Listen to our latest Investing Matters Podcast episode 'Uncovering opportunities with investment trusts' with The AIC's Richard Stone here.
London South East prides itself on its community spirit, and in order to keep the chat section problem free, we ask all members to follow these simple rules. In these rules, we refer to ourselves as "we", "us", "our". The user of the website is referred to as "you" and "your".
By posting on our share chat boards you are agreeing to the following:
The IP address of all posts is recorded to aid in enforcing these conditions. As a user you agree to any information you have entered being stored in a database. You agree that we have the right to remove, edit, move or close any topic or board at any time should we see fit. You agree that we have the right to remove any post without notice. You agree that we have the right to suspend your account without notice.
Please note some users may not behave properly and may post content that is misleading, untrue or offensive.
It is not possible for us to fully monitor all content all of the time but where we have actually received notice of any content that is potentially misleading, untrue, offensive, unlawful, infringes third party rights or is potentially in breach of these terms and conditions, then we will review such content, decide whether to remove it from this website and act accordingly.
Premium Members are members that have a premium subscription with London South East. You can subscribe here.
London South East does not endorse such members, and posts should not be construed as advice and represent the opinions of the authors, not those of London South East Ltd, or its affiliates.
Thanks for that much-needed heartening appraisal of SHG’s prospects Daisan. But why should a fall in the price of gold to the levels of last year stop there? With the dollar’s continuing strength and Trump’s fiscal policies pushing the Dow ever higher, what happens when the US economy implodes and deflation sets in as predicted by the respected American forecaster Harry S Dent, who sees gold falling to $700 or even $400/oz? Then, surely, there would be generational buying opportunities, the only trouble is that by then we’d all be skint!
Technically there are a lot of arguments for a return to the Dec/Jan lows or even just below them but less clear technical arguments for lower prices. Or at least from the analysts that I have read. The market is turning its thoughts from deflation to inflation currently as indicated by the dramatic rise in bond yields. Trumps policies are potentially highly inflationary as well but also potentially beneficial to the dollar in the short to medium term as they raise the spectre of interest rate rises and the potential for repatriating overseas profits (suggested as $3tn). It is the strengthening US dollar that has hurt gold and there is some support to suggest this continuing for a while. I have read Harry Dent and also one other writer (whose name escapes me) who is suggesting $500 gold. Harry isn't too optimistic about the world and I tend to agree. However, the main issue with gold at these levels is that every gold miner in the world will go out of business as I know of none with AISCs of less than $500/oz. So there will be nothing left to invest in should gold pop from there! I can certainly see where Harry Dent is coming from. However, I am still looking for closer to a hyperinflation blow off than a deflationary blow off. And given that the current vogue is to meet deflation with negative interest rates, I'm not entirely convinced that gold won't react positively to that scenario as well (the gold price is driven by real interest rate differentials rather than inflation rate)
If you do read around all the analysts, one thing that is clear is that some well respected analysts are going to end up looking pretty stupid as the predicted gold prices range from $400 to $10000+/oz. They can't both be right unless of course they plunge and soar or soar and plunge! I find it difficult to imagine either scenario encompassing both the lower and upper limits.
Interesting and well balanced thoughts Daisan. Re the POG I look at the basic fundamentals too. We have reached 'Peak Gold'. Global production is going to begin to slide from next year and continue to slide going forward. Meanwhile exploration/new projects have slumped to a multi year low in terms of expenditure/discoveries. For me this inevitable means, if nothing else, an increasing tightening of supply. I would then assume there would have to be a commensurate slide in demand for the gold price NOT to rise in future years. Of course the strong dollar is an important factor but history shows the gold price can rise with the dollar. And we have got the paper gold casino on the COMEX and how long that can override true price discovery?
I agree on the fundamentals but I have no idea on how long the COMEX market can override physical. It has done so for quite a while and the volume traded is colossal. However, if 2011 taught us anything it was that true price discovery can be realised even in an environment dominated by paper gold. I suspect all that happens is that volatility is just increased and the likely slingshot higher will be all the more dramatic as the paper shifts to the buy side.
Since every prediction by so called experts have been dead wrong recently, I feel more optimistic. Gold sales firstly are seasonal, & China & India's buying season approaches. Secondly, European banks are about to go into crisis. Thirdly, SHG sells its product in dollars but reports in sterling, which means the annual results are going to be very good this year ... providing production is maintained.
Italian referendum takes place this weekend on constitutional reform. PM says he'll resign if his proposals are rejected ... sounds familiar ... Experts (there's that word again) reckon a full blown banking crisis if the government loses, sending shockwaves around the EU. Could be good for gold.