Guest Commentary: Gold and Silver Outlook for November 12-16

Monday, 12 November 2012 15:10 GMT

By  Lior Cohen, Commodities Analyst at Trading NRG, 

The prices of precious metals changed direction last week and rose. Will this rally continue this week?

The prices of precious metals changed direction last week and rose. Will this rally continue this week? The U.S Presidential elections are over. The results of the elections may have contributed to the recovery of bullion rates. Back in November 2007, during the 2008 elections, the prices of precious metals also increased. The next step for the U.S is tackling the "fiscal cliff" by the end of 2012. This situation is likely to pull up bullion in the weeks to follow. 

 

There were several reports published last week that may have also affected the forex and commodities: the U.S jobless claims declined again by 8k to reach 363k; American trade deficit declined on account of the sharp rise in exports of goods.

 

The video report herein has an outlook of gold and silver for the main publications and events that may affect precious metals during November 12th and November 16th. Some of these reports include: 

 

Tuesday – European Council Meeting: In the European Council Meeting the EU ministers of finance will meet and talk about the recent monetary developments in Europe; this could include Greece's eligibility to receive the next bailout package; 

Wednesday – Minutes of FOMC Meeting: Following the October FOMC meeting, in which the Fed kept its policy unchanged, the bullion market didn't have a strong reaction to this news – gold and silver prices slightly declined on the day of the announcement. The minutes of the recent FOMC meeting might add some additional insight behind this non-decision and more important the potential future steps of the FOMC especially with respect to the U.S fiscal cliff and the last FOMC meeting of the year; 

Thursday – Bernanke's Speech: Many will look towards Bernanke's speech that could hint of the Fed's future monetary steps. The Chairman of the Federal Reserve will talk at the HOPE Global Financial Dignity Summit, Atlanta, Georgia. The title of the speech is "Housing and Mortgage Markets". 

For further reading: Weekly Outlook of Financial Markets for November 12-16

By: Lior Cohen, M.A. in Economics, Commodities Analyst and Blogger at Trading NRG

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What Will the Price of Gold Be in January 2014?

What Will the Price of Gold Be in January 2014?

19/10/2012

While many of us at Casey Research don't like making price predictions, and certainly ones accompanied by a specific date, it's hard to ignore the correlation between the US monetary base and the gold price.

That correlation says we'll see $2,300 gold by January 2014.

There are plenty of long-term charts that show a connection between gold and various other forms of money (and credit). Most show that one outperforms until the other catches up. But let's zero in on our current circumstances, namely the expansion of the US monetary base since the financial crisis hit in 2008.

Here's the performance of the gold price compared to the expansion of the monetary base since January 2008.

You can see the trends are very similar. In fact, the correlation coefficient is an incredible +0.94.

Since the Fed has declared "QEternity," it's logical to conclude that this expansion of the monetary base will continue. If it grows at the same pace through January 2014, there is a high likelihood the gold price will reach $2,300 at that point. That's roughly a 30% rise within 15 months.

And by year-end 2014, gold could easily be averaging $2,500 an ounce. That's 41% above current prices.

Some may argue that there's no law saying this correlation must continue. That's true. And maybe the Fed doesn't print till 2014. That's possible.

But it's not just the US central bank that's printing money…

• European Central Bank (ECB) President Mario Draghi has declared that it will buy unlimited quantities of European sovereign debt.
• Japan's central bank is expanding its current purchase program by around 10 trillion yen ($126 billion) to 80 trillion yen.
• The Chinese, British, and Swiss are all adding to their balance sheets.

The largest economies of the world are all grossly devaluing their currencies. This will not be consequence-free. Gold and silver will be direct beneficiaries –along with mining companies– starting with rising prices.

There are other consequences, both good and bad, of gold hitting $2,000 and not stopping there. We think investors should be prepared for the following:

• Tight supply. As the price climbs and attracts more investors, getting your hands on bullion may become increasingly difficult. Delivery delays may become commonplace. Those who haven't purchased a sufficient amount will have to wait in line, either figuratively or literally.

• Rising premiums. A natural consequence of tight supply is higher commissions. They won't stay at current levels indefinitely. Premiums doubled and more in early 2009, and mark-ups for silver Eagles and Maple Leafs neared a whopping 100%.

• Swelling profits for the producers. If margins on gold production average $1,000 per ounce now, what will earnings be like when they average $1,500? At $2,000? Gold can rise much faster than operating costs, so this could happen. Imagine what this could do to dividend payouts, especially those tied to the gold price and/or earnings.

• Tipping point for a mania. There will be an inflection point where the masses enter this market. The average investor won't want to be left behind. Will that happen when gold hits $2,000? $2,500?

The message from these likely outcomes is to continue accumulating gold – or to start without delay. Waiting will have consequences of its own.

People say that there's nothing certain in life except death and taxes. In my view, $2,300 gold is a close second.

Source: http://www.wealthwire.com/news/metals/4022?r=1