CelticGold Market Report 3rd August 2015
Gold closed on Friday at about $1,095 and was able to bounce off of its lows earlier in the session to trade just below $1,100 an ounce. According to data complied by Kitco, Gold declined 6.6% in July, which is its lowest point since February 2010. Crude oil was down 18% for the month, which is the biggest fall since 2008.
Gold prices have been impacted by the overall fall in commodity prices. According to Bloomberg, in July commodities touched the lowest level since 2002. On a positive note, Gold has been able to stabilize a bit as the month closed, but the short term outlook remains very uncertain.
Lower prices are still a possibility over the next month or two. Gold has been holding the support zone in the $1,070-80 range however, should that fail then the next support level comes in at about $1,050. Gold must clear $1,100 and then ideally rise to the key resistance level of about $1,140 to flush out the short positions.
August typically starts the time of year where prices historically see a bump, with September and October being among the strongest months. So we’ll see what the next few months brings for Gold prices.
Gold is an Investment in Monetary and Financial Disorder
Below is a link to an interview with Jim Grant, founder of Grant's Interest Rate Observer. In the short interview Mr. Grant discusses his views on Gold and why he is still bullish. As he explains, the global financial system faces uncertainty, turbulence and disorder which is one of the environments Gold historically thrives in.
Gold Mine Production
One of the fundamentals that will greatly impact the price of Gold in the coming years is mine output. In an article in Newsmax, an analyst at Lombardi Financial said that U.S. gold mine production declined 8% in 2014 vs. 2013, and 2015 gold production is running “much lower than the 2014 figures”. (Source: News Max 2015 July 25th)
The article states that most mines can not make profits at $1,200 Gold. As result with Gold prices depressed well below $1,200, mining companies are struggling. According to data complied by Casey Research, Gold stocks are down 78% from there peak in 2011. The bear market has lasted for 52 months, making this the second-longest bear market in gold stocks in 76 years. (Source: Casey Research 2015 July 27th)
Gold stocks are not our area of expertise and we are not necessarily recommending them as they carry a higher degree of risk. But the point is Gold mining companies are not doing well and some may even go bankrupt. As a result, lower mine production and depressed prices will impact supply moving forward. This is another reason prices will have to eventually recover.
Market Update for Silver
Silver closed Friday at $14.74 and was able to mange a gain of about 1% for the week. However, when looking at the metal on a monthly basis, Silver had just as difficult of a July as Gold, where prices dropped 5.7%. (Source: Kitco: 2015 July 31st)
When Silver and Gold do start to move higher the rally could be powerful. Should Silver and Gold catapult to the next level of resistance, short sellers will likely head for the exits, which could generate a nice rally. So we’ll see if Silver and Gold can gain some momentum this month.
In this update we have discussed some of the supply factors for mining companies that will be positive for the metals in the long term. Below is an article about supply issues in the Silver market.
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