Saturday, January 22, 2011

Gold is going through Cold Spell---By Shan Saeed

Gold is having a resting time and looking for some investors to start buying at the dip......Upsurge will happen after February/ March-2011

Gold bull run will continue in 2011. My conservative estimate is $1547/ounce for 2011. What's funny about bull markets is that no matter what the sector [ Energy, technology, Mines, airlines, gold, Wheat etc.], they always trade the same way. Pull back and consolidation are part of all financial transactions. Commodities are not different from them.

This means that bull markets climb [a wall of worry]. Every time there is a dip in the bull market, people begin to cry wolf and scream, "The sky is falling!" Is the sky really falling? The answer is yes on countries like Ireland, Greece, Spain, Portugal, Belgium, France, UK and USA where economies are deep in debt and fiscal mismanagement......

Investors think the bull market is over. Fear creeps into the minds quickly and they forget about fundamentals. What I find funny is how fast the sentiment has turned against Gold, Silver and Copper. I am still bullish on these commodities as financial markets would remain uncertain and volatile for the next 2-years till 2012

Gold, after all, just hit an all-time high last month with 1431/oz on 7th Dec-2010 and has just dropped about $77, or 6 %, from its high. People are acting like the sky is falling and the bull market is over. But, I think its a brilliant buying opportunity for the long run...These times won't come back.


Lets analyze it strategically and look at the commodities prices especially Gold.

In the past 10 years, seven of the 10 yearly lows for gold have occurred in January or February. Gold often sees weakness early in the year. You bet..Its happens always

For example, in 2009 gold dipped to $810 in the first quarter then finished the year at $1,096 an ounce. Last year in 2010, gold bottomed at $1,044 on 26 February and finished the year at $1,370. Therefore, as we can see, if you buy these dips early in the year it usually pays off as the gold price usually rises throughout the rest of the year.

We should remember that despite the talk of improving economies and rate increases in Brazil and China, nothing has really changed. China, Japan and Russia have got $2.9 trillion, $1.4 trillion and $900 billion respectively the reserves in their kitty. Euro solvency crisis has yet to be resolved. Spain, Italy, Portugal, Belgium, France are all in Red in the balance sheets. Fiscal indiscipline and profligacy would continue to slow down their economies.

QE has gone global with ECB, BOJ and BOE are all following the same road map as laid down by FED Chairman Ben Benanke. Printing money to keep the economies moving. You call it printing money or increase in monetary base, or interest rate stabilization or balance sheet expansion or quantitive easing or monetary easing/accommodation. Governments are still spending like crazy. The U.S. deficit is still going to be far north of $1 trillion this year i.e. 2011. US overall deficit would touch $20 trillion by 2014. The disasters of Medicare and Medicaid, in the form of unfunded liabilities, are still to come. US dollar would stay weak in 2011 against all major currencies like Yen, Canadian, Aussie Dollar and Pound sterling

This is just a normal correction in gold and excellent buying opportunity for the long run in commodities. Buy Gold, Silver, Oil, Palladium, Copper, Uranium, Wheat, Rice, Cotton, Corn, Soybean and Natural Gas.....Chinese consumers, Russain consumers, Arabs Central Bank, Hedge funds in USA and big players like Marc Faber/George Soros are all buying Gold and Silver. These are REAL CURRENCIES/ASSETS.....

Disclaimer: This is just a research piece and not an investment advice. Investors are encouraged to execute their own due diligence and research work before making strategic investment or taking decision in the short or long run. Research is the key for any investment.

No comments:

Post a Comment