Gold Advice
Back in 2002 the editors of Profit Confidential started telling their readers it was time to jump into gold related investments. This gold advice proved to be extremely timely. Yes, back in 2002 we started offering gold advice to our readers and we still do it today. We have been recognized as one of the first investment letters to tell its audience to jump into gold stocks, very early in the gold bull market. The gold advice we provided resulted in many stocks we follow rising in price 100% or more in short periods of time. Today, you can regularly find gold advice in Profit Confidential. Each time gold prices moved higher, we told our readers to buy more gold related investments. See what we have to say about gold’s future dally in Profit Confidential.
Gold’s Decade-Long Reign Near an End?
By George Leong, B.Comm. for Profit Confidential
I have been a major supporter of gold for the past decade during the run-up in prices, but I can’t say I’m that confident at this moment.
Of course, there are still the issues in the eurozone, tension in the Middle East, and the crazy man running North Korea, but I sense the party may be coming to a halt for gold investors.
This is sad, but the shining yellow metal has made money for investors for a decade, so perhaps it’s time to take a siesta.
Here’s my thinking.
The U.S. economy is on the mend. The global economy is recovering; albeit, there are some concerns in China and Europe. The world’s central banks have created a low interest rate environment that has helped to drive global economic renewal and recovery in stocks. It’s all about risk and return at this juncture. While I feel the eurozone could still offer a surprise and America continues to tread on massive debt accumulation, gold is not seen as a viable investment opportunity at this time. Unless the stock market reverses course to the downside, the immediate outlook for the yellow metal looks dull in my view.
Even the recent rally back above $1,600 an ounce on the Cyprus concerns was short-lived and void of any major momentum. There was no reason for the metal to hold above $1,600.
While just recently there was talk of gold retracing back to the high-$1,600 level witnessed earlier in the year, I now feel it could be a challenge for the metal to hold $1,500.
Just take a glance at the chart below. Note the relative divergence between the move of the S&P 500 since November 2012 and the downward slide of gold as indicated by the blue lines. Clearly, the equities market and gold are moving in opposite directions, based on my technical analysis.
Chart courtesy of www.StockCharts.com
Now, I’m not saying the yellow ore is dead; but as long as the global economy continues to improve, I just can’t see a reason why investors would want to h… Read More
Central Banks’ Gold Purchases in 2012 Most Since 1964
By Michael Lombardi, MBA for Profit Confidential
According to the International Monetary Fund (IMF), in February, the central bank of Mongolia increased its gold bullion reserves to its highest level since August of 2008. The country has been purchasing gold bullion for three consecutive months—its reserves have increased from 1.5 metric tons to 5.8 tons, or about 287%. (Source: Bloomberg, March 26, 2013.)
Similarly, the central bank of Russia has been purchasing gold bullion. It bought seven tons of the yellow metal in February to bring its total gold bullion holdings to 796.9 tons.
Turkey, the country which has started to use gold bullion as collateral, increased its reserves by 5.7 tons in February, bringing its total holdings to 375.7 tons.
According to the World Gold Council, central banks around the world purchased 534.6 tons of gold bullion in 2012, which was the highest amount since 1964.
How long can this buying spree by central banks continue in the gold bullion market? Consider China, for example. The country’s central bank holds only 1.7% of its reserves in gold bullion. (Source: “World Official Gold Holdings,” World Gold Council, March 2013.) And China has the biggest reserve in the world—worth more than $3.0 trillion.
But compared to the gold bullion holdings of other major central banks, China is still far behind. The U.S., Germany, and Italy hold more than 70% of their reserves in gold bullion. Imagine what would happen to gold bullion prices if China even just tried to double its gold reserves.
In the backdrop of the gold bullion buying spree, central banks around the world are printing paper money, working to depreciate their currencies to jumpstart exports.
Thanks to the Federal Reserve, central banks around the world are losing trust in the U.S. dollar; which used to be the “safe haven” currency. As more countries print paper money, known as “fiat currency,” the same countries will be relu… Read More
What the Cyprus Crisis Told Me About Gold Bullion
By Michael Lombardi, MBA for Profit Confidential
As the chart below indicates, the price of gold bullion ticked higher when news came that the Cyprus government would vote on a levy for bank deposits. Gold bullion prices moved above $1,600 an ounce on the news.
Chart courtesy of www.StockCharts.com
What this goes to show is that in times of uncertainty, investors still run to gold bullion.
I don’t believe the gold bears realize the fundamentals, which will eventually move gold bullion prices much higher. Some investors are judging the price of gold bullion simply by looking at the wave of optimism hovering in the global economy due to rising equity markets. The view I hear over and over is: “The economy is getting better every day; gold’s glory days are over.”
The reality is that the global economy is still tormented. The eurozone is in a deep recession; China is struggling with high inflation and an economic slowdown; Japan is printing too much money in its effort to stop an export slump and jump-start its economy; and the U.S. economy saw no growth in the fourth quarter of 2012.
Central banks in the global economy are printing in overdrive, and governments are spending with both hands. The U.S. government alone has incurred a national debt of more than $16.0 trillion. By the end of this year, it will be $17.0 trillion.
Add to all this the fact that the Federal Reserve is creating $85.0 billion a month in new money with no end in sight.
No doubt, the end result of all this paper money printing is going to be higher inflation. The official numbers may not show it yet, but eventually inflation is going to be a major concern.
But what still holds true is that gold bullion still has a shiny future.
Where is gold bullion headed next? From what I can see, the mainstream has become outright bearish on the yellow metal. However, many industry veterans have a different view on gold bullion prices. Here’s what the CEO of Goldcorp Inc. (NYSE/GG), Chuck J… Read More
As Investors Flee Gold ETFs, Central Banks Jump in as Bigger Gold Buyers
By Michael Lombardi, MBA for Profit Confidential
While mainstream financial and a growing number of economic forecasters focus on investors fleeing the gold bullion market, I am following in the footsteps of central banks around the world…
Investors pulled out a record amount of money from gold bullion-backed exchange-traded funds (ETFs) this past February. A total of $4.1 billion was withdrawn from gold bullion ETFs last month, the largest single-month outflow since January of 2011. (Source: ETF Trends, March 6, 2013.)
Gold investors fled the market on speculation that gold bullion prices will plummet, as the metal’s future looks anything but bright—the theory being the global economy is improving and central banks will need to pull back on their easy monetary policies.
But, as investors sold ETFs in February, central banks around the world added to their gold bullion reserves.
South Korea added another 20 metric tons of gold bullion to its holdings in February—raising its gold reserves by 24% to 104.4 tons. Since June of 2011, South Korea has purchased gold bullion five times. (Source: Bloomberg, March 6, 2013.)
Similarly, central banks from Russia and Kazakhstan have been increasing their gold bullion holdings as the prices go down. According to the International Monetary Fund (IMF), the Russian central bank purchased 12.2 tons of gold bullion in January.
As the World Gold Council cites, central banks across the world ramped up their gold bullion buying; they bought 534.6 tons last year, 17% more than the previous year.
Dear reader, when you have the former biggest sellers of gold bullion, central banks, turning into buyers, it is nothing less than a bullish indicator.
What holds true is that central banks need gold bullion because countries around the world are in an outright war to lower currency values and thus central bank reserves are in danger.
I will turn bearish on gold bullion the day I find central banks … Read More
Gold Burning up the Chart: My Gold Advice
By George Leong, B.Comm. for Profit Confidential
What a few months it has been for gold. With war worries in Libya to debt concerns in Europe and the United States, along with rising demand out of China and India, it appears to be the perfect storm for driving gold prices higher. In fact, the break at $1,500 was much sooner than I had expected and, based on the chart, prices could go even higher, albeit the buying may be somewhat ahead of itself and hence vulnerable to some profit-taking.
The June gold broke to a record high of $1,535.10 on April 28 and is looking to go higher. The chart showed a bullish inverse head and shoulders formation in March. Prior to this, there was a bullish V formation in January and early February. The June gold made a strong breakout at the $1,440 resistance that was in place since November 2010 in early April.
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