Stay the Course with Gold as Mixed Signals Move Markets
Traders stampeded out of gold, emerging markets and bonds last month, setting record monthly outflows in June. Ever since the Federal Reserve hinted in May that signs of a stronger economy could allow for a slowdown of stimulus, markets have protested the news.
Gold has been hit hard by the tapering talk and resultant rising interest rates and liquidity drain, falling below $1,200 last week for the first time since August 2010. We're also seeing India, the world's biggest gold buyer, trying to stifle gold demand. As the government seeks to reduce its record current account deficit, it has hiked import tariffs on gold to 8 percent and introduced new constraints on rural lending against gold jewelry and coins.
Ross Norman, CEO of bullion broker Sharps Pixley, said, "It's almost as if the finance ministry is waging war on the gold sector, which would suggest that they feel they have lost control of the economy to some extent. In that environment, you would want to own gold more than ever."
Other factors fueling the liquidation were the raising of margin requirements on gold by the CME Group, the largest operator of futures exchanges in the U.S., and global liquidity concerns in the U.S. and China.
When the country with the largest GDP in the world and the country with the largest population on earth have liquidity concerns, traders run from stocks, bonds and gold, and head to cash. Even though gold traders have pulled out of their financial investments, there has been a surge in physical gold buying and central bankers have maintained their positions.
Gold Prices Waiting to Rally on Central Bank Decisions
Last week it was earnings reports taking center stage, this week it's policy statements from the U.S. Federal Reserve and European Central Bank (ECB).
What comes out of the central banks could have a huge impact on the gold market. Gold prices have been on the rise - 2.5% last week - and could keep going depending on what the central banks deliver.
Gold prices on Monday saw their fourth consecutive day of increases. The August contract rose 0.1% to $1.70 with a $1,619.70 settlement price, thanks to market participants buying on optimism from this week's Fed action.
A two-day meeting begins today (Tuesday) for the Federal Open Market Committee (FOMC). After its conclusion Wednesday, market watchers will be waiting with bated breath on whether a third round of quantitative easing (or QE3 as it is fondly called) will take place.
If that isn't enough, there's Thursday's meeting over in Europe with the ECB. They're also set to make a monetary policy decision.
Let's take a look at these two potential actions that could drive up the price of gold.
To continue reading, please click here...
The Commodities Bull Market: Insights on Gold, Energy and Agriculture
Despite the setback caused by the 2008 financial crisis, the commodities bull market rolls on. A short four years later, many commodities are trading at or near all-time highs.
And thanks to huge swaths of the developing world moving up the ranks, the current bull market in commodities promises to be one for the history books-- both in time and size.
After all, the wants and needs of 7 billion people are an irresistible and monumental force.
Soon virtually every substance vital to modern life will become enormously expensive − and profitable for investors who know how to play it.
In fact, today's scarcity and soaring costs could spur history's biggest gains.
It is one of the reasons why I recently sat down with resource investor extraordinaire Rick Rule.
A leading American retail broker specializing in mining, energy, water utilities, forest products and agriculture, Rick has dedicated his entire life to all aspects of the natural resource industry.
Rick is without question something of a heavy hitter.
At Sprott Global Companies, he leads a team of professionals trained in resource-related disciplines such as geology and engineering. Together, they work to evaluate commodities-related investment opportunities.
I think you'll enjoy what Rick had to say during our recent Q&A.
Insights on the Commodities Bull MarketPeter Krauth: What is your general outlook for commodities - the commodities market over the next, say, one to three years and even beyond that?
To continue reading, please click here...