January 17, 2012
BY: Robert Hallberg, Topics: Gold IRA
Many good folks may not be aware that you can setup a gold IRA and allocate your retirement money in physical gold and silver. Gold and silver has outperformed almost any traditional investment over the past decade by leaps and bounds, but getting a gold IRA is more than just looking for a superior investment return. A gold IRA is about protecting your hard earned retirement money from devaluation, loss and theft.
Although, it is possible to put physical gold in your retirement account most custodians do not allow customers this option for the simple reason that gold and silver are static assets that cannot be traded for commissions. However, this can be circumvented by setting up a self directed Gold IRA. Donât be surprised if your current custodian do not want you to know this.
Getting started with your gold IRA Account â 5 Simple steps
I have created a guide with 5 simple steps to follow for setting up a self directed Gold IRA. You can follow these steps to create a new self directed IRA for or roll over an existing IRA or 401K into your new self directed gold IRA.
January 15, 2012
BY: Robert Hallberg, Topics: Silver
Silver had two phenomenal years in 2009 and 2010, gaining more than 130%, but last year it closed the year in the red despite a strong rally earlier in the year. It appeared that silver had gone up too quickly and the bulls had become too bullish in too short of a time span.
Silver is currently trading at the $30 level and investor sentiment is down from last year which is common after a correction. So is silver a buying opportunity now?
There are strong reasons to believe that this is the case. First, the fundamental data suggest that silver is in a long term bull market with many year left to run. Of course, it never feels good to buy when the sentiment is down but history has shown that it has been the right thing to do. To our detriment we feel good about buying when prices are rising and we hesitate when the price is down, and many investors experienced this the hard way during the correction of last years. But with the correction behind us and with improving fundamentals we should expect higher silver prices in the near future.
Demand for silver on the Comex is fluctuating up and down but the demand for physical silver is up sharply. During 2011 dealers were frequently out of inventory and delays in shipments, especially among the popular 100 oz silver bars and American silver eagles were common, and many dealers placed large premiums on their products. The chart shows demand for American silver eagles sold by the US Mint.
January 12, 2012
BY: Robert Hallberg, Topics: US Dollar
We have seen a long trend of dollar depreciation but the US dollar has recently been hitting a 52 week high and outperformed most other currencies. Does this mean that the financial problems in the US have been solved and a new trend towards a stronger dollar is emerging?
Hardly! With all the problems going on in the world the US dollar just look like the âleast uglyâ currency at the moment. We will see continued dollar depreciation over time, but there is no immediate risk of collapse as there may be in Europe. The chart below shows the broad dollar index which has been rallying since the middle of last year.
Trillions of dollars flows through global financial system, from one country to another and from one currency to another and the majority of this capital is controlled by large banks, funds and other institutions. The flow of funds causes currencies to fluctuate as huge amounts of money are looking for a safe home. During the end of 2010 when QE 2 was announced, large amounts of capital fled the US into the Europe, and Japan, pulling down the dollar in pushing up those currencies. Then problems in Europe surfaced and the flow of funds was reversed.
Read More...January 09, 2012
BY: Robert Hallberg, Topics: Gold, Silver, Market Outlook
Gold was up for the 11th year in a row last year and silver finished slightly lower. Despite a run up in prices earlier in the year the performance of gold and silver was below its 10 year average and many investors was disappointed on how it finished the year.
The chart shows the performance of gold and silver since the beginning of the bull market in year 2000. Silver has outperformed gold by a thin margin but gold has been more stable, posing a positive return year after year.
As we ring in the New Year many investors ask what 2012 has in store for gold and silver and whether we will see new highs this year. Although the fundamentals are strong for both gold and silver there are a lot of moving variables that will affect the price. The world is wobbling between a deflationary recession / depression and runaway inflation cased by too much stimulus. I have listed a number of favorable and unfavorable scenarios and trends for gold and silver in 2012.
Favorable scenarios for the price gold and Silver in 2012:
-2012 is an election year, not only in the US but in 59 other countries and politicians in power will spend as much as they need to ensure reelection.
-Central banks become net buyers of gold in 2009 for the first time in two decades and they continue to accumulate the metal.
Read More...January 08, 2012
BY: Robert Hallberg, Topics: Market Outlook
2011 was an interesting year for investors. Gold was up for the 11th year in a row and silver finished slightly lower. The Precious metals were soaring early in the year but they ended the year without any noteworthy gains. Gold finished the year with a 12.5% return, silver was down 4.8%, while the equity markets in the US closed flat for the year.
The correction in the metals towards the end of the year were largely a result of the ongoing sovereign debt crisis playing out in Europe, and investors were dumping any so called ârisky assetsâ and swarmed into cash and US treasuries. As a result US treasuries were among one of the best performing assets in 2011. But given the weak fundamentals for the dollar and US government bonds I donât suspect this asset class will continue to outperform. Below is a table of the performance of difference asset classes over the past three years.
Equities have done reasonably well over the last three years but if you consider their performance over the last decade they are miles behind precious metals and most other commodities. Silver is slightly ahead of gold with an average year over year return of 18.7%, but gold has offered more stability and has been up for eleven years in a row.
Read More...January 04, 2012
BY: Robert Hallberg, Topics: Economic Outlook
The world economy has remained weak ever since the recession / depression that began in 2008. Only through massive quantitative easing and stimulus programs worldwide have we been able to manufacture an artificial recovery. But the economy has once again started to slowdown and there is talk about another recession.
It is virtually a certainty that we will get another recession but the question is when and how big will it be this time? Rescissions are actually quite common and we have had 20 recessions over the last 100 years, which comes out to about one every four years on average. The chart shows the time period and the length of all previous recession since year 1910.
Whether we will have another recession in 2012 still remains uncertain. The economic numbers are suggesting a substantial slowdown, not only in the US but in China and India too, while most of Europe and Japan is already in a recession. However, this is an election year; not only in the US but in 59 other countries throughout the world and those in power will do whatever they can to forestall a slowdown in the economy.
Read More...January 01, 2012
BY: Robert Hallberg, Topics: Gold, Silver, Gold and Silver Mining
Gold and silver mining shares offer leverage and should in theory outperform the physical metal in a bull market. Or at least that is commonly held belief among many precious metal investors. But according to historical data this is no always the case.
Although gold and silver mining shares have outperformed general equities in this bull market, they have not always outperformed gold and silver. While some gold and silver mining shares have had phenomenal returns others have lagged behind, and only investors who had the foresight to pick the winners were able to profit.
The Philadelphia Gold and Silver Index (XAU) and the NYSE Arca Gold BUGS Index (HUI) are the two most watched gold indices on the market. And they are composed of some of the biggest and best gold and silver mining companies in the industry. By the dividing the price of gold with these two indices we can compare goldâs performance against the shares.
The first chart shows the Gold/XAU ratio. Although there have been periods when the XAU have done better than the metal, gold has outperformed the XAU by 249% since its inception in 1984.
December 20, 2011
BY: Robert Hallberg, Topics: Gold, Bull and Bear Markets
We have been in a decade long gold bull market with steadily rising prices. The price of gold has already gone up by more than 6 times, and a lot of investors seem to be asking how much further it still has to rise or if it has already reached a top. The recent drop in the price of gold has gotten a lot of investors worried.
Nearly all bull and bear markets have three distinct phases, and if you learn to recognize them you will significantly increase your chances of getting in while the market still has room to go up, and getting out before the bull market is over and people start to sell en masse.
If you have not read part 1 of this article series I recommend that you do this before you continue reading.
A quick recap about the three phases of a bull market:
1 â âDenialâ is the first phase of a bull market and it operates in stealth mode, beginning as its last bear market ends. During this phase only the so called âsmart moneyâ participates.
2 â The second phase, âClimbing a Wall of Worryâ is when the general investing publish becomes aware of this new market that is continuing to move up in price. In this phase prices are rising but investors remain skeptical, many still remember last painful bear market and consider the asset class too risky.
3 â Finally, âEuphoriaâ is the last phase which comes after years upon years of solid price action. By now the bears have turned into bulls. The investment public starts to bid up prices en masse, accelerating the price increase and creating a lot of excitement. Then, at the height of this excitement a problem starts to occur. There are not enough new investors left to continue to bid up the price so the whole thing starts to slow down.
December 18, 2011
BY: Robert Hallberg, Topics: Bull and Bear Markets
Have you ever thought about when to get in to an investment and when to get out? Nearly all bull and bear markets have three distinct phases, and if you learn to recognize them you will significantly increase your chances of getting in while the market still has room to go up, and getting out before the bull market is over and people start to sell en masse.
Bull and bear markets almost always repeat in a similar pattern and peopleâs behavior is all too predictable. A new bull market typically starts with a gradual rise in prices of an investment class that no one has wanted to own for a long time, and consequently the price is very low. Then it slowly starts going up, but peoples attitude still remain negative. After a lengthy bull market with steadily increasing prices, people start noticing the new asset and it gets more and more media coverage. The institutional players buy into this new market and prices continues to rise. Finally, after the price has gone up many times over the public wants in on the price action. The price keeps rising faster and faster and a sense of euphoria starts to set in among investors. Then shortly thereafter, the price starts to fall, and people realize some time later that they bought near the peak of the market and it is now well on the way down.
Have ever gotten caught buying at a top of a bull market, whether its stocks, real estate or commodities? If so, congratulations you have taken one of the first steps in the education process of becoming an informed investor. Now the second step is to see how bull and bear markets actually work, and this time you can be in control and get in front of the market, rather than to let it run all over you.
Bull and bear markets typically have three distinct phases, and we will investigate theses phases in this article. By understanding the behavior of these phases you will be able to following along as the bull market progresses. You will get much more control over the timing of your investments, and be able to get out before the top.
December 16, 2011
BY: Robert Hallberg, Topics: Gold
Gold has been in a decade long up trending bull market and there are some interesting facts about gold investors should be aware of to avoid being shaken out of the bull market on a down day. Understanding the goldâs fundament strengths will give you the conviction of knowing when to buy and when to sell.
Gold has unique characteristics that make it suitable for money, and for the last 5,000 years it has been used for exactly that purpose. It is seen as a safe haven throughout the world, with the exception for a few Keynesian economists, and during times of distress, whether its inflation, deep deflation, war, or economic uncertainty people have always preferred gold.
As with any other asset, gold is cyclical in nature. This is perhaps the most important thing for investors to understand. Gold fluctuates in 15 â 20 year long cycles. By studying and understanding these cycles you will be able to buy it cheap, when no one wants it, and sell it at overvalued prices at the peak when it is in high demand.
First, letâs take a look at gold demand. There is a notable increase in investment demand for gold over the last couple of years. And even though demand for gold in jewelry is down the overall trend is up.
December 13, 2011
BY: Robert Hallberg, Topics: Markets
Stock market volatility and uncertainty has been the theme for the last couple of months. The VIX, which measures the implied volatility of S&P 500 index options, has remained at an elevated level for an extended period, which is quite unusual.
The volatile markets have created a difficult environment for traders. As a result, many traders have simply stepped away and taken money off the table. And with liquidity withdrawn from the market, volatility has been further exacerbated. On the chart below you can see the seesawing motion in the S&P500 index.
Part of the problem is that investors donât know what to expect. Some fear a deflationary bust and others fear inflation, created by too much stimulus. The ongoing debacle in Europe does not add any certainty, with new developments everyday as the political leaders trying to figure out what to do next. Then we had a failed bond auction in Germany, Europeâs perceived safe haven.
Read More...December 10, 2011
BY: Robert Hallberg, Topics: Portfolio Allocation
I have been a big advocate of investing in gold and precious metals and the data points to higher prices in the future. However, I do not recommend allocating 100% of assets in to gold and precious metals, nor do is suggest taking a traditional approach such as a diversified portfolio of mainstream stocks and bonds. Wide diversification of assets that are in a bear market certainly grantee a mild loss at best.
As we have discussed before, certain assets do better during certain times periods and other assets do better during other investment cycles. Right now gold and precious metals are in a bull market so it would only make sense to add a larger allocation to these metals. But there will be opportunities in a small number of equities, such as gold mining companies and energy companies. During the mania phase of the last gold bull market in gold it was not unusual to see the market cap of some junior exploration companies increase by hundreds or even thousands of percent, much like the .com mania. So it may make sense to allocate a portion of your capital to this sector.
I suggest allocating one-third of your assets into physical gold and silver, preferably in different geographical and political regions. Another one-third can be invested in equities with a strong emphasis on gold mining shares and some energy stocks. A smaller portion, about 10% of this third can be invested in junior gold exploration companies.
I recommend that the last third of your capital remain liquid. There will be continued and increasing volatility moving forward and keeping some âdry powderâ will give you courage, and it opens up opportunities to take advantage of bargains that may present themselves in a liquidity crunch. However, in a world of depreciating currencies I suggest diversifying your currency holdings into different types of cash, including the US dollar, the Norwegian Krona, and the Australian dollar.
Read More...December 9, 2011
BY: Robert Hallberg, Topics: Currencies
We are living in a world of currency depreciation and the purchasing power of the money in your bank account is slowly dwindling away. And even though I am a huge advocate of gold, it is still necessary to keep some âdry powderâ on hand. Having cash and being liquid gives you courage and it opens up opportunities to take advantage of bargains that may present themselves in a liquidity crunch.
However, some currencies are better than others and itâs important to diversify your holdings. Since the fiat currencies today are not backed by gold or any other commodities, the strength of a currency depends of the strength of that countryâs economy. Favorable characteristics for a strong currency include, a positive balance of trade with other nations, positive real interest rates, and a stable monetary base, to name a few. Running a budget surplus and keeping a reasonable debt load also contributes to a sound economy.
The chart below compares a collection of fiat currencies against gold. They are all significantly down against gold over the last 10 years. The U.S. dollar and the British pound are among the worst performers.
December 4, 2011
BY: Robert Hallberg, Topics: Trends, Precious Metals
There is an old saying that âthe trend is your friendâ and this is as true today as it was ten or twenty years ago. An investor that that can identify a positive trend and have the audacity to stay with it throughout its ups and downs is set out to make huge returns.
Most large returns are made by getting on a trend early. Identifying a new trend early requires a bit of research and some contrarian thinking as the majority of the public is often latecomers. This was the case for internet stocks at the beginning of the new millennium, as well as for real estate during this latest mania, and it will probably be the same for gold and precious metal at the end of this bull market.
The chart shows how an investor could have turned a $35 investment into over $400,000 without anytime of type of leverage, by simply identifying and investing in four major trends, one per decade. This is a powerful approach and by following the principle of trend investing you can make grand returns without actively having to managing your portfolio. As a matter of fact, research has shown that some of the best returns are made by buying the right commodity or stock and staying with it for as long as it remains viable. Some of the most successful Investors like Warren Buffet, Jim Rogers, and Peter Lynch have made their fortunes by practicing this concept.
December 3, 2011
BY: Robert Hallberg, Topics: Silver
There are strong fundamentals in favor of silver. The metal is in short supply and demand is rising. With bullish signs in favor of silver, many prominent silver investors see the price of silver increasing several times and eventually hitting a 1:15 ratio against gold. Industry veteran Eric Sprott, called gold the investment of the last decade and silver the investment of this decade.
I have provided some facts and figures in this article to show why silver is undervalued and has a lot of upside potential. Part of the argument for higher silver prices in the future is shortages in supply and a growing usage in technology. Another reason is that silver is a monetary metal and will attract investors during what I believe will be an inflationary times ahead.
First, there is growing demand for silver in industry and the metal is used in a wide array of applications including electronics, solar panels, mirrors, and various medical devices. There are constantly new application found that can use silver, and demand for silver in electronics alone has more than doubled over the past decade, while demand in solar panels is up six fold. The chart shows demand for silver in different applications. Although, demand in photography and silverware is declining, the increasing demand in industry and investment is quickly rising, and the overall trend is up.
November 23, 2011
BY: Robert Hallberg, Topics: wealth cycles, precious metals
Different asset classes have proved to be more or less favorable during different time periods. History has shown that the bigger returns have been made from being in the right market at the right time. The fluctuations among different assets are called wealth cycles.
Simply put, a wealth cycle is a way for an observant investor to forecast market direction and move money from an overvalued asset in a bubble to an undervalued asset class. Then ride the new asset up until it becomes overvalued, sell, and repeat the process with a different asset. But you must pay close attention to the market and know when to get out. It is also important to watch what's happening in other sectors and look for the next big opportunity.
Wealth cycles are not new, they have been around since ancient Greece and Rome and they still reoccur regularly in today's modern world. In fact, recognition of cycles is a way humans recognize patterns and plan for the future.
Wealth cycles and economic cycles are actually quite simple; they start off with economic expansion, often led by an increase in credit, which then leads to a crisis, followed by a recession, and finally preceded by a recovery, which leads yet again to an expansion. By watching these patterns and keeping tap on the pulse of the economy these cycles can actually be predicted by with some regularity.
You can see these cycles play out in different asset classes such as stocks, real estate, precious metals and commodities. For a while commodities are plentiful and prices are low. During this time real estate and stocks outperform commodities and gold. Then, the cycle reverses, and gold, precious metals and commodities outperform stocks and real estate.
The chart shows the real estate and stock markets performance against gold over the past 80 years. Both markets have followed each other almost perfectly. At the last bottom in stocks in the early 1980's you could have bought the Dow Jones index for about one ounce of gold, and you could have picked up a new house for less than 80 ounces of gold. Then twenty years later the Dow Jones was worth 44 ounces of gold and an average house in the US was selling for close to 800 ounces of gold.
Read More...November 19, 2011
BY: Guest contribution by Forex Traders, Topics: Currency trading, precious metals
The most prevalent word in the trader's lexicon these days has surely been volatility. Although its presence can cause an adrenalin rush in the collective trader community, the "whipsaw" action that has characterized pricing behavior over the past several months can also result in a "buzz-killer" of sorts. The sensitivity to any news in Europe, whether a political shift or a few basis point rise in Spanish debt, will now have a new "competitor" across the pond as the "Super Committee" nears its deadline to resolve the deficit conundrum in the United States.
As uncertainty, the "cousin" of volatility, persists, investors are continuing their rush to "safe havens", hoping the storm will pass in the near term. Under such conditions, conventional wisdom would suggest that a prudent investor look to precious metals as a store of value or switch to currency trading where wavelike patterns can be anticipated with some degree of statistical probability. Analysts, however, are confused that normal correlations are not holding up. In other words, the trading environment is quickly morphing into what was seen three to four years back, and no one wishes to witness a repeat performance of those horrendously de-leveraging markets.
Commodities have been the "darlings" of the dance over the past year, but the sudden attention fostered run ups that were clearly unsustainable, resulting in a predictable, and in some cases, severe pullback move. The diagram below tells the story:
November 17, 2011
BY: Robert Hallberg, Topics: Gold
Anyone that has been following gold for a while know that the metal has a seasonal factor with strong price performance in the fall and winter and weaker performance in the spring and summer. Since the beginning of this decade long bull market, gold has made an annual high in November or December, except during 2006 and 2008. This year gold made a high in September and we are yet to see if gold will test the old highs or perhaps make new highs.
The chart below shows the seasonal strength and weakness of gold. It is calculated based on the monthly average annualized increase in gold over the last 10 years.
Similar seasonal trends can be found among the gold shares. This chart also shows the monthly average annualized increase in the gold bugs index (HUI) over the last decade.
Read More...November 15, 2011
BY: Robert Hallberg, Topics: Gold Mining Companies
I have been investing in gold mining companies for a number of years and although this sector can offer spectacular returns it also has quite a number of challenges.
First of all, gold mining is a very tough business. It is capital and energy intensive, it requires large upfront investments, and there are a vast number of environmental laws and regulations that companies must comply with.
Furthermore, most companies in this industry are in a constant need for capital to fund new mining projects, and needless to say the biggest risk to investors is dilution.
As result, gold mining stocks are subject very high volatility with huge price swings. This of course adds both risk and creates opportunities.
Here is a list of guidelines that may prove to be helpful...
The first question you want to ask is who is running the company and who are the majority stake holders? Some management teams are better than others, so make sure you look at their track record. For example, Rob McEwen and Pierre Lassonde are two persons that have solid track record of building up successful mining companies, and betting on talent like this certainly eliminates risk. This sort of information is available from a variety of sources, including company websites and other publication like King World News and Casey Research.
Make sure that management have a significant stake in the company. Management needs to be financially aligned with shareholders. Rob McEwen for example has a 22% stake in US Gold, the company he runs, and he does not take a salary as the CEO. He has stated that he plans to make all his money in stock appreciation just like all other investors.
Read More...November 11, 2011
BY: Robert Hallberg, Topics: Gold, Silver
Government fiat currency currently serves as money throughout the world, but it is far from ideal. At present, it works well as a medium of exchange but it is a poor store of value. A good money (a medium of exchange, and a store of value) has certain characteristics. Aristotle defined these characteristics 4th century BCE, and they are still valid today:
1 - Durable: A good money is durable and should not fall apart in your pocket. It should be close to unbreakable. This is why we don't use fruit as money.
2 - Divisible: A good money needs to be convertible into smaller and larger pieces without losing its value, so it can fit a transaction of any size. This is why we don't use a porcelain vase as money; once half of it is gone it is pretty much worthless.
3- Consistent: A good money always looks the same, each piece looks the same as the next and it's easy to recognize. This is why we don't use an oil painting as money. Each painting is different even when made by the same artist.
4 - Convenient: A good money contains a high concentration of value into a small package and it is highly portable. This is why water is not used as money, even though it is essential for human life. You would need a truck full of water just to buy groceries, and just imagine how much you'd need to buy a larger item like a house.
5 - Intrinsically valuable: A good money should be something that many people want or can use. This is vital to money functioning as a medium of exchange. Even though, you may not want to carry a gold ring or bracelet, you know that someone somewhere wants it and will take it in exchange for something else of value. This is why we should not use paper for money.
Read More...November 9, 2011
BY: Robert Hallberg, Topics: Gold, Silver
I have written extensively on why and how to invest in gold and silver. Party because gold and silver is in the midst of a secular bull market with many years left, and partly because I see it as the best and safest investment moving forward.
Uncertain economic conditions, sovereign debt worries, and currency debasement are all factors that have driven investors to own gold. Because gold is not somebody else liability it offers safety and protection against risks such as inflation and a systematic breakdown.
There are a number of ways to invest in gold but make sure you start off buying physical gold before you get into any paper products. One of the reasons you own gold is for protection against a systematic breakdown and paper products such as GLD or IAU offers no such protection.
Each person has a different risk tolerance but I personally recommend allocating at least 1/3 of your total portfolio into physical gold. You can either find a local dealer close to where you live or you can buy from a reputable dealer online. Just make sure you don't over pay. You should not pay more than 5% - 6% over the spot price.
Once you have physical gold in you possession you can try to speculate on gold mining shares. They offer leverage to gold as their profits go up more than gold bullion itself and in theory they have more upside potential than the bullion itself. But they are inherently more risky and the sector as a whole has up to this point in the bull market underperformed bullion itself.
Read More...