Gold finished the week strong, as the yellow metal was up in price to finish the week after data showed U.S. economic growth picked up in the third quarter. That being said, gold did end lower overall for the week, which means this is now the third week in a row that the yellow metal has fallen overall, mainly because of the uncertainty of the future of the U.S. Federal Reserve's monetary stimulus.

Gold now has a three-week losing streak with a little less than one week left in October. This is the first time in over a year that gold has lost overall three straight weeks in a row. The yellow metal is still trading higher than it was when the market was diving a few months back, and with November right around the corner (November is historically strong for gold), many traders and investors are still choosing to buy into the yellow metal in hopes for a nice ROI in November and into 2013.

Positive-Pullback

"I don't believe gold is able to rally off of that (GDP) data for now. Gold is an momentum asset and its momentum is not there right now," said Jeffrey Sica, chief investment officer at SICA Wealth, which manages more than $1 billion in assets. While Sica may have a point here, he fails to mention that gold has also been in a positive pullback, and with that these things happen. Gold is actually in a very good place heading into November.

Spot gold edged up 0.2 percent at $1,713.84 an ounce earlier today. Bullion was set for a weekly drop of 0.4 percent, and that would mark its first three-week consecutive loss in more than a year. Gold posted a four-week decline after a rally to a record price above $1,920 an ounce in September 2011. Again though, this was part of a positive pullback.

While it is always nice to see an investment shoot up fast, in this case gold, you don’t want the yellow metal to shoot up too high and too fast at once, as a positive pullback will happen because it is too much at once.

Again, the yellow metal is looking pretty good heading into November. If history is any indicator, then the yellow metal should make some very nice gains in November. Try to buy into  gold now before the month starts, as a nice ROI may be on its way for you.

Published in Gold Investing

Central banks from Europe to China to the U.S. have pledged to do more to boost economies. The yen reached a four-month low versus the dollar this week on speculation the Bank of Japan will further expand stimulus and the Federal Reserve said it plans to continue buying bonds. Gold rose 70 percent as the Fed bought $2.3 trillion of debt in two rounds of quantitative easing from December 2008 through June 2011.

“The whole economic situation is going to get worse rather than better,” said Thorsten Polleit, chief economist at Degussa Goldhandel GmbH, a precious metal trading and investment company in Frankfurt. “Paper currencies have already lost their function as a store of value and it’s getting worse. People are increasingly putting their savings into precious metals.”
Gold Prices

Positive-Pullback

Gold rose 9.5 percent to $1,712.95 an ounce in London this year, advancing for a 12th consecutive year, the longest winning streak in at least nine decades. October’s average of $1,749 is set to be the third-highest month ever. The Standard & Poor’s GSCI gauge of 24 commodities lost 1.2 percent since the start of January and the MSCI All-Country World Index of equities climbed 9.5 percent. Treasuries returned 1.4 percent, a Bank of America Corp. index shows.

The BOJ, which holds a policy meeting Oct. 30, will consider raising its asset-purchase program by 10 trillion yen ($125 billion) to 90 trillion yen, the Nikkei newspaper reported yesterday. The Fed said Oct. 24 it will maintain $40 billion in monthly purchases of mortgage debt and probably hold interest rates near zero until mid-2015. The European Central Bank has said it is ready to buy bonds of indebted nations and China approved a $158 billion subways-to-roads construction plan.

Some investors buy bullion as a hedge against inflation and a weaker dollar, and the metal generally earns returns only through price gains, increasing its allure as interest rates decline. Inflation expectations measured by the break-even rate for five-year Treasury Inflation Protected Securities jumped 33 percent this year and reached a 16-month high in September.
Investors Buy

Gold ETP holdings gained 7.9 percent since the end of July and now account for almost a year of mine production, according to data compiled by Bloomberg and Barclays Plc. Speculators’ wagers on a rally were the highest since August 2011 in the week to Oct. 9, CFTC data show. They cut their net-long position by 7 percent to 184,404 futures and options by Oct. 16, data show.

Gold dropped below $1,700 this week as “fatigue set in” among fund managers after they boosted bets and as prices failed to reach $1,800, said Edel Tully, an analyst at UBS AG in London. Higher prices also curbed physical demand, said Walter de Wet, an analyst at Standard Bank Plc in Johannesburg.

The U.S. Mint sold 48,500 ounces of American Eagle gold coins so far this month, 29 percent fewer than throughout September, data on its website show. This year’s sales of 530,000 ounces are down 41 percent from the same period in 2011.
Indian Demand

Gold imports by India, last year’s biggest buyer, slid to as low as 170 tons in the third quarter from 205 tons a year earlier, according to Bachhraj Bamalwa, chairman of the All India Gems & Jewellery Trade Federation. Local prices fell 5.7 percent since setting a record Sept. 13. Gold’s drop this month may spur more physical demand in Asia, Standard Bank said in an Oct. 24 report. Indian consumers usually boost purchases before the wedding season and religious festivals later this year.

Central banks have been expanding bullion reserves to diversify from currencies. Nations may add almost 500 tons this year, the London-based World Gold Council said in August. Brazil raised its gold reserves last month for the first time since December 2008 and countries from South Korea to Russia increased holdings this year, International Monetary Fund data show.

In other commodities, 15 of 30 traders and analysts surveyed expect copper to gain next week and 10 were bearish. The metal for delivery in three months, the London Metal Exchange’s benchmark contract, climbed 2.8 percent to $7,812.25 a ton this year.
Sugar Survey

Fourteen of 20 people surveyed said raw sugar will rise next week and three expected a decline. The commodity slid 17 percent to 19.33 cents a pound since the start of January on the ICE Futures U.S. exchange in New York.

Fifteen of 28 people surveyed anticipate higher corn prices next week and five were bearish, while 17 of 29 said soybeans will climb and five predicted a drop. Corn rallied 15 percent to $7.4225 a bushel in Chicago trading this year as soybeans rose 29 percent to $15.585 a bushel. Both crops reached records since August as the worst U.S. drought in a half century hurt crops.

The GSCI gauge of raw materials erased this year’s gain three days ago after entering a bull market in the third quarter. The last annual decline was in 2008 and the index (MXWD) made annual advances in 11 of the past 13 years.

The commodity supercycle has further to go because of increasing demand from China and emerging markets, Chris Watling, chief executive officer of Longview Economics Ltd., and Dambisa Moyo, a former Goldman Sachs Group Inc. economist, said at a conference in London on Oct. 24.

“The inflation story in commodities is warranted,” said Colin O’Shea, the head of commodities at Hermes Investment Management Ltd. in London, which manages about $2.3 billion of raw-material assets. “Inflation could really happen, and happen in a big way over the course of the next few years. Historically, the primary reason for investing in commodities is diversification.”

Published in Gold Investing

Gold edged down early Friday, on track for its third week of declines as the US dollar strengthened and momentum traders continued to exit positions or go short.

Investors and dealers await the US CFTC commitment of traders figures due at 1930 GMT, after last week's data showed hedge funds and other big speculators decreased their long positions in gold to their lowest since the end of August. This is bullish from a contrarian perspective and shows that much of the short term speculative froth has been removed from the market.

The US GDP figures are released later today and they are expected at 1.9%. A weaker than expected number would benefit safe haven gold.

Positive-Pullback

Gold corrected in October as we anticipated and has fallen by 5.5% (in USD terms) from over $1,795.55/oz to a low of $1,699.65/oz It is too early to tell yet if the October correction is over. There would appear to be strong support at $1,700/oz and Asian physical demand is very robust down at these levels.

The physical bullion market was subdued in Asia overnight although there was some buying out of Japan. Trade was muted because of a public holiday in Indonesia, Malaysia and Singapore, but Reuters noted that dealers saw gold buying from Thailand.

Importantly, Chinese buying of gold, official and public, on dips is likely to be continuing.

Physical demand for gold bullion coins and bars in western markets remains subdued but smart money buyers continue to add to allocations. Gold and silver 1oz bullion coins from the Australian Lunar – 2013 Year of the Snake Coin Series are officially sold out at The Perth Mint. The sell out of the full mintages of 300,000 pure silver 1oz coins and 30,000 pure gold 1oz coins was achieved in just two months, ranking this release as one of the fastest selling behind the phenomenally successful Year of Dragon coins in 2012.

With gold having pierced slightly below $1,700/oz there is a risk that gold could fall to test the 200 and 100 day moving averages which are now at $1,663.30/oz and $1,664/oz respectively.

A rise of over 1% today (from the current price of $1,705/oz) would result in a higher close this week, above $1,721.75/oz. This would be a good indicator that the recent dip is over and it is time to get into position for November, which is one of gold’s strongest months and the November to March rally which is one of gold's strongest periods. A lower close this week could see further falls next week and in early November.

As ever it will be nigh impossible to pinpoint the exact price lows.

The low of $1,699.65/oz seen two days ago on Wednesday may mark the intermediate low however gold could continue falling until October 31st (next Wednesday) as month ends often mark intermediate lows or could even continue falling until the US election or soon after.

There are now 6 trading days left until the US Presidential election on November 6th. The US election has many investors on the sidelines.

Gold will be supported by and likely see gains into yearend due to the coming uncertainty surrounding the US “fiscal cliff.” Tax increases and spending cuts are expected which would sink the US economy into a deep recession or Depression. If US Congress cannot agree on a deal by the end of the year it could have deleterious effects on the dollar and on capital markets.

The US elections themselves are unlikely to have a significant impact on currencies and wider markets in the short term but we expect the recent calm may recede and the stormy volatility of recent years may again be seen soon after the election when the reality of the appalling US fiscal and monetary situation is realised.

November is traditionally one of gold's strongest months.

Given the extremely bullish fundamentals due to negative fiscal outlooks, ultra loose monetary policies, negative real interest rates and global currency debasement, we expect this November and year end to be very positive for gold and particularly still undervalued silver.

Prudent buyers should now be buying this dip by cost averaging or getting into a position to do so. While gold may correct by another 2% or 3% from here, there is a greater likelihood of gold beginning to rise sharply and quickly recovering the 5.5% loss seen this month in November.

Published in Gold Investing
Wednesday, 24 October 2012

Paper Promises: A Review

It should be clear to even the most casual observer of international affairs that ours is a world plagued by debt.  The 2008 financial crisis was brought on by too easy access to mortgages that people couldn’t afford.  The economic crises in Spain and Greece occurred largely over debts these nations could not afford to pay back.  And guess which nation is the largest debtor nation in the world?  You guessed right:  The United States – to the tune of more than $16 Trillion.Let’s just repeat that, and, this time, express this debt as a pure number, one onerous digit after the other.  Here it is:  $16,000,000,000,000.Staggering, isn’t it?

Let’s forget for the moment about how we’re going to pay back that debt.  And let’s put it out of our minds temporarily that our two biggest creditors happen to be China and Japan.  Let’s just try to wrap our minds around the overall problem of being a debtor and what that means to an individual or a nation.  To help you do that, I’d like to recommend an eye-opening new book called Paper Promises -- Debt, Money and The New World Orderwritten by Philip Coggan and published by Public Affairs Books in New York.  The author is a current columnist for The Economist and a former columnist for The Financial Times.

Positive-Pullback

You’ll come away from the book appreciating the magnitude of world debt and its consequences.  And one thing’s for sure:  once you won’t read it, you won’t want to be caught without any gold and silver in your portfolio.  The relationship of debt to precious metals is acutely summarized by Coggan: 

“… this whole book is about debt.  But the key fact is that debt and money are two sides, not of the same coin, but of the same bank note.  That would not be true of a currency consisting entirely of precious metal.  Such metals have one defining characteristic:  they are no one else’s liability.  But as we have seen, there is not enough precious metals to go round….As soon as goldsmiths and banks started storing gold and issuing receipts (bank notes), money and debt became interchangeable.  Early bank notes were proof that the bank owed the holder money; they were thus a claim on the creditworthiness of the bank.  Modern bank notes are a claim on the creditworthiness of the government.”

While Coggan writes to clarify more than to shock, you can’t help feeling financially vulnerable once you’re just a couple of chapters into his book.  In fact, as early as page 4, the author admonishes us “On the monetary side, a government that expands the money supply at a rate in excess of economic growth will eventually erode the real value of taxpayer’s wealth via inflation.”  To our thinking, here at The Investor’s Corner, regardless of the current rate of inflation (around 2%), that statement is tantamount to an alert for each of us to buy gold, since the growing inflationary effects of QE3 lie shortly ahead.

Coggan points out in Paper Promises that Quantitative Easing is by no means a new tactic unleashed by our own Federal Reserve or by other contemporary governments in Europe or Asia.  He delves deeply into previous attempts. For instance, the economist and mathematician, John Law, after having fled his native Scotland for killing a man in a duel, became the monetary advisor to the government of France in the early Eighteenth Century.  Law became the first economist to recommend quantitative easing when he persuaded the country’s regent to create a bank to issue paper money as a way out of the immense debts facing France.

Once you learn how the scheme failed, and learn from Coggan’s book how other schemes of quantitative easing failed, you’ll come to be less forgiving of our current venture into paper money.  This venture – QE3 – offers a much greater cause for anxiety than any doubts you might have about the price of gold when you wake up tomorrow morning.

Published in From The CEO
Monday, 22 October 2012

The Fiscal Cliff

In the first two days of next year, we will see large tax cuts expire which were passed in 2001 and 2003.  As a result, the nation will undergo cuts to both defense and nondefense programs.  Taxpayers will notice a cut in pay during the first two weeks in January.  The lowest income tax rate is slated to rise from 10 percent to 15 percent. And the highest tax rate is slated to rise from 35 percent to 39.6 percent.  Tax rates on dividend rates now at 15 percent are slated to rise to 39.6 percent.

The majority of defense programs will be cut by 9.4 percent. Most nondefense programs, except for Social Security Medicare and Medicaid will be cut by 8.2 percent; and Medicare will be cut by 2 percent.  Social Security, veterans benefits, military personnel, Medicaid and the Children’s Health Insurance Program will be spared cuts.

Positive-Pullback

No doubt about it:  this major reduction in the federal budget will apply the brakes to the U.S. economy.  Economists in the public and private sectors agree that these cuts are a natural invitation to recession.  Nobody is more aware of the consequences of the budget reduction than Federal Reserve Chairman, Ben Bernanke.  In fact, it was he who coined the term “fiscal cliff.”

Reuters reported back on October 5th that investors could be looking at gold as their “top commodities choice” for a difficult fourth quarter in anticipation that the fiscal cliff will prompt printing of more money.  Although gold has retreated in price since the news agency made this observation, it’s certainly possible that investors will grab at lower prices as we approach the year’s end.  Keep in mind we noted in a previous column that HSBC precious metals analyst Jim Steel, even in view of gold’s pullback, issued an upward revision of the yellow metal’s price for the coming year.

The reasoning behind this possibility seems clear.  Since Ben Bernanke has pledged to pump money to keep the economy afloat, the consequences of the fiscal cliff would in effect force the Fed to keep its word with respect to QE3. The printing of more money is likely to prove an additional steroid for gold.  Under the circumstances, Paul Morilla-Giner, chief investment officer at London & Capital, views gold as “flirting with $1,900 or $1,950.

Regardless of your metaphor of choice in trying to understand the market – the “slingshot effect,” the “boomerang effect” – the pullback in gold is due for its next ride up.  You should not try to chase the market or look for a bottom.  Nor should you try to wait for the election to start accumulating gold.  The results of the fiscal cliff will dog the President as well as the presidential hopeful.  While Obama is looking for legislation that extends cuts for families earning $250,000 or less, he still has to deal with a Congress that has been largely unsympathetic to this extension.  And despite Romney’s pledge that he will not allow automatic tax cuts to happen, he wouldn’t take office until January 20th of 2013. And it’s unclear what he’ll do to honor his pledge.  During the current fiscal mess, gold is your best portfolio insurance.

Published in From The CEO
Friday, 19 October 2012

A Timeout for Gold

In our last column, we mentioned that the market has already factored in the news about QE3.  Gold bugs need not feel discouraged though.  Quantitative easing is still the single biggest factor driving the market.  Just now though, the gold market is weighing the effects of other news -- counting all the other chips on the table, so to speak.

During this recount, the yellow metal needs additional news to push past the wait.  But as long as our Fed and other central banks choose to print paper money, it’s not a matter of if for gold.  It’s a matter of when.  Although gold needs an additional engine right now, quantitative easing continues to work its disastrous magic.  In the meantime, let’s look at the impact on gold of some of the market forces currently motivating a delay in gold.

Positive-Pullback

The U. S. housing market is beginning to reveal a bit of a pickup, with existing home sales reaching 4.73 million.  According to an article in this morning’s Wall Street Journal, residential construction is at its four-year high point and could positively influence the U.S. job market and economy at large.  Also, builders surpassed economists’ predictions with a seasonally adjusted annual rate of new starts of 872,000 units last month, up 15% from August and 34.8% from September of last year.  Since this level of housing starts “was the highest since July 2008,” the gold market was bound to react in some way.

Also, the euro has weakened about one quarter cent to the tune of 1.3033 against the dollar, according to The Bullion Desk.  The effect on gold is not surprising since, as we’ve previously pointed out, gold will often take its signal from the euro as it moves contrary to the dollar.  Also, speculative investors long on gold may have been pushed out of the market as their stops clicked in.  A “stop” is simply a sell order at a specific price specified by an investor to his broker.  For technical reasons, gold blogger Toby Connor views the current move down in gold as an expected correction, and anticipates this downward activity as turning around next week.

While much of these economic developments seem to be inhibiting gold on the way up, other less publicized developments seem to be supporting gold within a range.  We have previously mentioned disappointing news for bold emanating from India because of the weak monsoon season.  Suddenly, there’s news of a pickup in demand from India (traditionally, the world’s largest buyer of gold).  According to the Economic Times, India has experienced a surge in gold buying in response to a drop in local prices.  Month-to-date in October, Indian demand has increased by 10%.

The Indian increase in buying is tied to the very popular Diwali holiday season. The holiday symbolizes the triumph of good over evil. Celebrated traditionally between mid-October and mid-December, and otherwise known as “the festival of lights,” Diwali represents an enhanced gold-buying season for India.  Bullion demand will likely accelerate for the holiday.   The president of the Bombay Bullion Association reports that India is likely to import 250 metric tons of gold in the fourth quarter in connection for the festive season and to satisfy wedding demand.

Under the circumstances, the current price levels for gold (between $1,717 per ounce and $1,737 per ounce today) represent excellent value for buyers looking for a timeout in the gold market. 


Published in From The CEO
Wednesday, 17 October 2012

Gold: If Not Now … When?

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.

Positive-Pullback

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.

Published in From The CEO

Just when we thought everything was alright.  Few breaths were taken in the world financial community last September 13 until Ben Bernanke surfaced from the Fed FOMC’s annual meeting on monetary policy at Jackson Hole, Wyoming.  Then he made his fateful announcement:  The Federal Reserve would now execute its mandate to print money as it deemed necessary to boost U.S. employment figures in particular, and the economy in general.  Welcome America, to QE3!

Once Bernanke made his announcement, several things became clear:  a) the price of gold would increase, but not without some speed bumps along the way. b) monetary easing would need to catch on internationally. c) gold would require help from additional economic events to push it past the $1,790-per-ounce resistance level.

Positive-Pullback

What remains unclear is how the Fed makes its decision about how much inflation it would allow to slip into the economy and who exactly in the Fed is voting to keep the presses running, and who exactly is voting to hold them back or stop them altogether.  As it turns out, the twelve board governors are not a unanimous gaggle of geese.  There’s some dissension in the ranks; so they’re more like a fluttering bunch of doves and hawks, squawking over the nation’s tolerable rate of inflation.

According to a Reuters report Friday, all is not peachy keen at The Fed.  Since the U.S. is recovering slowly, the official position is that the Fed would continue to buy bonds until the economy improves “substantially.”  Depending whether you’re a Fed hawk or a Fed dove, you ‘ll probably come up with a different definition of “substantially.”  (Figures don’t lie, but liars figure).  Minneapolis Fed President NarayanaKocherlakota feels comfortable with a 2.25-per-cent rate of inflation.  Chicago Fed dove Charles Evans, on the other hand, can sleep nights as long as the inflation rate stays under 3 per cent.

Than we have Richmond Fed President Jeffrey Lacker who feels that what his colleagues are putting forth is all feed for the birds. According to a Bloomberg report Friday, Lacker asserts that the QE3 “will increase inflation risks and complicate the pull-back from record stimulus while not fueling economic growth.”  In a speech at the University of Virginia in Charlottesville, Lacker said that “adding to our balance sheet increases the risks we’ll have to move quickly when the time comes to normalize monetary policy and begin raising rates.”  Lacker doesn’t believe the Fed should be sainted with the authority to meddle with rates in the first place.  Moreover, he has little faith in Fed action’s ability to impact unemployment rates.

Published in From The CEO
Friday, 12 October 2012

The View from Abroad

Here at The Investor’s Corner, we try to tap the views of experts from around the world, not simply from those here in the United States.  After all, gold represents real money to the entire world, not just to the U.S.  Still, it’s all too easy to get caught up in our own point of view, particularly since the United States is the world’s third largest consumer of gold (India is the first, and China is second); and the US Dollar is the principal currency of all international transactions.

Today, as gold hovers quietly around the $1,765-per-ounce level, let’s take a look at the Union Bank of Switzerland’s updated view of the yellow metal.Though UBS has had a long and controversial history, it remains the world’s second largest manager of private wealth assets. As such, the influential Swiss organization needs to monitor gold very closely through its investment research department. While some of today’s report repeats what we already know, other parts of the report seem refreshingly novel and direct.

Positive-Pullback

On the one hand, UBS reports what we know to be the case about our own Fed – that its role in the debasement of currencies through quantitative easing will be the principal driver of the gold price in the coming year.  In the words of the report, “a $2,000 price tag is not overly ambitious.”

On the other hand, while we have emphasized that the ultimate price of gold has little to do with political considerations, UBS investment researchers think otherwise.  They observe that the US debt ceiling is expected to be reached in early December, and that politicians will work hard to keep the country from reaching a resulting fiscal cliff in 2013.  But since the electorate will emphasize government growth over the budget, the debt ceiling will likely be extended.  If this happens, ratings agencies will downgrade the US credit status, thus weakening the dollar.  Obviously a credit downgrade will bode well for gold.

Perhaps the biggest surprise in the UBS report is its view of the current Presidential race.  Since Romney is more conservative than President Obama, UBS researchers view his proposed hawkish actions towards the Fed as being detrimental to quantitative easing, and therefore towards the price of gold. (Romney has pledged to fire Fed Chairman, Ben Bernanke, if he’s elected President.)  And in what some pollsters would no doubt consider an outlandish prediction, UBS comes out and states “we expect resident Obama to be re-elected, and so from a Fed and QE perspective the current status quo to prevail.”  This projected scenario remains particularly ironic since Vice Presidential hopeful, Paul Ryan, remains a big supporter of a gold standard.

Looking beyond what many would consider its off-the-wall perspective of U.S. politics, the UBS report sees three conditions for “a sustainable gold rally” as being firmly in place:  robust spec buying, “sizeable ETF inflows and physical demand.”  Also, due to initiatives from the Indian government, the rupee has shown considerable strength. This currency strength comes at the right time for gold -- during the heightening of the Indian wedding season in late October.  This is particularly strong news on the demand side coming from the world’s largest consumer of gold.

While some analysts would disagree with some of the UBS report, they should not ignore it entirely.  Nor should you.  The outlook on gold remains promising for those who choose to accumulate the physical metal at current prices.

Published in From The CEO
Thursday, 25 October 2012

Gold Rebounds on Fed Policy Comments

After a few days of losses gold was able to rebound based on the most recent Fed policy comments. After the Fed meeting was over yesterday they went ahead and reiterated their commitment to ultra-easy monetary policy. This was a welcomed piece of news, as it eased some tensions that have been created over the last few days within the gold trading arena.

Gold for December delivery jumped back up by $11.40, or 0.7%, to come in at $1,713.00 an ounce on the Comex division of the New York Mercantile ExchangeGold futures had settled $7.80 lower on Wednesday, bouncing off the psychologically important $1,700 level. Yes, that’s right. That $1,700 per ounce price mark is very important right now, as investors and traders look at that number very carefully.

Positive-Pullback

Many think that the positive correction in gold price we have experience over the last week or so may be over. However, not all are on board with that statement. There are still many (including myself) who think gold may drop a bit more before regaining footing and spiking back up to the $1,800 price mark and beyond. All of this will more than likely happen sometime in 2013. That being said, November is right around the corner, and traditionally November has been a very strong month for gold.

“It is too early to tell yet if the October correction is over,” said Mark O’Byrne, executive director at GoldCore. “But a higher close this week would suggest the recent dip is over and it is time to get into position for November, which is one of gold’s strongest months.”

While the Feds may have stated that they are still committed to their monetary policy, this really didn’t do anything to the market. What it did do was encourage investors to keep buying and selling gold.

“The market was not expecting much from [Wednesday’s] Fed statement, and nothing much is exactly what it got,” Ben Traynor, chief economist at BullionVault, wrote in emailed comments. “Nonetheless, the commitment to ongoing asset purchases at $40 billion a month should be a supportive factor for gold. The initial impact of last month’s announcement may have worn off, but the steady drip-drip of liquidity will go on.”

All signs point to November being a strong month for gold, so it would be a wise move to buy into the precious metal now before November comes. That way you have a much better chance of making gains.

Published in Gold Investing