AGE Gold Commentary is our regular report analyzing trends in precious metals and rare coins. We monitor domestic and international markets and extrapolate from our 30 years in metals to place current events into a hard asset perspective. View archives.
2/20/2001: Gold Market Update
Because of the recent drop in the gold price, we're issuing a Strong Buy Alert!
Since our last update, gold has softened in price as the bears continue to control this market in the near term. Today gold is trading just above the previous 20-year low in the $255 to $259 range. It is possible the market may weaken a little bit further, perhaps testing the low side of $250, before it rebounds and hold its gains.
In our opinion, the current lows are a market anomaly that cannot be sustained. We fully expect the market to rally. When the rally comes (not if the rally comes), we expect it to be fast and furious, like the last two rallies that drove gold up $50 to $70 in a matter of days.
Today's low price creates an excellent buying opportunity that absolutely should not be missed!
We urge you to take advantage of this low price and add to your portfolios NOW. Use one half of your available hard asset funds to buy at the current price. If the market drops further, use the other half to buy at the new low and cost-average down. Those of you who are familiar with our reputation know that we seldom issue strong buy recommendations. We are issuing one now!
Here are a few reasons why the current dip is temporary, and the prospects for gold are excellent:
- The PPI came out last week, showing an unexpectedly high 1.1% inflationary gain in wholesale prices in January. The Consumer Price Index is due out soon, and similar results are expected.
- South African miner Gold Fields Limited just announced that it's closing out the last of its gold hedges, which will improve sentiment.
- The U.S. dollar is over-priced and is about to fall. Falling prices of nickel, zinc, and other industrial commodities show demand from U.S. producers isn't picking up, and suggest the dollar's rally since the start of February isn't sustainable. High dollar prices have kept the gold price artificially low.
- University of Michigan reports that consumer confidence unexpectedly fell in February to its lowest since 1993. Gold usually rises in price when confidence drops.
- Energy prices are climbing again, and increased militancy between the U.S. and Iraq threatens to disrupt oil supplies
- Gold mining production is nearing an all-time low, yet industrial demand for gold is at an all-time high. According to figures released last week by the World Gold Council, demand was 11% higher in the fourth quarter of 2000 than a year earlier, setting a new quarterly record for the world's 27 major markets.
- Gold is absurdly cheap right now. From 1979 to 1999, the average price of gold was $386 per ounce, more than $100 higher than today. In fourteen of the last twenty years, gold has traded at over $400 per ounce. If gold merely returns to its 20-year average, today's investors would realize a 50% gain!
Again we urge you to take advantage of this rare opportunity to build you core gold holdings at prices near a 20-year low. We recommend British Gold Sovereigns in Brilliant Uncirculated condition as the best bullion buy today.
As always, thanks for your time.
Dana Samuelson, Owner and President
Dr. Bill Musgrave, Vice President
AGE Gold Commentary
After breaking out to a 6-year high of $1,560 in September, gold is consolidating gains of 14% for the year, its best since 2010 ... read more