By: John Fisher
As I write this, gold has rebounded up $29.10 from yesterdays close to $1317.60 and silver has risen $.63 to $21.90. All of us gold and silver investors will see ongoing economic uncertainty over the next couple of weeks – all of which should bode well for gold and silver prices. The significant price drivers for 4th quarter are as follows:
- The entire U.S. Congress and Senate are stubbornly storming into the shutdown with fierce determination. The end game is a confrontation of the debt ceiling with a potential U.S. default. No deal on the debt ceiling will lead to safe-haven demand from all quarters and should cause a run on the U.S. dollar.
- Continued mediocre employment data will also lend to further gold and silver price recovery.
- China was on holiday yesterday so the market was closed. Meanwhile the Chinese government is taking an aggressive approach to accelerate the buying of gold in China. Their means of doing so is to increase the overall number of gold import licenses to include non-banking importers, which will include Chinese manufacturing companies. With their middle classes growing by the day in terms of numbers and wealth, this is in a country that is mining 440 tonnes of gold a year now and importing over 600 tonnes p.a. of it already.
- In India, the premiums on gold have dropped to single figures down from $40 an ounce previously. This is a result of the gridlock in gold imports at the ports coming to an end and gold is finally reaching wholesalers. For two months prior, India’s gold imports were close to zero, having averaged 70 tonnes per month previously. In addition, gold demand from India traditionally picks up in the September-December period because of the wedding season and the festival of Diwali.
All Things Considered – John’s Commentary:
If the shutdown is not resolved before Oct. 17, “the U.S. is likely to be downgraded in credit markets, its economy will falter, and confidence in the U.S. as leader of the global economy will stumble,” GoldForecaster.com founder Julian Phillips warned. In that case, “we see the potential for an impact on the global system equal to the mid-2007 credit crunch.
Action to take: As always I recommend buying in incremental amounts over time. Many clients right now are simply making weekly or bi-weekly purchases to consistently add to their portfolio at multiple price points. It is a simple way to “dollar cost average” your metals inventory.
