Investment Contrarians

gold prices

Why Consumer Confidence Will Remain Weak for Months to Come

By for Investment Contrarians | Oct 22, 2013

Consumer ConfidenceAs most of you know, the consumer represents the largest part of our economy. The key to getting our economic recovery moving forward is to ensure that consumer confidence continues rising. The only problem: consumer confidence isn’t rising—in fact, it’s dropping sharply.

One of the few reports available on recent consumer confidence (due to the government shutdown) is the Bloomberg Consumer Comfort Index, which showed a significant drop from -9 in September to -31 in October. This latest reading is now the lowest level of consumer confidence since November of 2011. (Source: “Consumers’ Outlook for U.S. Economy Plunges to Two-Year Low,” Bloomberg, October 17, 2013.)

Now, I know what you’re thinking: consumer confidence naturally took a hit when all of the shenanigans in Washington began, culminating in the U.S. government shutdown.

That is true. A big part of the drop in consumer confidence was directly due to the ridiculous position that Washington imposed on all of us. And I’m sure when we begin to see the economic releases flowing out of government agencies again, the news will be that the economic recovery has stalled due to the impact of the shutdown.

However, there are two points that still bother me.

The first is that prior to the government shutdown, the level of consumer confidence, at least from the Bloomberg Consumer Comfort Index, was still very low. It’s not as if consumer confidence and the economic recovery were barreling full steam ahead, and then all of a sudden the government shutdown let down the anchor.

The truth is that both the economic recovery and consumer confidence were far below optimal levels … Read More

Update: Global Gold Bullion Demand Still Rising, Supplies Running Dry

By for Investment Contrarians | Oct 21, 2013

Global Gold Bullion DemandIt is amazing how different investor sentiment can be around the globe regarding just one topic: gold bullion.

Most of you are quite aware that the price for gold bullion here in America has dropped significantly this year. One could come to the conclusion that investor sentiment has left the precious metal for good.

However, looking at investor sentiment for gold bullion on an international basis, the picture is very different.

Just recently, the premium for gold bullion in India hit a record $100.00 an ounce above London prices. The demand for gold is so high in India that the supply for physical gold is running out. (Source: “Gold Premiums Hit Record in India,” Reuters, October 15, 2013.)

As most of you are probably aware, the Indian government has tried to clamp down on imports of gold bullion to try and stem the outflow of their currency, which is causing the rupee to drop significantly.

This is a great example of not just investor sentiment on a local level, but of global investor sentiment as well, which gives us a better picture of the true fundamental situation. Gold bullion has fallen in price here in America; that’s because investor sentiment looking at the precious metal from the point of view of the U.S. dollar.

People in other nations are not experiencing the same type of price drop in gold bullion. In fact, in India, the rupee has dropped so far that gold prices are still near their record highs.

Will investor sentiment shift in favor of gold bullion once again versus the U.S. dollar?

Obviously, no one can predict the … Read More

Why I See an Upcoming Trade Opportunity for Gold

By for Investment Contrarians | Oct 16, 2013

Upcoming Trade Opportunity for GoldIf you are a gold bug, you probably won’t like what I have to say in this column, but just give me a chance to explain why I simply feel the time for the shiny yellow metal has come and gone for now.

Yes, the yellow precious metal could inevitably head back to the $1,800-an-ounce level, but I doubt that. Maybe $1,400, but it won’t reach much higher in the short term, of course, unless the country defaults on its debt, a war in the Middle East escalates and brings in more countries, or inflation suddenly jumps much higher.

But to expect gold to rally back above $1,400–$1,500 just because we are seeing some central banks buying or people hungry for jewelry—it’s unlikely that will happen.

The best trade on the yellow ore is as a safe haven play. There are many who talk about the limited amount of yellow ore in the ground. That may be true but so far, we have ample supply. Plus, there are more reserves yet to be unearthed.

Back in September, when gold surged by $60.00 to over $1,360 an ounce following the decision of the Federal Reserve not to begin its tapering program, I was bearish on holding the precious metal. Even when gold fell back, then bounced back to $1,340, I was still not convinced.

Here we are with gold hovering around $1,280 an ounce. Last Friday afternoon, prices were at $1,287 an ounce—a decline of roughly $29.00 an ounce in intraday trading. There was news that prices fell $25.00 an ounce in two minutes on Friday morning due to a major … Read More

Why I Won’t Be Buying Gold Anytime Soon

By for Investment Contrarians | Sep 12, 2013

Gold Anytime SoonWhen gold surged to over $1,400 an ounce, I was still not a believer in its potential as a buying opportunity—rather, I thought it was more a trade against the possibility of an expanded conflict arising in Syria.

The gold bugs were suggesting the time for the yellow metal was here again, and I even heard a target price of $1,700 an ounce. Now, with the situation in Syria looking to be resolved, the safe haven’s gains over the past few weeks are beginning to fade away as the price falls below $1,400.

My feeling is that gold could move even lower and back towards $1,300-$1,325 if the Federal Reserve decides to rein in its bond buying at next week’s Federal Open Market Committee (FOMC) meeting. The numerous rounds of quantitative easing and lower interest rates drove down the value of the greenback and created an environment of easy money that helped to drive up the price of gold.

Now, with the Fed’s bond tapering around the corner and bond yields set to edge higher, the U.S. dollar will likely get stronger. And since gold is priced in U.S. dollars, the cost to buy U.S.-denominated gold will increase. The higher expected financing rates will also impact the carrying cost of buying the yellow metal, so I also expect demand to fall, which will help to drive down prices.

In the absence of a strike in Syria, I’m calling for gold prices to decline as we move forward.

The futures market is predicting gold will stay in the $1,300 range until mid-2015 and prices to break above $1,400 by the end … Read More

Global Gold Demand Shows Positive Trend Going Forward

By for Investment Contrarians | Sep 5, 2013

Global Gold DemandOne of the most difficult things to do as an investor is to buy when others are selling. This is the most common mistake investors—both the retail public and some professionals—make.

The recent move in gold shows the difference between short-term and long-term thinking. While many investors were hesitant to step in and start buying gold as the price was dropping, many central banks were doing just the opposite.

Recently, Russia continued buying gold; China and India followed suit, taking advantage of the significant pullback in gold prices. While exchange-traded funds (ETFs) were busy selling gold bullion, many of the emerging market nations were buying gold and in significant quantities.

It goes beyond central banks buying gold for reserves, which they continue to do, but even jewelry demand for gold continues to increase.

Jewelry demand for gold bullion worldwide increased to 576 tons in the second quarter of 2013, up 37% from the same period last year. Jewelry demand for gold bullion in China increased 54% during the second quarter of 2013. (Source: World Gold Council web site, August 15, 2013, last accessed September 3, 2013.)

We already know about the insatiable demand for gold in India, which saw an increase of 51% for gold bullion in jewelry in the second quarter of 2013 versus the same period in 2012.

As many of you know, buying gold in India has created such a currency problem that the government is trying to clamp down on imports of gold bullion by continuing to increase taxes. It seems that regardless of the price of gold, many of these emerging market nations continue buying … Read More