the first 8 days.

As a special surprise, Director Moy invited Mint Sculptor-Engraver John Mercanti to the podium and announced his new job title of Chief Engraver of the U.S. Mint. He was greeted by a warm round of applause.

Philly-born John Mercanti is head of engraving at the Mint. Apprenticed here in 1974. As a sculptor-engraver. “I’m actually the last engraver on staff that did steel carving.” Gravers, wood handled tools with hard steel blades are used to cut into hard steel, he explains, showing a rack of about 28 antique tools. Gold, silver carving, too. Bald Eagle print on the wall behind him. (Philly.com)

Director Moy then cut the ribbon.

One of the highlights was that attendees were able to pick up and handle two live UHR coins while under the watchful eye of two Mint Police officers.

It was very exciting to be able to pick up and handle the coin, albeit with cotton gloves on, because I know that I’ll never touch my coin when I get it.

I posted a 15 minute video of Director Moy’s remarks at today’s UHR ceremony at the Philadelphia Mint. It’s available at the following YouTube links (Part 1, Part 2) and is embedded below.

Part 1:

Part 2:

Update: I’ve added photo galleries from the ceremony (29 images) and the tour (33 images).

The new pricing methodology is based primarily on the London Fix weekly average (average of the London Fix prices covering the previous Thursday a.m. Fix through the Wednesday a.m. Fix) platinum and gold prices, which reflect the market value of the platinum and gold bullion that these products contain.

As required by law, the prices of these products also must be sufficient to recover all other costs incurred by the United States Mint, such as the cost of minting, marketing, and distributing such products (including labor, materials, dies, use of machinery, and promotional and overhead expenses).

This pricing methodology will allow the United States Mint to change the prices of these products as often as weekly so they better reflect the costs of platinum and gold on the open markets.

Provided the average price of gold remains between $850 and $899.99, the price of the coin will be $1,239.00.

As long-time readers of Casey Research know, I believe owning real, physical gold is rule No. 1 when it comes to protecting your family’s finances from a potential dollar crisis.

And if you’ve tried to buy gold in the past few months, you know many investors are coming around to this line of thinking. The premiums folks have to pay now to own physical gold have shot up to historic highs… with the Royal Canadian Mint reporting being “busier than we’ve ever been.” Coins are still hard to find, and premiums remain unusually high.

The good news is that most of the recommended dealers (which we select at Casey Research for their reasonable premiums and timely delivery) tell us conditions “appear” to be loosening. Kitco, in particular, has resumed offering most of its standard bullion products. But overall, the market hasn’t yet returned to normal, and no one really knows when it will.

The bullion market is always unpredictable, meaning premiums and delivery times can change, so don’t delay when you find what you want. Here is a quick rundown on the best bullion deals, as I highlighted in the most recent issue of BIG GOLD:

Kitco (Kitco.com, 877-775-4826). All coins are back up for sale except one-ounce gold Eagles and Buffaloes. Premiums are above our recommended 6.5% limit, except for the Krugerrand, which is currently selling for an industry-low 5%. A one-ounce bar looks even better, at only $22.30 over spot (as of 12/12/08), the lowest we’ve seen. Delivery is slow, though: up to six weeks after the order is paid.

Gold Eagles were available in the first week of December but quickly sold out. We advise checking the website regularly for availability. Here’s a link to Kitco’s prices… Notice the company charges a set dollar amount over spot, versus a percentage as most dealers do. This can work in your favor as the gold price moves up (although Kitco does change its prices from time to time). You can also buy gold and silver in its pool account at just pennies over spot.

The Coin Agent (thecoinagent.com, 1-888-494-8889, thecoinagent@gmail.com). Wayne Lemonier has gold Maple Leafs (the popular Canadian coins) at 6% over spot with a three- to four-week delivery time after a paid order. He can ship gold Eagles in about three weeks, but the premium is 9.5%.

We don’t recommend paying the high premium for an Eagle, especially when the premium on the Maple Leaf is so much lower. Remember, you’re buying an ounce of gold regardless of whose picture is on the front, and he’s got one of the lowest premiums in the industry on Maple Leafs.

Border Gold (bordergold.com, 888-312-2288 ext. 7). Border Gold has Maple Leafs at 6.5% over spot and can sh ip within three weeks of a paid order. It also offers one-ounce gold bars at $25 over spot and five-ounce bars at $22.50 per ounce over spot.

One-ounce Silver Maple Leafs are available at $4 over the spot price of silver. While that’s one of the lowest premiums we’ve seen recently, it’s still too high for our wallet. For gold, its direct link to the Royal Canadian Mint allows a good price and prompt delivery.

Asset Strategies International (assetstrategies.com, 1-800-831-0007). Coin availability comes and goes, but ASI can deliver gold bars in one week after a paid order, the quickest delivery we know of. A one-ounce gold bar has a 7% premium over spot and a 10-ounce bar is 6%. Silver coins are available, but the premiums are not pretty.

If You Want Cheap Gold Coins, Canada Has Them
Where to Start When You Want to Buy Gold

ASI guesstimates we may see some improvement in availability and delivery times in January. The U.S. Mint is already producing the ’09 coin, which should hit the market sometime next month.

If you haven’t bought physical gold yet, I encourage you to use this list to shop around for the best deals. Your time will be well spent. As the Federal Reserve continues conjuring new money for Washington to borrow and spend, you can count on three things: The dollar will fall, inflation will return with a vengeance, and gold will rise to new heights.

Tip: Gene Leoffler