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Coutts: Gold at Attractive Entry Point

Release Date: 
Friday, January 10, 2014

Gold and Silver Prices

Gold prices rallied on Friday after a disappointing December nonfarm payroll report.  “December U.S. nonfarm payrolls came in far below expectations on Friday, boosting gold’s investment appeal and setting prices for the precious metal up for their highest close in four weeks.  The disappointing jobs data cast doubt on the strength of the economic recovery and on how quickly the Federal Reserve will move to further slow its flow of monetary stimulus.”  (“Gold rallies after December payrolls disappoint,” MarketWatch, 1/10/14)

Gold closed the week at $1,249.60, up $10.60. Silver prices moved up $0.02, closing at $20.27.

Coutts: Gold at Attractive Entry Point

Private bank and wealth management firm, Coutts, wrote to clients that, “[w]e believe gold buyers will return…The fundamental reasons for holding gold have not changed.  While some systematic risks in the global economy, such as the meltdown of the euro zone, have been partly allayed, the developed world is still carrying a burden of debt that remains largely unaddressed.  We see current [gold] prices as an attractive entry point given our view that the balance of risks now points to the upside.”

David Lennox, a resources analyst at independent research house Fat Prophets, also sees positive signs for gold. “‘When you have a look at what the industry itself is doing, it is now actually adjusting to the lower gold price environment. We've seen primary production starting to moderate. We've seen secondary production, through recycling, actually collapsing through the latter part of 2013. And we saw a good increase in jewelry demand and also in industrial demand,’ Lennox told CNBC. ‘We do think that's going to lend quite strong support to the gold price,’ he said, adding he expects the price to rally toward the latter part of the year.” (“Will gold be 2014’s comeback kid?” CNBC, 1/8/14)

Technical Analyst Believes Gold Can Retest Record High

Tim McCullough, technical strategist at Lloyds Bank, explained to CNBC why his analysis points to a rally for gold. 

“Following the U.S. Federal Reserve's decision to lift the foot off the gas of its aggressive bond-buying program, the consensus expectation has been for both U.S. Treasurys and gold to lose value.  However, Tim McCullough, technical strategist at Lloyds Bank Commercial Banking has different ideas, expecting both to test recent highs. McCullough uses DeMark Indicators, which are a collection of sophisticated market-timing tools created by Thomas DeMark, the founder and CEO of DeMark Analytics. The outcome, he says, is gold bulls should look to load up on more bullion.”

“‘Gold still has to retest that $1,921 area higher again at least up to around sort of the $1,700 area before that long term trend can be exhausted,’ he told CNBC Wednesday.  ‘The combination of the downtrend trend reaching its own exhaustion pattern and the long term trend still being intact suggest that the risk now is to the upside.’”  (“Forget the drop—Gold, Treasurys on track for rise: Pro,” CNBC, 1/8/14)

Job Growth Remains Stagnant; Sign of Shaky Economy

The Department of Labor reported the economy only created 74,000 new jobs in December, far below the 200,000 new jobs projected by many analysts. Forbes commentator Sy Harding wrote, “The dismal jobs report [raised] a serious question. Was it perhaps confirming recent warnings from the housing industry in the form of plunging mortgage applications, and from the auto industry in the form of significantly slowed December auto sales, that the economy may still be on shaky ground?”

“The report will force the Yellen Fed to at least consider that possibility, and perhaps slow the tapering process, which Bernanke had indicated it would do if ongoing economic reports disappointed sufficiently.” (“The Jobs Report Rained On New Fed Chair Yellen's Honeymoon Period,” Forbes 1/10/14)

On a macro level, the New York Times reported that in 2013, the share of Americans with jobs remained stagnant, despite proclamations of a falling unemployment rate. “The share of Americans with jobs did not increase in 2013. The economy added about 182,000 jobs a month, just enough to keep pace with population growth…At the end of 2006, 63.4 percent of American adults had jobs. By the end of 2009, this employment rate fell to 58.3 percent, and it has recovered only very slightly…

“This stands in sharp contrast to the more familiar unemployment rate, which continues to fall rapidly. But the unemployment rate doesn’t measure the share of American adults who don’t have jobs. It only counts people who are seeking work. It has been falling primarily because a smaller share of people is seeking work. That has some important policy implications. The decline in unemployment may limit the Federal Reserve’s ability, or at least its willingness, to stimulate the economy. But the employment rate may offer a more accurate picture of the health of that economy and the picture, as you can see, is not very good.” (“The Employment Rate’s New Normal,” New York Times, 1/10/14)

Central Banks Keep Interest Rates Steady

Two major central banks announce plans to keep monetary policy and low interest rates unchanged. 

“The Bank of England on Thursday left the size of its bond-buying program unchanged and held its key lending rate at a record low of 0.5%, where it has stood since March 2009. The central bank's Monetary Policy Committee left its asset purchases, the centerpiece of its quantitative-easing strategy, at 375 billion pounds ($617 billion).”  (“Bank of England holds rates at 0.5%, QE steady,” MarketWatch, 1/9/14)

“The European Central Bank left its key interest rate at a record-low 0.25 percent at its policy meeting Thursday, as widely expected, to continue supporting the eurozone.  The ECB will continue to monitor the impact of its last rate cut in November, which was carried out amid deflation concerns after the eurozone inflation rate dropped to 0.7 percent in October, the lowest level in nearly four years and far below the ECB's target of 2 percent.”  (“ECB keeps key interest rate at record-low 0.25%.” Kitco News, 1/9/14)

Goldline’s Express IRA Program

Many Goldline clients choose to include precious metals as part of their retirement planning especially during times of economic crisis and uncertainty.* Goldline’s Express IRA allows clients to acquire precious metals on their schedule; they no longer have to wait for your self-directed IRA to be funded before getting started.

Goldline's Express IRA not only provides clients with the ability to diversify their IRA on an expedited basis, clients can also qualify for Goldline's ground-breaking Two-Way Price Guarantee Program when they acquire $10,000 or more of our exclusive bullion coins.  When an Express IRA purchase qualifies for Goldline's Two-Way Price Guarantee Program, clients are protected on short-term upside and downside market movement: they can either call to reprice their coins if the selling price falls (up to a maximum of 28 days depending on the size of the purchase) or, if the selling price of the coins increase during the qualifying period, clients can call Goldline to acquire additional coins at the original selling price.

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. Click here to listen.

*Federal IRA tax laws are complex and may change from year to year. Goldline believes it is appropriate to have 5%-20% of retirement portfolio allocated to precious metals. Other individuals and institutions may recommend different percentages. As with any investment, you should consult your tax advisor before making a decision regarding precious metals IRA investments.

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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.

You should review Goldine's Account Agreement along with our risk disclosure booklet, Coin Facts for Investors and Collectors to Consider ®, prior to making your purchase. Goldline has a spread or price difference between our selling price, called the "ask", and our buy-back price, called the "bid". That spread varies depending on coin or bar you acquire. Spreads on 1 oz bullion coins, 90% silver dimes and quarters, and one ounce and larger bullion bars are 13%. All other coins have a spread of 28%. There is also a 1% liquidation fee when you sell your coins back to Goldline. The market must go up enough to overcome this spread before an actual profit is achieved. Precious metals and rare coins can increase or decrease in value. Past performance does not guarantee future results. Coins are a long-term, three- to five-year, preferably five- to ten-year investment. We believe precious metals are suitable for 5% to 20% of the average investment portfolio though others may recommend a different percentage.

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