A Balanced Assessment of the Future of Gold (+2K Views)

Volatility in the gold market often results in extremely bullish and bearish views. Below are 4 facts to remember about gold that should help neutralize such views and allow you to take a more balanced and thoughtful approach to the yellow metal.

So says Frank Holmes (www.usfunds.com) in edited excerpts from his original article* entitled Four Important Facts to Remember About Gold.

This post is presented compliments of Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!) and the free Intelligence Report newsletter (see sample here). The post may have 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. You can also “Follow the munKNEE” daily posts via Twitter or Facebook. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.

Holmes goes on to say in further edited excerpts:

1. You can’t print more gold

The Federal Reserve continues to print…$85 billion every month…and research has found that the correlation between the rise in gold and the U.S. balance sheet is 0.96…

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2. Gold is viewed as a currency by central bankers

…I feel investors should look at how central banks around the world are viewing their own reserves….The World Gold Council reported that in 2012 central banks purchased 535 tons when only a few years ago central banks were net sellers of gold…While the tonnage is only a fraction of the overall gold market, it is widely acknowledged that central banks are building their supplies of gold as a means to diversify their holdings away from the U.S. dollar and the euro.

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3. A lack of love from the Love Trade is affecting fundamentals

…The two emerging countries that make up almost half of gold demand—China and India—have had a long relationship with the precious metal that is intertwined with their culture, religion and economy. With half of the world’s population buying gold for their friends and family, it’s important to put into context what is happening in their countries.

It was announced this week that China’s income growth is at its slowest pace since 2001…This is very important to gold, as China’s income growth has been shown to be highly correlated to the price of the precious metal over the past decade.

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…In India, gold consumption has been hurt by both a weak rupee and government taxes on imports. In the first quarter of 2013 alone, gold imports declined 24 percent, according to Mineweb.

4. Corrections happen, but have historically offered buying opportunities

As of the end of April 15, the gold price on a year-over-year percentage change basis registered a -2.6 standard deviation. While minor corrections in the gold price happen frequently, a move this severe has never occurred before over the previous 2,610 trading days.

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With gold’s standard deviation drastically below the “buy signal” blue band, we consider the yellow metal to be in an extremely oversold position on a 12-month basis.

The probability that gold will move higher over the next several months is high.

* http://www.usfunds.com/investor-resources/frank-talk/four-important-facts-to-remember-about-gold/

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