Why hasn’t the GOLD PRICE Held Up? – Marc Faber On Bloomberg
Local gold stocks are taking a big hit this morning after the price for the precious metal fell into bear market territory in offshore trade on Friday, sinking to its lowest level since August last year. This outlook is even direr for gold. The plunge in the gold price has pushed the ASX’s gold stocks sub-index down 7.7 per cent in early trade.
The precious metal was trading at $US1493.45 this morning, down 4.2 per cent from local trade on Friday. US investment bank Goldman Sachs put a ”sell” on the metal last week, which sparked an early sell-off. But IG strategist Evan Lucas said it had come under even more pressure from technical selling, as it broke through the $US1522 support level to fall to $US1483. ”The bears roared even harder towards the end of last week as soft data led to analysts making the call that a period of deflation is on the cards, as the US stimulus package floods the market, but is not followed by any discernible changes to the economy,” he said. ”This outlook is even direr for gold.” Thomas Averill at Rochford Capital said gold had also fallen on the back of concerns that America and other G20 countries would criticise Japan at the upcoming G20 meeting over monetary policies that have weakened the yen and as a result, gold. ”I think you’ll see the Japanese reassure world leaders that their new monetary policy is not designed to deliberately weaken the yen,” he said. Mr Averill said it was only a short-term problem for gold, which would pick up later in the week. ”I would say that gold shouldn’t lose much more,” he said. ”The G20 meeting is a bit of a distraction, but after this week, we are predicting a resumption of the yen trade, which supports the gold price.” Burrell Stockbroking adviser Jamie Elgar said the recent rally on stock markets – Wall Street posted record highs last week – had also dampened demand for gold. ”I think gold started to come off over the last couple of months as people started becoming more confident in equities,” Mr Elgar said. ”Particularly as the economic data out of China and the US was looking pretty good.” Shares in Australia’s biggest listed gold company, Newcrest, fell 7.5 per cent this morning to $18.26. Here’s how some of the other local gold miners are performing: Kingsgate Consolidated: Down more than 12 per cent Alacer Gold: Down more than 15 per cent Precious metals investors can’t look back at this week’s declines in gold and silver and not be a little upset. But it’s important to keep in mind that nothing happened this week that reversed the decade long bullish trends for gold and silver. So, keep in mind that for over a decade gold and silver have gone up for a reason; the mismanagement of the world’s monetary system by the global central banks. That plus all financial assets today have huge counter-party risk thanks to the fraud plagued OTC derivatives market, whose notional value is in the hundreds of trillions. Physical gold and silver have no counter-party risks for their owners, and this makes them especially attractive to forward thinking investors. This lack of counterparty risk also makes the old monetary metals objects of ridicule by the global financial industry, who market fraudulent “financial assets” by the trillions of dollars, euros and other currencies. Are there any indications that central bankers have seen the error of their ways at the end of this week? Good grief no! The Bank of Japan has reaffirmed its commitment to destroy the yen as an economic asset, and the ECB is scheming to confiscate Cypress’s “excess gold reserves”. Our Doctor Bernanke is no monetary slouch either. Look at the post credit crisis Federal Reserve’s balance sheet in the chart below. Since 2008 the supply of newly created digital dollars has exploded. If US Currency in Circulation (CinC / Green Plot) lags behind the growth in digital dollars (Blue and Red Plots), it is most likely because the Earth doesn’t grow enough cotton to supply both the world’s textile mills and the US Treasury’s need for high-grade cotton based paper for its paper money production. That’s a scary thought that just might be true!