CNBC conducted an Interview with Stephen Flood, director of Gold Investments, this morning. How High Can Gold Go? "Gold is doing exactly what it should do in this market: it is reacting to risk.
Gold Gold was down $1 to $944.70 per ounce in trading in New York on Friday but silver was up 10 cents to $18.00 per ounce. Gold rose close to new nominal record highs in early European trading ($951.90) and silver rose to new 27 year highs ($18.15). Last week gold was up by more than 4.5% (more than $40) as fears regarding burgeoning inflation and indeed stagflation began to permeate financial markets. Silver was even stronger and was up by 5% on the week. Gold remains near new record nominal highs in British pounds and euro. The London AM Fix at 1030 GMT this morning was at $947.50. Gold fixed near new record highs at £482.26 and €639.77.
And does it matter? The foundation of Modern Portfolio Theory was a 1952 paper, “Portfolio Selection” by Dr Harry Markowitz in which he established a theory explaining the best way for an investor to choose a portfolio. Modern Portfolio Theory is of such fundamental importance in investing that the economists that formulated the theory received the Nobel Prize in Economic Science in 1990. Asset allocation involves dividing an investment portfolio among different asset categories such as equities, commodities, fixed interest, cash, property and the process of establishing which mix of assets to use, is largely determined by investment objectives, time horizon and tolerance to risk.
Gold Gold rose $11.10 to $945.70 per ounce in trading in New York yesterday and silver was up 18 cents to $17.90 per ounce. Gold and silver have traded in a narrow range in Asian and early trading in Europe. Gold reached new record nominal highs at $952.75 and silver has surged over $18 per ounce to new 27 year highs at $18.06. Gold also surged to new record highs in British pounds and in euro. The London PM Fix at 1500 GMT yesterday afternoon was at $945. Gold fixed at new record highs at £482.76 and €641.20. Increasing fears of stagflation drove gold to new record highs (non inflation adjusted highs) in major currencies. Both the ECB and the Federal Reserve have lowered their growth estimates and the Fed has also increased its inflation forecast. The Philly Fed Index fell to its lowest level since 2001 and unemployment news was poor with the 4 week moving average of jobless claims rising 10,750 to 360,500. Meanwhile most commodities continued to rise with zinc and copper surging, leading the base metals higher. Equity markets in Asia and Europe are down and fears of a U.S. recession are sure to be to the fore. Despite the significant and growing inflation, markets have moved to fully price in a 0.50% rate cut at the next FOMC meeting in March. Central bankers are throwing in the towel in the fight against inflation in order to try and prevent a systemic crisis and a subsequent deep recession. The risk is that they let the inflation genie fully out of the bottle. Thereby wreaking havoc in the form of an inflationary spiral as was experienced in the 1970s (or worse in 1920s Germany which led to order-of-magnitude increases in prices and interest rates, redenomination of the currency and a wholesale consumer flight from cash to hard assets).
Max Keiser, the self-dubbed 'financial activist' and occasional reporter for Al-Jazeera's current affairs program People & Power, is given the youtube treatment with his prescient though irreverrent advice. 'Buy Gold!'
Gold Gold rose $7.80 to $934.60 per ounce in trading in New York yesterday and silver was up 22 cents to $17.72 per ounce. Gold and silver continued to rise in Asia and early trading in Europe and gold reached new record highs just below $950 at $949.60 per ounce and silver has surged over $18 per ounce. Gold also surged to new record highs in British pounds and in euro. The London PM Fix at 1500 GMT yesterday afternoon was at $920. Gold fixed at new record highs at £474.37 and €627.90. Gold has surged on increasing inflation concerns with yesterday's stronger than expected and sharply higher US CPI report. With the commodities complex continuing to surge and oil staying above $100 a barrel, inflation will continue to increase significantly in the U.S. and internationally. The Chinese reported inflation at an 11 year high at 7.1%. Central banks risk creating a very dangerous inflationary spiral should they continue trying to alleviate macroeconomic and systemic risk by lowering interest rates in what is a very inflationary environment.
Gold Gold surged $23.55 to $926.80 per ounce in trading in New York yesterday and silver surged 50 cents to $17.50 per ounce. Gold and silver have traded sideways in Asia and early trading in Europe. Gold also surged to new record highs in British pounds and in euro. The London PM Fix at 1500 GMT yesterday afternoon was at $925. Gold fixed at new record highs at £473.68 and €626.91. After seeing strength in Europe and Asia while the U.S. was out for Presidents Day, gold continued to strengthen on the U.S. markets return and gold surged on increasing inflation concerns with the commodities complex surging, oil rising above $100 a barrel again and the dollar, stocks and bonds falling. Economics 101 is that weak and declining supply conjoined with strong demand will result in higher prices. Finite natural resources, such as gold and platinum, are being chased by a fastly growing money supply internationally and by fastly growing global population in terms of demographics and wealth. Analysts have continually expected a correction in the gold price in recent months and this has not materialised. Platinum has now hit new record highs for 14 days in a row and this shows how markets, including commodity markets, can often surprise, both to the downside, and to the upside.
Gold Markets were closed in New York yesterday and the action centred on London where gold sold off initially and tested support at $900 prior to rallying strongly and this strength has continued in Asian trading with gold rising above $910 per ounce. Silver traded similarly, testing support just below $17 and then bouncing; in Asian trading silver has risen above $17.20 per ounce. Commodities Surge and Burgeoning Inflation With commodity markets surging internationally, gold is very well supported and looks to be consolidating prior to challenging the recent highs and targetting $1,000 in the coming weeks. Oil is back above $96, wheat is up 90% in the last 6 weeks and the entire complex of base metals and soft commodities are showing strong gains. The rise in prices of commodities will take a few weeks to feed into the supply chain, affect the already embattled consumer and be reflected in inflation statistics. This is obviously very inflationary especially with the Federal Reserve expected to continue cutting interest rates and negative real interest rates in an increasingly stagflationary environment. Money supply growth in the U.S. continues to surge and the reconstituted U.S. money supply (M3) figures show a very inflationary 18% growth. Supply of Gold Decreasing Internationally Meanwhile supply continues to decline and the situation and outlook in South Africa continues to deteriorate and is seriously affecting the supply of gold and particularly platinum. South Africa and indeed most of the major gold producing countries are experiencing a decline in gold production. Indeed China is the only major gold producer in the world to have increased production last year.
Gold Gold was down $4.80 to $902.80 per ounce in trading in New York on Friday and silver was down 12 cents to $17.10 per ounce. Gold has traded sideways to slightly up in Asia and early trading in Europe. Gold rose in British pounds and fell in euro. The London AM Fix at 1030 GMT this morning was at $905 (down from $909.75). Gold fixed at £464.03 (up from £463.97) and €618.51 (down from €619.76). With U.S. markets closed, gold would be expected to have a quite day but recent volatility may continue especially with the deteriorating situation in South Africa seriously affecting the supply of gold and particularly platinum. Despite Bernanke’s poor outlook for the U.S. economy and the poor economic data (Michigan consumer sentiment fell to its lowest since 1992) last week, the dollar is up this morning. However, the dollar’s recent strength is likely to be short lived and the dollar is likely to weaken materially in the medium to long term in the coming weeks and months.
What's the Outlook for Gold, Silver? Gold has been one of the best performers of late, trading above $700 per troy ounce.
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