Gold Forecaster
- Global Watch
A Change of Tides
Julian D.W.
Phillips
Gold Forecaster snippet
Sep 28, 2007
The gold price is
being driven by macro-economics and currencies
...There has been a change
of tides, and possibly a change as fundamental as a change of
current. Yes, last week will be seen in history, as an important
one for the global economy and gold alongside other precious
metals. We write this section because until last week the price
range of gold was seen only in the context of May 2006 price
ceiling of $730. After all what could have sent the gold price
towards new highs? Yes, jewelry demand was robust, but with India
price sensitive, particularly to jumps in the gold price, this
factor alone could not have produced new highs. The balance of
supply demand factors while, again, good, do not seem capable
of producing a run up in the price either.
So the spur had to come from
investment demand, which in turn had to be spurred on by $ factors,
or the oil price or an item sufficiently significant to damage
monetary or economic confidence, or create a large dose of new
uncertainty. Yes, a general decay of confidence and rise in uncertainty
would be sufficient to bring in investment demand on a sustained
and large way. Indeed, when Central Banks are put on the defensive
and have to react 'as need be,' the feeling of loss of
control grows and creates a climate that precipitates long-term
demand.
 With the past
month and more happenings signaling a breakdown in vital confidence,
the trigger for a growth in investment demand was pulled and
the funds flowed into the gold Exchange Traded Funds in quantities
that were much larger than before. 26 tonnes a week for two weeks
started the story. With the cut in Fed funds rate now established
and more to come, the fundamentals for gold and silver have
never been better.
Unfortunately, they are factors
that will send wave after wave of changes in the global economy,
fragmenting the monetary and economic unity that we have come
to believe is the norm for the world. The signal we have been
given is that we should expect tension on many fronts now - currency,
political, trade... and the resources front that
cannot be reversed. The next big leg of the gold 'bull'
market is underway.
As investors, you have a need
to keep in touch with these events and how they affect gold and
other precious metals, just as you would need to keep in touch
with the balance sheets of the companies you invest in. To date
most gold and silver advisors have written about the definable
market factors influencing the gold and silver prices, as well
as the health of companies in which to invest. We have
added the global gold markets and global currencies, alongside
macro-economic features to this understanding. But this has to
broaden still further.
Now for one's understanding
of the gold and silver markets to remain at a professional level,
there is a critical need to understand the factors that drive
investment demand alone and they lie outside the shape of most
commentator's analyses. Now, it will be absolutely necessary
to comprehend each currency affecting the global economy and
to understand the political factors that affect it. For instance:
- If oil demand runs ahead of
supply, which countries will have to ration the oil that they
can buy? How will such a scene lead to higher gold prices?
.
- Just how far will the $ drop
that it is close to breaking critical support levels and what
collateral damage will this cause in the currency markets? Will
gold reflect this fall more dramatically from now on?
.
- What will be the knock-on
effects of these events that are shaking the global economy,
not just the events alone? How will this affect confidence and
the growing levels of uncertainty?
We at Gold & Silver
Forecaster will continue to cover these facets of the
gold and silver markets, translating them into language you can
translate into investment strategy. As such this newsletter becomes a "must
have" letter going forward.
Please subscribe to GoldForecaster
for the entire report.
-Julian D.W. Phillips
email: gold-authenticmoney@iafrica.com
321gold Ltd
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