March 11, 2014
So far, the gold market has largely ignored the East-West clash over Ukraine and control of Crimea. With gold recently trading mostly within the $1,340–to-$1,350 range, we’d guess the Ukraine/Crimea crisis has added no more than $10 or $15 an ounce to the yellow metal’s price. But there is the potential for larger, more dramatic price movement in the weeks ahead.
For the next few days, world financial markets will be anticipating the March 16th referendum in which Crimea will likely vote to secede from Ukraine and join the Russian Federation. While this may already be reflected in the price of gold, what comes after – in the form of Western sanctions and Russian reactions – has not yet been accounted for in the metal’s price.
March 5, 2014
Russian saber-rattling sent gold over $1,350 an ounce earlier this week, its highest price in four months. But, contrary to many press reports, it was neither safe-haven demand nor physical buying that fueled gold’s short-lived price advance.
Instead, it was institutional speculators and short-term traders – among them the trading desks at some of the gold-dealing banks – who rushed reflexively to buy gold futures and other “paper gold” derivatives . . . and then sold quickly to take profits as the crisis seemed to abate.
Meanwhile, buyers in China and India, the two largest physical markets in the world, continued to dance to their own market fundamentals, virtually ignoring the geopolitical drama unfolding in Europe.
February 21, 2014
So far, 2014 has been a year of recovery for gold. Trading recently near $1,320 an ounce, the metal is already up some 10 percent from its 2013 year-end price of $1,201.50 in the London bullion market.
Gold’s improvement was apparently quite a surprise to many of the most prominent analysts and investors who, forecasting the price through a rear-view mirror, expected prices to head further south. With gold possibly on a sustainable upswing, they are now busy jacking up their gold-price targets.
Although gold has recovered smartly in recent weeks, an uninterrupted upswing to progressively higher levels is hardly assured. Indeed, the yellow metal may have a steep uphill fight, very likely with occasional setbacks that are mistakenly taken as signs of further weakness and deeper setbacks ahead.
February 17, 2014
Gold-mine output and production costs may mean a lot to gold miners and to investors in gold-mining equities, but should they mean a lot to the rest of us?
Total global gold-mine output (primary supply) will make headlines this year, hitting a new record with “reported” annual production just over 3000 tons (about 96.5 million ounces).
Actual mine production is probably somewhat higher taking into account unreported output from informal producers and under-reporting by China and possibly a few other countries.
The continuing growth in worldwide mine production – even in the past year of low prevailing prices – is in contrast to the expectations of many investors and analysts who have been counting on declining gold production to set a floor under the price and set the stage for the next leg up in a long-term bull market.
January 29, 2014
In this “NicholsOnGold” commentary, we take a look at the gold-market situation and outlook for India, long the world’s biggest gold-importing country.
The precipitous fall in gold imports during 2013 – from an annual rate of roughly 1000 tons per month early in the year to an annual rate of only 250 to 300 tons late in the year – was a powerful negative influence on the metal’s price in world markets during the past year, its impact on price being both physical (in terms of the overall global supply/demand situation) and psychological (in terms of investor sentiment).
A relaxation of these policies, possibly ahead of the country’s general election this May, could prove to be a big plus for gold in the year ahead.
January 16, 2014
Bullish news may soon be coming out of China. We hear that the country’s central bank will soon announce a substantial increase in its official gold holdings, bringing the total to some 2,710 tons at the end of last year.
NicholsOnGold has long held the view that China’s central bank, the People’s Bank of China (the PBOC), has been surreptitiously adding to its official gold reserves.
The PBOC reported in April 2009 that its official gold reserves stood at 1,054 tons – and it has not reported any increase in official gold reserves since that announcement nearly five years ago.
Now, it seems, we will soon learn it bought a total of 654 tons in 2009 through 2011, another 388 tons in 2012, and more than 622 tons last year. Much of this has come from domestic mine production and secondary supply.
January 14, 2014
Over the past year or two, as the broad equity indexes moved from one high to the next, institutional money – seeking higher quarterly returns – has been moving out of gold and into stocks.
This institutional flight from gold by Western investors may have been the single-most important factor weighing on gold prices in the past couple of years – and it owes much to the introduction and popular acceptance of gold exchange-traded funds over the past decade.
January 7, 2014
It’s been a rough few years for gold investors – but despite the yellow metal’s fall from grace, I remain solidly bullish on gold’s long-term prospects. In my book, the metal’s price will, more likely, reach $3,000 or even $5,000 an ounce in the years ahead than sink beneath $1,000 an ounce.
That said – and despite gold’s recent resiliency – the short-term risks most certainly abound. In other words, gold is not out of bear country just yet.
December 19, 2013
Surprised? So am I, both by the Fed’s decision, announced this past Wednesday, to taper back its easy-money policies of the past year . . . and, even more so, by the subsequent fall in gold and silver prices.
In fact, Federal Reserve Board Chairman Ben Bernanke surprised many investors, traders, and analysts, announcing the Fed would cut back its monthly asset purchases by a relatively modest $10 billion in January – and continue “in further measured steps” if the economic recovery stays on track.
To understand my own expectations ahead of the Fed announcement, read my last commentary “Gold This Week – Eyes on U.S. Monetary Policy” published on December 15th.
Importantly, Bernanke also said the Fed would keep short-term interest rates low for a long time after its bond-purchasing program – known as quantitative easing –comes to an end.
This week’s decision by the Fed promptly drove gold prices lower. By Thursday afternoon, the yellow metal was trading below the psychologically important $1,200 an ounce level.
December 15, 2013
Precious metals and the broader financial markets continue to react to the latest economic news, both statistical and political, with traders and investors guessing how each new bit of information on the economy may affect the Fed’s decision – when and by how much – to cut back, or taper, its $85 billion per month bond-buying program.
It has become the accepted wisdom of the markets that rosy economic prospects increase the odds that the central bank will choose to begin tapering sooner rather than later . . . and expectations of reduced monetary stimulus have been one of the key bearish influences pushing gold lower this year.