Best of the Week
Most Popular
1.UK General Election Exit Polls Forecast Accuracy - Nadeem_Walayat
2.What's Next for the Gold Price? - Axel_Merk
3.UK House Prices Correctly Forecast / Predicted Conservative Election Win 2015 - Nadeem_Walayat
4.15 Hours to Save England from SNP Scottish Nationalist Dictatorship - Election 2015 - Nadeem_Walayat
5.Exit Poll Forecasts Conservative UK Election 2015 Win - Nadeem_Walayat
6.Gold And Silver China’s Pivotal Role: More Questions Than Answers. Not So For Charts - Michael_Noonan
7.Conservative Win 2015 UK General Election, BBC Forecast of 329 Seats - Nadeem_Walayat
8.Investing and the Lollapalooza Effect - Niels C. Jensen
9.Gold Price Target - Rambus_Chartology
10.Gold Price Nearing An Important Pivot Point - GoldSilverWorlds
Last 5 days
Stock Market SPX Uptrend Inflection Point - 23rd May 15
What You Know for Certain - Huge Demand for Gold And Silver - 23rd May 15
Are We in Another Credit Bubble? And Is It Different than Before? - 23rd May 15
The “Real Flash Crash” Will Scare You to Death - 23rd May 15
Venezuela: No Rule of Law, Bad Money - 23rd May 15
Robots That Can Beat the Market by 100% - 23rd May 15
Why Shake Shack Stock Is a Bad Investment - 23rd May 15
Gold Price Primary Driver Bullish - 23rd May 15
Time To Get Real About China - 22nd May 15
Gold Lifeboat to Global Economies “Titanic Problem” Warn HSBC - 22nd May 15
One Investment Could Save Two Generations' Retirements - 22nd May 15
Investing is About Identifying Gifted and Talented Camps - 22nd May 15
One of Europe's Latest Debt Nightmares - 22nd May 15
UK Immigration Crisis Could Prompt BREXIT, Propelling Britain Out of EU Despite German Factor - 22nd May 15
America Superpower 2016 - 21st May 15
Stock Market Secular Versus Cyclical Investing - 21st May 15
Banking Stocks Break Out with Higher Bond Yields - 21st May 15
The Tech Portfolio Built to Beat the Market - 21st May 15
Gold “Less Sexy” Than Bitcoin … For Now - GoldCore on CNBC - 21st May 15
The Russia-West Rivalry in the Balkans - 21st May 15
The US Dollar and the Precious Metals Complex - 21st May 15
Gold GLD ETF Drawdown Continues Unabated - 21st May 15
Who’s Killing the Stock Market? - 21st May 15
Your Best Way to Profit from the Narrowest Market in 20 Years - 21st May 15
Government Regulation and Economic Stagnation - 20th May 15
It’s Time to Hold More Cash and Buy Gold - 20th May 15
Choppy Asian Stock Markets - 20th May 15
Countdown to Global Financial Collapse - 20th May 15
Will Interest Rates Ever Rise? - 20th May 15
How to Cash in on Amazon Stock’s Amazing Cloud Success - 20th May 15
Three Hidden Forces Pushing Crude Oil Price Back Up - 20th May 15
U.S. Housing Market Strong Numbers in Perspective - 20th May 15
Greece Debt Crisis - Obama Has A Big Fat Greek Finger - 20th May 15
Now Is the Time to Own the Oil & Gas Leaders - 20th May 15
UK Deflation Warning - Bank of England Economic Propaganda to Print and Inflate Debt - 20th May 15
Trading Gold and Silver along with the Pros - 19th May 15
Gold Ticks Higher as London Housing Market Crash Looms? - 19th May 15
Global Stock Market, Commodities Group Analysis - 19th May 15
How Stock Investors Could Profit from the Dark Net Pattern That Few Others See - 19th May 15
The Patriot Act is now USA Freedom Act - 19th May 15
Investing in Europe? 5 Critical Insights to Boost Your Portfolio Now - 19th May 15
Gold Price Trend Forecast - 19th May 15
Stock Market Continues Defying Gravity, Dow New All Time High - 19th May 15
Are Gold and Interest Rates About To Take Off Higher? - 18th May 15
Nikkei Japanese Stock Index Set To Get Smashed - 18th May 15
Silver Price Projections For 2020 - 18th May 15
The IMF Leaks Greece, Institutions Forcing a Debt Default - 18th May 15
Europe's Stocks Bull Market Continues After Correction - 18th May 15
European Banks Vulnerable Today As 2008 Financial Crisis - 18th May 15
Payments, Currencies, and Broken Money - 18th May 15
Learning to Trade Markets - Dealing with Losing Trades - 18th May 15
Stock Market Sell in May and Go Away - Last Hurrah - Take2 - 18th May 15
The No. 1 Reason Stocks Will Climb Higher - 17th May 15
Gold, Silver Distorted Markets, Financial Sophistry, and Moral Hazard - 17th May 15
Stock Market CAC40 Trend Forecast - 17th May 15
Stock Market Diagonal Pattern Nearly Complete - 16th May 15
Gold And Silver - Elite's Game Of Jenga In Place. Your Move - 16th May 15
You’ll Never See a Better Moment to Invest in China - 16th May 15
Are Gold and Silver Stocks Breaking Out? - 16th May 15
War On Cash - Why the IRS Seized All the Money from a Country Store - 16th May 15
Is China Economy a Fire-Breathing Dragon or a Dragon on Fire? - 16th May 15
Silver Buying Only Starting - 16th May 15
Why Opinion Pollsters Got UK Election 2015 Badly Wrong - 15th May 15
Double Black Diamond - What a Bond Bear Market Looks Like - 15th May 15
This “Bubble” Is Set to Kick Off New Energy Profits - 15th May 15
German Gold Demand "Spikes"- Investment Demand Surges 63% - 15th May 15
How GDP Metrics Distort Our View of the Economy - 15th May 15
McDonald's Future Is Hard to Digest (NYSE: MCD) - 15th May 15
Dry Bulk Shipping Index Chart Analysis Update 2015 - 15th May 15
Economic Expansion Ahead? World Stock Markets Analysis - 15th May 15
Why Not Tell Greece How To Run A Democracy? - 15th May 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Biggest Debt Bomb in History

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

© 2005-2015 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

Biggest Debt Bomb in History