When looking at the global prices of gold one cannot help pondering on the following question: What did George Soros get to know that made him sell all of his gold reserves in April 2011? The situation gets more interesting if to remember thatin April 2008 Mr. Soros sold out all the Russian stocks he had and 2 months later (in June 2008) numerous stocks around the world started collapsing and provoked a global financial crisis.
There is now doubt that the sky-high prices on gold are extremely overrated. The instability seen in the US and EU plus a natural and nuclear disaster in Japan keep obscuring the period during which gold will keep growing in value (a month? 2 months? till the end of 2011?) and the pace at which gold will start losing in value ( a gradual decline or a collapse) while making other assets collapse as well (indexes, stocks, currency futures etc.).
In his “Live Journal” Dmitri Krutik, Vice President of Rietumu Banka (Latvia) and President of RB Asset Management, mentioned a “gold bubble”, which raised a serious discussion among the experts of .
Is there really a “price bubble” in the market of gold?
Rietumu Banka is one of the biggest Baltic banks and the major stock and currency broker in the Baltic region. As we have just mentioned, Dmitri Krutik warned the readers of his “Live Journal” about the price bubble in the market of gold. These are his arguments:
· Gold prices. Investors keep losing confidence in further price growth and its pace while gold keeps growing in price, which means that the price already exists.
· The comparative growth of the prices on precious metals. Last week gold gained in price 0,6%, platinum and palladium gained 3% while silver lost 4%. During the week the prices on silver fluctuated between $35 and 38,7/oz. The 10% range cannot testify to the stability in this segment of the market.
· Inflation expectations. According to last week’s US consumer confidence index, there is no inflation growth in the country.
· Crisis expectations. The same USA’s CCI show that people get less worried about a possible crisis, which keeps pressing the prices on precious metals.
Consequently, D.Krutik assumes that gold is unlikely to reach the record high price of $1600/oz.
What supported the strong price growth in the market of gold?
Silver:
· COMEX. Over the last 3 days of the last week silver declined in value by 5,6% down to $36,191/oz. This is the record low of the last 10 days.
· Silver started this week with a rally in COMEX. By the end of Monday it gained 1.6% against Friday’s price.
· Tuesday’s trading session started with a price increase (Tuesday’s $36,52 vs Monday’s $ 36,22).
Gold:
· Rumors. Last week the rumors about the possible default of Greece made gold slightly gain in value (+0.3%) in COMEX.
· Price growth. On Monday gold grew in price by 0,32% up to $ 1547,2/oz.
The experts of say that on Monday in COMEX platinum lost 1.15% of its value while palladium lost 0,25%. According to the Department of Masterforex-V trading system , the market of gold keeps forming a bullish wave (the “moment of truth” pattern by MF) as at this point the price is moving in a range of the senior wave lave. There are two scenarios: either the all-time price record ($1577/oz) will be broken or the price will eventually form a bearish FZR and confirm the formation of a retracement pattern.
Over the last year gold gained in value 30%, which is an all-time record. In Jan 2011 there was a 6% decline. In March gold resumed its price rally after the natural disaster in Japan and the revolts in Tunis, Egypt and Libya, which made the price of crude oil rocket sky-high. In May gold declined again - this time it lost 1.3% of its value.
What factors influenced the market of precious metals in the last few days?
· The weak US dollar and Euro prevented gold from declining in price to a great extent. Some experts say, investors are still unwilling to risk and that is why gold and silver keep growing in price.
· Change of power in Peru. Peru is one of the world’s major silver producers. During the weekend a new president was elected there. He promised to increase the state control over the country’s mining industry.
· On June 3rd the USA published another Non-Farm Employment Change report, which only showed a 54k increase. The fact favored the appreciation of the metals.
· The US unemployment gained 0.1% in comparison with April. It reached 9.1%.That was another factor supporting the price growth in the market of precious metals.
· There is uncertainty around the Fed Reserves’ QE2. The price growth gains support once again.
Gold and all the other precious metals are traditionally viewed as the safest assets during the times of financial crises and market uncertainty. Investors assume that precious metals are less risky than stocks and commodities. That is why the precious metals will hardly see any price decline until there is uncertainty in the markets, experts say.
What should common investors and traders do?
They had better do nothing or stop buying when and where the major players start selling and taking profit. Dmitri Krutik wished the traders of and the readers of Market Leader “successful trading, adequate greediness and moderate risks”. The latter two are the traits that tell professionals from amateurs in any field.
and Market Leader would appreciate if you could share with others your own opinion on the matter. Just visit the Academy’s forum and answer the question below:
How long will Gold keep growing in price?
· Until EUR and USD become stable
· Until crude oil declines in value
· Always, with short-term retracements
