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Gold Trends 30% Increase

Release Date: 
Friday, September 13, 2013

Gold prices dropped to a four week low, dragged down by the reduced threat of military action in Syria, a stronger than expected labor report on Thursday, and technical selling triggered by a large sell by a single market participant. “The whole concoction [of events] has sort of pushed us down to these levels," said the chief commodities analyst at HSBC Bank USA. (“Gold Prices Plunge as Jobs Data Delights,” TheStreet, 9/12/13.)

Gold closed the week at $1,328.90, down $61.00. Silver prices also slumped, ending the week at $22.37, down $1.57.

Gold May Rise 30% in Next 12 Months: Agnico Eagle CEO

Sean Boyd, CEO of $5.2 billion Agnico Eagle, an international gold producer, told King World News that demand from Asia, central bank purchases and excessive liquidity will lead to significantly higher gold prices within the next year. “From a gold price perspective, we still see higher prices. What we are looking at is strong Chinese demand, and we firmly believe that demand will continue to stay strong. Indian demand has also been strong, despite the higher taxes and duties that have been put on gold. We also expect Indian demand to remain quite robust. Central bank buying will continue to remain firm in our view as well. When you add up just those three components, astonishingly, it’s almost equivalent to the annualized gold production of the entire world… When you add investment demand into that equation, this is going to drive gold prices much higher. So we are looking for a 30% increase in the gold price over the next 12 months.”

Mr. Boyd believes gold prices may hit all-time highs: “We are not factoring in super-high prices when we do our modeling and life-of-mine planning. In fact, we are using conservative prices to ensure we have enough financial flexibility in our business. But from a gold price perspective, there is no reason that it can’t hit all-time highs. The reality is that none of the excessive debt levels have been addressed… The bottom line when you work your way through all of these major issues is there is a fundamental desire out there for investors and major entities to want to own physical gold, and also to have it close (in physical form not paper)… We are still going to have volatility, but over the next few years we think that volatility will mostly be to the upside for gold.” (“Remarkably 3 Sources Now Buying Entire World Gold Production,” King World News, 9/9/13.)

Charteris CEO: Gold and Silver Prices Hit Bottom in June; Asian Demand Will Drive Record Prices

The CEO of Chateris, a treasury portfolio manager, Ian Williams was interviewed about the gold and silver consolidation and future prices by “I would think the gold and silver market both bottomed on the 28th of June, 2013. We think that was quite a major low and the next move is quite a bit of move on the upside for both silver and gold… [The move] almost predominantly comes from Asia which is really the big story in the gold market… the West is a net seller of gold and the East, the Asian countries, are a net buyer... The West only has a finite amount of gold to sell where the buying demand in Asia seems to be open-ended… Three Asian countries between them will take the entire global mine output… We think gold will go to $2,400 without too much trouble. Silver will be the big play and go over $100 per ounce. (“Charteris CEO Ian Williams believes silver and gold prices bottomed out at the end of June,” ProactiveInvestors UK, 9/12/13.)

“Love Trade” May Drive Higher Prices

U.S. Global Investors CEO Frank Holmes wrote that “Historically, September has been gold’s best month of the year. Looking at more than four decades of monthly returns, the precious metal has seen its biggest increase this month, averaging 2.3 percent.”

The reason for this increase, Mr. Holmes noted, is due to what he describes as the “love trade.” “This group gives gold as gifts for loved ones during important holidays and festivals…Indians will be getting ready for their wedding season that begins in October followed by the five-day Hindu festival of lights, Diwali, which is India’s biggest and most important holiday of the year. In December, millions of people will be gathering with loved ones to exchange gifts as they observe Christmas. And finally, millions will celebrate Chinese New Year at the end of January 2014.”

Mr. Holmes believes the “love trade” will provide an important driver for gold prices. “Despite this possible short-term threat to gold demand, keep in mind the East’s long-term sentiment toward the metal, as this area of the world has a different relationship related to both the Love Trade and the Fear Trade. And it’s not easily broken. You can see this encouraging sentiment in the chart below, as people in China and India have a ‘particular positivity around longer-term expectations for the gold price, according to the World Gold Council (WGC).” (“Will Gold Follow Its Seasonal Pattern This Year?” Business Insider, 9/9/13.)

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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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