Business Line: Five Reasons to Buy Gold Now

Release Date: 
Friday, October 24, 2014

Gold and Silver Prices

Gold prices retraced some of its earlier losses on a weaker dollar and ended the week slightly down. “Gold prices stabilized Friday after three straight losing sessions as the U.S. dollar and stocks weakened…‘Dollar weakness is lending strength into gold,’ said broker Bob Haberkorn of RJO Futures in Chicago. A weaker U.S. currency makes dollar-denominated gold appear less expensive to foreign buyers…Friday’s gains were a turnaround for gold, which had been weakening as recent economic data eased fears of a global recession.” (“Gold Steadies After Losing Streak,” Wall Street Journal, 10/24/14.)

Gold finished the week at $1,231.20, down $8.00. Silver prices were down $0.17, closing at $17.20.

Business Line: Five Reasons to Buy Gold Now

Long known for their affinity for gold, the Indian culture celebrates their many festivals and the approaching wedding season with gifts of gold. The Hindu Business Line told investors this week there are five reasons why they should buy gold now. Among the reasons were:

“Limited reserves

“In the years ahead, it is likely to get increasingly difficult for producers to find easy-to-mine deposits of gold. At 2,968.5 tonnes (Thomson Reuters GFMS data), many investors believe that 2013 may be the peak year for gold production.”

“Unviable

“If gold prices decline any further, it will make production unviable. The average cost of producing an ounce of gold is said to be about $1,100. But some manage it at about $950-$1,000/ounce due to favourable geographical conditions at the pit and with the use of better technology and less labour. Now, with the current market price of gold at about $1,200/ounce, many miners, especially the junior and mid-tier ones, have shelved their plans to explore new deposits. This can reduce supply in the future.”

“Rising demand

“Even today, more than 50 per cent of gold is consumed for jewellery…In India and China, where gold is an essential part of festivals and weddings, people love to adorn themselves in gold and save it for their children. Their appetite for gold may only grow as their disposable incomes go up in future. Gold consumption demand hit an all-time high of 2,209.5 tonnes in 2013, with India and China alone consuming more than 1,200 tonnes as jewellery.” (“Five reasons to buy gold now,” The Hindu Business Line, 10/19/14.)

Chinese State-Run Gold Producer Seeks Foreign Mines

One of the largest Chinese state-run gold producers is looking to acquire gold mines in other countries.

“Shandong Zhaojin Group Co., one of China’s largest gold producers, is in talks to acquire gold-mining assets in North America and Australia, Chairman Lu Dongshang said Wednesday…Even as gold prices have fallen 10% this year due to low inflationary pressures and a stronger dollar, Chinese gold producers have continued to scour the world for mining assets, betting that resilient longer-term domestic demand will underpin their investments.” (“China’s Shandong Zhaojin Hunting for Global Gold Assets,” Wall Street Journal, 10/22/14.)

Solar Industry May be Key Driver for Silver Prices

Advances in the growing solar industry may be a key driver for silver prices in the coming years.

“[I]n addition to its characteristic as a safe haven investment, silver is widely used in industrial applications. It is used in the manufacture of semiconductors, solar photovoltaic cells and batteries, in the fabrication of jewelry, in photography and has a variety of applications in nanotechnology. With the rapid adoption of solar energy across the world, the demand for silver from the solar photovoltaic industry is expected to rise rapidly. Assuming a balanced market in which supply matches demand, the demand for silver from the solar PV industry will rise from 10% of the total demand for silver in 2014 to around 15% in 2018.” (“Trends In Silver Demand By The Solar Photovoltaic Industry,” Forbes, 10/22/14.)

Officials Warn: “You’re Going to be Hacked”

Federal officials are warning consumers that hacking of their financial accounts is inevitable.

“Federal officials warned companies Monday that hackers have stolen more than 500 million financial records over the past 12 months, essentially breaking into banks without ever entering a building. ‘We're in a day when a person can commit about 15,000 bank robberies sitting in their basement,’ said Robert Anderson, executive assistant director of the FBI's Criminal Cyber Response and Services Branch. The U.S. financial sector is one of the most targeted in the world, FBI and Secret Service officials told business leaders at a cybersecurity event organized by the Financial Services Roundtable. The event came in the wake of mass hacking attacks against Target, Home Depot, JPMorgan Chase and other financial institutions. ‘You're going to be hacked,’ Joseph Demarest, assistant director of the FBI's cyberdivision, told the business leaders. ‘Have a plan.’” (“Officials warn 500 million financial records hacked,” USA Today, 10/20/14.)

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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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