Mineweb.com, a South African-based website dedicated to the mining industry, is an excellent source of articles about precious metals. With contributors around the globe, mineweb.com offers wide perspectives. Today’s issue has four articles and a podcast, most of which should be of interest to investors with gold hitting all-time highs and silver hitting 30-year highs.
The Bank of International Settlements hit the headlines earlier this year when it was discovered that its gold holdings had soared: now it appears BIS gold holdings are on the increase again.
The dollar dropped after the Federal Reserve signaled that the US economy may need extra stimulus, pushing the yellow metal up.
BH: Today gold popped again as news sources around the world revealed that indeed the Fed was prepared to create still more money in efforts to get the economy going. The Financial Times, a widely-read and respected newspaper, headlines: Fresh Fed boost more likely.
The first sentence of the article predicted “that the US will soon launch a fresh burst of ‘quantitative easing.’ Quantitative easing is a new euphemism for the creation of new money out of thin air. We used to say, “The Fed is printing again.” Now, we say, “The Fed has started another round of quantitative easing.”
According to Natixis, the global economy is not in quite as bad a state as many in the market are thinking and as a result the price of gold could reach its zenith in 2011.
“We are projecting that at some point in the next three to six months we will have reached the peak and (gold) prices will decline from then on. So we will be looking for prices to perhaps fall below $1,000/oz by the end of next year.”
BH: to predict a top in 2011 is bold. The US is running trillion-dollar deficits, the financial survival of the PIIGS countries is in question, and concerns about the world’s financial structure abound. Yet someone says gold will top next year. An impossible call. However, I will concede that an intermediate top could be put in next year, but at this time I don’t see “prices declining from then on.”
The bank has raised its forecast to $1,650 after a slowing US recovery and falling interest rates drive further investment into the yellow metal.
BH: In another bearish article, the same Nic Brown of Commodities Research Natixis, sees a correction, but he doesn’t know when, which is understandable.
In the Gold could peak in next 3 to 6 months article, Brown predicted a correction in within six months. In this article, he hedges. There will be a correction, but will gold climb another $200 before the correction?
“There is the potential for a substantial correction in gold prices – when it’s going to start – very difficult to tell.”
BH: Conflicting, confusing articles are the norm in the second phase of bull markets. Analysts will disagree with each other, and many observers will find valid arguments on both sides. In the third phase (and the final), the articles will be uniformly bullish, with hardly a bear around. In my opinion, the third phase is years away.