Gold Investments Market Update – As January Goes So Goes 2009?

Gold continues to consolidate near recent highs despite profit taking falls. It remains near record highs in British pounds, euro (03-Feb-09 London AM Fix: $902.00, £636.02, €702.93 – http://www.lbma.org.uk/?area=stats&page=gold/2009dailygold ) and many other currencies internationally as fiat currencies come under pressure due to the unprecedented zero percent interest rates, quantitative easing, bailouts and stimulus packages.

Increasing fears of protectionism from the Obama White House may lead to the dollar coming under renewed pressure and see gold prices rise above $1,000/oz early in 2009.

The EU, Canada and others have warned that the “Buy American” clause in the US economic recovery package could promote protectionism. This will not be liked by the US’ many very large creditors – especially the Chinese. They currently only have 1% of their currency reserves in gold and are on record saying they are going to diversify into gold. It is likely they have been nibbling in the gold market for some months but their buying may become more robust in the coming months as they are understandably concerned about the value of their dollar denominated government debt.

The old market adage as January goes so goes the year bodes ill for stock markets this year. Stock markets in the US had the worst January ever with the Dow Jones and the S&P 500 down by some 8%. Gold, after falling in the first few days of January, rallied from $806/oz to over $900/oz and ended the month up by 2%. Silver surged by over 8.6% in January ($11.38/oz $12.36/oz) – see Performance Table.

The US bond market began to come under serious pressure in January and this does not augur well for US bond markets and the dollar in the coming months. The US 10 year bond fell sharply in price and saw yields rise sharply from 2.087% at the end of December to over 2.84% on January 30th. It could be that the so called bond vigilantes are finally waking up to the fact that government bonds and currencies are being debased as never before. Bonds remain near all time record yields and remain one of the largest bubbles in the world. Especially with Bernanke saying that they will monetize the debt and print money to buy their own bonds. This will not please creditors of the world’s largest debtor nation.


Non Inflation Adjusted Gold Chart 1971-2009

It is important to remember that gold is correlated with US interest rates (see strong correlation since 1971 in charts below) meaning that when interest rates are very low for a period this tends to create inflationary pressures necessitating higher interest rates as was seen in the 1970s. As interest rates move up (and bonds fall in value), gold moves up as well as it takes many months for interest rate changes to have the desired effect and wrong inflation out of the system. Thus in the 1970s, interest rates had to rise to 14% in early 1980 before investors and savers were incentivised to start holding US government bonds and deposits again.

This is likely to happen again and the gold bull market is only concievable to end when deposits and bond markets offer an attractive yield in order to incentivise savers and investors to hold these assets again. Especially in the light of the unprecedented counter party and systemic risk confronting us today.


Mark O'Byrne

Also on news-goldcore-com

Videos

This Little Known Indicator Says Gold Is Still Set For A Major Rally In 2022

David Hunter Stock Market Prediction – DOW 45,000 In 2022

Physical Gold and Silver – Essential for what’s coming – Lobo Tiggre

Blog posts

Is Gold Starting to Behave Itself?

Gold is doing what it is supposed to do!  Equity markets are tumbling, “NASDAQ 100 Rout Erases $1.5 Trillion in Market Value in 3 Days” reads one Bloomberg headline. The big names such as Apple lost over US$225 billion, Microsoft almost US$200 billion, Amazon and Tesla each lost US$175 billion market value over the three […]

READ MORE

This Little Known Indicator Says Gold Is Still Set For A Major Rally In 2022

If you’ve been looking at the gold and silver prices lately and wondering when the broad-based asset sell-off will take the pressure off, then you will enjoy this week’s offering on GoldCore TV. This week David Russell has been speaking to Patrick Karim of NorthStarBadCharts.com, the website that provides technical analysis for the inspired. Patrick […]

READ MORE

The Fed is all set to battle inflation – Really??

“I think he was…the greatest economic public servant of the era.’ It’s common knowledge that Paul Volcker is a professional hero of Fed Chair Jerome Powell. As inflation in the US climbs, the head of the reserve is working hard to channel some of his hero, but not so much to cause alarm. Unsurprisingly gold […]

READ MORE

Featured

Rick Rule- Should You Invest In Gold 2022

READ MORE

Jim Rogers- The Worst Bear Market is Coming

READ MORE
Newsletter
Category
Archives
Popular

No posts available

Videos

This Little Known Indicator Says Gold Is Still Set For A Major Rally In 2022

David Hunter Stock Market Prediction – DOW 45,000 In 2022

Physical Gold and Silver – Essential for what’s coming – Lobo Tiggre

Blog posts

Is Gold Starting to Behave Itself?

Gold is doing what it is supposed to do!  Equity markets are tumbling, “NASDAQ 100 Rout Erases $1.5 Trillion in Market Value in 3 Days” reads one Bloomberg headline. The big names such as Apple lost over US$225 billion, Microsoft almost US$200 billion, Amazon and Tesla each lost US$175 billion market value over the three […]

READ MORE

This Little Known Indicator Says Gold Is Still Set For A Major Rally In 2022

If you’ve been looking at the gold and silver prices lately and wondering when the broad-based asset sell-off will take the pressure off, then you will enjoy this week’s offering on GoldCore TV. This week David Russell has been speaking to Patrick Karim of NorthStarBadCharts.com, the website that provides technical analysis for the inspired. Patrick […]

READ MORE

The Fed is all set to battle inflation – Really??

“I think he was…the greatest economic public servant of the era.’ It’s common knowledge that Paul Volcker is a professional hero of Fed Chair Jerome Powell. As inflation in the US climbs, the head of the reserve is working hard to channel some of his hero, but not so much to cause alarm. Unsurprisingly gold […]

READ MORE

Featured

Rick Rule- Should You Invest In Gold 2022

READ MORE

Jim Rogers- The Worst Bear Market is Coming

READ MORE