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While the monetary policies in the United States, Japan and Europe are accommodative to a large extent, these
policies are not having the desired effect on inflation. I expect the long-term impact on inflation will be quite positive but the short-term deflation worries are more than enough to weigh on the prices of gold and silver. Deflationary pressure might prevail in the short-term and will probably give us a chance to buy precious metals at lower levels.
The above are edited excerpts from an article by ONeil Trader as posted on SeekingAlpha.com under the title Gold And Silver: More Short-Term Pain?
The following article is presented by Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!) and the FREE Market Intelligence Report newsletter (sample here) and has been edited, abridged and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. This paragraph must be included in any article re-posting to avoid copyright infringement.
The article goes on to say in further edited excerpts:
As the charts below show, inflation in the most of the developed world has been subdued in the last two years.
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Source: www.tradingeconomics.com
- The U.S. inflation rate is in the 1% to 2% range since the end of 2012.
- The situation in the eurozone is even worse, as the inflation is the lowest since the 2009-2010 period.
- The situation in Japan is getting better, but this might be a short-term event because of the pickup in consumer demand before the sales tax hike in April. We should find out soon if this was a one-time event, and what the impact of the sales tax hike was on Japan’s inflation rate.
- China’s inflation rate has been declining in the past several months.
Safe-haven buying
- Although the Ukraine crisis seems far from over, it will likely remain a local conflict, and should not have an impact on the prices of precious metals…
- The China-Japan and China-Vietnam territorial disputes might spark safe-haven buying, but I do not think that there is potential for serious escalation.
- The instability of equity markets has also been a non-issue so far, but may be in the intermediate-term. This may be also linked to deflation worries which are not bullish for gold and silver, and they could both plummet together with the equity markets, as they did for the most part in the 2008-2009 period.
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The Gold & Silver Charts
Gold and silver are on their way to test their 12-month lows in the next couple of weeks.
- Silver is already there and may break to the downside any day…
- Gold is still 5% above its July and December 2013 lows…
The rallies following the lows have taken gold and silver prices to a lower level than before, which is also bearish for the precious metals, as it shows the buyers are not able to take the price higher.
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Source: Stockcharts.com
Conclusion
I believe that the inflation and price charts paint a clear picture, and that until inflation in the world picks up significantly, there will be no meaningful rallies in precious metals…[While] I am bullish on gold and silver long term, the short-term pressure is still evident and might take them lower in the next couple of months.
Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.
*http://seekingalpha.com/article/2260773-gold-and-silver-more-short-term-pain?ifp=0 (© 2014 Seeking Alpha )
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