Gold will soon target $2400/oz: Citi Bank

NEW YORK (Commodity Online):  Gold  prices will target $2400/oz in a snap back rally as the current sell-off is overdone, says Citi Bank analyst Tim Fitzpatrick. He however cautions that prices could fall to $1550 before resuming its upside move.

" Unless and until we see a weekly close below $1,535, we believe the uptrend in Gold has resumed and a move to $2,400 throughout the course of this year is on the card”, he states in a research report.

Continuing weakness in the global economy and tensions in Iran, with a potential war in the Middle East brimming, could create a sustained momentum in  Gold  prices.

Earlier, Bridgewater also echoed a bullish sentiment in gold for 2012 by saying that they are positioned long gold for the year. Bridgewater is the largest Hedge Fund in the world with assets worth $125 billion.




 

 

 

Dow/Gold ratio suggest a mega bull rally in gold is coming

For  Gold  to rise to levels significantly higher than the recent high of $1,920, a new impetus is needed. Without additional energy from such an impetus, gold could just trade sideways for a very long time, or even fall further.  See the chart below.

There is only so much value in the world economy, and it is split between all the different instruments (like gold, silver, stocks bonds, etc.) where value resides.

For gold (and silver) to rise significantly, relative to other instruments of value, value will have to be diverted away from those other competing instruments. The printing of more money does benefit gold, but it does not necessarily benefit gold more than other assets-such as commodities, for example.

Historically gold has made its significant gains, relative to other assets (as well as nominally), not during inflation, but during deflation  (Note: I am using the terms inflation and deflation very loosely in this case). These significant gold rallies historically occur when value flees instruments such as stocks and certain commodities.

Since the 1920s there have been three major gold rallies (1930s, 1970s and the current rally). Below is a Dow Jones Industrial Average chart (from stockcharts.com) from 1900 to today.

I have indicated in the chart the periods where a gold rally occurred. During the 1930s there was one big rally (increase based on the real price of gold - data from minefund.com) from about 1931 to 1934. During the 1970s there were two rallies, and I have also indicated two rallies since 2001.

All three major gold rallies came after a significant top in the Dow and the Dow/Gold ratio (1929, 1966 and 1999). A great portion of the 1930s and 1970s rallies occurred when the Dow was falling significantly. In fact, the biggest rise in the  Gold  price occurred when the Dow was falling or was trading closer to the bottom of its trading range during that period.

The 1932 bottom in the Dow came during the 1930s gold rally indicated. Also, the top in the price of gold came when the Dow was trading closer to the 41.22 low in the Dow than to the 381.17 high.

The 1974 bottom in the Dow came during the 1970s gold rally indicated. Also, the top in the first of the two gold rallies of the 1970s came at about the low in the Dow in 1974.

From the above it is clear that the  Dow was weak and/or falling when gold had its best rallies. In other words, much value was diverted from the Dow and related instruments to gold during these periods. A weak and/or falling Dow (or what it represents) was an impetus for the massive increase in the gold price during these rallies.

The current gold rally (since 2001) has mostly been during the time when the Dow has also been rising, with the exception of a short period in both 2002 and the end of 2008 to Feb 2009. The best of the current gold rally, since 2001, has been during a time when the Dow was rising as well. Therefore, based on the evidence from the 1930s and 1970s gold rallies,  I believe the current gold rally has not yet had its best period - it is still to come. My current fundamental and fractal analysis of the Dow and gold supports this view.

The Dow is currently trading close to its all-time high, and it is my opinion that  gold will step into the next phase of this bull market when the Dow starts to fall. A falling Dow, with weak economic conditions, will be the impetus for the next massive rally in gold, just like it was in previous bull markets. A falling and/or weak Dow will in some way represent the diverting of value from stocks to gold.


Source:  hubertmoolman

 

 

 

World Gold Council: Gold will beat 2011 returns, weak Rupee may affect Indian demand

NEW YORK (Commodity Online):  Gold  will not only give positive returns in 2012, it will actually perform better than its 2011 gains, says Marcus Grubb, Managing Director of Investment Research at the World Gold Council (WGC).

Speaking in a Bloomberg interview, Marcus said that central bank purchases of gold are more stronger than ever while pointing out that major buying is coming from the Far East nations and Latin America – regions who have low reserves in gold and are looking to diversify from the US Dollar and the Euro so as to balance their reserves.

Marcus goes on to add that India accounted for nearly 1000 tonnes of the 4000 tonne global  Gold  market and the weakness of the rupee may have affected Indian imports since gold became more expensive. Going into 2012, gold will have to face this rising risk.

Earlier, it was reported that the WGC is planning to tie up with 5 more micro-finance institutions by March in a bid to push gold-linked micro finance scheme deeper.


 

 

'Silver to hit $50 sooner than you think'

Could gold repeat another double digit rise in 2012?

By Debbie Carlson
Like a prizefighter who has taken a few upper cut blows,  Goldmight be a bit woozy, but the metal’s longer-term uptrend is hardly on the ropes. As in many financial sectors, gold’s price direction has been guided by headlines, particularly out of Europe on the sovereign debt situation, and the volatility caused by swiftly changing news has made many markets a bit punch-drunk.

The December price break for gold came as several events aligned. First, the market was never able to retest its all-time nominal high in August of $1,923.70 an ounce. Second, gold was one of the few star performers this year and when equity and other markets soured, money managers needed to raise cash to meet margin calls and shore up positions elsewhere. Third, with investors spooked by the continued inability for eurozone leaders to convincingly shore up their union, these investors sought safety in the most liquid vehicle available – cash – again pulling profits from gold.

Gold might be down about 16% from the August highs, but it’s still up roughly 14% from the 2010 settlement of $1,421.40, basis the nearby futures, which still makes it one of the best performers this year.

The yellow metal may be in a consolidation mode for the time being, resting and building a base to rally again, just like that prizefighter whose corner man keeps him in shape to go the distance.

Market watchers said the structural strength for gold remains intact, with most Western nations’ global interest rate policies falling or near zero, which makes the opportunity cost of holding gold negligible. The sovereign debt crisis in Europe still makes people nervous about holding fiat currencies. With the amount of liquidity floating around from quantitative easing programs from central banks like the Federal Reserve, fears that when the global economy starts to show decent growth again it will be difficult to rein in that stimulus.

Mark Leibovit, editor the VRTrader newsletter, said he remains overall bullish, but concedes the washout gold experienced in early December has done damage to technical charts.

“We might hit bottom in a month or so. How far it might go depends on how the technicals unfold. Short-term it’s held the September lows of $1,531. But we have to see it perform in both time and price to confirm it. What might it take do so? We’d need to see the equity market improve, Europe improve, and maybe a QE3,” he said, referring to a possible third quantitative easing by the Federal Reserve.

Leibovit said it’s possible that gold prices could have further room to fall, especially if a scenario unfolds like what happened following the bankruptcy of Lehman Brothers in September 2008. Price were already in a downdraft prior to the Lehman news, but a month later gold fell as far as $681, basis a front-month continuation futures chart.

This could happen if gold prices take out the $1,531 level, he said. In 2008 there was a 34% correction for gold. Based on that calculation, prices could drop to $1,270, Leibovit said.

Gold rebounded after the trip to sub-$700, but he pointed out that it still took about six months to confirm the bottom.

“We could see gold’s bottoming take anywhere from two to 12 months. But the bull market is still intact we’ve seen these moves before. I think longer term $3,000 or $4,000 gold is possible in an inflationary environment,” he said.
BNP Paribas, which updated its precious metals forecast for 2012 on Dec. 20 to reflect the recent selloff, downgraded its outlook for gold prices by $250 an ounce to $1,775. The bank says “with high uncertainty likely to remain a major feature of the markets,  Gold  could be vulnerable to further episodes of price correction.” However, they do not believe the bull market is over and are “still positive towards the gold price in 2012 and 2013.”

Sterling Smith, commodity trading adviser and senior market analyst at Country Hedging, said gold is putting in a bottom now, but said it will likely trade “sideways” for a while. The fundamentals for gold have not changed, he said.

“The EU problems will  Lead  to some QE there and here maybe more mortgage-backed securities buys (by the Federal Reserve). If that happens, then it will help gold rise. Gold is still an asset central bank buying will push it higher. Look six to nine months down the line and we can see gold back at $2,000,” he said.

While gold might benefit from any safe-haven buys at these lower price levels, the worries about Europe moving into a recession could cause the metal to be trapped in a tug-of-war, said Bob Siegel, president Cabot Capital Group, a money management firm.

“I see it range bound because it’s struggling to compete with the huge global concern that is the EU and the dampening effect on commodities. If it gets to be a depression (in Europe) it could get out of hand. Gold in the end is the ultimate store of value, though it is not as strong as some think it should be,” he said.

Gold is plagued by competing influences. The EU woes supports gold, but investors who seek liquidity pressure the metal, he said.

Could gold repeat another double digit rise in 2012?
In a word: sure. But much depends on the strength of the dollar, physical demand out of Asia and any new crises that may develop.

The forecast for gold to return to seeing a “two” as the front number in 2012 is shared by several investment banks. Morgan Stanley, TD Securities, Bank of America-Merrill Lynch and SEB Merchant Banking are among some of the banks who see gold either averaging above $2,000 or at least trading to that level at some time during next year.

Based on gold prices around $1,600, a move to $2,000 would be about a 23% rise.

Leibovit said he sees inflation coming down the road, the question is, “when does it kick in?” Gold could continue to weaken into January, but he said gold investors need to consider a longer term view than six months or even a year. They should be taking at least a three to five year perspective.

Tom Winmill, portfolio manager of the Midas Fund, said there’s a good chance for gold to see another strong year.

“It’s very possible that it can be very strong year after year after year. We think the key component to gold is that it’s denominated in dollars. How high it can go will be dependent on how much money is created. With the two QEs, $2.2 trillion was created. There will be more money created down the road…. We (the U.S.) will be adding more money because we are borrowing. The borrowing represents the future creation of new money,” he said.
For 2012, Winmill is forecasting $1,950 by the end of the year, with a high of $2,200 and a low of $1,650.


The low interest rate environment is important to the gold outlook, Winmill said. “You can’t view rates in a vacuum – at Midas we view inflation rate next to the real yield…. The two-year bonds yield is 25 basis points. The 12 month CPI is (3.2%), so the negative real rate is (3%). That is destroying savings. Our view is as people become more aware of the destruction of wealth they will there will be a stampede into hard assets – gold, diamonds, real estate,” he said.

 

The biggest hedge fund is long gold in 2012, Jim Rogers says gold headed to $1200/oz