By Profit Confidential<\/p>\n
There has been increased volatility in gold bullion<\/a> prices as investors run from precious metals. According to data compiled by Bloomberg, gold bullion<\/a>\u2019s 60-day historical volatility reached 28.9% on June 13. This was the highest level since December of 2011. Average volatility over the past five years for gold bullion prices has been around 20%. (Source: Bloomberg, June 14, 2013.)<\/p>\n As the volatility continues in gold bullion prices, the fundamentals remain strong. Actually, demand for gold coins is unprecedented right now.<\/p>\n Aside from individual investors buying gold bullion, central banks continue to diversify their reserves into gold bullion as fiat currencies fail to protect their wealth. In spite of the decline in gold bullion prices, as has been well documented in these pages, central banks form Russia, Turkey, and Kazakhstan continue to add precious metals to their reserves.<\/p>\n Bullish stock advisors are forgetting that we are standing on the cusp of a global economic slowdown\u2014an event that bodes well for gold bullion. It may be difficult for my readers to envision right now, but with the recent exodus by investors out of U.S. bonds, once the stock market starts declining, there will be few other \u201cstores of wealth\u201d for investors to seek aside from gold.<\/p>\n Major economic hubs have been slowing down for some time and now, they are taking with them smaller nations that rely on their demand. China<\/a>, Japan, India, Australia, Germany, and France\u2014they are all begging for economic growth.<\/p>\n But instead of getting growth, world economies are slowing. The World Bank lowered its forecast for global growth last week. It now expects the global economy to grow by only 2.2% in 2013, down from its previous estimate of 2.4%\u2014and by the end of this year, I wouldn\u2019t be surprised to see that forecast fall again<\/p>\n Meanwhile, while the politicians say there is no inflation, even the government\u2019s own out-of-whack official figures show inflation is a problem.<\/p>\n The Producer Price Index (PPI), an early indicator of inflation, increased 0.5% last month (source: Bureau of Labor Statics, June 14, 2013)\u2014annualized, that\u2019s six percent a year in wholesale inflation that will eventually make its way to consumers!<\/p>\n The Federal Reserve<\/a> continues to print $85.0 billion a month to purchase government bonds and mortgage-backed securities, even after seeing that aggressive money printing did not work for the Japanese economy.<\/p>\n Dear reader, the historical fundamental reasons that drive gold prices are still present. Gold bullion prices have come under pressure, because there\u2019s a notion that the U.S. economy is improving and conditions are getting better.\u00a0Imagine that: the U.S. economy has turned the corner because the Federal Reserve has printed trillions of dollars in new money! That doesn\u2019t sound right to me; it actually sounds artificial.<\/p>\n Gold bullion prices still have a bright future. And I don\u2019t expect the scrutiny in the precious metal to last much longer. When all the pieces of the puzzle come together, the gold bears will realize they were wrong.<\/p>\n What He Said:<\/b><\/p>\n \u201cWe will wish Greenspan never brought rates down so low as to entice so many consumers to have such big mortgages.\u201d Michael Lombardi in Profit Confidential<\/i>, April 27, 2004. Michael first started warning about the negative repercussions of Greenspan\u2019s low interest rate policy when the Fed first dropped interest rates to one percent in 2004.<\/p>\n