Analyst: Inflationary Pressures “Gold Positive”

Release Date: 
Thursday, July 3, 2014

Gold and Silver Prices

Gold and silver prices retreated after a stronger than expected U.S. jobs report but nonetheless ended the week in positive territory.  “Gold prices fell Thursday, after better-than-expected jobs data showed the U.S. recovery may be gaining traction, prompting traders to take profits on recent gains in precious metals.” (“Gold Prices Fall on Jobs Report,” Market Watch, 7/3/14.)

Gold finished the week at $1,320.60, closing up $4.50. Silver prices closed up $0.26, at $21.23.

Analyst: Inflationary Pressures “Gold Positive”

Recent U.S. economic data could be positive for gold, according to analysts with the Australian investment bank Macquarie.

“‘Markets in recent weeks have interpreted most of the new information on the U.S. economy as being gold positive - in particular that there are early signs of inflationary pressures building up yet the Federal Reserve says it is unconcerned,’ Macquarie analyst Matthew Turner said.”

“Gold is usually seen as a hedge against inflation, while a low interest rate environment encourages investors to put money into non-interest-bearing assets…The metal tends to be seen as an insurance against risk in times of political or financial trouble.” (“Gold near 3-month high on fund inflows ahead of U.S. data,” Reuters, 7/2/14.)

Sterne Agee: Gold a “Good Place to Be”

In their most recent Money in Motion report, analysts with brokerage firm Sterne Agee had a positive outlook for gold.

“…Gold is in the throes of a ‘Bearish-to-Bullish’ Reversal and a good place to be long.”

“Current thinking: Gold Bullion and gold mining stocks are disparaged, ridiculed and passed over. And that is exactly what makes them so interesting on the long side, by our work. The patterns themselves are quite well developed…and qualify as full-fledged ‘Bearish-to-Bullish’ Reversals.”

“Bottom line: We retain the view that Gold bullion...[is] a good place to be.” (“Money In Motion,” Sterne Agee, 6/30/14.)

Prepare for Inflation Risk – Brecht

Kira Brecht, managing editor of TraderPlanet, warns the Fed is missing critical signs of inflation.

“While official government statistics show U.S. inflation at still low levels, anyone who buys gas, food or health insurance can attest to the fact that inflation exists in our everyday lives…there are concerns about more widespread inflation rebounding in the broader economy. Societe Generale wrote a research report in late June entitled: ‘American Themes: Prepare for the return of U.S. inflation.’”

“‘The next two years –prepare for upside risks on inflation…With import prices bottoming and no longer a drag on inflation, tighter domestic slack should push goods inflation higher. But the real upside is on the service side, as housing inflation heads towards new cyclical highs and healthcare costs reverse their recent weakness,’ wrote Societe Generale economists.”

“Gold has historically been utilized for many purposes—a safe haven investment, a vehicle for capital appreciation and diversification—and also traditionally as a hedge against inflation. While disinflation has been the concern in recent years amid the sluggish growth environment, faster growth will likely be accompanied by a pick-up in inflation.” (“Gas Prices Near 6-Year Highs, No Inflation? Who Says,” Kitco News, 7/3/14.)

Perth Mint Reports Brisk Sales

One of the world’s premier mints has reported brisk sales in June.

“Gold sales from Australia’s Perth Mint, which refines all the bullion output in the world’s second-biggest producer, climbed to the highest level in four months in June as a rally in prices spurred demand.”

“Gold climbed 6.2 percent in June to extend the rally this year to 10 percent as unrest in Iraq and Ukraine spurred haven demand, while the U.S. Federal Reserve said it will keep interest rates at almost zero for a considerable time…‘There’s been a couple of good reasons to buy gold as a safe haven this year,’ Victor Thianpiriya, an analyst at Australia & New Zealand Banking Group Ltd., said by phone from Singapore. ‘We’ve had a little bit of geopolitical unrest around various parts of the world and also the price has recovered.’” (“Perth Mint Gold Sales Climb to Four-Month High as Prices Rally,” Bloomberg, 7/2/14.)

WGC: Asian Gold Demand to Pick Up This Year

In a recent interview with the Wall Street Journal, a managing director with the World Gold Council said that gold demand in Asia should increase in the second half of the year.

“Asia’s gold demand will likely pick up through the rest of the year as China’s economy improves and hopes grow that India will lift its import curbs, a senior World Gold Council executive said Wednesday. The two countries together account for about 70% of the world’s gold demand so consumption trends in the region have a significant impact on the price of the precious metal. ‘Market fundamentals in Asia remains intact and is getting stronger,’ said Albert Cheng, managing director for the Far East at the World Gold Council. ‘If we combine China and India demand, I would imagine it will be on par with last year.’ (“After Dip, Gold Demand in Asia Set to Rise,” Wall Street Journal, 7/2/14.)

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Goldline provides a wrap-up of the week's precious metals news along with important commentary on the American Advisor Week in Review audio program. Listen to the show below:


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†This material has been prepared for private use. Although the information in this commentary has been obtained from sources believed to be reliable, Goldline does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice.

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