Sunday , 22 October 2017


3 Reasons Gold Might Rally, and Might Not, & What to Do Right Now

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The price action in gold and gold miners over the past six months has many investors turning their back on the precious metal. Gold fell below $1,600 last week to reach a six month low, prompting many to step back and wonder aloud if the precious metal’s decade long bull market has officially come to an end. With the price of gold now back to where it was in July of 2011, it’s time to decipher whether this is a buying opportunity, or time to head for the exits.

So writes Tyler Laundon (www.wyattresearch.com) in edited excerpts from his original article* entitled 3 Reasons For and Against a Gold Rally.

This article is presented compliments of www.FinancialArticleSummariesToday.com (A site for sore eyes and inquisitive minds) and www.munKNEE.com (Your Key to Making Money!) and may have been edited ([ ]), abridged (…) and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.

Laundon goes on to say in further edited excerpts:

Three Reasons to sell (or stay away):

1. …SEC filings show that some hedge fund managers (including George Soros who sold half of his holdings in the SPDR Gold Trust ETF (GLD)) liquidated gold holdings in late 2012, and sales like these “bolster speculation that gold’s 12-year bull-run is coming to the end”, according to Bloomberg. It may be right.

2. Speculation is rising that the Fed will end asset purchases, which currently stand at $85 billion a month, in mid-to-late 2013. Removing some of this “excess liquidity” would likely      reduce the fear trade that has pushed investors toward gold.

3. The evidence speaks for itself – gold and gold mining stocks keep going down and are breaking through technical support. Physical gold’s price fell to a 6-month low last week, and gold mining stocks are falling even faster, breaking to a 9-month low last week. There is no reason to catch a falling knife, as they say.

Three Reasons to buy (or hold):

1. Soros may have sold his gold holdings because he saw a better use of the capital, specifically in the Japanese yen. In late 2012, Japan’s new leader, Prime Minister Shinzō Abe stated his goal to drive down the yen. Spurred by Japan’s policies, the yen fell, driving up the price of gold as denominated in yen by nearly 20% over six months. Over the same period gold denominated in U.S. dollars was flat. The Wall Street Journal reported that Soros was on the right side of this trade, gaining “almost $1 billion on the trade since November (2012).”

2. According to the U.S. Global Investors “oscillator model” gold has corrected far enough and has entered a potentially profitable buy zone. The model indicates that gold has dropped 2 standard deviations on a year-over-year basis. “An event like this has happened only about 2 percent of the time over the last 10 years … following these extreme lows, gold has historically increased as much as 15 percent over the next year“, according to the mutual fund group.

3. Central banks around the world are still buying gold. The WGC reports that in 2012, central bank demand was 534 tons, the highest recorded since 1964. Demand was high in emerging      markets including Brazil, Mexico, Brazil, South Korea, the Philippines and Russia, which now has the 8th largest gold reserve in the world. Central bank buying is a good showing of confidence in gold.

Conclusion:

The technical evidence suggests that the price of gold may soon move to the upside. I wouldn’t bet against a rise in gold’s price, regardless of what hedge fund filings show. Nothing happens in a vacuum. That said, a reversal isn’t guaranteed. For these reasons I’m neutral on gold right now.

The performance of gold miners is troubling. Bullish indicators, such as takeover bids and dirt cheap valuations still haven’t led to stabilization in the sector. When a turnaround comes, there will likely be plenty of time for investors to get into these stocks, so I see little reason to load up on gold miners now.

I have advised subscribers to Pay Dirt not to stray from gold unless they need to rebalance their portfolios but I’ve advised them to steer clear from the miners for now.

Editor’s Note: The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.

*http://www.wyattresearch.com/article/3-reasons-for-and-against-a-gold-rally/29466 (©2013 Wyatt Investment Research & Business Financial Publishing LLC, PO Box 790, Richmond, VT 05477; If you would like to learn more about ongoing trends in the resource sector, including safe and dependable resource stocks, consider taking a free, 30-day trial to our natural resource stock service, Pay Dirt. You’ll discover exactly how we built our resource stock portfolio and get access to every special report and investment recommendation. Click here to try Pay Dirt, for free)

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