Gold - The Weekly Global Perspective
HIGHLIGHTS of "Global Watch - The Gold
1. Short-term forecasts across the Board!
2. Comex: Net Long positions Gold / Silver / Platinum.
2 - 3. Why did the $ weaken on a lesser Trade Deficit?
3 - 4. India: How much gold to marry? Prospects for the U.S. $ / Oil prices rising?
5. Summary: The present Gold Price Drivers.
5 - 6. Technical Analysis of the Gold Price: Long/Short term.
6 - 8. International gold markets: - Investment Strategies.
9. Silver / Platinum
10-15. STOCK OF THE WEEK - Meridian [MDG] / Shares: HUI Index /NEM /DRD/ NG/ VGZ/ GPXM/ MMRSF/ CAU / CRCUF
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Why did the Dollar weaken on an improved Trade Deficit?
If all the professional commentary and expectations put out last week were correct, we should be looking at a lower gold price. So why didn't the $ rise and gold fall? This could mark a fundamental change in the structure of the market. The market professionals appeared to have misread the entire picture. If it is a structural change, we have to understand just what it is! If we don't we will continue to be caught on the wrong foot when important moves take place. More than ever, now, you must understand the global picture of gold and the monetary scene!
1. The first conclusion has to be that this market is not mechanical and superficial. It can see deeper than the obvious. A small monthly change is not going to convince the markets that the Trade deficits are on the mend. They appreciate now that this is a structural problem, which will change market behaviour.
2. The Oil price impact on the deficit is significant, as was shown last month when oil prices were lower than previous months. The inelasticity of the demand for oil would still ensure Trade deficits due to oil, as the oil price went up in the $. Irrespective of the price, the U.S. needs to import oil. With the prospect of Chinese demand rising more than the projected 80,000 barrels a day, we are rapidly approaching the time when demand will overtake surplus in this market. The vulnerability of the U.S. situation is starting to be appreciated.
3. The Japanese monthly Trade surplus hit a new high level. Japanese cares are taking a greater and greater share of the U.S. car market. Their cars match and seemingly better their average U.S. counterparts. They will continue to hold their currency down to protect these advantages. In terms of the prices on Japanese goods, they are unlikely to rise with a falling $.
4. The numbers have shown conclusively that the U.S. deficit is a structural problem that cannot be fixed by a change in the exchange rate of the $. Oil will still be imported, Japanese goods will still be imported, and Chinese goods will still be imported, almost irrespective of probable drops in the value of the $ on foreign exchanges!
5. The stability of the Euro is starting to prove more attractive than the $ with higher interest rates. If a man who cannot repay his debt offers you more interest will that improve the repay-ability of the loan? Unlikely. The bulk of the World's Central Banks have let it be known that they are favouring the Euro over the $ presently, in terms of acquiring reserves.
6. And Gold? As the evidence mounts of structural problems underlying the $'s value mounts primarily non-U.S. Investors are buying more gold. It is likely at some stage that the U.S. Investors will follow suit.
7. There is little on the table that convinces the market that there are realistic plans to adjust the structures that are giving rise to the problems.
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The London Gold Fix
14th February a.m. $422.80 € 325.757
14th February p.m. $424.20 € 327.492
Gold & Silver
Action: We hope you followed our recommendations and covered shorts and established long positions as recommended for the last two weeks. - For ongoing information on this, see below for subscription details.
Gold/Silver Equities? - Which specific equities do you wish to be reviewed? Requests for more attention to silver shares have been requested and it will be followed more closely in future issues. Every week we will continue to follow some of the majors and highlight some small to mid-tiers. Any specific gold/silver stocks will be considered.
In "Global Watch - The Gold Forecaster", we will present the global picture, as it relates to gold and its price whilst synthesising these factors to forecast the gold price.
The gold price is an amalgam of diverse and changing influences, from Currencies to Jewellery, from Investors to Speculators. From Asia, to India, to Australia, to Canada, to South Africa, to the U.S.A. and to Asia, the gold price is of interest to all. It cannot be seen in isolation as a metal, but must be understood as a Global Thermometer measuring monetary, political, economic, stability as well as the raw demand / supply features of the metal itself. These factors do not merely add up to the price but interact in sometimes, strange ways, to produce the gold price. For example, rising prices often lead consequently to rising demand, as the appetite for the metal grows. Its price may rise in one currency and fall in another, at the same time. Overall, it reacts sensitively to the overall level of global stability, which, in turn, gives us the gold price.
It is our task in this letter to track these different features, giving you both the Technical Analysis and the fundamental features impacting on the gold price each week. It is our goal to help you to understand and profit from this market, wherever you are on this globe, in a professional manner. We welcome any input or observations you may have, which contribute to the enhancement of this service.
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