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Gold Correction May Be Over – Deutsche Bank

Release Date: 
Friday, July 12, 2013

Gold and Silver Prices:

Gold and silver staged a bit of rally this week, with gold rising in four out of five sessions. Gold closed at $1,285.80, up $61.00. Silver rose $1.02 to end the week at $20.02.

Gold Correction May Be Over – Deutsche Bank

Strategist at Deutsche Bank said gold’s recent correction may be coming to a close. Deutsche Bank strategist Michael Lewis noted, "Lessons from history suggest that although gold-price losses have been extreme, the extent of the price correction today is still some way short of the percentage declines that occurred in 1980-1."  (“Gold correction may be mostly done: Deutsche Bank”, MarketWatch, 7/08/13.)

“…analysts from Citi have noted that in spite of the recent fall in the yellow metal, it may be premature to declare the end of the yellow metal...According to [Tom] Fitzpatrick [Citi’s Top Chartist]: In 1976 the Gold correction ended in August… During that period Gold rallied by about 78% and over the 1976-1980 period it multiplied in value by a factor of 8 from just over $100 to over $800.” (“Analysts eye reversal as Gold history likely to repeat itself”, Commodity Online, 7/09/13)

The Real Value of Gold

Forbes contributor and independent money manager Todd Ganos wrote this week about the real value of gold.  “Recently, there has been quite a bit of volatility in the dollar price of gold.  It certainly can’t be that the fundamental value of the United States dollar is experiencing wide swings… So, what should the price of gold be in dollar terms?…we’ve discussed this in terms of expansion of the money supply relative to the expansion of gross domestic product.  That analysis suggested the price of gold should be somewhere around $1,600 to $1,800 per ounce… According to a report released by the Federal Reserve last week, the M2 money supply is about $10.5 trillion.  The amount of gold held by the United States government is approximately 260 million ounces.  Doing the math, that translates to north of $40,000 per ounce.  This is too difficult to even comprehend.  But, whatever the real number might be, it seems that it is above the current $1,200 area that gold in currently trading…We think gold will be moving up and we’ve positioned our clients accordingly.”  (“Is Gold Really Worth $40,000 Per Ounce?” Forbes, 7/07/13)

Asian Gold Demand Rising

U.S. Global Investors issued a report on Wednesday describing recent Asian demand as well as possible supply constraints from miners.  “In this environment, gold should remain attractive. However, as the West flees the precious metal, another set of gold buyers has come forward with the aim to preserve wealth…In May, gold imports into the Asian giant rose to the second-highest level ever... In fact, this year’s demand is so significant that the physical gold delivered on the Shanghai Gold Exchange through May is almost all of the official gold reserves in China!... China’s imports would be equivalent to 50 percent of [world] mine production.” (“The Asian Giant Stampeding into Gold,” U.S. Global Investors, 7/10/13)

Europe Still Facing Economic Woes

“The International Monetary Fund trimmed its global growth forecast on Tuesday for the fifth time since early last year due to a slowdown in emerging economies and the woes in recession-struck Europe…the Washington-based lender also warned global growth could slow further if the pull-back from massive monetary stimulus in the United States triggers reversals in capital flows and crimps growth in developing countries.” (“IMF Cuts Global Growth Forecast as Emerging Markets Slow,” Reuters, 7/09/13)

Credit rating agency Standard & Poor’s lowered Italy’s credit rating to BBB, just two levels above junk, due to expectations of a weakening economy and a troubled financial system.  (“Italy’s Credit Rating Cut to BBB by S&P;  Outlook Stays Negative,” Bloomberg, 7/10/13)

Fed’s FOMC Minutes, Bernanke Speech Indicate Continued Easy Monetary Policy

The release of the Federal Reserves’ minutes from the June FOMC policy meeting indicated a continuing spilt among Fed members on the future of quantitative easing. Notably, Fed Chairman Bernanke, Vice Chairwoman Janet Yellen and New York Fed President William Dudley remain strongly committed to the $85 billion per month bond buying program.

Citing high unemployment, low inflation and "quite restrictive" fiscal policy, Mr. Bernanke told reporters, “You can only conclude that highly accommodative monetary policy for the foreseeable future is what's needed in the U.S. economy… The overall message is accommodation…." (“Fed Affirms Easy-Money Tilt”, Wall Street Journal, 7/10/13)

Two-Way Price Guarantee Program

For a limited time, Goldline has expanded its industry leading Price Guarantee Program to provide its clients with both upside and downside protection. With a qualifying purchase of Goldline's exclusive, limited production gold and silver coins, you can either call to reprice your coins if the selling price falls  or, if the selling price increases during the qualifying period, you can call to acquire additional coins at the original selling price. Conditions and limits apply so call Goldline now to learn more about this special offer.

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.

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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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