How Appealing Is Gold
Priced In Other Currencies?
By Przemyslaw Radomski, CFA
The gold naysayers are still out there in droves,
other than Lady Gaga who is ensconced after surgery in a custom-designed,
24-carat gold plated wheel chair.
There is no denying that gold is off to its worst
yearly start in a quarter century and that just in February investors sold 106
metric tons of gold from gold ETFs. (Even so, this is just a small portion of
the fundís holding and gold has gone up since then, a bullish sign) The
newspapers headlines are full of eulogies for the gold bull market saying itís
finished, washed up, over.
This sort of stuff gets us, contrarians, excited.
The best time to buy into the gold market is when investors are at their most
Still, legendary investor George Soros reduced his
stake in a gold ETF by 55 percent in the last quarter, but we donít know if he
has piled back in or not. Soros Fund Management LLC owned about $97 million of
the yellow metal through the SPDR Gold Trust as of Dec. 31, according to
regulatory filing. John Paulson, the largest SPDR investor, kept his gold
holding valued at around $3.4 billion, unchanged last quarter, his filing
Gold has underperformed so far this year. That is
the unsavory truth. (We note that gold didnít decline for all investors. Gold
priced in yen rose this year and the same was the case in terms of the British
With global stock markets at a four-year high and
the dollar near its strongest in seven months, eight of 13 analysts surveyed by
Bloomberg said they expect gold prices will be lower in 2014 than this year. The
median estimate of the 13 analysts is for a record annual average of $1,700 in
2013, falling to $1,638 in 2014.
There seems to be a general sentiment that the world
economy is improving. Many are speculating that the Fed is going to stop
printing money after 2013 (through QE that is).
Thatís nice. But things are not always what they
seem. We donít see reasons for this enthusiasm about economy recovery just yet.
We donít see an end to quantitative easing. The Fed is increasing its already
large $3 trillion holdings of Treasury and mortgage securities by $85 billion a
month. Bernanke has made it clear in his most recent testimony before Congress
last month that he will not make any changes until unemployment rates fall to
6.5% or lower. He plans to hold short-term interest rates near zero and has no
plans to increase rates.
The truth is that fundamentals since gold reached
its apex a year and a half ago have not changed. Central banks around the world
are accumulating more gold, and announcing much more quantitative easing than
With fundamentals unchanged,
letís see how technical situation looks like for the yellow metal Ė weíll start
with its long-term chart (charts courtesy by
In this chart, we see that in
addition to reemphasizing that the
suggests that the situation is as extreme as 2008, we must also discuss the
While a move below this level is not bullish for gold on its own, recall that in
2008, gold moved below this level twice and the second time marked the final
We are now in this situation once again. This is
the second time gold is visibly below this important moving average. This
consolidation period was longer, but it still is the second move below the
average and in 2008, a rally was subsequently seen.
Other than adding this
observation virtually nothing changed on the above chart since we previously
commented on (Gold
Price in March 2013) and
we continue to have a bullish outlook as gold is above the declining medium-term
and 2012 lows.
We have already mentioned that even though the
yellow metalís performance seems relatively poor this year, it is not so in
currencies other than the USD. Japanese Yen seems to be the best example hence
weíll turn to gold priced in this currency now.
In this chart we see a clear breakout and a
verification of the breakout above the 2011 high. With this breakout just being
verified, the outlook is clearly bullish at this time.
On a side note, we would not be
surprised if some websites provided this chart as an example when
what a breakout or verification are Ė itís that clear.
Letís have a look at the yellow metal from the euro
Here, we see a small breakout
above the declining
On Friday, when the above chart was made available to our subscribers, we wrote
that if [the breakout was] confirmed, the outlook would
be very bullish for the weeks ahead Ė and we expect to see this confirmation
We now see that this was indeed the case and the
technical picture has improved.
we continue to have a bullish
outlook for the yellow metal. The yellow metal remains above key support lines
from both the USD and non-USD perspectives. We also saw a breakout for gold
priced in euro this week, and it seems that the final bottom for recent declines
may already be in for the precious metals. In case of the speculative capital,
having a stop-loss order ďjust in caseĒ, is still suggested, though.
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Thank you for reading.
Have a great and profitable week!
Gold & Silver Investment &
Trading Website - SunshineProfits.com
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Seeing is believing.
All essays, research and information found above represent
analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits'
associates only. As such, it may prove wrong and be a subject to change without
notice. Opinions and analyses were based on data available to authors of
respective essays at the time of writing. Although the information provided
above is based on careful research and sources that are believed to be accurate,
Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or
thoroughness of the data or information reported. The opinions published above
are neither an offer nor a recommendation to purchase or sell any securities.
Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw
Radomski's, CFA reports you fully agree that he will not be held responsible or
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