Gold falls on dollar rise, seen vulnerable

Gold drifted lower on Wednesday tracking as the dollar firmed against the euro, with investors staying on the sidelines as the metal struggled to retain recent gains, analysts said.

Spot gold <XAU=> fell as low as $913.80 an ounce and was quoted at $916.10/917.10 at 1021 GMT, against $920.65/922.05 late in New York on Tuesday.

 

“The metal is under pressure as its failed to respond to higher oil prices and a weaker dollar,” said Simon Weeks, managing director of precious metals at Bank of Nova Scotia.

 

“Gold is vulnerable to another major sell-off in the near term, with a drop of about 18 tonnes in ETF inventories on a day hardly being a good advertisement for the upside.”

 

Gold held in New York-listed StreetTRACKS Gold Shares GLD.N XAUEXT-NYS-TT, the world’s largest gold-backed exchange-traded fund, fell to 623.41 tonnes on Tuesday from 641.82 tonnes the previous day.

 

The metal hit a three-week high of $952.60 last week but attempts to stay above $950 were met by profit-taking. Dealers noted some physical demand but it was not enough to trigger another rally towards last month’s record high of $1,030.80.

 

“In the near term, gold is likely to continue to take its lead from dollar movements,” said Suki Cooper, precious metals analyst at Barclays Capital. 

The euro retreated from a record high set the previous session versus the dollar after a European Central Bank policymaker toned down earlier hawkish comments on interest rates.

 

Make sure gold dealer is licensed

We Buy Gold, the commercials say. You’ve probably seen the ads on TV and in newspapers.

With gold prices at or near record highs lately, more and more people are taking a second look at the precious metals sitting in their jewelry boxes and drawers, wondering if they should sell, sell, sell.

Harvey Galinn, a 70-year-old Towson resident, has been thinking about selling American Eagle gold coins dating from 1993 to 1997.
“I was just wondering what the process is?” Galinn said. “I sell it to somebody and then they resell it or do they melt it down? Where does that gold ultimately wind up after it leaves the consumer?”

Even though you may want to jump fast into that hot gold-selling action, now is a time to be extra cautious, informed and patient.

The best course of action would be to find an appraiser or dealer who advertises that it buys gold. In Maryland, Thomas Terpilak says that the Department of Labor, Licensing and Regulation issues licenses to secondhand precious metal object dealers.

“Dealers can’t buy your gold without a license,” said Terpilak, an accredited senior appraiser with the American Society of Appraisers. “You can find dealers and appraisers in the newspaper, but if you want to double check, you should make sure they have a license.”

Once you’ve pinpointed a few dealers, Terpilak advises shopping around. Go from dealer to dealer to let them assess your gold and ask them how much they’ll pay you per gram.

“If you’re selling jewelry, certain gold will go for more money if it’s from a known company like Tiffany or Cartier,” Terpilak said. “Those names will trade for more money than generic pieces. If you’ve got a signature piece like that, you might want to consider going to an estate buyer. You shouldn’t sell a fine piece for just the gold value.”

If you’re selling gold coins, you may want to go to a coin show to see if your coins are collectible. Coins like South African Krugerrands and Australian nuggets are bullion coins that are valued by their weight in a specific precious metal. People who purchase bullion coins usually just want to invest in metals.

But coins that have numismatic value may be worth more.

According to the American Numismatic Association, American Eagle and Canadian Maple Leaf bullion coins typically have a higher price than Krugerrands. And, according to the Professional Numismatics Guild, the average retail commission for one-ounce American Eagle or Maple Leaf coins is about five or six percent.

In getting the best price for jewelry, you should realize that most of your gold jewelry is not pure gold. For instance, 10 karat is 41.6 percent pure, 14 karat is 58.5 percent, 18 karat is 75 percent and 24 karat is, of course, pure, Terpilak said.

“What that means is that if you sell a 14 karat gold chain that weighs one ounce, you will not make $900 on it,” Terpilak said. “As of Thursday, the price of gold was $945.10. Most people think you bring in an ounce and you’ll get that much. You won’t. The dealer would give you 58.5 percent of that $945, minus what the dealer would deduct from the price to make a slight profit.”

Once the sale is made, the dealer could buff up your old jewelry and try to resell it in the store. Or, if it’s in bad shape or damaged, the dealer could accumulate pieces to send to a refiner, which would melt it and then send the dealer a check.

Both Terpilak and the ANA warned against cold-call solicitations or mobile offices, set up in temporary locations such as motels, that offer instant cash for gold and silver coins.

“Reputable dealers will take a police report when you sell your gold,” Terpilak said. “They’ll hold on to the piece for 15 days or two weeks, depending on the jurisdiction, in case it’s stolen. Oftentimes, the people who set up temporary shop don’t take police reports and they don’t have licenses to buy.”

Gold futures advance on weaker dollar

Gold ends 3 percent lower as dollar, stocks jump

Gold ended 3 percent lower Friday, trading at a one-week low as the dollar jumped and investors dumped safe-haven gold and added positions in riskier bets including stocks and crude oil, traders said.

“You see the stock market and crude pushing strong today. It just seems to me that the risk appetite of the market is back, and people are going full steam out of the safe haven place and right back into the risky place,” said Zachary Oxman, senior trader of Wisdom Financial in Newport, California.

The metal fell as low as $904.35 an ounce and was at $916.40/917.20 by New York’s last quote at 2:15 p.m. EDT (1815 GMT), against $938.90/939.70 late on Thursday, when it hit a three-week high.

Oxman said he expected gold could drop below $900 before bouncing back to above the $960 to 970 an ounce area in the second half of the year.

The dollar rose broadly after Citigroup (nyse: C - news - people )’s earnings sparked hope the credit crisis may be nearing an end, weighing heavily on bullion.

“Precious (metals) are all tracking the dollar,” said David Thurtell, analyst at BNP Paribas (other-otc: BNPZY.PK - news - people ). “Investors who have been seeking the relative safety of commodities have unwound some of that long position to get back into equities.”

A rising dollar makes dollar-denominated gold more expensive for holders of other currencies. The metal, traditionally seen as a safe-haven asset and a hedge against oil-led inflation, often thrives on bad news.

Oil recovered to set a record high $117 a barrel, after falling more than $2 a barrel on worries about a possible slowdown in China, the world’s second biggest energy consumer.

Looking ahead, traders said bullion markets were waiting for a meeting of the U.S. Federal Reserve later this month. Further aggressive interest rate cuts in the United States could hit the dollar and boost gold prices.

“We continue to find gold uninspiring at the moment and are disappointed that the metal is so far off its recent all-time high,” said John Reade, analyst at UBS Investment Bank.

“While some long liquidation has occurred and jewellery demand has reappeared, neither of these indicators is telling us that gold is a raging tactical buy.”

RISK APPETITE

Huge writedowns from U.S. banks have undermined the health of the U.S. economy, and sentiment towards the dollar.

But some banks and analysts are now saying the worst of the turmoil that has plagued financial markets since last August could be coming to an end.

“The increasing risk appetite of investors could lead to shifts of assets into stock markets, which might be negative for gold,” analysts at Dresdner Kleinwort said in a report.

Palladium was down at $450/455 per ounce against $458/463 late in New York, and silver fell more than 3 percent to $17.87/17.92 an ounce from $18.23/18.28 late in the U.S. market on Thursday.

Platinum fell more than 1 percent to a low of $2,017 an ounce before rising to $2,035/2,050, versus $2,042/2,052 late on Thursday.

£254m Battle of the Black Swan

The crew of Nuestra Señora de las Mercedes must have thought their ship had fought its final battle on the morning of October 5 1804. A little after 10 o’clock, their seven-month voyage from Peru, via Uruguay, to almost within sight of the Iberian peninsula came to an end with the British broadside that sent the treasure-laden frigate and 200 souls to the bottom of the Atlantic and brought Spain into the Napoleonic wars.

But after lying undisturbed on the seabed off Portugal for more than two centuries, the Mercedes is now at the center of the biggest treasure grab in history.

The battle for ownership of its £254m cargo of gold and silver coins, which has already pitted a US treasure-hunting company against the Spanish government, has been joined by a third party. An emotive campaign is welling up from within Peru to reclaim the treasures the conquistadores and their descendants took by force over the course of almost three centuries.

Last May, the Florida-based Odyssey Marine Exploration announced that it had recovered 500,000 gold and silver coins weighing 17 tonnes from a wreck in international waters in the Atlantic and flown them back to the US from Gibraltar.

The company has refused to speculate on the identity - or nationality - of the vessel and has further ratcheted up the intrigue by referring to the find only as the Black Swan.

Despite the secrecy and Odyssey’s unwillingness to confirm anything about its discovery, the Spanish government is convinced that the Black Swan is Nuestra Señora de las Mercedes.

Spain is so sure of its claim to the ship’s treasure that over the last six months it has dispatched gunboats to search one of Odyssey’s salvage vessels in the Mediterranean and lawyers to Florida to fight its corner in the courts.

After months of legal wrangling, Odyssey has agreed to reveal the wreck’s location to Spain, hand over photographs and documents, and allow experts access to the artefacts it has recovered.

Spain’s case is simple enough: if Odyssey has found the Spanish ship, Madrid wants its cut. The treasure hunters, however, are confident that they will profit whatever happens.

Natja Igney, Odyssey’s head of corporate communications, said the company was expecting a number of claims, but added: “It is the opinion of our legal counsel that even if a claim is deemed to be legitimate by the courts, Odyssey should still receive title to a significant majority of the recovered goods.”

The Mercedes was one of a squadron of four Spanish frigates returning to Cádiz from what was then the vice royalty of Peru with a cargo of millions of gold and silver coins.

The quartet was ambushed by a British squadron off Cape Santa María on the Portuguese coast and the Mercedes blown to pieces after a volley of shots ripped through the ship’s magazine.

The other three Spanish ships - the Fama, the Medea and the Santa Clara - were taken to Plymouth, relieved of their cargo and pressed into service as Royal Navy vessels. Two months later, Spain declared war on Great Britain.

Since news of the find emerged last year, some Spanish newspapers have denounced treasure-hunting outfits as “the new pirates of this century” who are hell-bent on ransacking Spain’s archaeological heritage for profit.

But Madrid and Odyssey are now facing growing calls from Peru for some, or all, of the Mercedes’ cargo to be returned to the South American country.

Peruvian campaigners say that because the gold and silver coins were probably minted from metal taken without permission by the Spaniards, they belong to the modern-day country, not its former colonial master.

Last year, Peru’s production minister, Rafael Rey, said it was only “logical” that his country would seek the treasure’s return.

Blanca Alva Guerrero, director of the defence of cultural patrimony at Peru’s National Institute of Culture, said: “If we can establish that some or all of the recovered artifacts came from Peru, we are ready to reclaim them as material remnants of our past.”

She added that Peru had a legal right to recover any items deemed part of its “cultural heritage”.

Mariana Mould de Pease, a Peruvian historian who has successfully campaigned to oblige Yale University to return hundreds of artifacts taken from the Inca citadel of Machu Picchu, said that although Spain had “acted duplicitously, and - where necessary - brutally” during the colonial period, she hoped a deal could be reached. “Given the historical ties between the two countries, I think Peru should join Spain in taking part in the scientific recovery of the ship’s contents.”

She said that Italy’s recent success in securing the return of Roman items from the Metropolitan Museum of Art and the Getty Museum in the US had “already influenced countries such as Peru when it comes to taking legal action founded on cultural restitution”.

Spain, however, has so far dismissed the Peruvian claim, saying that the Mercedes was sailing under a Spanish flag and pointing out that Peru did not exist as a country in 1804.

Odyssey, meanwhile, remains confident of its legal position - and a 90% share of the proceeds from the ship.

“If Peru or any other country believes [it has] a claim,” said Igney, “it is invited to file it.”

The company may be optimistic, but the international tug-of-war over the wreck has brought the issue of profit-making firms’ involvement in historical salvage back to the surface.

“There’s a world of difference between the archaeological approach and the treasure-hunting approach,” said Dr Peter Marsden, a marine archaeologist and the founder of the Shipwreck and Coastal Heritage Center in Hastings. “What we don’t know about Odyssey is what they are doing, because they are keeping things very close to their chests. But they are making their money from the sale of historical items that really should be in museums.”

Odyssey’s secretive behavior has raised concerns in the archaeological community about the deal the British government has signed with the company to salvage HMS Sussex, an English warship which sank in the western Mediterranean in 1694 while carrying a large cargo of gold coins.

A spokeswoman for the Foreign and Commonwealth Office said it was confident that the contract required Odyssey to “respect the relevant international archaeological standards”, adding: “We keep this under continual review.”

But as the first shots are fired in what could be a long legal battle for the cargo of the Mercedes, Marsden cannot help wondering whether the luster of the treasure has blinded the world to the wreck’s true value.

“You have to remember that the ship was just carrying cargo from A to B,” he says.

“What was the purpose of the journey and of that money? What is its real story? The important thing is what it tells us about what was going on.”

Gold futures plummet to 2-week low as dollar gains on euro

Gold prices plunged to a two-week low Friday after the dollar gained some muscle against the euro, giving investors reason to sell the metal traditionally viewed as an inflation hedge.

Other commodities traded mixed, with crude oil surging to a new record of $117 and wheat prices plummeting.

The dollar edged higher against the 15-nation euro, rebounding from a record low reached Thursday after European officials expressed concern that its strength was becoming harmful. Luxembourg Prime Minister Jean-Claude Juncker, the head of the euro finance ministers’ group, told reporters Thursday that the euro was moving in a “direction I don’t consider desirable.”

The euro bought $1.5795 in afternoon trading, down from $1.5888 late Thursday. A stronger dollar encourages investors to sell hard assets like gold and silver, which are viewed as inflation hedges since they’re known for holding their value in times of rising prices.

Gold for June delivery dropped $27.70 to settle at $915.20 an ounce on the New York Mercantile Exchange, after earlier falling as low as $907.30, its lowest level in two weeks.

Gold was “heavily weighed down by an initial retreat in crude oil and the dollar’s rapid ascent,” Jon Nadler, analyst with Kitco Bullion Dealers Montreal, said in a note.

Gold had closed above $948 on Wednesday, giving investors hope that the metal might resume its climb toward the $1,000 barrier that it first broke in March.

Other precious metals also fell sharply Friday. Silver for May delivery dropped 48.5 cents to $17.820 an ounce on the Nymex, while May copper fell 2.40 cents to settle at $3.888 a pound.

Gold, treasuries, U.S. interest rates – Vialoux

Gold is showing an interest parallel to its trading in March/ July 2006. In March 2006, gold briefly moved lower on slowing demand for jewelry following a big increase in the price of gold. It bottomed late June/early July near its 200 day moving average and resumed its intermediate and long term uptrend. A similar scenario is possible this year.

The yield on U.S.10 year treasuries broke above several key short term technical levels this morning:
- An intermediate downtrend
- Resistance at 3.62%
- Its 50 day moving average

This change in trend in U.S. interest rates has important implications on a variety of markets including:
- The U.S. Dollar (bullish)
- U.S. bond prices (bearish)
- Financial service stocks (bullish as interest rate spreads widen)
- Commodities (bearish).

Rare Coins: My Favorite “Old Money” Investments

One of the things every investor quickly discovers is that there are no sure deals or “can’t lose” investments in this wild and wooly world.

There is always risk in the marketplace.  Always.

The key to success is to weigh the pros and cons of every investment, and determine the prospects of success.

I remember a time when we were told that old rare coins were a “guaranteed” moneymaker.  During the 1970s and 1980s, Salomon Brothers published an investment index that showed that the price of rare coins had never declined.

During this time, Harry Browne appeared in an ad on the Howard Ruff Show holding a silver dollar, and declared, “They aren’t making any more of these…”

But limited supply isn’t the only determination of price.  Demand is also important, and demand for collectibles fell sharply after 1989.

I’ve always had a fascination with historical coins and currency, and now is a good time to buy.  Old money is hot!

I recommend you buy coins you actually enjoy owning and learning about.  For example, several months ago I bought two Roman coins for my wife.  She teaches Sunday School, and was thrilled to receive as a birthday gift coins with the image of Caesar Augustus, the Roman emperor who ruled in the New Testament period.

One day, she passed around the coins to her class, and everyone was fascinated to hold coins that existed in Jesus’ time.  She told the story of when Jesus was asked if it was okay for Jews to pay taxes to the Romans.  Jesus asked to see a coin.  “Whose image is on the coin?” he asked.  “Caesar,” they said.  Then Jesus declared famously, “Render unto Caesar the things that are Caesar’s and unto God the things that are God’s.”

Roman coins sell for several thousand dollars apiece, depending on condition and rarity.  (At a sale of Roman gold coins in May in Zurich, some top-quality coins sold for double their estimates.)

Lately, I’ve been buying the 2005 American Eagle Silver Dollars, which are slightly larger than the Morgans, and have exactly one troy ounce of silver in them.

• The American Eagles cost less than $10 each - a real bargain.
• Common dated Morgan silver dollars in BU condition sell for less than $30.  (Lately, rare coin dealers have been hoarding the Morgans and repackaging and selling them on television, thus driving up the price.  Buy them now before it’s too late.)  Your best bet is to buy high quality coins.
• I also love to collect gold coins, especially the Saint-Gaudens Double Eagles and the foreign gold bullion coins, such as the Mexican 50 Peso, the Canadian Maple Leaf, and the Vienna Philharmonic (with musical instruments on one side and the opera house on the other).
  

Power crisis sparks platinum struggle

The ‘supply shock’ suffered by the platinum market as a result of South Africa’s power crisis is likely to result in a deficit of 360 800 oz in 2008, down from 412 400 oz in 2007.

This is according to Virtual Metals Research & Consulting’s VM Group and Fortis Bank, which on Tuesday released the fourth issue of The White Book, a bi-annual analysis of global platinum group metals fundamentals.

Mine closures late in January and restricted power supply to mines will see South African platinum production decline again this year, making 2008 the second consecutive challenging year after 2007 was plagued by safety stoppages.

South African mine supply is forecast to drop to 4.775 million ounces in 2008 from last year’s estimated 4.909 million ounces.

The White Book predicts that overall mine supply will fall by 247 500 ounces in this year to 6.013 million ounces from 6.261 million ounces in 2007.

With desired demand outstripping supply, the platinum price has risen substantially already this year and is likely to continue to move higher.

“How high the price can go, and how sustainable platinum’s gains are likely to be, will depend on how sensitive supply, demand and investment are to these much higher prices,” commented Jessica Cross, CEO of VM Group.

“South African mine supply remains vulnerable to further power generating problems, although Eskom appears to have eased the situation temporarily. Mine supply from outside South Africa is constrained in the short term, although we are forecasting a rise in recycling volumes,” she said.

“We believe jewellery sales will be hit by the high and volatile prices in the market, but overall demand will remain strong enough to see another year of deficit for platinum, at 360 800 ounces,” Cross said.

According to the latest analysis, the palladium market will remain in surplus in 2008 but by 391 300 ounces, which is down sharply from more than one million ounces in both 2006 and 2007.

On the demand side, platinum’s use in autocatalysts is expected to ease to 3.6 million ounces from 3.7 million ounces on substitution for palladium and weaker European car sales.

Palladium autocatalyst demand will fall slightly to 4.5 million ounces on weaker US car sales while jewellery demand for platinum is expected to fall from 1.7 million ounces to 1.5 million ounces as higher prices take their toll.

In the meantime, exchange-traded fund demand in both platinum and palladium is poised to set new records, said VM Group.

An additional 300 000 ounces of platinum and 400 000 ounces of palladium in 2008 are expected to go into investment and stocks.

Gold ends higher on inflation fears

Gold ended higher but off its session peak on Tuesday after key U.S. data prompted bullion investors to trim trading positions, but record-high oil prices underpinned the market.