George Soros makes a sensation once again: not so long ago the Wall Street Journal reported that Soros Fund Management, one of the world’s largest hedge funds ($28B) had sold out almost the entire stocks of gold and silver. Yet, the prices on the precious metals have recently reached the record-high levels.
What did the famous financial genius find out? Is it some other global speculation from Mr. Soros? Not so long ago he said that the prices would keep growing for a couple of years….
What is happening in the market of precious metals?
Gold keeps setting new price records. experts note that today the demand for gold and other precious metals is fantastic, which explains why gold keep setting new price records.
Over the last few days the price has been moving in the range of $1510–1516/oz. On May 2nd gold set a new historical record by reaching $ 1577,75. Since the beginning of 2011 gold has already grown in price by 6,8%. The market of gold has been rallying for 10 quarters in a row. Only the veteran traders can remember the similar situation seen in the market in 1975. Last year gold showed a 30% price increase, which is a record. At the beginning of 2011 the price declined a little (by 6%) but in March gold started getting more expensive again against the background of the weak US Dollar and the problems with the crude oil supplies from the revolt-ridden Arab East.
Replacing the weakening Dollar?
Numerous central banks around the world are currently trying to replace the weakening US Dollar and US T-bonds with something more safe and secure, seeing gold as a “safe heaven asset”:
· In 2011 the Bank of Mexico has already increased its gold reserves almost by 100M tons, having spent $4.6B.
· The Central Bank of The Russian Federation bought 18.8tons of gold in March. Now the total amount of the Russian gold reserves is estimated at 811,1tons. Over the last 5 years Russia has doubled its gold reserves.
· This year Thailand has already increased its gold reserves by 10% or 9,3tons.
· Since late 2009 the gold reserves have been expanded by China, India and many other countries. The Central Bank of India bought 200 tons of precious metals form the IMF in October 2009. The People’s Bank of China bought 454tons of gold in 2003–2009.
The high demand for gold makes the prices increase. George Soros’ counterpart John Polson (the head of another big-scale hedge fund) is sure that gold will keep growing for the next 3 years and well may reach $4.000 per troy ounce.
Piter Morici from the University of Maryland says that the US Dollar is no longer a safe asset. On May 5th USD reached the low of July 2008 against the basket of 6 currencies.
As soon as the info about the gold sales made by George Soros was made public, gold almost instantly declined in price around the world. On Tuesday the June futures in Comex declined in value by 0.5% down to $ 1526,5/oz. At the end of the day gold lost 1.1% of its value, which is the biggest decline within a day since the March “gold fever”. Silver saw even a deeper decline - 7,5%. Platinum and palladium declined in value as well.
Is the “gold price bubble” going to burst?
experts remind you that George Soros’ tactics is often aimed at causing panic in the markets. Uncertainty makes investors get rid of their assets. This is want he needs. But this time the situation is probably different.
John Boggle says that the current situation in the markets of precious metals is nothing but the result of massive speculations. Gold and other precious metals may continue growing in value. But the higher the prices will get, the sharper and deeper they will decline
According to the Department of Market Sentiment Analysis, , the Weekly chart of gold futures (СМЕ) shows a 2-year movement within an upward sloping channel.
The correction movement started last week was expected and predictable basing on the fact that the price had come close to the upper border of the sloping channel. The traders of the department consider the rebound scenario to be the most probable one. A decline down to $1400 and a rebound from it will prompt trend continuation. In this case sooner or later the price will reach the target area of $1620 - $1625. A break below the lower border of the SC will initiate a further price decline, probably down to $1346 - $1350.
The COT report will also help to define the direction.
In its turn, the analysts for Mig Bank, one of the leading Forex brokers (the 6th place in ’s rating of FX brokers), note that gold is extremely overbought. The key support is located around $1500.00 (a psychological level). A break below the level will probably make the price decline down to $1471.00 (a TDST level). The current resistance levels can be found at $1543,24 and 1577,57.
Market Leader and offer you to visit the forum for traders and investors and to participate in a survey by answering the following question:
Is it worth investing in gold and other precious metals in the short run?
· No, it‘s not. The price bubble is going to burst soon
· Yes, it is. Gold will always carry a value
· The general trend will be bullish even though some price correction is probable.
