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The Overlooked X Factor in the Gold Price
Topic Started: 1 Oct 2013, 10:29 AM (1,411 Views)
Kris Sayce
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Oh shit...Oh shit...Oh shit

http://www.moneymorning.com.au/20130930/the-overlooked-x-factor-in-the-gold-price.html

The Overlooked X Factor in the Gold Price

Written on 30 September 2013 by MoneyMorning

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The Overlooked X Factor in the Gold Price

Goldman Sachs created a stir recently when it forecasted that gold would fall to $1,000 an ounce by the end of 2014, as the firm expected the Federal Reserve to reduce its bond buying program. Goldman also suggested that gold miners might want to hedge their output, locking in 2013 prices.

HSBC analysts have also been bearish on gold, although the firm admits that lower gold prices tend to draw out tremendous demand from emerging markets, especially China. Because of that demand, HSBC believes gold will end 2014 at around $1,435 an ounce, says MarketWatch.

Keep in mind that ‘Goldman Sachs does things that are good for Goldman, not you,‘ says Byron King from Agora Financial. Things can change quickly in the gold market, as investors saw when, only days after Goldman’s assertion, the Federal Reserve surprised everyone by announcing it would continue purchasing $85 billion worth of bonds. Gold investors cheered as the precious metal shot up the most in 15 months.

Unlike many commodities, there are many shades to gold, such as the Love Trade’s buying gold for loved ones and the Fear Trade’s purchasing gold as a store of value. An additional ‘shade’ investors need to be aware of is how the Fed interprets the recovery of the US economy.

I had a few reasons to believe Ben Bernanke was going to pull the rug out from under the market’s feet. Before word came out, I told Canada’s Business News Network that the ending of quantitative easing was not going to be abrupt because it’s not a black and white issue.

Consider the lack of significant job growth in the US, as many of the jobs that have been created in recent history were part-time positions. Investor’s Business Daily (IBD) links this lackluster employment situation to President Barack Obama’s Affordable Care Act.

According to the publication’s scorecard, ‘more than 300 employers have cut work hours or jobs, or otherwise shifted away from full-time staff, to limit liability under ObamaCare.‘ While providing affordable health care to Americans sounds honourable, the loss of full-time jobs seems to be an unintended consequence from the onerous regulations placed upon a business.

Take a look at IBD’s chart, which shows the accommodations industry’s average weekly hours that nonsupervisors put in since 2000. During each recession, in 2001 and again in 2008 to 2009, the hours dropped.

But since ObamaCare was signed into law, which mandated that employers would need to provide health care coverage for staff who work more than 30 hours a week, the average plummeted. As of July, the accommodations industry workweek hit 28.8 hours, ‘at a record low,‘ according to IBD.

It’s not only about job growth. Housing is also not rebounding as strongly as some people think. I told Reuters that many people don’t realise that the real estate market boom has been narrowly focused.

According to USA Today, almost half of the homes purchased in July were bought with cold hard cash. In places like Florida, ‘nearly two-thirds of home sales were completed without a mortgage loan,‘ says USA Today.

In Nevada, about 65 percent of buyers paid with cash, followed by Maine, where nearly 60 percent of house sales were cash. Perhaps regulation in the banking industry has made the process of getting a mortgage too burdensome for families?

Housing is one of the biggest multipliers for jobs, where $1 spent in housing results in about $16 in related economic activity. When interest rates are low, more people apply for mortgages. They build houses, employ moving services and buy new furniture, which in turn employs more people in multiple industries.

But after interest rates rose quickly, the housing market came to a halt. People who once qualified for a mortgage to build a new home no longer qualify at the higher rates, meaning a potential inventory of new housing may quickly build.

At the same time, big banks are announcing layoffs in mortgage lending. Wells Fargo announced it was going to lay off 1,800 employees as refinancing activity continues to slow. The company had already told 2,300 workers to stop coming to work as rising interest rates curtail demand for new mortgages and refinancing.

So instead of the Fed quickly tapering its bond purchases and raising rates, this process will likely be very gradual. I believe the government will have to keep interest rates low to stimulate the economy.

And that’s positive for equity markets as well as for gold. If interest rates remain low, real rates could remain in negative territory.

In my presentation on opportunities in resources and emerging markets, I told the crowd at the Toronto Resource Investment Conference that 2% has been the tipping point for gold. Historically, gold and silver performed well in a low or negative real interest rate environment.

Regardless of where analysts think the gold price will be a year from now, we believe gold and gold stocks can be an excellent portfolio diversifier. We’d rather hold quality gold companies that are experiencing a growth in resource base, growth in production and growth in cash flow instead of trying to time the market.

Frank Holmes

CEO and Chief Investment Officer, U.S. Global Investors
Money Morning Australia
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Trojan
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Where were you Kris?
Gold prices has been suffering in your absence.

Anyway, glad you are back - gold prices will reach USD5000 in no time now
:lol
I put trolls and time wasters on my ignore list so if I don't respond to you, you are probably on it ....
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mel
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Kris the gold articles are as useless as the time spent writing the house price crash reports. Why not advise people to hold a balanced portfolio, including gold and focus your time on becoming better at picking stocks?
Edited by mel, 5 Oct 2013, 01:14 PM.
APF - a place where serious people don't take themselves too seriously. There's nothing else like it.
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MMM
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This bloke has no clue, no confidence or idea when talking about interest rate direction or what the fed will do. Using specualtion from others who cannot make up there own mind themselves to back his arguments, how about some stats on chinese and indian gold buying . And just to tell people to buy gold and gold stocks for their portfolio, what else you going to buy, where else you going to diversify, what gold stocks do you have for us, cant name any . When the us bond and stock markets take another big hit, if they dont collapse alltogether that is,so will gold and gold stocks temporarily, how long who knows, weather these will increase enough before it collapses is uncertain with the fed and their bs tactics. You cannot go long on any stocks right now, unless your usuing a fraction of your wealth and were smart enough to get on some in late june, even then no guarantee when the US market shits itself again, which could be anyday with the uncertainty going on.
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Blondie girl
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I do have an anticipation that gold will eventually in the longish term will make some improvement. Don't think you can knock off the gold black duck.

I do wonder if gold is gonna get lower than what it is @ present.
Newjerk? can you try harder than dig up another person's blog. My first promo was with Billabong and my name in English is modified with a T, am Perth born but also lived in Sydney to make my $$
It's Absolutely Fabulous if it includes brilliant locations, & high calibre tenants..what more does one want? Understand the power of the two "P"" or be financially challenged
Even better when there is family who are property mad and one is born in some entitlements.....Understand that beautiful women are the exhibitionists we crave attention, whilst hot blooded men are the voyeurs ... A stunning woman can command and takes pleasure in being noticed. Seems not too many understand what it means to hold and own props and get threatened by those who do.
Banks are considered to be law abiding and & rather boring places yeah not true . A bank balance sheet will show capital is dwarfed by their liabilities this means when a portions of loans is falling its problems for the bank.
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Perthite
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Blondie girl
5 Oct 2013, 09:31 PM
I do have an anticipation that gold will eventually in the longish term will make some improvement. Don't think you can knock off the gold black duck.

I do wonder if gold is gonna get lower than what it is @ present.
So you are kind of bearish on this global recovery?
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MMM
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Blondie girl
5 Oct 2013, 09:31 PM
I do have an anticipation that gold will eventually in the longish term will make some improvement. Don't think you can knock off the gold black duck.

I do wonder if gold is gonna get lower than what it is @ present.
Hello blondie

The price was lower at the end of june, bottomed on the 26th june this year, the same day I came on and told you all what a super bargain silver was.
So the question is will it drop below that, it was tested again just recently last week but failed to go below the low of june , I think the low last week was around 1289, back in june it dropped to around 1189, dont quote me on that but they were close to these figures.

As far as gold stocks go the shareholders are telling me that the bottom was in june and will not go any lower for the year, unless the stock market was to shit itself or collapse for which there would be an initial large hit before recovery rather quickly, the reason is evrybody shits themselves on a large collapse and evrything seems to sell off initially. So if the stock market holds together I doubt we will go lower than june26th.

As for what I was saying about shareholders telling me it was the low is because of the price the gold stocks dropped to back in late june and where they dropped to last week. I will give you a few prices to help explain, saracen mineral(SAR) dropped to 9 cents per share and then climbed back to over 30 cents in a couple of months, last week it did not go below 20 cents so still over a 100% return from june. SBM dropped to 36 cents per share back in june before going up to 92 cents a couple of months later, last week it did not go below 52 cents, so still holding up well compared to june prices. Newcrest mining (NCM) , Australias largest gold miner and producer, also the worlds fifth largest gold producer dropped back to around $9 in june before climbing to over $14 dollars a couple of months later, but last week the low was about $10.95 . So the shareholders are telling me the lows we sawin june are the lows for the years. Most people that follow the gold and silver market knows it usually drops down in june at the end of the financial year before bouncing back, this has happened about evry year for the last ten years.

Now gold tells us a lot about the market , firstly the US has been in debt for years , they owed about 1/2 a trillion dollars back in 1980 and from there the debt has grown at a rapid rate. The market was not initially concerned with this debt climbing as the price of gold had been pretty flat and fallen up to about the year 2000. The US dollar has always been strong and built a reputation over many decades, they were the greatest economy in the world at one stage, how times change. Anyway so even though they were pilling up on debt over the years the market was not that concerned until about the year 2000 for which it started to climb, that showed that people were starting to lose faith in the US Dollar. the housing market did not collapse until late 2006 -2007, and the stock market did not collapse until about 2008, but the gold price was telling us that people were starting to lose faith in the dollar back in the early 2000s. The US is not recovering and can never repay its debt and will only continue to borrow more money until the dollar now collapses, So yes gold has much more to climb, what we are seeing lately is a correction from highs people were unfamiliar with when it came close to the 2000 dollar mark, they were also fed bullshit that the US was recovering and that stimulus will be reduced.

But as the US goes further into debt and people realise it is not recovering, their faith in the dollar will continue to diminish and they will turn back towards precious metals and they will continue on there way. So people began losing faith in the dollar in the early 2000s ,long after the US began its debt spree and long before the housing and stock market collapse, before they were both propped up temporarily through not only more borrowing of money ,but purchasing of both treasury bonds and mortgage backed securities on top of zero interest rates . This is not rocket science, right PF
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Blondie girl
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Perthite
5 Oct 2013, 10:21 PM
So you are kind of bearish on this global recovery?
Yeah
Gotta have eyes in the back of my head.
;)
Nothing is always positive, positive, positive.
Thanks for your perspective, MMM gold die hard . ;)

I will be maintaining a very close observation with gold, coz eventually there will be some positives butt not yet honey buns.

It's certainly not rocket science but you gotta know what's what...eyes in the back the head is needed..

Look
Listen
Shut up.
Edited by Blondie girl, 6 Oct 2013, 10:51 AM.
Newjerk? can you try harder than dig up another person's blog. My first promo was with Billabong and my name in English is modified with a T, am Perth born but also lived in Sydney to make my $$
It's Absolutely Fabulous if it includes brilliant locations, & high calibre tenants..what more does one want? Understand the power of the two "P"" or be financially challenged
Even better when there is family who are property mad and one is born in some entitlements.....Understand that beautiful women are the exhibitionists we crave attention, whilst hot blooded men are the voyeurs ... A stunning woman can command and takes pleasure in being noticed. Seems not too many understand what it means to hold and own props and get threatened by those who do.
Banks are considered to be law abiding and & rather boring places yeah not true . A bank balance sheet will show capital is dwarfed by their liabilities this means when a portions of loans is falling its problems for the bank.
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Blondie girl
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Oooooohhhhhh

Gold bug, it seems gold is performing very buggered up, it's not looking pretty, its really no wonder you have the shits for property investing.

Bugger hey.

Golly gosh how much dough have you lost you silly sod.
Newjerk? can you try harder than dig up another person's blog. My first promo was with Billabong and my name in English is modified with a T, am Perth born but also lived in Sydney to make my $$
It's Absolutely Fabulous if it includes brilliant locations, & high calibre tenants..what more does one want? Understand the power of the two "P"" or be financially challenged
Even better when there is family who are property mad and one is born in some entitlements.....Understand that beautiful women are the exhibitionists we crave attention, whilst hot blooded men are the voyeurs ... A stunning woman can command and takes pleasure in being noticed. Seems not too many understand what it means to hold and own props and get threatened by those who do.
Banks are considered to be law abiding and & rather boring places yeah not true . A bank balance sheet will show capital is dwarfed by their liabilities this means when a portions of loans is falling its problems for the bank.
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herbie
Member Avatar


Gold remains overpriced - IMO.

Look to buy at something like around USD 1,000 maybe? - Or hang out for USD 800 if you're more the bargain hunter/bottom picker ( :re: ) type perhaps?

Though who's ta REALLY know - We'll see ...

PS: If I actually wanted any more than I have (and I don't) I'd buy a bit at USD 1,100 - Just as a bit of fun.
Edited by herbie, 7 Oct 2013, 08:12 PM.
A Professional Demographer to an amateur demographer: "negative natural increase will never outweigh the positive net migration"
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