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GOLD – From the Situation Room

October, 09 2012

The Simple Facts

There has been a major shift in investor attitudes around the world toward gold and silver. Investors remain interested in buying and holding these metals against a wide range of possible political, economic, and financial crises that could shake their personal financial positions, but they have have shifted from a fear-driven attitude that they have to buy gold and silver today regardless of the price because the world’s financial system is going to collapse tomorrow, to a more nuanced realization that their worst fears are what we already are seeing: A protracted period of reduced real growth, higher unemployment, structural debt, deficit, trade, political, military, and other imbalances that threaten economic stability worldwide, low interest rates, and weak overall economic performance as Europe, the United States, and Japan slowly pays down the debt built up over the past five decades. In that environment, investors have become price-sensitive: They buy on dips and pull back when prices rise.


      PIMCO On Gold – The Simple Facts 


Fourth Quarter Outlook

Short term overbought it is our view that from January 2013 on we will start the next Bull Leg in this continuing Bull Market.  So, get ready to deploy some of that cash you have been holding back when Gold and Silver start testing support.

See the latest report and technical analysis here and in our blog

First, gold is definitely overbought, so a near-term unwinding of both the RSI and stochastic is to be expected.
Second, a fairly significant area of price resistance has been reached. The reaction highs in November 2011 and February 2012 both failed between $1790 and $1810 an ounce. We saw three intraday highs last week in the $1790s. Finally, traders need to deal with slowing momentum.



See Also  : World Gold Council commentary Q3 2012

Q3 2012 in summary

  • Gold (US$/oz) returned 11.1% in the third quarter as investors responded to further central bank measures aimed at stimulating the economy. Volatility decreased during the period, with gold prices experiencing little movement in the first half of the quarter; correlations to other assets, generally low, remained similar to those seen in Q2.
  • Central banks announced a continuation of their unconventional monetary policy programmes in Q3.
  • Central banks have numerous rationales for undertaking unconventional monetary policy, including lowering borrowing costs and supporting financial markets.
  • Financial assets have responded to central bank policy announcements, but gold’s reaction has been the strongest.
  • There is a consensus that these policies drive investment into gold purely due to inflation-risk impact. We believe that there is not one but four principal factors that provide further support to the investment case for gold:

– Inflation risk
– Medium-term tail-risk from imbalances
– Currency debasement and uncertainty
– Low real rates and emerging market real rate differentials