Gold Investors Weekly Review – January 23th

In his weekly market review, Frank Holmes of the USFunds.com summarizes this week’s strengths, weaknesses, opportunities and threats in the gold market for gold investors. Gold closed the week at $1,294.49 up $14.04 per ounce (+1.10%). Gold stocks, as measured by the NYSE Arca Gold Miners Index, lost 1.23%. The U.S. Trade-Weighted Dollar Index rose 2.60% for the week.

Gold Market Strengths

Russia, the world’s fifth biggest holder of gold, boosted reserves for a ninth month in December, while its reserves jumped the most in six months. The country has more than tripled its gold reserves since 2005 and holds the most since at least 1993. The precious metal accounts for about 11 percent of Russia’s total foreign reserves.

Gold prices topped $1,300 per ounce for the first time in five months on Thursday. As a result, gold traders were bullish for an eighth week, citing safe-haven demand stemming from the weaker euro as well as inflows into exchange-traded funds.

After a 47-year absence, the British Royal Mint is bringing back gold and silver bars bearing the mint’s historic refinery brand. The Royal Mint Refinery dates back to 1852 and was operated by N.M. Rothschild and Sons. Silver bars will be available in 100-gram units, while gold bars will be offered in a variety of sizes, ranging from one gram to 100-gram units. The gold bars, in particular, will be exempt from the value-added tax for British citizens.

Gold Market Weaknesses

The International Monetary Fund made the steepest cut to its global growth forecast in three years in an outlook released on Monday. It said slowing growth almost everywhere except in the U.S. will more than offset the boost to expansion from the slump in oil prices.

Germany’s Bundesbank announced that it repatriated 120 tonnes of gold from Paris and New York in 2014. Since the transfers began in 2013, the bank has relocated a total of 157 tonnes. However, with Germany being the second biggest holder of gold, there is a question as to why the Bundesbank continues to struggle to get its gold reserves back. Previously, Germany has been denied requests for gold by New York as well as the opportunity to even view its gold on grounds of “security.” Further adding to this cloud of doubt is the fact that the last audit of the New York Fed took place over 50 years ago.

Indian gold importers are offering the widest discount in 17 months versus London prices, as jewelers curtail purchases ahead of a possible cut in the import duty. This expectation has been built as a result of a falling trade deficit.

Gold Market Opportunities

GLD-MACD-vs-Spot-Price-Jan2015

The institution of the Swiss National Bank’s peg of CHF 1.20 per euro, back on September 6, 2011, was the day that gold peaked at $1,920 per ounce. With the undoing of the peg and gold taking off, speculation abounds as to whether the Swiss National Bank’s actions will have once again marked a turning point for gold. In addition, silver appears to be breaking out, too, from its historic downtrend as shown in the chart below.

Silver-Break-longterm-downtrend-Jan2015

In his submission to this year’s London Bullion Market Association’s precious metals forecasting competition, Ross Norman who heads up London bullion broker Sharps Pixley, is forecasting gold to average $1,321 per ounce in 2015. Norman is considered to have been the most successful forecaster in the LBMA panel in the past, and has been the winner of the competition five times.

Gold Market Threats

Goldman Sachs cut its average gold forecasts for 2016 and 2017 to $1,089 per ounce and $1,050 per ounce, respectively, citing that recent gains from weaker economic data and the surprise move by the Swiss to abandon the peg to the euro is most likely priced in.  Ironically, they then suggest that coming interest rate hikes in the U.S. which have been talked about for the last couple of years, are not incorporated into the current gold price.

Barclays announced that opportunities to short gold are building as recent price gains are unsustainable.

Global credit ratings advisory firm Moody’s Investors Service has changed its outlook on the global base metals industry to negative, citing weakening macroeconomic growth indicators and investor sentiment.

 

Receive these articles per e-mail

Subscribe for the free weekly newsletter and receive 3 papers about physical precious metals investing