Tuesday, February 28, 2012

Record movement in gold and silver is coming soon--By Shan Saeed

Yes, that is true. Gold and silver are about to hit new highs in 2012. Gold will touch $2000/oz and Silver will touch $57 or more in 2012. Getting insurance of your wealth is a good strategy and by buying gold and silver you will achieve that along with your peace of mind of not losing your precious wealth. So, where Gold and Silver are heading in 2012. Lets analyse this strategically.

With gold nearly $1,780/oz and silver at $36/oz, the fact that silver is not pulling back is an indication of how strong that market is right now. This is a great start to the week for the precious metals. This is the kind of strength to make sure both gold and silver follow through in the next few trading days to confirm the big gains from last week where gold climbed 2.9%, while silver soared 6.4%. It is remarkable to see both metals hold their gains with no profit taking. Clearly, traders see something big is about to happen, and so do I.

In this regard, I have mentioned several times my expectation that once resistance at $35 is taken out, silver will climb to $57-$70 in 3 to 6 months. I still expect that outcome, but of course, only time will tell. I thought it might be tough going for silver in the $35-$36 area, but maybe not based on the strength we are witnessing today.

I expect the silver price will begin to accelerate to the upside once $36 is hurdled. In many ways silver is positioned today like it was back in the summer of 2010. I have informed my valued investors for the last 2-years why I am bullish on Silver and its industrial utilization. Investors will remember the events from back then and my bullish views about silver. I feel the same way today.

I have written in my blog many times about the relationship between oil and gold, which was up 2.9% last week. Oil jumped a remarkable 6.3%. With all the money printing going on in central banks around the world, not to even mention the growing tensions in the Middle East, oil looks ready to test its record highs some time this year....Governments are broke, banks are insolvent, investors are looking for real assets to take position to have sustainable profits going forward. This is why it is so important to be outside of the banking system by having a portion of your assets in physical gold and silver.

It is also quite possible that gold will outperform oil by the end of the year. But the bottom line is the wind is at the back of the bulls in both the gold and oil markets. I follow this like on a daily basis, but I look at it differently. I look at the price of crude oil in terms of gold and since the beginning of 2012 gold has been outperforming crude oil. This relationship between oil and gold goes back decades. Today an ounce of gold buys basically the same amount of crude oil it did 60 years ago.

But you do get some fluctuations in this relationship and right now I expect the purchasing power of gold to increase. What I am saying is that an ounce of gold at the end of the year will buy more oil than it does today.

You always want to be in harmony with the major trend in prices. As they say time and again, never fight the market. So here's the point I am making, Events so far this year have been extraordinary. The markets are signalling it. In reality, events are spinning out of control. Financial markets will be very messy and turbulent in 2012. There will be lot of headwinds to confront by the policy makers in the noisy market.

Despite this new bailout scheme being foisted on Greece, the situation there continues to spiral out of control, which is one of the factors causing confidence in the safety of European banks to continue eroding.

Surprisingly, over the weekend, the Telegraph in London reported comments by George Osborne, the British Chancellor, who said, ‘The British Government has run out of money because all the money was spent in the good years.’ Finally, a political leader came out and said what everyone has been ignoring. While I applaud Osborne for telling the truth, the frightening reality and what everyone has been ignoring is governments around the world are broke. UK budget deficit will rise and economy might go into recession by Q2-2012. QE has already hit the British economy. Ben Bernanke is the pioneer of Quantitative Easing

Disclaimer: This is just a research piece and not an investment advice. All financial transactions carry a RISK

Thursday, February 2, 2012

JP Morgan is manipulating the commodity's market---By Shan Saeed

I shared this news with my readers last year when Wall Street Journal reported on 5th July 2011 that 2 american banks JP Morgan and Goldman Sachs were taking massive positions in industrial commodities. These banks were piling up future reserves of the base metals in USA and Europe. This story and my insight have proved correct. JP Morgan is showing its muscle to metal warehousing money. It is bulking up its metal warehousing facilities in Rotterdam and Chicago in a business that consumers complain deliberately delays delivery of metals to boost revenues from rent. Quite smart approach. I have shared this insight on Business Plus TV with the host Ali Nasir who asked a very good question on this topic. I said that globally we would witness financialization of commodities with big financial investors moving into this market to make sustainable revenues going forward. Ali Nasir, thank you for asking me this important question.

London Metal Exchange rules allow warehouse companies to release only a fraction of their inventories per day, much less than is regularly taken in for storage, creating long queues to get metal out and guaranteeing rental income.

JP Morgan's aim is to fill its Henry Bath warehousing arm with inventory in the two port cities large enough to rival trading house Glencore's Pacorini and U.S. bank Goldman Sachs. The Pacorini and Metro facilities in Vlissingen, Netherlands and Detroit combined are estimated to hold around half of the global London Metal Exchange (LME) aluminium stocks which stand at just under 5 million tonnes.

I have got the inside information from a very close source that the bank is pursuing a strategy to consolidate warehousing in the two locations to create the next Detroit or Vlissingen. JPMorgan is rebuilding stocks again.
There are complaints from clients about long queues, particularly in Detroit, prompted the LME to raise minimum delivery rates - 3,000 tonnes a day for operators with stocks of over 900,000 tonnes in one city - but traders and analysts say the new rules will make little difference when they come into effect in April-2012

The JPM strategy is likely to inflame consumers and traders already angry about the influence of warehousing companies on the flow of metal.J.P. Morgan is already preparing to store aluminium in Europe's largest port, Rotterdam, where it has over 30 sheds. Nobody would even imagine about it.

JP Morgan, the largest bank by asset side in the United States, was behind the cancellation of 500,000 tonnes of LME aluminium warrants in Vlissingen, just 50 miles away from Rotterdam, on December 21, traders and warehousing sources told Reuters. Cancelled warrants show metal is earmarked for delivery.
They are taking material from producers or traders, or trying to get it out of the market place - they were lucky to get 500,000 tonnes out of Vlissingen and moving it to Rotterdam. I was talking to some senior people at Citigroup who shared further inside that there had been a large number of copper cancelled warrants in St Louis and New Orleans, many carried out by JP Morgan. It wouldn't be a surprise if they wanted to move metal into their own warehouses in Europe or USA. The cancellations don't fit in with the underlying demand picture."

It is unclear how much metal JPM wants to eventually hold in the two locations, but to compete with its two closest rivals, it will require millions of tonnes, most likely aluminium which has the most ideal characteristics for long-term storage deals. Even few traders shared that most of Detroit's 1.4 million tonnes of aluminium stocks, and is ideally located to attract surplus aluminium in North America. There were other signs in recent weeks that the bank's focus has shifted after traders reported JPM sold a large number of warrants, or ownership titles to metal, to release funds. JPM have dumped a large amount of warrants or sold very cheaply. They've let go of a lot of warrants they were holding onto. JP Morgan is manoeuvring into the new commodities business very quickly. Financialization of commodities is in full swing. Happy investing in the industrial metal market

Disclaimer: This is just a research piece and not an investment advice. All financial transactions carry a RISK.