Third time lucky for gold above $1,000?
Posted on 10 September 2009 with no comments from readers
Well, the immediate market answer to that question has been negative, and gold is back under the $1,000 mark as this article is being penned. But all the signs are that the yellow metal is on the verge of a major breakout, and buying on any weakness from here is so obvious you have to wonder if that weakness is going to happen.
There are still a few obstacles for gold to overcome. The world’s biggest consumer of gold is the jewelry industry and that is focused on Indian demand. And demand from that source has now slumped because the price is seen as too high.
Chinese investors
Investment demand can meet this gap, and indeed jewelry concerns will then have no choice except to buy if they want to stay in business.
Probably the most exciting factor to emerge in recent weeks is that the Chinese have admitted to being big buyers of gold and silver whenever the price is right, and that effectively puts a floor under the price of precious metals.
Investors love an asset class with limited downside and unlimited upside, and precious metals seem now to be in that particular spotlight. To return to the inflation adjusted peak price of 1980 gold needs to rise to at least $1,650 according to the calculations of gold super-bug Jim Sinclair, although anything up to $5,000 is forecast by the serious bulls.
So when exactly will gold not only hold above $1,000 but advance much higher? The first step could be over the next few weeks if global stock markets hold at their current ludicrously high levels.
But if equities correct from their unprecedented rally then gold prices would suffer in a general sell-off, although probably not anything like last year as the gold price has held up so well over the usually weak summer period.
Commentators such as Dr Marc Faber think a dip in the gold price to $850 is possible under such circumstances and even the gold bugs tend to agree. But the outlook after that point is for a big flow of funds into precious metals and related equities.
Stock up
Gold and silver stocks would be an amazing buy in these conditions with their leverage to the underlying price of the metals.
Of course, if you think the stock market is not going to correct from current levels then you should be buying precious metal stocks now, or you might consider riding out any downturn as a way of avoiding being too late into this asset class.
no Comments posted by readers:
Few acknowledge it, except for the central bankers themselves, but this market suffers from obnoxious selling that seemingly shows up from nowhere.
Yesterday the dollar was down big, oil up, stocks up, gold up, and then gold turns negative all by itself. Could simply be noise, but it just as well could be some sort of official or semi-official selling.
The financial press is constantly churning about this sort of governmental/quasi-governmental activity in the major currency pairs, nobody bats an eye. However, mention CB gold activity on air and you will suddenly find yourself persona non grata.
An old favorite is the rumor of an imminent IMF gold sale to take a quick 10% off the price. However at $1000 gold appears still very cheap, silver even cheaper.
$1000 is good round number, but I believe it is not significant. Significant will be when gold (will) pass $1040 level.
For the moment, gold must do small correction to 970 , or even 960, before go up.
http://nmmmnu.blogspot.com/2009/09/gold-4h_09.html
>>> and then gold turns negative all by itself
Nothing happens itself
. I do not say “conspiracy”, but I believe at 1000 mark, stupid money sells “because gold will not raise further”, different stupid money buys, because they think – “we do not bought when it was $640, we missing the train”.
I agree gold at 1000 is cheap, but when it corrects to let say 960, second stupid money will sell…
Anyway. Small correction and then we will see $1200+
If and when gold takes off, platinum might zoom up even faster, since it is far more useful than gold. Platinum mines are also being depleted faster than gold mines. I’ll bet a lot less platinum is in storage than gold. China is getting ready to build a few hundred million cars. Sooner or later, they might need platinum for pollution control, oil refining, and chemical production. Gold probably won’t fall a lot, since the Chinese will continue to buy in order to gradually get away from the dollar. You need to remember that governments can, and will, manipulate the price of gold whenever it is in their interest to do so. They don’t care about your fortune or survival, as evidenced by the recent give away of trillions of tax dollars to the billionaire Wall Street criminal banksters.
Silver is also much more useful than gold. Silver is selling at historic lows compared to the gold price. If you believe that Armageddon is just around the corner, silver coins could be a good trading medium, as could alcohol, cigarettes and acetaminophen. How are you going to trade a $1,000 gold coin for a cup of rice, an egg, or a stale piece of bread? The gold is too valuable for barter. And the government will steal your gold a lot faster than your silver. When hyperinflation starts, many governments will need your gold to trade for oil for farming in order to prevent a successful revolution when food supplies start to run out and people start to slowly starve. Get caught with gold after the confiscation order goes out, and it will be off to prison with the other “terrorists.” Would you want to pull out a gold coin in a hungry, post apocalyptic crowd? Good luck with that! Maby if you had a machine gun and a sniper covering you. The movie “Night of the Comet” comes to mind. In the not to distant future, those little silver coins might be the difference between eating something, or yet another day of hunger.
>> And the government will steal your gold a lot faster than your silver.
Silver was demonetized decades before gold in the US, net effect was to effectively confiscate a great deal of value from existing silver holders. There are no guarantees that your statement will hold true in the future.
Additionally, seems like having it both ways to assert that silver is superior because it’s valuable intrinsically; as well because it’s used industrially.
Reality is that gold and silver are valuable primarily because they are not average commodities. Their “uselessness” is what makes them so fit for being currency.
Advocating for a currency based on a “useful” asset is a recipe for poverty. People would be unnecessarily hoarding a good that people need to consume for survival.
I think I am now pretty sure that Silver will shoot up since they have now allowed the Chinese to buy silver and gold in China.
http://www.nuwireinvestor.com/blogs/investorcentric/2009/08/chinese-investment-in-silver-could-push.html