Okay, I accept the "7 factors" challenge.
Price of gold in US$ = value of gold / value of US$
Therefore it depends on supply and demand for both gold and US$, so 4 things in total, and each of those can be broken down further:
GOLD SUPPLY = new mine supply + sales by those holding gold
GOLD DEMAND = safe haven buying + speculation + use of physical gold
US$ SUPPLY = new US govt. supply + sales by those holding US$
US$ DEMAND = US GNP growth + foreign purchase of US$
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And what's the situation for each of these?
NEW MINE SUPPLY - bullish
Production is low and not growing despite high gold price. This has been a factor in the bull market so far.
GOLD SALES - bullish
Not much sales from rich countries, and developing countries are stockpiling rather than selling.
SAFE HAVEN BUYING - bullish?
Lots of investors are holding some gold "just in case". With the economy slowing, I see this trend continuing.
SPECULATION - Could go either way
This is make or break time for the multi year gold bull. If gold moves up now (which it is starting to do) the trend is intact and the party continues. If not, it's all over.
USE OF PHYSICAL GOLD - neutral
Yawn.
NEW SUPPLY OF US$ - bearish
Due to new policy of the Fed as discussed by Slider.
US$ SALES - neutral or bullish
Not much happening now, but if China hits a real downturn they may have to start spending their US$ reserve, which would be bullish for gold. Also if US recession gets serious foreigners (and some Americans) will start divesting.
US GNP GROWTH - bullish
Bearish outlook for economy is bullish for gold
FOREIGN PURCHASE OF US$ - ?
Depends how US economy does relative to rest of world. I don't know about this.
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So finally: THE LIST: Key factors for the next 6 months:
1) STOCK MARKET
If this continues up, Bernanke wins, speculators move on, and gold bugs die. If it's down, then safe haven buying kicks off more outrageous gold speculation.
2) SPECULATION
This will make the move very extreme, one way or the other.
3) US MONETARY POLICY
This is the main bearish factor for gold, and recently it's been in control. Can there really be a soft landing?
4) GLOBAL LIQUIDITY
Economic slowdown raises some risk of a liquidity crunch, which would be hugely bullish for gold.
I'm going to stop there. The other factors are all important, but to me these 4 are the biggies.
On balance I am bullish on gold, but not sure enough to make more than a small bet.
Fun-da-Mental |
