Gold under pressure as investors await Fed for US rate outlook

Gold bars are stacked in safe deposit boxes room of the ProAurum gold house in Munich

Gold added to overnight losses to hover near $1,180 an ounce on Wednesday as investors waited for a Federal Reserve statement for clues on the timing of a U.S. interest rate hike.

Spot gold had eased 0.2 percent to $1,179.01 an ounce by 0655 GMT after dipping 0.4 percent in the previous session. Platinum fell to a six-year low of $1,068.75, while palladium dropped to its lowest since March 31.

All eyes will be on the Fed’s statement due at 1800 GMT after the Federal Open Market Committee’s two-day policy meeting. Fed Chair Janet Yellen’s news conference will also be monitored for pointers to the timing of the coming rate rise.

Also out after the meeting will be the committee members’ latest forecasts for economic growth and interest rates, both of which might be nudged lower.

Bullion has not made much headway in recent months because of uncertainty over the timing of the rate rise, which would reduce demand for non-interest-paying assets.

“Gold may find support at $1,165 if Yellen proves to be unambiguously hawkish tonight,” said Howie Lee, an analyst at Phillip Futures.

“The dollar is likely to be the beneficiary tonight,” he added.

A stronger greenback would hurt the dollar-denominated metal, making it more expensive for holders of other currencies while also curbing safe-haven demand.

The continuing Greek debt crisis is not spurring much safe-haven demand.

Prime Minister Alexis Tsipras accused Greece’s creditors on Tuesday of trying to “humiliate” Greeks with more cuts as he defied a growing drumbeat of warnings that Europe was preparing for his country to leave the euro. [ID:nL5N0Z21I7]

The unrepentant address to lawmakers after the collapse of talks with European and IMF lenders at the weekend was the clearest sign yet that the leftist leader has no intention of making a last-minute U-turn and accepting austerity cuts needed to unlock frozen aid and avoid a debt default within two weeks.

Gold is typically seen as a good bet at times of financial and economic uncertainty, but bids have failed to emerge in a robust way as expectations of a U.S. interest rate rise this year are weighing on the market.

The metal’s technical picture was also bearish, ScotiaMocatta analysts said.

Gold appears increasingly vulnerable to a break towards a recent low near $1,160 reached last month, they said.

Read more on protecting your portfolio profits at http://www.youroffshoremoney.com

Books Every Gold Gold Investor Must Read – go to Amazon.com books to start your library

 

A controversial effort to overcome  the emotion and fear that often drives the price of precious metals and certainly drives perpetual interest in gold.

 

Barry Eichengreen’s Golden Fetters is the classic must-read on gold. It has been near-two decades but it is still the required own. Eichengreen’s tome changed the discussion. Before Golden Fetters there was no authoritative text that brought together the economics and finance of what gold meant for society. Warning: Eichengreen writes in a deceptively dense fashion. It will take you longer than you think to wade through the 400+ pages. It is worth it. It helps that the young Eichengreen of 1996 has become a definitive international economist. A Berkeley Bonus: check out his concise Exorbitant Privilege.

 

I recently talked about Peter Bernstein’s Against the Gods. That one gets the fame and acclaim which unfortunately hides his other great efforts. One of those other works isThe Power of Gold. The book combines an exploration of our beliefs in gold with a quick and measured history. Peter Bernstein does what he does in every book; makes you furious that there are no more pages to turn. It is hugely readable and is without question the one-volume to move you beyond the gold-bear/gold-bug parallax. Bernstein does economic history like no one else and brilliantly tosses in myth and mystery when writing on gold.

In the great tradition of gold writing there are those who worry. Agree or disagree, James Rickards owns the high ground on why we should worry about the many swans of our international financial system. In the great tradition of Harry Browne (and yes, I read them all), The Death of Money informs on why we should worry. It makes for must reading for gold-bugs and those sitting on top of the wall of worry. Far more, optimists will frame and reframe their optimisim with a careful reading of Rickards. How can you not worry if you don’t understand why the worriers worry?

Books on the end of the dollar/Fed/WallStreet as we know it are a devalued dime a dozen. Some are earnest, most shrill and few dead wrong over many decades. Rickards is different. He writes clear, cogent and direct.

One important note: I am clearly in the things-will-work-out-camp. The great savior of the financial system is always ‘compensating factors’ and adjustment at both the macro- and micro-economic level. See this classic paper from William Cline on over-wrought worry in foreign exchange.

So, here are three constructive efforts on all things gold. You may not want to ‘buy gold’ but buying the best books about gold is a great investment.

Our First Choice :

Why Peter Schiff is still wrong about gold

While Peter Schiff, and others of his ilk, have remained staunchly bullish on gold since the all-time highs in 2011, I feel they have done a terrible disservice to those who have followed them for the last three-plus years of (relative) pain.

Schiff is an uber-bull, or gold bug, as some may call him, who continually calls for $5000 gold. Since markets move in two directions and not just up, I believe that anyone who is uber-anything should be dismissed, as there is no appropriate substance being proffered by simply saying the word up every day. Ultimately, they will be right, but, in this case, you have to deal with a multi-year 40%-60% drawdown before eventually being correct.

Myra Saefong had a piece earlier this week reiterating Peter Schiff’s perspective about gold going to $5000. So, let’s look at Mr. Schiff’s underlying perspective a little more closely, and see if he is finally going to be right. Or should people consider our perspective that Mr. Schiff’s followers have more pain to experience in the near term, as metals have a lower low to be seen before the next bull phase takes hold.

First, last year, Mr. Schiff was of the exact same perspective regarding gold, and, he has been of the same perspective on gold since it topped in 2011. However, we called the top to gold within six dollars of the actual top in 2011, while most were still looking for gold to exceed the $2000 mark along with Mr. Schiff. In fact, we even called the downside targets correctly even before gold topped. Since that time, gold has lost 41% of its value from its high to low during this correction. Yet, Mr. Schiff has stayed staunchly bullish during this 40% draw down.

Second, last year, Mr. Schiff maintained the perspective that “renewed weakness in the dollar and strength in oil and other commodities will add to gold’s appeal during 2014.” Despite its drop, Mr. Schiff simply dismisses it as being “completely out of touch with reality.

I want to digress for a moment and point out something to those that feel that the dollar must drop in order for metals to rise. There is nothing written in stone that states that the dollar must fall for the metals to rise. In fact, if one closely observed the market action since November of 2014 until the end of January of 2015, gold rallied almost 15% while the dollar rallied over 9%. And, yes, we expected both markets to rally together at that time, too.

Third, Schiff seems to claim that only further quantitative easing will cause the metals to rise. But, this was the same perspective he had with all the previous QE programs were instituted by the Fed. We had QE1, QE2, Operation Twist, and then QE3, and metals are still near their lowest levels in four years. Yet, we are to believe that QE4 will be the one that supposedly causes the metals to rise to $5,000? Does anyone else see the inconsistency in this argument?

Fourth, in Schiff’s recent interview, he noted that “what is holding gold back . . . is the idea that the Fed is going to be raising interest rates.” Wait a second. For years, all people have been talking about is that a rise in interest rates evidences inflation, which is the real driver of gold. So, isn’t the common theme that gold will go up when rates go up, because that is supposedly a signal of inflation?

Yet, when looking a little deeper into what Schiff is now suggesting, it seems that low interest rates are needed to cause gold to rally? Is not a drop in rates commonly viewed as being associated with periods of deflation? So, is it deflation which will cause gold to rally or is it inflation?

The answer is that gold’s movement is not based upon either if you look honestly at the history of gold’s movements. Let’s take a look at the 2007-2009 time frame, which evidenced the most recent period of deflation in our markets, and see if we can glean anything from the metals action in relation to deflationary market pressures and dropping interest rates.

We all know that the S&P 500 topped in October of 2007 and began an estimated 300-point decline into March of 2008, and then we saw a corrective bounce in the equities for a couple of months. During that same period of time, the metals continued to rally. So, here we have “evidence” of the metals supposedly rising during a period of deflation.

But, when we then look toward the May 2008-March 2009 severe decline in the equity market, we witnessed the metals also experienced significant declines within that time period. In fact, gold lost a little more than 30% (yet, rallied again, thereafter). So, when one is presented with these facts, does it make sense that the metals are surely going to rise during periods of deflation and/or low interest rates?

One has to put aside their personal biases toward the metals and recognize that they are not necessarily going to rise during periods of deflation, or due to the drop in the dollar or interest rates. Oddly enough, metals can rally during periods of deflation or dollar appreciation, and they can fall during periods of deflation and dollar appreciation.

The same applies to periods of inflation as well. I know you are likely thinking to yourselves, “Avi has really lost it this time.” But in all honesty, how can you come to terms with the reality of how they reacted during the 2008 broad equity market carnage, which was clearly a deflationary event? Did they act as the supposed “safe haven” during the strongest period of deflationary pressures experienced since the Great Depression, especially while interest rates were dropping precipitously?

The one thing said by Mr. Schiff with which I agree is that “the moves in gold come in waves.” And, these wave movements are driven by waves of sentiment. That is exactly what we track. In fact, not only did the tracking of market sentiment allow us to make various calls, such as the drop into the November 2014 low, but at this time, unlike Mr. Schiff, we still believe that lower lows and more pain are still in store for those that have been continually bullish since 2011.

So, I would urge anyone reading prominent pundit “expectations” about metals to test them against the reality of the price action history. If someone suggests to you that it is a matter of interest rate sensitivity or an inflation/deflation argument or a factor of quantitative easing, you need to think long and hard about if the price history of metals supports their proposition. I suggest that it will not.

Rather, metals are purely a sentiment trade, and unless you understand how sentiment drives metals, you will more than likely be caught on the wrong side of a popular fundamental argument. Ultimately, he will be right. But, do we all have the deep pockets to be able to withstand yet another drop to lower lows before being proven right?

See chart on GLD 2007-2009.

Tax Reduction read more at http://youroffshoremoney.com

Miners Sector 2015 Forecast :Dumping Assets At Fire-sale Prices

Senior mining companies are still holding many unnecessary and troubled assets on their books. So it would not be a surprise to see a few more dirt-cheap deals in 2015.

Scott Douglas/Riversdale Mining Ltd.Senior mining companies are still holding many unnecessary and troubled assets .

The junior mining sector is in such brutal shape right now that most companies are unwilling to even pay for booths at conferences that are geared to them.

 

Mr. Dethlefsen’s firm, Corsa Coal Corp., was approached this year about buying coal assets in Pennsylvania from Russian steel giant OAO Severstal, which was bailing out of the United States.

Severstal had bought these operations for $900 million in 2008, when steelmaking coal prices were hitting all-time highs. Mr. Dethlefsen would not pay anything close to that in today’s awful coal market, but he didn’t have to. Corsa bought the operations for a grand total of US$60 million, or less than 8% of what Severstal paid.

“It’s a tough market. We have our work cut out for us with this business and it’s not going to be easy,” said Mr. Dethlefsen, Corsa’s chief executive.

“But we’d rather start by paying US$60 million than US$500 million.”

Indeed. It used to be that when mining companies put assets up for auction, they wouldn’t actually sell them unless they got a very full price. That could be because their commodity price assumptions were too optimistic, or they were just too attached to them and convinced they could extract more value. Dozens of interesting projects were put up for auction in recent years and never changed hands because sellers demanded too much money.

We have our work cut out for us with this business and it’s not going to be easy

That changed in 2014, especially at the low end. This will go down as the year when miners were happy to dump their troubled assets. They just wanted to get them off the books and make them someone else’s problem.

The Corsa-Severstal deal was one such example. Rio Tinto Ltd., another, sold coal assets in Mozambique for US$50 million, just three years after paying US$3.7 billion for them. Kinross Gold Corp. dumped Fruta del Norte, possibly the world’s richest undeveloped gold project, for US$240 million, or less than a quarter of what it paid six years ago.

A Billion Dollar Loss – and more of these stories to be written in 2015

And then there was the unfortunate tale of Alberta coal miner Grande Cache Coal Corp. A pair of Asian commodity traders (Marubeni Corp. and Winsway Enterprises Holdings) paid $1 billion for the company in 2011. But coal prices turned dramatically against them. So in October, they agreed to sell their Grand Cache stakes for a buck. Each.

These fire-sale prices generated some laughs across the industry. Yet the deals have an undeniable logic in the current volatile market conditions.

Handout/Grande Cache Coal

Handout/Grande Cache CoalA pair of Asian commodity traders (Marubeni Corp. and Winsway Enterprises Holdings) paid $1 billion for Grande Cache Coal in 2011. But coal prices turned dramatically against them. So in October, they agreed to sell their Grand Cache stakes for a buck. Each.

During the mining bull market (roughly 2002 to 2011), the industry was undergoing massive consolidation as miners rode the wave of rising metal prices. Senior mining companies like Rio Tinto and Vale SA snapped up almost everything in sight, piling up a lot of debt and unnecessary assets in the process. As long as commodity prices were high, who cared? They were just happy to get bigger.

It took a steep drop in prices — and an embarrassing wave of writedowns — to force them to reconsider their strategy. They realized too much management time was being wasted on non-core assets that deliver minimal or no return. They also recognized that low commodity prices may last for a while and that they needed to shed these assets to get as lean as possible.

It has helped that almost every major mining company replaced its CEO over the last couple of years. These guys have no emotional attachment to the assets their predecessors overpaid for, and are happy to do whatever it takes to get value out of them.

“Everyone is looking at rationalizing their portfolios to their best core assets,” said Melanie Shishler, a partner and mining specialist at Davies Ward Phillips & Vineberg LLP. “In furtherance of that, I think people are being quite unrelenting in what they’re prepared to do to reach that goal.”

And there was nothing CEOs wanted to divest more than their problem assets. These assets were unloaded for bargain-basement prices after they backfired in spectacular ways.

For Severstal, it was a combination of a deteriorating coal market and Vladimir Putin. When Severstal bought the U.S. assets in 2008, coking coal prices were soaring above US$300 a tonne. Supply was so tight that steelmakers were terrified they would not be able to source product, so they started snapping up coal mining operations.

Today, that strategy seems absurd. Benchmark prices have plunged to US$117 a tonne, due to soaring supply and uncertain Chinese demand. Steelmakers no longer see any need to be vertically integrated.

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Kinross – Poster Child For Mining Sector Errors

For Toronto-based Kinross, the central issue was also politics. The problem with the Fruta del Norte (FDN) project is that it is in Ecuador, a country with no history of large-scale gold mining. Kinross paid $1.2 billion for FDN in 2008 even though Ecuador did not have a firm mining law at the time. It was a reckless gamble, and it backfired after the government demanded outrageous windfall profits taxes. (Kinross owns equity in FDN’s new owner, so it could still benefit if the mine is built.)

Rio Tinto fell victim to a lack of good due diligence. It paid billions for the Mozambique coal assets without having a firm transportation plan in place. The transportation constraints were far bigger than anticipated, making the coal assets almost worthless in Rio’s eyes.

Handout/Kinross

Handout/KinrossKinross paid $1.2 billion for the Fruta del Norte mine in 2008 even though Ecuador did not have a firm mining law at the time. It was a reckless gamble, and it backfired after the government demanded outrageous windfall profits taxes.

 

In the two-dollar Grande Cache deal, the Asian sellers decided the assets definitely worthless to them at these prices. Experts said the sellers were facing potential cash outflows in the short term, something they clearly wanted to avoid.

Senior mining companies are still holding many unnecessary and troubled assets on their books. So it would not be a surprise to see a few more dirt-cheap deals in 2015.

One notable thing about these transactions is they usually involved a large company selling to a very small one. Sometimes it takes a small company to give a problem asset the attention it needs to create value. If they can’t get the assets turned around, then these deals are not such a great bargain.

“I’ve always said one company’s non-core asset is the cornerstone asset of another one,” said Jack A. Bass, managing partner at Jack A. Bass and Associates.

That is certainly the case with Corsa, which transformed into a serious player overnight with the Severstal deal. But now that the excitement has worn off, the company has to prove it can generate actual value out of these operations in a miserable coal market. If Corsa pulls that off and prices rebound, it could turn out to be one of the best mining deals in decades.

“We took the opportunity to come in and buy at what we think is the trough,” Mr. Dethlefsen said.

“To do that, you’ve got to have a pretty strong stomach. Over the next 12 months, it’s going to be a knife fight.”

You Have Options:

What To Do ?

Here is our recent letter:

Managed Accounts Year End Review and Forecast

November 2014 – 40 % cash position
Gold and Precious MetalsThe largest gains for our clients came from the exit from the gold producers at $18oo an ounce and continuing until we hold no gold and no gold miners . This from the author of The Gold Investors Handbook.2015 – We continue to be on the sidelines for this sector – regardless of the gnomes of Switzerland . As a safe haven gold simply wasnot there for investors despite turmoil in the Middle East, Africa and Ukraine.How much more frightening can the prospect for peace be than to have wars in multiple locations? Secondly the spectre of inflation – on which I have given numerous talks – simply failed to materialize. In fact economists and portfolio managers such as myself are now more concerned about deflation – and the spectre is a Japanese style decades long slide in the world economy.
Shipping Sector / Bulk ShippersYou can review our stock market letter athttp://www.amp2012.com to follow our profits in the shipping sector before our retreat as overcapacity has yet to effect continued overbuiding. In 2008-9 rates-  illustrated by the Baltic Dry Index – were at their peak. The BDI hit over 10,000. Today it is roughly 10 % of that benchmark and the sector slide continues. We have an impressive watchlist of former ” darlings” – but we are content to watch and wait.
Oil/ Energy I am very happy for the call in natural gas prices – out at $12 and into oil. When oil was above $100 we lessened positions and that is our saving grace in the past two weeks. We are not bottom feeders and will wait for a turn in the market before reentering drillers or producers.On Friday November 27th, crude oil prices dropped to below $72 and the slide has continued into the weekend, with Brent crude oil at $70.15 as I write this post. Shares of major oil companies traded down on Friday. Our former energy sector holdings are down another between 4% and 11%, including SDRL, which dropped another 8% following Wednesday’s 23% plunge…

Have you avoided these sectors – you would have been better off to follow our advice in 2014 and now you have to decide for 2015.
No one – and I am not being humble here – can project the future with great accuracy but our clients continue to do very well and we offer that experience to you.

Fees : 1 % annual set up and a performance bonus of 20 % – only if we perform.

You can withdraw your funds monthly if you require an income stream.

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Our client is seeking funds to expand their tanker fleet .

Interest 12 % compounded – paid 1% per month

Floating charge of the full $500,000 against the fleet – valued at  more than $ 1 M

 

Contact information:

To learn more about portfolio management ,asset protection, trusts ,offshore company formation and structure for your business interests (at no cost or obligation)

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10:00 – 4:00 Monday to Friday Pacific Time ( same time zone as Los Angeles).

Similar to wise buying decisions, exiting certain underperformers at the right time helps maximize portfolio returns. Selling off losers can be difficult, but if both the share price and estimates are falling, it could be time to get rid of the security before more losses hit your portfolio.

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2014 Commodity Review – Record Losing Run

Oil Set for Biggest Slump Since 2008 as OPEC Battles U.S. Shale


Photographer: Ty Wright/Bloomberg

Rig hands work at a Knox Energy Inc. oil drilling site in Knox County, Ohio, U.S. OPEC… Read More

Oil headed for the biggest annual decline since the 2008 global financial crisis as U.S. producers and the Organization of Petroleum Exporting Countries cede no ground in their battle for market share amid a supply glut.

Futures slid as much as 1.1 percent in New York, bringing losses for 2014 to 46 percent. U.S. guidelines allowing overseas sales of ultralight oil without government approval may boost the country’s export capacity and “throw a monkey wrench” intoSaudi Arabia’s plan to curb American output, according to Citigroup Inc. U.S.crude inventories are forecast to rise to the highest level for this time of the year in three decades.

Oil’s slump has roiled markets from the Russian ruble to the Nigerian naira and squeezed government budgets in producing nations including Venezuela and Ecuador. It’s also boosted China’s emergency crude reserves and helped shrink fuel subsidies in India and Indonesia. OPEC has signaled it won’t cut supply to influence prices, instead preferring to defend market share amid an unprecedented U.S. shale boom.

“For this year, the biggest factor driving down oil prices was U.S. shale production followed by a price war,” Hong Sung Ki, a commodities analyst at Samsung Futures Inc. in Seoul, said by phone today. “The possibility of U.S. curbing output will be the only booster but nothing has been done, so we’re seeing a continuation of the price decline.”

West Texas Intermediate for February delivery dropped as much as 57 cents to $53.55 a barrel in electronic trading on the New York Mercantile Exchange and was at $53.75 at 12:04 p.m. Singapore time. The contract climbed 51 cents to $54.12 yesterday, gaining for the first time in four days. Total volume was about 68 percent below the 100-day average.

U.S. Condensate

Brent for February settlement fell as much as 72 cents, or 1.2 percent, to $57.18 a barrel on the London-based ICE Futures Europe exchange. Prices have decreased 48 percent this year. The European benchmark crude traded at a premium of $3.62 to WTI, compared with $12.38 at the end of last year.

President Barack Obama’s administration opened the door for expanded oil exports by clarifying that a lightly processed form of crude known as condensate can be sold outside the U.S.

The publication of guidelines by the Commerce Department’s Bureau of Industry and Security is the first public explanation of steps companies can take to avoid violating export laws. It doesn’t end the ban on most crude exports, which Congress adopted in 1975 in response to the Arab oil embargo.

“While government officials have gone out of their way to indicate there is no change in policy, in practice this long-awaited move can open up the floodgates to substantial increases in exports by end-2015,” Citigroup analysts led by Ed Morse in New York said in an e-mailed report.

Shale Oil

The U.S. oil boom has been driven by a combination of horizontal drilling and hydraulic fracturing, or fracking, which has unlocked supplies from shale formations including the Eagle Ford and Permian in Texas and the Bakken in North Dakota. Production accelerated to 9.14 million barrels a day through Dec. 12, the fastest rate in weekly data that started in January 1983, according to the Energy Information Administration.

Crude stockpiles probably expanded by 900,000 barrels to 387.9 million in the week ended Dec. 26, based on the median estimate of nine analysts surveyed by Bloomberg News before today’s report from the Energy Department’s statistical arm.

“What we’re seeing is that supplies from North America have really outpaced worldwide demand growth and as a result, we have a supply glut,” Andy Lipow, the president of Lipow Oil Associates LLC in Houston, said by phone. “And that of course has put pressure on prices over the last several months.”

OPEC Policy

Global markets are oversupplied by 2 million barrels a day, according to Qatar’s Energy Minister Mohammed Al Sada. Saudi Arabia, which is leading OPEC to resist production cuts, has said it’s confident that prices will rebound as global economic growth boosts demand.

OPEC, which pumps about 40 percent of the world’s oil, decided to maintain its output quota at 30 million barrels a day at a Nov. 27 meeting in Vienna, ignoring calls for supply reductions to support the market. The 12-member group produced 30.56 million a day in November, exceeding its collective target for a sixth straight month, a separate Bloomberg survey of companies, producers and analysts shows.

Saudi Arabia this month offered the widest discounts in more than 10 years to sell crude to Asia, a move followed by Iraq, Kuwait and Iran. That prompted speculation that Middle East producers are protecting market share amid increased shipments from Latin America, North Africa and Russia.

Economic Fallout

Venezuela’s President Nicolas Maduro vowed an economic “counter-offensive” to steer the OPEC member out of recession as it struggled with the world’s fastest inflation. Ecuador, which relies on crude for about a third of its revenue, may cut next year’s budget by as much as $1.5 billion and seek additional financing if prices don’t stabilize, the Finance Ministry has said.

Oil’s collapse has also threatened to push Russia, the world’s second-largest crude exporter, into recession as its currency headed for its steepest annual slide since 1998. The economy, which relies on crude sales for almost half its budget, may shrink as much as 4.7 percent next year if oil averages $60 a barrel, according to the central bank. Russia must adapt to the reality of prices that could drop to as low as $40, President Vladimir Putin said on Dec. 18.

In China, a factory gauge for December fell to a seven-month low today, adding to signs of slowing growth in the world’s second-biggest oil consumer. The Purchasing Managers’ Index from HSBC Holdings Plc and Markit Economics was at 49.6, down from 50 in November, indicating a contraction.

The Asian nation will account for about 11 percent of global demand in 2015, compared with 21 percent for the U.S., projections from the International Energy Agency in Paris show.

Commodities Head for Record Losing Run on Oil’s Rout, Dollar

The Bloomberg Commodity Index (BCOM), which tracks 22 products from crude to copper, traded at 106.0552 points at 11:45 a.m. in Singapore from 106.1031 yesterday. It’s lost 16 percent this year, with crude, gasoline and heating oil as the biggest decliners. The gauge fell to 105.7551 yesterday, the lowest level since March 2009, and a fourth year of losses would be the longest since at least 1991. A breach of 101.9986 in 2015 would bring the measure to its lowest since 2002.

Energy prices collapsed in 2014 as a jump in U.S. drilling sparked a surge in output and price war with OPEC, which chose to maintain supplies to try to retain market share. The dollar climbed to the highest level in more than five years as a U.S. recovery spurred speculation that the Federal Reserve will start to raise borrowing costs next year. Commodities are set for a volatile year in 2015, with crude oil poised to extend its slump, according to Australia and New Zealand Banking Group Ltd.

“What we’re seeing is that supplies from North America have really outpaced worldwide demand growth and as a result, we have a supply glut,” Andy Lipow, president of Lipow Oil Associates LLC in Houston, said by phone. “And that of course has put pressure on prices over the last several months. And as a result, it’s dragging down commodities indexes as well.”

Brent Slumps

Brent for February settlement traded at $57.48 a barrel on the London-based ICE Futures Europe exchange, with front-month prices 48 percent lower this year. West Texas Intermediate dropped 0.6 percent to $53.81 a barrel on the New York Mercantile Exchange. Gasoline sank 44 percent this year.

A slowdown in China also hurt demand for raw materials as policy makers grappled with a property slowdown, and data today showed a factory gauge at a seven-month low in December. The world’s biggest user of metals is headed for its slowest full-year economic expansion since 1990. China’s central bank cut interest rates last month for the first time since 2012.

Coffee was the biggest gainer this year as the worst drought in decades eroded supplies in Brazil, the largest producer and exporter. Nickel rose the most among metals, gaining 9 percent to $15,149 a metric ton on the London Metal Exchange after Indonesia halted ore exports. Both commodities rose in the early months of 2014, before dropping this quarter.

Oil Outlook

While most commodities looked oversold as the New Year neared, weak near-term fundamentals were unlikely to bring much confidence, ANZ analysts including Mark Pervan said in a report dated Dec. 22. An oversupplied market was likely to keep crude oil prices under pressure, they wrote.

Deutsche Bank AG this month cut its 2015 forecast for Brent to $72.50, down from an October prediction for an average of $88.75. Goldman Sachs Group Inc. expects Brent to average $80 to $85 a barrel in 2015, while WTI may trade at $70 to $75.

The Bloomberg Dollar Spot Index, which tracks the U.S. currency against major peers, advanced 10.6 percent in 2014 amid speculation the Fed may raise interest rates in the third quarter as the world’s biggest economy improves. The greenback strengthened against all of its 31 major peers this year.

You Have Options:

What To Do ?

Here is our recent letter:

Managed Accounts Year End Review and Forecast

November 2014 – 40 % cash position
Gold and Precious MetalsThe largest gains for our clients came from the exit from the gold producers at $18oo an ounce and continuing until we hold no gold and no gold miners . This from the author of The Gold Investors Handbook.2015 – We continue to be on the sidelines for this sector – regardless of the gnomes of Switzerland . As a safe haven gold simply wasnot there for investors despite turmoil in the Middle East, Africa and Ukraine.How much more frightening can the prospect for peace be than to have wars in multiple locations? Secondly the spectre of inflation – on which I have given numerous talks – simply failed to materialize. In fact economists and portfolio managers such as myself are now more concerned about deflation – and the spectre is a Japanese style decades long slide in the world economy.
Shipping Sector / Bulk ShippersYou can review our stock market letter athttp://www.amp2012.com to follow our profits in the shipping sector before our retreat as overcapacity has yet to effect continued overbuiding. In 2008-9 rates-  illustrated by the Baltic Dry Index – were at their peak. The BDI hit over 10,000. Today it is roughly 10 % of that benchmark and the sector slide continues. We have an impressive watchlist of former ” darlings” – but we are content to watch and wait.
Oil/ Energy I am very happy for the call in natural gas prices – out at $12 and into oil. When oil was above $100 we lessened positions and that is our saving grace in the past two weeks. We are not bottom feeders and will wait for a turn in the market before reentering drillers or producers.On Friday November 27th, crude oil prices dropped to below $72 and the slide has continued into the weekend, with Brent crude oil at $70.15 as I write this post. Shares of major oil companies traded down on Friday. Our former energy sector holdings are down another between 4% and 11%, including SDRL, which dropped another 8% following Wednesday’s 23% plunge…

Have you avoided these sectors – you would have been better off to follow our advice in 2014 and now you have to decide for 2015.
No one – and I am not being humble here – can project the future with great accuracy but our clients continue to do very well and we offer that experience to you.

Fees : 1 % annual set up and a performance bonus of 20 % – only if we perform.

You can withdraw your funds monthly if you require an income stream.

Alternate Guaranteed Income Payments

Private client funds Minimum $10,000 Maximum Loan $500,000

Our client is seeking funds to expand their tanker fleet .

Interest 12 % compounded – paid 1% per month

Floating charge of the full $500,000 against the fleet – valued at  more than $ 1 M

 

Contact information:

To learn more about portfolio management ,asset protection, trusts ,offshore company formation and structure for your business interests (at no cost or obligation)

Email

jackabass@gmail.com OR

info@jackbassteam.com  OR

Call Jack direct at 604-858-3202

10:00 – 4:00 Monday to Friday Pacific Time ( same time zone as Los Angeles).

Similar to wise buying decisions, exiting certain underperformers at the right time helps maximize portfolio returns. Selling off losers can be difficult, but if both the share price and estimates are falling, it could be time to get rid of the security before more losses hit your portfolio.

Tax website  Http://www.youroffshoremoney.com

Get Out Of Gold Part 2

Cheap Oil Is Dragging Down the Price of Gold


Photographer: Carla Gottgens/Bloomberg

Bars of 10-ounce gold are arranged for a photograph

Gold, the ultimate inflation hedge, isn’t much use to investors these days.

Oil is in a bear-market freefall that began in June, spearheading the longest commodity slump in at least a generation. The collapse means that instead of the surge in consumer prices that gold buyers have been expecting for much of the past decade, the U.S. is “disinflating,” according to Bill Gross, who used to run the world’s biggest bond fund.

A gauge of inflation expectations that closely tracks gold is headed for the biggest annual drop since the recession in 2008. While bullion rebounded from a four-year low last month, Goldman Sachs Group Inc. and Societe Generale SA reiterated their bearish outlooks for prices. The metal’s appeal as an alternative asset is fading as the dollar and U.S. equities rally, and as the Federal Reserve moves closer to raising interest rates to keep the economy from overheating.

“Forget inflation — all of the talk now is about deflation,” Peter Jankovskis, who helps oversee $1.9 billion as co-chief investment officer of Lisle, Illinois-based OakBrook Investments LLC., said Dec. 16. “Obviously, oil prices dropping are adding to deflationary pressures. We may see a rate rise next year, and we could see gold come under pressure as the dollar continues to move higher.”

Even though there’s been little to no inflation over the past six years, investors have been expecting an acceleration after the Fed cut interest rates to zero percent in 2008 to revive growth. Those expectations, tracked by the five-year Treasury break-even rate, helped fuel gold demand and prices, which surged to a record $1,923.70 an ounce in 2011.

Eroding Appeal

Now, inflation prospects are crumbling, undermining a key reason for owning the precious metal.

Crude-oil futures in New York have tumbled 44 percent this year, dropping below $54 a barrel last week, as global output surged. The five-year break-even rate is down 33 percent this year, the most since 2008. In November, the cost of living fell 0.3 percent, the most since December 2008, government data show, and economists surveyed by Bloomberg predict the annual gain in consumer prices will slow in 2015 to 1.5 percent from an estimated 1.7 percent this year.

Cheaper energy means there are no signs that inflation is approaching the Fed’s 2 percent target, Gross, who used to run the world’s largest bond fund at Pacific Investment Management Co. before joining Janus Capital Group Inc. in September, said Dec. 12 in a Bloomberg Surveillance interview with Tom Keene.

Shunning Gold

Investor holdings in exchange-traded funds backed by gold last week were the lowest since 2009, and $7.68 billion has been wiped from the value of the funds in 2014, according to data compiled by Bloomberg. Open interest in New York futures and options dropped 5.3 percent this year, set for a second annual loss and the longest slump since 2005, U.S. government data show.

After rebounding 4.4 percent from a four-year low in early November, prices will average $1,175 next quarter, below the Dec. 22 close of $1,179.80, according to the median of 31 analysts tracked by Bloomberg. Goldman forecasts a drop to $1,050 by next December, while SocGen expects $950 in 2015’s fourth quarter.

Since touching a six-week high on Dec. 9, futures fell 4.9 percent to $1,178.20 on the Comex in New York today, heading for a second straight annual decline, down 2 percent. The Bloomberg Commodity Index dropped 15 percent this year, while the Bloomberg Dollar Spot Index climbed 11 percent. The Standard & Poor’s 500 equity index is up 12 percent, after touching a record high Dec. 5.

Rebound Bets

Speculators haven’t given up on gold. Money managers remain bullish, increasing their net-long position to 103,738 futures and option contracts as of Dec. 16, more than doubling bets since early November, according to U.S. Commodity Futures Trading Commission data.

Signs that central banks in China, Europe and Japan will add to stimulus efforts have increased speculation that global inflation could rise, even as U.S. consumer costs stay stable. While dollar-denominated gold is down this year, bullion is up 12 percent priced in yen and 9.6 percent in euros.

“It’s confounding that inflation is not rampant on a worldwide basis, based on the amount of liquidity that has been pumped into the system,” Michael Mullaney, chief investment officer of Fiduciary Trust Co. in Boston, which oversees $11.5 billion, said Dec. 16. “We are not there yet, but once this starts to percolate, we will see headlines on inflationary pressures” that can support gold prices, he said.

Rally Ends

Gold climbed 70 percent from December 2008 to June 2011 as the U.S. central bank bought debt and held borrowing costs at a record low. Prices slumped 28 percent last year, the most in three decades, after some investors lost faith in the metal as a store of value.

The Fed’s benchmark interest rate will be 1.125 percent at the end of next year, quarterly estimates from U.S. central bankers showed Dec. 17. Chair Janet Yellen said in a press conference that day that inflation will eventually reach the Fed’s target, allowing the central bank to raise borrowing costs.

Bullion’s link with inflation dates back more than 2,000 years, with the first use of coin currency in 550 B.C., according to the World Gold Council. While countries from the U.S. to the U.K. adopted a gold standard by the 19th century to limit inflation, no nation links currencies to the metal anymore. The Fed cut the dollar’s ties to gold four decades ago.

“Gold as an inflation hedge is unnecessary,” Atul Lele, who helps oversee $5.1 billion as the chief investment officer at Bahamas-based Deltec International Group, said Dec. 16. “ We think inflation in the U.S. could rise, but nothing that should be a cause of worry.”

 You Have Options:

What To Do ?

Here is our recent letter:

Managed Accounts Year End Review and Forecast

November 2014 – 40 % cash position
Gold and Precious MetalsThe largest gains for our clients came from the exit from the gold producers at $18oo an ounce and continuing until we hold no gold and no gold miners . This from the author of The Gold Investors Handbook.2015 – We continue to be on the sidelines for this sector – regardless of the gnomes of Switzerland . As a safe haven gold simply wasnot there for investors despite turmoil in the Middle East, Africa and Ukraine.How much more frightening can the prospect for peace be than to have wars in multiple locations? Secondly the spectre of inflation – on which I have given numerous talks – simply failed to materialize. In fact economists and portfolio managers such as myself are now more concerned about deflation – and the spectre is a Japanese style decades long slide in the world economy.
Shipping Sector / Bulk ShippersYou can review our stock market letter athttp://www.amp2012.com to follow our profits in the shipping sector before our retreat as overcapacity has yet to effect continued overbuiding. In 2008-9 rates-  illustrated by the Baltic Dry Index – were at their peak. The BDI hit over 10,000. Today it is roughly 10 % of that benchmark and the sector slide continues. We have an impressive watchlist of former ” darlings” – but we are content to watch and wait.
Oil/ EnergyI am very happy for the call in natural gas prices – out at $12 and into oil. When oil was above $100 we lessened positions and that is our saving grace in the past two weeks. We are not bottom feeders and will wait for a turn in the market before reentering drillers or producers.On Friday November 27th, crude oil prices dropped to below $72 and the slide has continued into the weekend, with Brent crude oil at $70.15 as I write this post. Shares of major oil companies traded down on Friday. Our former energy sector holdings are down another between 4% and 11%, including SDRL, which dropped another 8% following Wednesday’s 23% plunge…

Have you avoided these sectors – you would have been better off to follow our advice in 2014 and now you have to decide for 2015.
No one – and I am not being humble here – can project the future with great accuracy but our clients continue to do very well and we offer that experience to you.

Fees : 1 % annual set up and a performance bonus of 20 % – only if we perform.

You can withdraw your funds monthly if you require an income stream.

Alternate Guaranteed Income Payments

Private client funds Minimum $10,000 Maximum Loan $500,000

Our client is seeking funds to expand their tanker fleet .

Interest 12 % compounded – paid 1% per month

Floating charge of the full $500,000 against the fleet – valued at  more than $ 1 M

 

Contact information:

To learn more about portfolio management ,asset protection, trusts ,offshore company formation and structure for your business interests (at no cost or obligation)

Email

jackabass@gmail.com OR

info@jackbassteam.com  OR

Call Jack direct at 604-858-3202

10:00 – 4:00 Monday to Friday Pacific Time ( same time zone as Los Angeles).

Similar to wise buying decisions, exiting certain underperformers at the right time helps maximize portfolio returns. Selling off losers can be difficult, but if both the share price and estimates are falling, it could be time to get rid of the security before more losses hit your portfolio.

Tax website  Http://www.youroffshoremoney.com

Gold Downside Risk Seen As : ‘Significant’

 The author of The Gold Investors Handbook says the worst isn’t over yet for gold after prices erased  this year’s gain.

“Risks are significantly skewed to the downside,” said Bass, who told investors to sell last year before gold’s biggest collapse since 1980. “Much of the support was coming from political uncertainty in Ukraine and what was going on in Middle East,” and those concerns have faded, he said in a telephone interview yesterday.

After bullion’s rally in the first half of the year beat gains for commodities, equities and Treasuries, the metal is heading for a quarterly decline to end out 2014. Demand for precious metals as a protection of wealth has been eroded by the outlook for a strengthening U.S. economy, which helped spark a rally in the dollar .

Gold fell to an eight-month low this week after the Federal Reserve  raised its outlook for interest rates, crimping demand for an inflation hedge. Money managers cut bullish holdings for five weeks, while holdings through global exchange-traded funds slumped to the lowest since 2009.

“Gold is more responsive to the near-term growth momentum in the U.S., rather than long-term inflation concerns,” Damien Courvalin, a Goldman analyst, said . “Interest is lower in gold than it was say 18 months ago.”

Dollar Rally

. The Bloomberg Commodity Index of 22 raw materials slid 5.2 percent in 2014, while the MSCI All-Country World Index of equities rose 3.7 percent. The Bloomberg Dollar Spot Index climbed 4.3 percent.

Bass isn’t alone in predicting the end to this year’s rebound that drove the best first-half performance for gold since 2010. Societe Generale SA’s Michael Haigh, who also correctly forecast 2013’s slump, said in a report this month that he expects the metal will drop more than 5 percent by 2015’s third quarter. Investors, who in June and July were adding to bullish wagers, may be starting to agree with analysts, taking their short holdings on the metal to the highest in three months.

Muted Inflation

After 12 straight years of gains, gold tumbled 28 percent in 2013 as an equity rally and muted inflation prompted some investors to lose their faith in the metal.

Bass on April 10, 2013, issued a sell recommendation, before a two-day 13 percent plunge that ended April 15, 2013, and left prices in a bear market. The slump wasn’t foreseen by most money mangers, who had increased their bullish bets by 11 percent the prior month. The investors cut holdings to a six-year low by December.

Now, Currie expects bullion to drop to $1,050 by the end of 2015, maintaining a forecast from the start of the year. SocGen’s Haigh sees prices at $1,150 in the third quarter next year, he said in a report e-mailed Sept. 12. The metal reached this year’s peak of $1,392.60 in March amid violence in Ukraine.

Citigroup Inc.  lowered its forecast for next year amid expectations of U.S. rate increases, while the “risk-related source of support has been diminished.” The bank cut its outlook to $1,225 from $1,365. UBS AG reduced it three-month outlook yesterday by 7.7 percent to $1,200.

Target Price

“Turbulence is still there, but is not escalating any further, which we believe will help gold decline to our target,” Courvalin said.

“Our inflation forecasts are pretty subdued,” Bass said.

Inflation expectations, measured by the five-year Treasury break-even rate, this week reached the lowest since June 2013.

 

“Ultimately, what drives fair value for gold prices is the U.S. real interest-rate environment,” Courvalin said.

 

It is human nature to look for bargains – and destroy your portfolio as you gather losers into what used to be a ” nest” egg.

Look at Seeking Alpha and count the ” analysts” saying Dryships ( DRYS) is going to turn – how none forecast the sub dollar level it now enjoys.

What To Do ?

Here is our recent letter:

Managed Accounts Year End Review and Forecast

November 2014 – 40 % cash position
Gold and Precious MetalsThe largest gains for our clients came from the exit from the gold producers at $18oo an ounce and continuing until we hold no gold and no gold miners . This from the author of The Gold Investors Handbook.2015 – We continue to be on the sidelines for this sector – regardless of the gnomes of Switzerland . As a safe haven gold simply wasnot there for investors despite turmoil in the Middle East, Africa and Ukraine.How much more frightening can the prospect for peace be than to have wars in multiple locations? Secondly the spectre of inflation – on which I have given numerous talks – simply failed to materialize. In fact economists and portfolio managers such as myself are now more concerned about deflation – and the spectre is a Japanese style decades long slide in the world economy.
Shipping Sector / Bulk ShippersYou can review our stock market letter athttp://www.amp2012.com to follow our profits in the shipping sector before our retreat as overcapacity has yet to effect continued overbuiding. In 2008-9 rates-  illustrated by the Baltic Dry Index – were at their peak. The BDI hit over 10,000. Today it is roughly 10 % of that benchmark and the sector slide continues. We have an impressive watchlist of former ” darlings” – but we are content to watch and wait.
Oil/ EnergyI am very happy for the call in natural gas prices – out at $12 and into oil. When oil was above $100 we lessened positions and that is our saving grace in the past two weeks. We are not bottom feeders and will wait for a turn in the market before reentering drillers or producers.On Friday November 27th, crude oil prices dropped to below $72 and the slide has continued into the weekend, with Brent crude oil at $70.15 as I write this post. Shares of major oil companies traded down on Friday. Our former energy sector holdings are down another between 4% and 11%, including SDRL, which dropped another 8% following Wednesday’s 23% plunge…

Have you avoided these sectors – you would have been better off to follow our advice in 2014 and now you have to decide for 2015.
No one – and I am not being humble here – can project the future with great accuracy but our clients continue to do very well and we offer that experience to you.

Fees : 1 % annual set up and a performance bonus of 20 % – only if we perform.

You can withdraw your funds monthly if you require an income stream.

Alternate Guaranteed Income Payments

Private client funds Minimum $10,000 Maximum Loan $500,000

Our client is seeking funds to expand their tanker fleet .

Interest 12 % compounded – paid 1% per month

Floating charge of the full $500,000 against the fleet – valued at  more than $ 1 M

 

Contact information:

To learn more about portfolio management ,asset protection, trusts ,offshore company formation and structure for your business interests (at no cost or obligation)

Email

jackabass@gmail.com OR

info@jackbassteam.com  OR

Call Jack direct at 604-858-3202

10:00 – 4:00 Monday to Friday Pacific Time ( same time zone as Los Angeles).

Similar to wise buying decisions, exiting certain underperformers at the right time helps maximize portfolio returns. Selling off losers can be difficult, but if both the share price and estimates are falling, it could be time to get rid of the security before more losses hit your portfolio.

Tax website  Http://www.youroffshoremoney.com

 

Lor Loewen's photo.