Achtung! Germany wants its Gold back, Schnell!!

This week the German Central Bank (Bundesbank)  applied to repatriate its gold reserves from both the U.S. Federal Reserve Bank in New York and the French Central Bank in Paris.  (Think they know something we don't?)
Wonder if they trust their Central Bank counterparts.....hmmmm...

On another international note, Japan is doing whatever it takes to downgrade the Yen at this writing. (Yea another currency joins the race to the bottom)

 While you are contemplating that, here is an interesting Chart from Bloomberg detailing the price of gold in the year after U.S. Federal Elections.

  If you dont own gold, may be you should buy some now!
 ED

Related articles

• Frenzy in the Gold Market: The Repatriation of Germany's Post World War II Gold Reserves
• Interview: German gold repatriation not an issue for Federal Reserve
• Germany's Gold Repatriation Unlikely To Assuage Public Concerns
• Germany to bring back gold stored in US, France
• German gold move may spark 'chain reaction'

Gold investment statistics commentary

Reprinted: World Gold Council Report

Quarterly statistics commentary Q3 2012

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Overview

This commentary summarises gold's price performance in various currencies, its volatility statistics and correlation to other assets, and the macroeconomic factors that influenced gold's behaviour during the quarter. In this issue, we explore the influences that unconventional monetary policy has on financial markets. In particular we discuss the effect of central bank policy actions on gold.

Q3 in summary

• Gold (US$/oz) returned 11.1% in the third quarter as investors responded to further central bank measures aimed at stimulating the economy. Volatility decreased during the period, with gold prices experiencing little movement in the first half of the quarter; correlations to other assets, generally low, remained similar to those seen in Q2.
• Central banks announced a continuation of their unconventional monetary policy¹ programmes in Q3.
• Central banks have numerous rationales for undertaking unconventional monetary policy, including lowering borrowing costs and supporting financial markets.
• Financial assets have responded to central bank policy announcements, but gold's reaction has been the strongest.
• There is a consensus that these policies drive investment into gold purely due to inflation-risk impact. We believe that there is not one but four principal factors that provide further support to the investment case for gold:
  • Inflation risk
  • Medium-term tail-risk from imbalances
  • Currency debasement and uncertainty
  • Low real rates and emerging market real rate differentials

Summary of gold price performance in Q3 2012

Table 1: Performance of gold with respect to various currencies - click to enlarge

Chart 1: Gold (US$/oz) performance and key events during Q3 2012

Table 2: Timeline of central bank action in Q3 - click to enlarge

Third quarter review

By the end of September, gold (US$/oz) was up 16% year-to-date with two thirds of the gains generated in Q3. This performance was echoed in most currencies with returns ranging from 5.0% to 11.1%, using end-of-period gold price data, and 0.7% to 5.2% using average prices. The difference between these two measures reflects gold’s sharp price rise towards the end of the quarter.
Exchange rate shifts had a notable impact on some key regional gold prices. During the first half of the year Indian rupee depreciation caused the local gold price to breach a key psychological threshold, generating the strongest return of the 19 different currency-denominated gold prices monitored by the World Gold Council. That currency weakness reversed in the third quarter, leading to a modest return of 5% for gold in rupee terms. Consequently, the year-to-date performance of the rupee gold price ranked only 11th (+15.7%) as of the end of Q3.
As Chart 1 illustrates, gold’s strong performance began in earnest only in the latter half of August. The first few weeks of the quarter had been quiet for gold as well as other assets. For equities and bonds, the likely cause was a combination of northern hemisphere vacation doldrums and low conviction amidst a slowing global economy and uncertainty about the fate of the euro area.
For gold, as for many other assets, central bank policy announcements and actions in late August and early September created a catalyst for price activity. It is critical to note that while gold prices react to monetary policy developments, they are more generally determined by a geographically and thematically broad set of factors. A number of positive gold-specific developments also took place in Q3, including the IMF’s reporting of central bank purchases of gold by Russia, Turkey, Ukraine and the Kyrgyz republic. Just before the start of the third quarter, Turkey announced that it had raised to 30% the proportion of gold held by commercial banks as capital requirements. This requirement will likely boost demand as Turkish commercial banks use gold as part of their capital portfolios.
Price volatility during the period was subdued, ranging from 11.4% for rupee investors to 16.4% for yen investors. Gold’s lower than average volatility was echoed in other markets: global equities, bonds and commodities all posted numbers below their long-term averages.²
Correlation statistics between gold and other assets were similar to those experienced in Q2 2012 (see Chart 2). Its correlation to developed and emerging market equities was slightly higher than normal, but its correlation to global bonds and commodities was lower than in Q2. However, these deviations from long-term averages were not large enough to imply atypical behaviour. In prior quarterly commentaries we have shown how gold’s correlation to equities hovers around zero over the long run, but can fluctuate over shorter periods of time.
In particular, both gold and equity prices moved higher during Q3, leading to an elevated correlation. However, prices were driven higher by different underlying reactions. While both responded to monetary policy announcements and measures undertaken by central banks around the world, equities responded to central banks’ pledges to stimulate economic growth; gold, on the other hand, moved higher encouraged by factors that we discuss in the section titled “unconventional monetary policy and gold”.

Chart 2: Gold's correlation to global assets - click to enlarge

Unconventional monetary policy

Events leading up to Q3 announcements

The key developments in Q3 were undoubtedly the series of declarations by central banks to expand their unconventional monetary policy programmes (UMP). Weak global macroeconomic data during the preceding quarters had created expectations among investors of further stimulus from major central banks. However, policy meetings were not scheduled until the latter half of Q3; thus, positioning for outcomes was kept on hold in anticipation of announcements. In addition, a concomitant slowdown in both India and China had also raised hopes that the Reserve Bank of India (RBI) and People’s Bank of China (PBoC) would act, fiscally or monetarily, to support their economies. Similar sentiment had been expressed in Brazil and South Korea.
As the quarter progressed, the case for further easing was emboldened by the weak incoming macroeconomic data. Global manufacturing indicators fell to a 36-month low in July – with noticeable slowdowns in the US and Europe.³ China’s industrial production growth reached the lowest level since May 2009, with GDP following suit to reach 7.6% YoY. The euro area contraction continued with 6 of 17 member countries in recession.⁴ Japan’s trade deficit quintupled to US$32bn, as a worsening export outlook compounded internal weakness.⁵ The news flow, though by now largely expected and supportive of further easing, helped drive asset prices higher across the board.
By the final week of August, the Federal Reserve (Fed) provided the first hints that it would consider an extension of its QE programme, despite some signs of housing and retail sector buoyancy. In addition, the European Central Bank (ECB) announced plans for its new bond buying programme on the premise of an ‘irreversible’ euro plagued by severe dislocations in the region’s government bond markets. By September, central-bank commitment to further stimulus had been announced in the US, Europe and Japan. China had launched a new infrastructure-spending programme to the tune of US$158bn, and India had vowed to lower its barriers to foreign investment.
The Fed extended its quantitative easing programme to an open-ended run rate of US$40bn per month. The ECB announced a new bond buying programme named “outright monetary transactions” (OMT), and the Bank of Japan (BoJ) announced a boost to its asset purchase programme, surprising markets by doubling the size of earlier extensions.
By the end of the quarter, gold was 11.1% higher, global equities finished up 6.2%, commodities were up 11.5% – the best performance since the first quarter of 2011 – and global bonds saw yields fall further and prices edge up 3.3%. Weakening economic data had finally spurred a concerted reaction by central banks, leading to a sharp rally in asset prices as the long wait for further easing came to an end.

Rationale and effect of unconventional monetary policy

Universally, the motivation for UMP is the need to remedy anaemic economic activity in the face of fiscal restraint and already exhausted conventional monetary policy. Central bankers hope a policy of asset purchases will, in the short to medium term, lower borrowing costs and increase perceived wealth through rising asset prices. The weakening of a domestic currency would also be a welcome spur for the export sector. Using these motivations, central banks have undertaken unprecedented monetary policies since 2008 (Chart 3).


Chart 3: Central bank balance sheets have collectively expanded - click to enlarge
Despite the difficult environment for central banks, they have arguably achieved some successes in financial markets: as the Bank for International Settlements (BIS) asserts, “unconventional monetary policy likely helped prevent further catastrophe after the global financial crisis and helped secure liquidity in Europe during the peak of its crisis.”⁶ These actions have, in aggregate, supported credit as well as equity markets (Chart 4). They have bought time for banks and governments to address solvency issues, lowered debt-servicing costs, and boosted asset prices and corresponding sentiment based on perceived wealth creation. However, few of these positive effects are directly linked to underlying growth.

Chart 4: Asset returns resulting from central bank actions- click to enlarge
“Monetary policy is not panacea,” Fed Chairman Bernanke said during a Q&A session in June. There are a number of potentially negative consequences, including the returns for savers and shortfalls for pension and insurance funds, food price inflation, and ‘moral hazard’ in financial markets. These and other consequences are well documented.⁷
While the highlighted longer-term reaction of assets has largely followed expectations, as shown in Chart 4, there have been a few exceptions. Equities in Europe and Japan have fallen since the advent of UMP. In addition, strong initial responses to announcements of monetary policy – both initiations and extensions of programmes – have tended to fade. The FTSE 100 has gained a mere 2% since November 2008, despite positive jumps following announcements. Finally, the yen has disappointingly kept rising despite aggressive easing by the Bank of Japan, further hurting the critical export sector.
We may not know for some time if these untested central bank policies will work for the real economy. In fact, Bernanke, in his most recent speech at the Fed conference in Jackson Hole, said “In summary, both the benefits and costs of non-traditional monetary policies are uncertain; in all likelihood they will also vary over time depending on factors such as the state of the economy and financial markets, and the extent of prior Federal Reserve asset purchases.” Recent academic research supports this uncertainty of success and the fleeting impact of current measures.⁸

Unconventional monetary policy and gold

A common perception is that UMP has a singular effect that is reflected in gold price reactions – the rise in inflation risks. However, a closer look shows that unconventional policy affects gold through four principal channels. While these effects will to some extent be present in conventional policy easing, they are exaggerated by unconventional policy.
First, Inflation risk is understandably the strongest rationale for gold’s reaction to unconventional policy. There is a well-established relationship between the amount of money in an economy and the rate of inflation – whereby too much money chasing too few goods causes price appreciation. However, this is not a straightforward relationship, and inflation can be contained if economic growth keeps pace with money supply growth.
Current unconventional policy has increased the monetary base in most countries without increasing the money supply (Chart 5). This is largely due to a tightening of commercial bank lending.⁹ The distinction is important: a simple metaphor might be a cheque that is yet to be cashed. While recent evidence shows that central bank balance sheet expansion has not fed through to an increase in money supply growth, money supplies are likely to increase over the long-term when the liquidity in the system translates to private sector spending.
The increase in money supply could be a potential catalyst for higher inflation in the future – a likely positive for gold investment. Previous research by the World Gold Council shows that a 1% change in money supply, six months prior, in the US, Europe, India and Turkey tends to increase the price of gold by 0.9%, 0.5%, 0.7% and 0.05%, respectively.
This crisis has forced central banks to aggressively fight against the risk of deflation. While a deflationary spiral is the greatest tail risk for many of these central banks – even low levels of inflation and dis-inflation could be troubling given high public debt levels in most advanced economies. In this context many market participants speculate that central banks have actually increased their tolerance for inflation, exceeding target levels for brief periods of time to accelerate the deleveraging process. To this end, some point to Bernanke vowing to not withdraw stimulus “[prematurely]”, suggesting an acceptance of higher inflation down the road. Similarly, the Bundesbank head, Jens Ulbrich, announced in May that a slightly higher inflation target could be accommodated.¹⁰ While the inflation needle has yet to move, there appears to be a willingness to tolerate a higher rate of inflation in future to ensure the sustainability of fragile economic growth.

Chart 5: Money supply growth has not kept up with central bank asset purchases - click to enlarge
In summary, while inflation is to many investors a primary concern, it is still some way off.  The near term threat of deflation remains real, and as long as central banks are willing to resort to unconventional measures, this will imply that the deflationary threat has not disappeared.
Research by Oxford Economics shows that both inflationary and deflationary environments could be conducive to gold investing. While gold’s performance during periods of high inflation is well understood, the deflationary environment is less understood. Using its global macro-economic model, Oxford Economics found that despite currency related headwinds, a deflationary environment would prove destructive to risk assets such as equities and housing, with gold outperforming.
Second, closely linked to the inflation effect is the impact that unconventional policy has on currencies. Although seldom explicitly stated, a weaker currency is a desirable outcome for most economies in the current environment. As global trade slows, a weaker currency becomes all the more important to maintain export competitiveness. While the term ‘competitive devaluation’ may be a little dramatic, the problems of currency strength are evident.
If a desired indirect effect of expansionary monetary policy is a weaker currency to promote export-led growth, then at least on that front, central banks like the BoJ and the Swiss National Bank (SNB) have not succeeded. Both the BoJ and SNB have had to resort to several episodes of intervention to prevent their currencies from rising too quickly. Elsewhere, countries have voiced their concerns over the ramifications of UMP. Sweden’s Riksbank will be monitoring the exchange rate closely after posting an “unexpectedly” rapid appreciation in Q3.¹¹ The Norwegian sovereign wealth fund has been selling the krone to counter investment flows, and the central bank has not ruled out currency intervention to maintain its inflation target.¹² Most recently, Brazil’s finance minister, Guido Mantega, expressed anger at the Fed over QE3, which he termed a “protectionist” move.¹³ Given that gold is typically transacted using its US-dollar price as reference, it naturally provides a hedge against an investor’s concern over domestic currency debasement; this is especially true for US dollar-based investors who typically see a negative correlation between the US dollar and gold.
Third, the willingness of central banks to engage in protective strategies provides an implicit ‘put’ option – an implied guarantee to prevent precipitous falls in asset prices. This, however, raises the risk of undermining the efficient flow of capital, which could foster new and dangerous imbalances in the global economy. By vowing to intervene to prevent slides, some of the tail risk has undoubtedly been removed in the short term. However, by extension, the distortion created by intervention can have a longer term impact on tail risks by incentivising credit buildups and the inefficient allocation of capital to firms and households at an artificially low interest rate.¹⁴
With increased tail risk looming in the longer term, investors need to take these rallies in financial markets with caution. As investor sentiment on the efficacy of central bank policy changes, equity markets might give away some of the central bank-led gains. During times of crisis and sharp market pullbacks, gold has proven to be an effective diversifier. Research shows that gold could play a role as a tail risk hedge by protecting investors against falls in equity and credit markets.
Fourth, an environment of unprecedented low interest rates – negative in real terms – can greatly impact savers and investors. In our Q2 commentary, we discussed the skewed risk/reward scenarios that investors face in such low-rate environments. One motivation for unconventional policy, to further depress interest rates, stems from the belief that households will increase their expenditures. However, prudent households will have to save greater sums of money to pay future obligations in a low interest rate environment. The almost universally negative real savings rates in developed countries are likely to see a shift of saving to real assets that will provide long-term real security.
In addition, the relatively higher real rates across emerging markets are attractive for investment flows into those countries from western investors as risk adjusted returns appear more favourable. Developed market currency weakness amplifies the attraction of emerging market investment. Flows of capital to emerging markets have a clear impact on wealth creation – a principal driver of gold demand in emerging countries.¹⁵

Conclusion

Most central banks currently view their country’s economic state as unacceptable and have acted to accelerate the economic recovery. However, there are many obstacles facing developed countries that will force central banks to continue their unconventional monetary policies. In the US, the Fed is motivated by the ailing labour and housing markets and would like unemployment and inflation to be closer to normalised levels. The market expects partial normalisation to begin around mid to late 2014, though if Japan were to be used as a guide, a prolonged period of subpar performance may lie in store. BoJ’s policies have set a precedent in unconventional monetary policy duration as they are now in their 12th year. The ECB is caught between regional recession coupled with fiscal austerity and a prolonged period of intervention before growth and price stability are restored to a consistent path.
The backdrop of negative real yields, a slow recovery and a likely continuation of expansionary monetary policies – with all the risks these present – provides further support to the long-term strategic investment case for gold.
¹Unconventional monetary policy refers to measures used to provide liquidity once policy rates are at the zero bound.
²2 Long-term average volatilities (December 1987 to date): Gold (15.7%), Global equities (15.2%), Emerging markets (18.8%), Global bonds (5.5%), Commodities (21.4%), US dollar index (8.6%), Q3 volatility: Gold (14.4%), Global equities (12.8%), Emerging markets (15.6%), Global bonds (3.8%), Commodities (18.1%), US dollar index (6.7%).
³The US ISM survey has ticked up in September to 51.5, down from a high of 60 in January 2011.
⁴NBER definition of two consecutive quarters of negative growth.
⁵Gross debt reached 236% of GDP and the budget deficit 10% of GDP.
⁶BIS Annual Report 2011/2012, Neely, Christopher J. The large-scale asset purchases had large international effects, 2012.
⁷BIS Annual Report 2011/2012, White, 2012. The unintended consequences of loose monetary policy. Economist, QE, or not QE?, July 2012.
⁸Berkmen, S. Bank of Japan’s quantitative and credit easing: Are they now more effective?; Gambacorta et al. The effectiveness of unconventional monetary policy at the zero lower bound: A cross-country analysis, 2012. Kozicki et al. Unconventional monetary policy: The international experience with central bank asset purchases, Bank of Canada review, 2011.
⁹Under the ‘transaction’ motive of money, nominal GDP equates to demand for money.
¹⁰Bundesbank prepared to accept higher inflation, Spiegel online, May 2012.
¹¹Minutes of the (Riksbank) monetary policy meeting, September 2012.
¹²“Norway won’t tolerate persistent Krone Gains, Qvigstad says”, Bloomberg, August 2012.
¹³Financial Times, September 2012.
¹⁴Reinhart and Reinhart. After the fall, 2010. Jorda et al. When credit bites back: leverage, business cycles, and crises, 2012.
¹⁵World Gold Council, India: heart of gold: strategic outlook. World Gold Council, China gold report: gold in the year of the tiger.

Investment statistics commentary archive

The quarterly Investment Statistics Commentary succeeded the Gold Investment Digest (GID), which was published between Q3 2006 and Q2 2011 and examined trends in price, investment markets and the macro-economy relating to gold and other assets typically found in an investor portfolio.
The Commentary complements the investment statistics analysis updated on a regular basis.
Investment statistics commentary Q2 2012
Investment statistics commentary Q1 2012
Full year 2011 - Download this do

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The Global Physical Gold & Silver Reserves Race is the New Nuclear Arms Race

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Why it’s Still Buying Season for Gold and Silver Mining Stocks

July 21st, 2011

The old Cold War USA-USSR nuclear arms race has been replaced by the East-West Central Bank battle to accumulate physical gold and physical silver reserves. While Western Central Banks and their puppet bullion banks have distracted and goaded private citizens with the invention of fraudulent bogus paper gold and paper silver derivative products, including ETFs more recently, and paper futures contracts for a much longer period of time, they themselves have been making sure to avoid the very fraudulent paper products they have invented and have been diving headfirst into real physical precious metals.

As Central Banks continue to significantly devalue all major global currencies through excessive creation of new supply out of thin air in a digital world where “new money” is never even printed into paper/cotton form but only is created as digital bytes that are sent across international borders, the private families that are the majority shareholders in the world’s most powerful Central Banks have engaged in heavy buying of physical gold in particular, and to a lesser degree, physical silver. In 2010, Central Banks as a group, became net buyers of physical gold after two decades as net sellers. EU Central Bankers became net buyers of physical gold for the first time during the 1st Quarter 2011 since their introduction of the heavily flawed Euro into circulation in January of 2002.

As of April 2011, China was, according to “officially reported” statistics, the sixth-largest official holder of gold, with 1,054.1 tonness, according to World Gold Council estimates. The U.S. was still reported to possess the largest gold reserves at 8,133.5 tonnes. However, all of you know by now that I believe all “officially reported” statistics, whether the statistic is GDP, unemployment, inflation, or gold reserves, to be a charade and mockery of the truth. To this day I am highly skeptical of the US reported reserves of 8,133.5 tonnes, especially since these reserves have neither been independently audited nor independently tested to ensure that they meet good-for-delivery bar status since Dwight D. Eisenhower was the US President in the 1950s. As for China’s “officially reported” holdings of only 1,054.1 tonnes, anyone that takes these reported stats at face value as the truth is a fool for any number of logical reasons. One, China reported that its “official” gold holdings were a constant 600 tonnes from 2003 to 2009 and then reported that it had increased its holdings to more than 1,000 tonnes overnight in 2009. Since China lied about its gold reserve holdings for more than 6 years, one cannot and should not assume that their “officially” announced 1,054.1 tonne level was truthful. Since China made that announcement in 2009, their “official” gold reserve level has not increased at all.

Anyone that believes that China has not accumulated more gold, and lots of it, since that time, does not understand the Chinese government and Chinese bankers. Chinese bankers have been studying the best ways to invest in gold and silver for many years now in preparation for this global monetary war and they realize that one of the best ways to invest in PMs is to own the real thing. Furthermore, there are multiple mechanisms by which China could be secretly increasing their gold reserves out of the scrutiny of the public eye. In 2008, China replaced South Africa as the largest gold producer in the world, but nobody really knows exactly how much gold China produces or how many proven/ probable reserves or how much measured/indicated resources they own. Thus, China could be increasing gold reserves significantly on in-house production alone. Certainly we know that China is increasing its silver reserves through a policy of decreasing its domestic silver exports and increasing its foreign silver imports.

For example, last month, China’s General Administration of Customs reported that its net imports of silver nearly quadrupled year-over-year in 2010 to more than 3,500 metric tons. Also of important note is the fact that in 2010, China exported 1,575 metric tons of silver, 58% less than in 2009, and imported 5,159 metric tons of the metal, 15% more than in 2009. This is a huge change if one realizes that from 2005 to 2010 China transitioned from a net exporter of 2,900 metric tonnes of silver to a net importer of 3,500 metric tonnes.

From 2005 to 2010, China increased its gold holdings in its State Administration of Foreign Exchange (SAFE) more than tenfold from a very small starting point of USD $4.2 billion to USD $48.1 billion. However, China could be increasing gold (and silver) reserves significantly through purchases in its Sovereign Wealth Fund – purchases that are not made available for public inspection or consumption. For China to publicly announce their buildup of gold and silver reserves that would drive up the price of the very commodity they wished to accumulate more of would be akin to then-Chancellor of the Exchequer Gordon Brown’s foolish decision to pre-announce in 1999 that the UK would be selling half of its gold reserves.

Also of important note are the following facts. China only recently deregulated gold in 2003 to allow gold prices in China to mirror international prices. The Shanghai Gold Exchange only opened in October of 2002.  In late 2009, the Chinese started making gold and silver bullion easily accessible to its citizens through introducing physical sales of multiple size bars at its banks and China finally legalized ownership of 99.999% pure silver bullion. The Chinese typically have a tendency to buy PHYSICAL gold and PHYSICAL silver, not the fraudulent paper gold and paper silver derivatives invented by bankers to suppress the price of gold and silver. For the first time ever, Chinese citizens will be able to buy silver futures in Hong Kong this week and later in Shanghai; however, since the Chinese are fond of owning Physical metals, perhaps even the majority of Chinese may settle these futures contracts with physical delivery. Furthermore, even when the option to buy gold and silver ETFs in China becomes a reality, the average Chinese citizen may shy away from these products due to his or her propensity for owning real gold and real silver.

For Asians in general, gold and silver have always been money. In Thailand, the word for money “ngen” is also the word for silver. In China, the word for bank combines the characters for “silver” and “movement”. In China not only is private demand strong AND relatively young, but even in India, private ownership of gold bullion bars was not legalized until 1990. Thus, the war between East and West over gold and silver will intensify in coming months and coming years. The objective of the East will be to release the gold and silver price from the clutches of Western price suppression schemes while the objective of the West will be to hoard gold in an attempt to prevent citizens of Western nations from owning the asset that will protect them the most from their currency devaluation schemes.

The current talk in the mainstream financial media about gold being a bubble at $1,600 an ounce and of silver having already reached its top of its long-term peak at $50 an ounce is simply rubbish. A bubble is never defined by high prices, the perception of high prices or even a decade long rise in prices. What defines a bubble is a meteoric rise in price that is not supported by fundamental reasons. For example, the US NASDAQ dot.com stock market was a bubble because dot.com stocks that had zero earnings were trading at impossible valuations and sometimes double and triple digit dollar values per share. However, the fundamental reasons that have driven gold from $250 to $1,600 and silver from $4 to its current $39 – $40 range are even stronger today than they were at the beginning of this precious metals bull. Therefore, it is impossible for a bubble in gold and silver to exist at their current prices and at this current time.
And for this reason, this is precisely why the global nuclear arms race has been replaced by a global physical gold race. Welcome to the new global war in precious metals.

About the author: JS Kim is the Managing Director of SmartKnowledgeU. SmartKnowledgeU now offers monthly subscriptions to our premium investment newsletter, the Crisis Investment Opportunities newsletter, an investment newsletter that has returned well over a cumulative 200% (on all opened and closed positions) since its launch in June 2007 to present day.

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Editor:  Here are some more thoughts on gold stocks this summer from Analysts.....

Tocqueville Gold Fund Portfolio Manager John Hathaway: "I'm looking for gold stocks in general to be re-priced over the next several months. Gold stocks have tremendous catch-up potential. I don't know whether that's 30% or 25% or 40%, but it's something like that because of what kind of earnings they'll report... Mining stocks will be producing great earnings, while the rest of the economy is stalling out. Just by exception, people will have to look at them. That to me will be very positive for mining stocks I think for the next 6 to 12 months."

Raymond James/Canada: "With many of the equities trading at historically lower multiples, we would view this as an attractive buying opportunity... We recommend investors take advantage of the strengthening precious metal prices by accumulating gold and silver equities ahead of the typical fall rally."

BofA/Merrill Lynch analysts said precious metal stocks are "substantially undervalued... Based on the higher gold and silver price forecasts (offset somewhat by the lower copper prices) we have increased our price objectives on most of our stocks under coverage. Our analysis indicates that gold stocks are reflecting a gold price in the $1,200-$1,300/oz range."

Dundee Capital Markets updated a study of the historical price-to-net-asset-value multiples on a number of gold equities and described the situation as one of "bargain basement prices." Their conclusion: "Our analysis suggests that most of the gold producing companies appear undervalued and therefore offer excellent investment opportunities at this time. In fact, we recommend an overweight position in gold equities as the summer wanes and we head into the fall season, traditionally a great time to own gold companies."

RBC Capital Markets noted the relative underperformance of the gold stocks, stating the stage was set for a "potential surge in gold equities."

BlackRock's Catherine Raw of the Gold & General Fund said regarding gold miners, "I, as an investor, would say that in the end, given that belief the world isn't going to collapse, if you're prepared to be patient, then I would see now as a very good buying opportunity."

HSBC Global Asset Management, putting its money where its mouth is, reportedly sold most of its physical gold holdings and bought gold shares. "Gold equities will remain under pressure while investors remain fearful, but once investors feel that the risk of another leg down in general markets passes, or after a downswing in the markets, we feel the gold equities will do some catching up."

Blue Phoenix CEO John Licata: "Gold companies... are not factoring in $1,500 gold prices. Many of them are still building models based on $1,000 gold. So to me there's a lot of value still within the gold sector that has not been realized."

Sprott Asset Management's Chief Investment Strategist John Embry: "They [gold and silver equities] haven't moved up a lot with gold and silver... they've been sort of wallowing a bit... If money decides it has to come into this space, it's going to be like Internet stocks in the '90s, except the mining stocks are going to have real fundamentals."

CIBC's Barry Cooper said the proliferation of bullion ETFs is a "market-sentiment driven event that will pass, as fundamental financial drivers kick in to support share prices and drive them higher."

U.S. Global Investors Chief Investment Strategist Frank Holmes: "There is a substantial opportunity to buy healthy gold mining companies at historically low prices compared to gold... With gold companies currently undervalued and offering strong cash flows and attractive yields, we think gold equities will be rewarded by the market and rise with strong gold prices."

BMO financial analyst Don Coxe: "Gold and gold stocks offer protection that is going to become more valuable in the months ahead. It's possible that the long-awaited period, when gold stocks outperform bullion, is coming soon."