-- Published: Friday, 26 December 2014 | Print | Disqus
Holdings in the SPDR gold exchange traded fund fell to 712.9 metric tonnes before Christmas, the smallest amount held by the fund since September 2008. You can argue about price manipulation but actual physical holdings are a clear indication that many investors don’t think they need a gold hedge and indeed are worried that the price will fall further in 2015.
Bloomberg summed up their reasoning: ‘A collapse in oil prices is curbing demand for the metal as an inflation hedge, while the Federal Reserve is moving closer to raising interest rates. Gains for the dollar and US equities have also made gold less attractive as an alternative asset.’
But how likely are these factors to continue in 2015? Could we be close to the bottom for gold prices or even past it now?
Saudi Arabia is budgeting for an average $80-a-barrel oil price this year, and it should be able to drive the oil price back up to meet this target if anyone can. The US economy looks ready to raise interest rates mid-year, particularly in view of the stellar five per cent GDP growth figure for the third quarter.
Except that figure is a fraud. Two-thirds of this is the Obamacare effect that statisticians disastrously dropped from Q1 GDP number, and the rest is inventory building for an assumed consumer spending recovery that may not follow through again. Perhaps the Fed will have to be more ‘patient’ than expected in raising interest rates next year or cut them like the eurozone and China.
And what about US equities sat at an all-time high? Where’s the next reason for buying stocks going to come from? Might we at long last have all the good news written into stock prices and some fraudulent data too? And what about some of the bad news like the still weak housing market and fall in durable goods orders in November?
OK so what could work against the US dollar? Most currency experts think its rise-and-rise is a no brainer for 2015. Well perhaps some of the currencies that have depreciated against the dollar the most this year are due for a bounce back. The ruble has must managed to claw back from 80 to 50-55 to the dollar, what else is looking oversold?
Gold of course! And as investors realize that their current prognosis for 2015 is wrong or falls rather short of expectations then the gold price will go up and up. Rather like the Chinese buying every drop of oil in the world that they can right now those stocking up on gold today are doing the sensible thing.
If oil is going to average $80-a-barrel this year then it has to rise 40 per cent from current levels by the second half. If gold does the same it will be $1,650 later this year.
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-- Published: Friday, 26 December 2014 | E-Mail | Print | Source: GoldSeek.com
comments powered by DisqusPrevious Articles by Peter Cooper 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 in www.ameinfo.com, which later became the Middle East's leading English language business news website.
Over the course of the next seven years he had a ringside seat as editor-in-chief writing about the remarkable transformation of Dubai into a global business and financial hub city. At the same time www.ameinfo.com prospered and was sold in 2006 to Emap plc for $27 million, completing the career circle back to where it began a decade earlier.
He remains a lively commentator and columnist as a freelance journalist based in Dubai and travels extensively each summer with his wife Svetlana. His financial blog www.arabianmoney.net is attracting increasing attention with its focus on investment in gold and silver as a means of prospering during a time of great consumer price inflation and asset price deflation.
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