gold Archives

Gold price continues its steady march upwards

The gold price kicked off this year with a fall.
It dropped from $1422 / oz, down to a low of $1318 / oz by late January.

This was a fall of just 7.3%, but still this gave all the gold bears something to rant about for a few weeks: ‘It’s the end of the gold bull market’, ‘I told you it was in a bubble’, and so on.

We’ve heard it all before, and we can be sure to hear it all again.
But the fall they were all getting so excited about was really just another tiny dip on the way up.

Take a look at the top right hand side of the two-year gold chart below.

That little pull-back was what all the fuss was about…..

Gold price continues its steady march upwards

http://goldprice.org/charts/history/gold_2_year_o_usd.png?0.8974633984098723
Source: Goldprice.com

More to the point, you can see that the gold price has already bounced since then! It is on its way up already, climbing 4% in the last few weeks. It didn’t take long.

Media reports also focused on the amount of gold being withdrawn from the gold ETF (GOLD). This is the world’s largest gold exchange traded fund (ETF), and apparently holds around 40 million ounces of gold for investors.

But when these investors cashed in on a few million ounces of gold last month, the media were citing it as evidence of the coming end of the gold market’s epic run.

But again, take a step back. This few million ounces was but a fraction of the amount of gold on their books. And moreover, this drop is no worse than ones we have seen in the last few years.

Recent withdrawals from the GOLD ETF barely even register in the big picture

etf_withdrawls.png
Source: Credit Suisse
Most reporters would have you believe that the GOLD ETF is the only part of the gold market that you need to look at.

But it is just a small part of the puzzle.

CHINA is soon to be the world’s largest gold market.

With four gold recommendations in Diggers and Drillers (which are up 85% on average), it is what’s  been happening in China’s gold market that makes me sleep well at night.

This has always been the main reason I am bullish on gold: the potential demand from the hundreds of millions of newly wealthy, Chinese middle classes.

Not to mention the fact that the Chinese government are doing all they can to promote gold ownership. With a long cultural history of personal gold ownership, this is not a hard sell.

Gold demand in China has now gone ballistic.

It imported 6.7 million ounces in just the first ten months of last year! Compare that to 1.4 million ounces in the full twelve months of 2009.

It’s not just gold either.

Last year China imported 120 million ounces of silver. The year before that it was just 30 million ounces of silver. A 300% increase!
It’s good to know this as another two of the Diggers and Drillers tips are silver plays.  These are up 42% on average, with the most recent one just getting going now.  (You can get my latest research, and take a test drive of my service by clicking here )
Last week I managed to get my hands on some current data for Shanghai gold trading volumes. This is a market that has pretty much started from scratch just a few years ago, but is already now going at full tilt.

It’s hungrily vacuuming up any gold that US investors are silly enough to liberate.

Shanghai Gold Exchange volumes climbing last six years

China_gold.png
Source: ANZ commodity research
There are many days where 30million ounces have changed hands, and the 12 month rolling average is now closing in on 20 million ounces daily. This is one busy market.

So with this kind of growing demand from China, it really is hard to see the gold price falling very far, for very long, in the foreseeable future!

The fact is that for all the media coverage of gold, only a fraction of global investment assets are tied up in gold and gold stocks. It’s just a fraction-of-a-fraction of the investible universe.

The thin bar on the bottom right of the chart below is what we are talking about.

Gold is still a small fish in a big pond, for now anyway…

gold_as_percent.png
Source: Barrick
Maybe this is the real reason why so few commentators understand the gold market. Because so few are genuinely involved with it!

There are many willing to venture an opinion, but few who really know the gold market. Check out Sprott Asset Management’s commentary to hear it from some of the best.

The good news is that until gold becomes main-stream, there is still a huge opportunity there. When the media start saying gold is good, that’s when I’ll be thinking about selling out!

For the foreseeable future though, in the words of another one of the world’s best gold commentators Marc Faber: ‘The risk is really not to own any precious metals at all’.

Regards,

Dr.Alex Cowie
for Money Morning Australia

A 60 Second Market Wrap

Yesterday, the S&P/ASX 200 gained 79 points (1.73%), closing to 4,686.80. The Australian Bureau of Statistics releases the labour data for September, and it’s expected the unemployment rate will remain at 5.1%

The Dow Jones Industrial Average managed to hold onto Tuesday’s gains, closing 22 points higher to 10,967.65. But, trading volume was lower than normal. The private sector in the U.S. lost 39,000 jobs last month, which is a sign the labour market is slowing. This could be another reason the Fed are looking for to get the printing presses ready.

However an America economist said, ‘We remain firmly of the view that a proper rise in payrolls cannot happen as long as small businesses, which employ half the work force, remain credit constrained.’

The FTSE got a few points closer to the 5,700 mark overnight, closing 45 points higher to 5,681.39. The UK’s central bank, Bank of England (BoE) meet tomorrow, however at this stage a rate change or further quantitative easing isn’t expected.

The Nikkei added 172 points, ending the day at 9,691.43.

Yet again, gold reached another record high yesterday of USD$1,349.80. The yellow metal has hit all new high in eight of the past ten trading sessions.

The price of spot gold in Australian dollars is $1,379.57, while in US dollars it’s $1,347.24. The price of silver in Australian dollars is $23.68 and in US dollars it’s $23.12.

The disappointing employment data in the U.S. helped the Aussie dollar remain above 97 cents.

The Aussie dollar versus US dollar is AUDUSD 0.9769 and against the Japanese Yen it’s AUDJPY 81.00.

Oil declined after a surprising drop in stockpiles, and the weakening the greenback convinced traders to buy up on commodities. Crude Oil closed at USD$83.23.

By Shae Smith Money Morning Aus.

Currency Devaluations and Gold

Competitive currency devaluations steal work from one country and give it to another. That makes them unpopular in the countries where jobs begin disappearing. This is why currency wars quickly become political hot potatoes. Out of work citizens are angry voters. And angry voters want somebody to do something about the problems.

That is where we are now. And that is why gold – which is nature’s currency and can’t be printed by anyone and is relatively scarce in the earth’s crust – is going up against all that paper money serving a devious master. But as the Aussie dollar reaches parity, something must give.

That is, if now resembles the past few years, this latest move down by the dollar and up by the commodities would be reversed. Gold, copper, silver, tin, oil and the rest would fall as the dollar corrects. Corrects to what, though? Can you think of a good reason why the U.S. dollar should get stronger from here?

We can’t either – unless it’s just the simple observation that everyone is agin’ it and no one is for it. If everyone is a dollar bear, is it a good trade to be a dollar bull? Or is this the long-awaited moment where the dollar begins to circle the hyper-inflationary drain?

It’s a moment we’ve been talking about for years. Does the simultaneous rise of all asset classes against the greenback indicate that the moment is finally here? And if it is….what should you be doing, or have already done?

This is one of the subjects we’ll be taking up next month in Sydney at the Australian Gold Symposium.
Thanks to Daily Reckoning Australia