The Chinese have made a deal to purchase a large gold mining concern.
The Federal Reserve is making noises about another round of quantitative easing.
The European Central Bank (ECB) is working to – yet again – bail out everyone in the euro zone that needs bailing out.
By all accounts, it must be time to buy gold! By all accounts, except one: what happens next?
There’s no question the Chinese are buying gold supply, but does that mean the gold price goes higher? Is China going to sell gold to the world or themselves?
In the past, the country has not shown an overwhelming desire to share. It’s entirely possible that the Chinese take both their supply and their demand off the world market. Poof! In one move, one of the largest anticipated drivers of the price of gold is gone.
As for central banks… yes, there does appear to be another around of easing in the cards. We’ve forecast this for a long time. But just implementing the program does not ensure success.
The Fed and the others are trying to manufacture inflation. It’s not working. The reason is they are busy focusing on liquidity and credit availability when the problem is excess debt and lack of demand!
Unless the Fed, the ECB, the Bank of Japan, the People’s Bank of China and the Bank of England start printing fat stacks of cash and handing them out on street corners, with a mandate that the funds be spent, don’t expect any greater results this time than the last… or the time before that… or the time before that.
In fact, expect less. Expect the markets to respond to the next round of quantitative easing with small applause and then a yawn. There will be a collective sigh of boredom.
There’s a very real chance that the global economy, currently in the midst of a slowdown, will not be greatly affected by more printing.
The end result will be an overall compression of prices, which includes commodities and precious metals. As credit shrinks and economic activity slows, all metals, including gold and silver, should decline.
So what should investors be doing with gold? As the old saying goes, “Buy the rumor, sell the news.”
Now is a golden opportunity… to SELL gold, not buy gold.
Use the current run in the “risk on” trade, which includes a run up in gold, to lighten your gold and silver investment positions.
Set a trailing stop loss, or use some other measure to lock in gains, and let the positions run a bit.
Does gold go to $1,700, or $1,900? We don’t know, but we do know that right now, the stuff looks really shiny. It also looks ready for a fall.
That being said, this is not about your physical gold that was purchased as a hedge against calamity. We are often asked if we think investors should sell their gold coins. There is no way for us to know the answer, as each investor has their own threshold for how much gold makes them feel comfortable. But as for the holdings like GLD and SLV, it’s time to plan your exit – SELL Gold!
Ahead of the Curve with Adam O’Dell
$50bn in Market Cap – GONE!
We’re quickly approaching the one-year anniversary since gold prices peaked. On September 6, 2011 gold futures made a high of $1,942.30. The popular gold ETF, GLD, peaked the same day at $185.85.