The question that we are asked the most at Bleyer, yet the one we by law cannot answer, is “Will the price of Gold and Silver go up after I buy?” If anyone knew the answer to that, we wouldn’t be working in an office anymore!
Seriously, though, although under English Law we are not allowed to give financial advise to our clients, we can and do continue to highlight the factors paving the way for the future price of Gold and Silver, and the historical patterns that our clients can research alongside us.
We also avidly read the weekly and daily commentaries on the price of Gold and Silver.
As many of you know, there are several long term geo-political factors that are playing into this elongated price corrention; from National Central Banks repatriating their physical Gold, to a move by banks such as JP Morgan out of paper GLD and SLV into physical. Incidentally, Iran has been in Bleyer’s headlines as far back as October 2013. Read our slightly tongue in cheek blog here. Although a delay in the Iran nuclear talks is unlikely to affect the price of metals immediately, a move into a nuclear arms race in the Middle East and petrolium war or threat thereof from Iran in an attempt to manipulate the outcome of international sanctions against it, definitely would affect the price of metals.
All of these factors not only remain but seem to be increasing. We’re sure we’re not unique in thinking that some weeks it feels like the world’s News Headlines are on fire, there are so many regime changes and unhealthy international currency dependencies.
So what can we bring you to allay your fears and remain focused on the Gold and Silver price above the noise?
This week The Economic Times released this prediction: “Gold prices are forecasted to bottom out in 2015 after a two-year slide as the expected start of the Federal Reserve’s rate-raising cycle removes a key event risk from the market, consultancy Metals Focus said in a report on Tuesday (yesterday). Better prospects for gold sales in Asia, lower selling from Western investors, and a retreat in mine supply from record highs are likely to play into a stable market this year, it said. Expectations for higher interest rates, which would lift the opportunity cost of holding non-yielding bullion while supporting the dollar, have been the chief factor pushing spot gold lower so far this year. “We remain cautious of gold in the near term,” the company said in its Gold Focus 2015 report. “The end of the bear cycle however may well be in sight. Counter-intuitively, we see this as likely to come shortly after the Fed starts raising interest rates.”
Commentator Nikos Kavalis from Metals Focus concludes on a piece for Bulllion Vault in the US: “Longs may be tempted back in” as the realization grows that – thanks to the United States’ huge household debt levels meaning increased servicing costs would badly hurt consumer spending – the Fed cannot raise rates very high. Central-bank gold buying looks “quite supportive” Kavalis went on, while the outlook for supply is “relatively benign”, with the decade-long rise in mining output now finished and scrap flows of second-hand metal depressed by lower prices.
What is worth highlighting is the attractive investment prospects of Silver in this cycle: “Silver remains the only precious metal to show a gain in 2015 to date, rising 3.9% in US Dollar terms over the first quarter from New Year’s Eve.” (Bullion Vault)
We at Bleyer do encourage our clients to “hold long” ie: not to jump in and out of the Physical market. With silver especially, you have the 20% VAT to add to the profit-cutting emphasis on such moves. For quicker deals in and out the paper market is more of a suitable investment vehicle. We also encourage our clients to research the market and to this end we found a very interesting article this week on produced back in January by the US National Inflation Association. If Gold and Silver prices are hitting ‘bottom’, what happens next and why? It’s a short article but packs a punch with the graph below:
“Why Gold Prices Will Rise Dramatically Very Soon:NIA will soon be releasing an exclusive must read report entitled, ’50 Reasons Gold Must Rise’. Here is one of the most important reasons that NIA will be featuring in its report:
Even though QE3 has ended, the Fed is expected to at least maintain the current size of its balance sheet moving forward. In December 2014, the Fed Monetary Base averaged $3,900 billion and gold averaged $1,200 per oz for a gold/monetary base ratio of 0.308 – up slightly from October’s all time low gold/monetary base ratio of 0.303.
Going all the way back to 1918, the median gold/monetary base ratio has been 1.063. We last had a gold/monetary base ratio above the long-term median in March 2008 when it reached a peak of 1.128.
Following the inflationary crisis of the 1970s, the gold/monetary base ratio reached a peak monthly average in January 1980 of 5.106. The all time high monthly average gold/monetary base ratio of 5.159 was reached in July 1933 during the Great Depression.
As the Fed’s monetary inflation works its way through the economy, NIA expects the gold/monetary base ratio to return to its long-term median of 1.063 at a very minimum, which would currently equal a gold price of $4,189.28 per oz. If we see US price inflation begin to spiral out of control like the 1970s, we could easily see the gold/monetary base ratio return to 5+ for a gold price of $19,700+ per oz. The bottom line is, with gold below $1,300 per oz, there is very little downside but astronomical upside.
Also worthy of note is the column you will find on their website to the right of their articles – full of one clickable facts such as:
Gold reached an all time high adjusted for price inflation on 1/21/80 of $4,291.36 and at its 7/25/14 price of $1,295.50 gold is 69.8% below it.” Wow!
Finally we would like to encourage our readers to stay relaxed and not spend all their time watching the markets. The truly long historic view always comes up with the same conclusion – Physical Gold and Silver have been regarded as ‘money’ for thousands of years. Paper currencies have, on average by contrast, 40 year cycles. So regardless of what the Dow does, or the Pound against the Dollar, holding Physical Gold and Silver seems a good idea. We found an article via Mike Maloney’s site on “The Importance of Gold, Silver and Peace of Mind.”
“As people continue to digest breaking news from around the globe, with the world on the edge of chaos, the Godfather of newsletter writers, 90-year-old Richard Russell, warned about the dangers of Russian roulette and what you must know right now. Regardless of what the market does in the months and years ahead, I know that silver and gold will be here, and that over any period of time, they will keep up with purchasing power. Nobody on this green earth knows when this market will top out. We have seen events over the last few years that have never been seen before in stock market history. To attempt to arrange your investments on calling the top of this bull market is a fool’s game, and a sure enemy of peace of mind.”
Following on from our piece last week The Smart Coin Collectors Guide to Investing on Gold and Silver coins, here are some of the Gold coins we offer at Bleyer. Take a browse and call one of the team on 01769 618618 to find out how you can invest in a variety of Gold bullion coins today. Their advantages range from high portability to considerable Capital Gains Tax advantages, such as the Gold 1oz Britannia and all Gold sovereigns.
In addition, we hold a wide variety of coins from many nations, for the clients among you who enjoy investing in beautiful designs.
Take a look at the stunning Austrian Philharmonics or the extremely popular American Eagle and Buffalo. We’ve noticed an increase in interest in Chinese coins, and Bleyer now offer a variety of denominations of the Chinese Panda in 1/10, 1/4 and 1/2 ounces. These make ideal gifts or as an incentive to start acculmulating Gold for a family member or grandchild.
Browse our extensive range of additional South African, Canadian and Australian Gold coins, for a bullion investment that – like all our bullion investment coins – are recognisable and tradable the world over.