The question many investors are asking themselves today is, just what happened to the price of gold? Did the world change? Did the problems in Europe go away? Did all the states manage to find funding to cover their deficits?
No, none of that happened, but gold still dropped $100.
It’s all about market perception and timing, two things we’ve talked about many times before on the Trader’s Blog. I don’t know about you, but I remember when gold was over $1,400 an ounce and all I could see on TV where ads from gold companies extolling the virtues of buying gold as it is real money. Since the fall, I expect we’ll see fewer of these advertisements on TV and in print.
So what did happen to gold?
Well, for starters there were some key technical levels broken. If you’re a gold trader, but not a technical trader, you really need to learn how to read charts and see what other traders are doing.
Secondly, there did not appear to be any other news to drive this market higher. When that happens, markets tend to fall under their own weight, and as many retail investors purchased gold, there was nobody on the other side of the market to support gold.
So the question is, is the move over in gold? That’s a tricky one. I want to show you in today’s video exactly how we’re looking at this very emotional market. Every time we have created a video indicating that there would be some pullback in gold, we were bombarded by the gold bugs saying that we’re crazy. When you see a market pullback as much as gold has, you have to have some respect for the market itself.
If we look at the price of gold today at approximately $1,330, it pretty much equates to what happened in the last 30 years when gold was trading at a high of $850 an ounce. If you factor in inflation over the last 30 years, gold is probably lower now than it was 30 years ago. So how good an investment is gold? I think gold is more of a barometer of fear than anything else. Clearly there are other investments in the marketplace that have better returns.
Let’s get back to gold and what we think will happen. In this short video we analyze the market using our “Trade Triangles,” the Williams%R, and the MACD indicator.
As always our videos are free to watch and there are no registration requirements. If you like what you see please comment on our blog and feel free to Tweet or e-mail your friends. I think there’s an important takeaway message in this video – what goes up, must come down.
Who Has The Most Gold?
The price of gold reached an all-time high of $1432 per ounce in December, rising 29% in 2010 following uncertainty in the equity markets and European sovereign debt problems.
The biggest individual holders of gold - Central banks, International entities and governments - are believed to account for approximately 16.5 percent of the world's gold
The biggest individual holders of gold - Central banks, International entities and governments - are believed to account for approximately 16.5 percent of the world's gold
China should increase precious metals reserves By Sungwoo Park (China Daily/Agencies) Updated: 2011-02-01 13:59
0 comments Posted by Nse at Saturday, February 05, 2011SEOUL - China should increase its gold and silver reserves, the Economic Information Daily reported on Monday, citing an interview with China's central bank adviser Xia Bin.
Increasing gold reserves at the "appropriate time" is in line with the strategy of internationalizing the yuan, the report cited Xia as saying. "Related departments" should employ a "buy in the dip" strategy over a very long period of time, Xia said.
Bullion soared nearly 30 percent in 2010, advancing for the 10th year, as the dollar dropped and investors sought a store of value amid currency debasement. China is allowing greater use of its currency for cross-border transactions, seeking to reduce reliance on the dollar.
The report is "a positive factor for gold prices in the mid-and-long term," Hwang II Doo, a senior trader at Seoul-based Korea Exchange Bank Futures Co, said on Monday. Still "it didn't have immediate impact on prices as gold's gain has more to do with the unrest in Egypt at the moment."
Total gold consumption in China, the second-largest buyer, may gain 15 percent in the first-half, fueled by growing demand for alternative investments and a hedge against inflation, the China Gold Association said last week.
Imports of gold by China jumped almost five-fold in the first 10 months of last year from the entire amount shipped in 2009, the Shanghai Gold Exchange has said. Shipments were 209 metric tons compared with 45 tons for all of 2009, said exchange Chairman Shen Xiangrong.
Bullion for immediate delivery gained as much as 0.7 percent to $1,346.27 an ounce, and was at $1,339.25 at 12:53 pm in Seoul. The price rose 2.5 percent on Jan 28, the biggest intra-day increase since Nov 4 as escalating tensions in Egypt fanned concern that unrest may spread to other parts of the Middle East, increasing demand for an investment haven.
US crisis inquiry points to widespread failures
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Gold
The weakening dollar is likely to strengthen precious metals and commodity prices. Gold found support at $1320, evidenced by the long tailtwo days ago. Twiggs Momentum (21-day) remains below zero, warning of a correction; only recovery above the declining trendline would negate this.
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| 10th January 2011 | ||||||||||||||||||
 Indian Economy Next Quarter | ||||||||||||||||||
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| India : Kal, aaj aur kal | ||||||||||||||||||
Let us begin with the good news. Economic growth in India continues to present a happy story. Even if we take the highly volatile IIP, which has consistently shown lower growth since the peak of 15% growth in the Jan-March 2010 quarter, manufacturing is expected to turn in a 9% growth in 2011-12. The service sector is expected to grow by close to 11% next year, as trade, transport, communication, hotels, finance etc. are all set to continue their robust growth. Apart from all the usual indicators of production and economic activity, the improvement in the hiring indices across all sectors is a pointer to firms turning back to their expansion plans. Salary hikes are also on the way up, not yet to the peaks seen during the boom years, but significantly higher than the past year. Now for the bad news. Though all inflation indices show falling inflation rates, as we, at Indicus, have been saying for the past two years, inflation is not on its way out. This will not be news to the households who are grappling with high price spikes in basic food and fuel goods, nor will it be news to companies who feel the pinch coming in back again through inputs and commodities, nor will it be news to the RBI whose eagle eye is forever trained on inflationary pressures – it will however probably be news to the government, who has been seemingly unaware of the omnipresent pressure points in the system. Take the ongoing onion spike as a perfect example of apathy – when un-seasonal rains hit crops, is it really so difficult to predict and take appropriate action against impending shortfalls in supply? Emerging onion short supply was well-known months back, corrective action could very easily have been taken then. Why did we not? And why does this happen repeatedly? Now going ahead, crude oil prices have moved up, again a trend that has been on the cards for a few months now, cement, steel and other commodities have pushed up as well while prices in the auto sector and consumer durables are now set to factor in these rises in input prices. To make matters worse, it is not just domestic prices but global food and commodity prices that are trended up. Whether it is sugar or iron ore, the story is the same, we are to expect higher prices ahead. Now in such a situation, is it feasible to look forward to a benign inflationary environment in 2011? We anticipate consumer price inflation to stay (at best) around the 8-9% range in the year ahead. Clearly there are structural issues at play here that need to be dealt with, especially when it comes to food – anticipating the implications of erratic weather, higher productivity, better storage, processing, market reforms, the list is long and well known. There are of course other reasons lending a hand to inflationary pressures, as we have said all along, the higher fiscal deficit necessitated by the crisis is one of them, government programmes that have boosted rural incomes through higher MSPs is another and so on. And then there is all the cash floating around as high government expenditures on infrastructure and social spending brings with it the baggage of what has always euphemistically been termed ‘leakages’. So the economy is heating, though thankfully it is under some control. But the RBI has a tough job ahead. Of course, a better fisc and efficient food management could make its life easier, but the government is either unwilling or unable to oblige. | ||||||||||||||||||
| Sumita Kale and Laveesh Bhandari | ||||||||||||||||||
10th January 2011, Indicus Analytics | ||||||||||||||||||
Sumita Kale is Chief Economist, and Laveesh Bhandari is Director, Indicus Analytics. They can be contacted at sumita@indicus.net andlaveesh@indicus.net | ||||||||||||||||||
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| Economic Growth | ||||||||||||||||||
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| Read:The story behind the PMI data | ||||||||||||||||||
| Read:IMF pegs India’s GDP growth at 8.75% | ||||||||||||||||||
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| Inflation | ||||||||||||||||||
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| Read: Inflation pressures rise in emerging Asia | ||||||||||||||||||
| Read: High agri commodity prices a concern: FAO | ||||||||||||||||||
| Interest Rates | ||||||||||||||||||
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| Read: China central bank says inflation a priority | ||||||||||||||||||
| Read: ECB rate hike likely sooner than expected | ||||||||||||||||||
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| Exchange Rates | ||||||||||||||||||
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