Saturday, July 30, 2011

"Don't Bet on a Plunge in Gold"

Says Tatyana Shumsky in the "Commodities Corner" in this weekend's edition of Barron's.  Before I get to the main points of her article, it is important to understand that Barron's is owned by Dow Jones (owned by News Corp.) so is about as mainstream Wall Street as they come.

Update: 6:30 PM ET Sunday, sure enough gold just dove $15.00 in Asian trading, hahaha!  I guess they like our Debt Ceiling Deal, LOL...

High points of the article:

-- Gold is up almost 15% this year, she sees a fall back to $1500 where it will stay in orbit, but will not likely go lower.
-- Chinese investors are buying gold to shield themselves against food inflation, Germans are buying gold to shield themselves form the European debt crisis and many Americans are buying because of the slow growing economy and the corrosive impact of monetary easing.
-- She goes on to say that last year gold was up 28%, and that we are half way there this year, and that if the US$ gets weaker up we go.
-- A FOFOA style remark I quote in full: "Market wisdom says record prices should undermine investor enthusiasm for gold, but there is little evidence of this so far.  Even emerging-market buyers, who are typically more price-sensitive than their wealthier Western counterparts, remain committed to buying more gold."
-- Chinese buyers have eclipsed Indians as the top buyers of gold (25% vs. 23%, acording to the World Gold Council.
-- "A commodity-market Cassandra, Goldman Sachs (ed. note: ?), expects gold to reach $1,730 in the next 12 months, but the firm believes prices will peak next year as U.S. growth picks up and leads to tighter monetary policy and higher interest rates."
-- "But for many analysts, higher rates are unlikely until the end of 2013, almost a year later than initially expected."

So, there you have it.  Wall Street's take on gold.

But, wait there's more!  

On the same page (your edition may vary), there is a snippet of an article ("Silver Linings and Debt Ceilings" (from  Gold/Silver Weekly by International Strategy) with a bullish plug on silver, namely that gold price leads silver up.  Writer Ashraf Laidi says this is GOOD for silver.

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