Posts Tagged ‘gold prices’
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
Can you believe this?
The Bureau of Labor Statistics (BLS) reports the U.S. economy experienced deflation in October. The Consumer Price Index (CPI), a widely followed government measure of inflation, declined 0.1% in October.
The Producer Price Index (PPI), which measures the change in prices that producers pay, also declined in October—by 0.2%, continuing its slide from September when it declined 0.1%. (Source: Bureau of Labor Statistics web site, last accessed December 2, 2013.)
But I don’t buy any of this. The government statistics are heavily skewed and do not present the real picture of what’s going on with inflation in the U.S. economy.
Just look at the annual PNC Wealth Management Christmas Prices Index. Every year, the firm tracks the prices of the items of the “12 Days of Christmas” through its Christmas Price Index. It looks at prices compared to last year.
Surprise! This year, the cost of all those items will be 7.7% higher than last year. With its finding, the Managing Executive of Investments for PNC Wealth Management, Jim Dunigan, said, “We were surprised to see such a large increase from a year ago, given the overall benign inflation rate in the U.S.” (Source: “Cost Of Items In ‘12 Days Of Christmas’ Tops $114,000,” The Associated Press, December 2, 2013.)
As I have been writing since the Fed started its second round of quantitative easing (QE2), inflation in the U.S. economy is going to be a huge problem going forward. There is no way the continued printing of $85.0 billion a month in new paper money won’t create inflation problems.
While my readers … Read More
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
In 2012, the U.S. Mint sold 753,000 ounces of gold bullion in coins. So far this year, until November 6, the Mint has sold 761,000 ounces of gold bullion in coins—and we have two more months to go in 2013. (Source: U.S. Mint web site, last accessed November 6, 2013.)
If we assume U.S. Mint sales of gold bullion coins will be the same for the months of November and December as last year’s (136,500 and 76,000, respectively), the demand at the U.S. Mint will be 28% higher this year than last year.
But it’s not just the U.S. Mint that is experiencing strong demand for gold coins.
The Perth Mint in Australia is one of the biggest mints in the global economy. The Mint’s sales and marketing director, Rob Currie, said, “We’re desperately trying to keep up with production.” (Source: “Perth Mint Mulls Expansion as Gold Coin Sales Rebound,” Wall Street Journal, November 6, 2013.)
And I haven’t even gotten into strong demand from India and China for gold bullion! So gold bullion demand is as strong as ever, but prices are still low?
Let’s move to the supply side of the equation…
As I recently reported in these pages, according to the U.S. Geological Survey, production from U.S. gold mines declined in the first seven months of this year compared to the same period a year ago. Production is declining because, as gold prices dropped, producers cut back on production at mines where producing at a cost of $1,300 to $1,400 per ounce of gold bullion doesn’t make economic sense.
Consider AngloGold Ashanti Limited (NYSE/AU). In its … Read More
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