The gold market was so strong, showed such meaningful gains, and broke enough boundaries in January of 2012 to lead some analysts to question if it means a correction, or temporary price shift, is due. Posted by James Randolph on February 03, 2012
Best January for Gold Market Since 1980
February 3, 2012 – The gold market was so strong, showed such meaningful gains, and broke enough boundaries in January of 2012 to lead some analysts to question if it means a correction, or temporary price shift, is due. While that forecast sounds a lot like the analysts who thought gold had entered a bear market during the December correction, it does highlight and underscore just how strongly gold has performed this past month. Gold rose 11 percent in January; it’s largest gain since August of 2011 and the largest January gain since 1980. However, the market fundamentals that brought that 11 percent to pass are very different from those we experienced in 1980 and 2011.
January started off with a New Year’s rally for the record books. In a twenty-four hour period, gold was up 4.4 percent and in a matter of twenty minutes gold gained $40 in the gold market. The US Mint eventually sold over 5.5 million ounces of American silver Eagles after just a few business days. The Mint has been selling gold on par with silver on a dollar for dollar basis, meaning a much larger quantity of silver is passing through but demand for gold is just as strong. The only month in the preceding twelve that the Mint sold more volume and dollar amount was August of 2011.
This race to buy was bolstered by a couple of key political and economic events. The first to appear was the forecast problems in Europe. We experienced a reprieve over the New Year and holidays, but the problems were brewing and it was just a matter of time before the newest manifestation of that broke. Negotiations for a credit interest rate of 3.5 percent versus 4 percent from private bondholders collapsed, meaning private moneylenders could decide the financial future of the sovereign nation of Greece more easily than governments. The response was swift as gold popped another $20 per ounce in one trading session.
Most recently, the Federal Reserve’s Federal Open Markets Committee’s declaration that Fed policy will keep interest rates at the lowest possible level until the end of 2014 and the further raising of the debt ceiling by $1.2 trillion in the United States brought a further boost to gold. These, perhaps more than others, indicate the gold market will be strong going forward through the coming twelve months at least. Temporary setbacks are always possible, but fundamental dynamics of low interest rates and inflationary monetary policy ensure the price of gold will increase. The gold market continues to attract smart investors seeking safe haven or just seeking real money as they continue to move into gold.
Senior Staff Writer – Certified Gold Exchange