Gold near final bull stage; gains possible

[brigadeer]

Interesting article I found on Reuters today. I can see this as being a reasonable assumption if you are of the mindset that the economy will be returning to normal growth in the next 1-2 years. If that were to happen, I could definitely see a lot of investors getting out of gold and back into assets offering higher rates of return. Unfortunately, I see nothing but financial disaster worldwide for the next few years, so I don't see a flight from gold (from an investment perspective) anytime soon.

http://in.reuters.com/article/businessNews/idINIndia-47690620100414

NEW YORK (Reuters) - Gold is near the final phase of its 10-year bull run, but prices could still climb as high as $1,300 an ounce in 2010 driven by higher investment demand, said Philip Klapwijk, chairman of metals consultancy GFMS Ltd.

The rise of gold prices is not sustainable because jewellery demand has dropped to less than half of total demand, and record investment buying at some point will fall off, Klapwijk told Reuters in an interview before the release of Gold Survey 2010. "There are pointers to the fact that we are entering the final stages of a bull market," Klapwijk said.

Bullion has more than quadrupled since 2000 when it was trading at about $250 an ounce. Year to date, it has gained about 5 percent and spot gold is currently fetching about $1,150 an ounce.

"But that doesn't rule out the potential for some fairly fancy price gains before it reaches a peak in prices. We are actually pretty bullish still in at least the next 6-12 months."

Klapwijk said the last phase of gold's bull cycle could last as long as two to three years. "By the end of this year, we believe prices will be near the $1,300 mark," he said.

Klapwijk said gold will eventually face strong headwinds, such as the end of governments' emergency economic stimulus packages. "Investment demand at some point has to falter," he added.

The worst economic crisis since the Great Depression has led to both a sharp drop in jewellery buying and soaring gold investment demand for wealth protection.

Klapwijk said that gold supply and demand are not currently in a long-term equilibrium and prices at higher levels are not sustainable. "This is not an healthy underlying market when the traditional mainstay of the gold market on the demand side, jewellery, is reduced to just 40 percent of demand."

GFMS' gold survey showed that jewellery demand fell 20 percent to 1,759 tonnes due to weak consumption during a recession. Jewellery demand, excluding scrap gold, was even weaker, down 25 percent at 1,111 tonnes.

Jewellery consumption is usually the biggest underpinning factor, representing about 70 percent of total gold demand. "At some point, there will be a resumption of normalcy, and gold is going to look very pricey. You could see some massive volatility and significant swings in prices," Klapwijk said.

[Plastic]

Sounds like another one of those sell your worthless gold for valuable paper cheerleading sessions... Dunno, could have mis-interpreted I 'spose. thanks for posting the story.

[brigadeer]

I don't necessarily agree with the article itself. That said, I do think it is very important to keep perspective and not turn into a cheerleader.

I think the main premise was that gold is now functioning as money, with less than half of current gold consumption going towards jewelery. I would guess that just a few years ago, jewelry was the largest consumer of gold.

I think the writer believes that there has been a bunch of money placed into Gold over the past few years, and that it cannot continue, thus an eventual drop in the price of gold.

The theory sounds good if you are of the belief that the world will soon exit this recession and return to prosperity. I'm not buying that for a minute. This is where I disagree with the writer.

[Defender]

http://www.caseyresearch.com/displayGsd.php

in London's Financial Times. Gold Field Mineral Services [GFMS] is up to their old tricks... being negative about the gold price. Of course, they've been negative about the price from the time it broke through $300 ten years ago... so why should they change their tune now. The headline reads "Record gold prices unsustainable"... and the link is http://www.ft.com/cms/s/0/9ed3961c-47bc-11df-a4a6-00144feab49a.html

The basis for Klapwijik's rationale is in that FT.com article and is "Jewellery demand is sensitive to price" "but in the longer term, he said, investment demand would not be able to offset subdued demand for jewellery."

[Trinity]

Jewelry demand was constantly rising from 1980 all the way to the 1999 bottom. Jewelry demand seems to be a contra indicator for the Gold price according to this chart.

[jedemdasseine]

Define "jewelry demand." And think globally.

[Neuro]

very good point Trinity! Seems like an inverse and strong correlation between jewelry demand and POG...

[Libertarian_Guard]

$1,300 gold - - and that's it!

OMG, lets see then, silver might even break $21 ....... before the next crash!

The investing life of a gold-bug is one tough road.

[jedemdasseine]

I see some of you are still thinking in terms of Federal Reserve Notes. Good. That's the way you're supposed to think. :)

[Libertarian_Guard]

Au & Ag need to be converted back into fiat, there is no other way to purchase whatever I'm interested in.

I'd call it a profit, if I sold for more (fiat) than I bought for.

[jedemdasseine]

Au & Ag need to be converted back into fiat, there is no other way to purchase whatever I'm interested in.

I'd call it a profit, if I sold for more (fiat) than I bought for.


If that's what a profit is, then I'm not interested. Show me real gains in relative purchasing power over time without counterparty risk, and then we'll talk. Gold has that potential, but that's besides the point. Why limit oneself to thinking in terms of instruments of debt, when one can also think in terms of silver, gold, oil, corn, cupcakes, and/or anything else? Dollars are a necessity for Americans, and thus, thinking in terms of dollars is a necessity, but one should be cautious not to be think like the herd.

A note for everyone: Checking the spot price obsessively is NOT healthy.

[peachesinfla]

Au & Ag need to be converted back into fiat, there is no other way to purchase whatever I'm interested in.

I'd call it a profit, if I sold for more (fiat) than I bought for.


If that's what a profit is, then I'm not interested. Show me real gains in relative purchasing power over time without counterparty risk, and then we'll talk. Gold has that potential, but that's besides the point. Why limit oneself to thinking in terms of instruments of debt, when one can also think in terms of silver, gold, oil, corn, cupcakes, and/or anything else? Dollars are a necessity for Americans, and thus, thinking in terms of dollars is a necessity, but one should be cautious not to be think like the herd.

A note for everyone: Checking the spot price obsessively is NOT healthy.



Real gains in purchasing power? Don't you have to sell your metals to buy more of whatever you want to purchase? What are you talking about? ;D

[jedemdasseine]

Au & Ag need to be converted back into fiat, there is no other way to purchase whatever I'm interested in.

I'd call it a profit, if I sold for more (fiat) than I bought for.


If that's what a profit is, then I'm not interested. Show me real gains in relative purchasing power over time without counterparty risk, and then we'll talk. Gold has that potential, but that's besides the point. Why limit oneself to thinking in terms of instruments of debt, when one can also think in terms of silver, gold, oil, corn, cupcakes, and/or anything else? Dollars are a necessity for Americans, and thus, thinking in terms of dollars is a necessity, but one should be cautious not to be think like the herd.

A note for everyone: Checking the spot price obsessively is NOT healthy.



Real gains in purchasing power? Don't you have to sell your metals to buy more of whatever you want to purchase? What are you talking about? ;D


lol. Clever. ;)

To those you still don't get it: I'm talking about changing your mental reference point. I hate the phrase "paradigm shift," but that's what I'm suggesting. I'm NOT saying forget dollars. I'm saying learn to adapt your thinking. Don't limit yourself to dollar thinking. It's a mind trap.

[jedemdasseine]

A good measure of where we stand in this "gold bull" is the gold basis. Fekete is best source for info on the gold basis. Think like warehousemen of the old commodities exchanges, and then merge that context with the notion that gold is money and can extinguish debt. That's what the big players do.

[peachesinfla]

Au & Ag need to be converted back into fiat, there is no other way to purchase whatever I'm interested in.

I'd call it a profit, if I sold for more (fiat) than I bought for.


If that's what a profit is, then I'm not interested. Show me real gains in relative purchasing power over time without counterparty risk, and then we'll talk. Gold has that potential, but that's besides the point. Why limit oneself to thinking in terms of instruments of debt, when one can also think in terms of silver, gold, oil, corn, cupcakes, and/or anything else? Dollars are a necessity for Americans, and thus, thinking in terms of dollars is a necessity, but one should be cautious not to be think like the herd.

A note for everyone: Checking the spot price obsessively is NOT healthy.



Real gains in purchasing power? Don't you have to sell your metals to buy more of whatever you want to purchase? What are you talking about? ;D


lol. Clever. ;)

To those you still don't get it: I'm talking about changing your mental reference point. I hate the phrase "paradigm shift," but that's what I'm suggesting. I'm NOT saying forget dollars. I'm saying learn to adapt your thinking. Don't limit yourself to dollar thinking. It's a mind trap.


Aside from the very wealthy I think a lot of people who post here and on other like minded sites want to turn a good portion of their metals holdings into land or property at some point. So most are definitely tracking metals prices and property prices. It's not clever at all it's very simple. Most would prefer not to sell their metals and just pay for property out of future savings but some if not most won't be able to do that. That's what I mean.

[1970 Silver Art]

Au & Ag need to be converted back into fiat, there is no other way to purchase whatever I'm interested in.

I'd call it a profit, if I sold for more (fiat) than I bought for.


A note for everyone: Checking the spot price obsessively is NOT healthy.


Yep I have to agree with that. That is one of my bad habits that I am having a hard time breaking. Oh Well...........

[gunDriller]

Klapwijk said that gold supply and demand are not currently in a long-term equilibrium and prices at higher levels are not sustainable. "This is not an healthy underlying market when the traditional mainstay of the gold market on the demand side, jewellery, is reduced to just 40 percent of demand."

meanwhile, China has $Trillions in FRN's, and a stated desire to acquire gold.

plus they're planning to re-value the yuan 40% as early as May or June of this year - making gold that much cheaper for them.

2500 tons is the world's annual production ... that would be about $71,429 billion in US dollars.

China can scoop up the next 10 years' worth of production and have money left over to buy a few years of silver, copper, and other industrial metals production.

I'm pretty sure that various countries' flight to safety and desire to trade in FRN's for something of tangible value, will offset any loss in demand because unemployed people have less money for jewelry.




gains possible

fair statement ! 8)

[Sparky]

Gold is not near its final bull stage.