…A decisive break above $1,400 an ounce could be just around the corner and, to my mind, would signal the start of gold’s next major advance.
The comments above and below are excerpts from an article by Jeffrey Nichols (NicholsOnGold.com) which has been edited ([ ]) and abridged (…) to provide a faster and easier read.
Indeed, it looks like gold is setting itself up for a major price advance that will see the metal challenge its previous historic high of $1,924, registered in September 2011, in the next few years – and, longer term, continue into still higher virgin territory.
Near term, gold prices will continue to be “data driven” – that is, dependent on the flow of economic news as it affects expectations of Federal Reserve interest-rate policies.
- Good news leads to expectations of a near-term rate increase and a weaker gold price.
- Bad news leads to expectations of continued near-zero short-term rates and a higher gold price.
…Whatever the news in the weeks and months ahead, [however,] I believe that:
- the Fed will have little room to raise interest rates by anything more than a token increase. What’s more likely, the U.S. and global economic news will continue to disappoint – and this could be enough to support a rising gold price…[and that]
- seasonal buying, from both India and China, the world’s two-biggest gold-buying nations, should be good for gold].
- Gold demand in India has a strong seasonal component, reflecting the annual monsoons, the associated rise in agrarian incomes, and the autumnal festivals beginning in September.
- Gold demand in China also typically picks up late in the year in anticipation of the Lunar New Year holiday in January 2017. In addition, once it is clear we are in a rising market, Chinese gold buyers are likely to chase the market higher, fearful of missing out on still-attractive prices.
- …the shift in gold ownership to “strong hands” in Eastern markets (led by China and India) from “weak hands” in Western markets (led by the United States and Europe)…has allowed for an orderly recovery in the price of gold over the past few years [although] now, however, we are beginning to see rising competition between Western buyers and Asian buyers – and greater day-to-day price volatility.
- Key to the bullish outlook, as Western investors and institutional speculators collectively decide that it would be good to own more of the metal, they will find a shortage of “available supply” – with buyers increasingly having to pay a higher price to encourage sellers to part with their metal…Importantly, several thousand tons of gold have gone into the Asian region in recent years, yet not one ounce of gold will come out during the next few years despite the much higher prices that lay ahead.