Gold to $1400 – Capital Economics

Release Date: 
Friday, April 17, 2015

Gold and Silver Prices

Gold prices moved above $1200 on Friday due to safe haven buying as Greece moved closer to default and a possible exit from the eurozone.

“Gold prices rose Friday as fresh worries about Greece’s ability to pay its creditors sent investors into the safe-haven metal…

“The European Union’s executive arm, which helps oversee Greece’s bailout, said Thursday it is ‘not satisfied’ with the slow progress in talks, while the International Monetary Fund, another key lender, said Greece needs to ‘get on with the work’ of fixing its economy. The comments ratcheted up concerns that Greece may default on its loans and exit the eurozone, buoying gold, an asset some market participants buy in times of economic or political turmoil because they believe it will outperform other investments in turbulent times.

“‘Gold is seeing some safe-haven demand.’ Gold prices are up more than 5% from March lows, buoyed not only by Greece concerns but also indications the Federal Reserve is unlikely to raise interest rates in June.” (“Gold Prices Higher Amid Renewed Concerns About Greece,” WSJ, 4/17/15.)

Gold finished the week --- down $4.00, closing at $1,204.30. Silver prices closed the week at $16.33, down $0.26.

Gold to $1400 – Capital Economics

Julian Jessop of Capital Economics, remains bullish on Gold, expecting a tight supply and safe-haven demand to lead the precious metal towards $1400 by 2015-end… ‘We continue to expect the gold price to climb over the next few years (our end-2015 forecast is $1,400 per ounce, well above the consensus).’ …[T]here is still plenty of scope for gold to outperform, supported by tight supply, a revival of safe-haven demand, and a rebound in appetite from households in China and India.’” (“Gold targeting $1400 by 2015-end – Capital Economics,” FXstreet, 4/17/15.)

Hedge Funds Bullish on Gold

Hedge funds have reversed their earlier bearish views of gold by nearly doubling their long positions, betting that gold prices will move higher.

“Large scale speculators in gold futures continue to add to bets on a rising price even as the metal struggles to hold onto the $1,200 an ounce level… After eight straight weeks of increasingly bearish positioning on the gold market to levels last seen December 2013, large investors like hedge funds or so-called ‘managed money’ have now doubled their bullish positions within the space of two weeks.

“In the week to April 7… hedge funds slashed short positions and at the same time added to long positions in gold. That resulted in a 43% increase in their net long positions – bets that price will rise – for the week and a similar rise as the week before. Hedge funds are now long 6.5 million ounces compared to 3.1 million ounces mid-March.” (“Hedge funds double bullish gold price bets,”, 4/13/15.)

Three Prominent Experts Warn of Pending Economic Crisis

Congressman Ron Paul
Former Congressman and presidential candidate Ron Paul joined two other prominent commentators in warning Americans that a new financial crisis is on the horizon.

“The United States is on the brink of a catastrophic ‘financial crisis,’ according to former U.S. presidential candidate Ron Paul. And the culprit could be the dollar.

“’There's a huge bubble with the dollar,’ Paul said on Tuesday's ‘Futures Now.’ The Dollar index… is near 12-year highs ... But rather than take the rally as a sign that investors see strength in the U.S. economy, the outspoken former congressman sees the dollar's massive move higher as simply a byproduct of a world awash in easy money… ‘"The fundamentals are a disaster. The economy is in bad shape when you have more than half the people hardly making ends meet." Paul declined to offer a catalyst or even a timeframe for when the dollar ‘bubble’ could pop, but did warn that it does happen, it will be quick and unexpected.” (“Ron Paul: Watch out. Dollar's in a 'huge bubble,'” CNBC, 4/14/15.)

As we discussed last week, JP Morgan Chase’s CEO, Jamie Dimon, and President Reagan’s former budget director, David Stockman, also foresee another, more volatile, financial crisis.

JP Morgan Chase CEO Jamie Dimon
“While financial conditions have improved vastly since the 2008 credit meltdown, another financial crisis will eventually arise, says JPMorgan Chase CEO Jamie Dimon… ‘Triggering events could be geopolitical, a recession where the Fed rapidly increases interest rates, a commodities price collapse, a commercial real estate crisis, bubbles, etc.’

And what about the impact on financial markets? "The markets in general could be more volatile… It will be harder for banks either as lenders or market-makers to “stand against the tide.”’ (“Dimon: 'There Will Be Another Crisis',” Newsmax, 4/10/15.)

Budget Director David Stockman
“David Stockman, White House budget director under President Reagan, sees a crisis looming close on the horizon. ‘The worldwide central bank money printing spree of the last two decades has generated massive excess capacity and mal-investment all around the planet… What is coming, therefore, is not their father's inflationary spiral, but an unprecedented and epochal global deflation…’

“’So the central banks just keep printing, thereby inflating the asset bubbles worldwide. What ultimately stops today's new style central bank credit cycle, therefore, is bursting financial bubbles… That has already happened twice this century. A third proof of the case looks to be just around the corner.’" (“Dimon: 'There Will Be Another Crisis',” Newsmax, 4/10/15.)

American Advisor Week In Review

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: What are the rumors with Greece's debit situation? Learn more in this week's American Advisor.

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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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