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A Few Reasons for Gold to Rise and Fall

By: Chintan Karnani, Insignia Consultants

 -- Published: Wednesday, 8 July 2015 | Print  | Disqus 

WHY GOLD SHOULD RISE – some reasons

  1. Gold industrial demand will be on the rise as the world moves towards robots. Robots and other future gadgets will use gold in them. Even solar electricity can be generated using gold.
  2. Bitcoins and other virtual currencies backed by physical gold should be an alternate to the US dollar. (Global share of the US dollar is on the decline).
  3. There will be more slowdown in gold production if gold falls and stabilizes around $1000. Hedge funds and long term investors are all waiting to pounce gold around $1000 and below. History suggests that the price of any investment has a tendency to overshoot or undershoot investor expectation.
  4. Monetary policies of central bankers will go bust as they are just focused on short term and liquidity play.
  5. Asian demand should form a long term bottom this year and thereafter slowly and steadily rise.
  6. Geopolitical risk particularly in Eastern Europe, North Africa and the Middle East should result in more demand in these regions.
  7. The rise of the Islamic state along with an increase in Islamic state terror activities in the USA and all over Europe should result in a higher allocation of investment to hard assets (from virtually zero now).
  8. There are no new big supplies of gold which have been found.
  9. Demographic changes in Europe and America will result in higher physical demand in these nations. (At present Asia is the largest consumer).
  10. Central banks will continue to increase their gold reserves in order to protect themselves from the indirectly American slavery which they are facing now.
  11. Recession causes more wars than boom. I do foresee an emerging sustained global recession in six years from now.

WHY GOLD SHOULD FALL – some reasons

  • Climate change or global warming, in my view will be the biggest contributor to a gold price fall. Food price increases will be uncontrollable due to slump in production. There will be a very sharp decline in global food grain reserves.  This will result in a continued rise in expenses on food, water and other surviving essentials. Higher prices of surviving essentials will increase the global poverty rate followed by a big slump in demand. 
  • Demand is virtually zero at the moment. Physical gold premiums are trading at a discount.
  • Short term investors and medium term investors shun gold due to its inability to rise. Gold investors who tried for “bottom fishing” have cut their fingers.
  • India and China, the world’s largest consumers do not have huge demand projections for the rest of the year.
  • The US dollar could float for a much longer time than most of us expect.
  • Higher investment return elsewhere will continue to act as a dud for gold.

Gold has more bearish factors for the next twelve months. After the next twelve months, I foresee a slow and steady increase in bullish factors. Gold is an investment for a period of a minimum four years and over.

Disclaimer: Any opinions as to the commentary, market information, and future direction of prices of specific currencies, metals and commodities reflect the views of the individual analyst, In no event shall Insignia Consultants or its employees have any liability for any losses incurred in connection with any decision made, action or inaction taken by any party in reliance upon the information provided in this material; or in any delays, inaccuracies, errors in, or omissions of Information. Nothing in this article is, or should be construed as, investment advice. Prepared by Chintan Karnani

Disclosure: Insignia consultants or it employees do not have any trading positions on the trading strategies mentioned above. Our clients do have positions on the trading strategies mentioned in the above report.

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 -- Published: Wednesday, 8 July 2015 | E-Mail  | Print  | Source:

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