Gold (and Silver): Where From Here?

By: Ian Campbell | Thu, Mar 28, 2013
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These days gold and silver seem to attract more attention than pretty much any other commodity, perhaps other than oil, and not a day goes by without numerous commentators:

While these commentators may well believe strongly in the positions they take, many of them have either a declared or obvious vested interest in their 'side of the argument'. Further, it has always struck me that some of them have 'ridden the horse they ride' for so long that they very likely are attached to the saddles they are sitting in by crazy glue and couldn't get unstuck from their positions if they wanted to.

Some commentators, my observation being principally those on the 'long side' of the gold/silver debate, parade out comparative gold/silver, gold/dow, silver/dow, gold/historic inflation rate, silver/historic inflation rate ... you name it ... relationships as 'proof positive' that gold and/or silver inevitably will go materially upward or downward in price. My principal concern with these comparative approaches is that I think that generally the 'historic base times' were times of quite different macro-economic circumstance than the macro-economic circumstances that prevail today.

So where am I today with respect to the gold (and silver) price:

In support of this, consider that:

In the past two months (on January 15, and again on February 21) Jeffrey Christian of New York's CPM Group commented in this Newsletter on what he saw as a 'risk premium' of (by interpolation) about $625 in the gold price (see Gold: The risk premium inherent in gold prices, and Gold: More on the risk free gold price).

Given how I see the comparative macro-economic climate one year ago (when the physical gold price was about $1,675) against how I see it now (when the physical gold price has hovered around $1,600 of late) I currently think that:

Then again, if you read this Newsletter you know I see physical gold as a protector of purchasing power in good and bad times, not something (at least for me) to trade for short-term profit or loss, and hence I am not as concerned about near-term price changes in either gold or silver that many others seem to be.

All that said, a report yesterday says that Mr. Christian's CPM Group has now forecast that:

That latter article is titled CPM Group sees 3% fall in Gold investment demand this year. I suggest you read it if you hold or are thinking of holding physical gold. You ought also to discuss the various views set out herein with your investment advisor and 'smart trader/investor' friends.

Topical References: CPM Group sees 3% fall in Gold investment demand this year, from BullionStreet, March 27, 2013 - reading time 3 minutes. Also read New gold discoveries declining at accelerating rate - IntierraRMG, from Mineweb, Lawrence Williams, March 25, 2013 - reading time 3 minutes.

 


 

Ian Campbell

Author: Ian Campbell

Ian R. Campbell, FCA, FCBV
Economic Straight Talk

Through the Economic Straight Talk Newsletter Ian R. Campbell shares his perspective on the world economy, the financial markets, and natural resources. A recognized business valuation authority, he founded Toronto based Campbell Valuation Partners (1976), Stock Research Portal (2007) a source of resource companies market data and analytic tools, and Economic Straight Talk (2012). The CICBV* annually funds business valuation research in his name**. Contact him at icampbell@srddi.com.
* Canadian Institute of Chartered Business Valuators
** through The Ian R. Campbell Research Initiative

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