Best of the Week
Most Popular
1.Oil Wars 2016 - US vs Russia vs Saudi Arabia vs Iran - Nadeem_Walayat
2.Crude Oil Price Crash Triggering Global Instability, Trend Forecast 2016 - Nadeem_Walayat
3.Stock Market Crash - Last Week was The 2nd and Final Warning... - Clive_Maund
4.Stock Market Crash Apocalypse or Bull Market Severe Correction? - Nadeem_Walayat
5.TShipping Said to Have Ceased… Is the Worldwide Economy Grinding to a Halt? - Jeff_Berwick
6.Crude Oil Price Crash Catastrophe, Independant Scotland Literally Begging to Rejoin the UK - Nadeem_Walayat
7.Summers: Global Economy Can't Withstand Four 2016 Fed Hikes - Bloomberg
8.Gold And Silver: New World Order: Public Be Damned, Preferably Dead - Michael_Noonan
9.Rigged U.S. Ttreasury Bond Market Double Barreled Hidden Q.E. To Infinity - Jim_Willie_CB
10.Major Stocks Bear Market Awakening - Zeal_LLC
Last 5 days
Is This the Debt Bubbles Last Rattle? - 12th Feb 16
Gold Stocks Upside Targets - 12th Feb 16
Stock Market Observations - 12th Feb 16
Will Capital Controls Return? - 12th Feb 16
Gold, Gold Stocks, and the End Game - 12th Feb 16
Canadian Dollar Now Even Less of a Haven from US Dollar Collapse Than Before - 12th Feb 16
The Stock Market Dow Elevator; 18, 17, 16.... - 12th Feb 16
Will Harry Dent Eat Crow on His $700 Gold Price Prediction? - 12th Feb 16
Where to Hide Your Money From Reckless Governments - 12th Feb 16
The War on Cash is About to Go into Hyperdrive - 11th Feb 16
More Bankruptcy For Your Retirement Portfolio - 11th Feb 16
2016 - Gold & Silver Rising: A Gold And Silver Bottom May Be In - 11th Feb 16
Gain Trading Confidence by Improving Your Elliott Wave Analysis Skills - Video - 11th Feb 16
With A Gloomy Start To 2016, A Bust Seems Just Around The Corner - 11th Feb 16
UK Interest Rates, Economy Forecasts 2016 and 2017 - Video - 10th Feb 16
World Markets Are in Sync - 10th Feb 16
If You Miss Buying Gold – You Will Regret, it Later - 10th Feb 16
The Fed Doesn't have a Clue! - 10th Feb 16
How Far Can Gold Price Go? - 10th Feb 16
It's Stock Market Panic Time! - 9th Feb 16
Gold Stocks Picks for Patient Pickers - 9th Feb 16
Oil Price Collapse U.S. Recession Odds 2016 - 9th Feb 16
Preparing for Crisis - It's About Risk Mitigation and Capital Preservation - 9th Feb 16
Top Silver Mining CEO: Don't Laugh, We Could See Silver $100+ - 8th Feb 16
Gold, Investment Leadership Changes Permanent? - 8th Feb 16
Stock Market Panic Decline Begins... - 8th Feb 16
How to Save Money By Growing Your Own Homegrown Tomatoes Indoors From Seeds - 8th Feb 16
US Economy Slides One Step Further Towards A Recession - 8th Feb 16
Gold Bear Market Bottom : Mr. Bear has left the PM Sector for Greener Pastures - 8th Feb 16
Stock Market At Important Support - 8th Feb 16
David Cameron Humiliated in Poland Over Refusal to Stop Taking UK Benefits, BrExit or Super State? - 8th Feb 16
Why Crude Oil Prices Could Continue FALLING From Here - 7th Feb 16
Stock Market S&P, NAS Best, Most Reliable Answers Come From The Market And You - 7th Feb 16
Stocks Bear Market Continues - 7th Feb 16
Silver COT Paving Way for Sustained Upside Breakout Sharp Rally - 7th Feb 16
US Dollar Double Top, Gold Prospects Brightening Rapidly - 7th Feb 16
Gold And Silver - Is A Bottom In? Nothing Confirmed - 7th Feb 16
Gold Stocks Something has Changed - 6th Feb 16
UK Interest Rates, Economy GDP Forecasts 2016 and 2017 - 6th Feb 16

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Global Financial Crisis 2016

Three Reasons to Buy Gold Now

Commodities / Gold and Silver 2014 Mar 12, 2014 - 03:54 PM GMT

By: DailyGainsLetter

Commodities

Mohammad Zulfiqar writes: When it comes to gold bullion prices, despite their mere 10% climb since the beginning of 2012, I wouldn’t be at all surprised to see gold bullion prices increase even further. With this, companies producing or looking for the precious metal are still presenting a great buying opportunity.


Let me explain…

We see demand for gold bullion continues to increase, and at the same time, supply constraints are slowly starting to show. This is something I have been talking about for some time now and at the very core, it is the perfect recipe for higher gold bullion prices ahead.

In 2013, we learned that the Indian government and the central banks have been working together to curb the demand for gold bullion in that country. This was a concern to many because India was the biggest consumer of the precious metal at that time. As a result of this, emotions took over, and we saw massive selling. A little-known fact that never made the mainstream: though the official demand for gold bullion declined, smuggling the precious metal into the country became the next big thing.

According to the World Gold Council (WGC), smuggled gold bullion in the country amounted to 150–200 tonnes in 2013. The WGC also predicts that if the restrictions imposed by India’s government remain in place, then it wouldn’t be a surprise to see an increase in the amount of gold bullion smuggled into the country. (Source: “UPDATE 1-Gold smuggling in India likely to rise if curbs stay-WGC,” Reuters, February 18, 2014.)

But this is just the tip of the iceberg.

We see uncertainty in the global economy is increasing, as well. For example, the troubles in Ukraine continue to show signs of escalation. We don’t think anything major will occur in terms of war, but what’s happening now is just enough for investors to run towards safety, which gold bullion provides.

As this is happening, we also hear about very problematic data that is coming out of the Chinese economy. The country is showing signs of deep stress and there may be a cash crunch—companies strapped for cash are in the making.

Above all, the debt levels in the global economy continue to increase. This means countries are creating more money out of thin air. This is only bullish for gold. Consider this: according to the data from the Bank for International Settlement compiled by Bloomberg, the global debt level has increased 40% since the financial crisis. Between mid-2007 and mid-2013, global debt rose by $30.0 trillion, from $70.0 trillion to $100 trillion. (Source: Glover, J., “Debt Exceeds $100 Trillion as Governments Binge,” Bloomberg, March 10, 2014.)

The sell-off in the gold bullion market in 2013 was a blessing in disguise. It forced gold companies to cut their costs—as gold bullion prices increased, their costs for these companies soared as well. As a result of this, they are cutting back on their exploration expenses, delaying projects, and so on and so forth. This all creates a massive constraint on the supply of the metal.

Gold companies fell victim to the sell-off last year. Since early this year, they have seen some huge gains. I have seen some junior gold mining companies double. Now imagine what happens if the price of gold goes up from $1,350 to say $1,500 an ounce—these companies may double or triple from their current levels.

You just have to be careful when choosing what you buy. There are companies that may look like a great story, but that shouldn’t be the only criteria on which you decide to buy. I would consider companies looking to cut their production costs with high-grade, quality reserves and cash on hand.

Daily Gains Letter

© 2014 Copyright Daily Gains Letter - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 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

Biggest Debt Bomb in History