Why Read This: To observe and think about contrary views expressed in the last few days with respect to the prospective price of physical gold.
Featured Article: Paul Walker of GFMS Consultancy is reported to have said on April 12, 2012 at a conference in Johannesburg that:
physical gold could trade well below U.S.$1,000 once 'real' (not inflation included) interest rates begin to "return to positive territory";
the biggest factor that would determine the future gold price is going to be investor appetite to absorb the approximate 200 tonnes per month of production, in circumstances where Mr. Walker does not place much weight on Central Banks purchases to sustain demand; and,
the current scenario might be sustained for the next six to twelve months.
The same article reports that concurrently Phillip Klapwijk, GFMS Head of Metal Analytics, thinks gold could drop lower from current levels over the next month or two, but that a "push toward $2,000 is definitely in the cards before the year is out, although a clear breach of that mark is arguably a more likely event for the first half of next year". Clear drivers of this view are said to be:
expected resumption of acute fears over Eurozone sovereign debt, with Spain being a new area of concern; and,
expected faltering of the U.S. recovery over the next few months that will force the U.S. Federal Reserve into taking "additional monetary policy measures" (read new quantitative easing measures).
My Comments: While Mr. Walker's views should not be dismissed without thinking about them, it seems to me:
- the likelihood of 'real' interest rates being experienced in the next six
- twelve months and beyond that in the Europe and the U.S. is remote based
on (to note but three things):
- ongoing Eurozone sovereign debt issues;
- the struggling UK economy, and
- the fragile recovery in the U.S., if indeed the U.S. is in 'meaningful recovery', and the U.S. Federal Reserve's repeated statements of its intent to hold interest rates low for the foreseeable future; and,
- Curious - that Mr. Walker and others at GFMS apparently see things so differently.
I suggest you read the referenced articles with an open mind, and only then reach your own conclusions on both Mr. Walker's and Mr. Klapwijk's views.
Also read: GFMS
cautious on short-term prices but sees new gold highs by early 2013
Source: Mining Weekly, Natasha Odendaal, April 11, 2012.
Reading time: 4 minutes.