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Julian  D. W. Phillips

Julian D. W. Phillips

Global Watch: The Gold Forecaster covers the global gold market. It specializes in Central Bank Sales and details, the Indian Bullion market [supported by a…

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Gold Forecaster - Is it Time to Sell Gold and Silver?

In the last days we have seen the gold price hit $1,324 and yesterday spring to $1,355, leaving it in a neutral zone technically speaking. More than 10% of the gold ETF, SPDR in the States has been sold as well as around 10% of the ishares Silver Trust. Investors need to know, "is this the time they should be selling their gold and silver investments?" Traders will look solely at the short-term charts, medium-term investors at the medium-term fundamentals and long-term investors before this checked to see if this was a sufficient correction to disinvest and when will be the right time to re-enter the market. With so much emotion creeping into these decisions, investors need to sweep that away and coldly assess the individual investment situation within their own investment criteria. We will stand back further and look only at, "Is it time to sell Gold & Silver" and leave you to make up your own minds.


Technical picture

In the dollar the gold price has moved into 'neutral' territory having halted the downward movement as it hit support between $1,324 and $1,330 after which it bounced to $1,355. The Fix in London was at $1,347.50 up almost $20 from yesterday afternoon's Fix of $1,328.

Many of you will feel that the dollar gold price is what defines gold's movements, but we would caution investors who think this way. Gold has fallen back from its recent peak of $1,425 to $1,324. Take a look at the euro price of gold. It has pulled back from its peak of €1,065 and fell back to €962, almost the same amount of fall. And yet we have seen the euro jumping back from its recent low of $1.32 to stand over $1.38 a 4% move. This complicates matters because if you see the relationship of gold reflecting the strength or weakness of the dollar, you would have been wrong-footed. After all, a 4% move in the $ gold price is $65 move from the recent peak.

Recently, the euro weakened, because of the sovereign debt crisis, more rapidly than the dollar fell. Now the euro is recovering because the EU leaders are supposed to come out with a plan that will remove the fear of a euro collapse, in March. With politics playing games with the raising of the borrowing limits of the U.S. fear is growing that confidence in the dollar is going to press it lower against the euro. So you, the investor, have to decide which is the currency that most accurately reflects the demand and supply factors dictating the gold price or which is the one through which to invest to maximize profits? We have our own opinion for sure.


The Fundamental picture

  • The gold market has changed its shape since the last century, when it was at the mercy of the developed world's central banks. Since the beginning of this century, the world's central banks have completed the gold sales they had planned to make and halted this policy and that of accelerating the production of gold.

  • We have seen the jewelry market recover recently in the developed world.

  • We are seeing the rise of persistent Asian demand.

  • Investment demand in the developed world looks undecided as to whether to invest more or to divest believing gold has had its day. On the other side of investment demand for gold, there is a school that is selling from the gold ETF' and buying physical gold, to hold overseas.

  • We are seeing producers just manage to replace the ounces they have mined with new discoveries, but at such a slow pace that, at best, we expect little to no growth in newly mined supplies, despite the rising gold price.

  • In the silver market there is a far greater scope for newly mined supplies, except for those that come as a by-product of base metal production.

  • There is also a far greater scope to reclaim silver. However, most new uses of silver do consume the silver used and are not reclaimable.

  • Investment demand for silver tends to be more institutional despite silver being the 'poor man's' gold.

  • Asian demand for silver is growing as it is the next best investment to gold, so they believe.

However, the silver price moves with the gold price, with more extreme swings either way.


It's a matter of Perspective

This makes it even more complicated for the investor, for Asian investors buy silver and gold for very different reasons than investors watching the level of interest rates in the U.S.A. The difficult task ahead of investors is to give the correct weighting to the different parts of global gold and silver markets: -

  • How far will the east dominate gold & silver prices?

  • To what extent will the developed world's events dictate the direction of the precious metal prices?

  • Will an economic recovery in the West lead to more or less demand for the precious metals?

  • What are the different characteristics of global investors when it comes to buying and selling?

  • What is the future of currencies and their values against gold?

  • What effect will the shift in power from West to East have on the precious metals going forward?

Giving the correct weighting and balance to each of these factors is what will dictate the gold price in the future. There are few investors out there who actually get the emphasis right, but those who do will keep making exceptional profits as they have done since the turn of the century. We believe Gold Forecaster & Silver Forecaster can assist in this task?

 


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