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 climbing with gusto!
Greetings from American Gold Exchange.
Since our Strong Buy Alert of February 20, gold pushed up from $256 to $269, pulled back to $259, and is now pushing higher once more. Today alone gold gained $6.20, closing at over $272.00, a 10-week high! Gold is looking very strong and conditions are ripe for continued gains.
The present rally was sparked by several important, very bullish events this week, all of which suggest sustained strength:
- The Bank of England announced it plans to auction 30 tons less gold in the next year than it has since May 1999. Reduced Central bank sales will tighten already sparse supplies, driving prices higher.
- Central banks are signaling that they're reducing the amount of bullion available for lending to speculators and mining companies. Already speculators are scrambling to cover short positions, fueling this week's rally. With supplies dwindling, more short covering rallies should follow.
- The cost of borrowing gold for one month rose to 6.3% (annual), the highest rate in eighteen months, almost tripling the level of a week ago. This surge in lease rates is extremely encouraging for gold. It means there is a physical shortage on the market. Remember that we're in the first quarter of the year, traditionally the slowest quarter for physical gold demand. The last time gold lease rates were this high was in September 1999 after the signing of the Washington Accord, a pledge by European central banks to limit sales and lending of bullion. This accord, and the high lease rates it engendered, rocketed gold prices from the mid-$260s to a two-year high of $339 per ounce on Oct. 5, 1999, just weeks later.
These bullish developments are just icing on the cake. Overall gold market fundamentals are the best we've seen in 20 years. Here are a few more reasons why gold is poised for major gains:
- 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 14 of the last 20 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!
- Gold mining production is nearing an all-time low. South Africa, the world's largest gold producer, announced recently that its output has dropped to the lowest level since 1954. The low price of gold has hurt the mining industry and it is now showing in production rates.
- Industrial demand for gold is at an all-time high. World Gold Council figures, released last month, show 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. The world continues to buy gold at an ever-increasing annual rate.
- U.S. stocks are weakening and the vaunted technology sector is a bust! From its all-time high of over 5000 — one year ago tomorrow — NASDAQ has plummeted nearly 60% and lost an estimated $4 trillion! Closing today at 2052, it reached its lowest point in 27 months.
- Job layoffs are becoming commonplace (Intel, an "unassailable" Blue Chip, cut 6000 jobs yesterday), consumer confidence is dropping, energy cost are going through the roof, and the economy is in a slow motion tumble.
Gold, the ideal insurance policy to protect your hard-earned wealth, is now offering outstanding profit potential as well. We are looking for upside resistance at $275, $295 and $320. If gold moves above $275, look for more gains and quickly. We urge you to take advantage of this exceptional and fleeting chance to buy gold low in a market that could be on the verge of a strong up move!
That's it for now. We'll keep you informed.
Dana Samuelson, Owner and President
Dr. Bill Musgrave, Vice President
AGE Gold Commentary
Gold is gathering momentum to begin its assault on the previous record high of $1,911 and then push above $2,000 ... read more