Thursday, September 29th, 2016 MST

Gold in the news

The last few posts were about silver because that’s the way the news fell. Now, we have a plethora of articles about gold, some worth reading and one worth listening to if you prefer not to read.

ANZ Australian Economics Weekly says gold prices may “firm this week.” With gold having hit $930 Wednesday morning, I bet ANZ now wishes they had predicted rising gold prices this week. Analysts love to be right about predicting short-term price moves. Accurate predictions sell subscriptions.

Although ANZ advised that gold could firm this week because of surging oil prices, the analysis warned that concerns about oil prices were “re-setting” global inflation concerns, “which should trigger a catch-up rally in gold (compared to oil).” I guess that’s what we’re seeing with gold up $65 from this time last week.

Nevertheless, ANZ cautioned, “We expect gold prices to drift lower over the coming months, with increasing signs that the fall in the USD is near the trough.” Seasonally, the summer is the low period for gold and silver prices, so there remains the possibility that “gold prices may drift lower over the coming months.” Still, past summers have not had the dollar in so much trouble and real fears that the Bush administration may bomb Iran’s nuclear research facilities.

Mineweb.com reviewed ANZ’s analysis, for those who want to read it
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Meanwhile, Kevin McArthur, President and CEO of Goldcorp, a major gold mining company, said Tuesday that he is certain that investors will again see four-digit gold prices this year with the potential to “go well into the four digits.” Four-digit means above $1,000, and I guess that “well into the four digits” means something like $3,000 or $4,000 gold. McArthur didn’t give a time frame, but I don’t think he was predicting $3,000 or $4,000 gold this year.

I think that $3,000 – $4,000 gold is a real possibility, out there four to five years. A widened war in the Middle East, and it may not take four or five years.

Mineweb.com ran an article on McArthur’s comments, but the article is mostly about “greens” dominating the conference where McArthur made his predictions.

The third article, which you can listen to instead of read if you prefer, is titled Is the dollar doomed? and is more about the dollar than about gold. Because you can’t talk about a sinking dollar without talking about gold (if you’re giving an honest appraisal of the situation), the article really is quite good. Except where the speaker says, “Well, we don’t actually need a government run gold standard anymore.” Here, he covers himself by saying that there are places where individuals interested in investing in gold can go.

When a government is not on the gold standard, the door is wide open for inflation, exactly what we’ve had in the United States since 1971 when President Richard Nixon closed the gold window.

Meanwhile, resourceinvestor.com slapped gold around a little with an article titled Gold Demand Drops to Five-Year Low in Q1. The article, based on a GFMS study for the World Gold Council, noted reduced demand for gold, with the blame laid at the feet of higher gold prices. In India, for decades the biggest buyer of gold, demand shrank.

Here’ how resourceinvestor.com summed it up:

Gold demand in India, the world’s largest physical bullion consumer, was most severely affected by the movement in the gold price, falling 50% to 102.1 tonnes in Q1. Jewellery and investment demand, at 71.1 tonnes and 31.0 tonnes respectively, were half the levels of the correspondent quarter last year.

In almost an after thought, the resourceinvestor.com article noted:

In marked contrast to India, demand in China grew by 15% to 101.7 tonnes, with both jewellery and investment demand increasing during the first quarter as continued economic strength allowed consumers to increase their purchases regardless of the rising price. Jewellery demand rose 9% to 86.6 tonnes and investment demand surged 63% to 15.1 tonnes.

Somewhere a news outlet should broadcast that China is about to replace India as the biggest buyer of gold. Further, with China’s increasing prosperity and its people freer to buy gold, China’s impact on the gold market should be huge in the years ahead. Wonder why only the perpetual bulls seem to know what’s going on in China when it comes to gold?