Gold - The Weekly Global Perspective
HIGHLIGHTS of "GLOBAL WATCH - THE GOLD FORECASTER" Pages:
1. Short-term forecasts across the Board!
2. Comex: Net Long positions Gold / Silver / Platinum.
2 - 3. What Greenspan's comments mean for the Global Economy!
3 - 4. The Oil crisis comes into view. / The U.S. & the Islamic Middle East
/ Prospects for the U.S. $ / hedging continues to drop to meet
mining finance needs.
5. Summary: The present Gold Price Drivers.
6 - 7. Technical Analysis of the Gold Price: Long/Short term.
6 - 9. International gold markets: - Investment Strategies.
9-10. Silver / Platinum
11-17. INDEX OF THE WEEK - CRB Index / Shares: HUI Index /NEM
DRD/ NG/ VGZ/ GPXM/ SSRI / EDR / PAAS
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That was the week that was - Gold Market action.
But this week was a better week than that was. Gold finally broke upwards through resistance, despite the thoughts that everything was all right in the States and with the $, again after Greenspan spoke. But after that another look at his words, as they are without trying to translate them and one sees that they contain warnings that are not good for some sectors of the economy and certainly not for the $. Try as he may to please Washington and yet stay accurate, his previous comments on the Trade deficit when combined with the realities pf the $, helped us to appreciate even more that the $ is structurally in trouble!
It took the day after the long weekend to send it cracking but up it went as the $ went down. The funds were seen back in buying mode increasing their positions by 40.53 tonnes to get back in the game.
The Market has been looking strong on a firm foundation despite its cautious stance while waiting for Greenspan to speak. The news of more Central Banks letting it be known that they are diversifying away from the U.S. $ into other currencies, brought the foreign exchange reality back to the market! [South Korea's central bank had said that it would diversify its USD200.2Bn in foreign exchange reserves from government bonds into higher-yielding paper and a greater variety of currencies. S. Korea C.B. is the 4th largest holder of U.S paper.]
But our attention has been captured by gold's performance in Euro terms. This stalwart action of holding the mid Euros 325-6 level solidly through the last couple of weeks seems remarkable, now made more remarkable by this present move through Euros 328.
What Greenspan's testimony means for the Global Economy?
The Chairman of the Federal Reserve, Alan Greenspan, confirmed that the U.S. economic recovery had firmed. i.e. Growth is on track. His prime objectives are, "the maintenance of Price Stability and maximum sustainable employment". With this in mind, what is the future for the Trade deficit? These are the words from Alan Greenspan that are consistent with our own views often expressed in these pages.
"First, partly as a legacy of the dollar's previous strength, the level of imports exceeds that of exports by about 50 percent. Thus exports must grow half again as quickly as imports just to keep the trade deficit from widening--a benchmark that has yet to be met. Second, as is well-documented, the responsiveness of U.S. imports to U.S. income exceeds the responsiveness of U.S. exports to foreign income; this difference leads to a tendency--even if the United States and foreign economies are growing at about the same rate--for the growth of U.S. imports to exceed that of our exports. Third, as of late, the growth of the U.S. economy has exceeded that of our trading partners, further reinforcing the factors leading imports to outstrip exports. Finally, our import bill has expanded significantly as oil prices have risen in recent years."
And there we are, he made it clear in these words, that good growth in the U.S. leads to increased imports, "Third, as of late, the growth of the U.S. economy has exceeded that of our trading partners, further reinforcing the factors leading imports to outstrip exports. Finally, our import bill has expanded significantly as oil prices have risen in recent years." Quite clearly, the drive behind President Bush's policies for good economic growth inside the U.S.A., will lead to an exacerbation of import levels and the Trade deficit.
The Oil crisis comes into view.
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. O.P.E.C. expects Chinese oil consumption to rise by 500,000 barrels a day, to 7 million a day, because of higher-than-expected economic growth, according to the monthly OPEC report. But this too may prove to be a conservative estimate, for China's fourth-quarter demand was 290,000 barrels a day more than previous estimates. If such demand persists the annual demand should rise to 8.16 million barrels a day. This ignores the continuation of Chinese growth, which may well be close to 10% this year, taking demand to 1.276 million barrels a day, extra. Demand in China alone, should it continue to grow at this pace, will then completely absorb O.P.E.C. surplus in 2006. Now add growth of demand from India together with stockpiling to this and demand will overtake supply in this market, within 2005. It is most unlikely that the market will wait for this reality to arrive before reacting to it. There is no doubt an explosion in oil prices will then arrive. Unlike 1970 and after, O.P.E.C. will not be able to turn on the taps then. The taps have only 2 million to 2.5 million extra barrels left in them right now!
We published an article on "Capital Controls for the U.S.A. - A glance at South Africa's Trail", which we will happily send you [free] if you send us your e-mail address [to email@example.com]. It is the second article on a series on the prospects for Capital Controls in the future.
The first, called "Capital Controls for the U.S.A.", the prime article and important to those who want to understand what a collapsing $ could lead to, will be sent free to new Subscribers to "Gold - Authentic Money" in which it is published.
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The London Gold Fix
22nd February a.m. $430.75 € 326.647
22nd February p.m. $432.85 € 327.000
Latest: At the time of writing, gold stood at $434.90 and in Euros 328.12. The Euro is worth $1.32545. Gold has broken the first layer of resistance in Euros!
Platinum $874 [Euros 659.40] -
The Rand price of platinum is of course fundamental to the production plans of the South African miners, among whom Anglo Platinum is the latest to modify (again) its expansion plans, with the announcement this Monday past (14th February) that the 2006 platinum production target is now between 2.7M and 2.8M ounces (the original target two years ago, was for 2006 output of 3.4M ounces). The company expects yet more revisions to expansion plans if the Rand remains strong.
In the Johnson and Matthey study of the Platinum market just released, the political risk of mining in Zimbabwe is considered. We quote the report, which says, "and the company suggests that the foundations for the long-term expansion of the local PGM mining industry have been partially destabilised during 2004 as a result of a set of government initiatives that have caused confusion both in the industry and among investors. The "Enhanced Platinum Sector Regime", or ESPR, under which the Zimbabwean government proposes to take responsibility for platinum group metal marketing, is singled out, although the company comments that it is hard to see what immediate impact it will have, given that all Zimbabwean PGM concentrate is currently shipped to South Africa for refining."
The report continues to confirm, "the automotive sector and the Chinese jewellery industry are important sectors of demand. Within the auto industry, the European light-duty diesel sector is an important force as growth in both the market share and sales of diesels is expected to continue. In addition the voluntary fitment of diesel particulate filters is forecast to increase, notably following the decision by the German government to offer tax rebates to purchasers of diesel cars fitted with these filters, while a number of other European governments are considering following suit. The outlook for the Chinese jewellery industry is predicated on the platinum price and its volatility, while the outlook for platinum jewellery elsewhere in the world is described as "rather uninspiring", with the upward path of US interest rates and sluggish Japanese activity highlighted as contributory factors.
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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