Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Key Time For Stock Markets: Bears Step Up or V-Shaped Bounce - 24th Sep 20
Five ways to recover the day after a good workout - 24th Sep 20
Global Stock Markets Break Hard To The Downside – Watch Support Levels - 23rd Sep 20
Beware of These Faulty “Inflation Protected” Investments - 23rd Sep 20
What’s Behind Dollar USDX Breakout? - 23rd Sep 20
Still More Room To Stock Market Downside In The Coming Weeks - 23rd Sep 20
Platinum And Palladium Set To Surge As Gold Breaks Higher - 23rd Sep 20
Key Gold Ratios to Other Markets - 23rd Sep 20
Watch Before Upgrading / Buying RTX 3000, RDNA2 - CPU vs GPU Bottlenecks - 23rd Sep 20
Online Elliott Wave Markets Trading Course Worth $129 for FREE! - 22nd Sep 20
Gold Price Overboughtness Risk - 22nd Sep 20
Central Banking Cartel Promises ZIRP Until at Least 2023 - 22nd Sep 20
Stock Market Correction Approaching Initial Objective - 22nd Sep 20
Silver Bulls Will Be Handsomely Rewarded - 21st Sep 20
Fed Will Not Hike Rates For Years. Gold Should Like It - 21st Sep 20
US Financial Market Forecasts and Elliott Wave Analysis Resources - 21st Sep 20
How to Avoid Currency Exchange Risk during COVID - 21st Sep 20
Crude Oil – A Slight Move Higher Has Not Reversed The Bearish Trend - 20th Sep 20
Do This Instead Of Trying To Find The “Next Amazon” - 20th Sep 20
5 Significant Benefits of the MT4 Trading Platform for Forex Traders - 20th Sep 20
A Warning of Economic Collapse - 20th Sep 20
The Connection Between Stocks and the Economy is not What Most Investors Think - 19th Sep 20
A Virus So Deadly, The Government Has to Test You to See If You Have It - 19th Sep 20
Will Lagarde and Mnuchin Push Gold Higher? - 19th Sep 20
RTX 3080 Mania, Ebay Scalpers Crazy Prices £62,000 Trollers Insane Bids for a £649 GPU! - 19th Sep 20
A Greater Economic Depression For The 21st Century - 19th Sep 20
The United Floor in Stocks - 19th Sep 20
Mobile Gaming Market Trends And The Expected Future Developments - 19th Sep 20
The S&P 500 appears ready to correct, and that is a good thing - 18th Sep 20
It’s Go Time for Gold Price! Next Stop $2,250 - 18th Sep 20
Forget AMD RDNA2 and Buy Nvidia RTX 3080 FE GPU's NOW Before Price - 18th Sep 20
Best Back to School / University Black Face Masks Quick and Easy from Amazon - 18th Sep 20
3 Types of Loans to Buy an Existing Business - 18th Sep 20
How to tell Budgie Gender, Male or Female Sex for Young and Mature Parakeets - 18th Sep 20
Fasten Your Seatbelts Stock Market Make Or Break – Big Trends Ahead - 17th Sep 20
Peak Financialism And Post-Capitalist Economics - 17th Sep 20
Challenges of Working from Home - 17th Sep 20
Sheffield Heading for Coronavirus Lockdown as Covid Deaths Pass 432 - 17th Sep 20
What Does this Valuable Gold Miners Indicator Say Now? - 16th Sep 20
President Trump and Crimes Against Humanity - 16th Sep 20
Slow Economic Recovery from CoronaVirus Unlikely to Impede Strong Demand for Metals - 16th Sep 20
Why the Knives Are Out for Trump’s Fed Critic Judy Shelton - 16th Sep 20
Operation Moonshot: Get Ready for Millions of New COVAIDS Positives in the UK! - 16th Sep 20
Stock Market Approaching Correction Objective - 15th Sep 20
Look at This Big Reminder of Dot.com Stock Market Mania - 15th Sep 20
Three Key Principles for Successful Disruption Investors - 15th Sep 20
Billionaire Hedge Fund Manager Warns of 10% Inflation - 15th Sep 20
Gold Price Reaches $2,000 Amid Dollar Depreciation - 15th Sep 20
GLD, IAU Big Gold ETF Buying MIA - 14th Sep 20
Why Bill Gates Is Betting Millions on Synthetic Biology - 14th Sep 20
Stock Market SPY Expectations For The Rest Of September - 14th Sep 20
Gold Price Gann Angle Update - 14th Sep 20
Stock Market Recovery from the Sharp Correction Goes On - 14th Sep 20
Is this the End of Capitalism? - 13th Sep 20
The Silver Big Prize - 13th Sep 20
U.S. Shares Plunged. Is Gold Next? - 13th Sep 20
Why Are 7,500 Oil Barrels Floating on this London Lake? - 13th Sep 20
Sheffield 432 Covid-19 Deaths, Last City Centre Shop Before Next Lockdown - 13th Sep 20
Biden or Trump Will Keep The Money Spigots Open - 13th Sep 20
Gold And Silver Up, Down, Sideways, Up - 13th Sep 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Gold Slips on Queationable Inflation Data

Commodities / Gold & Silver May 15, 2008 - 11:42 AM GMT

By: Mark_OByrne

Commodities Best Financial Markets Analysis ArticleGold was down  $ 3.60 to $8 6 5.40 yesterday  and silver was  down  18  cents to $1 6. 55 . Gold traded flat in Asia and has  risen marginally in early trading in Europe. While the dollar is down today, the dollar's short term bounce may continue and this could put further pressure on gold and result in further consolidation at these levels (the $850 to $890 range). But oil is up more than 0.5% again this morning to over $125 a barrel again and this should result in gold being well supported at these levels.


While the CPI inflation data (more below) was tamer than expected yesterday, there are doubts as to the accuracy of the inflation data and concerns that government statisticians may be underestimating the data. The report said that gasoline prices dropped 2 percent in April despite the fact that gasoline prices actually rose some 10% at the wholesale level (from $2.58 to $2.83) in April. However, the data was greeted with glee by much of Wall Street and risk appetite was again very prevalent. 

Today's Data and Influences
There is a lot  of US data scheduled today including the  TICs, Empire and Philly Fed eral Reserve I ndices, industrial production and the NAHB housing index and weekly jobless claims. The TICs will assume increasing importance in coming months as we see whether the U.S.' many creditors are continuing to fund the U.S.' massive debts even at near record low yields. Even a small decline in buying interest in dollar assets could have serious ramifications for U.S. bond markets, interest rates and the dollar.

A number of Fed eral Reserve  speakers, including  Ben Bernanke, are  due to speak . Markets will be watching to see if Bernanke qualifies his recent comments re the current financial crisis when he said on Monday that  "conditions in financial markets are still far from normal. This process is likely to take some time."

Former Chairman of the Federal Reserve Warns Again
In contrast to more speculative players with short term horizons and the stock market permabulls, Former Chairman of the Federal Reserve, Paul Volcker, warned yesterday that the United States could face a 1970s-style period of skyrocketing inflation if investors lose confidence in the buying power of the U.S. dollar. "We are back in the 70s or worse if confidence in the Federal Reserve is lost.    . . .   If there is a real loss of confidence in the dollar, then I think we are in trouble. That is something that has to be watched," Volcker told the congressional Joint Economic Committee.

Yesterday's Inflation Figures and the Fundamentals
The consumer-price index rose 3.9 percent in the 12 months ended April 30, the Labor Department said yesterday . The inflation statistics were odd and some economists are rightly asking how gasoline prices were down 2% in April despite obviously soaring gasoline prices. The report also has energy prices unchanged. Conveniently and possibly a little simplistically seasonal adjustments were cited as the reason that gasoline and energy prices did not reflect their recent surge in prices. Some are suggesting that statisticians are manipulating figures in order to appease their political masters and this seems increasingly likely as inflation seems to be significantly  underestimated in recent government data.

Even so with government inflation figures at an annual 3.9% and the Federal Reserve holding interest rates near record lows at 2%, there are still negative real interest rates and thus monetary policy remains extremely loose and accommodative which is very bullish for gold in the medium to long term.

Despite the big picture fundamentals remaining extremely favourable to gold it is finding it hard to get traction after this most recent sharp sell off. Many market players remain in some fantasy  " la la land " and refuse to acknowledge the growing risks posed by stagflation and the markets appear to be in another one of their "irrational exuberan t " phases where risk appetite is again the 'force du jour'.

Having said that, periods of consolidation are common after such sharp sell offs and this type of sideways movement can often frustrate bulls and bears alike prior to the market reasserting it's primary trend - which is likely to be up as none of the fundamental macroeconomic, geopolitical and geological issues driving the gold markets have been resolved.


Poor Analysis of Gold Market
Some of what purports to be  'analysis'  of the gold market remains highly selective, uninformed and biased. A recent report said that gold would fall to $700. Interestingly it failed to say whether this was just another sharp correction and healthy consolidation or rather an end of the bull market.

The report purported to show that gold remains overvalued and said that the fact that gold is at near record low levels versus the price of oil ratio does not mean that gold is cheap relative to oil.

Bizarrely, the report selectively  chose the 1982 to 2008 as their time frame of choosing .  ' Lies, damn lies and statistics' comes to mind. How convenient to ignore the 1970's which is the last decade that gold and oil were in bull markets. Stagflation is already present in western economies and  to completely ignore the last time period when western economies had high inflation and low growth - the 1970's is shoddy at best and extremely biased at worst (see Former Chairman of the Federal Reserve, Paul Volcker, warning above) . And seems like an attempt to use data in order to establish a pre ordained set of opinions. Rather than allowing the facts to help guide and establish opinions.

Financial and economic history pre-1980 and the reality of stagflation  remain s taboo which is incredible given the current macroeconomic conditions. From a research point of view this is very much a case of "g arbage in - garbage out ".

T he same report said that gold was primarily a play on dollar weakness. This is nonsense - dollar weakness is a factor in gold's strength but gold has been surging in all currencies internationally (as seen in the gold charts here - http://www.research.gold.org /prices/monthly/  ). We have a global financial and economic crisis and gold has surged in all major currencies particularly since the start of the crisis last summer. To suggest that gold's strength is primarily due to dollar weakness is very misinformed and blinkered. How bizarre for any analysis to ignore unprecedented systemic risk as seen in the run on Northern Rock and the bankruptcy of Bear Stearns. A few of our clients who had their life savings in Northern Rock would have something to day about such analysis. Most of them are not concerned in the least regarding the dollar's weakness.

The IMF has warned that if another major bank fails (a la Bear Stearns) it could take down four or five of the world's largest 15 banks with it. Obviously this has serious ramifications for the stability of the global financial system and the global economy. The macroeconomic climate is the most uncertain since the Great Depression and much of the western world faces the toxic combination of a virulent housing crash and credit and debt crisis and the spectre of stagflation. 

To attempt to analyse the gold market while completely ignoring geopolitical risk is highly unprofessional as well. Geopolitically, the world remains beset by many serious risks any of which could seriously impact western economies. Pakistan, North Korea, Lebanon and Israel are some of the hotspots posing risks in this regard. This was graphically illustrated when Benazir Bhutto was tragically assassinated in Pakistan and gold surged some $25 on safe haven buying due to fears regarding a nuclear bomb falling into the hands of Islamic militants in Pakistan.

The crux of the matter is that the western world, and particularly the U.S., is massively dependent on oil and gas exports from countries who are at best lukewarm and at worst outright hostile to them. Russia, Venezuela and Iran are some of the more obvious glaring examples of this.

The economics 101 of supply and demand might have something to do with gold's rising price as well. Gold production is stagnating and gold output in the leading gold producing countries continues to fall year on year despite higher gold prices leading geologists to wonder whether we may have or may soon reached the point of ‘peak gold' production. The world's biggest producer -- South Africa produced nearly a 1000 tonnes of gold in 1980. This was down to 264 tonnes last year, the lowest since 1932.

B est not to let the facts get in the way of a good argument though. Gold remains one of the most poorly covered and analysed markets in the world and this creates amazing opportunities for investors as the mass of the public remains blissfully ignorant of gold's fundamentals due to this extremely poor analysis of the gold market.

Gold and silver will  very likely at least reach their inflation adjusted highs of 1980 in the coming years at $2,300 per ounce and $150 per ounce. They will also likely reach inflation adjusted record highs in all major currencies. And those who have been wrong regarding the precious metals markets in recent years will continue to be wrong. This is unfortunate as it will cost many investors a lot of money through further misallocations of capital. Even if their bearish pronunciations on precious metals were right, it would be more responsible of them to admit that nobody knows the future direction of any market or asset class and thus proper diversification is merited and risk aversion should be a prime consideration for investors. Thus, a 5% to 10% allocation to precious metals should be advised in order to hedge against increasing macroeconomic and systemic risk.

Silver
Silver is trading at $1 6. 63 /1 6. 68 per ounce at  1200 GMT.

PGMs

Platinum is trading at $20 17 /20 27 per ounce ( 12 0 0 GMT).
Palladium is trading at $4 29 /4 34 per ounce ( 12 0 0 GMT).

By Mark O'Byrne, Executive Director

Gold Investments
63 Fitzwilliam Square
Dublin 2
Ireland
Ph +353 1 6325010
Fax  +353 1 6619664
Email info@gold.ie
Web www.gold.ie
Gold Investments
Tower 42, Level 7
25 Old Broad Street
London
EC2N 1HN
United Kingdom
Ph +44 (0) 207 0604653
Fax +44 (0) 207 8770708
Email info@www.goldassets.co.uk
Web www.goldassets.co.uk

Gold and Silver Investments Ltd. have been awarded the MoneyMate and Investor Magazine Financial Analyst of 2006.

Mission Statement
Gold and Silver Investments Limited hope to inform our clientele of important financial and economic developments and thus help our clientele and prospective clientele understand our rapidly changing global economy and the implications for their livelihoods and wealth.
We focus on the medium and long term global macroeconomic trends and how they pertain to the precious metal markets and our clienteles savings, investments and livelihoods. We emphasise prudence, safety and security as they are of paramount importance in the preservation of wealth.

Financial Regulation: Gold & Silver Investments Limited trading as Gold Investments is regulated by the Financial Regulator as a multi-agency intermediary. Our Financial Regulator Reference Number is 39656. Gold Investments is registered in the Companies Registration Office under Company number 377252 . Registered for VAT under number 6397252A . Codes of Conduct are imposed by the Financial Regulator and can be accessed at www.financialregulator.ie or from the Financial Regulator at PO Box 9138, College Green, Dublin 2, Ireland. Property, Commodities and Precious Metals are not regulated by the Financial Regulator

Disclaimer: The information in this document has been obtained from sources, which we believe to be reliable. We cannot guarantee its accuracy or completeness. It does not constitute a solicitation for the purchase or sale of any investment. Any person acting on the information contained in this document does so at their own risk. Recommendations in this document may not be suitable for all investors. Individual circumstances should be considered before a decision to invest is taken. Investors should note the following: The value of investments may fall or rise against investors' interests. Income levels from investments may fluctuate. Changes in exchange rates may have an adverse effect on the value of, or income from, investments denominated in foreign currencies. Past experience is not necessarily a guide to future performance.

All the opinions expressed herein are solely those of Gold & Silver Investments Limited and not those of the Perth Mint. They do not reflect the views of the Perth Mint and the Perth Mint accepts no legal liability or responsibility for any claims made or opinions expressed herein.

Mark O'Byrne Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules