Blanchard article in Gold Newsletter is very bullish for Gold:
1. Inflation.....The Fed is printing money at an unprecedented rate, such activities always reflect themselves in higher inflation, in time.
2. The bull market in stocks is destined to turn....peak is being realized now, bearish times ahead, investors will soon rediscover gold.
3. Central bank gold sales will abate.....there is in facta fear of central bank gold sales. Net CB AU sales were a relatively modest 239 tonnes in 1996. There were in addition to sales unusually heavy CB gold purchases.
4. China's central bank buys gold....The central bank of China over the last several years has increased its gold reserves from and estimated 400 tonnes to 1,000 to 1,400 tonnes. They have a need to in crease their gold reserves to about the level of equopean gold reserves or approx 39.5 million ounces or an additional 1,228 tonnes.
5. A growing gold supply deficit.....Over the next five years we will see a net increase of 400 tonnes in production. But this is small in comparison to a healthy 5 percent annual growth trend in gold demand. Over the next five years, the projected cumulative deficit in the gold market is a staggering 6,343 tonnes.
6. Rsumption of the bear market in the US dollar.....The US dollar is expected to depreciate, the bull run in the US$ is about to end. A weaker dollar is bullish for gold. If gold rose by only half of the projected rise in the yen, or 8.5%, that would bring the metal back to $369 from its $340.
7. The reverals in foreigh central bank demand for US Treasury debt.....The past 2.5 years have seen a dramatic acceleration in the net holding of US Treasury bills and notes by foreign central banks. In the last two weeks, from its high of $648 billion, foreign holdings of Treasuries are donw $4.85 billion. The liquidation of foreign holdings of US TBills and notes ma have already begun. Immediatly following historical highs such as currently being experienced modern history has shown that whenever we overly depend on foreign central banks to finance our deb, it places us in a very dangerous situation.
8. The debt crisis is far from over....Us national debt has grown from $400 million in 1971 to $5.337 trillion today - a 1,334 percent increase. It is expected that this debt will continue to escalate.
9. Huge short positions in gold......It is extimated that the gold short position has soared to 500 tonnes, worth $5.6 billion. Much of this short position is carried by hedge funds, which borrow gold at 2% and invest in US Treasuries. Rumors have rencently surfaced that these highly leveraged short positions may have funding problems. When these positions unwind, gold will take off. It is just a matter of time.
Conclusion: The bullish consensus now is back to 26%, near historic lows. Gold is holding tn the $340's, and these low levels - compared to last year's average gold price of $387.87 - is causing record physical offtake. Gold could still go back and test the lows in the $330's but I believe it will build a strong base in this price range and move strongly higher over the next 12 months.
Enjoy, the article is much longer with a lot of detail.
Ron E |
