B of A Turns Bullish on Gold

Release Date: 
Friday, July 25, 2014

Gold and Silver Prices

Gold and silver lost ground this week even as the conflicts continued to boil in both Ukraine and Israel. “Less risk aversion in the market place this week…Even with some increased risk appetite in the market place this week, geopolitics is still in the focus of traders and investors. Unsettling to traders and investors Thursday was news that an Air Algerie jetliner with 110 passengers on board crashed after take-off. The Russia-Ukraine situation is still in crisis mode, as two Ukrainian military jets were shot down Wednesday. Meantime, the Israel-Hamas fighting is also near the front burner of the market place as many airlines are prohibiting their jets from landing in Tel Aviv, Israel.” (“Gold Sells Off, Hits 4-Week Low, on Technicals, Less Risk Aversion,” Kitco News, 7/24/14.)

Gold finished the week down $2.60, closing at $1,309.30. Silver prices closed the week at $20.85, down $0.14.

B of A Turns Bullish on Gold

Bank of America Merrill Lynch analysts believe gold is ready to move higher.

“On the heels of a 2.1% loss for gold last week and news that hedge funds have gone way short, gold bugs could perhaps use some cheer. Enter analysts at Bank of America Merrill Lynch who say the worst days for the precious metal may be over. In a note to clients Monday, metals strategist Michael Widmer notes how gold prices have stabilized this year thanks to steady physical demand from emerging markets — China and India absorbing mine and scrap supply — which has helped compensate for investor selling. In the future, he says, that balance will sway in gold’s favor: ‘We believe that physical demand from emerging markets will gain further clout in the medium term as countries get more affluent, suggesting the worst may be behind the gold market.’”

“Echoing some of B. of A.’s thoughts, Julian Phillips, in his Gold and Silver Market Morning note, explained just why those Asian buyers are so important to gold, and less fickle than their western counterparts. Asian buyers are not all about short-term and short-term profits, trusting gold and silver as long-term investments…They are fully confident in the long-term and rarely sell for profit reasons alone, so buying is ‘persistent and on-going.’ Phillips argues the technical picture remains positive for both gold and silver.” (“The worst for gold may be over: Bank of America Merrill Lynch,” MarketWatch, 7/21/14.)

Fund Managers: Gold to Break to the “Upside”

Fund managers with Greystone Asset Management told The Gold Report the gold bull market has resumed.

“Money managers Doug Loud and Jeff Mosseri of Greystone Asset Management say that a bull market may have already begun. All the signs are there: rising political tension, a shortage of new supply and a cull of the weakest stocks. In this interview with The Gold Report, Loud and Mosseri list a dozen gold, silver and copper companies that should ride the crest of the wave.

“TGR: How high do you believe gold will go?

“JM: The average sustaining cost of production for gold is about $1,500/oz. If gold continues to trade below that level, at some point no new mines will be brought on. Supply and demand indicates higher prices for gold. At the same time, we're dealing with a seasonal trading pattern. Usually the position for those commodities tightens up around September–October. We think this will happen again this year. Higher prices? Yes. How much higher? We don't know.” (“Doug Loud and Jeff Mosseri: Three Reasons Why Gold and Gold Stocks Will Rise,” The Gold Report, 7/23/14.)

Rule: Gold Market “Healthy”

Rick Rule, Chairman of Sprott US Holdings discussed his outlook for the gold market in a recent interview.

“Does the recent drop in the gold price affect your outlook for gold in 2014?

“‘No, not at all, Henry. You will recall that in our last interview, I suggested that gold and gold equities would grind higher after reaching a bottom, I believe, in July of last year. That is precisely what’s happening…I think this market is in good shape. It’s healthy…I am very encouraged by the market action that we are seeing in both gold, and the gold equities.’”

“What do continued low interest rates mean for gold going forward?

“‘Ultimately, it’s probably pretty good for gold…But the way I look at this nearly ‘free’ capital is ultimately good for gold. It weakens the medium of exchange, the US dollar, in which gold is denominated.’” (“Rick Rule: This Gold Sell-off is a Normal Event in this Market,” Sprott’s Thoughts, 7/18/14.)

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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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