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The Bullion Report For August 31, 2011: Name Dropping
bullionfk
post Aug 31 2011, 07:04 PM
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No matter what the fundamental and technical picture in gold, there always seems to be a nod towards outside analysis. Big names in the investment world are watched, their actions and opinions on the precious metals market weighed separately as potential indicators. Just like central banks, their comings and goings from these markets can bring a lot of potential influence. Right or wrong, here is a small overview of name dropping in the world of gold and silver.



Past performance is not indicative of future results.
***chart courtesy of Gecko Software


I recently read a little note on investing that mentioned days before electronic trading when people always wanted to know what the floor traders were up to. That kind of search for information still proliferates news outlets even today. There is an intense level of scrutiny that some of the biggest names fall under as investors look for probable cues regarding their particular market view. Are they bullish or bearish? What are they seeing in charts that the rest of us might miss? Do they have a cadre of analysts who can seek out minute details and research that could put them ahead of the curve? There is no end to the kind of sifting through opinions that might occur when the name being dropped is big enough.

Probably the first name that comes to mind in recent news for gold is George Soros. He removed a large stake in SPDR Gold Trust in the second quarter of this year, along with Eric Mindich. Soros Fund Management LLC’s holdings in the “exchange-traded product” went from 49,400 shares to just over 42,000. Mindich’s Eton Park Capital Management LP went from 2.328 million to 813,000. John Paulson kept his stake, which totaled about 31 and a half million shares. (1)

When news broke about Soros exiting, there was a definite negative, even bearish turn, despite the fact that several fresh high prices for gold were just around the corner. Nothing had fundamentally changed about the bullion market, but the lack of continued maintenance of a position from a big name was enough to change the demand-scape for some investors.

Another big name that has occasionally shed a negative light on gold is Warren Buffett, arguably one of the bigger names in investing. He has been quoted as saying that gold buying is a waste of time because it doesn’t produce anything. If he did say that, and I don’t have a direct quote for it, he is missing the idea that has been driving people into gold since the recession began. Gold doesn’t fall under the same follies as other stocks or related investments. It hinges on other sets of demand functions, and is often viewed as a haven because it isn’t as deeply tied to manufacturing as a metal like platinum or weighed down with internal policies like foreign currencies. These are the things that have made gold, and to a certain extent silver, attractive to other investors. They aren’t looking to make money on interest payments; they are trying to find something in the financial chaos to try to protect their assets and money they have already made.

Other investors know this; among them is Phil Streible, a market strategist who has often been quoted with higher price forecasts for gold and silver. Ed Yardeni, the president and chief investment strategist for his own research firm said, “Gold is a great hedge against out-of-control governments and their reckless fiscal and monetary policies.” Dennis Gartman of The Gartman Letter called gold, “The world’s third most popular reserve currency behind the greenback and the euro.” Both Gartman and Yardeni cautioned against potential corrections in gold’s price in recent high moves but coupled it with kind words compared to Buffett’s possible bias.

I would be remiss if I left out one big name associated with investing. Jim Rogers is the name you will often hear in the commodity world. His bullish view on things like agriculture and gold are well-known, and hold few surprises for most people. He recently mentioned to reporters for the Economic Times of India that he saw gold prices going higher. (2)

Summary

All investing carries a risk of loss, and for many of these big names a slam dunk is never a guarantee. They are fallible and make mistakes just as easily as the rest of traders. That’s the key thing to remember every time an analyst or news network drops a big name in the middle of a report on gold or silver. That kind of reporting could probably be reserved for who is wearing what at some awards show. Right now, in the throes of unprecedented unemployment, housing issues, sovereign debt concerns, and a whole heap of other economic problems it seems the prudent thing would be to focus on tried and true fundamentals. That means a genuine reflection on the strength of the US dollar and the overall demand picture for gold and silver.

1. http://www.bloomberg.com/news/2011-08-16/s...ds-options.html

2. http://www.forbes.com/sites/kenrapoza/2011...rves-downgrade/

Disclaimer: The prices of precious metals and physical commodities are unpredictable and volatile. There is a substantial degree of a risk of loss in all trading. Past performance is not indicative of future results.


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