Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Silver Bulls Will Be Handsomely Rewarded - 21st Sep 20
Fed Will Not Hike Rates For Years. Gold Should Like It - 21st Sep 20
US Financial Market Forecasts and Elliott Wave Analysis Resources - 21st Sep 20
How to Avoid Currency Exchange Risk during COVID - 21st Sep 20
Crude Oil – A Slight Move Higher Has Not Reversed The Bearish Trend - 20th Sep 20
Do This Instead Of Trying To Find The “Next Amazon” - 20th Sep 20
5 Significant Benefits of the MT4 Trading Platform for Forex Traders - 20th Sep 20
A Warning of Economic Collapse - 20th Sep 20
The Connection Between Stocks and the Economy is not What Most Investors Think - 19th Sep 20
A Virus So Deadly, The Government Has to Test You to See If You Have It - 19th Sep 20
Will Lagarde and Mnuchin Push Gold Higher? - 19th Sep 20
RTX 3080 Mania, Ebay Scalpers Crazy Prices £62,000 Trollers Insane Bids for a £649 GPU! - 19th Sep 20
A Greater Economic Depression For The 21st Century - 19th Sep 20
The United Floor in Stocks - 19th Sep 20
Mobile Gaming Market Trends And The Expected Future Developments - 19th Sep 20
The S&P 500 appears ready to correct, and that is a good thing - 18th Sep 20
It’s Go Time for Gold Price! Next Stop $2,250 - 18th Sep 20
Forget AMD RDNA2 and Buy Nvidia RTX 3080 FE GPU's NOW Before Price - 18th Sep 20
Best Back to School / University Black Face Masks Quick and Easy from Amazon - 18th Sep 20
3 Types of Loans to Buy an Existing Business - 18th Sep 20
How to tell Budgie Gender, Male or Female Sex for Young and Mature Parakeets - 18th Sep 20
Fasten Your Seatbelts Stock Market Make Or Break – Big Trends Ahead - 17th Sep 20
Peak Financialism And Post-Capitalist Economics - 17th Sep 20
Challenges of Working from Home - 17th Sep 20
Sheffield Heading for Coronavirus Lockdown as Covid Deaths Pass 432 - 17th Sep 20
What Does this Valuable Gold Miners Indicator Say Now? - 16th Sep 20
President Trump and Crimes Against Humanity - 16th Sep 20
Slow Economic Recovery from CoronaVirus Unlikely to Impede Strong Demand for Metals - 16th Sep 20
Why the Knives Are Out for Trump’s Fed Critic Judy Shelton - 16th Sep 20
Operation Moonshot: Get Ready for Millions of New COVAIDS Positives in the UK! - 16th Sep 20
Stock Market Approaching Correction Objective - 15th Sep 20
Look at This Big Reminder of Dot.com Stock Market Mania - 15th Sep 20
Three Key Principles for Successful Disruption Investors - 15th Sep 20
Billionaire Hedge Fund Manager Warns of 10% Inflation - 15th Sep 20
Gold Price Reaches $2,000 Amid Dollar Depreciation - 15th Sep 20
GLD, IAU Big Gold ETF Buying MIA - 14th Sep 20
Why Bill Gates Is Betting Millions on Synthetic Biology - 14th Sep 20
Stock Market SPY Expectations For The Rest Of September - 14th Sep 20
Gold Price Gann Angle Update - 14th Sep 20
Stock Market Recovery from the Sharp Correction Goes On - 14th Sep 20
Is this the End of Capitalism? - 13th Sep 20
The Silver Big Prize - 13th Sep 20
U.S. Shares Plunged. Is Gold Next? - 13th Sep 20
Why Are 7,500 Oil Barrels Floating on this London Lake? - 13th Sep 20
Sheffield 432 Covid-19 Deaths, Last City Centre Shop Before Next Lockdown - 13th Sep 20
Biden or Trump Will Keep The Money Spigots Open - 13th Sep 20
Gold And Silver Up, Down, Sideways, Up - 13th Sep 20
Does the Stock Market Really "See" the Future? - 12th Sept 20
Basel III and Gold, Silver and Platinum - 12th Sept 20
Tech Stocks FANG Index Nearing Critical Support – Could Breakout At Any Moment - 12th Sept 20
The Tech Stocks Quantum AI EXPLOSION is Coming! - 12th Sept 20
AMD Zen 3 Ryzen 4000 Questions Answered on Cores, Prices, Benchmarks and Threadripper Launch - 12th Sept 20
The Inflation Mega-trend is Going Hyper! - 11th Sep 20
Gold / Silver Ratio: Slowly I Toined… - 11th Sep 20
Stock Market Correction or Reversal? The Jury Isn't Out! - 11th Sep 20
Crude Oil – The Bearish Outlook Remains - 11th Sep 20
Crude Oil Breaks Lower – Sparking Fears Of Another Sub $30 Price Collapse - 11th Sep 20
Inflation by Fiat - 10th Sep 20
Unemployment Rate Drops. Will It Drag Gold Down? - 10th Sep 20
How Does The Global Economy Recover After This Global Pandemic? - 10th Sep 20
The Best Mobile Casino - 10th Sep 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Gold Soars as Perfect Storm Hits Stock Markets

Commodities / Gold & Silver Sep 29, 2008 - 09:51 AM GMT

By: Mark_OByrne

Commodities Best Financial Markets Analysis ArticleGold  and silver rose slightly Friday ( gold closed at $ 881.20 up $6.80 while s ilver  closed at $13.38 up 19 cents ). They were thus higher (gold by 2% and silver by 8%) for a second consecutive week which is very bullish from a technical basis and with momentum and the trend now up it looks like the sell off is over and we should reach $1,000/oz in the coming weeks.



Gold has come under pressure overnight in Asia and early European trading as the dollar has once again very counter intuitively rallied sharply for no fundamental reason whatsoever (from over 1.45 to EUR to nearly 1.43) and oil fell a further 3%. However, stock markets in Europe are plummeting again this morning and this will likely see a safe haven bid re-emerge today.

Both technically and fundamentally gold is looking as good as it has ever done and prices are set to surge in the coming months. Informed speculation is that once the election is over on November 4th we will see fireworks in these markets and a price surge akin to that seen in the late 1970's. In the four years after the election of Jimmy Carter, gold surged by more than 700% and given the confluence of even more bullish factors in this election year, we are likely to see a similar price surge.

It appears we are witnessing a broad based flight to safety internationally with increasing retail, hedge fund, institutional and even central bank buying of gold. The price would appear to artificially capped at the $900/oz level for the moment but given the extent of the growing demand, any short term manipulations will be just that as the long term fundamentals will see markedly higher prices .

Institutional and Retail Demand to Create "Perfect Storm" for Gold
Reuters reports that 'Private banks rethinking gold, seen next big buyers'. "Private banks could be the next big buyers in the global gold market, helping drive prices higher as they consider restocking bullion bars that were sold off in calmer times, the top HSBC gold trader said on Monday.

Jeremy Charles, chairman of the London Bullion Market Association and global head of precious metals trade at HSBC Bank, also said he expected central banks around the world to put the brakes on their plans to sell down gold reserves as they see other assets deteriorate, lending further support to prices. "

"I think the institutional investors and private banks in particular will all be reconsidering their strategy. My belief is they are likely to want to own some gold again,"he told Reuters on the sidelines of the LBMA's annual conference. The current generation of private bankers destocked their gold holdings in the 1980s and 1990s to pursue higher-return investments in recent years, but are now seeing the wisdom of the previous generation's gold holdings, he said.

Wisdom has been uncommon in the financial markets in recent years but that is liable to change rapidly in the coming months as deleveraging, risk reversion and the merits of a prudent allocation to the safe haven asset are realised  once again.

Barclay's Capital See "Perfect Storm" for Higher Gold Prices
A near "perfect storm" has reformed in the gold market that should drive bullion to new record highs within the next six months, fuelled by a mix of anxious uncertainty and a weaker dollar outlook, a Barclays Capital official said on Monday. A reconsideration of gold's merits should propel it beyond the March record of $1,030.80 an ounce, says Jonathan Spall, a director in BarCap's commodities division. "We should be in a perfect storm for gold."

  "I was always very sceptical of the argument of gold as a safe haven, but that has changed dramatically for me and for others -- now it's financial institutions themselves that are under threat," he said.

$1,000 is an extremely conservative estimate and hardly a perfect storm. A perfect storm is indeed increasingly likely and would involve gold at thousands of dollars per ounce.

Institutions are Becoming Increasingly Bullish on Gold
G oldman Sachs has in recent months and days been reducing it's short position on the Tokyo Commodity Exchange ( TOCOM). The TOCOM is one of the few exchanges where institutional investors positions must be declared and there is transparency. Gold on the TOCOM now has the lowest net short position that Goldman Sachs has ever held in the 33 months (see chart) and informed speculation is that they may soon be net long. Interestingly and not surprisingly, GS tends to time the market well and short term lows in their short position have often coincided with short term lows in the gold price.

Citigroup are also extremely bullish due to obvious macroeconomic and systemic risk but also fears regarding a possible derivative meltdown, concerns regarding monetisation of debt and the impact that would have on the dollar and the likelihood of competitive currency devaluations. The analysts are surprised gold has not reached $2,000/oz yet and say they believe it will in the coming months.

Retail Demand Update - Bullion Premiums to Surge Further
Some of the largest  wholesalers  in the U.S. and in the world are out of all bullion product except for exchange bullion product -  100 ozt and 400 ozt gold bars and 1,000 ozt silver bars.

They cannot supply South African Krugerrands, American Eagles and Buffaloes, Canadian Maples, Austrian Philharmonics, Chinese Pandas, Australian Nuggets (all 1 ozt). They cannot supply 1 oz or 10 oz gold bars or 1, 10 and 100 oz silver bars and 90% and 40% silver bags. And I have confirmed they cannot sell any European or world gold coins such as British sovereigns, francs, marcs, Mexican pesos etc. etc.

Three large wholesalers have confirmed that there is little or no physical supply forthcoming from the primary marketplace - large refiners and government mints. Worryingly they are being informed that this is not a temporary problem and there are no supply side commitments and there is nothing in the pipeline for the foreseeable future due to excessive and unprecedented demand.

Secondary supply from the public and retailers is nearly non existent as there are nearly no sellers and nearly all buyers.

It appears that the demand is so large for bullion internationally and increasingly from institutions that the precious metals refineries are using all their resources to create larger gold bars (used by jewellery manufacturers, high net worths, institutions and central banks and thus they have greatly curtailed their production of gold and silver bars in the smaller retail investor formats (gold 1 and 10 ozt and silver 1, 10 and 100 ozt).

Thus, gold and silver prices will have to rise dramatically in the coming weeks and months in order for sellers to be incentivised to come back into the secondary marketplace in order to fill the void caused by the failure of the primary marketplace (refiners and government mints) to be able to supply the unprecedented demand.

Already premiums on bullion coins and smaller bars have increased dramatically (from low single digits to double digits) and we may be witnessing a new pricing structure whereby gold and particularly silver bullion in smaller formats always attracts a higher premium than does gold and silver bullion in large bar format.

In the same way that jewellers have massive mark-ups of hundreds of percent on their jewellery products (often only 9 and 14 carat purity), gold and silver bullion coins (22-24 carat) may soon attract a far higher premium to  both buyers and sellers.

Conclusion
Despite the wildly bullish fundamentals, gold remains taboo in most of the financial press. It is rarely covered and when it is covered, it is done superficially and more often than not negatively and sometimes even inaccurately.  Some stockbrokers and purveyors of other financial products (most of whom never predicted any of the recent financial and economic developments whatsoever and never warned of possible macroeconomic and systemic risk) have lost their clients much of their wealth yet continue to spout nonsense about gold.

They will be found out in the coming months and many questions will rightly be asked regarding what purported to be personal finance and wealth management advice in the coming months. Questions will especially be asked of those of who failed to inform the investment community of the very bullish fundamentals driving the gold market. Some have deterred investors from making an essential diversification into gold, one of the few asset classes that will protect and even increase wealth in the coming months.

It appears we are witnessing a broad based flight to safety internationally with retail, hedge fund, institutional and even central bank buying of gold having increased in recent days.

By Mark O'Byrne, Executive Director

Gold Investments
63 Fitzwilliam Square
Dublin 2
Ireland
Ph +353 1 6325010
Fax  +353 1 6619664
Email info@gold.ie
Web www.gold.ie
Gold and Silver Investments Limited
No. 1 Cornhill
London,
EC3V 3ND
United Kingdom
Ph +44 (0) 207 0604653
Fax +44 (0) 207 8770708
Email info@www.goldassets.co.uk
Web www.goldassets.co.uk

Gold and Silver Investments Ltd. have been awarded the MoneyMate and Investor Magazine Financial Analyst of 2006.

Mission Statement
Gold and Silver Investments Limited hope to inform our clientele of important financial and economic developments and thus help our clientele and prospective clientele understand our rapidly changing global economy and the implications for their livelihoods and wealth.
We focus on the medium and long term global macroeconomic trends and how they pertain to the precious metal markets and our clienteles savings, investments and livelihoods. We emphasise prudence, safety and security as they are of paramount importance in the preservation of wealth.

Financial Regulation: Gold & Silver Investments Limited trading as Gold Investments is regulated by the Financial Regulator as a multi-agency intermediary. Our Financial Regulator Reference Number is 39656. Gold Investments is registered in the Companies Registration Office under Company number 377252 . Registered for VAT under number 6397252A . Codes of Conduct are imposed by the Financial Regulator and can be accessed at www.financialregulator.ie or from the Financial Regulator at PO Box 9138, College Green, Dublin 2, Ireland. Property, Commodities and Precious Metals are not regulated by the Financial Regulator

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: 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. Past experience is not necessarily a guide to future performance.

All the opinions expressed herein are solely those of Gold & Silver Investments Limited and not those of the Perth Mint. They do not reflect the views of the Perth Mint and the Perth Mint accepts no legal liability or responsibility for any claims made or opinions expressed herein.

Mark O'Byrne 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