Gold traders are the most bullish in 10 weeks and investors are hoarding a record amount of bullion as central banks pledge to do more to spur economic growth.
Eighteen of 27 analysts surveyed by Bloomberg expect prices to rise next week and five were bearish. A further four were neutral, making the proportion of bulls the highest since Aug. 24. Holdings in gold-backed exchange-traded products gained the past three months, the best run since August 2011, data compiled by Bloomberg show. They reached a record 2,588.4 metric tons yesterday, the data show.
“Central banks are all very concerned about a depression, so they’re keeping monetary policies as loose as possible,” said Mark O’Byrne, the executive director of Dublin-based GoldCore Ltd., a brokerage that sells and stores everything from quarter-ounce British Sovereigns to 400-ounce bars. “People are buying gold as a store of value to protect against currency depreciation.”
The Bank of Japan (8301) expanded its asset-purchase program on Oct. 30 for the second time in two months, increasing it by 11 trillion yen ($137 billion). The Federal Reserve said last week it plans to continue buying bonds and central banks from Europe to China have pledged more action to boost economies. Gold rose 70 percent as the Fed bought $2.3 trillion of debt in two rounds of quantitative easing from December 2008 through June 2011.
Rampant Money Printing By The Federal Reserve
Central Banks worldwide have gone on a money printing rampage to save governments that are unable to control spending or raise sufficient tax revenues. David Einhorn, President of Greenlight Capital, who has a brilliant investment track record, is rampantly bullish on gold and raises the question of what type of truly desperate measures central banks will take if the world economy enters another recession or suffers an exogenous shock.
"It seems as if nothing will stop the money printing, and Chairman Bernanke in fact assures us that it will continue even after the economic recovery strengthens. Even after the economy starts to recover more quickly, even after the unemployment rate begins to move down more decisively, we’re not going to rush to begin to tighten policy. Apparently, anything less than a $40 billion per month subscription order for MBS is now considered ‘tightening’. He’s letting us know that what once looked like a purchasing spree of unimaginable proportions is now just the monthly budget."
Seasonal Factors
Gold has a pronounced seasonal tendency to rally strongly in the last quarter of the year. The chart below from GoldCore shows the seasonal strength of gold over the past 30 years.
Courtesy goldcore.com
