“OPPORTUNITY KNOCKS” SAYS ROSLAND CAPITAL’S SENIOR ECONOMIC ADVISOR JEFFREY NICHOLS
NEW YORK (July 6, 2010) – Jeffrey Nichols, Senior Economic Advisor to Rosland Capital (www.roslandcapital.com), had the following commentary based on recent market activity and the week ahead:
Asian investors, jewelry manufacturers and possibly a few central banks are already using the late-June/early-July sell-off in gold as an opportunity to step up buying. Leading the charge early this week to acquire gold on the cheap near or below $1200 an ounce have been dealers and investors in India, China, Thailand and Indonesia. We think U.S. and European investors would be wise to follow their lead. And, if gold prices continue to retreat, the opportunity to buy at a bargain is only that much more compelling.
Once again we are seeing the typical and now familiar geographic divergence that has characterized previous big gold-price corrections in recent years: Institutional traders and speculators selling gold futures and over-the-counter forwards, followed by a pick up in price-sensitive physical demand in key Asian and Middle Eastern markets.
Importantly, this selling is from market participants looking to make a quick buck shorting gold or taking profits on earlier gains. Meanwhile, much of the pick up in price-sensitive demand across the globe is from long-term investors and savers who have a lasting affinity and allegiance to the yellow metal, many of whom are unlikely to sell any time soon.
For the most part, the sellers are large-scale traders at Wall Street investment companies, banks, hedge funds, etc., who at one moment or another may be dumping or loading up on euros, or oil, or any other financial or commodity derivative.
Late last week, for a variety of reasons, a few decided to sell gold in favor of the euro, or the dollar or equities. Some press reports pinned the sell-off in gold on an abatement of perceived sovereign risk. Others spoke of disappointing economic indicators and increasing concern that the United States and Europe are heading into renewed recession -- the dreaded "double dip." And a few may have simply sold ahead of the July 4th holiday, anticipating seasonal weakness over the summer months.
Whatever the case, selling by some triggered selling by others, selling that continued this week as the U.S. gold market opened for business on Tuesday morning after the long holiday weekend.
Regardless of current or prospective price weakness, there are good, solid reasons to expect gold prices will be much higher by the end of 2010 . . . and still-higher in 2011 and beyond. Some of these are:
- Inflationary U.S. monetary and fiscal policies -- past, present, and future -- along with the coming second dip in the U.S. business cycle that will force the Fed to yet greater volumes of quantitative easing and monetary creation.
- Europe's intractable sovereign debt crisis -- which has greatly undermined the euro's appeal as an official reserve asset and competitor to both the dollar and gold -- and is pushing the European Central Bank to pursue inflationary monetary policies much like the U.S.
- Continuing moderate, self-sustaining, rates of economic growth in the "gold-friendly" newly industrialized or emerging economies - especially, and most importantly, in India and China. Rising incomes will support gold demand in these two countries sufficient to drive gold prices higher this year and beyond.
- Rising net buying by the official sector, principally the central banks of a number of newly industrialized or emerging nations that wish to diversify reserve assets and avoid dollar-related risks.
- Similarly, rising private-sector investment demand -- reflecting fear of inflation, currency depreciation, and a loss of confidence in Western governments to deal effectively with today's economic challenges.
To arrange an interview with Jeffrey Nichols, please contact Liz Cheek of Hill & Knowlton at (212) 885-0682 or elizabeth.cheek@hillandknowlton.com
About Rosland Capital
Rosland Capital LLC is a leading precious metal asset firm based in Santa Monica, California that buys, sells, and trades all the popular forms of gold, silver, platinum, palladium and other precious metals. Founded in 2008, Rosland Capital strives to educate the public on the benefits of investing in gold bullion, numismatic gold coins, silver, platinum, palladium, and other precious metals. For more information please visit www.roslandcapital.com.
About Jeffrey Nichols
Jeffrey Nichols, Managing Director of American Precious Metals Advisors and Senior Economic Advisor to Rosland Capital, has been a leading precious metals economist for over 25 years. His clients have included central banks, mining companies, national mints, investment funds, trading firms, jewelry manufacturers and others with an interest in precious metals markets.
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Contact: Liz Cheek
(212) 885-0682
elizabeth.cheek@hillandknowlton.com
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