February was a short month, and it’s been a wild ride. And it’s almost certainly going to be another wild month on the Libya front (not to mention Egypt, Tunisia, Iraq, Yemen, etc.). While we saw chaos erupt in virtually every Mideast country, the return of stock market volatility, oil spike, and several other things to get the pulse racing, February for gold was just a trailer.After a lull of almost two decade, when Gold started its recent bull run towards the tail end of the last decade when it was trading below $300 per ounce, since then, it has gone up five folds to over $1400 per ounce. And now, once again, we will witness the big show in March. While the price of gold is already appearing as if it is set up for another bull run, it is not from any sophisticated technical analysis. It is merely examining the spot gold price and observing the similarity of patterns that seems to be matching the gold price’s rise from the consolidations of last summer. While we have witnessed gold’s price gyrate up and down … just now, gold is headed for new highs.
If we look at the nature of the European Financial Stability Fund at stake, in the US, a major disappointment on jobs and an epic fight over the debt ceiling, its all going to make the budget stuff look like child’s play. And, the likelihood that the Mideast stuff will continue to spiral, and you’ve got the makings of what’s going to be an epic, it will be paramount for Gold and Silver. Note that the price is just now making a fourth attempt in as many months to penetrate the new high price set in as many months. Last summer saw a similar situation, where the price made about five attempts before finally setting a new high on or about September 1. This consolidation also lasted about four months. Then, when the price set a new high in September’s 2009, the “Gold Bull Run” was off and running for the fall. “The new floor for gold and silver is about to be established in the coming months” states Ron Fricke president of Regal Assets “September 2009 we saw gold break through the resistant level of $1000 an ounce and since this high it has not pulled back below $1000 an ounce, expect the same to happen shortly with both gold and silver prices”
Are there any other factors that may help an investor allay fears of a pending crash in the price of gold, rather than starting a new bull run? Just take a look at inflation of Paper Currencies. The markets interpret the Federal Open Market Commitees previous pronouncements as inflationary for paper currencies, is expected to continue until there are some indications of inflation being reined in. This currency inflation is a fundamental driver for the precious metals. Plus, there is a rising middle class as the world’s emerging markets continue to grow and gain parity with the world’s developed markets. The size of the world’s middle class growth is the largest in the Asian economies and of a scale that the world has never before seen. Asians have a particular affinity for the precious metals due to their history and culture of precious metals being a store of wealth. This buying by emerging middle classes provides a strong base of support for precious metals prices. And lastly, the peak Gold is coming due to higher costs and lower grades. Barrick Gold’s chief executive Aaron Regent already declared a state of “peak gold” in 2009. The thesis is that gold mining is difficult, and the challenges of increasing costs, lower gold grades, and difficult operating environments all coalesce to decrease gold production supply. This “peak gold” dynamic is ensuring that the new production supply of precious metals will be constrained in the future.
While some of the market’s reactions to the fundamental drivers affecting gold prices are currency inflation as the prime driver, buying from Asia will support the price during corrections. Future gold supply is constrained by peak gold. With all these factors affecting gold prices, is it any wonder that a significant rise is in store?
Finally, with massive withdrawals from savings banks already occurring in different areas of the world and being investing it in gold, just over the past week in Korea, a total of 490 billion won was withdrawn from 98 savings banks Monday, despite the financial regulator’s assurance that there will be no more shutdowns of such institutions. The withdrawals came after the FSC confirmed that it will avoid suspending operations of additional savings banks unless in an emergency, such as a bank run.
In many ways this is another example how global banking crisis will be affecting gold, since we are currently in the midst of, born out of faulty loans made in a global housing crisis. Another prime example of financial contagion, something we are seeing more and more of in our global economy—an economy that is deeply interconnected at this point; no event occurs in isolation, and a crisis in one part can spread to a crisis in other parts.
While fear might have been the catalyst to the gold record high last year, with weekly chaotic crisis hitting the global economy, gold will continue to be on the rise! In fact, it just hit a new five-week high. Demand for silver is becoming the second most precious commodity, moving up as fast as oil–oil is marching up again, now over a $100 a barrel. Agricultural commodities have gone ballistic in price over the past year and in some areas of the world, “gold fever” is absolutely exploding, says Peter Schiff, who has always been spot on, adds, buy silver now don’t wait for hyperinflation! Silver is going to explode to at least $100. Ultimately, if global political unrest is in the cards – and if new forms of government will emerge, perhaps in the form of new regional governments like the Eurozone, or non-state networks like Hezbollah and cyber-networks like Facebook, it would again strengthen the case for precious metals—as currencies introduced by non-state networks will eventually be tied to precious metals.
Source: http://goldcoinblogger.com
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