Gold prices drop amid Greece austerity talks

In the Lead: “On Borrowed Time and Money”

Next up, we have Warren Buffett who now feels that stocks, or investments in any productive asset, will "prove to be the runaway winner" over bonds or gold "over any extended period of time" and "more important, it will be by far the safest." Mr. Buffett is no stranger to the world of precious metals; he once (not that long ago) bought roughly 138 million ounces of silver (about as much as one year’s worth of retail demand) for himself, and then sold it all at a handsome profit.

However, his B-H shareholder newsletter notes that “what motivates most gold purchasers is their belief that the ranks of the fearful will grow. During the past decade that belief has proved correct. Beyond that, the rising price has on its own generated additional buying enthusiasm, attracting purchasers who see the rise as validating an investment thesis. As "bandwagon" investors join any party, they create their own truth -- for a while.” Money Box’s Matthew Yglesias encapsulates the phenomenon as one wherein: “you're betting that in the future more people will want to bet that future people will want to bet on gold.” Mr. Buffet, for his part, still prefers productive assets, such as farmland and businesses.

Finally, if you thought that gold rising in the wake of a Bernanke speech is as reliable a knee-jerk reaction as you would expect following a hit by your physician’s rubber mallet, well, think again. Marketwatch contributor Mark Hulbert has found no evidence of there being a reliable correlation between what Mr. B says and gold taking off for the stratosphere. This, despite urgings of the type we see in newsletters that declare that the Fed Chairman has ‘green-lighted’ gold’s next ‘orbital sortie.’ You might think of availing yourself of a different gold trading theory and strategy at this point. Perhaps the length of skirts on the runway or the Giants winning the Super Bowl.

Gold conspiracy theories that have cast the CME as the “uber-villain” that prevents freedom in trading by small investors were also dealt a bit of a “setback” overnight as the exchange lowered margin requirements for trading gold, silver and platinum. So much for the alleged never lowering of margins. At any rate, the shrinkage in margins now required evidently failed to ignite speculative enthusiasm in the complex.

Platinum fell by $24 of its own to trade at $1,633 while palladium slipped $14 to be indicated at $695 the ounce in New York. Rhodium was the standout gainer this morning, adding $25 to the bid-side and reaching the $1,500 mark once again. January’s Chinese car sales were dealt quite a setback by the calendar this year. The earlier-than-normal Lunar New Year resulted in many dealers closing shop for a full week or longer, and this resulted in the lowest monthly auto sales level in that country in seven years.

Still, nearly 1.4 million vehicles rolled out of Chinese showrooms last month and analysts expect this year’s sales to show a growth rate of probably 8% (almost four times better than in 2011). The euro was struggling near $1.318 while the U.S. dollar advanced 0.60% to the 79.10 level on the trade-weighted index. Overseas, equity prices suffered in Europe and U.S. stocks fell 125 points in the initial half-hour of trading today as risk appetite was ‘shelved’ for another session ahead of the weekend. Copper fell 2.4%, and crude oil slipped 1.9% lower this morning.

Have a pleasant weekend,

Jon Nadler

Senior Metals Analyst Kitco Metals Inc. North America

Blog: http://www.kitco.com/ind/index.html#nadler

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About the Author
Jon Nadler Jon Nadler is a Senior Analyst at Kitco Metals Inc. North America
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