Gold mining companies still have a long way to go to recover from the significant falls of 2013.Newcrest Mining Limited (ASX: NCM) shares for example are still down 50% on 12 months ago, while shares in Kingsgate Consolidated Limited (ASX: KCN) and Silver Lake Resources Limited (ASX: SLR) are down 65% and 72% respectively, according to The Motley Fool.
However before jumping in and buying shares in gold miners, here are three things every gold investor should know:
1. The price of gold is probably manipulated
First it was LIBOR rates and oil prices, now researchers believe the price of gold has also been subject to long-term manipulation.
The gold price we see is based on the ‘London gold fix’ which acts as a benchmark, but it is composed of five big international banks: Barclays, Deutsche Bank, HSBC, Scotiabank and Societe Generale.
According to Bloomberg, each day at 3pm these banks get together on a private conference call and set the ‘afternoon fix’, which researchers believe has resulted in signs of manipulation and collusion over the last ten years.
2. China is likely to drive demand for gold in 2014
The World Gold Council’s latest Gold Demand Trends.............................
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In September 2011 the Gold Bugs index, the HUI stood at 630 as gold prices peaked, since then both have trended lower with the HUI losing about 65% of its value. The bottom has been called a number of times and after such a dramatic decline its difficult not to think that we are there now. However, as we all know the timing of any investment is crucial to its success and that is exactly what we are trying to do here, trying to pick advantageous entry and exit points. If you would like to know which stocks we are buying and selling please join us at ‘Stock Trader’ our premium investment service.
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