WHAT OTHERS ARE THINKING

Two gold watchers who agree that the price of gold will be pushed higher in 2011 to around $1,600 an ounce. It's an interesting discussion with Peter Sorrentino, Huntington Asset Advisors and Frank McGhee, Head Precious Metals Trader at Integrated Brokerage Services, who shares a strategy tip for non-traders buying gold in a rising market.

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MERRY CHRISTMAS

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WHAT OTHERS ARE THINKING

Another excellent analysis by Tom at Metal Augmentor on the gold/silver ratio and what to look for to determine when one metal will outperform the other:

"It is a commonly held belief by many precious metal investors and even a good percentage of market pundits that silver always outperforms gold during the latter stages of a precious metals rally. … The truth, however, is that silver outperforms gold only during orderly and strong price advances that remain trend-bound. Once gold and silver prices achieve the wildfire stage, the blond metal can outshine its albino sibling both on the way up and especially on the way down (by falling less, of course)."

Based on his analysis of the patterns in the 1979-1980 rally and 2003-2006 (which had two interim peaks and a blow-off), Tom sees the market behaviour over 2009-2010 leading to one of two scenarios:

1.   interim peak, small correction in price
2.   blow-off, typically 25% price correction

At this stage Tom cannot commit to either scenario and is waiting for the market to establish stronger price trends. However, he does conclude that:

"the modeled relationship between gold and silver prices and the gold/silver ratio suggests silver will not outperform gold by a substantial margin in either case."

However, Tom does note that there is a

"possibility that the strong recent advance in silver prices will simply resume in short order and thereby provide impetus to a substantial further decline in the gold/silver ratio. Trend-wise we are getting long in the tooth for resumption in the price advance and therefore we will assume for now that failure to achieve new highs in silver by mid-January brings into play the scenario involving “interim peak preceding 1979-1980 or 2006 style blow-off”."

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BULLION BARS AND COINS

Commentators will look back on 2010 and remember it as an extraordinary 12 months for gold. Of course, gold has been regarded as an important tool for building and protecting wealth for millennia.

Below is an interesting interactive timeline, which you can activate by clicking here. Then drag the natural nugget across the screen to highlight many important events in the history of gold.

PS The timeline has been uploaded to our totally revamped numismatic site. If you have time, take a look around to see the latest Perth Mint commemorative issues, jewellery and gifts.

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TREASURY VIEW

Online fraudsters are targeting Perth Mint Certificate Program clients in a ‘Nigerian’ type e-mail scam. The scammers suggest that you may be able to claim the Certificate assets of a deceased person upon the provision of personal information, including details of your bank account.

If you receive such an e-mail purporting to have been sent by The Perth Mint, please delete it immediately.

The Perth Mint does not deal with beneficiaries of deceased persons or third-party transfers of any description. The e-mail is nothing less than a fraudulent attempt to gain your personal information.

Please read a statement from The Perth Mint’s CEO, Ed Harbuz.

We have reported the scam to the Australian Competition & Consumer Commission’s SCAMwatch website. The Australian Federal Police and the Computer Crime Squad at the Western Australian Police have also been informed.

If you receive a suspicious e-mail and remain unsure what to do, please contact us by e-mail or a PMCP Approved Dealer for further advice.

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WHAT OTHERS ARE THINKING

In a recent article by John Embry, he advises against trading your gold or silver position:

"I believe it is becoming more dangerous by the day to trade your gold and silver positions at the present time. If you are a believer and share my view that we are heading for very large trouble in the near future, the worst possible outcome would be to be out of gold and silver in a trade at the very moment the crisis arrives. Repositioning would be psychologically difficult, and in a time of rapidly shrinking stocks of physical gold and silver, could prove challenging."

Mr Embry’s approach is to add to one’s position rather than selling up with the expectation of being able to buy more later when the price drops. Even if you aren’t "a believer", the volatility of the gold price has increased over the past decade, making speculative trading more risky. It has long been my view that it is difficult to make consistent profits from short term trading in precious metals:

"Why do I say that the nature of the gold market itself makes profitable day trading difficult? It is all about information, or lack thereof. Apart from pockets of relative transparency like COMEX or ETFs, the vast majority of the market is opaque. The "retail" or "average Joe" trader simply does not have access to the same amount of information about the status of the market and its flows that a "wholesale" trader does (and even they can’t see the entire market). Without understanding what is really driving short term changes in the price, I doubt it is possible even for the most astute and disciplined trader to make consistent profits.

"If you call up The Perth Mint to trade, you are likely to speak to Deniece, the Mint's senior bullion dealer. She has what I would consider probably the best background training for a bullion dealer - croupier at Sun City. When the market is moving you can do any number of deals before you have time to enter them into the system to confirm your position and profit, so you have to be able to run them in your head, to know where all your 'gold chips' are on the 'table'. She has been there since 1994 and every working day she has been sitting in front of a computer screen watching the Reuter’s gold price tick up and tick down, talking to people like you wanting to buy or sell gold – that’s coming up to 4,000 days of trading. And you think you can day trade against dealers like her, with zero information about what’s going on in the market?"

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