There haven’t been a lot of headlines focusing on gold this year, but prices for the yellow metal have continued climbing quietly in the background. The price of spot gold’s up more than 6 percent since the start of the year from roughly $1,550 an ounce to nearly $1,650 an ounce.
Blame it on the subtle hints of an economic recovery in the U.S., but interest in gold seems to be waning. For some, that’s a sign to sell the yellow metal. To us, it’s yet another great buying opportunity. Even the head of metals analysis at Thomson Reuters GFMS, Philip Klapwijk, has sounded the alarm, warning investors not to abandon gold just yet.
He argues gold’s startlingly cheap when comparing it against inflation-adjusted spot prices from the 1980s. Back then, the gold price averaged $1,678 in today’s money. That’s just $30 more than the price of gold today, and the economic picture is far murkier now than it was even in 80s.
“This can be seen as a warning note if you are on the bearish side of the market,” Klapwijk told MineWeb earlier this week. “For those on the bullish side of things, however, the high point that year was over $2,200, which is rather far away from current levels.”
Klapwijk identifies three components that will drive the gold price moving forward: 1) the price of gold itself (not just in nominal terms but when compared against other assets, too); 2) the performance of the dollar; and 3) monetary policy.
Speculation’s running rampant right now on whether the Federal Reserve’s planning a third round of monetary easing. If that happens, the price of the dollar will likely fall and gold could climb higher. It’s not just the U.S. that investors are watching for hints of future quantitative easing, though: Europe’s debt woes are far from over, and that means we’re going to continue to see interest rates that produce negative returns when factoring in inflation.
Gold bears should take note. The ride may be slowing, but it’s not over yet. As Klapwijk pointed out in the interview with MineWeb, it’s remarkable how few mainstream money managers have actually invested in precious metals. Until we see that, and, perhaps, serious talk about the emergence of a new, non-fiat currency, gold’s going to be a tough asset to beat.
Fred Marion is the author of a brand new book on investing in gold and silver mining stocks: The Top 500 Gold and Silver Mining Stocks.
Related
|
UNCOVER THE NEXT MINING GIANT
|
DIVIDENDS OF THE FUTURE
|
|
FALSE PROFITS
Absolute proof of gold price manipulation? |
HEADED NORTH?
|
|
THE CASH UNDER OUR FEET
|
DELUDED ADVICE?
|
In a recent interview with 
Rather than shelling out bullion bars, shareholders will get Gold Resource Corp.’s “Double Eagle Rounds,” which are pictured to the left. The Double Eagle rounds have an American side and a Mexican side. The American side features an American Eagle with a pick and shovel flying over the mountains of Pikes Peak (where the face of a miner is hidden). 
The Mexican side of the coins, pictured at left, pay tribute to the year when Gold Resource Corp. reached commercial production at its Oaxaca Mine in Oaxaca, Mexico. The rounds are cast with a minimum purity of 0.999 percent and are only available only through Gold Resource Corp.’s new dividend program.
We all know that gold mining stocks have grossly underperformed the spot price of gold recently. What you might not know is that gold mining stocks (via the NYSE Arca Gold Miners Index) haven’t underperformed spot gold this badly since the very height of credit crisis in 2008. Reference Frank’s chart for proof:
The Comex is owned and operated by the CME Group, which acquired the Comex on August 22, 2008. The CME Group sets gold margin requirements based on volatility in the futures market. The more frothy the markets, the higher the CME sets margin requirements. Here’s a full list of the changes to Tier 1 gold margin requirements for COMEX 100 gold futures contracts since 2009:
1) Already in production. Unlike a lot of small-cap gold mining stocks, Argonaut Gold’s already in production. When the company reported its Q4 earnings two weeks ago, we learned that Argonaut netted $26 million ($0.30 per share) on revenue of $105 million in 2011. All told, the company sold 66,521 ounces of gold last year.
It’s not every day that a governmental office points out market manipulation – particularly when that manipulation involves the Federal Reserve, the LBMA and two international banking giants. That appears to have happened in a recent report from South Carolina’s treasurer. 
“We are expecting still that we are going to see a push above $2,000 in 2013, but it may be that 2013 marks the high water mark for the market,” company chairman Philip Klapwijk told 
