Monday 20 July 2015

Gold hits a five year low; a positive message?

Price of Gold

Perhaps the Greek crisis won't come back after all and Mr Schauble will play nice from now on?

Perhaps China creating money to give to private companies to buy their own shares is perfectly fine?

Perhaps that ISIS lot will just toodle-pip off and those nice Iranians won't sponsor global terror anymore?

Perhaps Mr Putin is fed up with his picnic in Ukraine and is about to leave for home?

All of these things must be true to an extent if we are to believe market signals. The price of Gold has fallen to near $1000 an ounce, a five year low. Looked at historically, since the Brown Bottom, gold is still 4x higher than 2002, but of late the price has really cratered. China and the Oil Producing countries have been stocking up on supplies sold by European countries and new supply from Africa and Russia - they are less likely in the future to buy more gold so the price is declining. Also India has put on strong restrictions against gold hoarding which has been a challenge in its economy for hundreds of years (i.e. wealth is stored and not productively invested).

But longer term a low gold price suggests the preachers of economic doom are at a low ebb, with the world economy recovering still and has a bit of growth left in it yet.

I won't be buying into a contrarian bet soon - perhaps if the price reaches below $900 will be the time to consider it....certainly I did well in 2008 buying at $600 an ounce but that that time buying anything would have seen strong returns over the next few years.

Price of Gold



Blue Eyes said...

Maybe the survivalists need to top up their supplies of tinned goodies.

andrew said...

Interesting to plot this against the rise in other portable stores of value that are more mobile transnationally (alt-currencies)
You can have problems walking through an airport with a few pounds of gold on you.
Or you can email some numbers to yourself.

Timbo614 said...

This also probably leaves NDs silver looking much like my supermarkets? Er... you can omit the bloody super!

Nick Drew said...

yep Timbo, that was indeed a washout, thanks for reminding me )+:

Blue Eyes said...

Can you live in a supermarket? Hmm?

Maybe when Sunday trading comes in! :)

hovis said...

"if we are to believe market signals" - what a quaint idea

James Higham said...

The thing is that's so artificial that it can be recovery or crash at call, according to where we are in the agenda. Markets are so manipulated that ebb and flow is an act of reassurance that the economic models studied still have some validity.

CityUnslicker said...

James - Gold is opaque but its a huge market...the gold bug manipulation fantasies are just that. Try buying a ton of gold...see how much it costs!

Budgie said...

We do not seem to have free markets and free enterprise any more. Instead we have manipulated markets and corporatism. It is everywhere you look, provided you are not stuck in the capitalism vs socialism (or right vs left) paradigms.

Under state ownership it was clear that the state was responsible (even if you were put in the gulag for pointing it out). Now for example, in the UK at least, the electricity market, rather than being "free", is grossly manipulated by the UK government's obsession with CO2.

Blue Eyes said...

Presumably all the C@W readers who know how the gold market works made a killing shortly before the price crashed. Congratulations - get the drinks in!

Suff said...

And the price of physical

Budgie said...

BE, I wish that were true, I could do with some pin money. Meanwhile, being able to observe manipulation (eg: oil prices by Saudi; electricity prices by the UK government) does not make you a party to those manipulations, or to the timing of them.