Subscribe for 12 months with recurring billing - $199

Buy 12 months of subscription time - $199

 

Search Gold Prices
Gold Price
[Most Recent Quotes from www.kitco.com]
Our RSS Feed

Gold Updates by Mail

Enter your email address:

Follow Us on Twitter
« Keeping Capital in a Depression | Main | SK OptionTrader Banks 15% in 17 days From Treasuries Short »
Tuesday
Apr122011

Gold and oil to hold up as commodities enter late stage of the cycle

Mineweb logo.JPG

Gold and oil are likely to fall the least if the global economy slows down in the second half which, Deliberations on World Markets author, Ian McAvity, sees as a very real possibility.


Gold and oil are likely to fall the least if governments are unable to escape their continually growing debt burden.

Speaking on Mineweb.com's Metals Weekly podcast, Deliberations on World Markets author Ian McAvity said, "The debt numbers that are being created both in Europe and in the United States are absolutely frightening in an historical context and ultimately the perception is that they hope that they can inflate it away without having a deflationary crash in financial assets first."

"To me that's the major contest that's going on and I don't know whether they can pull it off or not."

One of the major reasons why he is doubtful of a successful end to the contest is his belief that the U.S. housing market is headed toward a double dip. this would have a significant impact on U.S. consumers and, by extension, Chinese exports. It will also, he says, see a return of the economic downturn that was reversed by all the bailout money pumped into the system in March of 2009.

"To me that was the first half of the downturn and I'm still looking for the economy globally to slow down in the second half.  That will pull off a lot of the commodity markets."

For McAvity in the event of such an outcome, gold and oil (largely as a result of the ongoing destabilisation of the Middle East) are likely to be the least affected.

"The gold price holds up even while other markets come off largely as the only place to hide...Gold will come into one of those periods where it loses the least on a sharp decline on the other markets."

Part of the reason behind gold's resilience in the face of a very high likelihood of further problems in the west is the monetary role that it has played and, is increasingly playing again.

As McAvity explains, " These guys are just continually depreciating the purchasing power of money and in fact what you're seeing in the gold market is gold coming back on stage as a final form of money.  I don't think that we're ever going to see a viable day-to-day operating gold standard kind of a system and nobody other than the US dollar is really going to replace the US dollar as a global reserve currency.  But the US dollar has lost a lot of status."

McAvity says, at the moment, given the state of the U.S. dollar, with the questions being asked of the euro zone and the yen, "there is a real need for an alternate currency to the U.S. dollar and gold is playing that role to an extent.

Asked about silver's role in all of this, given its strong showing so far this year, McAvity says, he does not believe that silver has a monetary role in any official sense because central banks have no vested interests in it but, he says, it has "an extremely long monetary role in the minds of people around the planet".

Adding,." It's is the high price on gold that's driving an awful lot of speculative money back into silver playing in the role of ‘poor man's gold' -which does tend to materialise in the later stages of strength in the gold market and that's a fairly material factor that's going on right now."
However, while he sees a little more upside to the metal in the short term, he does not believe that silver is likely to continue rising indefinitely. And, given its strong recent showing, is likely to fall further than its yellow sister.

"I wouldn't be surprised if silver doesn't get a little higher in the short term but we've had an awful lot of tops."

He says when the S&P 500 takes a 10% or better break, which would come as a result of the pressure exerted by all the money sloshing in the system, he suspects "the silver price will find that the forces of gravity still work."

He adds, that he finds it interesting that the copper price has already been stalling for several weeks even while gold and silver were making higher highs.

"That's a change of character and that tells me that most of the commodity money is in the very late stages of this run."

"There has been a lot of money falling into a lot of commodity type instruments that are largely based on or driven by what I would call anti-dollar sentiment, and I believe a lot of that is getting a bit stretched on the high side... Copper, platinum and palladium to me have been exaggerated by investment flows competing with physical demand flows and investment flows are probably going to cool off and if China is in fact going to slow down for a couple of quarters, then you weaken the demand side of the equation as well which could lead to some pretty startling size corrections."

.................................................................................



Over in the Options pit, our model portfolio has managed an average return of 40.85% per trade, 69 closed trades, 67 closed at a profit, or a 97% success rate. Average trade open for 42.32 days.

SK chart 11 April 2011.JPG


The above progress chart shows our performance when profits are re-invested, however, to see exactly how it is going, please click this link.

So, the question is: Are you going to make the decision to join us today.

Stay on your toes and have a good one.

Got a comment then please add it to this article, all opinions are welcome and very much appreciated by both our readership and the team here.


To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address. (Winners of the GoldDrivers Stock Picking Competition 2007)

For those readers who are also interested in the silver bull market that is currently unfolding, you may want to subscribe to our Free Silver Prices Newsletter.

For those readers who are also interested in the nuclear power sector you may want to subscribe to our Free Uranium Stocks Newsletter, just click here.






PrintView Printer Friendly Version

EmailEmail Article to Friend

Reader Comments (6)

I recall, all these experts are going to be wrong big time this year. I am short and not changing my mind.

April 13, 2011 | Unregistered CommenterDi

Did you read the article Di? He says silver could take a hit. Is that not what you're looking for?

By all means, don't change your mind. Inflexibility...that's key for trading success. But hey, please let us know if you ever DO actually change your mind. I suspect many of us would love to use that as a contrary indicator.

$15...20...25...30...35...40. Hold firm with those shorts!

Silver will be a phenomenal short at say $140. Maybe you could layer in some more st $200. You know what they say, though...when you go short, your potential losses are infinite. And with silver, infinite is a distinct possibility.

April 13, 2011 | Unregistered Commenterfallingman

I first saw Di shorting gold when gold was less than 1000 $ and ounce, Would she please give us all an idea of how much she has lost since then and how much she still has left to lose.

Sure gold is in a late cycle, a cycle that will see gold beyond 5000$ per ounce [At the very least]. This MacAvity fella seems to have forgotten why gold is being bought. there are plenty of other soon to go broke experts like him

Obama is going to lobb 10 trillion dollars off the deficit in twelve years which just show how easy it is to spout words. Expected deficit to be 2.5% of GDP by 2015. [Horse laugh] No word as to how the massive debts will be paid off, but we all know how do we not? The word begins with an 'I' with the consequent devaluation against real money. that real money does not include the EURO, Franc, Yuan, the waste paper called Sterling and the rest of the rubbish in that club. Roger.

April 13, 2011 | Unregistered CommenterRoger Levinson

The long trend is telling us something. It says that a slowdown is not coming in the nearest future. Soon the DOW probably will break trough main resistance. I guess we will see Dow in nearly 14000 in year end. The unemployment is going down in a steady rate. The ecomomi in the world is now driwing for its own machine. The recovery is picking up, and it is real.

April 13, 2011 | Unregistered CommenterNorway

ROGER,
The recovery is real that is true, however there arec several man made obsticles that will or may stiffle it. If the recovery is real then more jobs are created those tillons of dollars will circulate with great velocity, causing an oh s..t moment. The fed will take that money putting back on many banks balance sheets, less liquidity for them to loan. Many of the staes in the united states are taking gold and silver as real money. gld will go down because people are taking physical delivery of their metals,
go back to to 1937 our president's hero FDR raised interest rates causing less diposable income. tiffanys and wallmart will be mine. the driver of our middle class known as the surfs will be shrink a bit more as is the story after every
recission or DEPRESSION. KEYNSIAN ECONOMICS THE END GAME IS A GUN WITH NO BULLETS HIGHER TAXES AND A LOWER STANDARD OF LIVING, BUT the poor will be poor and the rich will get richer and as always more of the middle class vanishes.
thank you peter the great.stek at 12.00$ a pound gas at $10.00 a gallon. quite a recovery
bob

April 16, 2011 | Unregistered Commenterbob

roger,
THIS SONG GOES OUT TO YOU. who would have that an ultra liberal would have nailed it right. the song MY LITTLE TOWN.
OR PAVED OVER PARIDISE WITH ASPHALT. GET RID OF ALL THOSE SMALL BUSNESSES. your recovery has killed many already.

April 16, 2011 | Unregistered Commenterbob

PostPost a New Comment

Enter your information below to add a new comment.

My response is on my own website »
Author Email (optional):
Author URL (optional):
Post:
 
Some HTML allowed: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <code> <em> <i> <strike> <strong>