I was with Mickey, Goofy, Mervin the magician and an Arab at Hong Kong Disneyland last week. This new friend oil rich of the Middle East as we talked, was telling me that his friends are buying gold hand over fist, and it turns out they’re not the only ones.
You know what? I think the best is yet to come for gold because the WORST is yet to come for the US economy, and its ascendance was temporarily halted by US dollar risk aversion. And these economic forces could send investors charging even faster into gold just as fundamental forces also align for a move much higher.
Emerging markets are falling into a ditch, Europe’s economy is in the tank and the ECB will probably have to lower its benchmark interest rate further. And downward pressure on all currencies, US dollar in particular, would only add to an upward pressure on gold.
Massive buying is seen in the Middle East, as well as rising demand for gold in China in the first nine months of the year, and on the supply side, a downward trend in global gold mine production. Retail investment blasted off with strong bar and coin buying reported in Swiss, German and US markets. Gold inflows into ETFs surged to a record 150 tonnes while jewelry demand in India soared by 65% followed by the Middle East, China and Indonesia which gold demand rose by 40% in dollar terms. If there was a party pooper for gold, it was naturally the US and UK. In all, global consumer demand for gold rose 31% from a year earlier to 250 metric tones.
I would expect some overhead resistance of gold at US$900 an ounce and potentially could a rocket ride for the New Year, but the path will not be a straight line. Besides the yellow metal, I also like silver.
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