Alternative Metals to Gold and Silver
The last decade has been a wonderful time for Gold Bugs and Silver Bugs. We have profited and protected our wealth against inflation. Gold has risen from around $250 per ounce in 2001 to a recent high of $1917.90 and silver has risen from around $5 per ounce in 2001 to a recent high of $49.81. These numbers are quite exciting for anyone involved in the precious metals markets. Being a Silver Bug myself, I have to admit the ride up has been rather erratic. Long ago I had to learn to ignore the daily Comex price of Silver. Gold and Silver will continue to be an important part of my future holdings, but going forward I am beginning diversification into other metals. Here is a brief overview of some of the rare industrial metals I like and why I believe they are a good choice for anyone who believes in holding physical metals as part of their asset strategy.
There are many who believe the world is in a recession and this may be true in the USA, EU, and other Western nations. There are a few of us who still believe that the speed of industry and commerce is accelerating. I have spent time in Africa, had an opportunity to live in Europe for a few years and I currently live in Panama. This experience has opened my eyes to what is happening outside of the USA. What I see is a great mass of people who were once walking now driving cars. These same people are talking on mobile phones, watching television on a flat screen, using their laptop at a cafe, getting better medical care, flying on vacations, living in modern homes and working jobs that require technology. This is happening across the planet! Can you imagine the impact on demand for rare industrial metals from countries of the BRIC, (Brazil, Russia, India, China), with the size of their populations? Like it or not commercialization was tested in the USA and was a huge success and now it has been exported worldwide. Here in Panama with a population of just over 3 Million we are adding 3000 automobiles a month to the roads. There are enough mobile phones in Panama to give every citizen 3 handsets. All of this takes a lot of natural resources and metals. Below are some of the important metals I would like to introduce to you.
Tantalum, the rare technical and industrial metal that gives technology the ability to be compact. Have you ever wondered why we no longer have to carry around mobile phones the size of a brick? The tantalum capacitor was a revolutionary invention for the world. Today you find tantalum in all of your personal electronics. Tantalum is now being used in in medical implants because it is non-toxic and does not react with body fluids. It is also used in jet aircraft as an alloying agent. Current worldwide production of tantalum is approximately 1160t annually. By 2030 just the demand is estimated to be 1410t. A few years back there was a lot of controversy surrounding tantalum because of its “Conflict Metal” tag. The metal was originally being mined in the Congo but most tantalum is mined in Australia, Brazil, and Canada.
Indium, how do you like that touch screen on your mobile phone? This rare technical and industrial metal has become a star among the elements recently. Indium’s uses in phones, computers, semi-conductors and televisions are well known. The one use that I would really like to highlight is in CIGS (copper-indium-gallium-selenide) thin film solar cells. These solar panels are the latest technology to hit the solar industry. Recently we have heard India, Japan, USA, Germany, Spain and many other countries announce huge solar initiatives. India alone signed into law a US $19 billion plan to produce 20 GW of solar power by 2020. Under the plan, the use of solar-powered equipment and applications would be made compulsory on all government buildings, as well as hospitals and hotels. This initiative alone will use up all the entire world’s production of solar cells. According to the USGS 84% of all indium production is currently used in solar cell production. Current worldwide production of Indium is approximately 600t per year. The future amount of indium required will depend greatly on the solar industry. Indium is mined in China, Canada, Bolivia and Japan.
Cobalt, have you driven a hybrid or electric vehicle lately? This rare technical and industrial metal is the one of the elements that makes the batteries in these cars possible. Cobalt is also used in pigments, super-alloys, non-corrosive medical implants, dental implants and jet engines. The top use today is as an alloy to make metals resistant to corrosion. The one I see real promise in is the use of hybrid and electric vehicle batteries. By 2012 the estimated sales of hybrid vehicles worldwide is approximately 2.2 Million and by 2015 to be at least 10% of the world auto market. Currently the biggest hurdle to these vehicles is the added cost and the ability to produce enough batteries to meet the demand. Cobalt has gained a lot of attention since the London Metal Exchange (LME) launched a cobalt contract in February 2010. Current worldwide production of cobalt is approximately 57,500t annually. The future is bright for cobalt. Every aircraft that goes in the air and every hybrid vehicle sold will put greater pressure on the supply of this metal. Cobalt is mined in Australia, Congo, Russia, Zambia and a few other countries.
These are just a few of the metals that our world needs to operate and the future is looking great for all commodities. I like the rare technical and industrial metals because of the tight supply and all of the wonderful uses for them. The mining of these metals is often a by-product of base metal like copper, lead and zinc. Most of the large deposits have been found and are in production. This translates into a very tight supply for the future and profits for investors. Silver and Gold have been my metals of choice for many years, but I see great opportunity for the person who is adventurous and willing to add another asset to their portfolio before the masses catch on.
By: Randy Hilarski - The Rare Metals Guy
Source: http://www.buyrareearthmetalschinaprices.com
U.S. Inflation Set to Soar as the Country’s Chief Export Boomerangs
January 13, 2011
By Martin Hutchinson, Contributing Editor, Money Morning
While prices for food and energy have been rising, inflation in the United States has remained relatively subdued.
One common explanation for that phenomenon is that U.S. inflation has been “exported” to China and elsewhere through the U.S. Federal Reserve’s monetary policy. And given the perennial U.S. balance of payments deficit, it’s good to know the country has found something it can successfully export!
However, the bad news here is that inflation does not stay exported - and in 2011 it may boomerang back to make life on Main Street miserable.
Thankfully, there are precautions we can take to combat higher prices and preserve our wealth.
U.S. monetary policy has involved excessive money creation since 1995, fueling asset bubble after asset bubble. However, it has not produced inflation in the United States because the dollar is a reserve currency, so excess dollars flow to countries whose economies are more vulnerable to inflationary pressures.
In the 1990s, the excess dollars flowed to Argentina, whose currency was pegged to the dollar. The imported inflation wrecked Argentina’s sound policies of that decade and contributed to a debt-fueled collapse in 2001. Since 2008, the excess money has gone to China, India, Brazil and other fast-growing emerging markets. It also has fueled a massive growth in foreign exchange reserves among the world’s central banks. Central bank holdings of forex reserve have grown more than 16% per annum since 1998.
China, India, and Brazil all currently have massive inflation problems. China, which has increased its inflation by holding down its currency against the dollar, has been very proactive in tackling inflation as of late. The People’s Bank of China (PBOC) surprised the markets on Christmas Day by raising its one-year refinancing rate by 52 basis points to 3.85% and increasing the benchmark deposit rate by 25 basis points to 2.75%.
The PBOC has increased bank reserve requirements five times in the past year and raised interest rates twice - albeit by a scant 0.25% each time.
China’s official inflation rate currently is 5.1%, up from 1.5% at the beginning of 2010, but its figures are suspect. The PBOC probably will have to raise its benchmark rate several more times from its current level of 5.81% before it’s able to bring inflation under control.
India’s inflation is about 7.5%, but is expected to rise further since food prices are surging at double-digit rates. Prices for onions, for instance, are up 33% from last year. The Reserve Bank of India (RBI) is again raising interest rates, now at 6.25%. But, as in China, sloppiness in official inflation statistics means Indian interest rates are negative in real terms and the RBI will have to continue raising rates if it wants to control inflation.
Brazilian inflation was 5.91% in December and is rising fast. Newly elected President Dilma Rousseff fired the central bank chief and is trying to bring interest rates down from their current level of 10.75%. Again, inflation seems likely to surge in the near term.
To complete the BRIC (Brazil, Russia, India, and China) picture, Russian inflation is currently running at 8.8%. That’s down from a year ago, but still much higher than the Russian government would like it to be.
With inflation rising in all four BRIC countries and many other emerging markets, the U.S. holiday from inflation cannot last much longer. The Fed’s second round of quantitative easing (QE2), which included purchases of $600 billion in Treasury bonds before July, and the December package of tax cuts are also fueling inflationary forces.
Money growth, which had been low in 2009 after the burst in late 2008, has once again risen to worrying levels. Over the last four months, the average growth rates of broad money on the Federal Reserve Bank of St. Louis’ Money of Zero Maturity and M2 Money Stock measures were up 10% and 7%, respectively. That’s comparable to their growth in the 1970s.
Furthermore, oil prices are approaching $100 per barrel, and other commodity prices are strong, as well. So however successful the Fed has been in exporting inflation since 2008, its success won’t last for much longer. At some point in 2011, inflation will be re-imported - and probably with a roar rather than a whisper.
When that happens, the Fed will have to raise interest rates to fight rising prices. Of course, Federal Reserve Chairman Ben Bernanke will almost certainly resist this inevitability, fudging figures and producing spurious arguments to avoid making the right decision. When the Fed does eventually raise rates, it will do so grudgingly - as it did during the period from 2004 to 2007.
That means higher short-term interest rates probably won’t arrive until 2012, and higher long-term rates could potentially be delayed by more quantitative easing. The result will be an unholy mess that takes the form of surging inflation in 2011 and a second recessionary “dip” in 2012.
Gold and other commodities will continue to offer protection against the surge in inflation in 2011, as they have in the last few years. At some point, though, the market will start to anticipate tighter Fed policy and gold and other commodities prices will collapse.
Still, in 1979-80, gold and commodities prices went on rising for more than three months following then-Federal Reserve Chairman Paul Volcker’s famous 1979 “October surprise,” in which he pushed up the Federal Funds rate by two full percentage points over a weekend.
If the gold and commodities markets didn’t believe the obviously serious Volcker would stop inflation until several months after he took decisive action, they certainly won’t have confidence in the actions taken by a reticent Ben Bernanke. So your gold and commodities investments will probably be pretty safe even if the Fed does eventually start raising rates. Certainly they are a good bet for now. More importantly, they will protect you against the pending surge in inflation.
Emerging Market Stocks Fall Second Day on China, India Inflation Concerns
By Jason Webb and Saeromi Shin - Jan 6, 2011 9:52 AM PT
Emerging market stocks fell for a second day on concern that China and India may raise interest rates and Brazil’s real weakened as the central bank set reserve requirements for short positions in U.S. dollars.
The MSCI Emerging Markets Index traded 0.2 percent lower at 1,158.94 as of 8:57 a.m. in New York. Benchmark stock indexes in China and India fell at least 0.5 percent. Brazil’s Bovespa stock index fell 0.3 percent, and the real weakened 0.5 percent. Turkey’s ISE 100 National Index rose 0.5 percent after the government sold $1 billion of 30 year bonds at what the Ankara- based Treasury said was the lowest ever interest rate for that maturity.
Escalating inflation in China and India may prompt officials to curb expansion by lifting interest rates, slowing growth in emerging-market assets. China’s central bank Governor Zhou Xiaochuan said yesterday that inflation pressures in China were rising, in part due to monetary easing in the U.S. and other major economies. India may need to continue raising interest rates to combat price increases, the International Monetary Fund’s mission chief to the country said yesterday.
It’s inevitable that we’ll see interest rates rise, Hugh Young, Singapore-based managing director of Aberdeen Asset Management Asia Ltd., said in an interview with Bloomberg Television today. If currencies and interest rates remain where they are today inflation could easily turn into a nightmare.
The Federal Reserve announced plans on Nov. 3 to buy $600 billion of bonds, leading to concern that U.S. liquidity was pushing up inflation in countries such as China. The policy known as âquantitative easing is designed to stimulate the world’s biggest economy.
Jobless Claims
U.S. initial jobless claims rose to 409,000 in the week ended Jan. 1 from 388,000 the previous week, according to Labor Department figures. That was in line with the median forecast of economists surveyed by Bloomberg.
The real weakened for a third day. The new reserve requirement has a potential to reduce short positions in the dollar to $10 billion from $16.8 billion in December as banks seek to avoid paying reserve requirements on currency operations, Aldo Mendes, the central bank’s director of monetary policy told reporters in Brasilia.
The Shanghai Composite Index declined 0.5 percent.
Ping An fell more than 4 percent in Shanghai after Citic Securities Co. said China’s second-biggest insurer may need to raise as much as 40 billion yuan ($6 billion). Citic, the largest brokerage, said the fundraising may cut earnings per- share by up to 15 percent.
Market Speculation
Ping An spokesman Sheng Ruisheng said the insurer won’t comment on âmarket speculation and that it has ânothing to disclose. The company in October reported third-quarter profit dropped 26 percent due to greater reserves, missing analyst estimates.
India’s Bombay Stock Exchange Sensitive Index fell 0.6 percent after the IMF comments. State Bank of India, the nation’s largest lender, declined 2.7 percent.
Indonesia’s Jakarta Composite index lost 1.3 percent, the most in Asia, after the central bank kept borrowing costs unchanged yesterday for a 17th meeting.
Turkiye Garanti Bankasi AS, Turkey’s biggest bank by market capitalization, rose 0.5 percent in Istanbul. Akbank TAS, the second-largest bank, advanced 0.5 percent.
The Turkish government sold $1 billion in debt maturing Jan. 14, 2041 at a yield to investors of 6.25 percent, the Ankara-based Treasury said in a statement on its website today.
Fundamentals
The issue is reported to have been five times oversubscribed, a reflection of generally constructive investor perceptions of Turkey’s fundamentals and also prospects for ratings upgrades, Timothy Ash, head of emerging-market research at Royal Bank of Scotland Group Plc, said in a report.
South Africa’s rand weakened 0.9 percent against the dollar. The price of gold, which with platinum accounts for about a fifth of the country’s exports, fell for a fourth day in London.
The South Korean won rose 0.5 percent against the dollar.
The difference between the yields investors demand to hold emerging-market debt over U.S. Treasuries widened 1 basis point to 2.23 percentage points, according to the JPMorgan Chase & Co. EMBI+ index.
To contact the reporters on this story: Saeromi Shin in Seoul at [email protected]. Ian C. Sayson in Manila at [email protected]
To contact the editor responsible for this story: Reinie Booysen at [email protected]