Best of the Week
Most Popular
1.Election Forecast 2015 - Opinion Polls Trending Towards Conservative Outright Win - Nadeem_Walayat
2.UK Solar Eclipse - End Time Sign, Judgement Day, Doomsday! - Nadeem_Walayat
3.Gold And Silver - When Will Precious Metals Rally? Not In 2015 - Michael_Noonan
4.Preparing for the Next Stocks Bear Market - Forecast 2015-2016 - Gary_Savage
5.Is a Stock Market Crash Imminent? - David Eifrig
6.Gold Price Slumps as US Dollar Soars, What's Next? - Nadeem_Walayat
7.US Dollar Forex Pairs and Gold Chartology - Rambus_Chartology
8.Election Forecast 2015: The Day Labour Lost the General Election - Nadeem_Walayat
9.The ECB Should End QE Next Month - EconMatters
10.Silver Price Poised to Surge - Zeal_LLC
Last 5 days
You Can’t Afford Not to Invest in This Latest Yesla Technology - 1st Apr 15
Election Forecast 2015 - Coalition Economic Recovery vs Labour Collapse - 1st Apr 15
Bitcoin Price Down Move Still in the Cards - 31st Mar 15
No Body Understands Debt - Living in a Free-Lunch World - 31st Mar 15
Will Gold Win Out Against the US Dollar? - 31st Mar 15
Middle East Balance of Power Matures - 31st Mar 15
Ed Miliband Debate Election 2015 Analysis - Labour Spending, Debt and Economic Collapse - 31st Mar 15
Gold and Misery, Strange Bedfellows - 31st Mar 15
Why are Interest Rates So Low? Ben Bernanke, Confused as Ever, Starts His Own Blog to Prove It - 31st Mar 15
Don’t Celebrate the U.S. Housing Market Recovery Yet - 30th Mar 15
A Middle East Nuclear Holocaust - 30th Mar 15
Peak Gold? – Goldman Sachs Research Warns of Peak Gold Production - 30th Mar 15
With Yemen Burning, Arab Spring II Is Underway - 30th Mar 15
No FED Bets From the BIS - 30th Mar 15
Election Forecast 2015 - Debates Boost Labour Into Opinion Polls Seats Lead - 30th Mar 15
Economic Recovery, Geopolitics and Detergents - 30th Mar 15
U.S. Dollar, Commodities and the Gold Miners GDXJ ETF Analysis - 30th Mar 15
Stock Market Short-term Downtrend - 30th Mar 15
David Cameron Election 2015 Debate Facts Check - Employment, Immigration, Debt & Deficit - 29th Mar 15
Stock Market About Ready to Crash! - 29th Mar 15
Reflections in a Golden Eye - Gold Market Rejection, Repatriation and Redemption - 28th Mar 15
Stock Market Inflection Point - 28th Mar 15
Gold And Silver - What Moved Price? Bab el-Mandeb And Uranus Square Pluto. What?! - 28th Mar 15
Stock Market Investment Parachutes; Do You Have Yours? - 28th Mar 15
Peak Gold Misunderstanding, is Gold About to Run Out? - 28th Mar 15
Deflation Watch: Key U.S. Economic Measures Turn South - 27th Mar 15
The Hard-Earned Truth About Recreational Real Estate - 27th Mar 15
Bitcoin Price Still in Important Territory - 27th Mar 15
Stocks Bear Market Conditions - Index Market Range Warning - 27th Mar 15
BEA Leaves Q4 2014 U.S. GDP Growth Essentially Unchanged at 2.22% - 27th Mar 15
Brazil Economy Victim of Vulgar Keynesianism - 27th Mar 15
Gold to Fuel Silver Price Upleg - 27th Mar 15
Gold and Silver Stocks Will Rise Again! - 27th Mar 15
Risk of ‘World War’ between NATO and Russia on Ukraine as Yemen Bombed - 27th Mar 15
FOMC Minutes Turned The Gold Tide - 27th Mar 15
Sheffield Hallam Election Battle 2015 - Lib Dems Go to War Whilst Labour Sleeps - 27th Mar 15
Gold Effect On Mining & Shale Wasteland - 27th Mar 15
How Stock Investors Should Play the 2016 Presidential Race - 26th Mar 15
MidEast Energy Alert: Why the Crisis in Yemen Could Get Ugly Very Fast - 26th Mar 15
Stock Market Downward Spiral of Dumbness - 26th Mar 15
The Monetary Approach Reigns Supreme - 26th Mar 15
Stock Market Large Gap Down, Despite the Algos' Push Back - 26th Mar 15
Crude Oil Surges, Gold price Spikes as Middle East Tensions Escalate - 26th Mar 15
The U.S. Housing Market Recovery Is Fabricated Optimism - 26th Mar 15
Why Yemen Is The Next Saudi-Iranian Battleground - 26th Mar 15
The Crude Oil Price Crash and China Economic Slow Down - 26th Mar 15
Global Financial Markets Are More Distorted Than Ever Before - 26th Mar 15
One More Stock Market Rally and Then a Huge Drop Expected - 26th Mar 15
Danger Will Robinson - Stock Market Crash Warning - 25th Mar 15
Learn the Basics of Corrective Elliott Waves - 25th Mar 15
Why CNBC Is Hazardous to Your Financial Health! - 25th Mar 15
Will Your Retirement Accounts Survive The Coming Tax Code "Revolution"? - 25th Mar 15
US Dollar - Americas Phoenix - 25th Mar 15
California’s Epic Drought: Only One Year of Water Left! - 25th Mar 15
What’s Wrong With Silver? - 25th Mar 15
SPX Futures Appear Weak. WTIC and Gold May Be at Max Retracement - 25th Mar 15
We’re at the Dawn of a “New Energy Age” - 25th Mar 15
A Very Weak U.S. Economic Recovery - 25th Mar 15
Zero UK CPI Inflation Rate Prompts Deflation Danger Propaganda For Fresh Money Printing - 25th Mar 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

US Economy Still on Life Support

Good News for Gold Prices: Commodities are Wounded, But Far From Dead

Commodities / Gold and Silver 2012 May 24, 2012 - 07:20 AM GMT

By: Money_Morning

Commodities

Best Financial Markets Analysis ArticlePeter Krauth writes: Greece is frozen in a political stalemate. Youth unemployment is running at over 50%. And there has been a $1 billion run on Greek banks.

From near and afar, there appears to be no easy way out, especially now that the Eurozone is heading back into a recession.


It's times like these when investors pour into the U.S. dollar for its "perceived safety."

With commodities priced in U.S. dollars, this spike in the greenback has sent commodities-including gold prices-into a tailspin since early March.

That has many doubters asking: "Has the commodities super-cycle ended?"

It's a reasonable question considering the Continuous Commodity Index (CCI) is back down to levels it last saw in September 2010.

What's more, gold prices have backed off to near $1,500/oz., and oil prices have fallen from $110 to $90/barrel.

But as you'll see, the commodities coin does have another side.

The Other Side of the Commodities Story
In fact, a recent article by Frank Holmes, CEO and chief investment officer at U.S. Global Investors, pointed out how China and other emerging nations are in better fiscal shape than much of the West.

Even if China is slowing somewhat, it is still growing at an enviable 8% per year, with only 42% debt to GDP ratio. So rather than go for more outright stimulus, it's expected that China will target new loan growth and its M2-money supply growth to around 14%.

Meanwhile, India and Australia have just lowered interest rates while other central banks are basically refusing to raise rates.

It means the world will keep turning, people will keep consuming and annual demand of raw materials is likely to remain elevated.

As for gold prices, let's cut right to the chase.

Real interest rates are running around negative 2% and thanks to ZIRP (Bernanke's Zero Interest Rate Policy), they're likely to remain so at least until late 2014.

And debt in the West (U.S., Europe, England, and Japan) has doubled in a little over three years to almost $8 trillion in a veritable monetary flood that's bullish for gold.

On top of all that, the demand for physical gold is still increasing.

According to the World Gold Council's (WGC) Q1 2012 trends review, they see record levels of Chinese demand, surging 10%, for a new quarterly high of 255.2 tonnes. They also see further growth, as the Chinese remain concerned about high inflation persisting.

The demand is so great that China has surpassed India as the world's largest gold consumer.

European demand has also held up well, with physical metals in the form of bars and coins selling at higher than historical levels.

And central banks keep doing their part, with net purchases totaling 80.8 tonnes, or about 7% of global demand. WGC believes there's been a secular shift, with central banks now set to remain net buyers of gold for the foreseeable future.

Yet, gold investors who are dismayed by its recent price action need to be psychologically prepared.

If we were to see a scenario similar to the 1970s bull market, gold could easily drop in half at any time.

That's exactly what happened when gold reversed from $200 in January 1975, and fell for 18 months to $100 in August 1976.

Certainly, a drop that big would have forced a lot of gold investors to sell. But the truth was that the best was yet to come.

From $100 in August 1976 until its peak in 1980, gold rose 8 times to over $800.

In fact, a chart of the entire current bull market shows that gold prices could easily pull back to $1,300 and still not violate its upward trend line.


A QE Boost to Commodity and Gold Prices
So yes, the markets are in a funk over Europe and less-than-stellar economic news here.

But this is déjà vu all over again. Since the financial crisis began, we've been here three times before. In fact, each time since then, the Fed has stepped in following a clear market pullback and opened the monetary spigots.

First came Quantitative Easing 1 (QE1), then QE2, then Operation Twist. Each one of these liquidity injections quickly sent the market soaring.

The Fed also promised to keep rates low until the end of 2014. Of course, Ben's been denying for months that more stimulus is coming. Yet recently released Fed minutes from its April monetary policy meeting showed more openness to another round of easing to coax the economy along.

But each time one of these injections ends (wears off), the market (junkie) goes into withdrawal, and looks for its next fix.

I've been saying for awhile that it's coming. With an election pending this November, odds are good we'll see QE3 before the end of summer.

With falling stocks, retreating commodity prices, and weak jobs reports, it'll make the QE3 sales pitch a much easier sell than your average time-share.

And based on the reaction the last three times, I'm pretty confident the commodities markets will smile at this one, too.

Still, it won't be enough. We're going to see a lot more central bank easy money. QE4, QE5, and QE-pick-a-number will not be far behind.

Get ready. Commodities and gold are about to come roaring back.

The commodities bull market is far from over.

Source :http://moneymorning.com/2012/05/24/good-news-for-gold-prices-commodities-are-wounded-but-far-from-dead/

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

Free Report - Financial Markets 2014