CelticGold Gold and Silver Market Report 14th September 2014
Gold closed on Friday at $1229 and has had a difficult two weeks since our last update. Gold fell through support areas at both $1265 and $1240 with the next support level at $1225, according to Jim Wyckoff. Since Mario Draghi’s announcement to cut interest rates and begin purchasing asset backed securities, the Dollar has strengthened considerably which has hit the Gold price.
Gold has not been the only asset to be impacted. Energy prices have tumbled about 10% in the last 3 months and many commodities are trading at multi-month lows. Falling commodity prices do not speak well to the economic recovery that many media pundits are promoting right now. If the global economy were robust commodity prices would be moving higher with equity prices.
The ECB’s recent decision to cut interest rates due to deflationary pressures in the EuroZone economy combined with falling commodity prices has refueled the debate about deflation vs. inflation. Many traders and investors hold Gold as protection against inflation. So one of the factors that has also led to Gold’s poor performance recently has been the so called lack of inflation in the system.
However, as we have stated before Gold has proven in the past that it is a hedge against both inflation and deflation. With the global Central Banks continuing with their monetary stimulus the chances are high that inflation will eventually become a big problem in many parts of Europe and/or the US long term. However, even if deflation wins out in the end, Gold will still be a vital asset to have in your possession.
Below is an article by Jim Rickards who shares this same view and provides some data to back it up. His examples are based upon what happened with Gold in the US in the 1930’s and 1970’s. However, whether your home country is Japan, the US, Europe, or some other country it is still a relevant example to pay attention to.
With all the debt in the global financial system a revaluation of Gold, like what occurred in the 30’s in the US could again become a reality. So regardless of how the Gold price performs over the short term the fundamental over the medium to long term continue to be rock solid.
Continue to view Gold and Silver as a long term holding. Much of the selling over the last couple of weeks was technical in nature by traders and hedge funds. As challenging as it is to be a Gold and Silver investor right now, history is on the side of the precious metals. Central Bank manipulation of the markets is having a short term effect. Markets will eventually find their true price level, which in the case of Gold and Silver is much higher long term.
Market Update For Silver
Silver has also had a rough couple of weeks, succumbing to the down draft that has occurred in most commodities. As we have mentioned many times before the moves in Silver are often more dramatic both up and down.
It is difficult to forecast the short term movements right now and as a result it is best to view your Silver holdings as a long term investment. We have posted a couple of very good articles from past market updates that provide a review of some of the key fundamentals that will impact Silver over the medium to long term.
Both links are below.
Also, Below is an excellent short video that was put out by the Silver Institute that outlines some historical facts and uses for Silver. If your a silver investor or are thinking of investing in Silver the video provides some excellent information.
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