Gold Shows No Sign Of Slowing Down – Plenty Of Upside To ComeAugust 8 | Posted by Kevin Monaghan | Top Story
We took a look at the charts for Gold and Silver to see what we thought the future holds for these precious metals. Since Gold and Silver currently have no problem with demand, we turned to the technical charts to see where 2012 prices would land.
GOLD 2012: $1,925
We give Gold a $1,925 price target for next year. Gold’s recent run may see a pullback in the shorter term, but we think the long term trend remains intact. We also place a 10-15% chance that Gold sees a parabolic upswing towards $2,245.
China has just passed India in terms of demand for Gold. In the first quarter, 25% of demand came from China as compared to 23% from India according to the World Gold Council. Higher prices don’t seem to bother buyers either, as a European’s wish to buy it to protect against defaults, American’s against a falling dollar, and China/India against rising inflation in items like food. Property used to be the preferred asset in China, but now that the government has put the brakes on property prices, Gold is seeing increasing demand. In addition, in China, Gold is very easy to buy as most consumers can buy Gold and Silver directly at their bank or even while banking online.
The only real threat to Gold prices moving higher is rising interest rates in the West. That most likely won’t happen. First, rising interest rates would make mortgages more expensive most likely resulting in lower housing prices which wouldn’t sit well with Ben Bernanke. Second, credit isn’t really in high demand from consumers and higher rates would only be discouraging for borrowers. Finally, after last week’s economic numbers, growth doesn’t seem to be coming anytime soon.
Silver is a little bit tougher to make a prediction with. Refer the chart below to see the narrowing trading range. We’re bullish on Silver as well and would think that Silver will test $50 again; however the volatile nature of Silver makes it tougher to call. The first step we would look for is for Silver to break above or below the Support/Resistance line drawn below. A bullish move above the top line would be a confirmation Silver was ready to move higher. A move below the bottom line and we’d look to short silver. Silver therefore makes a better trading vehicle at the present time until more clarity in direction is reached.
Keep in mind that last time Silver pushed higher, regulators came in and changed trading requirements for Silver. That sent Silver prices tumbling by about $16.00 as investors were forced to sell to meet the new margin requirements designed to slow speculation. Investors have found Gold’s slow and steady rise a bit more attractive, as a slow and steady rise seems less likely to trigger an unexpected change in margin requirements.
Owning both Gold and Silver, I am bullish that both will continue to see higher prices given the current environment. Unfortunately, political events can have such an impact on these metals that it is tough to forecast prices going forward. At the current moment, exposure to both metals has helped portfolios as sovereign debts and government downgrades dominate the news.
Disclosure: Author Kevin D. Monaghan, Senior Partner at Elite Investment Group, is long Gold and Silver