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Are Gold Prices Really Difficult to Predict?

Although it’s been said that people turn to gold in times of uncertainty, this doesn’t always hold true.

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Are Gold Prices Really Difficult to Predict_

Although it’s been said that people turn to gold in times of uncertainty, this doesn’t always hold true.

“Sometimes that works, sometimes it doesn’t. Gold did phenomenally well from 2000-2011 but really suffered after hitting nearly $2000 per ounce in 2011. From 2011 to 2015, the yellow metal pretty much fell in a straight line amid the European financial crisis,” stated Aaron Task in his Fortune article, “Why gold has been on a tear in 2016.”

Getting a Hold on Gold

Kenneth Rogoff — in his 2010 paper “Ten-Thousand Dollar Gold?” — asserted out that “gold and reason are difficult to reconcile.” He pointed out, “Most economic research suggests that gold prices are very difficult to predict over the short to medium term, with the odds of gains and losses being roughly in balance. It is therefore dangerous to extrapolate from short-term trends.”

Historically, there are several factors that influence the price of gold. Analysts use these factors to make their projections: supply and demand, dollar strength, and central bank movements.

Supply, Demand, and Dollar Strength 

Task wrote, “What ultimately drives gold is the dollar – which went on a tear in the second half of 2015 amid expectations the Fed would start raising rates aggressively while other global central banks have been easing.”

He added that “recent market volatility and weak U.S. economic data have caused some people to speculate the Fed might have to go to negative interest rates.” This has happened in Denmark, Switzerland, Japan, and the European Central Bank.

That said, Task continued, “In a nutshell, negative rates mean people and institutions are paying the banks to hold their cash, or paying governments to invest in their bonds. Rationally speaking, if it’s costing you money to keep cash in the bank, why not invest in something like gold that has an opportunity to provide a return on investment?”

The rise in demand for gold would, of course, drive up prices, especially since the world’s gold producers have cut back on their exploration budgets since 2011.

There are, of course, some experts who dare to predict gold’s future, even if they don’t necessarily quote prices.

In a July 2015 interview with CNBC, Sandy Jadeja, chief market strategist at Signal Pro, stated that he expected to see more short-term bad news for gold. However, he said that 2017 would be the year where he would go back to focusing on the bullion.
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He explained, “My view is that the equity markets will have really exhausted themselves (in 2017).”

Jadeja went on to say, “I would expect the equity markets to come off (in 2017), people coming back (to gold) from a sentiment point of view, thinking, ‘Maybe gold prices are so low right now maybe it’s time to go back in and hedge on equities.'”

Central Bank Movements

In an interview on CNBC’s Fast Money, commodities expert Dennis Gartman, editor of The Gartman Letter, said that gold is still in a bull market. He then predicted that gold “could finish out the year 10 to 15 percent above current levels.”

“With gold (CEC:Commodities Exchange Centre: @GC.1) hitting a 15-month high on May 2 and breaching $1,300, that would represent a price as high as nearly $1,500,” reported CNBC’s Stephanie Landsman.

Gartman based his prediction on central bank policies. “I think the monetary authorities around the world, with the exception of the United States, are continuing to err on the side of easier monetary policies,” he explained.

Landsman noted: “Easy monetary policies tend to make a country’s currency less valuable, potentially leading investors to turn to gold as a store of value. In addition, the low interest rates engendered by these policies make the yellow metal relatively more attractive, since it means investors aren’t missing out on much by holding a non-yielding asset.”

Price Predictions

Gold Stock Bull went as far as to quote specific figures for their long-term prediction. However, they issued this disclaimer: “The following represent our current short-term, medium-term and long-term gold price forecasts. Please note that short-term gold price forecasts are very unreliable in a market that is as managed and manipulated as the precious metals market. But this helps to give our readers some idea of what we expect the gold price to do in the coming months and years.”

2016 Gold Price Forecast: $1,550

2017 Gold Price Forecast: $2,400

2018 Gold Price Forecast: $3,200

2019 Gold Price Forecast: $4,000

2020 Gold Price Forecast: $5,000+

Then again, it must be said that one should not take these numbers at face value.

In the article, “The Future of Investing in Gold,” Terry Lane cautioned, “While gold tends to hold its value over time, its price growth is tied to interest rates, economic conditions and inflation. When the economy is growing, gold can lose value as investors look for investments such as stocks that may produce bigger returns.”

Rogoff likewise asserted, “If you are a high-net-worth investor, a sovereign wealth fund, or a central bank, it makes perfect sense to hold a modest proportion of your portfolio in gold as a hedge against extreme events. But despite gold’s heightened allure in the wake of an extraordinary run-up in its price, it remains a very risky bet for most of us.”

 

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Commodities

Gold Prices Reach Historic High, Breach $2,000 Level

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Gold Prices Historic High

For the first time ever, gold prices reach a historic high level of $2,000 today, even reaching a high of $2,049.18. Judging from the way the markets are still active, there are signs it’s still going up. Buoyed by a week dollar, low Treasury yields, and fiscal stimulus, gold keeps rising. On Monday, worldwide holdings in gold ETFs totaled 3,365 tons, and prices have surged more than 30% YTD. As prices rise during the day, there are yet no indicators that the bull market for gold is ending soon.

Related Article: How To Buy Gold For Your Investment Portfolio

Safe Haven

Along with government securities, dollars, and others, gold is a safe haven investment. Safe havens are assets that investors turn to during market turmoil. investors turn to during market turmoil. These stocks usually keep, or even gain value during periods of hardship. As they aren’t correlated with the economy, safe haven value can rise in value in a market crash.

While the gold prices reach historic high. Gold has profited from the pandemic and its resulting economic downturn. While US Treasury yields have dropped to below-inflation levels, lowering their value. Gold meanwhile, does not pay an income. In a booming economy, interest levels go high, which means higher yields for bonds or securities. For gold, the lack of yields makes it strong when the market crashes.

Gold Rush

The Fed’s earlier decision to lower interest rates to near-zero pushed investors to look into gold. It serves as an insurance asset in case stock prices go down. With the depreciation of the dollar, gold is the current safe haven choice for investors. With a weaker dollar, other currencies rush to buy gold, hence the historic highs. According to Rhona O’ Connell of StoneX Group: “Gold is a haven.  It doesn’t have anyone else’s political or financial risk associated with it.”

Other factors contributing to the rise in gold prices are international in nature. The tension between China and the United States over trade issues is one. Lately, some analysts think that the recent Lebanon explosion also pushed prices higher.

Stimulus plans also have an effect on prices. Some see the rising stock prices on news of a new stimulus package as a signal. It means stimulus money is powering the stock rally, and might not be sustainable.  This also leads investors to turn to gold instead.

Market strategist Margaret Yang believes the rise will continue in the next months. She said today’s low-interest rates and fiscal stimulus makes gold bullish for the mid and long term. And with the elections in November, gold prices may swing further depending on the winner. Analysts think that gold can breach the next psychological barrier of $2,500 within the year.

Pushing Precious Metals

Gold isn’t the only precious metal winner lately. Silver prices have also spiked to more than 30% year to date. Some analysts even believe that silver has the potential to outperform gold. Once the world economy recovers, industrial consumption will return. This in turn will spur demand for silver, which many industries use.  Already, the gradual reopening of industries has increased demand for silver. Its increasing applications in the medical and telecommunications fields helped with the demand. Apart from silver, platinum and palladium are also enjoying high prices this year.

Watch this video as the gold prices reach a historic high level of $2,000:

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Latest Update On Oil – Expected to Settle Between $45 and…

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“Oil is going to a new price point because of the revolution in production,” said Bill Perkins, chief investment officer of energy-focused hedge fund firm Skylar Capital Management. Perkins believes the price of crude could fall as low as $45 a barrel. He is personally short, a bet that the price of the commodity will drop. He believes oil will settle between $45 and $80 a barrel in the next year.

“Companies are harnessing amazing new technology to destroy the traditional energy value chain,” Perkins said. “There’s a lot of money to be made on that.” “U.S. energy names remain a significant net exposure for equity long/short managers who added longs and cut shorts after October’s trough,” the report said. “If pressed, one could interpret this positioning as bullish for energy stocks.”

Andurand thinks crude might hit $50 a barrel within the half-moon of 2015 and so rebound to a high of $70 within the fourth quarter. He also said the oil market is oversupplied by between 1.5 and a couple of million barrels per day, given weak demand, low disruptions to produce and enhanced production by nations that do not belong to the Organization of the oil mercantilism Countries.

“OPEC is not the swing producer anymore. U.S. shale oil producers are, but will take more time to react to prices than OPEC—it is a game changer that will lead to more volatile prices and bigger price ranges,” he added.

Morgan Stanley aforesaid the worth would wish to fall as low as $35 or $40 a barrel to prevent production and rebalance provides.

Still, the bank noted that the worth can doubtless rise eventually.

“Oversupply is probably going exaggerated and therefore the market is also content regarding side risks,” the report aforesaid.

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Commodities

Investing in Energy Markets Part 2: Oil, Gas and Energy

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It’s no secret that the energy industry is very profitable, with oil and gas making up 80% of the market.

 

Thus, these two resources attract the most people. They are the best energy investment resources due to high demand and wide range of options. However, with energy scares fresh in our recent memory and the climate change movement greatly affecting energy policy, new alternatives are constantly being sought.

Terror group ISIS may make $3 million a day selling oil

Everything that we do requires some type of energy. As a result, the price of energy affects the going rate for other commodities as well. When the price of oil increases, the price of transporting goods goes up as well.

That is why the cost of milk fluctuates and why your favorite imported coffee beans are more expensive than Folgers. Factors that contribute to these prices include geopolitics and natural disasters, but can never truly be accounted for in full. That is one of the underlying points to understand and accept about energy markets. Something can always go wrong. Typically, it doesn’t, but when it does things can get hairy and fast.

TYPES OF ENERGY SECTORS: That could affect your Household

Nuclear Nuclear power actually produces 1/10th of the world’s power, without emitting carbon. The United States and China have roughly 75% of the world’s nuclear plants with India and Russia also tapping into the market.

“Green” and renewable energy companies You can invest in different companies that place an emphasis on renewable resources by using the stock market. This option is optimal for investors who like the idea of green technology but do not now want to run the risk of investing in developing companies directly. This market has always been tricky from an investment perspective due to volatility. If you have an appetite for risk, however, this is a good place to look.

Modern Energy (solar, wind, geothermal, transportation, efficiency) Modern energy is made up of three major components or categories. They are wind, solar and biomass. The renewable sector is expanding at a rapid rate. We have witnessed a steady employment increase in the energy sector since 2011 with no end in sight. All types of investors and speculators are flocking to the natural resource markets in attempts to get out ahead of the renewable energy trend that could be the way of the future.

Big Oil In 2010, the world market for oil witnessed an incredible increase of 32%, to over $2,100 billion. According to estimations of oil segment professionals, the market’s value will hit $2,683 billion in 2015. The competitiveness of the global market of the crude oil is explained by its limited resources and mankind’s insatiable appetite for growth. This factor should not be disregarded easily. Our desire for more explains the majority of the energy marketplace.

Gas sector The market of natural gas reached $18.5 billion by the end of 2011. Demand for gas has recovered to match and surpass pre-recession levels. The US prices for gas are half of those in Asian countries and the EU. Gas demand decreased 3% in 2009, but at present is on the rise.

Electricity Buying the stock of electricity companies is the preferred way of entering this marketplace. The majority of the participation in electricity markets, however, takes place in the futures markets. Since power companies are constantly projecting and calibrating their loads, the futures market is the only place where investors with this sort of risk profile will feel that they belong.

Coal Many non-coal energy sectors directly depend on the performance of coal because burning coal has been proven to produce enough energy to support high demand. Due to recent regulations in the US by the Environmental Protection Agency, coal has taken a minor hit, but until a massive, institutionalized adoption of newer technology, it is highly unlikely coal will be going anywhere for the foreseeable future. In other words, coal is very much a barometer for this market. Though it is unlikely to happen any time soon, a massive dip in coal production would likely signal the emergence of a new viable energy source.

Hydro Hydropower energy is still very limited but there has been over $75 billion in investments pledged to R&D before the year 2020. There are some companies worth checking into, but for now this is very much a long term play.

Energy Funds These funds are established with companies related to the energy field. Be aware that some energy funds are more successful than others and produce a higher return than others. Often times, the energy funds are established to diversify various portfolios and minimize risk.

Read more on How Natural Resource Distribution affects your wealth

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