Gold’s Succession of New Highs Despite Continuing Public Apathy

Gold

Gold and silver are higher again this morning with gold hitting new record nominal highs and silver having risen sharply to $20.995/oz which is a new multi-month high. A close above $21/oz will be important technically and a close above $21.24/oz would be very bullish technically with long term chart analysts looking at the 1980 record high (just below $50/oz) and the silver’s record quarterly high close of $32.20/oz as the next levels of technical resistance.

Gold is currently trading at $1,278.60/oz, €978.64 /oz, £816.66/oz.

While gold has risen to new record highs, sentiment remains lukewarm amongst the investment public with much of the mainstream press barely covering gold’s new all time record highs. Skepticism remains high with many market participants expecting a pullback here and indeed one is quite likely at $1,300/oz. However, gold could surprise to the upside and surprise the consensus opinion as it has a habit of doing.

Despite some sensationalist headlines of gold "surging" and of a new "gold rush", gold’s rise has been gradual and it is only up some 3% this week and some 3% this month. Gold is only up 16.5% year to date which corresponds with its average annual appreciation in the last 10 years. It is worth remembering that in the gold bull market of the 1970s when gold rose 24 fold – or by 2,300% – in 9 years. Gold rose 49.7% in 1972, 73.5% in 1973 and by 60.1% in 1974. In the final phase of the bull market in 1979, gold surged 140% in one year. Gold’s recent rise has been tame and gradual by comparison.

Another indication of the lack of animal spirits or irrational exuberance in the gold market is the recent decline in investor buying of gold (and silver) coins. This is clearly seen in the low bullion coin premiums which have fallen dramatically since late 2008 (see chart below). In the aftermath of the Lehman Brothers collapse and the ensuing crisis, premiums surged as investors and savers scrambled to buy bullion coins leading to rationing and shortages. There is nothing like that happening in the bullion markets today.

This apathy or lack of mania in the gold market is confirmed by our sales desk who are less busy now than they were in the aftermath of the Bear Stearns and Lehmans collapse and panics. Indeed, despite our extensive international media coverage this week inquiries and sales have remained steady but there is no element of the public "piling into" gold. Indeed, much of the buying is being done by existing clients, particularly wealthier clients adding to positions. This lack of bullishness is confirmed by official government mint bullion coin sales figures. Muenze Oesterreich AG, the Austrian mint that makes the Philharmonic coin, said gold coin and bar sales were 1.003 million ounces in the year through August, down 39 percent from same period last year. Demand declined from 1.637 million ounces in the eight months through August 2009.


 

Silver

Silver is currently trading at $20.83/oz, €15.95/oz and £13.33/oz.

Platinum Group Metals

Platinum is trading at $1,618.25/oz, palladium is at $546/oz and rhodium is at $2,050/oz.

Mark OByrne

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