Spot gold prices are getting hit hard again today as of this post. Spot gold is currently quoted at $1368.40 down $17.50 on the session. The price of gold has now lost ground for seven consecutive sessions which is the longest losing streak in quite some time. The fact remains that the gold market has many hurdles to clear at this point if higher prices are to be seen.
The stock market continues to amaze many as it just seems to make new all time highs on a daily basis. It is difficult to tell where this may end, as the market is now in uncharted territory and there are no chart reference points to work off of. It seems that so much money has been sidelined for the last several years that every single day that goes by new money is being put to work in stocks.
This does make some sense, after all. Let’s not forget the turmoil of 2008/09 with TARP coming out, the AIG debacle and bailout, and other major issues that rocked stock markets. This was then conveniently followed up by the European debt crises coming to light, which also sent stock markets reeling and injected the markets with a further degree of uncertainty as the situation continued to unfold.
Although the situation appears to be more stable right now, there were times when it was thought the collapse of the EU was a possibility and the Euro was doomed. We do not believe we have heard the last of these issues, but it does seem that the situation has become more manageable. The point is this-the world did not end. markets have gone on and some degree of recovery has taken place. Because of this, new money is being put to work and money is being taken out of perceived safe=havens such as gold and silver.
In addition to this, the U.S. dollar continues to scream higher as the Fed gets ready to implement its exit strategy. Just yesterday, John Williams who is President of the San Francisco Federal Reserve Bank, commented that he is open to winding down the Fed’s bond buying program, otherwise known as QE. It appears that with more hawkish rhetoric coming from Fed members that this “tapering” of stimulus will be coming sooner rather than later.
Obviously this is supporting the dollar and is a bearish factor for the gold market. For now, gold looks poised to take out the April lows and lower prices certainly look like a distinct possibility. We think it is important to remember however, that just because stocks and the economy may be looking better now, we believe there will come a time when a price for all of the debt and QE must be paid. It is exactly that point in time when we feel physical gold ownership will “pay dividends.”
