Best of the Week
Most Popular
1.Is the Stocks Bull Market Over? Dow Trend Forecast into End January 2015 - Nadeem_Walayat
2.Gold and Silver Stocks Apocalypse Now, Bear Market Review - Rambus_Chartology
3.NHS Baldrick Plan to Spread Ebola Across UK - Sheffield, Newcastle, Liverpool, London Hospitals - Nadeem_Walayat
4.Ebola Terror Threat Suicide Bio-Weapons Threatens Multiple 9/11's, Global Plague - Nadeem_Walayat
5.Second-Richest Man Says Mortgages Now a "No Brainer" - Dr. Steve Sjuggerud
6.Gold And Silver Still No End In Sight - Michael_Noonan
7.NHS Baldrick Plan to Spread Ebola Across UK - Sheffield, Newcastle, Liverpool, London Hospitals - Nadeem_Walayat
8.The Gold Bug is Set to Bite Back - EWI
9.How Alibaba Could Capitalize on the EBay-PayPal Split - Frank_Holmes
10.The Consequences of the Economic Peace - John_Mauldin
Last 5 days
Bullish Silver Stealth Buying - 24th Oct 14
Blood in the Streets to Create the Gold Stocks Investor Opportunity of the Decade - 24th Oct 14
Swiss ‘Yes’ and ‘No’ Gold Initiative Campaigns Compete at Launches in Bern - 24th Oct 14
War And The Law Of Unintended Consequences - 24th Oct 14
Tesco Meltdown Debt Default Risk Could Trigger a Financial Crisis in Early 2015 - 24th Oct 14
Saudi Move to Cut Oil Prices Is Now Russia's Biggest Economic Threat - 24th Oct 14
US Stock Market Top Is Now In Sight - 24th Oct 14
New Profit Points in the Shifting Balance of Power, Welcome to Saudi America - 24th Oct 14
QE Failure & Folly Of Paper Mache, Treasury Bond Integrated Lifeline Patches - 24th Oct 14
U.S. Economy Faltering Momentum, Debt and Asset Bubbles - 23rd Oct 14
Annuities - Afraid Your Money Will Vanish before You Do? - 23rd Oct 14
What Debt Deleveraging? - 23rd Oct 14
How to Profit from Massive Spin-Offs with Just One Play - 23rd Oct 14
Evaluating Ebola as a Biological Weapon - 23rd Oct 14
Euro, USD, Gold and Stocks According to Chartology - 23rd Oct 14
Why You Should Always Be Invested in the Stock Market (Even Now) - 23rd Oct 14
Five U.S. Housing Market Warning Signs Point to Real Estate Market Downturn - 23rd Oct 14
The Better Short: Gold or Silver? - 23rd Oct 14
Focus on Graphite Companies with Green Energy and Technology Strategies - 22nd Oct 14
Crude Oil Price Hitting Bottom - 22nd Oct 14
Evidence of Another Even More Sweeping U.S. Housing Market Bust Already Starting to Appear - 22nd Oct 14
Gold Or Crushing Paper Debt Stocks Crash? - 22nd Oct 14
India Gold Demand Surges 450% and Bank of Russia Demand At 15 Year High - 22nd Oct 14
Bitcoin Stock Exchange Could Be "More Valuable than Alibaba" - 22nd Oct 14
Currency War - How to Profit from a Stronger U.S. Dollar - 22nd Oct 14
Banks Hold Treasuries and Make Loans- 22nd Oct 14
Gold and Silver Timing is Everything - 22nd Oct 14
Don't Get Ruined by These 10 Popular Investment Myths (Part VII) - 22nd Oct 14
Follow the Baby Boom to Biotech Stock Profits - 22nd Oct 14
Copper, Nickel and Zinc Won't Be Cheap for Long - 22nd Oct 14
How Will We Know That the Gold & Silver Price Bottom Is In? - 21st Oct 14
Is Gold as Dead as Florida Hurricanes? - 21st Oct 14
First Swiss Gold Poll Shows Pro-Gold Side In Lead At 45% - 21st Oct 14
The Similarities Between Germany and China - 21st Oct 14
The REAL Reason Why the Stock Market Turned Down - 21st Oct 14
Petrobras is a 'Scheme, Not a Stock' - 21st Oct 14
Stocks Bear Market Indicator Is Off the Mark - 20th Oct 14
Stock Market Ideal Turning Point is at Hand - 20th Oct 14
Investors Quit Complaining, The Environment is Perfect Right Now - 20th Oct 14
Ebola Armageddon Could Trigger a Rebirth in Gold and Silver Prices - 20th Oct 14
Gold vs Euro Risk Due To Possible Return of Italian Lira - Drachmas, Escudos, Pesetas and Punts? - 20th Oct 14
Stocks Rebounded Following Recent Sell-Off, But Will It Last? - 20th Oct 14
U.S. Responsible for West Africa Ebola Outbreak Says Liberian Scientist - 20th Oct 14
Stock Market Intermediate B Wave has Started - 20th Oct 14
Gold Stocks Analysis – FNV, CG, NCM, SBM - 19th Oct 14
Stock Market Primary IV Wave Counter Trend Rally - 19th Oct 14
Gold And Silver - Financial World: House Of Cards Built On Sand - 18th Oct 14
Anatomy of a Stock Market Sell-Off - 18th Oct 14
Why OPEC Has Declared an Oil War on Russia - 18th Oct 14
Gold and Silver Extreme Shorting Peaks - 18th Oct 14
Bitcoin Price Fall to $350? - 18th Oct 14
Tesco Supermarket Crisis Worse To Come as Customers Vanish! - 18th Oct 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Stocks Epic Bear Market

Three Forces That Will Send Gold Price Soaring

Commodities / Gold and Silver 2013 Aug 08, 2013 - 06:06 PM GMT

By: Investment_U

Commodities

Gold bulls got kicked in the teeth on Monday when Don Kohn – who is on President Obama’s short list of candidates to replace Fed Chairman Ben Bernanke – sent around a note saying the Federal Reserve will begin “tapering” its QE program after the September meeting.

That news sent gold lower on the day, and could grease the skids for the yellow metal for another week or two.


It doesn’t take much of a crystal ball to see that the Fed has been playing good cop/bad cop with the markets for months. First we’re told quantitative easing will wrap early, and then we’re told they’ll extend QE until monkeys fly. It’s silly. But like Charlie Brown and the football, traders go for it every time.

Personally, I’m glad for every short-term pullback in gold and silver, because I’m using those dips to buy more.

Looking at the chart, you can see that gold is between support and resistance. I don’t expect gold to get much cheaper, because it’s already below the average cost of production for the big miners. And I think gold could rally to $1,440 once traders shake off short-term fears.

Longer term, I’m very bullish on precious metals. Let me tell you about three things that could light a fire under the price of gold over time.

The Fed would like you to ignore these forces… but you ignore them at your peril.

Force #1: 7 Trillion Reasons to Buy Gold

Asia sits on almost $7 trillion in currency reserves, much of it in dollars. China alone holds $1.3 trillion in dollars. Japan holds another $1.1 trillion. This is all fine and dandy as long as Asia keeps loading up on dollars. It helps Uncle Sam support his high-living lifestyle. The problem comes when Asia decides to stop stacking greenbacks to the rafters.

If Asia decides to bring just a small slice of those funds home – to “sell” U.S. dollars – it could spend the money on infrastructure, education, new tech, energy research and more. The only reason Asian central banks hold on to their dollars is they like to keep their currencies cheap to sell us boatloads of poorly made junk.

So if Asia finally dumps some dollars, that would send the relative value of the dollar lower.

Gold especially should benefit, because China and other Asian countries are already loading up on as much gold as they can carry.

And that brings me to my second point…

Force #2: The Big Migration From West to East

The most bearish force in the gold markets right now is selling by exchange-traded funds that hold physical metal. Holdings are now at their lowest since May 2010. Barclays reports, “Net redemptions for the year-to-date have reached 653 metric tons, some 24% of holdings since the start of the year.”

Holy canoli, that’s a lot of gold! It’s surprising that gold prices aren’t lower than they already are. And the reason for that is eager buyers are snapping up that gold even as the big funds get rid of it.

The question every investor should be asking is, “where is the gold going?”

The answer is simple: To Asia, especially China.

Reports of gold buying in China are anecdotal; we won’t have the hard figures on how much they’re buying until long after the fact. But we do know that:

  • China’s May gold imports from Hong Kong jumped by more than a third from the previous month. So far, net imports through Hong Kong for the first five months of the year have totaled more than 413 metric tons – double those of a year earlier.
  • Indians were buying so much gold that the government instituted draconian crackdowns on gold importation. The biggest growth industry in India right now is gold smuggling.
  • Pakistan saw its own gold imports more than double. The value of gold imports in June recorded a jump of 176% compared to imports during June 2012. So, Pakistan announced its own temporary ban on gold imports.

Wall Street wants to pretend that gold is worthless, in order to keep up the pretense that all the paper money they’re printing still holds its value. So they’re selling gold on the cheap.

And Asia, particularly China, isn’t going along with the charade. The Chinese know that gold has real value. They’ll buy every gram that the SPDR Gold Trust (NYSE: GLD) wants to sell.

What the big banks really need gold for is to back up a currency when its value is questioned. That’s why the world’s central banks are buying a lot of gold right now. I wonder what the price will be when the Chinese sell our gold back to us.

Force #3: Future Gold Supply Is Imploding

The write-downs on gold projects this year isn’t just a disaster… it’s a catastrophe totaling $24.67 billion, according to Mineweb. Big miners trimmed operating mines, pushed back new projects and shut down mines that don’t work.

It’s so bad Barrick alone plans to sell, close or curb production at 12 of its 27 mines.

Not surprisingly, one major miner after another is reducing its production targets for this year. This will squeeze gold supply this year, and the squeeze will get tighter in future years as new projects are abandoned.

And that means there is a major opportunity coming up for smaller, low-cost gold producers. After all, the big gold miners are sitting on bags of money. They’ll need to deploy that cash… and they need to replace the high-cost projects they’re shelving.

These three forces are more than a push… they’re a potential rocket launch. When that big move higher comes, you’ll wish you owned more gold.

Good Investing,

Sean

Source: http://www.investmentu.com/2013/August/3-forces-that-will-send-gold-soaring.html

http://www.investmentu.com

Copyright © 1999 - 2013 by The Oxford Club, L.L.C 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 Investment U, Attn: Member Services , 105 West Monument Street, Baltimore, MD 21201 Email: CustomerService@InvestmentU.com

Disclaimer: Investment U Disclaimer: Nothing published by Investment U 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 investment 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 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Investment U should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Investment U Archive

© 2005-2014 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