Gold Investing – Weekly Review December 26th

In his weekly market review, Frank Holmes of the summarizes this week’s strengths, weaknesses, opportunities and threats in the gold market for gold investors. Gold closed the week at $1,196.00 down $0.35 per ounce (-0.03%). Gold stocks, as measured by the NYSE Arca Gold Miners Index, fell 1.66%. The U.S. Trade-Weighted Dollar Index rose 0.50% for the week.

Gold Market Strengths

China silver imports rose to a nine-month high in November, reaching 244 million grams. In fact, silver imports increased 2.9 percent in the first eleven months of 2014 from a year earlier. Rising demand from China should help boost depressed silver prices.

Aside from the dollar, gold has been the best performing currency in 2014. For those who hold most of their assets in dollars, the beauty of gold may go unnoticed. However, for those in Russia who just saw half of their wealth disappear with the depreciation in the ruble, the benefits of gold are clear. This year provided investors with the perfect case study for highlighting the importance of gold.

A spokesman for the U.S. Mint stated that it sold out of American Eagle silver coins on Wednesday. The U.S. Mint sold a record 44 million ounces of silver coins in 2014.

Gold Market Weaknesses

Investors sold the most gold in 18 months as holdings in the SPDR Gold Trust sharply declined. Declining oil prices and fear of higher interest rates have caused many investors to shy away from the precious metal.

China palladium imports declined 57.2 percent in November from a year earlier. The drop in demand is being attributed to flat growth in auto production in the world’s largest vehicle market.

Gold mining stocks slumped this week after higher than expected GDP growth in the United States boosted the dollar. The NYSE Arca Gold Miners Index fell 1.6 percent this week.

Gold Market Opportunities

The gold-to-silver price ratio reached its highest level since January 2009 this week. The ratio has more than doubled since it bottomed in April 2011, primarily driven by a substantial decline in silver. The recent peak could be a sign that silver prices will reverse and catch up to gold.

According to a report by the World Platinum Investment Council (WPIC), the platinum market is expected to be short 885,000 ounces in 2014. The supply shortage is primarily the result of strikes in South Africa. Demand is expected to increase, which should put upward pressure on platinum prices, which have been significantly depressed.

Gold Market Threats

The dollar reached its highest level since 2006 this week as GDP growth in the United States came in unexpectedly strong. The dollar’s rapid rise has reduced the appeal of gold as investors seek to hold dollar denominated assets.

The eurozone has yet to enact its quantitative easing program to revive economic growth and inflation. With declining oil prices pushing down inflation, gold will continue to be less attractive as an inflation hedge without any policy intervention.

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