{"id":70695,"date":"2015-04-07T04:23:26","date_gmt":"2015-04-07T08:23:26","guid":{"rendered":"http:\/\/countingpips.com\/?p=70695"},"modified":"2015-04-07T07:18:40","modified_gmt":"2015-04-07T11:18:40","slug":"gold-prices-stuck-between-rock-and-hard-place","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2015\/04\/gold-prices-stuck-between-rock-and-hard-place\/","title":{"rendered":"Gold Prices Stuck Between Rock and Hard Place"},"content":{"rendered":"
April 7, 2015<\/div>
\r\n<\/div><\/div>

By WallStreetDaily.com<\/span><\/a> \"Gold<\/p>\n

By Karim Rahemtulla<\/a>, Chief Resource Analyst<\/em><\/p>\n

Every few months, I like to canvass my gold contacts<\/a> at the retail and wholesale levels, such as Asset Strategies International<\/a>, to see what the consumer mindset is for gold and precious metals.<\/p>\n

Retail buyers are a crucial component when measuring sentiment both on the upside and downside. It\u2019s a good indicator of where gold prices may go.<\/p>\n

But now that we\u2019ve been in a sustained gold bear market for several years, retail buyers have unsurprisingly switched from being optimists to pessimists.<\/p>\n

In short, those who are selling gold are doing so because they need to or because they\u2019ve lost faith in their investment.<\/p>

\r\n
\r\n

Free Reports:<\/p><\/div>\r\n

\r\n

<\/a>\r\n\t Get Our Free Metatrader 4 Indicators<\/u><\/b><\/a> - Put Our Free MetaTrader 4 Custom Indicators on your charts when you join our Weekly Newsletter<\/p>

\r\n
\r\n
\r\n

<\/a>\r\n\t Get our Weekly Commitment of Traders Reports<\/u><\/b><\/a> - See where the biggest traders (Hedge Funds and Commercial Hedgers) are positioned in the futures markets on a weekly basis.<\/p>

\r\n<\/div>\r\n

\r\n
<\/div>\n

Meanwhile, the buyers are waiting for a price breakout to buy\u2026 which won\u2019t occur unless they start buying!<\/p>\n

This paradox is making investing in gold as brilliantly simple as it gets\u2026<\/p>\n

Ripples From U.S. Dollar Drop<\/h2>\n

In the current conundrum, being patient with your assets is the only thing to do.<\/p>\n

You see, when the price of gold is moving higher, retail buyers will inevitably hop aboard the train late and provide the momentum needed to propel prices to extraordinary levels.<\/p>\n

We saw this happen in the last rally when prices spiked from $700 to close to $2,000 per ounce in a short period of time (in terms of gold price history).<\/p>\n

Instead, the big gorilla in the gold market is the U.S. Federal Reserve. That\u2019s because, in the short term, gold is all about liquidity, inflation expectations, the U.S. dollar, and interest rates.<\/p>\n

Obviously, the Fed and statements from Chairwoman Janet Yellen play a key part in three of those four factors.<\/p>\n

Liquidity is always an issue with gold prices. There just isn\u2019t that much gold out there. For the most part, any level of sustained buying or selling will affect prices.<\/p>\n

Gold moves in dollars and sometimes tens of dollars per day. It\u2019s a rare resource and commodity that can\u2019t just be produced out of thin air, nor can production miraculously be ramped up overnight like in the oil and gas market. New mines require years of approvals and are hugely capital intensive. Some projects require billions of dollars compared to a few million for drilling and completing a shale oil well.<\/p>\n

That means when there\u2019s pressure, particularly on the buy side, gold can move sharply higher.<\/p>\n

Inflation expectations are a double-edged sword in the short term, but very positive for gold in the longer term.<\/p>\n

In the short term, raised expectations lead to tighter monetary policy, which can increase the value of the underlying currency and offer an alternative to monies seeking yield \u2013 something that holding gold doesn\u2019t offer. But, over time, inflation erodes the purchasing power. This benefits those holding gold who would normally enjoy an increased price for their \u201chard asset\u201d holdings.<\/p>\n

Interest rates staying low are a boon for gold prices, if they remain low\u2026<\/p>\n

With interest rates trending lower in many global markets, the underlying currency weakens and the price of gold, which is traded in U.S. dollars, strengthens.<\/p>\n

That\u2019s why gold is in a bull market in yen and euros, yet flat to slightly up in terms of dollars. Higher rates in the United States will be positive for the U.S. dollar in the short term and negative for gold prices in U.S. dollars.<\/p>\n

Carefully Sifting Through Opportunities<\/h2>\n

The U.S. dollar is king right now, and that\u2019s bad news for commodities prices all around, as most are priced and traded in dollars.<\/p>\n

It would take a significant and unpredictable non-dollar related event to move prices higher. But, one holds gold and precious metals because unpredictable things do<\/em> happen. And when the unpredictable happens, gold becomes a safe haven, despite the strength of the dollar.<\/p>\n

Gold has been able to hold its triple bottom around the $1,150 level for quite some time. That indicates there\u2019s accumulation at current levels.<\/p>\n

Whether a breakout is imminent is less sure, and would be more likely tied to the strength of the U.S. dollar, for now.<\/p>\n

But, that doesn\u2019t mean there aren\u2019t opportunities in what\u2019s likely the most-hated sector in the market today, other than oil and gas stocks\u2026<\/p>\n

Gold and precious metals companies are trading at bear market levels and may present an excellent opportunity for those who have the patience and foresight to buy today.<\/p>\n

And the chase continues,<\/p>\n

Karim Rahemtulla<\/p>\n

The post Gold Prices Stuck Between Rock and Hard Place<\/a> appeared first on Wall Street Daily<\/a>.<\/p>\n

 <\/p>\n

 <\/p>\n

 <\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

By WallStreetDaily.com By Karim Rahemtulla, Chief Resource Analyst Every few months, I like to canvass my gold contacts at the retail and wholesale levels, such as Asset Strategies International, to see what the consumer mindset is for gold and precious metals. Retail buyers are a crucial component when measuring sentiment both on the upside and […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-70695","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/70695","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=70695"}],"version-history":[{"count":2,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/70695\/revisions"}],"predecessor-version":[{"id":70710,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/70695\/revisions\/70710"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=70695"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=70695"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=70695"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}