{"id":33483,"date":"2012-11-13T23:21:16","date_gmt":"2012-11-14T04:21:16","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/2012\/11\/obama-wins-why-the-case-for-higher-gold-prices-got-even-stronger\/"},"modified":"2012-11-13T23:21:16","modified_gmt":"2012-11-14T04:21:16","slug":"obama-wins-why-the-case-for-higher-gold-prices-got-even-stronger","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2012\/11\/13\/obama-wins-why-the-case-for-higher-gold-prices-got-even-stronger\/","title":{"rendered":"Obama Wins: Why the Case For Higher Gold Prices Got Even Stronger"},"content":{"rendered":"

By MoneyMorning.com.au<\/a><\/strong><\/p>\n

With President Barack Obama\u2019s successful re-election, the case for higher gold prices<\/strong> got even stronger.<\/p>\n

Let me give you seven reasons<\/span> that gold prices are destined to head <\/u>much higher in the next several years. <\/p>\n

<\/span>Let\u2019s call it the Obama \u2018baker\u2019s half-dozen\u2019 case for gold:<\/p>\n

The Central Banker Effect on Gold Prices:<\/h3>\n

Official statistics, which some observers dispute (I’ll get to that in a minute), say that the world’s central banks have become net buyers of gold<\/a> for the first time in nearly a quarter century. If that\u2019s the case, that\u2019s clearly bullish for gold. At the very least, we\u2019re not going to see any big selling.<\/p>\n

The Central Banker Effect on Gold Prices\u00a0(Part Deux):<\/h3>\n

Although we referred to the \u2018Secret Gold Standard\u2019<\/a> to underscore the point that central banks were returning to the gold market<\/a>, we made clear this wasn\u2019t a literal return to a Bretton Woods-style \u2018gold standard\u2019.<\/p>\n

There\u2019s not enough gold in the world to support such a move – which is why Capital Economics Chief Economist Julian Jessop <\/strong>recently estimated that a return to the gold standard<\/a> would cause the price of the yellow metal to spike to $10,000 an ounce<\/span>. There’s an important lesson here: If central banks are hoarding gold, prices can\u2019t help but go higher – gold standard or not.<\/p>\n

The Gold Conspiracy:<\/h3>\n

There\u2019s a growing concern about just how much gold the world’s central banks actually own. For instance, the U.S. Federal Reserve and some of its counterparts do<\/u> reveal the specific amount of gold held in their inventories.<\/p>\n

What they don’t tell you, however, is who owns<\/u> the gold that they\u2019re holding. Countries like Germany keep big portions of their gold-bullion holdings<\/a> with the Fed and with the Bank of England (BOE). Those aren’t the only issues about the difficulty in separating \u2018ownership\u2019 from \u2018possession\u2019.<\/p>\n

Nevertheless, think of it this way: If gold holdings actually are lower than reported, it points to only one thing – scarcity. And scarcity equals higher gold prices<\/a>.<\/p>\n

The Euro Trashed Financial Markets:<\/h3>\n

<\/strong>MoneyWeek<\/em> reports the German Bundesbank last month reached a compromise deal with the German Audit Court (a civil body that makes budgetary recommendations) for an audit of Germany\u2019s gold reserves<\/a>, which are apportioned almost entirely between Paris, London, Frankfurt and New York.<\/p>\n

Some pundits are saying this is a sign that Germany is giving credence to the gold conspiracy theories<\/a>. But MoneyWeek <\/em>columnist Matthew Partridge <\/strong>sees it as a sign that Germany expects the euro to plunge<\/a>.<\/p>\n

The catalyst for that free-fall will be a still-secret \u2018quantitative-easing\u2019 initiative that’s actually a fourth-down\/Hail Mary lob that officials pray will avert a Eurozone collapse. A massive money-printing of that type would <\/span>cause the euro to plunge – and gold to rise<\/a> in an offsetting manner, Partridge contends.<\/p>\n

The Easy-Money Crowd Parties On:<\/h3>\n

Fed policymakers have said they expect to keep short-term U.S. interest rates down near zero until mid-2015 (unless the economy strengthens considerably before then). President Obama\u2019s re-election means this will continue as planned.<\/p>\n

He\u2019s appointed five of the six board members other than Chairman Ben S. Bernanke (who Obama also re-appointed). Whenever you have ultra-cheap money available, it flows somewhere and usually does major damage somewhere in the world. It also ignites inflation of some sort.<\/p>\n

This time around the inflation initially showed up in the U.S. stock market – igniting a rally that sent stock prices up to near-record levels … in the face of the worst financial crisis since the Great Depression.<\/p>\n

The Not-So-Safe \u2018Safe Haven\u2019:<\/h3>\n

Gold bullion initially soared 1% in a celebration of the Obama victory. The next day gold prices then reversed course<\/a> and sold off. Analysts claimed it was due to fiscal-cliff<\/a> worries.<\/p>\n

But the European Commission disappointed the markets by announcing that Eurozone growth would remain non-existent in the New Year (with high unemployment), and wouldn\u2019t resume until 2014. The euro plunged as investors abandoned it for the \u2018safe-haven\u2019 US dollar<\/a>. The dollar rallied, causing gold to fall. That \u2018safe-haven\u2019 view of the US greenback isn’t going to last much longer.<\/p>\n

The Obama Effect on Gold Prices:<\/h3>\n

Several months back, Money Morning<\/em> editor Keith Fitz-Gerald predicted that gold was in for a near-term reversal. And he was right. With Obama’s re-election, that \u2018yellow metal\u2019 correction could continue – but only in the near-term.<\/p>\n

As Keith explains it, traders have used gold to collateralize other investments, and will have to sell some to raise cash. That will put additional downward pressure on gold in the days and perhaps weeks to come. Consider that a \u2018buying opportunity\u2019, Keith says: \u2018President Obama’s first-term policies created a lot of damage and his second term is likely to reinforce the need to preserve value even more. That puts gold in a league by itself.\u2019<\/p>\n

Here\u2019s What to Do as Gold Prices Go Higher<\/h2>\n

There are lots of ways to play, profit from or own gold<\/a>, but we like two in particular.<\/p>\n

The first is the actual gold miners<\/a>.<\/p>\n

And the second is physical gold<\/a>.<\/p>\n

Physical gold – bullion<\/a>, for instance – gives you \u2018hard-asset<\/a>\u2019 protection against rampant inflation. It’s tangible, has an \u2018intrinsic value\u2019 (unlike paper securities, whose value is derived from an underlying asset), and is a good hedge.<\/p>\n

It’s liquid, you can carry it around, and it can be used as currency in situations where there’s a breakdown in the markets, or in the economy.
\nEither way, the combination of Fed Chairman Bernanke and President Obama is extremely bullish for gold prices<\/a> from here on out. And you don’t need to be a true \u2018gold bug\u2019 to make money on it.<\/p>\n

William Patalon<\/strong><\/p>\n

Contributing Editor, Money Morning<\/em><\/strong><\/p>\n

Publisher\u2019s Note: <\/em>This is an edited version of an article that originally appeared in Money Morning (USA)<\/em><\/a><\/p>\n

From the Archives…<\/strong><\/em><\/p>\n

APRA Spins Another Yarn On Australian Banks <\/a>
\n9-11-2012 – Kris Sayce <\/p>\n

The Secret Return to the Gold Standard<\/a>
\n8-11-2012 – William Patalon<\/p>\n

Forget the US Election, This Stock Market Event is the One to Watch For<\/a>
\n7-10-2012 – Murray Dawes <\/p>\n

The Greeks Giving Economists Nightmares<\/a>
\n6-10-2012 – Bill Bonner <\/p>\n

Super Fund Results: Whoopdeedoo<\/a>
\n5-10-2012 – Nick Hubble <\/p>\n

\n<\/img><\/a> <\/img><\/a> <\/img><\/a>\n<\/div>\n


\nObama Wins: Why the Case For Higher Gold Prices Got Even Stronger <\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

By MoneyMorning.com.au With President Barack Obama\u2019s successful re-election, the case for higher gold prices got even stronger. Let me give you seven reasons that gold prices are destined to head much higher in the next several years. Let\u2019s call it the Obama \u2018baker\u2019s half-dozen\u2019 case for gold: The Central Banker Effect on Gold Prices: Official … <\/p>\n

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