Earlier today data on US benefit payments was released and whilst it was weaker than previously, gold did not appear to really respond. Gold appears to have settled itself into a new holding pattern at these elevated levels, so disinterested it appears to be in economic releases. However, we will see what happens tomorrow when Non-Farm Payrolls data is released.
Earlier today I interviewed Marc Faber, editor of the Gloom, Boom & Doom report. Who tells us that there is nowhere to turn for Western governments; whether they print or not it will be ‘disastrous’! We also discussed the upcoming BRICS meeting (will there be a currency announcement?) and how we can start to protect ourselves from what lies ahead.
Each day we wake up to news of further escalations in both the Middle East and Russia/Ukraine. Gold has responded somewhat to the ongoing geopolitical events but the effect of geopolitical uncertainty on gold prices isn’t always clear-cut. Rather than view it as the only reason to buy gold, we see it as one of many reasons for investors to include gold in their portfolios. We buy gold for diversification and as a hedge against such uncertainties, which are wide ranging and don’t happen one at a time.
Ultimately it’s the macro-factors that will drive the gold price. Whilst it’s understandable to wonder if you should affect your gold-holdings based on headlines, instead look at the macro-backdrop, which is very supportive of gold (and further increases). It ultimately remains an underbought asset, institutional buying remains strong, and (Western) central banks are in easing mode, not forgetting the perfect storm being laid by fiscal and recessionary risks.
And what of silver? It had a stellar month, in September. Climbing 9.9%. The market continues to be in deficit, and it has strong potential to outperform gold, especially in an era of Fed paring back rates. We think the next few months will be incredibly compelling. Right now the industrial precious metal looks very cheap (when compared to gold) considering that silver is strongly supported by industrial and green-metal demand.
With all that I will leave you with my conversation with Marc Faber and his thoughts on what we can expect from the next few months.
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