Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Why Most Investors LOST Money by Investing in ARK FUNDS - 27th Jan 22
The “play-to-earn” trend taking the crypto world by storm - 27th Jan 22
Quantum AI Stocks Investing Priority - 26th Jan 22
Is Everyone Going To Be Right About This Stocks Bear Market?- 26th Jan 22
Stock Market Glass Half Empty or Half Full? - 26th Jan 22
Stock Market Quoted As Saying 'The Reports Of My Demise Are Greatly Exaggerated' - 26th Jan 22
The Synthetic Dividend Option To Generate Profits - 26th Jan 22
The Beginner's Guide to Credit Repair - 26th Jan 22
AI Tech Stocks State Going into the CRASH and Capitalising on the Metaverse - 25th Jan 22
Stock Market Relief Rally, Maybe? - 25th Jan 22
Why Gold’s Latest Rally Is Nothing to Get Excited About - 25th Jan 22
Gold Slides and Rebounds in 2022 - 25th Jan 22
Gold; a stellar picture - 25th Jan 22
CATHY WOOD ARK GARBAGE ARK Funds Heading for 90% STOCK CRASH! - 22nd Jan 22
Gold Is the Belle of the Ball. Will Its Dance Turn Bearish? - 22nd Jan 22
Best Neighborhoods to Buy Real Estate in San Diego - 22nd Jan 22
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Will Monetary Policy and Inflation Continue to Support Gold?

Commodities / Gold and Silver 2012 Mar 29, 2012 - 01:16 AM GMT

By: Eric_McWhinnie


Earlier this week, gold and silver prices jumped after Ben Bernanke delivered a speech that sparked more quantitative easing speculation. However, both precious metals have since given up gains as investors continue to employ a “buy the dip, sell the rip” trading mentality. According to CPM Group, a commodities research and investment company, this is a trend that is likely to continue, but gold prices should receive support.

CPM Group just released its Gold Yearbook 2012, a comprehensive source of information, statistics and analysis on the international gold market. Although gold prices reached a new nominal high of $1,920 per ounce last September, the company said gold prices are unlikely to set a new nominal high due to reduced fears of a global financial system breakdown. Last August, Standard & Poor’s credit agency downgraded the U.S. credit rating for the first time. In regards to a gold spike towards $2,000 or more, the report says, “Such a spike seems unlikely to CPM Group, which suspects that the peak in September last year may provide to have been the cyclical peak in an ongoing bull market.”

While investors appear to be more sensitive to gold prices, CPM Group expects gold prices to stay above $1,500 this year and above $1,400 over the coming years. The report cites large debts and currency market volatility as issues providing support for gold prices. “These factors should remain supportive of gold prices, keeping them at historically high levels, but it may be that these issues will not push gold prices significantly higher from present levels on a sustained basis,” explained CPM Group. The price of gold started the year just below $1,600 and currently trades near $1,650.

Another factor relating to gold support is loose monetary policy and the likelihood of it leading to inflation. CPM Group states, “Such monetary policy is typically supportive of gold prices because of its potential inflationary impact. Investors could demand more gold if conditions deteriorate further, but they also have other options such as equities and real estate.” In the latest consumer confidence report released on Tuesday, expectations for inflation jumped from 5.5 percent to 6.3 percent, the highest level since May 2011. Furthermore, General Mills reported in their latest financial results that input cost inflation increased 10-11 percent, compressing margins. While other options such as equities and real estate are available, they face problems of their own. High frequency trading and poor fundamentals have raised concerns in equities, while lingering high unemployment and tight bank lending can make real estate a difficult option for investors.

Although gold and silver prices have fluctuated during the past decade, the general trend has been higher. Using CPM Group’s support levels of $1,400 and $1,500 for gold, it appears that the precious metal has more upside than downside. Loose monetary policies such as ultra-low interest rates and excessive government spending plagued the past decade and look to plague the foreseeable future as well. The amount of precious metals one should hold in their portfolio is often debated, but many would agree at least a small portion of an investor’s portfolio should hold gold or silver as a hedge against global uncertainty and inflation.

For more analysis on our support levels and ranges for gold and silver, consider a free 14-day trial to our acclaimed Gold & Silver Investment Newsletter.

By Eric_McWhinnie

Wall St. Cheat Sheet : Only days after the S&P 500 crashed to the depths of hell at 666, the Hoffman brothers launched Wall St. Cheat Sheet: one of the fastest growing financial media sites on the web. Like a samurai, our mission is to cut through the bull and bear shit with extraordinary insights, a fresh voice, and razor-sharp wit. We provide the highest quality education and information for active investors, financial professionals, and entrepreneurs.

© 2012 Copyright Eric McWhinnie - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in