Skip to main content

Gold Outlook for 2006

Following are the excerpts from Peter Grandich's Outlook for 2006
Gold
• Physical and investment demand –
According to the World Gold Council (WGC), demand for gold coins, bars and bullion-backed shares rose 56 percent in the third quarter of 2005. Investors and jewelers bought $12.5 billion worth in gold, or 838 metric tons in the third quarter, up 7.6 percent from a year earlier. (Jewelry demand accounts for 73 percent of gold consumption). The rapidly growing economies in China and India have been key and while soft patches are likely going forward, the enormous wealth creation on-going there appears to assure strong demand for gold for the foreseeable future.
Debt, deficits and the #1 crisis in America
I believe the debt and deficit crisis has been one of the least talked about, but one of the major reasons why gold has performed so well. I’ve spoken to many sophisticated foreign investors and one of their core concerns is the out-of-control fiscal house of our government and many of our citizens. By 1980, U.S. public debt reached one trillion dollars--191 years after we first started keeping records (note that 1980 witnessed the last great run-up in gold prices). Now, just 25 years later, it’s on the threshold of $8 trillion. In 1980, each American’s share of the debt was $4,405. It’s now $26,700.
Bottomline –
Taking in all the above and throw in the belief the U.S. dollar can renew its long-term downtrend and eventually break below 80 on the U.S. Dollar Index (more below), I believe gold has all the underpinnings to make former multi-decade resistance around $500 the new floor and a test of at least $600 in 2006 is quite possible.

U.S. Dollar Index -
While an argument can be made that the U.S. Dollar Index has made a bottom technically, my interpretation is it must get above 95 in order to reverse its downtrend from the 120 area. This time last year, people were tripping over themselves to declare the dollar dead. In addition, the U.S. government for 2005 only, allowed U.S. corporations to repatriate dollars that were overseas and this combined with the Fed’s raising of interest rates allowed IMHO a counter-trend rally to occur. I’m looking for the neckline above 92 to hold and a resumption of the downtrend in the second half of 2006 to take place.

Comments

Post a Comment

Popular posts from this blog

Cognitive rules of business presentations

In his recent book, Clear and to the Point, Kosslyn explained that the four rules of PowerPoint are: The Goldilocks Rule, The Rudolph Rule, The Rule of Four, and the Birds of a Feather Rule. Here's how they work. The Goldilocks Rule refers to presenting the "just right" amount of data. Never include more information than your audience needs in a visual image. As an example, Kosslyn showed two graphs of real estate prices over time. One included ten different numbers, one for each year. The other included two numbers: a peak price, and the current price. For the purposes of a presentation about today's prices relative to peak price, those numbers were the only ones necessary. The Rudolph Rule refers to simple ways you can make information stand out and guide your audience to important details -- the way Rudolph the reindeer's red nose stood out from the other reindeers' and led them. If you're presenting a piece of relevant data in a list, why not mak...
Post a Comment
Read more

Monetary inflation, Spiritual devaluation

Its been sometime I have been trying to make some special people understand the evils of inflation. Inflation is an abstract subject most of us dont know about, let alone understand the technicalities amidst jargons. I have in my previous post have briefly touched the social part of inflation but never in a concentrated way. I understand what my friends mean when they say "tell me in layman’s language." It is not a heartening sign, that they avoid technicalities. But it could well be that knowing where they stand, their role and understanding the social changes in the light of inflation may motivate them to understand the term "inflation." This is just to highlight the brief points. First and the foremost, is there any link between inflation numbers and society. Yes. The relation is same as the relation between society and money. What is money? Money is an easy means of exchange. If I am selling my horses to a pig-farmer and I am not interested in taking pigs in ret...
2 comments
Read more

Unprecedented External Demand Shock Underway

India’s export growth averaged 24.8% over the last three years, driven by strong global growth. However, over the last three months, export growth has decelerated sharply. While until recently the strong demand from emerging markets including Latin America, Emerging Europe, the Middle East and Africa ensured that export growth remained healthy, over the last three months disruptions in the macro environment of these economies have been evident. Apart from weakening demand, exports have also been affected by the lack of availability of foreign trade credit and inventory liquidation. India’s exports declined by 12.1%Y in October 2008 compared with 10.4% in September and 26.9% in August. While we expect some improvement in the second half of 2009, exports are likely to be unusually weak over the next six months. We now expect exports to decline by 5.3%Y in 2009 compared with 12.7% in 2008 (estimated) and 23.1% in 2007 Excerpt source
Post a Comment
Read more