Best of the Week
Most Popular
1. US Housing Market House Prices Bull Market Trend Current State - Nadeem_Walayat
2.Gold and Silver End of Week Technical, CoT and Fundamental Status - Gary_Tanashian
3.Stock Market Dow Trend Forecast - April Update - Nadeem_Walayat
4.When Will the Stock Market’s Rally Stop? - Troy_Bombardia
5.Russia and China Intend to Drain the West of Its Gold - MoneyMetals
6.BAIDU (BIDU) - Top 10 Artificial Intelligence Stocks Investing To Profit from AI Mega-trend - Nadeem_Walayat
7.Stop Feeding the Chinese Empire - ‘Belt and Road’ Trojan Horse - Richard_Mills
8.Stock Market US China Trade War Panic! Trend Forecast May 2019 Update - Nadeem_Walayat
9.US China Trade Impasse Threatens US Lithium, Rare Earth Imports - Richard_Mills
10.How to Invest in AI Stocks to Profit from the Machine Intelligence Mega-trend - Nadeem_Walayat
Last 7 days
Facebook's Libra Crypto currency vs Bitcoin: Five Key Differences - 19th June 19
Fed May Trigger Wild Swing In Stock Index and Precious Metals - 19th June 19
How Long Do Land Rover Discovery Sport Brake Pads Last? - 19th June 19
Gold Golden 'Moment of Truth' Is Upon Us: $1,400-Plus or Not? - 18th June 19
Exceptional Times for Gold Warrant Special Attention - 18th June 19
The Stock Market Has Gone Nowhere and Volume is Low. What’s Next - 18th June 19
Silver Long-Term Trend Analysis - 18th June 19
IBM - Watson Deep Learning - AI Stocks Investing - Video - 18th June 19
Investors are Confident, Bullish and Buying Stocks, but… - 18th June 19
Gold and Silver Reversals – Impossible Not to Notice - 18th June 19
S&P 500 Stuck at 2,900, Still No Clear Direction - 17th June 19
Is Boris set to be the next Conservation leader? - 17th June 19
Clock’s Ticking on Your Chance to Profit from the Yield Curve Inversion - 17th June 19
Stock Market Rally Faltering? - 17th June 19
Johnson Vs Gove Tory Leadership Contest Grudge Match Betfair Betting - 17th June 19
Nasdaq Stock Index Prediction System Is Telling Us A Very Different Story - 17th June 19
King Dollar Rides Higher Creating Pressures On Foreign Economies - 17th June 19
Land Rover Discovery Sport Tailgate Not Working Problems Fix (70) - 17th June 19
Stock Market Outlook: is the S&P today just like 2007 or 2016? - 17th June 19
US China War - Thucydides Trap and gold - 16th June 19
Gold Stocks Bull Upleg Mounting - 16th June 19
Gold Price Seasonal Trend Analysis - Video - 16th June 19
Fethiye Market Fruit, Veg, Spices and Turkish Delight Tourist Shopping - 16th June 19
US Dollar Gold Trend Analysis - 15th June 19
Gold Stocks “Launch” is in Line With Fundamentals - 15th June 19
The Rise of Silver and Major Economic Decline - 15th June 19
Fire Insurance Claims: What Are the Things a Fire Claim Adjuster Does? - 15th June 19
How To Find A Trustworthy Casino? - 15th June 19
Boris Johnson Vs Michael Gove Tory Leadership Grudge Match - Video - 14th June 19
Gold and Silver, Precious Metals: T-Minus 3 Seconds To Liftoff! - 14th June 19
Silver Investing Trend Analysis - Video - 14th June 19
The American Dream Is Alive and Well - in China - 14th June 19
Keeping the Online Gaming Industry in Line - 14th June 19
How Acquisitions Affect Global Stocks - 14th June 19
Please Don’t Buy the Dip in Nvidia or Other Chip Stocks - 14th June 19
A Big Thing in Investor Education is Explainer Videos - 14th June 19
IRAN - The Next American War - 13th June 19
Boris Johnson Vs Michael Gove Tory Leadership Grudge Match Contest - 13th June 19
Top Best VPN Services You Can Choose For Your iPhone - 13th June 19
Tory Leadership Contest Betting Markets Forecast - Betfair - 13th June 19
US Stock Market Setting Up A Pennant Formation - 13th June 19
Which Stocks Will Lead The Cannabis Rebound? - 13th June 19
The Privatization of US Indo-Pacific Vision - Project 2049, Armitage, Budget Ploys and Taiwan Nexus - 12th June 19
Gold Price Breaks to the Upside - 12th June 19
Top Publicly Traded Casino Company Stocks for 2019 - 12th June 19
Silver Investing Trend Analysis - 12th June 19
Why Blue-Chip Dividend Stocks Aren’t as Safe as You Think - 12th June 19
Technical Analysis Shows Aug/Sept Stock Market Top Pattern Should Form - 12th June 19
FTSE 100: A Top European Index - 12th June 19
Gold Surprise! - 11th June 19
How Forex Indicators are Getting Even More Attention in the Market? - 11th June 19
Stock Market Storm Clouds on the Horizon - 11th June 19
Is Your Financial Security Based On A Double Aberration? - 11th June 19
What If Stocks Are Wrong About Interest Rate Cuts? - 11th June 19
US House Prices Yield Curve, Debt, QE4EVER! - 11th June 19
Natural Gas Moves Into Basing Zone - 11th June 19
U.S. Dollar Stall is Good for Commodities - 11th June 19
Fed Running Out of Time and Conventional Weapons - 11th June 19
Trade Wars Propelling Stock Markets to New Highs - 11th June 19
Best Travel Bags for Summer Holidays 2019, Back Sling packs, water proof, money belt, tactical - 11th June 19

Market Oracle FREE Newsletter

Gold Price Trend Forecast Summer 2019

Gold Not A Safe Haven On Terrorism, Middle East Bombing, Russia ... Yet

Commodities / Gold and Silver 2014 Sep 26, 2014 - 04:46 PM GMT

By: GoldCore

Commodities

With escalating conflict in the Middle East, an unresolved conflict in the Ukraine, and various other geo-political risks on the horizon such as the contagion risk of Ebola, it would be expected that the longstanding 'safe haven' qualities of gold would come into play as they have done in the past. 


In September 2008, during the financial crisis, the gold price rose $50 in one day, September 18, as investors sought refuge in the one asset that they perceived to be a safe-haven of high liquidity and high credit quality. This one day move in September 2008 was the largest one day move since February 1980. 

Back in late 1979 and early 1980, some of the key drivers that propelled the gold price higher were the Russian invasion of Afghanistan and the Iranian hostage crisis.

Just looking back at old newspaper gold market commentaries in 1979 and 1980 will highlight that a lot of the key drivers for the rise in the gold price at that time were geo-politically related.

Today, the world appears to be as uncertain if not more uncertain. Indeed, in 1980 there was little risk of terrorism - state sponsored or otherwise.

In the late 1970s and early 1980s, the gold futures markets did not have nearly as large an impact on the world gold price as they does now, and the gold price was primarily driven by physical demand for gold, a lot of which was Middle Eastern and Asian demand. 

The concept of unallocated gold accounts in the London market was in its infancy and was only being discussed by the five gold fixing bullion banks as a security issue in not having to move gold shipments around London so often. The practice of having unallocated gold not fully backed by allocated gold was not encouraged at that time.

Fast forward to today, and the 'flight to quality' and 'financial insurance' characteristics of gold should in theory be as important now as they were in 1979-1980 given similar invasions and occupations in various countries, not least in the Middle East with ISIS, and the renewed bombing in Syria/Iraq by the US and/or a US coalition. 

Coupled with these worsening geopolitical developments, global macro economic risks remain elevated, with official interest rates at historically low levels, continued central bank balance sheet expansion through quantitative easing programs, and continued fiat currency debasement in the US dollar, Euro and other reserve currencies. 

Inflationary risks therefore remain at the forefront. But at the same time, the gold price barometer is not signalling these inflationary risks either.     The key driver of the gold price at the moment is perceived to be the relative strength of the US dollar, yet the US dollar is only stronger compared to the other main currencies because these currencies, such as the Euro, are weak due to their economies remaining weak and their money supplies having been debased. 

The economic recovery in the US is tentative at best. With the current weakness in the gold price, there is a growing cacophony that the safe haven qualities of gold are no longer relevant. Indeed, some in the financial markets are saying that the current gold bull market is dead. 

It would appear to us that the factors that would make gold a safe-haven asset have not gone away. 

In fact these factors are strengthening, as described above. The only rational explanation appears to be that gold remains an investment safe-haven as it has always done, but that this is not yet being recognised by the price discovery process in the market.

Adding in the fact that there is a continued disconnect between, on the one hand, the global physical gold market primarily driven out of China and India, and on the other hand, the New York gold futures market and unallocated London bullion market on the other hand, then this disconnect should not be expected to persist over the medium term.

This is especially the case given the heightened geopolitical and macroeconomic risks. 

With the gold price not yet signalling the geopolitical and macroeconomic alarm bells that many would have expected it to, the question of gold price manipulation remains a valid question.

Recent gold price manipulation by an investment bank for commercial reasons has been established in the case of the successful prosecution against Barclays by the FCA regulator. 

For strategic reasons, central banks do not welcome a disorderly increase in the gold price because it makes their fiat currencies look vulnerable and adds to inflationary expectations.

It is therefore not unrealistic to think that some of the current gold price weakness may be related to nonpublic gold market interventions by some of the world's central banks such as the Federal Reserve and the ECB, perhaps under the auspices of the Bank for International Settlements (BIS). 

There is plenty of documentary evidence to suggest that the G10 central banks have historically discussed the gold price during their regular meetings and they also are very cautious on allowing more recent document releases through freedom of information requests. 

For different reasons, the Chinese government welcomes a low gold price since it allows China to continue to accumulate gold in large quantities. Even if this accumulation of gold by China is being done for other reasons, it does act as a way of hedging China's exposure to its vast holdings of US dollar denominated Treasuries. Time will tell if this has been China's strategy.    

Most markets these days are being manipulated. Therefore it seems very possibly that the gold and silver markets are too. This could be one of the factors in the precious metals surprisingly poor performance in recent weeks despite significant geopolitical and indeed economic uncertainty.

The Middle East is a powder keg that seems likely to explode. The U.S. and western nations have taken a hard stance against an increasingly powerful Russia. This is effecting an already fragile Eurozone and other economies.

Brinkmanship and a failure of diplomacy has brought the world close to a serious military conflict.

Gold has protected wealth throughout history from financial crises and war. We believe it will continue to do so in the coming years

It is very likely that tensions will lead to safe haven demand for gold and higher prices. An economic war has broken out between major world powers and the historical record shows that sanctions and protectionism tend to lead to military confrontation and war.

Everybody should own some physical gold as a hedge and a safe haven asset to protect against the significant risks challenging us today which include bail-ins, currency wars, terrorism and war. 

The contention therefore is that, for now, the death of safe haven gold has been greatly exaggerated.

Gold is a hedging instrument and a safe haven asset as seen in history and much academic research in recent years. That is not apparent in recent weeks but we believe it will be in the medium and long term.

Download ‘GOLD IS A SAFE HAVEN ASSET’ Here

MARKET UPDATE

Today’s AM fix was USD 1,222.25, EUR 958.70 and GBP 749.11 per ounce.  Yesterday’s AM fix was USD 1,210.50, EUR 950.61 and GBP 742.05 per ounce.

Gold climbed $3.80 or 0.31% to $1,221.00 per ounce and silver slid $0.18 or 1.07% to $17.52 per ounce yesterday.

Gold bullion in Singapore rose 0.1% to $1,223.91 an ounce by  0342 GMT, on track for a gain of almost 0.7% for the week.

Gold rebounded on Friday, aiming to break a three week losing streak, as equity markets dipped, but investors  are still cautious that a strong dollar and improving U.S. economy could mean a movement in monetary policy.

In London this morning spot gold was up 0.1% at $1,223.10 an ounce by 0959 GMT and on track for a marginal weekly gain. U.S. gold futures gained $1.50 to $1,223.50 an ounce.

The gold price is essentially unchanged from yesterday's New York close. In yesterday's New York trading session gold rose from $1,210 to close at $1,221.90. This level was maintained in overnight Asian market trading and into London morning trading.

Overhead resistance is now at $1,240 and if the price weakens to below $1,200, it would be expected to test the $1,184 level which is the December 2013 low. The $1,184 level is also a July 2013 low, so is being currently labelled as a ‘triple bottom’.

Below this is the $1,155 price level which is a technically important Fibonacci 61.8% retracement level. Technical levels are important in the commodity and metal markets since various trading strategies take these levels into account when deciding when to buy and sell.

The Fibonacci 61.8% retracement level represents a 61.8% pullback from the entire 2008-2014 upward gold price  move which saw gold rose from the $690 area in October 2008 up to above $1,900 in early September 2011, a move of about $1,210. 

A 61.8% pullback of this upward move brings the price approximately back to the $1,155 level.

Silver is also essentially unchanged from yesterday's New York close. The silver price was more range bound than gold yesterday and it moved within a $17.40 to $17.60 band. On the downside, the $17.27 level is a key technical level since this represents a Fibonacci 78.6% retracement of the entire move up in the silver price since 2008.

The Gold/Silver ratio is currently about 69.7 and could breach 70, which is an important trading level. If this were to happen, it would mean that the silver price would continue to weaken slightly relative to the gold price over the short term.

Palladium is currently trading at $805. After rising above $900 at the beginning of September, the palladium price has now fallen back to its current level very close to $800.

The continued long term move up in the palladium price this year has been made on the back of mining strikes in South Africa and strong industrial demand for palladium in the global automobile market. Palladium is currently trading near its 200 day moving average of 803. 

The weakness in the palladium price this week is due to news that Norilsk, the big Russian palladium producer, is in talks to buy $2 billion worth of palladium from a stockpile of palladium that is maintained by the Russian government / Russian central bank. The size of this stockpile is not publicised. 

Some of the current supply deficit in the palladium market would be solved if Norilsk was to be able to gain access to the Russian state's stockpile, hence the uncertainty in the palladium price.

If it palladium price makes a move down below the $800 level, it could fall to the March 2013 high of $786.  Palladium however, is still in a long term uptrend that began in 2008, but  since the price has fallen back from $900 to $800 so quickly, the 200 day moving average near $800 is an important level. 

Platinum is currently trading at $1314, near the lows over the last year. The 2013 low, in June 2013, was $1,288 so this is a critical level over the short term. The December 2013 low was $1,311 which has now been breached. 

For the current week, the gold price has risen marginally, and is up 0.25% from last week's close. 

Silver however is down 5.05% from last Friday's London silver fix price of $18.45. 

Palladium is down 2.18% for the week, from $823 at last Friday's London PM close.

Platinum is 2.45% lower compared to last Friday's PM platinum fix price of $1,347 in London.

Momentum remains to the downside and the short term technicals remain poor. We would caution against buying until we see a higher weekly or indeed monthly close.

A higher weekly close today would make us bullish for next week as physical demand is picking up in India and China ahead of festival season. Dollar cost averaging remains prudent.

by Ronan Manly , Edited by Mark O’Byrne

See GoldCore’s ‘Gold Important Diversification As Living In One Greatest Financial Bubbles Ever’ Webinar Here

This update can be found on the GoldCore blog here.

Yours sincerely,
Mark O'Byrne
Exective Director

IRL
63
FITZWILLIAM SQUARE
DUBLIN 2

E info@goldcore.com

UK
NO. 1 CORNHILL
LONDON 2
EC3V 3ND

IRL +353 (0)1 632 5010
UK +44 (0)203 086 9200
US +1 (302)635 1160

W www.goldcore.com

WINNERS MoneyMate and Investor Magazine Financial Analysts 2006

Disclaimer: The information in this document has been obtained from sources, which we believe to be reliable. We cannot guarantee its accuracy or completeness. It does not constitute a solicitation for the purchase or sale of any investment. Any person acting on the information contained in this document does so at their own risk. Recommendations in this document may not be suitable for all investors. Individual circumstances should be considered before a decision to invest is taken. Investors should note the following: Past experience is not necessarily a guide to future performance. The value of investments may fall or rise against investors' interests. Income levels from investments may fluctuate. Changes in exchange rates may have an adverse effect on the value of, or income from, investments denominated in foreign currencies. GoldCore Limited, trading as GoldCore is a Multi-Agency Intermediary regulated by the Irish Financial Regulator.

GoldCore is committed to complying with the requirements of the Data Protection Act. This means that in the provision of our services, appropriate personal information is processed and kept securely. It also means that we will never sell your details to a third party. The information you provide will remain confidential and may be used for the provision of related services. Such information may be disclosed in confidence to agents or service providers, regulatory bodies and group companies. You have the right to ask for a copy of certain information held by us in our records in return for payment of a small fee. You also have the right to require us to correct any inaccuracies in your information. The details you are being asked to supply may be used to provide you with information about other products and services either from GoldCore or other group companies or to provide services which any member of the group has arranged for you with a third party. If you do not wish to receive such contact, please write to the Marketing Manager GoldCore, 63 Fitzwilliam Square, Dublin 2 marking the envelope 'data protection'

GoldCore Archive

© 2005-2019 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

6 Critical Money Making Rules