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In the last days we have seen the gold price hit
$1,324 and yesterday spring to $1,355, leaving it in a neutral zone
technically speaking. More
than 10% of the gold ETF, SPDR in the States has been sold as well as around
10% of the ishares Silver Trust. Investors need to know,
“is this the time they should be selling their gold and silver
investments?” Traders
will look solely at the short-term charts, medium-term investors at the
medium –term fundamentals and long-term investors before this checked
to see if this was a sufficient correction to disinvest and when will be the
right time to re-enter the market.
With so much emotion creeping into these decisions, investors need to
sweep that away and coldly assess the individual investment situation within
their own investment criteria.
We will stand back further and look only at, “Is it time to sell
Gold & Silver” and leave you to make up your own minds.
Technical
picture
In the dollar
the gold price has moved into ‘neutral’ territory having halted
the downward movement as it hit support between $1,324 and $1,330 after which
it bounced to $1,355. The
Fix in London was at $1,347.50 up almost $20 from yesterday afternoon’s
Fix of $1,328.
Many of you
will feel that the dollar gold price is what defines gold’s movements,
but we would caution investors who think this way. Gold has fallen back from its
recent peak of $1,425 to $1,324.
Take a look at the euro price of gold. It has pulled back from its peak
of €1,065 and fell back to €962, almost the same amount of
fall. And yet we have seen
the euro jumping back from its recent low of $1.32 to stand over $1.38 a 4%
move. This complicates
matters because if you see the relationship of gold reflecting the strength
or weakness of the dollar, you would have been wrong-footed. After all, a 4% move in the $
gold price is $65 move from the recent peak.
Recently, the
euro weakened, because of the sovereign debt crisis, more rapidly than the
dollar fell. Now the euro
is recovering because the EU leaders are supposed to come out with a plan
that will remove the fear of a euro collapse, in March. With politics playing games with the
raising of the borrowing limits of the U.S. fear is growing that confidence
in the dollar is going to press it lower against the euro. So you, the investor, have to
decide which is the currency that most accurately reflects the demand and
supply factors dictating the gold price or which is the one through which to
invest to maximize profits?
We have our own opinion for sure.
The Fundamental picture
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The gold market has
changed its shape since the last century, when it was at the mercy of the
developed world’s central banks. Since the beginning of this
century, the world’s central banks have completed the gold sales they
had planned to make and halted this policy and that of accelerating the
production of gold.
-
We have seen the jewelry
market recover recently in the developed world.
-
We are seeing the rise of
persistent Asian demand.
-
Investment demand in the
developed world looks undecided as to whether to invest more or to divest
believing gold has had its day.
On the other side of investment demand for gold, there is a school
that is selling from the gold ETF’ and buying physical gold, to hold
overseas.
-
We are seeing producers
just manage to replace the ounces they have mined with new discoveries, but
at such a slow pace that, at best, we expect little to no growth in newly
mined supplies, despite the rising gold price.
-
In the silver market there
is a far greater scope for newly mined supplies, except for those that come
as a by-product of base metal production.
-
There is also a far
greater scope to reclaim silver.
However, most new uses of silver do consume the silver used and are
not reclaimable.
-
Investment demand for
silver tends to be more institutional despite silver being the ‘poor
man’s’ gold.
-
Asian demand for silver is
growing as it is the next best investment to gold, so they believe.
However, the silver price moves with the
gold price, with more extreme swings either way.
It’s a matter
of Perspective
This makes it even more complicated for
the investor, for Asian investors buy silver and gold for very different
reasons than investors watching the level of interest rates in the U.S.A. The difficult task ahead of
investors is to give the correct weighting to the different parts of global
gold and silver markets: -
-
How far will the east
dominate gold & silver prices?
-
To what extent will the developed world’s events dictate the
direction of the precious metal prices?
-
Will an economic recovery in the West lead to more or less demand for
the precious metals?
-
What are the different characteristics of global investors when it
comes to buying and selling?
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What is the future of currencies and their values against gold?
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What effect will the shift in power from West to East have on the
precious metals going forward?
Giving the
correct weighting and balance to each of these factors is what will dictate
the gold price in the future.
There are few investors out there who actually get the emphasis right,
but those who do will keep making exceptional profits as they have done since
the turn of the century. We
believe Gold Forecaster & Silver Forecaster can assist
in this task?
Julian D. W. Phillips
Gold/Silver
Forecaster – Global Watch
GoldForecaster.com
Is your wealth effectively structured to avoid the pernicious effects
of the regulatory climate that we have moved into? It should be and we can
help you to do so professionally and within the law. Please contact us for
any help regarding this at: gold-authenticmoney@iafrica.com.
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