Gold: If Not Now … When?

Wednesday, 17 October 2012
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Published in From The CEO

You can be a specialist in reading investment fundamentals and technicals, or you can be a fortune teller.   Here’s the difference. The specialist works very hard, consults a variety of sources, talks with other specialists, and makes very careful determinations about where he thinksthe market is going.  The fortune teller consults no other sources, talks with no other fortune tellers and makes a very certain prediction about the market.The specialist often gets it right – but within certain parameters. He frequently revises his judgments.  The fortune teller is always right (or always wrong) and never revises his predictions.

Here at the Investor’s Corner, we don’t know any fortune tellers, and we’re guessing you don’t either.  That said, let’s postpone our impatience with the gold market, resist the temptation to consult a fortune teller and take a look at what several specialists are saying about the gold market.

Fiscal-Cliff

While noting gold’s failure last week to hold on to gains over $1,790 per once, Jeffrey Nichols at Resource Investor, and senior economic advisor to Rosland Capital, believes gold will move “significantly higher by year-end or early 2013.”  We’ve noted often in this column at aggressive traders will often grab at profit opportunities, therefore putting brakes on a raging market. Accordingly, Nichols points to selling by institutional traders and speculators in the derivative markets to slap down gold to just under $1,730 per ounce.  Already Asian buyers have begun to take advantage of these low prices, and elsewhere central banks have begun to build their reserves.  Gold exchange traded funds have begun to accumulate more steadily, albeit more slowly.

We can only agree with Nichols since noticing that the $1,730 level for the yellow metal acted more like a quick bounce for gold rather than a stall.

Jim Steel of HSBC, a careful analyst, predicts a gold price of $1,900 by year end.  While the gold market still seems in search of an additional big story, Steel feels that QE3 and other central banks' policy on monetary easing will win the day for gold.  He also feels that a weaker dollar and U.S. fiscal concerns will continue to haunt markets and give gold a boost.  While he views lower jewelry demand as a possible negative for gold, it can serve only to restrain rather than defeat the current bull market.

Meanwhile, analyst Tony Daltorio has told the Financial Times that the illegal strikes of platinum workers in South Africa has begun to move to over to that country’s gold mines.  He feels these strikes could cause an “impasse” in mining activity, thus severely impacting gold demand.

You should take all of these developments into account when determining just how much gold you want to add to your portfolio at current prices.   Obviously, there are no fortune tellers out there.  No one can come up with an exact prediction for how high gold can climb.  What we do know is that all the cards are in place for a winning hand.  And the winner can be you if you choose to buy.

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Trevor Gerszt

Trevor Gerszt has been passionate about gold since childhood. Growing up in South Africa, the world’s second largest gold producer, Gerszt spent his youth collecting gold coins. Surrounded by a family of experienced coin collectors, he gained valuable insight about the precious metal.

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