Saturday , 23 September 2017


A Balanced Assessment of the Future of Gold

Volatility in the gold market often results in extremely bullish and bearish views.Multiple-forms-of-gold-bullion Below are 4 facts to remember about gold that should help neutralize such views and allow you to take a more balanced and thoughtful approach to the yellow metal.

So says Frank Holmes (www.usfunds.com) in edited excerpts from his original article* entitled Four Important Facts to Remember About Gold.

This post is presented compliments of Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), www.FinancialArticleSummariesToday.com (A site for sore eyes and inquisitive minds) and the free Intelligence Report newsletter (see sample hereregister here). The post 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. You can also Follow the munKNEE daily posts via Twitter or Facebook. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.

Holmes goes on to say in further edited excerpts:

1. You can’t print more gold

The Federal Reserve continues to print…$85 billion every month…and research has found that the correlation between the rise in gold and the U.S. balance sheet is 0.96…

Fed Balance Sheet, February 15, 2013 $2.8 Trillion click to enlarge

2. Gold is viewed as a currency by central bankers

…I feel investors should look at how central banks around the world are viewing their own reserves….The World Gold Council reported that in 2012 central banks purchased 535 tons when only a few years ago central banks were net sellers of gold…While the tonnage is only a fraction of the overall gold market, it is widely acknowledged that central banks are building their supplies of gold as a means to diversify their holdings away from the U.S. dollar and the euro.

Central Bank Gold Holdings in Tons click to enlarge

3. A lack of love from the Love Trade is affecting fundamentals

…The two emerging countries that make up almost half of gold demand—China and India—have had a long relationship with the precious metal that is intertwined with their culture, religion and economy. With half of the world’s population buying gold for their friends and family, it’s important to put into context what is happening in their countries.

It was announced this week that China’s income growth is at its slowest pace since 2001…This is very important to gold, as China’s income growth has been shown to be highly correlated to the price of the precious metal over the past decade.

Strong Correlation Between Rising Incomes in China and India and the Gold Price from 2000 to 2011 click to enlarge

…In India, gold consumption has been hurt by both a weak rupee and government taxes on imports. In the first quarter of 2013 alone, gold imports declined 24 percent, according to Mineweb.

4. Corrections happen, but have historically offered buying opportunities

As of the end of April 15, the gold price on a year-over-year percentage change basis registered a -2.6 standard deviation. While minor corrections in the gold price happen frequently, a move this severe has never occurred before over the previous 2,610 trading days.

Year-over-year Percent Change Oscillator: Gold Bullion click to enlarge

With gold’s standard deviation drastically below the “buy signal” blue band, we consider the yellow metal to be in an extremely oversold position on a 12-month basis.

The probability that gold will move higher over the next several months is high.

Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. 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.usfunds.com/investor-resources/frank-talk/four-important-facts-to-remember-about-gold/

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One comment

  1. Nice article and I really enjoyed the formatting of the charts along with the text.

    I was surprised to see Russia not listed on the Central Bank Chart, as I’m sure they hold Gold.
    +
    I’d like to repost the comment I made earlier about Gold:
    Another interesting thing about Gold is that there is a massive amount of Gold that is contained in seawater! These trace amount of microscopic Gold can be filtered out, something the Koch’s have already looked into, since they also own filtering media manufacturing companies!

    If filtering “out” Gold From Seawater (GFS) ever becomes economically feasible then the value of Gold might actually go down since any Company with enough resources (pun intended) could begin to mine the Ocean for Gold, and hopefully they would help clean up the seawater while they are doing it!

    This is just one of the reasons that I think that Silver will outperform Gold as a long term investment, especially for those with small amounts of money to invest.