Posts Tagged ‘gold bullion’
When I previously wrote about gold, prices were around $1,316 an ounce and subject to a bearish head and shoulders formation on the charts, as you can see below. (Read “Why Gold Might Only Be Good for Traders Right Now.”) I was bearish on the precious metal then and continue to be so, at least when considering it as a buy-and-hold investment rather than a speculative trading opportunity.
Spot gold has fallen below $1,225 and appears to be set to take a run at the key support level of $1,200, according to my technical analysis. The reality is that even with the 7.5% decline from early October, I would still not be a buyer at the current price, unless I wanted to trade the yellow ore and hope for a possible oversold technical bounce back above $1,250.
Chart courtesy of www.StockCharts.com
Instead, given the attractive buying opportunities in the stock market, I’d advise more conservative investors to invest their dollars in stocks, rather than gold bullion at this time.
Some of the underlying fundamentals that have traditionally supported the metal are not evident. Yes, China is continuing to accumulate physical gold, but buying by India, which is the world’s largest buyer of the precious metal, has been stalling.
In addition, the yellow metal usually receives a lift from a weaker U.S. dollar. With the greenback showing some recent strength against other world currencies, especially in the emerging markets, the precious metal isn’t seeing any support from a weak dollar.
Inflation, a historically supportive variable for the precious metal, has also been largely benign across the world economies (with … Read More
This morning we learned sales for this year’s Black Friday weekend declined for the first time since 2009. I have been warning my readers for months that falling consumer confidence would result in a pullback in consumer spending—and that’s exactly what’s happening this holiday shopping season.
According to the National Retail Federation, consumers spent an average of $407.02 from Thursday through Sunday, down about four percent from what they spent last year. (Source: National Retail Federation press release, December 1, 2013.)
The first decline in holiday spending since 2009 does not bode well for the economy, and as far as I’m concerned, it is an early indication of a weakening economy going into 2014.
But there is one place people are spending. In fact, you can say they’re spending so much here, they’re borrowing to buy more!
Investors have borrowed more money to buy stocks than at any other time in history!
The chart below shows the use of margin debt on the New York Stock Exchange (NYSE). It stands at the record-high level.
Yes, NYSE margin debt stands above the level it stood at just before the peak in stock prices in 2007 and much higher than it was when the Tech Boom bubble burst in the year 2000. The risk with margin debt is that it can turn a minor stock market sell-off into a major one for key stock indices as investor loans are called.
And while investors are borrowing like drunkards to buy stocks, earnings of companies that trade in key stock indices are anemic. In the third quarter of this year, the “surprise” rate … Read More
As gold bullion prices continue to take a beating because of the belief that the easy money policies of the Fed won’t go away anytime soon, silver prices have fallen into the same rut. Just like gold bullion, the silver market has also become a place where bears prevail.
But in the midst of the negativity towards silver, I see that the fundamentals that ultimately drive silver prices higher are getting stronger.
Demand for silver is robust. Sales of one-ounce silver coins at the U.S. Mint have reached a record for the year, and 2013 still isn’t finished! The table below shows how demand for silver (coins in ounces) has increased at the U.S. Mint since 2007.
Yearly Demand for Silver Coins in Ounces at the U.S. Mint
|Year||Sales in Ounces||% Change|
|Total % change since 2007||316%|
* Data as of November 28, 2013
Data Source: U.S. Mint, Sales & Figures, last accessed November 28, 2013.
Notice on the table above how demand for silver coins at the U.S. Mint this year has already surpassed the level seen in 2011—a time when silver prices were at about $50.00 an ounce.
Rising demand for silver is just one reason why I am bullish on silver prices. But I have another reason, too, as to why I expect silver prices to rise ahead.
Given the recent further weakness in the price of gold bullion, should investors be running for the exit doors?
Some well-known “gold bugs” have recently turned bearish on the precious metal. But I’m on the opposite side of the spectrum; I see the pullback in gold prices as an opportunity of a lifetime for contrarian investors.
The gold bullion price chart below shows the long-term trend in gold bullion is still intact. Since 2001, the precious metal’s price has marched higher. Note there have been many pullbacks along the way, but in all cases, gold bullion prices recovered and moved higher after their pullback. And I believe we will see gold prices recover again from their current price correction.
Chart courtesy of www.StockCharts.com
From a fundamental point of view, demand for the precious metal remains robust. Many central banks have become net buyers of gold bullion over the last couple of years, and consumer buying in gold is very strong.
So the question is: with so much negativity towards the precious metal, have we reached peak pessimism on gold bullion? My answer is that I believe we are slowly getting there.
Just yesterday, Bloomberg ran a story saying hedge fund manager John Paulson would not be investing more of his own money in his gold fund at this time “because it’s not clear when inflation will accelerate.” (Source: Bloomberg, November 25, 2013.)
While investors seem to have turned very bearish on gold bullion, I see it as a bullish sign. If history has taught us one thing, it’s that when there’s increasing pessimism on any investment, a bottom is … Read More
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