May 12th, 2010
With the Euro debt crisis not leaving the headlines and volatility gripping the markets, the flight to gold has become even more pronounced over the last week. GLD pushed through technical resistance at the previous 52 week high around $120 earlier this week and hit a high of $122.24 today. If the volatility continues, Gold could see larger swings in the 2-5% per day range as world markets struggle to put a value on the safety currency. Gold and silver stocks , especially the smaller miners such as Hecla also have benefited and have seen 10%-20% gains in little under a week. Technically gold is overbought at the moment and is high than 50, & 200 moving averages and is at the upper ceiling of its Bollinger Bands. That being said, once a stock or commodity breaks through a 52 week high, it could be a few days or even weeks until technical come back into focus.
Popularity: 45% [?]
March 13th, 2010
After topping $110 earlier in the week, GLD receded quickly and ended the week around $108 in cautious trading. An recent acceleration in Chinese inflation sparked worries that the country may tighten monetary policy to curb the trend. US Retail Sales also came in stronger than expected which put gold under pressure.
Regarding Gold In supply news, South Africa’s statistics service said the country’s gold output fell a full 18.2 percent year-on-year in January. The republic was the world’s second largest gold miner last year behind China, according to the World Gold Council. The chief executive of the world’s number three gold miner, Anglogold Ashanti said on Monday the company viewed price dips below $1,100 an ounce as an opportunity to accelerate buybacks of its outstanding hedged positions which bolsters their overall strategy that predicts long term gold prices above $1000 per ounce. Anglogold Ashanti is not the only large miner to start removing hedges, a full 70% of large miners are looking at significantly reducing gold hedges. Richard O’Brien, CEO of No. 2 Newmont Mining Corp (NEM.N), said he expects inflation will wreak havoc as central banks around the world continue to use stimulus programs to spur economic recovery. In a recent summit he stated the following:
“My view is that each country in the world, to some extent, has fueled the reigniting of its economy through issuance of additional currencies, The long-term impact of all the stimulus programs that we have seen in the U.S. and in European countries is going to come home to roost.”
If we look at a short term chart of gold we see that gold is near a critical support area. If it breaks current levels the next support point is $106.88 and then the 200 day MA just above $102. If it holds at current levels, it could rise toward $111.70 which represents the upper Bollinger Band
Popularity: 74% [?]
March 4th, 2010
As interest rates pertaining to the currencies of the world’s largest economic zones have reached almost zero, the status of gold as a refuge when the global economy is in turmoil is beginning to change in the mind of many investors. It is now seen by some as a more risky investment to be considered in the same category as other commodities. Nevertheless there is no broad consensus which is making future price moves harder to predict. Part of the reason is the investment shift away from buying physical gold vs the ever popular number of gold ETFs which are prone to the same level of panic selling that plagues the market seemingly every few weeks.
After breaking through the $1200 level towards the end of 2009 there has been a correction of sorts although the pattern of prices of this precious metal never falling for two consecutive months, that has held true over the last decade, has yet to be broken. Gold has recently bounced back from short term lows to above $1140 per ounce.
Some market fundamentals that are providing support for gold prices include unconfirmed and persistent rumors that the Chinese government is considering buying the remaining 191 tonnes of IMF gold reserves for sale. A large increase in the expected year on year February gold import figures for India also suggest that physical demand will remain strong in 2010. Countering these factors are pessimistic macro economic predictions from many analysts and the continuing strength of the US dollar.
Conflicting motives for buyers of gold only add to the confusion as to the future direction of the spot market. If the global economic outlook improves and the Euro stabilizes then there may be an unwinding of positions taken as a hedge against a possible further deterioration in the world economy as a whole. This downward pressure on the price of gold could be met with buying interest from those who see the gold bullion shortage as a reason for optimism but are staying on the sidelines until a clearer picture emerges regarding the outlook for the US economy and the EU’s possible moves to shore up the weaker countries in the Euro-zone.
As an investment against future inflation the picture is no clearer. If the US and UK governments continue to print money in an effort to stimulate their respective economies then inflation will be expected to rise as a result. However, recent figures from both countries have yet to suggest that this is happening. In fact, hints that China is already tightening its stimulus policies and the surprise hike in interest rates that banks pay for emergency loans in the US could be taken as a sign that inflation figures will remain flat for the foreseeable future. For the past few weeks gold has been trading in a $50 range with buying interest on dips and until a strong breakout occurs in one direction or the other, it is hard to predict a long term trend. The next test will be at $1200 which was tested in December of 2009. If Gold can break through that psychological mark, than a run to $1300 or $1400 has a high likelihood.
Popularity: 69% [?]
