Archive for Quantitative Easing
Gold’s recent price performance, strong physical demand for the metal in important world markets, worries about European and U.S. public debt, continuing aggressive monetary stimulus by the U.S. Federal Reserve, and news of substantial long positions by some prominent institutional investors and sovereign wealth funds together have contributed to the resumption of gold’s long-term upward march.
We believe that after a three-month period of correction and consolidation beginning in early December 2009 (when gold hit an all-time record price of $1,227 an ounce) gold has begun advancing anew - and could well register new U.S. dollar-denominated highs by midyear.
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Filed under: Gold Briefs, Reports | American Precious Metals Advisors, central banks, China, economy, euro, fiscal policy, gold, gold investment, gold price, India, inflation, Jeffrey Nichols, monetary policy, money supply, Quantitative Easing, scrap, Secondary Supply, sovereign risk, Sovereign Wealth Fund, U.S. dollar|No Comments
It’s now nearly two months since gold registered an all-time high of $1,227 an ounce, following a five-month run during which the metal rose more than $300 an ounce. From a long-term perspective, this is a remarkable 380 percent trough-to-peak gain from its early 2001 cyclical low point of $255.
Gold’s strength last year reflected a number of factors: (1) record worldwide private investment demand (thanks, in part, to rising inflation expectations, pent-up demand from China, and the popularity of new gold investment vehicles in various markets); (2) net official purchases (after two decades of net selling) as some central banks sought insurance against further devaluation of their dollar-denominated assets; and (3) at times, a weaker U.S. dollar.
Gold and the Dollar Continue Their Dance
Since then, mostly reflecting the “strengthening” U.S. dollar, the yellow metal eased off a bit, falling as low as $1,075 last week - a correction of some 12 percent - before bouncing back at the beginning of February.
The catalyst to dollar strength - measured against the euro, Europe’s common currency, or a basket of key currencies - has been heightened fear of sovereign debt default.
First it was doubts about Dubai-government guaranteed debt that rattled the markets and gave the dollar a boost.
More recently, market fears that Greece will be unable to meet its public debt obligations - and talk that Ireland, Portugal or Spain may follow - has pushed the euro to its lowest point in six months and the dollar to its highest level in five months against a basket of currencies.
It baffles me that so many foreign-exchange traders and institutional investors around the world think of the dollar as a “safe haven” at a time of currency-market turmoil and continued U.S. economic and financial market crisis. Just look at the facts:
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Filed under: Gold Briefs, Reports | American Precious Metals Advisors, China, economics, economy, fiscal policy, gold, gold investment, gold price, India, inflation, Jeffrey Nichols, monetary policy, money supply, Quantitative Easing, U.S. dollar|No Comments
From a long-term perspective, gold is a bargain at recent prices in the $900 to $930 an ounce . . . and will remain so even as it begins to move into a higher trading range.
Recent gold-market developments and technical price action — along with broader economic and financial-market developments — suggest gold is bracing for a resumption of its long march upward and a retest of its historic high in the months ahead.
First and foremost, the bullish outlook for gold rests on the increasing likelihood of accelerating U.S. inflation in the years to come — and an associated unprecedented rise in investor demand for the yellow metal.
This nascent inflation has not yet been reflecting in world financial markets. But, judging from anecdotal evidence and the financial press — and the warnings of a growing number of institutional investment managers — we believe a gradual, subtle, but important, upward shift in inflation expectations is already underway.
Inflation Expectations
Inflation doves (and others fearing imminent deflation) point to the currently low, almost negligible, rates of consumer price inflation and the narrow interest-rate spread between ordinary U.S. Treasury securities and U.S. Treasury Inflation-Protected Securities (TIPS) as evidence that inflation and inflation expectations remain subdued. This — along with other important factors that we’ll discuss in subsequent posts — has helped keep gold prices down in recent months.
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Filed under: Gold Briefs | American Precious Metals Advisors, deflation, economics, economy, gold, gold price, inflation, Jeffrey Nichols, monetary policy, money supply, Quantitative Easing|No Comments
The World Economic Crisis and the Outlook for Gold
Shanghai, China / December 4th, 2008
Thank you Mr. Chairman for that flattering introduction and thank you to the conference organizers who have made it possible for us to exchange information and insights into the future of gold here in China and in the global marketplace.
You should know that my presentation today will be posted on my website, NicholsOnGold.com, so you can easily check back in a few days, or a month, or a year – to review my analysis and my expectations for gold.
A few weeks ago, I mentioned to a Chinese acquaintance in New York that I would be traveling to Shanghai. He said, with some excitement that his family was originally from Shanghai and that he still had relatives here. Then he told me about a friend of his grandmother . . . a very old lady who is a fortuneteller of great repute. He said, in all seriousness, that I must visit her before speaking here today on the outlook for gold, just to be sure, and volunteered that his cousin would accompany me and translate.
So yesterday afternoon, we visited the old lady in her new apartment. We were offered tea and sat down together to talk. Finally, I asked: “So where do you see the price of gold next year?” To which the old lady replied: “Well, young man, we’ll just have to wait and see.”
Jeff Nichols addresses China Gold Summit
What the old fortuneteller really meant was this: Global asset markets have jumped into another dimension – a non-linear “Alice in Wonderland” universe – where the irrational and unpredictable have suddenly become the most likely.
Indeed, writing a forward-looking speech – at this moment of unprecedented worldwide economic crisis and uncertainty – has been like trying to hit a fast-moving target. Today, the price of gold has less to do with ordinary supply and demand fundamentals . . . and much more to do with fear-driven investment and speculative demand at the margin.
Every country is now affected by the spreading recession. From day to day, the business news worsens, bankruptcies and unemployment mount, one central bank after another cuts interest rates, new fiscal initiatives and other policies are undertaken – some of them seem wise, others may prove to be less so – and the United States, still by far the world’s largest economy and dominant political force, is in the midst of changing Presidents and changing directions in Washington.
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Filed under: Speech | American Precious Metals Advisors, central banks, China, deflation, economics, economy, gold, gold price, inflation, Jeffrey Nichols, monetary policy, money supply, Quantitative Easing, Sovereign Wealth Fund, U.S. dollar|1 Comment
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