Gold is One of the Few Assets That’s Up for the Year by: Tim Iacono December 16, 2008

http://seekingalpha.com/article/110910-gold-is-one-of-the-few-assets-that-s-up-for-the-year?source=email

Don’t look now, but the little yellow metal that pays no interest and provides no dividend is one of just a few assets that can make the claim of being in positive territory for the year.

It’s only eked out a gain of about one percent - a London PM fix of $833.75 last December 31st versus about $840 as this is written - but, most investors would be happy with any number that doesn’t start with a minus sign this year.

Interestingly, if you held the physical metal versus the paper variety, you’d be up somewhere around five percent at the moment.

The next two weeks could also be kind to gold as the second half of December has produced an average gain of about two percent over the last seven

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More on Gold Backwardation

By James Turk

http://www.kitco.com/ind/Turk/turk_dec122008.html

Over the last few weeks, there have been a lot of articles on the Internet about backwardation, i.e., when the price of commodities for delivery today is higher than the price of commodities for delivery in the future. Like nearly all the things on the Internet, most of what was written is useful, but some of it is total rubbish, and it takes time to sort through to find the gems from the rest.  I offer the following in the hope that it clears up some of the confusion that has arisen about backwardation as well as to provide some insight into today’s gold market.

Backwardations are no big deal in most commodities, but they are indeed a very big deal for gold. Since I started following gold in the 1970s, I can recall seeing a gold backwardation against the US dollar only

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“Zuercher Kantonalbank, the Swiss lender that manages about $107 billion, said its gold vault is full after a surge in demand from investors seeking a haven during the credit crunch.

Assets in the Zurich-based bank’s ZKB Gold ETF, backed by about 2.66 million ounces of the metal, have risen to a record for seven consecutive weeks. That amount of gold is worth about $2.25 billion at today’s prices and equal to about 12 days of global production.

“Demand is so strong,” Susanne Toren, a metals analyst at the bank, said by telephone from Zurich today. “Our vaults are full right up to the top.”

Investors are buying gold coins and bars, and exchange- traded funds backed by physical metal, after banks including Lehman Brothers Holdings Inc. collapsed. Assets in SPDR Gold Trust, the largest ETF backed by bullion, advanced to a record 770.64 tons (24.78 million ounces) on Oct. 10.

Zuercher Kantonalbank, which …

You are an investor in physical metal and like Marty of “Back to the Future II” you have stumbled into a nightmare world of $10.00 and whatever cents silver (you may have bought back when it was $15-$20 and thought you were doing well) wondering how can you change this distorted world to a peaceful “Hill valley” of the movie and a reality of honest pricing.

Biff / Griff Tannen aka the SEC/CFTC (Securities exchange commission and Commodity Futures Trade Commission) should look like this picture of a nice old chap that cleans your car and keeps the house in order. Not unreasonable given its position of watchdog to the markets.

Instead its accusers of late charge it with sitting in a Jacuzzi laughing at all of us who have invested in

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just a few short weeks, America has gone from looking at a potential economic downturn to staring into an economic abyss. In a matter of days, confidence in the Federal Reserve’s ability to unfreeze our nation’s credit markets has nearly vanished. And now, to add insult to injury, the Fed has decided to start financing business corporations directly. No wonder investors are looking for an escape from this madness! And no wonder gold is performing far better than virtually any other commodity! Here’s how this crisis has unfolded and where it could be headed … Wall Street’s Vote of No Confidence The market has shown how ineffective it thought the $700 billion bailout would be on Friday when stocks cratered … again on Monday … and still ...

Seeing beyond the blind curves of bailouts and meltdowns takes the keen vision of a veteran market observer, Roger Wiegand, Editor of Trader Tracks. In this exclusive interview with The Gold Report, Wiegand predicts a “severe bull market” for gold that will include both juniors and seniors. He advises selective buying and names several of his favorites.

The Gold Report: When we spoke in mid-July, at the height of the market, you predicted a major downward correction.

Roger Wiegand: The call was pretty accurate, although the oversell was surprisingly deep. The reason was the hedge funds had gotten into a position where they had to raise cash as crude oil was starting to sell with speed. Oil was a dominant part of their investment. When the price of crude oil fell swiftly, funds were forced to sell everything to cover investor redemptions. Now we’re at the bottom again, and prices are …

Not-for-profit sellers dropped gold $10 in the Globex market almost the moment that the Comex closed, says Casey Reserach's Ed Steer. Silver fared far worse... but it was on very light volume once again. Strangely enough, the share prices did very well yesterday.

Before sending me an e-mail telling me I am wrong, let me admit it!! I am WRONG -- silver is not the only asset that is not someone else's liability. But some of the staunchest "Gold Bugs" have it wrong and insist that gold is the only asset. In fact, fully-owned lumber or land or even an apple orchard are assets, and again, if owned outright would be an asset without a liability. Before moving on, I must digress and point out that silver is the ONLY asset that reflects light better than any other element the ONLY asset that conducts heat better than any other element the ONE asset, more than even gold, used as money -- for longer periods of time and by more people throughout world history The real rub is how silver will do in times of financial stress. Certainly we can look to history ...

Well, the current fiasco over the physical shortage symptoms surely isnt quieting down, if anything its getting more gas poured on daily as more and more analysts weigh in on the situation.

I was just reading one such article on Seeking Alpha, and ran across a rather excellent and well put comment:

Actually, the U.S. Mint has not just “run out of blanks” as Bron suggests.

Bron says that Perth Mint is not having trouble getting adequate supply. But, remember, the U.S. Mint is several orders of magnitude bigger than the Perth Mint. Its coin production many times larger than any other mint in the world. It needs a level of supply that the Perth Mint couldn’t even dream of. And, it doesn’t have any “unallocated storage” schemes with which it might have metal, it now is using, stored up from long ago, when availability of physical metal was higher.

The U.S. Mint’s daily

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U.S. mint suspends gold coin sales; futures price is a fiction

Submitted by cpowell on Fri, 2008-08-15 04:27. Section: Daily Dispatches12:25a ET Friday, August 15, 2008

Dear Friend of GATA and Gold:

The U.S. Mint has suspended sales of American eagle gold coins and is refusing orders from dealers, two coin and bullion dealers confirmed Thursday.

The mint’s suspension of gold coin sales follows its tight rationing of sales of silver eagle coins, begun in May, when sales to the public were terminated and sales to the mint’s 13 authorized dealers were tightly limited.

Word of the mint’s suspension of gold coin sales came from the American Precious Metals Exchange in Edmond, Oklahoma, (http://apmexdealer.blogspot.com/2008/08/news-alert-us-mint-suspends-sale…) and from Centennial Precious Metals in Denver, Colorado.

The suspension is overwhelming evidence that the futures contract price of gold

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