Archive for February, 2009
Gold’s retreat in recent days from its brief flirtation last week over $1000 an ounce was no surprise. We warned in recent posts that the surge in secondary supply, particularly from Asian and Mideastern markets, and the worldwide collapse of fabrication demand left the price vulnerable — and an easing of investor interest could bring a sizable correction in the yellow metal’s price.
Moreover, when everyone seems to be jumping on the gold train, nary a bear is to be seen, bulls are uniformly revising upward their price forecasts, and the financial press suddenly gets all hot and bothered, well, you just know its time to take some profits!
With gold now around $940, off about $60 from its recent high, the yellow metal could still fall further before resuming its upward climb. A decline to the $900 an ounce vicinity — or even lower — is certainly possible, particularly if sentiment about the Obama-Geithner-Bernanke rescue plans for the banks and the economy continues to improve and equity markets seem a bit less fearful. As gold was marching to the $1000 an ounce milestone, it was a flight from equities that sent money into gold, much via the gold exchange-traded funds. So, if the show in Washington continues to get good reviews, as it has in the past few days, gold prices may come under more pressure.
Gold also remains vulnerable near term to further appreciation of the U.S. dollar against the euro and yen. In particular, if the European Central Bank cuts interest rates at its forthcoming policy meeting next week, a pop in the greenback could knock gold down another notch.
Read the rest of this article »
Filed under: Gold Briefs | American Precious Metals Advisors, bullion coins, economics, economy, ETFs, Exchange-Traded Funds, gold, gold price, inflation, Jeffrey Nichols, monetary policy, money supply, U.S. dollar|No Comments
Gold keeps barreling along like a Shanghai maglev train ahead of schedule, hitting new highs for the year — and, increasingly, looking like it could break through it’s all-time high any day now. All this at a time when the dollar is surging against the euro and oil prices are under pressure.
Not so long ago, market pundits were claiming a strong dollar and a weak oil price would have the opposite effect on gold, pushing the yellow metal lower. Now, they’re saying that risk-averse traders and investors are losing confidence in the euro and are running to the greenback and to gold as safe havens in uncertain times.
More on Gold ETFs
In large measure, as noted in my last NicholsOnGold post, the influx of money into gold exchange-traded funds, is fueling gold’s advance and has supercharged its ascent. By facilitating gold investment for individuals and institutions, we are seeing significantly more investment demand than would otherwise be the case. Never before, has it been so easy for so many to buy gold.
As of Friday, February 13, the eight major gold ETFs traded on stock exchanges around the world were holding some 1432 metric tons (46.1 million ounces) on behalf of investors, of which 985.9 tons (31.7 million ounces) were held by the New York Stock Exchange traded SPDR Gold Shares trust. By today, February 17, the SPDR Gold Shares trust had grown to 1,008.80 tons (32.4 million ounces) — an astounding increase of 228.6 tons (7.3 million ounces) or 29 percent from the end of 2008.
Gold bugs and gold bulls are enjoying their time in the sun. Rightly so, but many are ignoring the clouds that could rain on gold’s parade and brake its upward climb. Importantly, the ease of investing in gold via exchange-traded funds could be matched, in the future, by the ease of disinvestment. Just as quickly as gold-ETF depository holdings have grown so might they shrink when sentiment changes.
Sentimental Surprises
Don’t get me wrong: I firmly believe that gold is going much, much higher in the next few years, to levels that many think unimaginable. But market’s do not go straight up for long . . . and, when everyone is jumping aboard, watch out for surprises.
Read the rest of this article »
Filed under: Gold Briefs | |No Comments
Bullion held in depositories on behalf of gold exchange-traded funds investors is at record levels . . . and, in recent days, has been growing by leaps and bounds. Worldwide total gold ETF holdings now exceed 1365 tons (42.6 million ounces).
To put this number in perspective, ETFs now hold more gold than the Swiss central bank. Strikingly, gold held by ETFs now account for more than 40 percent of identifiable gold investment worldwide.
Read the rest of this article »
Filed under: Gold Briefs | ETFs, Exchange-Traded Funds, gold, gold investment, gold price|3 Comments
With the price of gold lurching first one way then the other, it looks like the market has been suffering from bipolar disorder. I expect this split-personality behavior, characterized by extreme price volatility, to continue for some time to come with big swings up and down — but, importantly, around a rising trend with support levels moving up step-wise over time.
In short, gold is heading much higher, but not without more struggle and occasional disappointment for those looking for a speedy ascent. Further out — over the next year or two — I have no doubt that gold will move to new historic highs well above the $1030 level touched a year ago March.
The principal engine of gold’s ultimate ascent is the continuing rapid pace of monetary expansion - in part necessitated by a trillion-dollar stimulus program in the United States — and the acceleration in U.S. price inflation will surely follow sometime in the next year or two.
There are at least three other less certain but entirely possible developments any one of which could touch off a real panic in the gold market and carry the metal’s price to levels most would consider unimaginable:
- First, another large-scale financial catastrophe in which one or more financial institutions seemingly suddenly need hundreds of billions of dollars more in government bail-out funds.
- Second, a growing reluctance on the part of foreign central banks and other major investing institutions to continue underwriting the U.S. federal budget deficit without a significant rise in nominal U.S. interest rates.
- Third, a run on the U.S. dollar, though it is hard to imagine where dollar holders would run since other currency markets (and certainly the gold and other precious metals markets) are not large or deep enough to absorb a major shift in currency preferences and when other major currencies are also losing creditability as reliable stores of value.
Read the rest of this article »
Filed under: Gold Briefs | gold, gold price, IMF, inflation, monetary policy, U.S. dollar|No Comments
||
