Gold fell on Wednesday morning, trading ahead of the outcome of a US Federal Reserve FOMC meeting and after talks on relieving Greek debt woes faltered.
Spot gold fell $10.48 to $1,655.92-1,656.20 per ounce. The metal touched a five-week high of $1,681.80 per ounce earlier this week before giving up gains. Various factors have been responsible for this movement in prices.
One of the most important factors in bullion prices in recent days was the news released on January 17th that India would be boosting its import tax on gold by 90 percent and its silver import tax by 100%. The notable import duty rises were aimed at increasing the country’s revenue base by taxing jewelry metals that have historically been very popular as luxury and gift items within the country. Since India (debatably with China) holds the top spot as the largest consumer of precious metals in the world, this import duty increase could significantly slow demand for physical bullion within that key emerging market economy. Stock prices of Indian jewelers fell in response to the news, and bullion selling pressure emerged due to anticipated weaker demand, which helped soften gold and silver prices
As the world has been talking about, the great economic crisis has played a significant role in the precious metals market.
Genuine reform has not been implemented. This crisis was caused by unprecedented levels of consumer and corporate debt and Wall Street greed. When the crisis happened, government rescued distressed debt by massively increasing its own debt. For example, the Federal Reserve and the European Central Bank are using their balance sheets at about a 30:1 leverage. This is the same sort of leverage that Wall Street banks had recklessly indulged in. When government debt was substituted for corporate and consumer debt, the whole system rolled over into a much more dangerous phase.
In such an unstable market one would look for various protection tools to remain safe and profitable.
One of the primary measures of protection is a healthy cash balance. You have to be in a position where you are able to ride out any crisis and also to take advantage of valuations in case of a crisis. If the crisis is as bad as I think it will be, you will be able to find and acquire assets at generationally low prices.
The other way to protect you is to invest in precious metals. I believe precious metals will do well whether we continue to stagnate or actually see another crisis. I think silver and gold equities will do very well in the long run.
The yellow metal has been a top performing asset since 2001, as portfolio diversification, concern over sovereign risk and rock-bottom interest rates aided to push prices from a low around $250 an ounce in 2001 to a height above $1920 in September 2011.
In 2012 or during the first quarter of the next year, it is likely gold to surpass that level, potentially breaking through $2000 an ounce level.
Once the macro economic backdrop reverts, naturally interest in investment in gold will decline, but this is not expected to happen before the second half of 2012. During the first half a rising dollar and increased risk aversion, will still maintain the yellow metal’s prices at relatively steady levels, despite curbing gains.
Gold is the first truly global asset boom that investors at all levels can participate in. Today investors are savvier and more heavily invested across markets and categories but gold is fundamentally money and all investors and savers can buy it. Local yet global!
Spot gold fell $10.48 to $1,655.92-1,656.20 per ounce. The metal touched a five-week high of $1,681.80 per ounce earlier this week before giving up gains. Various factors have been responsible for this movement in prices.
One of the most important factors in bullion prices in recent days was the news released on January 17th that India would be boosting its import tax on gold by 90 percent and its silver import tax by 100%. The notable import duty rises were aimed at increasing the country’s revenue base by taxing jewelry metals that have historically been very popular as luxury and gift items within the country. Since India (debatably with China) holds the top spot as the largest consumer of precious metals in the world, this import duty increase could significantly slow demand for physical bullion within that key emerging market economy. Stock prices of Indian jewelers fell in response to the news, and bullion selling pressure emerged due to anticipated weaker demand, which helped soften gold and silver prices
As the world has been talking about, the great economic crisis has played a significant role in the precious metals market.
Genuine reform has not been implemented. This crisis was caused by unprecedented levels of consumer and corporate debt and Wall Street greed. When the crisis happened, government rescued distressed debt by massively increasing its own debt. For example, the Federal Reserve and the European Central Bank are using their balance sheets at about a 30:1 leverage. This is the same sort of leverage that Wall Street banks had recklessly indulged in. When government debt was substituted for corporate and consumer debt, the whole system rolled over into a much more dangerous phase.
In such an unstable market one would look for various protection tools to remain safe and profitable.
One of the primary measures of protection is a healthy cash balance. You have to be in a position where you are able to ride out any crisis and also to take advantage of valuations in case of a crisis. If the crisis is as bad as I think it will be, you will be able to find and acquire assets at generationally low prices.
The other way to protect you is to invest in precious metals. I believe precious metals will do well whether we continue to stagnate or actually see another crisis. I think silver and gold equities will do very well in the long run.
The yellow metal has been a top performing asset since 2001, as portfolio diversification, concern over sovereign risk and rock-bottom interest rates aided to push prices from a low around $250 an ounce in 2001 to a height above $1920 in September 2011.
In 2012 or during the first quarter of the next year, it is likely gold to surpass that level, potentially breaking through $2000 an ounce level.
Once the macro economic backdrop reverts, naturally interest in investment in gold will decline, but this is not expected to happen before the second half of 2012. During the first half a rising dollar and increased risk aversion, will still maintain the yellow metal’s prices at relatively steady levels, despite curbing gains.
Gold is the first truly global asset boom that investors at all levels can participate in. Today investors are savvier and more heavily invested across markets and categories but gold is fundamentally money and all investors and savers can buy it. Local yet global!
