Precious metals trounce stocks in best January for decades

Posted by Peter Cooper, Arabian Money

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The New Year rally in global stock markets saw the S&P gain four per cent in its best January since 1994. But 10 and 19 per cent gains respectively for gold and silver comfortably beat equities hands down.

Silver rose above $34 an ounce in Asian trading yesterday while gold is above $1,750 again. The bulls are talking about how long it takes to exceed the $48 and $1,923 highs set last year.

Dubai Souk

The talk of the Dubai Old Gold Souk is that silver will hit $58-60 an ounce by September (click here), though it is still hard to find anybody prepared to stick their neck out beyond $2,000 an ounce for gold, albeit possibly within a couple of months.

Global equities have rallied in thin trading on the back of economic data that is already history. When the statistics for January come out they will likely confirm a global slowdown in trade and exports. The eurozone crisis and particularly cold winter weather will see to that.

Market traders have also become bored stiff with the Greek debt crisis. However, it still threatens to drop another Lehman on to bullish complacency that flies in the face of the reality of a recession in Europe and slowdown in Asia.

Manufacturers now reporting increased output may find themselves with goods left in their yards this month, and anecdotal evidence of further redundancies suggests unemployment is still moving in the wrong direction.

Will stock markets soon be plunging from their current six-month highs? The notion of an economic recovery is surely an obvious illusion when we know that the world’s largest economic bloc is already in the midst of a double-dip recession.

Greek gifts

Boring as it is the interminable negotiations of the Greek crisis are not going well. They should have wrapped up almost a week ago. Never trust Greeks bearing gifts as the Trojans learnt to their cost.

That probably means the precious metal price surge is going to reverse alongside a re-run of the 2008 global financial crisis, unless the ECB can pump so much money into its banking system that a Greek default can be easily absorbed and then all that liquidity will push up gold and silver to even higher levels.

For precious metal investors this could be the annus mirabilis when everybody piles into hard assets because they are running scared from paper.


About Peter Cooper:
Oxford University educated financial journalist Peter Cooper found himself made redundant by Emap plc in London in the mid-1990s and decided to rebuild his career in Dubai as launch editor of the pioneering magazine Gulf Business. He returned briefly to London in 1999 to complete his first book, a history of the Bovis construction group. 

Then in 2000 he went back to Dubai to become an Internet entrepreneur, just as the dot-com market crashed. But he stumbled across the opportunity to become a partner, which later became the Middle East’s leading English language business news website.