GOLD: BIGGEST RALLY SINCE 1980!
Gold Bulls Ascendant on Biggest Rally Since ’80
By Nicholas Larkin, from Bloomberg
Gold traders are bullish for a fourth consecutive week, betting that the Federal Reserve’s pledge to keep interest rates low until late 2014 will extend the metal’s best start to a year in more than three decades.
Nine of 15 surveyed by Bloomberg expect prices to gain next week. The value of gold held in exchange-traded products jumped $3.9 billion on Jan. 25, the most since October, as the central bank laid the groundwork for a possible third round of asset purchases, data compiled by Bloomberg show. Lower interest rates increase the appeal of bullion because it generally earns investors returns only through price gains.
Bullion rose 2.7 percent, the most in three months, after Chairman Ben S. Bernanke said he’s considering additional bond purchases to boost growth. The Fed bought $2.3 trillion of debt in two rounds of quantitative easing from December 2008 to June 2011, during which gold appreciated about 70 percent. Investors are now buying American Eagle gold coins from the U.S. Mint at the fastest pace since July 2010, data on its website show.
“The trigger offered by the Fed definitely helped,” said Daniel Briesemann, an analyst at Commerzbank AG in Frankfurt.“The opportunity costs of holding gold will remain low in the future and this should boost the attractiveness of gold. We don’t see an end to the long-term uptrend in gold prices.”
January Rally
Gold rose 9.9 percent to $1,720.65 an ounce this month by yesterday, the best start to a year since 1980 and rebounding from the first quarterly decline in three years. Bullion is beating the 3.1 percent advance in the Standard & Poor’s GSCI Total Return Index of 24 commodities and the 6 percent gain in the MSCI All-Country World Index of equities. Treasuries lost 0.2 percent, a Bank of America Corp. index shows.
The metal reached a record $1,921.15 in September and slid to within 1 percentage point of a bear market on Dec. 29, taking it below its 200-day moving average for the first time since January 2009. Gold closed back above the 200-day moving average on Jan. 11 and the 100-day moving average on Jan. 25. That’s a sign for some investors who study charts of trading patterns and prices to predict trends that the rally has further to go.
The Fed pledged that it is “prepared to provide further monetary accommodation” if unemployment remains higher than it would like while inflation falls below a newly-established target. The International Monetary Fund said a day earlier that the world economy will expand 3.3 percent this year, down from a 4 percent estimate in September. The World Bank cut its growth forecast last week by the most in three years.
Monetary Easing
A third, fourth and fifth round of easing “lie ahead,” Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., wrote in a Jan. 25 Twitter post. The European Central Bank kept interest rates at a record low this month as the region contends with a spreading debt crisis.
The U.S. Mint sold 114,500 ounces of American Eagle gold coins so far this month, its website shows. Full-month sales would reach 143,125 ounces at that pace, the most since July 2010. The 2,359.638 metric tons of gold held in ETPs backed by the metal is within 1.5 percent of the all-time high set last month and exceeds the reserves of all but four central banks.
Dr. Pinna says:
If there were no gold, which currency would you buy? If you now have a profit in gold, will you sell and pay your government taxes?
These are the questions gold buyers are asking themselves around the world. The governments of Europe and the USA have put a floor under the gold price. In the entire world, not only Central Banks, but every individual is worried about the future of his economy and his currency. In Asia private persons are buying fractions of an ounce of gold and storing them in their homes. In India, men buy their wives gold jewelry.
This is a period of global anxiety in terms of currencies.
What are you doing?
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