Ole 49r,
Things are fine with me. I am still on the road to recovery. Hopefully the new year will bring better fortunes than 1997. I am not much of a gold coin collector/investor. I hear that the demand for gold coins in the US have increased significantly. I have recently taken advantage of bottom fishing some of the very beaten up jr. golds, and I am doing fine (for now). However, I do not think the market is about to explode unless ofcourse the POG rises significantly. Here are my thoughts on gold. (Please feel free to comment or add, as my knowledge in these matters is quite finite).
Downward pressure on gold.
1. Central banks selling (and at least there is a perception that more CB sales are on the way)
2. Producers forward selling their future production.
3. CBs lending a portion of their reserves to shorters, jewellery manufacturers, etc. thereby flodding the markets for the short term.
4. Year end liquidations by gold funds/investors to cover funding requirements.
5. A global deflationary threat thereby decreasing demand for gold as a hedge against inflation.
6. A strong US dollar makes gold more expensive in foreign markets, thereby decreasing demand.
Support for gold.
1. Closing of short positions.
2. Closing of unproductive mines.
3. Producers closing their hedged forward sales positions.
4. Higher gold demand from individual investors in the form of gold coins, gold jewellery (India), actual few ozs of gold bar purchases, etc.
5. Statements by many CBs that they are unwilling to decrease their reserves. Some have actually increased their reserves.
6. Once the Asian crises is over, there may actually be an increase in overseas demand.
7. As Asian economies come out of the downward spiral, their currencies may stabilize, thereby providing some stability in the POG in their respective currencies, and hence an increase in demand.
8. An early resolution by the ECU to include gold as part of their reserves and to reprice it.
Currently the downward pressure is higher than the support, but this can change very quickly. I think, and am hoping, that the POG will stabilize above $280 over the next few months. POG above $300 will provide a tremendous psychological boost to the overall gold mining sector.
Cheers, Lalit |
