10 Charts Pointing To Higher Gold Prices In 2014 And Beyond ...

10 <b>Charts</b> Pointing To Higher <b>Gold Prices</b> In 2014 And Beyond <b>...</b>

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• 10 <b>Charts</b> Pointing To Higher <b>Gold Prices</b> In 2014 And Beyond <b>...</b>
• <b>Gold Price</b> Decisive Breakout, Precious Metals Major Uptrend :: The <b>...</b>
• Why <b>Gold</b> Isn&#39;t A Perfect Inflation Hedging Tool | <b>Gold</b> Silver Worlds
• Don&#39;t Be Fooled By <b>Gold Price</b> Action [SPDR Gold Trust (ETF <b>...</b>

10 <b>Charts</b> Pointing To Higher <b>Gold Prices</b> In 2014 And Beyond <b>...</b> Posted: 17 Feb 2014 02:59 PM PST In this article we look at gold from different angles: the money supply, the physical gold market and technical gold indicators. Ten long term charts point to a healty condition in the gold market amid the price drop of 2013. We have always advocated to look at gold in a holistic way; the following charts offer a wide perspective. The charts were created and presented by Frank Holmes (USFunds.com) during the recent World Money Show. Monetary conditions In the first month of 2014, the M2 money supply, which is a measure of money supply that includes cash, savings and checking deposits, grew faster than the previous two years. In 2012, M2 grew 7.6 percent and in 2013, money supply rose 4.7 percent; at an annualized rate, January's money supply growth "reached an annualized rate of increase of 8.75 percent," according to Bloomberg's Precious Metal Mining team. This may mean "the U.S. Federal Reserve is trying to resurrect inflation, thus increasing the appeal of gold, the supply of which can only increase about 1.5 percent to 2.5 percent annually," says Bloomberg. The first two charts show the historic correlation between the money supply and the price of gold. The global money supply has clearly driven gold prices, although 2013 was the year in which a significant disconnect occurred. The odds favor an upward revision of the gold price, re-establishing the long term correlation. As Jim Rickards argues in his book, the price of gold would be well above $3,000 if there was some sort of tie between gold and the money supply. Jim Rickards still expects that the central banks will be forced by market forces to re-establish a tie with gold at some point in the future. Physical gold market 2013 was the year of a massive liquidation in physical metal backing gold ETF's. The following chart presents the exceptional outflow of gold out of primarily the GLD . The key question, in our opinion, is not the outlfow, but what happened with that gold. The most common answer is that it went East. Is this positive or negative for gold? We believe it's extremely positive, because the metal is now in strong hands which will keep it for several years or decades. The key point in all this is that much less physical gold will be available once the Western investment demand will pick up again, leading to a potential shortage in the gold market. The East loves gold. The explosive demand for gold in China is supported by an increase in incomes, a trend that is significantly different compared to the West. This trends favors the affordability of the yellow metal among the biggest gold consumer in the world. China's investment and jewelry demand has exploded in the last two years. The lower the price of gold went, the higher the demand for the metal. The following chart present an interesting insight: the average grams of gold consumed per inhabitant. Simple math learns that additional 0.1 gram of gold per capita results in an additional 130 tonnes gold demand (which is 5% of the current gold year supply). Technical picture From a technical point of view, gold is extremely oversold. Any historic measure shows that the current situation is extreme. One of those measures is the gold oscillator, measuring year-on-year change. A correction to the mean is long overdue. The successful retest of the June 2013 bottom is a very powerful technical signal. A short squeeze could be an important technical driver to drive short term gold prices. The chart shows how the gold price tends to rise with extreme short positions by COMEX speculators (non-commercials). What is tremendously powerful for gold stock investors is this chart: in the last 3 decades, there were only 3 times that gold stocks only saw a consecutive 3-year loss. Full presentation

<b>Gold Price</b> Decisive Breakout, Precious Metals Major Uptrend :: The <b>...</b> Posted: 16 Feb 2014 06:29 PM PST Commodities / Gold and Silver 2014 Feb 17, 2014 - 03:29 AM GMT By: Clive_Maund Gold broke out decisively last week from its downtrend dating back to last August, a development that was confirmed by a dramatic high volume breakout by silver on Friday. On its 8-month chart we can see that gold broke out both from its downtrend and also from a Head-and-Shoulders bottom. It even managed to close above its 200-day moving average on Friday, although the fact that this average is still falling coupled with an overbought reading on its RSI indicator may lead to gold consolidating a little before it makes further gains. Overall though this is a very positive picture, with a clear breakout, and a now rising 50-day moving average that will lead to a bullish moving average cross if gold can hold its gains made so far or if it advances further. The 14-year log chart for gold makes it clear why gold has turned up here - it has found support and reversed exactly at its major long-term uptrend line. On this chart gold's decline from its 2011 highs looks like a normal correction, if rather long and deep. The most encouraging thing about this chart for bulls is that it shows gold's massive upside potential from here, for if gold should succeed in bettering its highs and continues towards the upper boundary of its major long-term uptrend, it will result in it rising to the $3000 - $4000, which is not unreasonable considering what is being done to the world's major currencies, and specifically to the dollar. The 20-year arithmetic chart also presents a fascinating picture as it shows gold reversing to the upside from its long-term parabolic uptrend, which most importantly has not failed to date, and which projects a gold moonshot, if it can stay above the parabola and break above earlier highs. Gold firming up kind of implies that the outlook for the dollar is not too bright, so let's look at the dollar chart now in an effort to figure out the outlook for this crucial determinant of the gold price. On its 3-year chart we can see that the outlook for the dollar index looks increasingly grim. The potential Ascending Triangle in the dollar failed last week, with it breaking below an important uptrend line better seen on short-term charts, and this was doubtless a factor playing an important part in gold and silver breaking out. Gold and silver appear to be "scenting blood" with respect to the dollar and may be anticipating the Distribution Dome shown on our chart pressing down on the dollar to the extent that it crashes the important support also shown, leading to its dropping back to the next important support level in the 73 - 74 area. This would be a big drop by the dollar that would have serious global ramifications. The latest COT charts for gold continue to show a bullish setup, with the Commercials still having a historically low short position, the Large Specs a low long position, and the Small Specs are out, having been destroyed by the long reaction from 2011 (the Large Specs are able to bounce back more easily, because it's usually other peoples' money that they are losing). Public Opinion on gold is starting to pick up from a low level, but it is still at a fairly low level, so gold has a long way to go before interest in it rises to levels that would cause concern. Those indefatigable contrarian indicators, the Rydex traders, still have a very low stake in the Precious Metals sector, which is of course very bullish. When their holdings reach high levels it's time to start looking for the exits, and we are clearly a long, long way from that situation. The latest long-term 14-year chart for the HUI index looks good, with it turning up and breaking above its 200-day moving average. This is a valuable chart because it shows us that PM stocks still have a huge amount of ground to make up to make good the losses of the past couple of years, and with gold and silver now embarking on what should prove to be significant uptrends, that is precisely what stocks look set to do, and it also follows that should gold and silver eventually go on to break out to new highs and continue upwards to the tops of their respective major uptrend channels, then stocks indices too should break out to new highs, which would be a development that could lead to spectacular gains. The 5-year chart for the Market Vectors Junior Gold Miners ETF, code GDXJ, is most interesting. To the casual observer it looks like this is vulnerable to immediate reversal and decline, as it has just arrived at the top of its major downtrend channel, but the volume pattern is telling a very different story. Volume on the rally out of the December lows was HUGE, at record levels, and it was even greater on the 2nd upleg this month, and it has driven volume indicators sharply higher. This huge record upside volume is a clear sign that a trend change is underway, and thus that breakout from the downtrend is to be expected soon. We would therefore not expect to see anything more than a minor reaction back from this downtrend line - if that. The conclusion to all this is that a major Precious Metals sector uptrend began last week, and that this is the time to buy right across the sector, if you not already done so. This buying may include gold itself, gold ETFs, and a wide range of better gold stocks from large caps through mid-caps to juniors, but taking care to avoid the stocks of dodgy companies with huge debts and/or excessive number of shares in issue - common sense is what counts here. Speculators may want to leverage gains by means of Call options. We will continue to highlight the better ETFs and stocks on the site going forward. By Clive Maund CliveMaund.com For billing & subscription questions: subscriptions@clivemaund.com © 2013 Clive Maund - The above represents the opinion and analysis of Mr. Maund, based on data available to him, at the time of writing. Mr. Maunds opinions are his own, and are not a recommendation or an offer to buy or sell securities. No responsibility can be accepted for losses that may result as a consequence of trading on the basis of this analysis. Mr. Maund is an independent analyst who receives no compensation of any kind from any groups, individuals or corporations mentioned in his reports. As trading and investing in any financial markets may involve serious risk of loss, Mr. Maund recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction and do your own due diligence and research when making any kind of a transaction with financial ramifications. © 2005-2014 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication. Only logged in users are allowed to post comments. Register/ Log in

Why <b>Gold</b> Isn&#39;t A Perfect Inflation Hedging Tool | <b>Gold</b> Silver Worlds Posted: 17 Feb 2014 01:31 PM PST It's no news that inflation is one of the biggest retirement risks. There is a school of though that allocating a portion your self-directed IRA to precious metals – like gold or its stocks – could help hedge against inflation. In fact, with buzzes going around that inflation is around the corner, gold IRA rollover is becoming increasingly popular. But, in reality, gold isn't the ultimate inflation-hedging tool it's being made to be. Here is why. Inflation isn't what dictates the price of gold The idea of using gold or its derivatives to hedge against inflation is rooted in the fact that the price of the commodity gold often move counter to the value of the US dollar. Therefore, if inflation, which reduces the dollar value, sets in, it's expected that the price of gold would rise. However, just like any other thing in any market, the law of demand and supply is what dictates the price of gold. According to the data provided by Statista regarding the global demand for gold, there are three categories of demand for gold. They are demand for gold: for the jewelry market, for the technology world and for investment purpose. The demand from the jewelry market has consistently accounted for about one-third of the total demand for gold. Thus, logically, it is expected that this category of demand should have more influence on the price of gold. But, instead, it's the demand for gold investment that has more influence on the price of gold. Now, since demand for gold investment usually increases during inflationary periods, gold usually performs well. The bad thing is that most people have been led to believe that inflation dictates the price of gold. History has flawed this logic repeatedly. The chart below from CPM Group (found on Kitco.com) explains this better. As seen in the chart above, since 1969, there has been a percentage increase in the price of gold whenever its investment demand increases. A look at the performance of gold in US inflationary periods shows a bit of correlation, but it doesn't give a definite conclusion that gold performs well during inflation. In the last hundred years, the United States has seen two major inflationary periods. The first was in the 1940s, while the second occurred in the 1970s. At the start of 1940, inflation rate in the US was near zero percent (source). In 1947, inflation rate rose above the 14% mark and then the cycle ended at around 1950. To justify the case that gold performs during inflation, the price of gold also rose to a decade-high annual closing price of $43 in 1947. However, the 1970s inflationary cycle shows some divergence from the positive gold-inflation logic. While gold seemed to perform well during this cycle, the periods when gold rose were more directly related to periods of increased investment demands than when inflation was at its peak. In 1975 and 1976, the demand for gold investment plunged and as a result, the annual closing price of gold fell during the two years. One thing that even flaws the positive gold-inflation logic is that inflation rate was at a five-year peak of around 11% during the period between 1975 and 1976, when price of gold plunged. This tells us that the act of investing in gold during inflation has been around for a long time. However, inflation isn't what makes gold perform; an increased demand for gold investment is what does. And as shown over last decade, when inflation rate has been relatively flat, increased demand for gold investment has been the main driver of the gold price surge. Therefore, if the demand for gold investment doesn't rise during an inflationary period, there is no guarantee that gold would be perfect for hedging inflation. Gold stocks also perform similar to gold investment demands A look at the collective performance of gold stocks also shows a correlation with gold investment demands. Let's consider the NYSE ARCA GOLD BUGS INDEX (NYSE: ^HUI). We're considering this index because it gives a broader view of miners' performance. Moreover, the mining industry is used to mergers, making it daunting to discuss performances of some individual companies accurately. For clarity sake, the HUI index takes into record the performances of big miners like Goldcorp (NYSE: GG), Barrick Gold (NYSE: ABX) and Newmont Mining (NYSE: NEM). There isn't information available for a hundred years, but we can make sense out of the little we have. If you'd compare the above chart to the gold investment demand chart from earlier, you'd find that the index performs well whenever the demand for gold investment rises – and vice-versa. On the other hand, when the index is compared to inflation rate in the chart below, you'd find that there is no particular trend. In fact, during the period between 2001 and 2002, when inflation rate dropped, the index was on its way up – a period during which demand for gold investment rose. Although, during the period between 1997 and 1998, the index dropped as inflation rate dipped, nothing can be concluded from this since it was a period during which demand for gold investment dipped as well. Conclusion From above, we've seen that the price of gold isn't entirely dependent on inflation rate. As such, whenever you choose to invest in gold or its stocks, you shouldn't do it with the sole intention of hedging your retirement savings against inflation. With more people becoming increasingly aware of this truth, increase in investment demand for gold might not accompany the next inflationary cycle – as history has shown us – which could diminish the value of gold. The bottom line is investing in gold is a great way to diversify your portfolio – nothing more. About the author: Craig Adeyanju is passionate about writing about financial topics and investing. He has been a contributor on sites like Fool.com and SeekingAlpha.com. His goal is to provide real world retirement investing opportunities for baby boomers and early retirees. You can connect with him on Twitter and Google plus.

Don&#39;t Be Fooled By <b>Gold Price</b> Action [SPDR Gold Trust (ETF <b>...</b> Posted: 14 Feb 2014 07:19 AM PST Gold prices are getting closer to 1,300 USD an ounce each day in spite of the Fed tapering. As I have written before (here), gold prices are driven by two major factors: real interest rates (the difference between nominal yields and expected inflation) which encompass the inflation hedge property and the opportunity cost of holding gold, and the US dollar. The link with the VIX is very loose on the contrary. At first glance, gold prices are in sync with the direction suggested by real interest rates (see chart below). The correlation between gold and the US dollar remains negative (after a blip in positive territory in early 2014). As the USD has drifted upward since the beginning of the year, this move should have partially curbed the rise of the yellow metal. So gold prices are once again driven mostly by US real yields. The question is where could those rates be heading? On the nominal front, UST yields are closely following the US news flow, not the jitters on emerging markets. I would not rule out a fall down to the 2.55% area in the short run (even 2.46%), especially since Yellen proved rather dovish on forthcoming rate hikes. Regarding tapering though, the word "significant" is strong enough for me to rule out any change in the tapering stance barring a dire negative strong shock on growth. Therefore, given my nominal growth forecast for US GDP growth in 2014, I would clearly lean toward UST yields around 3.25% at year-end. Interestingly enough, and contrary to the normal relationship, the US 10-year inflation breakeven disconnected in late 2013 from nominal yields, first falling when nominal yields went up and then moving up while nominal yields were receding - a move that accentuated the downward trend in real yield and sustained the rise in gold. A look at the chart below shows that the disconnect between the Fed inflation target (PCE deflator) and expected inflation is historically wide. It shows the success of the Fed in steering and anchoring long-term inflation expectations, but it would nonetheless suggest a slightly lower inflation breakeven rate in the near future. Said differently, inflation expectations (or its proxy here, inflation breakeven) should fall in the near future, bringing upward pressure on real yields, hence a negative pressure on gold prices. Bottom Line: in the short run, barring any improvement in the news flow, US Treasuries nominal yields have some room to fall a little more. Given the stickiness of inflation expectations, real yield could fall sufficiently for gold prices to rise a little further. I see the 1,400 area as an upper limit (see chart below). Yet, given the current disconnect of inflation expectations and the PCE deflator trend, it would be very challenging to expect real yields to breach the zero threshold as inflation expectations will have to adjust on the downside any time soon. As a result gold may go up slightly above the 1,300 threshold, but any further rise would be challenging as the odds for much lower real yields are very low: tapering + GDP growth + disconnect between inflation B/E and observed inflation. Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...)

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