Gold Poised to Move Higher

Sunday, December 28, 2008 | posted by RedApple
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Adam Hamilton wrote a fantastic article on Seeking Alpha (Seeking Alpha - Gold Poised to Move Higher - 28 Dec 2008). He argues across the following points about his Gold Bullishness (I have added some of my thoughts where appropriate in italics):

  1. Supply - Mined Supply - new supplies are hard to bring onboard and will take time.
  2. Supply - Central Bank Sales - even though CB owns 18% of the above ground gold, their sales are limited by the Gold Agreement and Asian CBs are interested to buy from them or the IMF to bring their Gold allocation up in their reserves.
  3. Demand - Investment Demand - as we have reported, physical gold premium is at its historical high and simply very hard to find coins at the moment.
  4. Demand - Monetary Inflation - Money Printing Machine is ON!
  5. Demand - Negative Real Interest Rates - Central Banks need to promote credit lending and investment rather than saving. With such a large economic recession, I expect to see negative real rates to continue into 2009/2010.
  6. Demand - Secular Dollar Bear - I think that technically we are close to seeing a resolution in the next leg of the Dollar. While it is still in a major bear trend, further Dollar strength can change this technical picture.
  7. Demand - Secular Stock Bear - While I acknowledge the outperformance of gold and gold stocks over S&P, we prefer not to make an outright call on the stock market.
  8. Demand - Secular Commodities Bull - even though we are cautiously bullish in commodities from the point of view that 1. CRB has massively under-performance Stocks and other assets, 2. during recession and depression, government spending will orients around what their citizens need - we are bullish on water, agricultural products, some metal links to infrastructure projects; we are fully aware that the overall commodity investment space is in a deep sell off driven from the deleveraging activities and government selling from certain emerging markets to raise cash.
  9. Supply and Demand - Technical Proof - for an array of charts pls see Gold Boom Doom - Gold Outperformance to continue in 2009 - 26 Dec 2009

Even though we don't agree with all the points from Adam's article, it consolidates a lot of thoughts out there about gold and gold stocks. It is well worth a read in planning your 2009 investment allocations. (see Gold Boom Doom - Gold Outperformance to Continue into 2009 - 26 Dec 2008)