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Senior Portfolio Manager: Gold May Reach $2,000

Release Date: 
Friday, November 15, 2013

Gold and Silver Prices

Gold prices recovered from earlier losses to end the week in positive territory on seasonal demand and dovish statements from Federal Reserve chair nominee Janet Yellen during her Senate confirmation. Gold closed the week at $1,291.40, up $1.90. Silver was down marginally, $0.73, closing at $20.88.

Sentry Senior Portfolio Manager: Gold May Reach $2,000 by 2015

Kevin MacLean, Senior Vice-President and Senior Portfolio Manager for asset manager Sentry Investments, explained why gold may rise to $2,000 per ounce by 2015. “MacLean says he has a technical price objective for gold of $2,000 per ounce by 2015. [T]he technical indicators for gold are strengthening, and he is seeing general investors return to the commodity. He adds large fund investors are placing bigger orders.”

“And Chinese buyers are taking advantage of the low price for gold. They’ve bought US$70 billion so far this year, and show no signs of slowing down, says MacLean. A conservative estimate of Chinese gold consumption is 1,600 tonnes a year. ‘At that rate, China’s demand is in excess of 55% of all the gold being produced in the world…’”

“China has also said it wants the yuan to rival the U.S. dollar as a reserve currency, and plans to back 15% of its central bank holdings in gold (up from 1% now), says MacLean. That would mean accumulating nearly 16,800 tonnes. ‘If they were taking all the gold being imported into China this year, it would still take them 10 years. This is a phenomenon that is going to keep supporting the gold price for a long time to come, and eventually undermine the dollar...’”

“Central banks in European and the U.S. have already sold much of their gold, he adds. If they decide to sell the rest, that ‘could beat on the gold market for a while, he acknowledges. This is a generational liquidation event, so it’s probably a generational buy opportunity.’ The Federal Reserve’s quantitative easing program is also hurting gold prices by shoring up the rest of the market, but the central bank is now expected to start tapering in March…But QE is also devaluing the U.S. dollar, something the price of gold will eventually compensate for. ‘If you double the rate of money, the gold price should double over time…’” (“Gold prices to sparkle again soon,” Advisor, CA, 11/15/13.)    

Brodrick:  Three Reasons Why 2014 Could Be Good for Gold

Natural resources strategist and financial advisor, Sean Brodrick identified his top three drivers for gold in 2014.  “There are three bullish forces for gold. First is global stimulus. We're seeing the world's central banks start to increase stimulus because they're worried about economic growth as estimates have slowly lowered. Now, the banks are starting to pile in more stimulus. That generally tends to pump up the price of gold.  Second is selling by gold ETFs, which is starting to taper off. If that does taper off and end, then a major bearish force in the market will be lifted. That could really lift a weight off the price of gold rather quickly.  Third is the emerging middle class in Asia. It's enormous. They want all the things we have, all the cars, the air conditioners, you name it, but they have a cultural affinity for gold. They don't trust banks. That's one thing they are going to buy.  You put those three things together and we could have a good year for gold in 2014.” 

Mr. Broderick also noted several other factors that should support gold prices. “Chinese demand for gold just keeps rising year over year. There's extraordinary growth in China as millions join the middle class. And it's not just China. There is lot of uplift in the whole economic atmosphere across Asia.  The central banks are important and I am absolutely keeping an eye on what they're doing. But you have to understand why the central banks buy gold. They buy gold because they want to have something real and tangible, in case there's ever a run on their currency or some other kind of financial crisis…We have quantitative easing, not just in the U.S. where it's $85 billion/month, but around the world. The balance sheet of the whole of central banks system is now estimated to be more than $20 trillion by Bloomberg.” (“Three Reasons Why Gold’s Best Days Are Ahead:  Sean Brodrick,” The Gold Report, 11/11/13)

Yellen Unsure On What Drives Gold Prices

While central banks around the world continue to be net buyers of gold, the United States’ Fed Reserves seems perpetually confused by the gold market. Echoing earlier statements by current Fed Chair Ben Bernanke, Fed Chair nominee Janet Yellen told the Senate Banking Committee this week, “I don’t think anybody has a very good model of what makes gold prices go up or down.  But, certainly, it is an asset that people want to hold when they are very fearful about (a) potential financial-market catastrophe or economic troubles and tail risks.  And, when there is financial-market turbulence, often we see gold prices rise as we see people flee into it.” (“Yellen: Nobody Has ‘Good Model’ Of What Moves Gold; Investors Buy When Seeking Protection,” Kitco News, 11/14/13)

Mr. Bernanke told the same committee in July that, “Let me end by saying that nobody really understands gold prices and I don’t pretend to really understand them either.” (“Bernanke: Gold Price Decline Suggests Less Worry About 'Extreme Outcomes',” Forbes, 7/18/13.)

U.S Mint Hits New Record for American Silver Eagles

“The 2011 annual record of 39.869 million American Silver Eagle bullion coin sales was shattered Tuesday as U.S. Mint year-to-date sales figures revealed 40.175 million American Silver Eagle coins have been sold.  The record was surpassed even though the U.S. Mint suspended sales of 2013 American Silver Eagle bullion coins from January 20 to January 28. …Silver Eagle sales have exceeded 3 million in each month of this year.”  (“American Silver Eagle coin sales hit new record,” Mineweb, 11/13/13)

Inside Info on Precious Metals from Goldline

Call today to receive a copy of November’s Precious Metals Insider.  The Goldline monthly newsletter provides a compelling collection of current market commentary, precious metals price forecasts and trends. 

Here’s a preview of this month’s topics:

  • World Gold Council: Gold Improves Purchasing Power, Manages Risk
  • Tocqueville Fund Manager: Gold Ready for “Major Advance”
  • Gold May Rise Over 20 Percent in Next Months: Sean Hyman
  • China Calls for “De-Americanized World,” New World Reserve Currency
  • U.S. Avoids Debt Default — For Now
  • U.S. Gold Reserves Too Precious to Pay for Government Debt
  • Gold Reserves Are Key to Central Banks’ Independence: Banca d’Italia
  • Fed Chair Nominee Signals Continued QE
  • Hyperinflation Is “Around the Corner”

 

Call now to receive your copy of November’s Precious Metals Insider 800-963-9798

This material has been prepared for private use. Although the information in this report has been obtained from sources believed to be reliable, its accuracy is not guaranteed, and such information may be incomplete or condensed. The opinions expressed are subject to change without notice.

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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