By Barry Stuppler - MintStateGold.com
It’s starting to feel like the movie Groundhog Day, where every day starts the same way. Gold continues to move higher, hitting $1,881.40 in overnight trading, another all-time high. Friday commodity trading is normally less active than during the week and gold trading has been in the $1,837 to $1,866 range for most of the day. Right now at 11am PDT gold is trading at $1,847.90, up $28.10 per ounce in light trading.
I am beginning to get concerned about this recent Gold rally, with gold up $250 in the past month. For the value of 1 ounce of gold to reach $5,000 US paper dollars by 2014 we need strong up moves followed by corrections; then a period of stability and base building. To see gold back off to the $1,750 to $1,800 area and trade in that range for a few months would be healthy for the long term.
Since we have clearly started Phase II of the gold rally, as I stated in May’s Hyperinflation booklet the volatility has increased. Since Phase I lasted for over 10 years, phase II should last for 2-3 years, right in-line with my 2014 prediction. However, any move to a gold standard may accelerate my prediction.
Investment demand for Gold in India has increased dramatically this year and imports are projected to be over 1,000 metric tons by year end. The World Gold Council reported that Gold’s strong start to the year was reinforced during the second quarter of 2011 where total global gold demand measured 919.8 tonnes (t), worth a near-record US$44.5bn, with broad-based support across all sectors and geographies. Standout markets were India and China, as these two markets accounted for 52% of total bar and coin investment and 55% of global jewelry demand.
It’s about time we see Silver trade out and have a real rally. Silver is up over $1.50 today and trading at $42.08 at 11am PDT and the silver/gold ratio has hit 44 to 1. Silver buyers are encouraged by the value compared to gold and the renewed coverage by the press of the upcoming Jackson Hole Fed meeting. I believe some of the new Silver buyers are betting on a QE3 announcement after the Federal Reserve meeting. I would like to see support for this breakout with heavy volume trading on Monday regardless of gold trading.
I am wrapping up my affairs at the ANA’s World’s Fair of Money convention and after 8 days I am anxious to be heading home tomorrow. This convention was extraordinary on many fronts. I was able to discuss the markets with many of my longtime friends from around the world. I’ll share many of the enlightening comments from my Asian, European, and Middle East friends in Monday’s Weekly Market Report.