Opinion: Gold Crashes And Is Now Tarnished For Good

[UNEEK]

Opinion: Gold Crashes And Is Now Tarnished For Good

Published: Sept 22, 2014 6:00 a.m. ET  By  Jeff Reeves

Gold shined brightly at the beginning of 2014, with bullion prices jumping by about 13% from New Year’s Day until mid-March.

But since spring, and particularly since July, gold prices have been on the decline. Last week, the precious metal settled near lows not seen since Christmas 2013.

So should investors consider this sell-off as an opportunity to buy precious metals on the cheap? Or is gold really tarnished for some time to come? Sadly for gold bugs, it’s the latter.
 

  There’s always a big argument for gold as the only alternative amid overpriced stocks, a weak U.S. recovery and a fragile dollar that will collapse at any time. If you want to make those arguments in the face of the facts, feel free to scroll down to the comments section and make fun of my receding hairline.

But for those interested in reality, it’s important to note how much those arguments have missed the mark over the past few years and how they ignore recent data to the contrary.

The stock market, U.S. economy and the dollar are all doing quite well. Judging by recent data, all three look like they will improve.

Here’s why I wouldn’t expect gold to rebound anytime soon, and why the outlook for this precious metal is quite tarnished:

The dollar is strong: The U.S. Federal Reserve has been telegraphing its moves for some time, and last week reiterated that October will bring about the end of its bond-buying program and that key interest rates will almost certainly rise in 2015.

Higher interest rates will only bolster the U.S. dollar further. And thanks to the inverse relationship between our currency and the pricing of dollar-backed commodities, a stronger dollar means gold prices will fall.

After all, a big reason for gold’s trouble in recent months has been a strengthening greenback. After the Fed news, the dollar is now at a 14-month high vs. other major currencies. This will continue to put downward pressure on gold prices.

It’s not just our central bank fueling this trend, either. The European Central Bank, for instance, unexpectedly just cut rates and announced a stimulus plan despite opposition from Germany. Similarly, Japan has been maintaining loose policies to weaken its currency and drive up inflation. As other central banks weaken their currencies, the dollar gets an added boost there as well.

Now, I know there are gold bugs who like to talk about the death of the dollar. But with other central banks actively debasing their currency and America on the cusp of tightening monetary policy, well, I simply don’t see how we can expect anything but a strong dollar for some time.

An improving economy is diminishing safe-haven demand

A strong dollar adds up to weakness for gold, so this is a big hurdle to get over that can’t be ignored.

“Risk on” sentiment: You can shout all you want about how the Federal Reserve has destroyed capitalism for good, or how being the best among a group of doomed currencies is not a vote of confidence for the dollar.

But even if you want to ignore the relative strength of the greenback, it’s getting increasingly harder to ignore the strength of the U.S. economy.

There’s a 6.1% unemployment rate, which is down nearly 4 percentage points from peak levels and the lowest since September 2008. At the same time, claims for unemployment just hit the lowest level since early 2007. If you think that is all because of people giving up on work, that’s willfully naïve.

Corporate profits also look robust. According to research firm FactSet, the estimated earnings growth rate for the third quarter is 6.2%, with most analysts predicting double-digit growth in the fourth quarter as the economy continues to bounce back from a sluggish summer. And for calendar 2013, S&P 500 member companies saw earnings grow about 6%.

There are clearly real profits being made by publicly traded companies right now, justifying investors who are paying a premium for future growth.

There’s tons of other data that indicates the U.S. economy and corporate profits continue to improve. So why would investors flee stocks or other “risk on” investments to hide out in gold? Sentiment just isn’t in favor of safe-haven investments like gold right now.

Global demand slumps: Looking beyond U.S. borders, global demand also is bleak for gold.

China, which overtook India as the largest gold-buying nation last year, has recently seen demand for the precious metal slump sharply. But according to reports, that buying frenzy of 2013 has evaporated as demand has largely been met; China’s gold-jewelry fabrication was down 22% in the first half of the year.

And while India did see a bump in gold demand and gold prices about a month ago thanks to religious festivals, the Wall Street Journal noted that “sales in the rest of the world are sluggish despite a number of geopolitical risks that normally increase demand for the safe-haven metal.”

On the whole, the World Gold Council announced that global gold demand was off 16% in the second quarter, with total bar and coin demand down a staggering 56%.

If you think that seasonal jewelry demand around the Chinese New Year is going to make up for this broader downtrend, go ahead and buy gold.

But given the severity of demand pressures and the widespread nature of the declines, it’s very unlikely that global gold buying will snap back anytime soon.

Jeff Reeves is the editor of InvestorPlace.com

http://www.marketwatch.com/story/gold-crashes-and-is-now-tarnished-for-good-2014-09-22?page=2

[leanonme]

I don't think I would be doing any business with Jeff Reeves and Investorplace.com. The day will come when silver and gold will be VERY SHINEY.

[MyLadiesDaddy]

Now that's just freaking hilarious.

PRAY FOR REVIVAL EVERYDAY

9-28-2014

ETD

[UNEEK]

Thanks all  for your comments --  I am happy that the price is down --   but I do not believe it is "tarnished" for good or will stay down in price -- I listened to another very well  informed  person  Harvey Organ and he thinks this year is going to be one for the History Books  - He even thinks the price of  both will sky rocket by the first of the  year I think he said --  I have been buying silver for many  years  now but in small  quantities as I  could -- I will continue as I  can - Gold is  out of reach for me for now -

 

If you have not watched the video  you might want to -  It was really very interesting - and this guy seemed to have the credibility --  

 

http://dinarvets.com/forums/index.php?/topic/186774-harvey-organ-by-december-whole-thing-going-to-collapse/

[Indraman]

If and when the RV occurs, it will strengthen the USD and delay any serious economic crash in the USA. Watch closely the sudden windfall in revenue by the US Treasury and the way the government approaches this new found money. The right thing to do would be to retire US debt, which will only strengthen the USD further. However, the tax and spend mindset of DC will probably go back to their all to well known ways and continue on the path we are currently on.

 

Indy

[UNEEK]

Thanks Indy -- I hope you are right about  the US dollar getting stronger - I do not feel qualified to debate or even have a  open discussion - I  keep reading and reading and  much of what I read leads me to continue to have much concern -  Do you think  the US has any gold of its own?  They are not giving China or Germany back what  is due them  and some say the US does not have it -- 

 

Ok I am going out on a limb here and expose my lack of working knowledge in economics & politics - Don't be too hard on me please  - I have some questions -  If the RV could in fact get rid of  the tremendous debt  would that be what they would do with the exchange?  We owe China a lot but they do not want our paper money any more - that's a fact -  How do you think this will go down -- really ?  

 

If the US (government)  has dinar are they going to exchange for US dollars?  I understand that eliminating the debt would  strengthen the USD  - It seems to me that all the tax money they stand to get from the people that exchange  would also put the US in good shape  --  This may be a dumb question but  who actually gets the capital gains tax money? The Fed? The US Treasury?  Do they get all of it?  A percentage?  Well heck none of that money goes to running the gov does it?  Why is that?  Am I forgetting anything?

 

Some have voiced their opinion that the US has numerous times  held up the RV  in some way - I can understand their not  wanting the people to gain from the RV but don't you think that is a pretty big cut off your nose to spite your face move to hold it up and sabotage their own gain from it ? --

 

My last question I guess is  -- Does anyone think that there is a lot of behind the scenes deals being ,made between  countries - including the US  in regards to the "pending" RV of the dinar? If so  with whom and   what kind of deals? Thanks everyone  for your comments and answers -- I thirst for knowledge and I know there is a lot of it here at this site!!  Thanks for sharing!!

 

I will be gone for a few hours  but will catch up when I return - again please don't be too hard on me - all of my studies were in several different arenas --

[SocalDinar]

I guess I'll just have to dig harder and find more gold to make up for the downturn

This was forecast and expected so should not catch anyone by surprise