Bullish Factors Driving Gold
1) Continued declines in the U.S. Dollar are likely. Our economy is in horrible shape, and getting worse. The manufacturing sector is our best hope to pull us out of the recession, but we MUST have a weaker US Dollar for that to happen. There is great political pressure in Washington for a weaker dollar. We all know the inverse relationship between gold and the USD. When the housing market starts its collapse (the signs are here), there will be real fear in the streets, and the dollar will bleed.
2) The falling dollar will cause a rise in prices of imported goods. This will add to domestic inflation. We should see the effect in the CPI and PPI over the next few months (the dollar has fallen 5-6% in the last month. Unfortunately, the official numbers are manipulated, but the gov't will have to show some inflationary impact, otherwise the financial analysts will be challenge their numbers. Any rise in CPI/PPI will help gold.
3) We will now enter the strongest seasonal period for worldwide physical gold demand. September is the strongest month in the entire year for physical demand. You will find a chart of seasonal gold demand (26 yr. avarages) on the 321Gold website. Gold demand will peak in September, and stay relatively strong through February. So here we are holding the mid $270's, and the Indian wedding season hasn't even begun! Also note that the US Dollar enters its weakest period beginning in September. France and most of Europe have been on vacation, and we see gold busting out! I can't wait till they get home!
4) US Dollar denominated bonds will not look like a great alternative to the stock market. How much more Fed cuts can there be? Factor in inflation fears, and long term bonds look like a trap.
5) Central Bank sales are slowing! The current round of bi-monthly British sales will be over in the Spring! There can be no more official sales from Britain after this round, according to the 1999 Washington Agreement. The Central Banks have made it clear that they will maintain the Washington Agreement (which limits sales).
6) Lease rates can't go much lower. We have seen lease rates drop, which is bearish for gold, but gold has still shot up. Well what's next for lease rates? They can't go much lower!
7) There has been a steady increase in publicity on the gold market. The "Gold Shines" headline was on CBS Marketwatch (dot com) all day on Friday 8/17. The have been numerous stories on the strength on gold stocks on various investing web pages. Gold stocks are leading now, and will top the list for every sector report moving forward. Take a look at all the new handles on the Yahoo message boards for gold stocks! Look at Silicon Investor, traffic on their Gold Price Monitor Thread is way up (and that's mostly a tech investor site). We've now had over 9 months of gains! I go to cocktail parties and I talk about HM up 150%, MDG up 95%, NEM up 90%, and people are now listening! 321Gold (dot com) has had over 3,000 hits in the last few weeks.
8) GATA is continuing with their political pressure, and many mainstream media outlets are picking up the GATA story. Bill Murphy has been interviewed on Financial Sense (listeners in California and the west) and by an Indiana radio show host. A Harvard University Journal just featured the GATA case. Mr. Murphy was also recently interviewed on the Jeff Rense show, which is syndicated to over 100 radio stations around the country. This story is gonna blow!
9) Physical gold (in the form of coins) is undergoing massive accumulation. I use Tulving for a quick check, and the Tulving website shows many coins completely SOLD-OUT! Silver shows an even greater trend. On Friday 8/31, 10 out of 11 silver coins (based on year) were SOLD OUT.
Stay long! |
