As we suspected in last weeks feature article (Pleasure or Pain? Where to Now for Gold and Silver in New Zealand Dollars?), gold and silver have proceeded to bounce higher over the past week.
This morning in particular both metals shot higher and with the NZ dollar also falling by around 1 cent this amplified the move higher.
Gold in NZ dollars is currently at $1957 per ounce – up a massive $100 per ounce from less than a week ago. You can see in the chart below that the price is right back up to what was the previous support. The unknown is now whether this support, at around $1950, becomes resistance or whether the price remains above it now? Certainly the chance to buy at those much lower prices, as has been the case over the years, did not last for long.
Silver has also bounced back up, although not to the same degree as gold, but then it hadn’t fallen quite so hard either. Today we sit at NZ$35.62 and the price remains above long term support lines.
Our gut says maybe we are due some more weakness yet and a retest of the lows but as ever only time will tell. The RSI (top of charts) of both metals has bounced out of the oversold region, but the MACD indicator (bottom of charts) is not trending higher yet.
More Fed Double Speak
Overnight Bernanke not at all surprisingly poured cold water on the theory that the Fed may end its “stimulus” (we prefer the term currency debasement). The discussion for an early end to their currency debasement last week was all too coincidental given the lows prices of gold. And so no surprise that he has given a different point of view to what the Fed minutes of last week said. Just more Orwellian double speak as usual.
As we mentioned last week the Fed has no option but to keep printing.
“Remember the US is effectively using this printed currency to fund it’s ever growing budget deficit so if it were to stop or slow the currency creation they would have to make some sizeable spending cuts. Given US lawmakers have so far managed to put off even raising the US debt ceiling, the odds of them making significant spending cuts seems veeeeery slim.”
There was a great article on Zerohedge that expanded on this slightly that is worth a read too if you have the time.
Jim Rickards also commented this week that the Fed’s a long way off easing yet. Video Link Here
Good News for Gold from Goldman
Last week we discussed how we’d like to see a few more gold negative stories to really help bring about a bottom in gold. Well this morning we got our wish.
Goldman Sachs sent a note out to clients that they have adjusted down their gold price forecasts for 2013 and that they believe the rise in gold prices has now turned.
“The cycle for gold prices, which climbed for 12 straight years, has probably turned as the recovery in the U.S. economy gathers momentum and investment holdings collapse, according to Goldman Sachs Group Inc., which reduced forecasts for the metal.
The bank cut its three-month target to $1,615 an ounce from $1,825 and lowered the six- and 12-month forecasts to $1,600 and $1,550 from $1,805 and $1,800.”
Good stuff we say as there have been plenty of these same predictions from Goldman and their fellow bank(st)ers over the years. In the below chart we shared at the end of last year bank analysts projections have always been for lower gold prices in the longer term.
Pay more attention to them when they increase their long term gold price projections out significantly. We might be getting closer to the end of the upwards cycle then we reckon.
Is it Time to Sell Gold or Silver?
No is the short and simple answer to this question from us. We prefer to track historical indicators than listen to bank analysts. A good article to read if you haven’t read it before (or if you need a refresher) is this one:
But as we have written in the past, history says precious metals bull markets are not a one way street higher. So perhaps a reminder of how low they can fall would be due too:
But so as to not end on a downer, here’s another more recent favourite article that looks at the upside in gold:
The charts in the above article on valuing gold are similar to a couple of great charts in another of this weeks articles from Casey Research’s chief economist Bud Conrad.
Bud looks at the price of gold as a ratio to government debt and concludes it has a way to go yet. We’ve always had a soft spot for Bud Conrad given it was listening to him speak at a dinner here in Auckland where we met and GoldSurvivalGuide was born.
Money Morning Australia shared a similar chart during the week that shows a forecast as to how much the Feds balance sheet will expand in total over 2013 when increasing at $85 billion a month. And how the price of gold has historically tracked the expanding debt. Not a surprising correlation given the rising gold price is really a reflection of the ever growing debt across the planet.
Anyway, we mention all these charts and measures as when the price is not doing as you’d like, it pays to take a deep breath and look at the big picture. Eventually fundamentals will reassert themselves again. HINT: And while they don’t it’s usually a good time to be buying. But as always not in one hit as bottom picking is nigh on impossible.
Other Articles This Week:
We have a must watch video interview of our favourite monetary scientist Professor Antal Fekete on the Keiser Report. Max does a good job of extracting some good explanations from the Professor. Watch.
Along with an article from Louis James on going against the herd in gold:
So if you think now is one of those times to be going against the herd in gold or silver then get in contact:
1. Email: email@example.com
2. Phone: 0800 888 GOLD ( 0800 888 465 ) (or +64 9 2813898)
3. or Online order form with indicative pricing
Have a golden week!
Glenn (and David)
Ph: 0800 888 465
From outside NZ: +64 9 281 3898
This Weeks Articles:
|Gold Sentiment is Very Low|
Gold Survival Gold Article Updates: 22 February 2013 This Week: Pleasure or Pain? Where to Now for Gold and Silver in New Zealand Dollars? Gold Sentiment is Very Low What to Do About the High NZ Dollar? Canadian Maples Monster Box Deal We’re late getting this out this week as we’ve been trying to finish […]
|The Herd: Wrong About Alaska, Wrong About Gold|
Louis James outlines why now is a very contrarian, but potentially profitable time to buy gold mining stocks. He also covers why he believes so strongly that gold is still the asset to hold, despite what we may be hearing in the mainstream currently… The Herd: Wrong About Alaska, Wrong About Gold By Louis James, […]
|Why the Casey Research Brain Trust Is Convinced That Precious Metals Will Rise Again|
We just read this yesterday in the Casey Daily Dispatch and luckily they’ve already released it for wider consumption as an editorial. Given the negativity towards the precious metals it is interesting to read the breadth of opinion from the Casey Research Staff on what gold and silver may have in store for us in […]
|Prof Fekete Interviewed by Max Keiser on Gold Backwardation|
We’ve featured the writings of Professor Antal Fekete many times in these pages before. Why? Simply because we have learnt so much from him over the past few years both from reading his various writings but also from seeing him in person a number of times. But it’s not often we get to see a […]
The Legal stuff – Disclaimer:
We are not financial advisors, accountants or lawyers. Any information we provide is not intended as investment or financial advice. It is merely information based upon our own experiences. The information we discuss is of a general nature and should merely be used as a place to start your own research and you definitely should conduct your own due diligence. You should seek professional investment or financial advice before making any decisions.