Gold lovers’ hearts beat faster last week, as the
metal rose above $1,300 an ounce for the first time since November. The
precious metal also climbed above its 200-day moving average, which hasn’t
happened in about a year.
ISI’s John Mendelson noted that the generic gold
future “rallied off its mid-December low and has decisively broken out above
its downtrend line connecting the descending tops from late August, a near-term
positive.” The next price he’s targeting is $1,350, the price gold was at in
late October.
click to enlarge
So while gold may correct over the next several
months as the metal enters its seasonally weak period of the year, this looks
promising for gold investors.
Here are a few more gold charts that just might
have your heart beating faster:
1. The Love Trade Endures in the East
In January, 246 tons of gold were withdrawn from the Shanghai Gold Exchange, as
China continues expressing its love for the precious metal. This marks a record
level of gold deliveries on the exchange as well as a significant increase over
the same time last year.
In addition, you can see on the chart below that
January’s total also exceeds world mining production for the month.
click to enlarge
As Ralph Aldis, portfolio manager of the Gold and
Precious Metals Fund and the World Precious Minerals Fund, says, “Once the
metal moves from the West and goes into China, we won’t get that gold back very
easily.”
2. Money Supply Grew Faster in January
In the first month of 2014, the M2 money supply, which is a measure of money
supply that includes cash, savings and checking deposits, grew faster than the
previous two years. In 2012, M2 grew 7.6 percent and in 2013, money supply rose
4.7 percent; at an annualized rate, January’s money supply growth “reached an
annualized rate of increase of 8.75 percent,” according to Bloomberg’s Precious
Metal Mining team.
This may mean “the U.S. Federal Reserve is trying
to resurrect inflation, thus increasing the appeal of gold, the supply of which
can only increase about 1.5 percent to 2.5 percent annually,” says Bloomberg.
click to enlarge
Last year, gold started to take it on the chin when
the real rate of return went from a negative 0.62 percent in March to a
positive 0.54 percent by December. Like I told Jim Goddard from
HoweStreet, a positive real rate of return is
typically a major headwind for gold.
Listen to the podcast of the radio
show now.
Between March and December of 2013, two things
happened: 1) Yields rose in anticipation that the Federal Reserve would begin
tapering its bond purchases, and 2) the consumer price index declined. However,
going forward, I anticipate that CPI will increase, and, given the modest
economic growth we’ve been seeing in the U.S. economy, interest rates won’t be
able to rise too quickly.
3. Gold Stocks Poised to Rebound After Rare 3-Year
Loss
What I think is tremendously powerful for gold stock investors is this chart.
At the beginning
of January, we took a look back at the annual
returns for the Philadelphia Gold & Silver Index. In three decades, there
were only three times that gold stocks only saw a consecutive 3-year loss.
click to enlarge
These aren’t the only gold charts to love. See more
in my latest
presentation from the World Money Show.
Are
you on Twitter, Facebook or LinkedIn? So are we! Don’t miss the next post by following
U.S. Global Investors on Twitter, Facebook or LinkedIn.
All opinions expressed and data provided are subject to change without
notice. Some of these opinions may not be appropriate to every investor.
Disclaimer: This article was posted with the permission
of a third-party contributor and the opinions contained therein do not
necessarily reflect those of Smallcappower. Smallcappower does not endorse
any investment advice provided by these third-party contributors. Please
consult your investment advisor before making any investment
decisions.
Ubika Corporation and its divisions Smallcappower, Ubika
Communication and Ubika Research are not registered with any financial or
securities regulatory authority in Ontario or Canada, and do not provide
nor claims to provide investment advice or recommendations to any visitor of
this site or readers of any content on this site. – See more at: http://www.smallcappower.com/posts/small-cap-power-disclosure#.UoJQkZEq_vw
