Gold: All Signs Point To Higher Prices
International Business Times
A search on Google for "gold price predictions" will turn up a wide range of answers for the direction of yellow metal in the years ahead. They range from gold falling from its current price of $1700 per ounce to predictions of $6000 in the coming years. And if you delve into the search far enough, you will find five-digit gold predictions.
In December, Citigroup called for gold to hit the $2300 to $2400 range during the second half of 2012. The research firm went on to say it was possible to see gold move toward $3400 in the next two years. If Citi is correct, in two years the price of gold will double yet again.
Why I Am Bullish On Gold
In my opinion, there are three scenarios that could occur in the coming years when analyzing the global economy. All three have the potential to offer bullish environments for the price of gold.
The first and most likely scenario involves modest growth for the global economy. The developed countries such as the United States and Western Europe will grow by approximately 2.5 percent with the emerging markets slightly higher. This scenario assumes the worst is behind us in Europe and that no "black swan" events will occur in the coming years.
If this is the case, it will prevent the Euro from a further decline against the U.S. dollar. Therefore, the recent move higher in the greenback will be short lived. The long-term chart of the U.S. Dollar Index shows the index has been in a downtrend for a decade. This has occurred as the government continues to pound the table on their "strong dollar policy."
Another factor that will hold down the value of the greenback will be the government's strategy to increase exports substantially. The only way to achieve their lofty goals would be to keep the value of the U.S. dollar down.
So why is the value of the U.S. dollar so important? Because historically the price of gold and the greenback have an inverse relationship. As the U.S. dollar falls, it benefits commodities that are priced in the currency. In particular, the price of gold will move in the opposite direction of the U.S. dollar.
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Gold Seen Heading for 12th Annual Gain on Investor Hoarding
Bloomberg
Gold is poised for a 21 percent gain in 2012, extending its bull market to 12 consecutive years, as investors hoard record amounts and central banks expand reserves for the first time in a generation.
Bullion may rise to $1,897 an ounce in New York by Dec. 31 from $1,566.80 at the end of 2011, based on the average of 14 respondents in a survey at the Bloomberg Link Precious Metals Conference yesterday in New York. The rally that began in 2001 is the longest since at least 1920 in London, including a 10 percent gain last year.
Demand has strengthened as Europe seeks to contain its debt crisis, China’s economic expansion slows, and governments from the U.S. to the U.K. keep interest rates at all-time lows to shore up growth. Central banks have been net buyers for three straight years, the longest stretch since 1973, World Gold Council data show. Holdings (.GLDTONS) in exchange-traded funds backed by the metal reached a record 2,410.2 metric tons yesterday, data compiled by Bloomberg show.
“There are significant shifts going on in the world,” said Martin Murenbeeld, the 67-year-old chief economist at Toronto-based DundeeWealth Inc., which manages about $100 billion in the Dynamic Mutual Funds. “Gold has become an investment, an asset class, and over time, we are only going to be building it up. The central banks are holding gold because they are not sure if the euro will remain five years later.”
Gold futures have rallied 4.9 percent this year to $1,642.90 on the Comex in New York. That compares with a 9.1 percent jump in the Standard & Poor’s GSCI Spot Index of 24 commodities, and a 11 percent appreciation in the MSCI All- Country World Index of equities. Treasuries lost 0.9 percent, a Bank of America Corp. index shows.
Low Rates
The Federal Reserve has kept U.S. borrowing costs at a record low near zero percent and conducted two rounds of asset purchases, or so-called quantitative easing, in a bid to boost growth, fueling demand for gold as a hedge against inflation and a drop in the value of the dollar. Yesterday, the Fed said in a statement that the labor market was improving.
Portugal is raising taxes and cutting spending to meet the terms of its 78 billion-euro ($102 billion) aid plan from the European Union and the International Monetary Fund after it followed Ireland and Greece in seeking a bailout last year. Last week, Greece pushed through the biggest sovereign restructuring in history.
“Gold is the ultimate downside protection,” Rachel Benepe, who helps manage $3.5 billion, including 17 percent in gold bullion, at the First Eagle Gold Fund in New York, said at the conference. “The future is uncertain, and we have no idea how we’re going to get through with this situation. That’s why we own gold.”
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Gold Holds Steady at $1,700 as US Dollar Rallies on Retail Sales Data
Proactive Investors
Gold made little headway today and was unchanged at US$1,700 per ounce, held back by a surge in the US dollar ahead of today’s policy statement from the Federal Reserve.
It is currently expected that the Fed will release an upbeat assessment of the US economy following Friday’s non-farm payrolls data and refrain from introducing further stimulus measures including another round of quantitative easing.
Further stimulus form the Fed would drive up inflation and undermine the US dollar, which is seen as an alternative asset to gold.
In the meantime, the Commerce Department said today that retail sales in the US rallied 1.1 percent in February, posting the biggest gain in five months, further reducing the likelihood of further QE.
While gold held steady, other precious metals were on the rise today with silver tacking on 10 cents to reach US$33.71/oz and platinum advancing US$5 to US$1,699/oz.
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Dennis Gartman: Gold Likely to Outperform Stocks
CNBC
A stock market rally on U.S. employment growth wasn’t enough to move noted commodities trader Dennis Gartman back into equities — or away from gold.
“I’m comfortable sitting on the sidelines,” he said on “Fast Money.”
Gold hit a high of $1,714.90 per ounce midday after dropping to $1,670 in earlier trading.
The editor and publisher of the widely followed Gartman Letter said he remained positive on gold — “violently bullish in yen terms; I’m avoiding it in dollar terms” — and was “dead-solid neutral” on equities.
That position appeared solid, especially as the Indian rupee weakened and may have spurred buyers at the bottom.
“If you owned gold in yen terms, you never even get spooked,” he said, adding that a $10 drop earlier in the day did not cause him any worry. “It’s simply a better trade.”
The Labor Department employment report — showing a net gain of 227,000 new private-sector jobs — could bode well for equities.
“Let’s be blunt. Today’s number was really quite a good number, and I don’t think enough people are paying attention to how important the revisions are,” he said. “I always say that the direction of revision in most economic data is as important as the data itself, and the revisions have consistently been for the better.”
Gartman said the jobs report clearly showed employment was improving in the United States.
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Gold Bulls Strengthen as Wagers Hit $131 Billion
Bloomberg
Gold traders are the most bullish in four months after investors accumulated more metal than ever and hedge funds raised bets on gains to a five-month high.
Sixteen of 23 analysts surveyed by Bloomberg expect prices to gain next week and one was neutral, the highest proportion since Nov. 11. Investors increased their holdings in exchange- traded products backed by bullion for seven consecutive weeks and now hold 2,407 metric tons valued at $131 billion, data compiled by Bloomberg show.
Demand for gold is strengthening as European leaders seek to contain the region’s debt crisis and governments from the U.S. to the U.K. keep interest rates at all-time lows to shore up growth. The Federal Reserve and Bank of England have bought debt and the European Central Bank offered unlimited three-year loans to the region’s lenders, actions that spurred some investors to buy gold as protection against inflation.
“Record-high ETP holdings show both institutional demand and hedge-fund demand is robust,” said Mark O’Byrne, the executive director of Dublin-based GoldCore Ltd., a brokerage that sells and stores everything from quarter-ounce British Sovereigns to 400-ounce bars. “People are concerned about inflationary implications of quantitative easing, zero-percentinterest rates policy and global currency debasement.”
Bank of America
Gold rose 9.3 percent to $1,711.90 an ounce this year on the Comex in New York, heading for a 12th annual advance. That compares with a 9.5 percent jump in the Standard & Poor’s GSCI gauge of 24 commodities and a 10 percent appreciation in the MSCI All-Country World Index (MXWD) of equities. Treasuries fell 0.5 percent, a Bank of America Corp. index (MXWD) shows.
Hedge funds and other money managers increased bets on higher prices by 10 percent to 197,552 futures and options in the week ended Feb. 28, the highest level since Sept. 6, Commodity Futures Trading Commission data show. The CFTC will publish the latest data later today.
The most-traded options on March 7 were call options giving owners the right to buy gold at $1,900 and $1,850 an ounce by April 25, data from the Comex show. The most widely held contract confers the right to buy at $2,200 by July 26.
The economy of the 17-nation euro region may shrink 0.1 percent in 2012, compared with a previous forecast for 0.3 percent growth, ECB President Mario Draghi said yesterday. Inflation will probably breach the bank’s 2 percent limit this year, he said in Frankfurt. Chinese Premier Wen Jiabao lowered the country’s annual growth target to 7.5 percent, the lowest since 2004, in a state-of-the-nation speech on March 5.
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Fight Inflation with Gold
International Business Times
In the last decade, the price of an ounce of gold has risen over 500 percent, making it one of the best investments in any market. The yellow metal has risen for a number of reasons, but the next main driver of gold prices has yet to fully be accounted for.
The decade-long rally in gold has been fueled by a drop in the U.S. dollar, a run to safety after Sept. 11, as well as a supply/demand issue. Another catalyst for the rise has been the future expectation that inflation will rise to above average levels. As I have argued in the last few weeks, inflation is already here, just not according to the government statistics.
History Points to Gold
During the 1970's, there were two distinct timeframes when inflation was a major issue and, each time, the price of gold rose. From late 1971 through 1974, the inflation rate in the U.S. went from 2 percent to nearly 10 percent. During that period the price of gold went from $40 to over $180 per ounce and the value of the S&P 500 fell by over 25 percent.
A few years later, inflation crept back into the market, this time reaching hyperinflation with rates in the double-digits. From 1977 through 1980, the price of gold surged from $130 to $675 per ounce. Similar to the early 1970's, the value of stocks lagged well behind that of the precious yellow metal.
Gold and the Greenback
The relationship between the price of gold and the U.S. dollar has been evident for many years. As the price of the greenback falls, gold will typically rise and vice versa. From day-to-day the two asset classes do not always follow this pattern, but over the long-term, the probability of the two moving in opposite directions is high.
This is important because the greenback has a lot to do with the coming high inflationary environment. As the U.S. continues to print money to combat what they feel is a slow economic situation, the value of the dollar will fall. At the same time, the money flooding into the system will be one of the triggers for inflation. Not only will the value of the U.S. currency fall, potentially hurting national defense, inflation will also become a major headwind to any economic recovery.
Protecting Your Money with Gold
If you are on the same page as me when it comes to inflation in the coming years, then you must be thinking about owning gold in some manner. For my clients, we started buying gold in 2006, when it was near $600 per ounce. Today, the metal sits near $1700; my opinion is that it could be in the mid-$2000s in the next year and even higher if the U.S. moves into hyperinflation mode in the next five years.
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Gold Futures Rebound From Lowest in Five Weeks Amid Optimism for Greece
Bloomberg
Gold rebounded from a five-week low amid renewed optimism that Greece will be able to tame its debt crisis and as a report showed increased U.S. hiring.
Investors with holdings amounting to at least 58 percent of the Greek bonds eligible for the nation’s debt swap have indicated they’ll participate, moving the country closer to the biggest sovereign restructuring in history. U.S. companies added 216,000 workers last month, according to data based on payrolls from ADP Employer Services. Yesterday, gold declined to $1,663.40 an ounce, the lowest since Jan. 25.
“There is some positive news out there for the economy, and that is helping gold,” Frank Lesh, a trader at FuturePath Trading in Chicago, said in a telephone interview. “Some investors are back after the big fall.”
Gold futures for April delivery gained 0.7 percent to settle at $1,683.90 at 1:59 p.m. on the Comex in New York. Prices retreated 2.9 percent in the previous three sessions.
Bullion dropped below its 200-day moving average yesterday for the first time since mid-January. Falling below the measure, currently at about $1,674, can be a bearish signal to some investors follow historical price patterns.
“The metal remains vulnerable to further pressure in the short term,” James Moore, an analyst at TheBullionDesk.com in London, said in a report.
Silver futures for May delivery gained 2.4 percent to $33.585 an ounce in New York. Yesterday, prices slid to $32.49, the lowest since Jan. 25. Still, it’s the best-performing precious metal this year, with a gain of 20 percent.
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Gold Up 0.7%, Seizes Fed Bond-Buying News
MarketWatch
Gold futures gained Wednesday, breaking a three-session losing streak as markets cheered upbeat data on private-sector jobs and news surfaced that U.S. Federal Reserve officials are considering a new bond-buying program.
Gold for April delivery rose $11.80, or 0.7%, to $1,683.90 an ounce on the Comex division of the New York Mercantile Exchange.
Gold lost $50.10 an ounce, or 2.9%, in the three days of declines, including a drop of nearly 2% on Tuesday to its lowest settlement in six weeks.
The metal shot higher after investors welcomed a report by The Wall Street Journal saying Fed officials are readying a new type of bond-buying program.
The Fed would buy mortgage or Treasury bonds but would tie up the money by borrowing it back for short periods and at low rates, a twist designed to counter criticism surrounding quantitative easing as inflationary.
Gold traders were overlooking the twist, however, to cheer any hints of money printing.
“To the extent we’ve taken additional easing out of market, [this article] put it right back in,” said Dan Greenhaus, chief global strategist at BTIG in New York.
Gold had taken a hit last week in the wake of comments from Fed Chairman Ben Bernanke quashing hopes of more quantitative easing, at least a straight-out bond-buying program.
Prices had started their ascension before the report, said Jim Steel, an analyst with HSBC in New York. The recently lowered prices attracted “price-sensitive” physical buyers mainly in emerging markets, he said.
Earlier Wednesday, payrolls-processor Automatic Data Processing Inc. reported private-sector payrolls rose 216,000 in February. The data echo other reports that show an improving labor market and may provide some guidance on what to expect from the U.S. Labor Department’s jobs estimate due Friday.
All other metals futures added to gain throughout the session. Silver for May delivery added 80 cents, or 2.5%, to $33.59 an ounce, rebounding after prices settled at a six-week low on Tuesday.
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Gold Eases but Set for First Gain in Four Weeks
Reuters
Gold prices fell on Friday, breaking ranks with the euro, as sharp gains from earlier in the week based on economic optimism and a Greek bailout deal prompted investors to take profits.
Silver touched a five-month high after climbing past its 200-day moving average. Analysts, however, said it looks vulnerable for a pullback after the sharp rise.
Bullion is on track for its first weekly rise in four weeks, as expectations for further easing by China and a near-zero interest-rate outlook for the next several years boosted the metal's inflation-hedge appeal.
News that Europe sealed a rescue package for Greece to avert an imminent chaotic default lifted gold along with the euro and other riskier assets. Other investors also bought gold on lingering doubts about Greece's ability to implement deep cuts.
"When the debt crisis showed signs of easing, people started to look at gold's correlation with the equity market," said Min Tang-Varner, securities analyst at investment research firm Morningstar.
"It's a delicate balance about whether or not gold is considered a wealth accumulation tool or a commodity," she said.
Spot gold was down 0.2 percent at $1,776.21 an ounce by 11:54 a.m. EST (1654 GMT), heading for a three-percent rise for the week.
The metal is also set for its second consecutive monthly gain after it flirted with entering a bear market in late December.
The dollar fell to a 2/1-2 month low against the euro, which usually supports gold. However, the gold's relationship with the currency markets sometimes breaks down, as the metal itself is often seen as a safe haven.
U.S. gold futures for April delivery were down $8.40 an ounce at $1,777.90.
Gold has risen 13.5 percent this year. However, it appears to struggle to gain further to approach its record at $1,920.30 an ounce.
"It is not our favorite position to go long gold at these high levels," LGT Capital Management analyst Bayram Dincer said. "The potential for disappointment, and price consolidation, is a given."
SILVER SET FOR BIG WEEKLY RISE
Silver touched a four-month high of $35.70 an ounce, as its rally picked up momentum after breaking through its 200-day moving average at $34.84 on Thursday.
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Gold Encounters Profit-Booking, Silver Surges
The Economic Times
Gold prices took a pause after a three-day surge at the bullion market here today on moderate sell-off from stockists amidst reduced jewellery off-take on the back of lower European trend.
On the other hand, silver maintained its rally on sustained speculative buying following rising industrial demand.
Standard gold of 99.5 per cent purity declined by Rs 70 to end at Rs 28,530 per 10 grams from Thursday's closing level of Rs 28,600.
Pure gold of 99.9 per cent purity also fell by similar margin to finish at Rs 28,655 per 10 grams as against Rs 28,725 yesterday.
However, silver ready (.999 fineness) jumped by Rs 700 per kg to conclude at Rs 58,190 from Rs 57,490 previously.
In Europe, gold slipped snapping from its three months high following strong dollar amidst profit taking, though eurozone uncertainty limited the fall.
Spot gold was bid lower at USD 1,775.14 an ounce in early trade.
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