GOLDBUGS AMEX Goldbugs Index (GOLD)

[CaptWhizbang]

The Next Move for Gold to Set New All-Time Highs This Year is Days Away

By Barry Stuppler
Feb 21 2012 4:28PM

I believe that all the elements are now in place for a Gold break-out move from the current $1700/$1760 trading range. This move will happen very soon. There will be a short pause when it breaks into the $1,800 level, and then we are heading for new highs before the summer.

What are the key elements to the coming gold move?

1) More Global Quantitative Easing (monetary stimulus) is on the way

Both Great Britain and Japan have recently announced massive increases in monetary stimulus programs. The Eurozone countries have currently given problem banks that are holding sovereign debt massive injections of euros, and are also preparing massive amounts of monetary assistance for Greece, Spain, Italy, and Portugal. While in the U.S., more than a majority of Federal Reserve Open Market Committee Governors favor another round of monetary stimulus (QE3) to keep our economic recovery on course within the United States.

Over the weekend, China cut its required bank reserve ratios, joining a number of central banks in relaxing monetary policies to promote economic growth. Greece’s current debt crisis was dealt with on Tuesday morning as Euro zone finance ministers agreed to the 130-billion-euro ($172 billion) Greek rescue package.

Governments are loosening bank reserve requirements to make lending easier, as well as printing trillions of Dollars, Euros, and Yen to pay down debt and stimulate economies, driving down the value of paper money versus gold.

2) Investment demand for Gold is increasing from Central Banks and the public.

2011 was a record year for physical demand for gold investment products and that demand escalated more and more as we approached year end.

Global demand for gold in 2011 rose to 4,067.1 tonnes, worth an estimated US$205.5 billion - the first time that global demand exceeded US$200 billion and the highest tonnage level since 1997, according to the World Gold Council's Gold Demand Trends. Of the total 4,067 tonnes 2011 world gold demand, 1,703 tonnes (41.8%) came from China and India. Last week the World Gold Council (WGC) provided details on the 2011 World’s demand from Central Banks Gold purchases. In their report, the WGC disclosed that the World’s Central Banks purchased 440 tonnes of Gold in 2011, a 471% increase from a record high of 77 metric tonnes in 2010.

Physical demand for coins is now outpacing jewelry demand and many countries are seeing dramatic growth in public buying of gold sovereigns and popular European and U.S. gold coins.

3) The perception of Gold as a mainstream investment has changed.

10 years ago, investors would buy gold as a potential inflation hedge or for asset diversification. Only a small group of U.S. financial planners and money managers (less than 5%) would even consider gold as part of an investment strategy, as it was called a non-productive assets class. The few financial advisors that did allow gold into an investment portfolio would limit it to only 5-10%.

Now, high profile investment advisors (Soros, Paulson, and others) proudly share their gold investments. Gold is now in the mainstream media,with its daily price broadcast on major radio and T.V. stations.

Gold is now considered as a hedge against debasing currencies.More and more financial advisors and money managers that I work with are recommending gold and silver as part of a balanced investment portfolio with a range from 15 to 25% commitment. Many financial professionals now feel that with a consistent 10 year track record of appreciation, the risk element for gold investments has been minimized.

Fourteen out of our fifty States have passed (or have pending) legislation that allows gold and silver coins to be used as currency in commerce transactions. Both houses of Congress have proposed legislation that would re-introduce a gold standard.

4) Low global interest rates on bank CD’s, Corporate, and Government Debt

Global interest rates have fallen to 20 year lows in Europe, Asia, and the United States.

Earning a fixed return of less than 2% on a multi-year AA government debt, versus an average return on gold over the past 10 year of 20%, gives gold the advantage for income focused investors. Plus, the U.S. Federal Reserve has virtually guaranteed that interest rates will remain low for the next two years.

By Barry Stuppler
Feb. 21st 2012

http://www.kitco.com/ind/Stuppler/feb212012.html