CelticGold Market Report 1st March 2015
Gold has been in a tight trading range since our last update. The yellow metal has dipped below the important $1,200 support level a couple of times but has been able to rebound quickly. Gold moved a bit higher on Thursday and Friday to close out the week at about $1,213.
There does not appear to be a trend in either direction over the short term. Should Gold close below the $1,200 mark in the next two weeks it could find some support at the $1,180 level. As we mentioned in the last update the next real area of resistance is going to come in at $1,300. To attract interest from general traders and a wider group of investors Gold will need to show that it can get to the next level, which is $1,300.
Global Central Banks are still Pumping Trillions into the System
There was a recent article on ZeroHedge that illustrated a chart from Morgan Stanley which showed that there are 16 Central Banks that are easing right now with only 4 tightening. In other words, 16 of 20 Central Banks are printing money in an attempt to prevent the global economy from contracting. (Source: ZeroHedge 2015/02/22)
Sometimes in these updates we find ourselves repeating many of the same themes. This is because the factors that have re-inflated the global stock markets are still in play. Many investors are trading on the easing policies of the Central Banks. Stock markets will likely continue to get all the attention until the large speculative investors realize that the Central Banks do not have the ability to create a sustained recovery in the global economy.
A Picture is Worth a Thousand Words
For investors who have been losing faith in Gold, below is a good illustration from Simon Black at Sovereign Man. In the link below he provides a picture of the debt and derivative pyramid. The derivative market on top of the pyramid is estimated to be 1 Quadrillion in size. As you can see Gold sits at the very base and is just a tiny fraction of the size of the derivatives market.
The big problem with the derivative and debt markets is that they have grown to unprecedented levels. Counter-party risk is one of the main threats to the financial system. Those who own the debt and those who have excessive derivative exposure are in trouble when there is a default. This is why Gold is such an effective hedge. When the debt defaults hit the financial system, you’ll be glad that you own physical Gold and/or Silver.
Update for the Silver Market
Over the last several months Silver has traded at times like a monetary metal exhibiting strength when most other commodity prices have been falling. So should the global economy continue to show signs of deflation, Silver could still perform well.
The next real area of resistance comes in at above $18. So while that price level is still aways away, Silver has proven it can make dramatic moves in a short period of time. The pattern over the last couple of months has been for Gold to lead Silver. This pattern will likely be the way the price movements play out in the short to medium term.
One of the more interesting Silver articles we came across recently provided data on the overwhelming preference investors have to physical Silver vs. paper Silver. The link to the article is below.
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