Has Gold Peaked? Should U Buy Gold?

Cymorfund Investment Letter Comments on the Price of Gold 

The following chart from Kitco http://www.kitco.com/charts/popup/au1825nyb.html, shows the price of gold over the last 5 years.

5 Year Gold Price

 

In 2007. the world had a credit crunch and even MoneyMarket Funds were frozen. The price of gold dropped from $1,000 to under $800.

In 2008, the stock market crashed. Gold moved very little.

In 2011, gold peaked over $1,900 and then started its downward trend. It reached a low of about $1,200 in early 2013, and has since recovered somewhat, Currently it hovers around the $1,300 level.

Our Advice’s On Gold

We have written about gold a number of times and have been remarkably accurate in our comments. In September 2012 we discussed “The Future Price of Gold – The Golden Dilemma”.  In October 2011 we discussed “Gold – The Great Gamble”.  In October 2010 we published “Some Comments on Gold”.

  

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The Budget Dilemma in the USA

The world is currently riveted to the the freeze in the USA with many saying that the US currency will suffer. The debate has not affected the price of gold which remains about $1,300 per ounce. There are many issues surrounding gold, but 3 issues predominate:

  • the cost of producing an ounce of gold (all in) is near the trading price of gold
  • major new mines have not come on stream recently, but only smaller producers
  • the growing demand from the Asian growing middle class is unstoppable

A good summary of these matters was published this week in MineWeb and we reproduce it herein.

 

US gold sales unable to overwhelm Asian demand

There will be a point in the near future when Asian demand will swamp developed world selling and take complete control of the gold market, says Julian Phillips.

Author: Julian Phillips
Posted: Friday , 04 Oct 2013 

BENONI – 

Gold Today –New York closed at $1,317.40 barely changed on yesterday. Asia took $2 higher right to London’s opening. At the Fix, gold was set at market prices at $1,316 up $15.25. In the euro it Fixed at €967.007 up another €5.6 with the dollar a tad stronger at $1.3596. Ahead of New York’s opening gold was trading at $1,309.00 and in the euro at €967.86.

Silver Today – Silver closed at $21.70 the same as yesterday. Ahead of New York’s opening it traded at $21.65.

Gold (very short-term) 

The gold price should again consolidate above $1,300 with a weaker bias, today in New York.

Silver (very short-term)

The silver price should again consolidate with a weaker bias, today in New York. 

Price Drivers

Gold & Silver – If we are to believe what the press and politicians tell us, the Republican leaders have signalled that they ‘will not allow a default’ on U.S. debt. If this is true then the next few days will be full of sound and fury signifying nothing. We have to temper this against the demands of Republican constituents and the right wing of its own party. What we can say for sure is that nothing is for sure! 

So what impact is it having on gold? In the U.S. as you can see below it is precipitating sales from U.S. gold ETFs, which should have knocked the gold price down. But they haven’t.

Instead, reviving Indian demand for gold alongside the continuing robust Chinese demand is swallowing such offerings easily. Investors should take note of this as it has a significant bearing on the future of gold. As we have repeated often, U.S. gold sales are unable to overwhelm Asian demand. In 2013 U.S. institutions have been selling gold and did succeed in knocking the price down initially $500 and after a price recovery $300. We believe that we are close to the time when this selling ceases, but more importantly we now see that present U.S. selling is failing to dampen the gold price for long. It is a turning of the tide, which makes the present consolidations of gold and silver so important.

There is a point in the near future when Asian demand swamps developed world selling and takes complete control of the gold market. It is simply a matter of time in the near future.

Sales of 1.802 tonnes of gold came from the SPDR gold ETF. But once again, this appears to have been met by more physical demand than that, from Asia as the price held higher levels just below overhead resistance at $1,330. The total of the SPDR gold ETF holdings stands at 899.985 tonnes and the holding of the Gold Trust dropped by 0.795 tonnes leaving its holdings at 176.83 tonnes. 

Silver – The silver price is again ‘marking time’ waiting for gold to give direction.

Julian Phillips is the founder ofwww.GoldForecaster.com and www.SilverForecaster.com 

 

Our Commentary

In spite of the conspiracy theory which gold bugs adhere to, and the massive interference in the gold market by central bankers buying or selling the commodity, we believe in the simple laws of supply and demand. Gold remains in increasing demand.

 

We may or may not have positions in securities we name. In making an investment decision consider numerous factors such as portfolio balancing, timing, cash and capital reserves, asset allocation and other. Do your own research. Matters discussed contain forward-looking statements that are subject to risks and uncertainties and actual results may differ materially from any future results, performance or achievements expressed or implied.

Views expressed are opinions and not investment advice. You should retain a licensed professional to guide you and  not rely on the opinions expressed herein. This report is neither a solicitation nor a recommendation to buy or sell securities. We are not a registered investment advisor nor a broker-dealer. The information contained herein is based on sources which we believe reliable but is not guaranteed as being accurate or a complete statement or summary of the available data.

By Larry Cyna

Mr. Cyna is an accomplished investor in the Canadian public markets for over 20 years, and has managed significant portfolios. He is a financing specialist for private and public companies, and has expertise in real estate and debt obligations. He has assisted private companies accessing the public markets, has been a founding director of public companies and continues as a strategic consultant to selected clientele. He is and has been a director, a senior officer and on the Advisory Board of a number of TSX and TSXV public companies in the mining, resource, technology and telecommunications sectors, and the Founding Director of two CPC’s with qualifying transactions in mining and minerals. He was an honorary director of the Rotman School of Management MBA IMC program, has completed the Canadian Securities Institute Canadian Securities Course & Institute Conduct and Practices Handbook Course, was a former Manager under contract to an Investment Manager at BMO Nesbitt Burns, a roster mediator under the Ontario Mandatory Mediation Program, Toronto, a member of the Institute of Corporate Directors of Ontario, a member of the Upper Canada Dispute Resolution Group, and the Ontario Bar Association, Alternate Dispute Resolution section. He obtained his designation as a Chartered Accountant in Ontario in 1971 and was the recipient of the Founder’s Prize for academic achievement together with a cash reward. He became a CPA in the State of Illinois, USA in 1999 under IQEX with a grade of 92%. He is a Member of the Institute of Chartered Accountants of Ontario and the Canadian Institute of Chartered Accountants. He holds certificates in Advanced ADR & in Civil Justice in Ontario, Faculty of Law, University of Windsor, certificate in Dispute Resolution from the Ontario Institute of Chartered Accountants. Previous accomplishments are Manager of Cymor Risk Consultants LP specializing in Risk Management Assessment; CEO of Cyna & Associates specializing in mediation and ADR; Founder & Senior Partner of Cyna & Co, Chartered Accountants, a fully licensed and accredited public accountancy firm with international affiliations; and was a partner in a large public accountancy firm. Mr. Cyna is well known in the Canadian Investing community. He is invited to, and attends presentations given by public companies usually 3 or 4 times each week. These presentations are intended by the various hosting companies to present their inside story to sophisticated parties and Investment Managers for the purpose of attracting funding, or of making parties more interested in acquiring shares of those companies. Being a part of this keeps Mr. Cyna deeply involved in the current market and leads to numerous investment opportunities.