Best of the Week
Most Popular
1.Crude Oil Price Trend Forecast 2016 Implications for Stock Market - Nadeem_Walayat
2.Odds of Winning Walkers Crisps Spell & Go olidays K, C and D Letters - Sami_Walayat
3.Massive Silver Price Rally During The Coming US Dollar Collapse - Hubert_Moolman
4.Pope Francis Calls For Worldwide Communist Government - Jeff_Berwick
5.EU Referendum Opinion Polls Neck and Neck Despite Operation Fear, Support BrExit Campaign - Nadeem_Walayat
6.David Morgan: There Will Soon Be a Run to Gold Like You've Never Seen Before - Mike Gleason
7.British Pound Soars on BrExit Hopes Despite Remain Establishment Fear Mongering - Nadeem_Walayat
8.Gold Price Possible $200 Rally - Bob_Loukas
9.The Federal Reserve is Not Going To Raise Interest Rates and Destroy Gold - Michael_Swanson
10.Silver Miners’ Q1’ 2016 Fundamentals - Zeal_LLC
Free Silver
Last 7 days
U.S. Household Debt Still Below 2008 Peak - 25th May 16
Brexit: Wrong Discussion, Wrong People, Wrong Arguments - 25th May 16
SPX is at Strong Resistance - 25th May 16
US Dollar, Back From the Grave? - 25th May 16
Gold : Just the Facts Ma’am - 25th May 16
The Worst Urban Crisis in History Could be Upon Us - 24th May 16
Death Crosses Across The Board Are IRREFUTABLE Stock Market Sell Signals - 24th May 16
Bitcoin Trading Alert: Bitcoin Price Stays below $450 - 24th May 16
Stock Market Crash Death Cross Doom Prevails - 23rd May 16
Did AMAT Chirp? Implications for the Economy and Gold - 23rd May 16
Stocks Extended Their Rebound On Friday - Will They Continue Higher? - 23rd May 16
UK Treasury Propaganda Warns of 3.6% Brexit Recession, the £64 Billion Question? - 23rd May 16
Stock Market Support Breached, But Not Broken! - 23rd May 16
George Osborne Warns of 18% Cheaper House Prices - BrExit for First Time Buyers - 22nd May 16
Gold Bull-Phase I Continues to Confound (The Trek to “Known Values”) - 22nd May 16 r
Avoiding a War in Space - 22nd May 16
Will Venezuela Be Forced to Embrace the US Dollar? - 21st May 16
Danish Central Bank Stumbles with Its Currency Peg to the Euro - 21st May 16
SPX Downtrend Underway - 21st May 16
George Osborne Warns of More Affordable UK Housing Market if BrExit Happens - 21st May 16
Gold And Silver 11th Hour: Globalists 10 v People 0 - 21st May 16
David Morgan: There Will Soon Be a Run to Gold Like You've Never Seen Before - 21st May 16
Gold Stocks Following Bull Analogs - 20th May 16
The Gold Chart That Has Central Banks Extremely Worried - 20th May 16
Silver Miners’ Q1’ 2016 Fundamentals - 20th May 16
Stock Market Rally At the End of the Road? - 20th May 16
British Pound Soars on BrExit Hopes Despite Remain Establishment Fear Mongering - 20th May 16
NASDAQ 100, FTSE, and British Pound - When Rare Market Data Screams, Listen  - 20th May 16
Unintended Consequences, Part 1: Easy Money = Overcapacity = Deflation - 19th May 16
The Federal Reserve is Not Going To Raise Interest Rates and Destroy Gold - 19th May 16
Stock Market Final Supports Are Broken - 19th May 16
Gold - Pro-Inflation? Anti-USD? - 19th May 16
Further Stock Market Uncertainty As Indexes Gained On Friday, Will Uptrend Resume? - 19th May 16
What This U.S. Presidential Election Tells Us About Her Millennial Generation - 18th May 16
Stock Market Trendline Broken on Fed Announcement - 18th May 16
An Incredibly Simple, Rarely Used Way to Book 170% Investing Gains - 18th May 16
Statistically Significant Stock Market Death Cross? - 18th May 16
Precisely Wrong on US Dollar, Gold? - 18th May 16
What You Can Gain From One Tech CEO's $355 Million Loss - 18th May 16
The ‘Tide’ has turned… NEGATIVE For STOCKS!!! - 18th May 16
Goldman Sachs's - Regulatory Climate is Chilling Deals; Hatzius Not Worried About a Recession - 18th May 16
Bitcoin Price Remains above $450 - 18th May 16
Crude Oil Price Trend Forecast 2016 Implications for Stock Market - 17 May 16
Could the National Debt Really Grow as High as $31 Trillion by 2023? - 17 May 16
Gold Price Possible $200 Rally - 17 May 16
Crisis Investing - Jim Rogers on “Buying Panic” - 17 May 16

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Why 95% of Traders Fail

Everything You Need to Know About Gold Prices

Commodities / Gold and Silver 2012 May 11, 2012 - 11:24 AM GMT

By: Money_Morning

Commodities

Best Financial Markets Analysis ArticleKeith Fitz-Gerald writes: Gold's hot. Then it's not. Now what?

Where did the love for the shiny metal go?

Now the gold bugs are crying, and the "I told you so crowd" is warming up in the wings.


After a stunning rally to $1,895/oz., gold prices are down hard, falling below $1,600/oz. That's a 16.11% drop that has the gold bears drooling for more-but probably not for long.

Let's start with gold prices themselves. Right now they're down three months in a row and many gold investors fear there's no bottom in sight.

What they don't realize is that the fall in gold prices is as rare as proverbial hen's teeth. This is the first time we've seen gold prices tumble three months in a row since March of 2001.

In fact, since 1957 we've only seen gold prices fall three months in a row 65 times out of a total of 661 three-month periods, according to data compiled by Bloomberg and Standard and Poor's.

But here's the thing about gold prices...

Gold could fall all the way through May, turning what it already a rare occurrence into an ultra-rare occurrence.

Would that be a bad thing? In the bigger scheme of things, not really.

People forget that gold prices fell by more than half from 1975 to 1976, and were down 17 out of 24 months. At the same time, gold prices also recorded 10 three-month declines during the period.

That was, incidentally, right before gold rose 721.25% to $850.00/oz.-- a peak gold hit on January 21, 1980.

The point is, bear tracks always precede bull market runs. So I am not especially concerned by this pullback in gold.

In fact, as you can see from an earlier forecast, we're right on target with my expectations for gold this year.

Take a look at what I shared with my readers on January 2, 2012:

The drop in prices we're seeing is simply a matter of traders adjusting their risk tolerance by taking money off the table. They are moving out of gold and into dollars.

Gold Prices Are Driven by the "Smart Money"
Not surprisingly, Greece is the biggest single factor behind the move. Traders are concerned that the nation will summarily go its own way, shatter the EU's bailout and potentially sink the euro itself.

Next week the worries may be something entirely different. You just never know how these events are going to unfold in the short term. I sure don't.

I believe gold prices will fall further. Traders still haven't totally priced in the costs of an EU flameout, nor have they begun to liquidate positions to raise the necessary capital to meet redemption requests you just know are waiting in the wings.

Don't forget that gold is now a marginable asset. It is also one of the most liquid assets on the planet if you factor in derivatives like futures and options - many of which form the basis for sophisticated stock trading models because they indirectly dictate the amount of risk a trader can or cannot take.

In other words, gold is driven by "smart money" - meaning those with the scope and scale to move markets -- even if it's not all that smart.

As Western currencies decline and emerging economies continue to "buy" value outside the U.S. dollar, international demand for physical gold is more likely to increase than decrease.

China is the most aggressive of these foreign buyers, accumulating an average of 45 more tons per month over the last eight months than the prior eight, according to Eric Sprott, CEO of Sprott Asset Management.

You can guess what kind of effect this is going to have on gold prices as easily as I can.

Other nations have a more indirect impact. Iran, for example, is planning to sell oil to China for gold as U.S. sanctions take effect. Brazil and Russia are both hinting at a move towards some sort of physically-backed currency basket in lieu of the dollar as an international backbone. And India recently retracted a gold tax that paves the way for broader gold ownership.

Just as it is with other forms of investments, capital is shifting from the nanny states of the West to the growth-backed economies of the Far East.

The sovereign debt crisis still burning in Europe will only accelerate this process, especially as major financial hubs transition trading activity to emerging and newly regulated exchanges like Shanghai.

Then there's France and newly elected President Francois Hollande, whose tax-and-spend policies are perhaps the biggest single potential influence on gold prices on the planet at the moment.

Think about it.

The EU is going up in flames and Hollande wants absolutely nothing to do with austerity. In fact, he's likely to abandon it entirely. That speaks to more stimulus and more bailouts.

European central bankers suggest this is necessary to drive growth. But last time I looked this was political speak for "imprimer de l'argent," or printing money.

And printing money by its very definition is inflationary.

Don't Lose Your Love for Gold
That means institutions and individuals alike are going to be looking for hard assets as a means of preserving their wealth. Once the headlines die down they will again turn to gold.

"So do I buy in?"

I get that question all the time and my answer remains the same. It depends on your expectations and your time frame:

•If you're a short-term trader prone to timing-based decisions, I advocate buying into weakness over a period of months, especially now that gold has broken under $1,600 for the first time since December 30th and we've seen the first close under $1,600 this year. If it busts $1,500/oz., backing up the truck for gold is probably a pretty good idea. At $1,300 it's time to load up.
•If you believe, like I do, that global demand will ultimately override short-term gyrations, making measured investments is the way to go in the meantime. That could include, for instance, increasing allocations to bullion, gold certificates, coins or ETFs as the price drops. Just as you want to sell into strength, you want to buy into weakness, especially when so many people are looking the other way.
At the end of the day, there's no rocket science to this.

The gold industry produces just 2,500-2,800 tons a year, depending on various data sources. Eric Sprott notes that if you take China and Russia out of the picture by removing the 500 or so tons they produce, it leaves approximately 2,200 tons for the rest of the market.

And I agree.

Imagine what happens when somebody wants an extra 500 tons. It's highly unlikely they'll be able to buy it without moving prices...higher.

[Editor's Note: Keith's Geiger Index continues to deliver for his subscribers. The track record on this one is amazing. Since inception, 64 of his 67 recommendations have been winners.

And looking at the big picture here, things are just getting started...

Once you see Keith's "secret weapon," you'll understand why. To learn more about the Geiger Index click here.]

Source :http://moneymorning.com/2012/05/11/everything-you-need-to-know-about-gold-prices/

Money Morning/The Money Map Report

©2011 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2016 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife