GoldCore Update – Gold Versus Global Foreign Exchange Reserves (1980: $0.5 Trillion; 2009 $7 Trillion)

Gold
Gold is currently trading at $1,048.10/oz. In euro and GBP terms gold is trading at €703/oz and £640/oz. Support for gold is currently seen at $1,034/oz and resistance is at $1,054/oz. Gold took a much needed breather yesterday and fell some 1%.

The correction was much expected as gold had become overbought in the short term and profit taking, correction and consolidation is the natural order of things. Given the extent of the move up in the last three weeks ($70 or some 7% in 3 weeks), gold was due a correction and from a technical basis could be expected to fall back to previous resistance around the $1,030/oz level.

Physical demand in India was very robust yesterday with dealers and jewelers reporting very strong demand. Yesterday was Dhanteras, the most auspicious day in the year for buying gold, according to Indian tradition. This and the healthy premiums that gold has commanded in India recent days bodes well for the Diwali festival this Sunday and the rest of the Indian festival season (gold premiums in Vietnam are also very high). India has not been buying for some months now and dealers may be forced to stock up. This Indian demand is likely to put a strong floor under the market at $1,000/oz.

With the international monetary system itself being questioned and the dollar’s reserve status increasingly uncertain, any pullback looks likely to be short and shallow. It must be remembered that gold’s nominal record in 1980 of $850/oz was reached while interest rates were nearly double digits and global foreign exchange reserves were miniscule compared to today (some 14 times less – see charts from FT below). Today there is a huge global liquidity glut, zero percent interest rates and governments pursuing extremely expansionary fiscal policies. Yields on government bonds are being kept artificially low through government debt monetisation (printing money to buy their own bonds). This bodes very well for gold’s (and particularly for the much smaller silver market’s) continuing rise in the coming years.

Silver
Silver is trading at $17.30/oz. In euro and GBP terms silver is trading at €11.62/oz and £10.56/oz.

Platinum Group Metals
Platinum is trading at $1,339/oz while rhodium and palladium are trading at $1,700/oz and $318/oz respectively.

 

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Stephen Flood

Stephen Flood is the CEO of GoldCore. He is a former Wall Street equity trader and FinTech expert. He has been involved in the precious metals markets since 2004 and has appeared as an expert contributor on CNBC, CNN, BBC, RTE & Bloomberg TV and has had articles published in the Irish Times, Irish Independent and The Sunday Business Post.

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