What's the reason then for intervention in the gold market ?
الجمعة، 19 أغسطس 2016
For hundreds of years gold and silver were synonymous with the term "MONEY". basically they are alternative money to the ones we are using today the US dollar and the others that called that called fiat money. Fiat currency is legal tender whose value is backed by the government that issued it. This approach differs from money whose value is underpinned by some physical good such as gold or silver, called commodity money. Even though the central banking system ensures that no one has to fear that his money will become worthless in the event that a specific bank draft is not honoured, this dependence is still a given- it has merely been transferred to government. if the state no longer can or wants to fulfil its duties in this regard, money can become worthless at a stroke(which has happened time and again in the past) . The Fed interest is to Support the US dollar as representive of the government and the FED strength and policy. so if the price of gold , a measure of the dollar value goes up the FED has good reason to depress it.
i want to give one example of possible intervention in the gold market. The graph below shows the massive paper ambush on the gold futures market on Sunday evening July 19. An enormous amount of paper gold contracts were dumped into the Comex’s globex electronic trading system during one of the slowest trading periods at any point in time during the trading week. A bona fide seller trying to sell a big position at the best possible execution prices would never have dumped a position like this. The only explanation is that someone wanted to drive the price the price of gold lower and make a point of doing so. This particular occurrence in the gold market has been a recurring event over the life of the gold bull market. However, the frequency of the above trading pattern has significantly increased since 2011.
My point is. that If central banks are intervening in the gold market , This policy that can't last for long and that means that the gold is significantly undervalued.
Despite the last increase in the gold prices I still think that gold prices are undervalued and big gains could be ahead. i will try to mention some of the reasons that could support the gold in the short, medium and long term future
- Central banks around the world continue to buy the precious metal despite gold prices being well below the highs made in 2011. Know this: they are not buying it for speculative purposes. They are buying to hedge their reserves and they will need more.
- The biggest Hedge fund managers are buying gold- George Soros, a legendary investor purchased hundreds of million worth of shares in Barrick Gold and options to buy SPDR Gold ETF. But the "man who broke the Bank of England", is not the only one with bullish views on Gold. Stanley Druckenmiller, a famous American hedge fund manager and the former Chairman and President of Duquesne Capital, gave his opinions and suggestions regarding the near term future of the stock market. His message was simple enough - get out of the stock market and buy gold. John Ploulson, is famed for betting against subprime mortgages at the peak of the 2007 credit bubble and made billions on this trade also noticed to buy gold ETF's
- Gold as a hedge not just against inflation but "deflation" as well and the negative interest rates associated with it, which threaten to break the traditional banking system, fueling a flight away from financial assets to real assets like gold.
- The global economy continues to struggle. Major economic hubs are struggling to show any growth. China, Japan, Russia, Australia, the eurozone, the U.S., Canada, Brazil, and many other nations are reporting growth rates that are just outright dismal. (Recall that gold is a hedge against all of this uncertainty.)
- The Chinese economy could collapse. Remember that China is the second-biggest economy in the world; if its economy falls, it could have dire effects on the global economy.
- Terror attacks in Europe and the uncertainty of the refugees crisis
- The demand for gold bullion from India and China remains solid. In the first quarter of 2016, India consumed 116.5 tonnes of gold and China consumed 241.3 tonnes.
- Demand for the precious metal remains solid elsewhere in the world as well. In the first quarter, demand for gold in the U.S. increased by 21%.
- Exchange-traded products, which sold massive amounts of gold in 2013, are starting to buy once again. In the first quarter of 2016, they purchased 363.7 tonnes of gold bullion. Quarter-over-quarter, this figure increased well over 300%.
- Gold producers remain suppressed. Surely gold prices are up about 15% year-to-date, but they are still too low for many to produce profitably. Gold grades in the ground are low and costs to extract from the ground continue to increase.
- Gold discoveries have plummeted. According to Goldcorp Inc. (NYSE:GG), in the early 90s, well over 100 million ounces of gold were discovered. This figure has dropped to below 25 million in recent years
For short term we might see correction of the gold toward the levels of $1300 but medium and long term the gold will continue the bullish trend and might hit the technical level of $2000. I don't see this level getting hit this year but higher chance we could touch there in 2017 .
You have many ways to get exposed to the gold depend if you are looking for short or long terms investment.
For short term traders you can trade ETF on the UGLD, The VelocityShares 3X Long Gold ETN provides 3x exposure to a subset of the production-weighted GSCI that only includes gold contracts. As a levered product, UGLD is not a“a short-term tactical instrument” buy-and-hold ETF; it’s a short-term tactical instrument. Like many levered funds, it promises 3x exposure only for 1 day. Over longer periods, returns can vary significantly from 3 times of its underlying index.
Medium and Long term
The easiest one it's just to buy coins and bars online you have many companies offer them, if you don't feel comfortable to keep it at home these companies offer as well storage services for the gold you are buying.
In addition , Stocks or options on the Barrick Gold and SPDR Gold that regards the largest physically backed gold exchange traded fund (ETF) in the world its also a good option.
I'm hearing more ,that gold at 10,000$ it's just a matter of time, and the next financial crisis will push it closer to this level!
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