29 November 2014

Gold, Oil and the Commodity Sector

It was another wild week for the precious metals. Gold fell through the $1180 support level again and was down almost 2% on Friday closing at $1175. Silver had an even more difficult day loosing over $1 to finish at about $15.56. 

The big news recently has been the implosion of the crude oil market which has greatly impacted the overall commodity sector. US crude oil was down a stunning 10% on Friday alone. The collapse was felt throughout the entire commodity sector. Copper, just a short time ago, was holding steady at $3.00 is now trading at $2.84.

While the lower oil prices are good for consumers, the way in which the price has collapsed does not bode well for the global economy. Despite some positive headlines over the last few weeks, the global economy remains teetering on the edge of a slowdown.

German 10 year bond yields are at .70%; US 10 year yields are 2.16%; and Japan 10 year yields are at .41%. If the global economy were showing real signs of strength, bond yields would be rising not falling. Some investors are seeking safety, not knowing what direction financial markets will take.

Gold May be Nearing a Bottom

Gold investors need to accept volatility as a normal condition in the Gold and Silver markets. Looking at the headlines can be discouraging at times. However, the headlines in both Gold and Silver could be delivering an important message about where the price may be headed.

According to an article on Marketwatch.com, when tracking daily sentiment data on Gold, only 3% of traders were bullish on Nov. 5th. (Source: MarketWatch.com 11/26/2014). Sentiment on Gold continues to sink to lower levels. The article highlights that contrarian investing tells you that when everyone is on one side of a trade it usually goes the other way.

The headline in another article by the Associated Press was titled “ Gleam is gone as Gold sinks to a 4 year low”. The article goes on to say that “all of the reasons for buying gold over recent years have disappeared”. (Source: AP 11/6/2014)

I am not sure what world the author lives in, but it highlights the absolute faith and trust most mainstream media people have in Central Banks and a credit based financial system that is swimming in debt.

With sentiment as low as it is chances are good that Gold and Silver may be finding a bottom here. Lower prices are still possible because of what is taking place in the commodity sector. However, the reasons for owning the precious metals are not going away, they are only getting more compelling.

Author: celticgold.eu

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