Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Investing in Crypto Currencies With Both Eyes WIDE OPEN! - 25th Oct 21
Is Bitcoin a Better Inflation Hedge Than Gold? - 25th Oct 21
S&P 500 Stirs the Gold Pot - 25th Oct 21
Stock Market Against Bond Market Odds - 25th Oct 21
Inflation Consequences for the Stock Market, FED Balance Sheet - 24th Oct 21
To Be or Not to Be: How the Evergrande Crisis Can Affect Gold Price - 24th Oct 21
During a Market Mania, "no prudent professional is perceived to add value" - 24th Oct 21
Stock Market S&P500 Rallies Above $4400 – May Attempt To Advance To $4750~$4800 - 24th Oct 21
Inflation and the Crazy Crypto Markets - 23rd Oct 21
Easy PC Upgrades with Motherboard Combos - Overclockers UK Unboxing - MB, Memory and Ryzen 5600x CPU - 23rd Oct 21
Gold Mining Stocks Q3 2021 - 23rd Oct 21
Gold calmly continues cobbling its Handle, Miners lay in wait - 23rd Oct 21
US Economy Has Been in an Economic Depression Since 2008 - 22nd Oct 21
Extreme Ratios Point to Gold and Silver Price Readjustments - 22nd Oct 21
Bitcoin $100K or Ethereum $10K—which happens first? - 22nd Oct 21
This Isn’t Sci-Fi: How AI Is About To Disrupt This $11 Trillion Industry - 22nd Oct 21
Ravencoin RVN About to EXPLODE to NEW HIGHS! Last Chance to Buy Before it goes to the MOON! - 21st Oct 21
Stock Market Animal Spirits Returning - 21st Oct 21
Inflation Advances, and So Does Gold — Except That It Doesn’t - 21st Oct 21
Why A.I. Is About To Trigger The Next Great Medical Breakthrough - 21st Oct 21
Gold Price Slowly Going Nowhere - 20th Oct 21
Shocking Numbers Show Government Crowding Out Real Economy - 20th Oct 21
Crude Oil Is in the Fast Lane, But Where Is It Going? - 20th Oct 21
3 Tech Stocks That Could Change The World - 20th Oct 21
Best AI Tech Stocks ETF and Investment Trusts - 19th Oct 21
Gold Mining Stocks: Will Investors Dump the Laggards? - 19th Oct 21
The Most Exciting Medical Breakthrough Of The Decade? - 19th Oct 21
Prices Rising as New Dangers Point to Hard Assets - 19th Oct 21
It’s not just Copper; GYX indicated cyclical the whole time - 19th Oct 21
Chinese Tech Stocks CCP Paranoia, VIES - Variable Interest Entities - 19th Oct 21
Inflation Peaked Again, Right? - 19th Oct 21
Gold Stocks Bouncing Hard - 19th Oct 21
Stock Market New Intermediate Bottom Forming? - 19th Oct 21
Beware, Gold Bulls — That’s the Beginning of the End - 18th Oct 21
Gold Price Flag Suggests A Big Rally May Start Soon - 18th Oct 21
Inflation Or Deflation – End Result Is Still Depression - 18th Oct 21
A.I. Breakthrough Could Disrupt the $11 Trillion Medical Sector - 18th Oct 21
US Economy and Stock Market Addicted to Deficit Spending - 17th Oct 21
The Gold Price And Inflation - 17th Oct 21
Went Long the Crude Oil? Beware of the Headwinds Ahead… - 17th Oct 21
Watch These Next-gen Cloud Computing Stocks - 17th Oct 21
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21
How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
The Only way to Crush Inflation (not stocks) - 14th Oct 21
Why "Losses Are the Norm" in the Stock Market - 14th Oct 21
Sub Species Castle Maze at Alton Towers Scarefest 2021 - 14th Oct 21
Which Wallet is Best for Storing NFTs? - 14th Oct 21
Ailing UK Pound Has Global Effects - 14th Oct 21
How to Get 6 Years Life Out of Your Overclocked PC System, Optimum GPU, CPU and MB Performance - 13th Oct 21
The Demand Shock of 2022 - 12th Oct 21
4 Reasons Why NFTs Could Be The Future - 12th Oct 21
Crimex Silver: Murder Most Foul - 12th Oct 21
Bitcoin Rockets In Preparation For Liftoff To $100,000 - 12th Oct 21
INTEL Tech Stock to the MOON! INTC 2000 vs 2021 Market Bubble WARNING - 11th Oct 21
AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
Stock Market Wall of Worry Meets NFPs - 11th Oct 21
Stock Market Intermediate Correction Continues - 11th Oct 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold Has Two Major Hurdles to Overcome

Commodities / Gold and Silver 2015 May 27, 2015 - 05:10 AM GMT

By: Bob_Kirtley

Commodities

Background
Gold has 2 major hurdles to overcome and they are as follows:
1. Interest rate rises in the US
2. Money printing by other nations, Japan, UK, Europe, etc.
Both support the US$ and put downward pressure on gold.


The Chart above compares Gold, USD, Euro, Pound and the HUI.

The specter of interest rate increases in the US hangs over the precious metals sector like the Sword of Damocles. The Federal Reserve has stated that they want to ‘normalize’ rates now that the period of Quantitative Easing is over. Employment figures published by the Department of Labour have shown a steady increase in the number of jobs created over the last twelve months or so. On the inflation front; core prices, which exclude food and energy rose at a yearly pace of 1.8% for the month of April, which is the fastest monthly rise for almost a year. These data points will be viewed in a positive light by the Fed in that the economy is on track and recovering at a sufficient rate to allow for tighter monetary policy.

The European Union has announced a programme of Quantitative Easing for their members in an attempt to boost the European economy. The effect of this action will be to dilute the purchasing power of the Euro and so its value will fall. The same goes for the British pound and the Japanese Yen. These three currencies make up the lion’s share of the US Dollar Index, so as they drop it follows that the dollar will rise. The rising dollar will exert downward pressure on gold rendering gold cheaper in dollar terms.

Conclusion

It should be mentioned that gold has been outperforming most currencies other than the US dollar to the benefit of those living or trading in such currencies. However, they have all underperformed when compared to the dollar, so for those who wish to hold some of their funds in cash then the dollar rules.

At this stage of the cycle we remain of the opinion that the above mentioned factors weigh heavily on gold and as such gold’s progress will be severely hampered in the coming months. We also believe that some investors will throw the towel in and walk away from this sector thus precipitating a final capitulation in the precious metals sector.

The lion’s share of our investment funds are in the dollar as it continues to outperform the precious metals sector and we think it will continue to do so for now.

Patience is the order of the day and though it isn’t an exciting stance to take it certainly beats losing money.

We will continue to watch the Fed for what they say and do bearing in mind that they are ‘data driven’ which tells us the situation is fluid and subject to change. However, for those who are waiting for the advent of more Quantitative Easing, this is not going to happen and is certainly not on the cards for this year.

The producers may be cheaper than they have been for some time but that does not make them cheap or a viable investment opportunity. The mining sector has oscillated wildly this year but has gained nothing as the Gold Bugs Index, the HUI, is at the same level as it was in early January 2015.

Rallies will come and go but without the formation of new higher highs and some decent traction, this sector is held prisoner by the rising dollar and the continuing dilution of the other major currencies.

Patience is the order of the day and funds kept in US dollars are the current outperformers. Use this time to analyze and research the stocks that you would like to own and formulate a short list that you can manage and keep up with once you have made the purchase. Our watch list is huge but if we had to move tomorrow we have identified around 20 stocks that we would be happy to own and we will continue with the due diligence as a week can be a long time in the life of a mining company.

We currently retain 70% of our funds in dollars and are glad we did so as they have strengthened considerably which should enable us to purchase more stocks and or gold and silver when the bargains present themselves.

Stay flexible and don’t be afraid to place the occasional short trade as and when the market is overbought. These trades may take time to eventuate, but when the outlook in the short term is bleak the risk/reward environment is favorable.

Finally, go gently and only deploy small amounts of capital until a new direction is confirmed, we all need to be able to take a hit and live to fight another day.

Got a comment, then please fire it in whether you agree with us or not, as the more diverse comments we get the more balance we will have in this debate and hopefully our trading decisions will be better informed and more profitable.

Go gently.

Bob Kirtley
Email:bob@gold-prices.biz
URL: www.silver-prices.net
URL: www.skoptionstrading.com

To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address. Winners of the GoldDrivers Stock Picking Competition 200

DISCLAIMER : Gold Prices makes no guarantee or warranty on the accuracy or completeness of the data provided on this site. Nothing contained herein is intended or shall be deemed to be investment advice, implied or otherwise. This website represents our views and nothing more than that. Always consult your registered advisor to assist you with your investments. We accept no liability for any loss arising from the use of the data contained on this website. We may or may not hold a position in these securities at any given time and reserve the right to buy and sell as we think fit.

Bob Kirtley 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