Wednesday, 26 September 2012

September 2012 Gold Summary - How Does Gold Stack Up Against the Paper Markets?

As outlined in my previous entry, September and November months are traditionally up-trend months for the price of gold. It looks as though that trend is set to continue, with October being a month of consolidation prior to a massive upswing in gold's value.

Obviously the spot prices of various metals have shifted since that date - all upwards, I might add, really reinforcing the historic trend that September is a month that sees the largest gains in gold.

I post this mainly to point out that gold is now dropping in terms of its spot price, consolidating in order to make a huge break upwards come November. While there are never any guarantees in the investment world, this one would appear to be something of a no-brainer.

As we head into October, the price of gold is currently dropping - falling 1.1% this week so far from $1774.45 to 1756.31, where it currently rests as of this post. It would appear as though the seasonal trends discussed in my previous post are going to continue. 

Overall gold is up 6.2% so far in September, starting the month at it's August 31st closing price of $1,648.50 and rising (again) to $1756.31 where the spot price currently sits.

Essentially, October will be a month to stock up on gold, as I (and many far more educated and experienced investors/economists than myself) continue to remain bullish on this illustrious metal. Any dips in gold's spot price should be capitalized on and viewed as an opportunity to buy during a phase of consolidation before another upward trend in its spot price.

Many, including myself, expect this upward drive in the price of gold to break the $1900/oz barrier, and potentially the $2000/oz barrier shortly thereafter. Contributing to this outlook is the fact that the Fed will continue with their QE3 unlimited bond-buying and toxic asset purchases of MBS's (mortgage backed securities) products from the private sector.

They are currently purchasing MBS's at a rate of $40 billion per month. In addition, in January of 2013 they will begin purchases of long-term Treasury bonds - 10-30 year bonds - to inject stimulus into the economy. This will add an additional $45 billion per month in Fed asset purchases, bringing the total to $85 billion per month.

They are printing the US Dollar into oblivion, as this round of QE is infinitely perpetual and will continue as long as jobs and economic data remain gloomy for the downtrodden US economy. This is very bullish for the price of gold, and most experts expect the price of gold to continue to go up as the devaluation of the US Dollar continues.

In addition, further cause to buy gold is demonstrated in the fact that the paper markets are all trending downward - spiraling, one may argue, as the influx of fiat money is injected into the system a la the Fed - forever to rest on the balance sheets of big banks rather than ever changing hands to a taxpayer.

The Dow Jones industrial average (DJIA) closed today at 13,457.55, down 101.37 points or -0.8% - and has since lost a further 44.04 points, down an additional -0.33% as of this post.

The S&P 500 saw its biggest loss in three months, falling 15.3 (-1.1%) with a close of 1441.59. As of this post, it has fallen an additional 8.27 points (-0.57%). 

This, of course,  is after it saw huge gains prior to the FOMC meetings on September 12 and 13. This was not a fluke, but rather a phenomenon that has been dubbed "Pre-FOMC announcement drift", discussed in a previous post I compiled here.
September 2012 S&P 500 Fluctuations - Courtesy Yahoo! Finance

In further losses, the Canadian S&P/TSX composite index closed at 12,257.18, down 56.36 or -0.5%, and the NASDAQ fell 24.03 points to 3,093.7, down -0.77% on the day.

As you can see, the paper markets are taking a thrashing, and will continue to do so as the Fed sticks to its policy of currency debasement and lining the coffers of the banks while screwing savers and the average Joe.

If you are interested in investing in gold or silver, I personally use, as I've found they have the best prices. I have received excellent customer service from them, and delivery has been pretty fast, too. There are many options out there, and (as always) google is your best friend when it comes to finding other options.

Just make sure you do the research - read reviews of the dealer, find out information on delivery time and price, compare to other reputable dealers, etc. etc. etc.

That's all for now. Buy physical gold and silver, protect yourself from currency debasement and inflation, and stay tuned for my next installment!

No comments:

Post a Comment