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Gold Surges Higher

Release Date: 
Friday, August 16, 2013

Gold and Silver Prices:

Gold and silver prices surged this week fueled by several factors including the growing violence in Egypt, short covering by traders and uncertainty over future Federal Reserve action. Gold rose above the key technical level of $1,350 per ounce while silver saw a gain of more than 6%, moving into a “bull market territory.” (“Gold Prices May Add To Gains Next Week,” Forbes, 8/16/13; “Silver Surges Into Bull Market,” Wall Street Journal, 8/15/13)  Gold closed the week up $62.50, at $1,378.20. Silver closed the week at $23.36, rising $2.70.

Egyptian Violence Fuels Gold Prices

“Reports Thursday said around 525 people have died the past two days in anti-government violence in Egypt. Government troops have reportedly shot citizens protesting in the streets. This news helped to support the safe-haven demand in the gold market. Egypt controls the Suez Canal, through which a good percentage of the world’s oil traffic and other commerce flow.” (“Gold Surges to 7—Week High on Safe—Haven, Technical Buying,” Kitco News, 8/15/13)

Gold Bulls Have Momentum

Analyst Kira Brecht discussed how gold prices may rise if the Fed’s anticipated tapering of its massive bond buying program is delayed. “What if the Fed doesn't taper next month? There is a case to be made for waiting until later in the year. It would be fair to say the U.S. economic picture is still mixed and there are risks on the horizon, which the Fed will no doubt be eyeing. There is an argument to be made that the economic recovery remains fragile and inflation remains below the Fed's target at 2%.... If the Fed doesn't taper in September, gold could see another burst of energy on the upside. It would be supported by —a lack of tapering, weakness in the U.S. dollar and generally bullish seasonal factors. Gold bulls have the wind behind them right now… Gold bulls have the momentum and there's a bevy of potential bullish factors brewing right now. Ride the trend.” (“What If The Fed Doesn't Taper In September?” Kitco Commentary, 8/16/13.)

Chinese Demand Continues to Drive Gold

According to two Wall Street Journal articles, Chinese gold demand continues to support gold prices. “Demand in China, where consumers account for roughly a quarter of global gold demand, hit a record 385.5 metric tons in the second quarter, according data released Monday by the state-backed China Gold Association. That is double the figure from a year earlier, according to a Wall Street Journal analysis of the data…More buying in China likely would act as a catalyst for gold prices, taken together with other drivers, says Axel Merk, chief investment officer at Merk Investments LLC, which has $600 million under management...Chinese gold demand is a force to be reckoned with, analysts say.” (“China’s Consumers Show Growing Influence in Gold Market,” Wall Street Journal, 8/12/13)

Philip Diehl, former director of the U.S. Mint, echoed these views: “If the Chinese see their economy headed for a hard landing, they are likely to increase gold purchases as a way of preserving wealth in the face of a depreciating yuan. The Chinese also may buy gold for another reason: increasing social and political instability. For millions of Chinese, the government has failed to deliver its side of a social contract in which Beijing delivers a rapidly rising standard of living in exchange for the public's acceptance of authoritarian rule. Public dissent is growing…In such circumstances, the Chinese are likely to turn to gold, as many others have over the centuries, as a financial refuge in times of social and political turmoil. If a hard landing leads to a weaker yuan and an increase in political instability, demand for gold in the world's fastest growing gold market will accelerate.” (“China Turns to Gold,” Wall Street Journal, 8/13/13)

House Bill Mandates Return to a Gold Standard

A little reported bill was introduced into the House of Representatives (H.R. 1576) in April requiring the Federal Reserve to peg the value of the dollar to the price of gold. This week, commentator and entrepreneur Louis Woodhill wrote an op/ed column for Forbes criticizing the Fed’s quantitative easing policies and advocating for adoption of the gold standard bill. “The Fed’s ‘QE3’ ‘large-scale asset purchase’ (LSAP) program has been going on for ten months now. And, during that time, Bernanke has taken pains to tell everyone that, even when LSAP ends, he intends to keep interest rates ‘exceptionally low’ for a very long period of time. So, how is that QE3 thing working out for us? It has been an unmitigated disaster, even in its own terms… H.R. 1576 would cause the market value of the dollar to be defined in terms of the market value of a fixed amount of gold. The bill contains a mechanism for forcing the financial markets to disclose the correct gold price (in $/oz) to be used to define the value of the dollar (such value would then be the reciprocal of that gold price)… America doesn’t need “monetary policy,” and it doesn’t need monetary economists. It needs common sense and H.R. 1576.

Sprott: Gold to Double in Twelve Months

Fielding reader questions for The Globe and Mail, Eric Sprott, CEO of Sprott Asset Management, wrote, “I firmly believe that we reached the bottom on June 28th and that gold should double from that bottom within the next 12 months. So by next summer, I think that the price of gold will have made new highs and stand around $2,400 per ounce.”  (“Q&A:  Eric Sprott on gold and why it’s heading to $2,400 in a year,” The Globe and Mail, 8/15/13)

Goldline’s Exclusive Fractional Gold and Silver Coins

Gold and silver coins may be acquired in a variety of sizes.  Smaller coins, known as fractional coins, offer a lower price point than one ounce coins and can provide greater flexibility when it comes time to liquidate of distribute.  Goldline offers a variety of exclusive limited production gold and silver bullion coins that are guaranteed for their purity and weight by two of the world’s most prominent mints.  Call Goldline today to learn more about how to acquire these exclusive coins for your portfolio and precious metals IRA. 

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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