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What Gold Skeptics Won’t Tell You

The so-called gold skeptics often fail to highlight the qualities that make the precious metal a “safe haven asset.”

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What Gold Skeptics Won't Tell You

“All that glitters is not gold.”

So goes the age-old saying. However, gold skeptics take things one step further and question the stability of gold itself.

As observed in a Gold in Mind write-up, “You’ll often hear that gold should be ignored because it is just another fad currently hyped by brokers, just like the dot-com shares were before 2000. Other skeptics say that the gold price is just too high. These claims make sense if you don’t give them a second thought. Wise investors, however, will do and discover they are far from true.”

In a paper published on ZeroHedge.com, Phoenix Capital Research also observed, “It’s odd for an asset class that less than 1% of investors actually own, ‘reporters’ and ‘analysts’ sure spend an awful lot of trashing it. How come they don’t spend an equal amount of time trashing uranium or other under-owned asset? Why spend so much time focusing on an asset that so few people even own?”

Phoenix Capital Research then went on to cite three possible reasons why many so-called experts and analysts “trash” gold. They are the following:

1. Gold and its performance disprove the assumption that you can generate wealth by printing money.

2. Gold doesn’t benefit banks, as you have the option to store it in your own safe or another secure storage facility.

3. Gold doesn’t generate any immediate revenue for financial institutions.

Consequently, that explains why skeptics often neglect to highlight these three important things about gold.

1. It’s probably the most stable asset.

In a CNBC feature, options trader Dennis Davitt of Harvest Volatility Advisors stated, “One of the assets that I never liked for my whole trading career was gold. But if you have to pay money to store your assets somewhere, I’d rather store a hard asset like gold than something like paper currency.”

Davitt went on to say that gold “is looking even more attractive in the face of negative interest rates, especially as Treasury yields tumble.” He explained that “under ultra-low or negative interest rates, holding cash in a bank should cost investors more money.” Although, technically, it still costs money to store gold, Davitt reiterated that “it would be a better investment than cash in these circumstances.”

In any case, USA Gold pointed out, “Storing gold is not as expensive as people may think. The smallest safe deposit box is around $30 per year, and can hold hundreds-of-thousands of dollars worth of gold. A good quality home safe is a one-time cost, generally less than $1,000. Even if you opt to store at our exchange approved depository, the cost for fully allocated segregated storage can be as little as 1% per year.”

2. It’s the real money.

Keith Weiner — in his Forbes article, “The Gold Standard for skeptics” — stated, “The dollar may circulate, but it’s not money. It’s just a small slice of the government’s debt. It’s an I.O.U., a promise to pay, though most have long forgotten what the government once paid — gold.”

Weiner went on to say, “A measure of value is a better way of defining money than a medium of exchange.” That being the case, he further stated, “Gold is, by far, the best measure of value. Nothing else comes close, certainly not the dollar. If you defend the dollar simply because you live in America, imagine the debate in Argentina. No one there defends the peso as a better unit of measure than gold.”

3. It’s an asset that you can actually see and even wear.

In his article, “5 best bets for buying gold,” Geoffrey Michael pointed out, “Jewelry allows you to invest in gold and have the enjoyment of wearing it. It can also be combined with other precious gems and metals to enhance the overall value and appearance. Jewelry can be passed down to the next generation, as a family heirloom, adding sentimental value beyond that of the piece itself.”
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Michael noted, though, that jewelry “is not the best option if it’s strictly an investment.” He reasoned that this is because “the price will usually far exceed the meltdown value.”

However, you can invest in collector’s pieces whose value may increase over time due to the workmanship involved. Moreover, Michael added, “jewelry is covered by most homeowner insurance policies, so that’s an advantage, should it be lost or stolen.”

Aside from jewelry, you could also go for limited edition gold coins and gold art pieces.

The fact remains, though, that gold is one of the most complicated assets to price. Still, there’s no denying that in times of economic upheavals, it remains a “safe haven.”

A FoxNews.com feature asserted: “Gold is considered a safe-haven asset. Throughout history, it has been viewed as a store of value. It is essentially a currency that cannot be manipulated by the interest rate policies of any one government, and has traditionally been used as a hedge against inflation.”

No matter what skeptics say, the value of gold remains.

 

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Commodities

Latest Update On Oil – Expected to Settle Between $45 and…

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“Oil is going to a new price point because of the revolution in production,” said Bill Perkins, chief investment officer of energy-focused hedge fund firm Skylar Capital Management. Perkins believes the price of crude could fall as low as $45 a barrel. He is personally short, a bet that the price of the commodity will drop. He believes oil will settle between $45 and $80 a barrel in the next year.

“Companies are harnessing amazing new technology to destroy the traditional energy value chain,” Perkins said. “There’s a lot of money to be made on that.” “U.S. energy names remain a significant net exposure for equity long/short managers who added longs and cut shorts after October’s trough,” the report said. “If pressed, one could interpret this positioning as bullish for energy stocks.”

Andurand thinks crude might hit $50 a barrel within the half-moon of 2015 and so rebound to a high of $70 within the fourth quarter. He also said the oil market is oversupplied by between 1.5 and a couple of million barrels per day, given weak demand, low disruptions to produce and enhanced production by nations that do not belong to the Organization of the oil mercantilism Countries.

“OPEC is not the swing producer anymore. U.S. shale oil producers are, but will take more time to react to prices than OPEC—it is a game changer that will lead to more volatile prices and bigger price ranges,” he added.

Morgan Stanley aforesaid the worth would wish to fall as low as $35 or $40 a barrel to prevent production and rebalance provides.

Still, the bank noted that the worth can doubtless rise eventually.

“Oversupply is probably going exaggerated and therefore the market is also content regarding side risks,” the report aforesaid.

Read More at CNBC

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Commodities

Investing in Energy Markets Part 2: Oil, Gas and Energy

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It’s no secret that the energy industry is very profitable, with oil and gas making up 80% of the market.

 

Thus, these two resources attract the most people. They are the best energy investment resources due to high demand and wide range of options. However, with energy scares fresh in our recent memory and the climate change movement greatly affecting energy policy, new alternatives are constantly being sought.

Terror group ISIS may make $3 million a day selling oil

Everything that we do requires some type of energy. As a result, the price of energy affects the going rate for other commodities as well. When the price of oil increases, the price of transporting goods goes up as well.

That is why the cost of milk fluctuates and why your favorite imported coffee beans are more expensive than Folgers. Factors that contribute to these prices include geopolitics and natural disasters, but can never truly be accounted for in full. That is one of the underlying points to understand and accept about energy markets. Something can always go wrong. Typically, it doesn’t, but when it does things can get hairy and fast.

TYPES OF ENERGY SECTORS: That could affect your Household

Nuclear Nuclear power actually produces 1/10th of the world’s power, without emitting carbon. The United States and China have roughly 75% of the world’s nuclear plants with India and Russia also tapping into the market.

“Green” and renewable energy companies You can invest in different companies that place an emphasis on renewable resources by using the stock market. This option is optimal for investors who like the idea of green technology but do not now want to run the risk of investing in developing companies directly. This market has always been tricky from an investment perspective due to volatility. If you have an appetite for risk, however, this is a good place to look.

Modern Energy (solar, wind, geothermal, transportation, efficiency) Modern energy is made up of three major components or categories. They are wind, solar and biomass. The renewable sector is expanding at a rapid rate. We have witnessed a steady employment increase in the energy sector since 2011 with no end in sight. All types of investors and speculators are flocking to the natural resource markets in attempts to get out ahead of the renewable energy trend that could be the way of the future.

Big Oil In 2010, the world market for oil witnessed an incredible increase of 32%, to over $2,100 billion. According to estimations of oil segment professionals, the market’s value will hit $2,683 billion in 2015. The competitiveness of the global market of the crude oil is explained by its limited resources and mankind’s insatiable appetite for growth. This factor should not be disregarded easily. Our desire for more explains the majority of the energy marketplace.

Gas sector The market of natural gas reached $18.5 billion by the end of 2011. Demand for gas has recovered to match and surpass pre-recession levels. The US prices for gas are half of those in Asian countries and the EU. Gas demand decreased 3% in 2009, but at present is on the rise.

Electricity Buying the stock of electricity companies is the preferred way of entering this marketplace. The majority of the participation in electricity markets, however, takes place in the futures markets. Since power companies are constantly projecting and calibrating their loads, the futures market is the only place where investors with this sort of risk profile will feel that they belong.

Coal Many non-coal energy sectors directly depend on the performance of coal because burning coal has been proven to produce enough energy to support high demand. Due to recent regulations in the US by the Environmental Protection Agency, coal has taken a minor hit, but until a massive, institutionalized adoption of newer technology, it is highly unlikely coal will be going anywhere for the foreseeable future. In other words, coal is very much a barometer for this market. Though it is unlikely to happen any time soon, a massive dip in coal production would likely signal the emergence of a new viable energy source.

Hydro Hydropower energy is still very limited but there has been over $75 billion in investments pledged to R&D before the year 2020. There are some companies worth checking into, but for now this is very much a long term play.

Energy Funds These funds are established with companies related to the energy field. Be aware that some energy funds are more successful than others and produce a higher return than others. Often times, the energy funds are established to diversify various portfolios and minimize risk.

Read more on How Natural Resource Distribution affects your wealth

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Commodities

Oil Prices Surge As OPEC Members Agree To Cut Production

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The Organization of the Petroleum Exporting Countries (OPEC) took its first action in years to cut production on Wednesday in hopes of lifting oil prices. How big a cut did the cartel agree to? Will it really make a difference?

OPEC Members Agree To Cut Oil Production

Oil had its biggest day in more than five months as prices rose 5.3 percent. This action came after OPEC members agreed they could limit oil production – in November. While there are a lot of maybes, this is a big step forward for oil. But will it actually work?

While OPEC members agreed at a meeting Wednesday in Algeria that a production cut is needed to lift oil prices, plans for the supply cut won’t be finalized until November. Barrel output will go from 33.25 million barrels per day to 32.5-33 million barrels per day. A lot can go wrong between now and November, but for now investors love the news.

Many analysts, however, are not as optimistic.

This isn’t the first time this year OPEC has tried to cut oil supply. The committee met in April, but talks fell apart when Iran would not join the talks. In addition to that, all the OPEC countries compete against each other and the U.S. for market share. Several OPEC members, Iran, Libya, and Nigeria, all want to increase oil supply. Throw into the mix the political tensions of the group and this agreement seems very delicate.

Yet, there is a positive feeling about “this time”. Members are hoping that things are more conducive to getting a deal done. Many of the largest producers are close to maxing out capacity, so lowering output slightly wouldn’t be too much of a stretch. Additionally, Saudi Arabia and Iran are feeling pressure domestically from the drop in oil prices, and thus be willing to put aside differences to improve their finances.
Wonder why OPEC needs to cut production? Check the news here with CNNMoney!

For now, trading oil is a smart play. Exxon Mobil Corp. (XOM) rose 4.40% on the news. Chevron Corp. (CVX) rose 3.20%. Energy companies and oil shares will go up until november, and then take their cues based on that meeting.

The election is coming the Capitalist gives you the guide to thriving the election year markets. Read it all here!

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