Remaining Bullish On Gold, While Negativity Surges
Michael Lombardi | Jul 03, 2013 01:28AM ET
Gold bullion prices are taking a hard hit. Headlines are blaring with negativity, and bears continue to say the precious metal is useless. They may have done a good job driving the gold bullion prices lower, but they haven’t changed my opinion on gold one bit. I continue to believe that gold bullion has a shining future ahead.
Regardless of the gold bullion prices declining on the paper market, I see demand for the precious metal increasing. It’s giving the average investor another buying opportunity just like they had back in 2008.
Look at the chart below and pay close attention to the circled area. In 2008, gold bullion prices went from above $1,000 an ounce in early 2008, to below $700.00 by end of the year. If I recall correctly, the sentiment from many notable economists was very similar to what we’re hearing today.
But smart investors are buying.
The demand for gold bullion at the U.S. Mint is higher than what it was in 2011, when the precious metal prices were at their peak. So far this year, until June 27, the U.S. Mint has sold 619,000 ounces of gold bullion in coins. This figure is almost 7.5% higher than the same period in 2011, when the Mint sold 576, 000 ounces in gold bullion coins. (Source: U.S. Mint web site, last accessed June 27, 2013.)
Demand from gold bullion–consuming nations like India is robust in spite of the Indian government imposing higher import taxes and its central bank telling Indian banks not to sell gold bullion coins.
The premium paid on the precious metal by Indian consumers doubled on Wednesday, June 26 as suppliers could not meet the demand. Harshad Ajmera, proprietor of wholesaler JJ Gold House in Kolkata, said, “We are unable to supply, though there is demand … we give deliveries after two to three days.” (Source: “Gold premiums jump as physical demand outstrips supply,” Reuters, June 26, 2013.)
On top of this, I see more central banks buying gold bullion than selling. According to data from the International Monetary Fund (IMF), central banks from Russia and Kazakhstan bought the precious metal for the seventh straight month in April. Central banks from nations like Turkey, Belarus, Azerbaijan, and even Greece joined Russia and Kazakhstan on their buying spree that month as well. (Source: Bloomberg, May 27, 2013.)
You need to keep in mind that central banks were net sellers of gold bullion not too long ago, and now they are buying.
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So how low can the precious metal’s prices actually go with all the negativity?
It is certainly tough to be a gold bull these days, but what I know is that the greatest opportunities come in times of greatest uncertainty. Currently, gold bullion prices have come under scrutiny and even some of the most well-known gold bullion bugs are turning against the precious metal.
But I believe they’re wrong. While it can still go lower in the short term, the long-term trend still holds.
Michael’s Personal Notes:
A report from the National Institute of Retirement Security (NIRS) found that American households have a shortfall of anywhere between $6.8 trillion to $14.0 trillion when it comes to their retirement savings.
Looking at their assets only in their retirement accounts, 92% of working households in the U.S. economy don’t have enough savings to meet their retirement target. (Source: “The Retirement Savings Crisis: Is It Worse Than We Think?,” National Institute of Retirement Security, June 2013.)
Sadly, that’s just one part of the problem. The report also pointed out that as many as 38 million working-age households in the U.S. economy don’t have any retirement savings. In addition, for all working households, the median retirement savings is just $3,000. For those who are near their retirement, their median retirement savings are just $12,000.
About 67% of working households between the ages of 55 and 64 and with a minimum of one person involved in the Original post
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