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Syria Fuels Gold Prices

Release Date: 
Friday, August 30, 2013

Gold and Silver Prices:

Gold prices continued its upward rise this month, fueled in part by the growing threat of military intervention in Syria. Craig Erlam, market analyst at Alpari U.K., noted, “The move in gold back into bull market territory, following a 20% rally since the end of June, clearly highlights the level of risk aversion in the markets at the moment…As [Syrian] tensions continue to grow over the coming days, further gains in gold are likely, with $1,450 an ounce being the next key level, followed by May’s highs around $1,487 an ounce.” (“Gold Back in Bull Market Territory,” WSJ, 8/28/13)

Gold breached the $1400 level on Thursday before ending the week at $1,397.50, down $1.30.  Silver prices fell slightly to close the week down $0.55, at $23.63.

Citibank: Gold To $3,500, Silver to $100

Citibank technical analyst Tom Fitzpatrick sees new records prices for gold and silver as the markets resume their bull run: “we believe we are back into that track where gold is the hard currency of choice, and we expect for this trend to accelerate going forward.  We still believe that in the next couple of years we will be looking at a gold price of around $3,500.  As the gold/silver ratio plummets near 30, this would also suggest a silver price above $100.” (“CITI:  Gold $3,500,” Business Insider, 8/28/13)

September Best Month for Gold

Reviewing gold’s historic performance, RBC analyst George Gero observed “gold has momentum on its side. Gold historically outperforms in September. Since 1990, September has been the best month of the year for gold, rising an average 2.7 percent. The psychological $1,400 area could also be a magnet for investors.” (“Gold rises amid Syria fears, September jitters,” CNBC, 8/27/13)

“Mother of all Gold Bull Markets” Will March to New Highs: Grandich

Financial analyst and editor of The Grandich Letter, Peter Grandich.wrote to investors about the recent volatility in the gold market and what he sees for the future of gold. “In recent days, gold and silver have hearten the faithful who saw their life’s pass in front of them just a few months ago during the plunge. At the time, people were knocking themselves over in print and on the airwaves, telling us the king of hard assets (gold) is dead. While this recent rally has made many of those who uttered “death to gold” crawl back under their rocks, some have hit a new low...and are trying to change history by claiming they foresaw this rally...As volatile as it has been for the last 12 years, I believe the next several months are going to be anything but dull for gold and silver...Simply put, those who purposely attacked the gold paper market in hopes of seeing mass quantities of physical gold come into the market for sale only to see the opposite happen, are going to be in “crisis” mode (if they aren’t already). Whatever hope they could still cling to will be loss if gold gets much above $1,550...Buckle up boys and girls. We’re not out of the woods yet as these folks are capable of anything. But like their failed assault in the paper market, so too shall whatever they have left as the “mother” of all gold bull markets marches to new, all-time highs in 2014 and beyond.” (“The Mother of all Gold Bull Markets Took One Hell of a Beating but Kept on Ticking,” The Grandich Letter, 8/28/13.)

Debt Ceiling Fight May Spur Higher Gold Prices

Treasury Secretary Jacob Lew reported the U.S will hit its newest debt ceiling of $16.7 trillion by mid-October. The Christian Science Monitor reported this week that the failure to raise the debt ceiling may result in debt default, downgrade of U.S. credit rating, delay in payments to millions of Americans including military salaries and Medicare payments,  and loss of consumer confidence. A fight between the President and Congress over the debt ceiling appears inevitable given the President’s current unwillingness to negotiate the debt ceiling: “Let me reiterate what our position is, and it is unequivocal: We will not negotiate with Republicans in Congress over Congress's responsibility to pay the bills that Congress has racked up – period,” White House spokesman Jay Carney said Monday. (“US Treasury to hit debt limit by October. What if pols can't reach a deal?” CSM, 8/27/13.)

The looming debt ceiling battles has led some analysts to forecast higher gold prices.  Phil Flynn, senior market strategist with Price Futures Group commented, “It’s another reason to push people to buy gold…Whenever you have uncertainty about the debt of a major economy like the U.S. – that they’re not going to pay their bills due to political grandstanding – it is another reason why people would move to the gold market.”

Howard Wen, precious metals analyst for HSBC, agreed: “As we approach the debt-ceiling limit in mid-October, and if there is an appearance that progress doesn’t seem to be there, we could see a piling of assets into gold.”

During the debt ceiling batter in September 2011, gold prices rose to the record high of $1,921. (“Debt Ceiling Starting To Reappear On Radar Screens of Gold Traders,” Kitco News, 8/27/13)

Three Noted Analysts See Higher Gold Prices

Richard Russell, writer/publisher of The Dow Theory Letters believes gold prices will rise above $1600 per year: “gold doesn't have to surge straight up to 1620, but by hook or crook, one way or another, I believe we'll see 1620 gold this year -- in 2013.” (“Richard’s Remarks,” Dow Theory Letters, 8/26/13)

Jim Rogers, CEO of Rogers Holdings, told Reuters this week, “I own oil, I own gold, I own things like that if there is going to be a war … they’re [going to] go much, much higher.”

Marc Faber, publisher of the Gloom Boom and Doom Report, commented, “looking at how debt will continue to increase and how central banks will continue their monetization not only in the U.S. but on a worldwide scale, I assume the price of gold will trend higher…most likely we’ve seen the lows below $1,200” and gold will eventually be over $1,921…I think that part of your assets should be held in physical gold.  I emphasize physical gold.”  (“Jim Rogers expects higher gold prices, and Marc Faber does too!” MarketWatch 8/29/13.)

Another Mint Reports Record Gold Sales

Lower gold prices helped spur records sales of gold coins at Austria’s Muenze Oesterreich AG mint for the first half of 2013. Sales from January to July rose 79 percent with the mint selling nearly as many gold coins in seven months as it did for all of 2012.  “As soon as the gold price went down, many individual buyers thought: ‘Now it’s the best time for us to get into the gold market,’” the mint’s marketing and sales director told Bloomberg. “As soon as there’s a movement in the gold price, people are interested in the gold market.” Bloomberg also reported a surge in gold coin sales in India, China, Australia, the U.S. and U.K. (“Austrian Mint Increases Gold Sales as Price Slump Spurs Demand,” Bloomberg, 8/28/13.)

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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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