Gold prices have been used as a store of wealth for centuries. Gold prices can be quite erratic and have a history of massive swings. One issue with gold prices is that supply can and does come back into the market. Unlike other commodities that are used up, such as oil, when gold prices move up, people can sell their holdings, which can be melted down and added to the world supply again. High gold prices are usually a sign of a lack of faith in paper money, usually due to inflation, which erodes the value of fiat (paper) money.
“The sky is falling, sell;” “It’s useless, run away;” “There’s going to be deflation, so it won’t serve any purpose to your portfolio”—these are a few of the ways gold bullion is being described these days. The yellow metal is facing scrutiny, and those looking for it are gasping for air.
Looking at all this negativity, should you lose trust in gold and sell, like the mainstream says?
The scrutiny against gold bullion is significant, but I remain bullish on the metal in the long run. As it stands, I don’t see demand declining, and as the prices remain suppressed, I expect the supply to decrease.
When gold bullion prices slid lower, we started to hear that the buyers would run for the exits, but we still don’t see that happening; as a matter of fact, more consumers are jumping in to buy the precious metal.
The nations that are known as the biggest consumers of gold bullion are still buying. According to the World Gold Council, in the third quarter of 2013, gold bullion jewelry demand in China was 164 tonnes, an increase of 29% from the same period in 2012. In India, the demand for gold bullion remains robust; for the first nine months of this year, the demand for gold bullion was higher than the previous year by 19%, despite the government and central bank working together to curb the demand. (Source: “Gold continues its journey from West to East as buoyant consumer markets balance investment outflows,” World Gold Council web site, November 14, 2013.)
“Consistent with the first two quarters of 2013, the global gold market … Read More
I have been a very big advocate of using both fundamental analysis and technical analysis together to get a better idea of what to expect next when it comes to prices, be it for stocks, precious metals, currencies, or other investment instruments. But when I use this strategy to look at silver, I can’t help but be bullish.
First, let’s look at the technical side:
As you can see in the chart below, silver hasn’t performed well since the beginning of the year—it’s down roughly 30% from its peaks in February—but few things have changed since it had sell-offs in April and June. The prices found support at the $19.00 level, and have not seen those levels again; as a matter of fact, the precious metal’s prices have been trending higher since then.
In addition to this, the moving average convergence/divergence (MACD), a momentum indicator, is suggesting that bulls are coming in slowly. Furthermore, silver prices recently crossed above their 50-day moving average, a move considered to be significant and in favor of the bulls.
Chart courtesy of www.StockCharts.com
On the fundamental side, there’s a significant amount of information that suggests the price of the white precious metal may increase going forward.
First and foremost is the relationship between gold and silver. I have mentioned in these pages before that we are seeing the fundamentals of gold prices getting better. The central banks are continuously printing, keeping easy monetary policies low, and those in the emerging markets are buying the precious metal. As the gold prices go up, silver prices will follow the same direction.
Secondly, the demand for the … Read More
I realize gold is out of favor right now, but there are just too many technical and fundamental indicators pointing to the upside. With the yellow precious metal currently trading near a three-year-plus low, one has to wonder if now is a good time to get involved.
While gold prices recently dipped below the 50-day moving average, they have been finding support on the back of the U.S. government shutdown and impending debt ceiling showdown.
Gold prices were up earlier this week as the U.S. government shutdown barreled into its second week with no end in sight. Astute investors have turned their backs on the U.S. dollar in favor of the yellow precious metal, a global, borderless currency that acts as a store of value.
Granted, Federal Reserve chairman Ben Bernanke claims he doesn’t understand gold prices. But that hasn’t prevented other central banks around the world from adding it to their coffers.
Central banks, which own roughly 18% of the world’s gold supply, are expected to increase their reserves of the precious metal in 2013 by as much as 350 tons, valued at about $15.0 billion. In 2012, central banks from around the world purchased 535 tons of the yellow precious metal, the most since 1964.
Gold may be trading down more than 20% year-to-date, but between July and September, it posted its strongest quarterly gains in a year. Why is the precious metal re-emerging? Oddly enough, it has nothing to do with the Federal Reserve’s $85.0-billion-per -month monetary policy; rather, it’s the idea that the world’s strongest economy and holder of the reserve currency could default on its … Read More
Gold prices hit one-week highs after the Federal Reserve did exactly what it said it would do (not what the market feared it would do)—continue it’s $85.0-billion-per-month bond buying program until unemployment numbers decrease and inflation increases.
Gold, often seen as a safe haven investment and hedge against inflation, had lost more than 20% of its value since the beginning of the year after the Federal Reserve hinted it would start to taper quantitative easing, which would put an end to its loose monetary policy.
More recently, gold prices had been on the decline since the beginning of September on encouraging U.S. economic data and suggestions that a war in Syria would be averted. Between September 3 and 17, gold lost approximately six percent of its value.
But in spite of gold’s year-long tumble, it’s important to remember that gold prices are still roughly 60% higher than they were in late 2008, before the Federal Reserve kick-started its first round of quantitative easing.
Gold was poised to fall even further had the Federal Reserve announced it would begin to taper its quantitative easing policies. It didn’t, however, and the markets responded in kind.
The price of gold bullion soared 4.2% last Wednesday to around $1,367 per ounce, its largest daily gain since June 2012, after Federal Reserve chairman Ben Bernanke said it would stick to its stimulus plan (for now).
The correction in gold prices was inevitable. That’s because gold, and many other sectors, have become overly reliant on the Federal Reserve’s support. Gold prices drop when investors think the Fed’s going to taper, and they rise when it doesn’t. … Read More
Gold bullion gets a lot of attention in the financial media and economists talk about it regularly. Sadly, another precious metal, silver, isn’t usually a topic of discussion. This metal moves in line with gold bullion, and for investors, it can serve as an alternative to owning the shiny yellow metal.
When gold bullion prices started to tumble in late April and then declined even further in June, silver prices did the same. Please look at the chart below of silver and gold prices. The golden line represents the spot price of one ounce of gold bullion, and the red and green line represents silver prices per ounce.
Just like gold found support at the $1,175 area, silver prices found support at around the $19.00 level. Since then, they have been on the rise, having roughly increased more than 23%; gold prices are up about 18%.
Where are silver prices headed next?
Looking at it percentage-wise, silver has the ability to outperform gold prices.
Chart courtesy of www.StockCharts.com
To give you some idea about what I mean, consider this: for gold prices to go up 50% from the current level of around $1,400, they will have to increase $700.00; to get there, it can take a long time and a lot of buying. Now, for silver to increase 50%, from the current level of around $23.50, it will have to go up by $11.75 to $35.25. This sounds attainable because the silver prices have seen that level; for gold bullion, $2,100 would be in uncharted territory.
Here’s why I think silver has the potential to increase.
The demand for silver … Read More
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