2013 as a whole was not a great year for gold.
The flowing river of ETF outflows coupled with the improvement in the US economy with a series of “will they won’t they” fed meetings which eventually lead to the cutting back of quantitative easing by $5 billion per month.
2014 look set to be another interesting year with the US economy continuing to show signs of improvement especially in its manufacturing and construction industries.
Further, the UK is set to have a strong year as demand increases for mortgages, banks lend out more and companies clamber to find employees.
What does this for mean for gold?
Well, Marc Faber author of “Gloom, Boom and Doom” maintains gold WILL gain in 2014 namely through China’s incessant buying and “given all the monetary printing that is going on globally”. Further the total global credit has risen by 30% SINCE 2007, for that reason along gold remains to be a vital source of insurance.
Brent Johnson, CEO of Santiago Capital, also highlights the dangers of money printing. He points out that if the economy continues to print money at the rate they are gold could end up hitting $5,000. His advice is simple – “If you believe it Math – BUY gold”.
He believes gold fell so much as people have been putting back into the stock market on the back of persuasion by the fed and central banks, this has led to an imaginary inflation of housing and stocks. Long term, put simply printing money doesn’t work there will be another 2008 crash and this is when gold true power will shine through.
The fact that gold price is now lower can only be viewed as a positive thing as it tends not to correlate with other assets you have in your portfolio therefore it is simply better value for money to have gold in your portfolio.
If that wasn’t enough look to the array of central banks who have continued to stock up on the yellow metal. For example Turkey is up 22%, as well as Russia who now has the eighth largest holding in the world.
And it’s not just central banks who are continuing to hold gold, commercial banks who have been seen to “dis” gold in 2013 have been secretly stashing up. Take Goldman Sachs, who have not been shy in advising their clients to sell up and buy treasuries etc. However the tables turned when Venezuela decided to trade in their gold stock, as they swiftly jumped in to handle the transaction. They have also purchased reported 3.7 million shares in the GLD.
Meanwhile Citi Bank believe gold is back on track for hitting $3,500 and is the commodity of choice.
Therefore for those who feel the positive economic predictions of the worlds major economy being not good for gold, for many it is clear gold has already bottomed out in 2013 and things can only get better. Further gold power as an insurance remains unchanged and many are even asking themselves whether gold is heading towards a new bull market?
by Holly Stevens