Although the U.S. dollar is “fundamentally overvalued” and in a long-term downtrend, one prominent economist is expecting gold prices to average $1,335 an ounce in 2015.

Speaking at the 25th Denver Gold Forum, keynote speaker Dr. Martin Murenbeeld, chief economist with Canadian firm, Dundee Capital Markets, outlined his bullish and bearish factors for the gold market in 2014-2015.

Murenbeeld started his presentation by looking at what went wrong in 2013, highlighting an ‘orgy of ETF sales – 881 metric tons – and investors going to equities.’ He did note that Chinese gold net imports from Honk Kong set records, which was positive.

Dr. Martin Murenbeeld, chief economist at Dundee Capital Markets
He explained that in 2012, net imports in gold in China totaled 557 tons, by 2013 imports rose to 1158 tons.

In his presentation, Murenbeeld highlighted five key bearish points causing headwinds for gold: the Federal Reserve must inevitably tighten policy, the U.S. dollar will remain firm in 2014-2015, the world economy is sluggish, equity markets will continue to draw investment interest away from gold — investors still have gold to sell — and “technicals” remain bearish.

Focusing on the Fed and the end of QE, Murenbeeld said that the Fed balance sheet must inevitably decline and real rates will rise, but he questioned if higher rates will be seen before 2016. He said U.S. real rates rose in 2013, during the ‘taper tantrum’ and gold may have fully discounted rising yields, discounting further Fed actions.

Touching on the U.S. dollar, he said the currency was actually in a long-term downtrend; however, other currencies have been devalued against the dollar.

Murenbeeld also highlighted several bullish points that could help gold prices in 2014-2015, among them: ETF “supplies” that are down dramatically in 2014-2015; Asian physical demand will continue to expand; central banks will continue to buy gold and the global debt crisis will require ongoing monetary reflation.

He also noted global imbalances will remain unresolved until the dollar declines significantly, the commodity cycle will run many more years, geopolitical crises will multiply and the gold price is not ‘expensive’ by normal measures.
On the supply front, Murenbeeld doesn’t see supply reaching the highs of 2013, and he also expects a lower supply from jewelers and investors.

Looking on the demand side, he said the strengthening middle class in China and India are positive trends for the market, despite consumer demand being down from both countries.
He also expects central banks to continue buying gold as other countries will be looking to make a move to become viable reserve currencies.

Global debt is Murenbeeld’s big factor for gold. He said there are more entitlements from U.S. Government and “super-aged economies – Japan, Germany and Italy, today. U.S. real growth, as well as in many economies, are in decline.

“To deal with what’s coming at us we need to change a lot of stuff,” he said. “And it looks like it’s going to reflation, and that worries me.”

Gold prices fell to their three-month lows in September. The London PM Fix gold price stood at $1,286.50 per ounce at the beginning of the month, with prices closing at $1,251 per ounce at the close of trading on September 10. Gold is often viewed as an inflation hedge and safe haven investment by investors. Thus, gold prices are to a large extent influenced by a set of related factors including the macroeconomic outlook for the U.S. and world economies, the performance of alternative assets such as equities and the U.S. Dollar, the trajectory of interest rates and geopolitical uncertainty. In this context, we will look into the reasons for the recent decline in the prices of gold.

U.S. Macroeconomic Data

The Manufacturing Purchasing Managers Index measures business conditions in the manufacturing sector of the concerned economy. When the PMI is above 50, it indicates growth in business activity, whereas a value below 50 indicates a contraction. The manufacturing PMI has consistently registered values of over 50 for all months in 2014. As per PMI data released by Markit Economics, manufacturing activity in August was the busiest since April 2010. An improvement in conditions in the manufacturing sector points to a general improvement in macroeconomic conditions in the U.S. This has led to the strengthening of the U.S. dollar and has fueled expectations of an increase in interest rates.

Strengthening U.S. Dollar

Positive U.S. macroeconomic data has led to the dollar strengthening against a basket of other currencies. The U.S. dollar Index, which measures the value of the dollar relative to the majority of its most significant trading partners, has risen from a value of 82.75 on September 1 to 84.28 on September 10. Investors expect that improving macroeconomic conditions in the U.S. may lead to a sooner than expected interest rate hike by the Federal Reserve.

Interest Rates

With the economy strengthening, the Fed is expected to raise interest rates some time in 2015. However, the timing of an interest rate hike is contingent upon the pace of economic and jobs growth in the U.S. Current indications are that the Fed is weighing up revisions to its interest rate guidance of “low rates for a considerable time”. Investors are keenly looking out for cues from the Fed pertaining to the timing of an interest rate hike. A rate hike is likely to lead to a decline in the price of gold, as investors shift towards interest bearing assets.

European Central Bank Interest Rate Cut

The European Central Bank recently cut interest rates, in addition to announcing two bond purchase programs, reflecting concerns over low inflation in the Eurozone and the threats to the region’s fragile economic recovery. However, the impact of the ECB’s actions may be mixed. While gold may benefit from greater investment demand as traders hedge against excessive monetary stimulus, the ECB’s actions will also weaken the Euro and strengthen the Dollar. This would make dollar denominated gold contracts more expensive for buyers that use other currencies, and thus, temper the demand for gold.

Easing Geopolitical Tensions

Easing tensions in Ukraine and the Middle East will reduce geopolitical uncertainty, and consequently demand for gold as a safe haven asset. The withdrawal of two-thirds of Russia’s troops stationed in Ukraine from the country post a truce signed on September 5, signals the easing of the Ukrainian crisis. In addition, violence has also eased in the Middle East. A more stable geopolitical scenario has also put pressure on gold prices.

The Road Ahead

Due to the fall in gold prices, the stock prices of major gold producers have tumbled. Barrick Gold and Newmont Mining have registered a 7% and 5% decline in their stock prices this month, respectively. Gold prices in the short term will be influenced by the interplay of the factors discussed above. With a strengthening U.S. economy, an interest rate hike looks likely, with only the timing of such a hike uncertain. In the absence of any major geopolitical disruptions, gold prices are expected to weaken further. This is bad news for the likes of Barrick and Newmont.

by Alhambra Partners.

With credit markets in Europe and the US taking a bit of a pause for profit-taking or reassessment, it is notable that currencies have not. The euro finally broke free of what looked like a steady range, though unfortunately to the downside. While that may be celebrated by orthodox economists in Brussels and elsewhere, it should not as such devaluation has led to no place good in the recent past.

euro_dollar_march_2009_august_2014

While they continue to “fish” for economic growth via debasement, they should be looking to Japan for a realistic assessment of just how much worse such interference and instability makes economic function.

The yen too has broken free of its range, curiously for much the same reasons. The lack of actual economic progress (really, like Europe, expectations for progress, even diminished, are now being downshifted further to nothing more than hope it doesn’t outright deteriorate significantly from here) has “markets” looking for the “easy” way out. Currency intrusion seems to be the path of least resistance for central banks and their central planning, yet it may actually be the most poisonous of prescriptions.

yen_dollar_january_2014_august_2014

The yen has touched a low against the dollar last seen at the outset of 2014 when expectations for further QQE were highest. With the currency now breaking out of what was a very steady trend, Japan is actually courting very real danger and not just from the same impoverishment that it has undertaken since Abe took office. At some point, Japan’s currency will not be “worth” the claims it supposedly represents, and when that happens investors no longer will hold the currency and attempt to exchange that derivative claim to something more like real property – underlying Japanese assets themselves.

This is a kind of parallel to Gresham’s Law written into the fabric of a currency collapse. Such a trend need not be hyperinflationary, but it is always preceded by economic distress that stubbornly remains despite ever-increasing means to displace it.

That, too, binds the yen and the euro, as the euro cross with the Swiss franc touched a low not seen since November 2012. Again, that occurred last week while bond markets were retracing dramatic flatness and spread compressions (swaps).

swissfranc_euro_january_2010_august_2014

There isn’t much deeper analysis to be had at this point, only that with such major crosses now outside their “comfortable” ranges of late there is a distinct elevation in both risk and uncertainty (the two, obviously, related).

Curiously, however, the ultimate indicator of such risk, gold, has remained in its rut while these other pieces notoriously shed such contented framing.

gold_prices_february_2014_august_2014

The $1,300 level still looks like the relevant anchor or really axis by which gold prices are gyrating. I still believe that at some point prices here will begin to react to such apprehension as displayed by currencies now exiting toward more unknown terrain. Given the state of complacency, maybe it makes sense that more is “needed” before uncertainty turns toward fear. Central banks have been at least “successful” in that respect, though these latest developments are very real erosions of faith that such was lasting, or even real.

If you have unwanted gold that you hope to exchange into cash. You can sell your gold jewellery in a shop, online or at a garage sales. Don’t just go to anywhere that buys gold, you might get ripped off. Here are some tips to help you sell your gold more valuable.
sydney-gold-traders-what-we-buy-scrap-gold-01
1. Find a Trader
There are plenty of gold collecting traders in the city of Sydney, also lots of pawn shops in your neighborhood. If you consider your items as big deal, try to avoid some small shops. Gold buying traders need to have a second hand dealer license according to the State and Territory Law in Australia. If you google a trader or find it in the yellowpage, be sure they have the license.

2. Understand the gold spot price.
You can check online to find out the live spot gold price. You can evaluate your items roughly. Although gold price is not as up-and-down as stocks, it has different price depends on the time. If you think the gold price is gonna rally, you might want to wait for a while unless you are in short of cash.

3. Call the shop
It’s worth your time to do some work. Find out the exact location if they are in the city. Do they open at the weekend. Check their website if they have it. Tell them that what your item is and get a quotation before you go there.

sydney-gold-traders-niton-gold-high-price-buy-back-1
4. Go to the Trader
Not like other online trading, you’ll have to go to the actual shop to sell your gold. Make sure they have the right technology to test your gold. Remember, if you are not satisfied with the results, you can always leave. Gold buyers are in the business to make money and so you should expect a discount to the market price. Be sure you sell the gold to them, not the whole package. They probably don’t care the design of your pieces or your gold being broken. Do get back the attachment to your gold piece, such as gemstones or diamond.

The World Has Become A More Dangerous Place: Gold Is A Safe Haven

The world is more dangerous now than it was a few years ago, according to a new survey from Pew Research Center and USA Today. The survey revealed that 65% of those polled believe the world is more dangerous than several years ago, 7% feel the world has gotten safer, and 27% believe things haven’t changed much.

Take a look at global news headlines and it is not hard to understand the findings of this survey.

A quick look at cnn.com world news reveals the following headlines:

Meanwhile, BBC news world headlines offer up more information:

The Pew Research Center also noted that perceptions of the United States as a global power have plunged near a four-decade low. The study showed that 48% believe the U.S. is a less important and powerful world leader that it was 10 years ago.

As global political, military instability continues to increase —that in turn can have economic implications. Throughout history, gold has been considered a safe-haven investment and store of value that is essentially driven by the free market and can’t be influenced by monetary policies of a government.

Gold is considered to be the world’s first and most longest lasting currency. Historical lore says that gold was first used as money and a form of transactional payment in 3000 BC under the direction of the Pharaohs of Egypt. A gold/silver ratio was determined pegging the worth of gold equal to two and one/half parts of silver, according to the code of Menes, the founder of the first Egyptian dynasty. The first gold coins were minted in the kingdom of Lydia in Asia Minor around 610 BC.

Current day gold demand generally revolves around four key categories including:

Safe-haven or diversification demand would fall into the investment demand category.

In an uncertain world, there will be a segment of investors who always gravitate toward gold.
The months and years ahead show potential for increased global instability. The major industrialized economies continue to show structural deficits, with entitlement issues likely to bog down spending and growth in the years ahead. For example, in general, the older industrialized world maintain the majority of global political power at major international bodies like the United Nations and the IMF, while the rising emerging markets, especially China, have the economic power. The international political structures in the world have not adjusted to reflect the changing and current economic reality.

As the Pew Research Center survey revealed, the world is perhaps becoming a more dangerous place. And, given gold’s historical role as a safe-haven it remains a key portfolio diversifier.

Kira Brecht is managing editor at TraderPlanet.