Gold Prices

Gold Prices

Gold prices seem to be anything but sluggish recently based on the fact that the rise of the dollar has made gold prices higher in most other currencies and as the expected support from some of the most powerful economies on the planet which include China and India has been lukewarm especially after the monetary policies of the United States and inflationary pressures in Europe drove prices of gold to higher levels late last year.  The commonly expected trigger for buying from Asian gold consumers did not materialise as expected this time around largely due to the huge gold reserves that these countries had already stockpiled and were able to satisfy gold demand. These countries were proactive in the sense that they not only managed to stockpile when prices were low, but they also had a clear line of sight towards the amount of gold they would be able to produce domestically from mining activities and current prices that hover at about 1,600 AUD were simply unattractive enough for Asian consumers who preferred to make a move on capital markets within the region that promised higher returns.

Latest reports however indicate that Indian consumers will drive the import of gold higher due to the rapid increase of the middle income segment especially during the festive seasons which is also the reason that the Indian government moved to lower the exorbitant duties that previous law makers had imposed. Bloomberg reported that ‘the lowered taxes imposed on the Indian consumers would increase gold buyers interest in the region, which would be a catalyst for increasing the value of gold to a higher position that would be strong enough to turn the market around and allow heavy selling to take place”. The price of gold has been driven up and down by both China and India with a force that is considered to be equivalent to that of the US dollar and Fed Rate Hikes. This is largely attributed to the robust economy of these countries and the enormous buying power of the population collectively, if these two countries do not make a move on prices of gold it is most likely that the prices of precious metals would likely to remain stagnant for longer periods of time. This situation is expected to turn around according to most experts as statistic reveal that 16 million Indians stand to lose their jobs if the current duties imposed on gold imports is not reduced or removed altogether. The mathematical equation is simple – as far as the Indian market is concerned there isn’t enough precious metal (especially gold) to go around sustaining the jewellery industry firstly and secondly for those who invest in gold.

European Gold investors eager to let go of their bullions have also been met with disappointment as the Asian market did not respond to the drop in price, this will likely to drive prices further down the line until the Asians decide to make a move buying out fast enough before prices start moving up again. Eventually when selling starts on the Asian side the prices will easily be more than the current 1,600 AUD which would give the Asians plenty of margins. The first move is expected to be from India during their festive towards the middle of the year with prices expected to go as high as 1,700 AUD and not a penny more according to James Steel an analysts from HSBC. The fact that the dollar gained on the Euro pretty significantly has made gold expensive for these markets as well and therefore the buying will not pick up pace in this region as it would have if the dollar had remained status quo.

A Beginners Guide towards Investing in Gold

A Beginners Guide towards Investing in Gold

Unlike a decade ago, most people these days have realised that gold is without a shred of doubt one of the most effective ways through which investors are able to diversify their . Gold is definitely rare and the fact is that the value of the shiny yellow metal does not always move parallel to other financial instruments or assets such as equities or property.

In essence, gold is a sort of insurance for portfolios and the general advice given to people is that they should allocate approximately 5 – 15 % of their entire portfolios to the precious metals or gold-related investments. However, this advice has been floating around on the internet for such a long time, it has become a standard that most people believe works, when the actual truth is, this piece of advice is only half true.

The truthful part or acceptable part pertaining to this advice is that yes, one should allocate 5 – 15 % of their portfolios to gold (best is 15 % or more), but as for now, gold related investments are shaky. Current market conditions, the low price of gold, couple with high operational cost for mining companies have started to pressure mining stocks downwards as most smaller mining companies are looking for mergers or acquisition by bigger companies in order to not go bust, whereas larger companies are flocking to buy up smaller mining companies at low cost and paint a pretty picture on their balance sheets.

ETFs or other ‘paper gold’ formats have become so complex that when one does decide to trace the value stated on the paper, often times they lead nothing but a debtor who borrowed money on the basis that the debtor has gold, most of this gold is borrowed or bought on loan and therefore quite often a kilo of gold is usually owned by 5 or 6 people at the minimum. So, this leaves the question: how can we invest in gold with a guarantee?

The answer for both new and old gold buyers is physical gold, however the type of physical gold that you buy also counts in terms of dollars and sense, for instance buying physical gold in the form jewellery as an investment is not a very good idea, or even gold that have too much premiums added to them such as special edition bullion or P.A.M.P gold which actually reduces your margins quite significantly. Even numismatic coins are not advisable these days.

The best form of gold to invest in is standard good delivery gold bullion bars or coins in small denominations that are above 2 grams but below 10 grams. The reason behind buying smaller denominations is to make liquidation easier, meaning when the time does come when you have to sell your gold; having smaller denominations would allow you to dispose of the gold quickly and easily.

For the present moment this is the best advice on investing gold, the entire financial system has become shadowy and if it is not tangible, it is not trusted, therefore in order to be safe, this is the best approach.

For more information on gold investment options, please visit the Melbourne Gold Company website.

A Macro Perspective of the Golden Arena

A Macro Perspective of the Golden Arena

It has come to light that the government of Russia and China are leading a massive gold buying spree and for good reason. The fact is that, we must remember that Vladimir Putin is not just an ex-KGB figure; he is also a competent economist. The United States of America is actually in utter chaos despite the dollar being strong, their days are numbered. The position of the dollar currently is an illusion that many in Europe and America have bought into, but not Russia, China, India and other smaller economies that are following these 3 massive economies simply because the U.S is not going to be holding the top spot for long.

The average life span of a super power is 250 years and the United States of America has been in that position for 240 years and the fact that the dollar is high actually pans out well for Russia, China and India as their dollar reserves are substantial and they are using it to gobble up all the gold they can get at the current cheap prices and that is one of the reasons behind gold’s recent rally. Somewhere in August last year most western media were pointing out the fact that Russia’s reserves were dropping fast and they were right, but what they failed or forgot to mention was the fact Russia and China started getting rid of the soon to be worthless dollars and replacing them with gold bullion whilst everybody else are being led to believe that America has the biggest gold stash, which nobody has seen.

The IMF revealed that the leading global gold buyers, Russia and China, have in fact been the largest net purchasers of precious metals especially gold behind India for eight consecutive years.  Both these countries bought up 590 tons of Gold in 2015 which accounts for 14% of the total annual global gold bullion demand.  The dollar is definitely not going to go much higher whilst the possibility of precious metals heading for a bull market is imminent and nations that do not believe in band aid economic measures are divesting from the dollar, using its strong position to invest in gold.

Reality is about to strike the world and the next global economic meltdown is going to make the previous meltdowns seem like child’s play as the number of bilateral deals that is bypassing the dollar is on a stark upward trend.  The establishment of the Asian infrastructure bank and with Chinese currency being used as a reserve currency, the dollar’s future does not look as bright. Whilst America and Western Europe concentrate on ‘now issues’ smart nations are ignoring the current situations and are concentrating on the future by making sturdy and solid long term investments by holding strong positions in Gold bullion.

The current resistance for gold is at approximately $1,350.00 and once this barrier breaks, most analysts believe there will be no stopping gold’s rally for quite some time and only at that point everybody will realise that what Russia and China did by dumping dollars for gold was in fact a prudent and excellent initiative.

Precious Metals Market and the Dow: Revisited

An abstract closeup of two gold cast statuettes depicting a stylized bull and a bear in dramatic contrasting light representing a financial market trends on an isolated dark background
An abstract closeup of two gold cast statuettes depicting a stylized bull and a bear in dramatic contrasting light representing a financial market trends on an isolated dark background

As the old adage goes, if you do not know your history, you are doomed to repeat it; this particular wise adage is applicable to any scenario, even the precious metals market. By peering into the past, we just might be able to get a small glimpse of what the future has in store for us.

Over the last 10 years that is from 2006 right up to now (2016) gold prices have been on a roller coaster ride! In March 2006 gold was at approximately $660.00 per ounce before sky rocketing to $1,073.00 per ounce in March 2008 and falling to $ 800.00 in October 2008. If we look at the Dow Index during this period, the Dow was on a positive trend from March 2006 with industrial average at 11,000 points right up to October 2007 when the industrial average of the Dow Jones was at 13,930, before all hell broke loose and the market took a downward spiral right up to February 2009 hitting an all time low industrial average of 7,000. The Dow lost more than 50 % of its market share within a time frame of 2 years due to the credit meltdown.

During this time the gold market was however on an upward trend, as a matter of fact the gold rally started in June 2007, a good 4 months before the Dow crashed. As mentioned earlier gold prices rallied before stabilising sharply at $800 per ounce before rallying again for the next 4 years with occasional fluctuations of between 10 – 15 %. Gold hit an all time high in August 2011 breaking the $1,900 barrier, before readjusting at $ 1,688 the following month and surging to above $1,800 over the course of 3 months while the Dow fell 2000 points during this period to 10,900 points as a result of the September 11 attacks. Over the next 2 years gold prices maintained itself in a $ 200.00 bracket before going into a bull market in September 2012 right up to June 2013 when gold prices hit the $1,200 line close to where it is currently.

The Dow during this time picked up pace and surged and continued its bullish trend right up to May 2015 when the market took a 1000 point hit as Grexit, China’s grinding economy as well as ISIL attacks gripped the market. Gold however did not respond to these issues as much as the Dow and maintained its course.

Based on both trends, it does seem that in most instances both these markets move in the general same direction, until something happens and investors dump one for the other. When ‘this something’ happens if gold prices rally, the Dow rides the bear before subsiding or market resistance pushes both markets into the same tangent at different ratios. Predicting market directions are not as easy as they used to be and as such the safest haven is to invest and not speculate.

Short term gains are elusive and have a high risk price tag; hence the moral of the story here is to take it ‘slowly, but surely’. Patience is a virtue, do you have any?

Welcome to Gold Buyers Blog

Welcome to our blog, as a gold buyer and speculator for a number of years, I have decided to run this blog and share information on gold, the benefits and risks of investment, along with gold history and general information.

I hope you find future articles interesting, and please feel free to link to us from your website if you find any information here useful for your own blog and website articles 🙂

I look forward to bringing you a fresh perspective on gold buying and gold investment in future posts!

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