gold price chart
Gold Bugs Will Love What This Chart Says About Gold Prices
There's no shortage of catalysts pushing gold prices higher, but now gold bugs have another...
A technical analysis of the chart depicting gold's rocky ride over the past nine months shows that gold prices have only just begun to break out to the upside.
Gold Price Drop Drives Global Buying Frenzy
The recent gold price drop caused some major losses in the paper gold market, but it's triggered a gold rush for physical buyers.
Ever since the precious metal got clobbered in a two-day period by heavy short selling in the futures market, there has been an unprecedented frenzy around the globe for the actual physical metal, in the form of bullion, jewelry, bars and coins.
In fact, the U.S. Mint announced Tuesday it had suspended sales of its one-tenth ounce American Eagle gold bullion coins for the first time since November 2009, as demand depleted the government's inventory.
The gold bears must be scratching their heads...
Why Gold Really Crashed and What You Can Do About It
The news is great at telling us what's happening. But knowing what's happening is a lot different than understanding what happened - and that's what makes the difference between an average investor and truly great investors.
Gold's crash Monday is a perfect example. The media was falling all over itself as one pundit after the other came on TV to talk about how gold was falling and how far off its highs it was. Few tied the devastating slide to real economic events -- let alone made the connection to actual trading.
But that's my bread and butter. Today I'm going to tell you what really happened and why - from a market insider's perspective. Then I'm going to tell you what to expect next and, most importantly, how you can use the situation to your advantage.
There are three fundamental things going on - all of which are at a very high level and all of which are completely transparent to most investors:
In Gold, Not Cyprus, We Trust
Global investors had to muster the courage to keep calm as news of Cyprus' proposed partial theft of all bank deposits took Wall Street by surprise, closed the country's banks and drove the gold prices higher.
The thoughtless idea was intended to capture a portion of the $31 billion in bank assets held by Russians. According to the Financial Times, Cyprus has developed a "well-earned reputation for being a haven for dirty money from Russia."
Although Cyprus' government came to its senses and blocked the proposed seizure, the damage has been done. To many people around the world, raising income taxes may be one thing, but changing the rules to steal hard-earned savings from all citizens rattles their confidence. What Adrian Ash of BullionVault says is "most amazing" about this situation is that "small savers are no longer sacred."
It's remarkable to see the response from Cypriots, as they protested in the streets, with "NO" stamped on their palms, demanding the government take its hands off their money. It's refreshing to see their pushback to sanity.
How did this tiny island make it into the European Union (EU) in the first place? The Financial Times gave an insightful background:
"Many EU leaders had been deeply reluctant to admit Cyprus into the union in 2004, without a peace settlement that reunified the island. But Greece had threatened to veto the entire enlargement of the EU - blocking Poland, the Czech Republic and the rest - unless Cyprus was admitted. Reluctantly, EU leaders succumbed to this act of blackmail."
As Cyprus Struggles, Now Is the Time to Buy Gold
I'll bet a few Cypriot bank account holders are paying much closer attention to gold now.
Since the announcement that Cyprus was looking to confiscate up to 10% of bank deposits, gold has risen by up to $24/ounce on safe haven demand.
After all, gold is real wealth, and it's the only asset that's not simultaneously someone else's liability.
Central bankers, even in the West, know this too. As former Federal Reserve Chairman Alan Greenspan once said:
"Gold is the canary in the coal mine. It signals problems with respect to currency markets. Central banks should pay attention to it."
I just hope the irony of that message -- and its messenger -- aren't lost on you.
As for Cyprus, this ongoing crisis has it all. Along with gold, there's debt, energy, intrigue and a long storied history...
Gold Prices Jump Above $1,700, but Hurdle Ahead
Gold prices have made the most out of a short trading week, and today jumped $10.50 to $1,704.50 an ounce at the Comex division of the New York Mercantile Exchange.
Gold, which one year ago today hit a historic high of $1,920 an ounce, came out roaring Tuesday after the Labor Day holiday. Gold closed up 2.55% to reach a more than five-month high of $1,700.
This came from increased investor hopes that the U.S. Federal Reserve will deliver QE3 to give the slowly-recovering economy a much-needed lift.
U.S. Fed Chairman Ben Bernanke's remarks from Friday's Jackson Hole, WY speech served as the gold price catalyst.
"Taking due account of the uncertainties and limits of its policy tools, the Federal Reserve will provide additional policy accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability," said Bernanke, giving enough of a hint that QE3 was on the way in 2012.
Gold ETFs also started strong in September after a healthy performance in August.
On Tuesday, SPDR Gold Trust (ETF) (NYSE: GLD) holdings, the world's largest gold-backed ETF, increased to 1,293.138 tons. This is the highest level since mid-March.
GLD's price also jumped 1.77% to 163.36.
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Gold Prices Await Big News from Bernanke
Gold prices are desperately waiting for bullish news from the Federal Reserve this week after slipping from last week's gains.
Last week, gold woke up from its sleepy August and increased 3.5%. It saw its greatest one-week jump since January and gold exchange-traded funds (ETFs) followed in its footsteps by reaching four-month highs and breaking 200-day moving averages.
These jumps came in response to the Federal Open Market Committee (FOMC) meeting minutes that suggested the need for more stimulus and some sort of quantitative easing. The report release extended the recent precious metals rally initiated by European Central Bank President Mario Draghi, who pledged his commitment to keep the Eurozone in place.
Gold prices on Monday fell from last week's high of $1,674.28 to $1,671.80, and have continued that decline this week. The most actively traded contract for December delivery was down Thursday morning by $1.10, or 0.1%, to $1,661.90 per ounce.
So what happened to dampen last week's enthusiasm for gold?
Europe, China Pound Gold PricesNews from abroad knocked down some of the gold price optimism.
Germany's Ifo Institute announced Monday that its business sentiment declined for a fourth consecutive month in August to 102.3; this came in lower than the 102.6 estimates and July's revised 103.2 figure.
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Gold Price Outlook 2012: Miners Will Shine as Prices Soar
Despite a pullback from its all-time high of about $1,920 an ounce set in September, gold is still trading in the $1,750 range. In fact, the glittering metal has gained 22% in the past 12 months.
What's more is that I believe gold prices will eclipse $2,200 an ounce next year, and shoot beyond even $5,000 an ounce after that.
So there's obviously still time to get in on this once-in-a-lifetime bull-run, if you haven't already.
Of course, every investor should at least have shares of a gold-based exchange-traded fund, but if you really want to profit from the price surge, you ought to look at gold mining companies.
Let me explain.
A Golden OpportunityWhile gold prices have surged 22% over the past year, gold mining stocks have lagged curiously behind over that period.
The Amex Gold Bugs Index, a weighted benchmark made up of 16 of the world's largest gold and silver mining companies, began the year at 540, and after numerous troughs and peaks, we're back near those same levels.
Normally, gold stocks will leverage gold on a 2-for-1 basis, but in this case, we've seen miners move sideways as gold has advanced.
Yet with gold's price powering skyward, the gold miners have seen their margins expand, making them very profitable at current levels. That makes them absolute steals at these prices.
You don't have to take my word for it, either. Just look at what industry insiders are saying.
"A substantial disconnect has developed between the price of gold and the mining companies," said David Einhorn of Greenlight Capital. "With gold at today's price, the mining companies have the potential to generate double-digit free cash flow returns and offer attractive risk-adjusted returns even if gold does not advance further. Since we believe gold will continue to rise, we expect gold stocks to do even better."
Portfolio managers Michael Bowman and Allan Meyer of Wickham Investment Counsel Inc. concur.
"We are now finding a large number of gold stocks are hitting our value screens, something that has been unheard of in the past," said Meyer.
What else are experts noticing?
Well, as gold prices have risen and stayed high, the price/earnings (P/E) ratios of gold miners have been cut in half. That means the sector as a whole is at as compelling a value as it's been in three years. And with the price of gold set to rise still higher on the back of incessant money printing in the United States and Europe, these miners are only going to get more profitable.
How high is gold likely to go?
My own research tells me we should expect gold to easily reach $2,200 in 2012.
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