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GOLD PRICES FROM JANUARY 2016 TO 10th MARCH
CHART COURTESY WWW.KITCO.COM
Are Central Banks Pushing on a string?
In the first west week of January I posted this Goldwatcher note
“Gold is insurance against the unexpected and the unthinkable. Gold is poised to breach the psychologically and technically important $1100 threshold…Gold pundits like to punt gold demand as coming from fear or love trades. But they ignore the more important trade trades – i.e. the speculative punts that can account for most the money flowing in and out of gold”
The global risk landscape this time last year was fairly tame and I posted several comments on gold price prospects for the year that proved to be useful. The landscape this year has been different and recent posts on gold have included Ray Dalio on Central Banks Risk Pushing on a string
Messages from The Goldwatcher Book:
The manuscript for The Goldwatcher was submitted to the publisher, at the end of 2007. At the time the gold price was a little over $800 – about double the where it was when I first submitted the book proposal to Wiley.
The Goldwatcher (Page 186) included this comment under the heading
Messages From History
.”…Pundits had been calling for the Gold Price to reach $850, the level it spiked to in 1980. That’s equivalent to about $1900 in 2007 money. However a price spike and a price average over a longer period are very different situations. “
As we all know the price spiked to above $1900 in September 2011, fell again below $1100 in January this year and is now in sight of breaching $1300.
Motivation, Strategy & Timing
My contribution to investing in gold has been based on motivation strategy & timing. Yesterday’s dramatic responses to ECB President Draghi’s package of stimulus measures was followed by dramatic prices movements that are settling down today with these among other price changes:
GOLD +0.60%, COPPER+ 0.68%
OIL + 2.27%, LEAD +1.15%,, ZINC +1.61%
MOMENTUM, ALGORITHMS & ANIMAL SPIRITS:
Price overshoots and undershoots are par for the course in currency and commodity markets. As it’s likely that future price movements will also be driven by momentum, algorithms and animal spirits it will make sense for investors to monitor these influences themselves or keep well informed from a reliable information source.
All postings on this blog (The Goldwatcher) will remain freely accessible in the public domain. For further Goldwatcher comments please follow Investor Literacy
From previous Goldwatcher postings:
# GOLDRUSH PERFORMANCE CHARTS :
SOURCE THE ECONOMIST
# Content added 12th August:
by Nicholas R. Lardy Peterson Institute for International Economics
|China’s central bank took a potentially major step toward a more market-determined exchange rate on August 11, when it announced a revision in the process for fixing the central parity exchange rate, the starting point for daily trading of the renminbi (RMB) in the onshore market…China’s move is consistent with long-standing advice from the IMF and from the US Treasury, both of which have repeatedly called for China to adopt a more market-determined exchange rate policy. We should expect this to lead to greater volatility and two-way movement in the value of the RMB vis-a-vis the dollar.
11th August posting:
Following this morning’s fall in the Chinese Remninbi Anthony Doyle’s Bond Vigilantes Quick Comment is informative :
“The People’s Bank of China (PBoC) has announced this morning that it is improving the pricing mechanism of the daily fixing rate of the remninbi. It will do this by referencing the previous day’s closing rate and by taking into account “demand and supply conditions in the foreign exchange markets” as well as exchange rate movements of other major currencies. As a result, the USDCNY (US dollar to Chinese Yuan Renminbi rate) was fixed higher by 1.9% as a one-off adjustment and represents a record weakening of the Chinese currency. It is the first weakening in the exchange rate by the PBoC since 1994.”
“…Any move to liberalise the determination of exchange rates should be viewed positively for the global economy. Given China’s level of importance as a key manufacturer of goods and its huge cache of foreign reserves, it is unsurprising that large moves in the exchange rate can have significant spillover effects for other economies and financial assets. Any further evolution of the determination of the daily fixing rate of the renminbi will continue to be closely watched, especially in an environment where the Chinese economic growth profile continues to be questioned.”
Link to Video of Fed Deputy Chairman Stanley Fischer Bloomberg interview yesterday where he mentions concerns with low US inflation and reservations on not moving interest rates until inflation “normalised.”