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What Today’s Central Bank Uncertainty Means for Gold Prices In The Future

Precious metals have taken off in the first quarter, and so far nothing seems to be able to stop the inexorable rise back to the glory days for gold. With the reclaiming of the prices above substantial point $1,200 per ounce, major voices in the banking and investment world are jumping back aboard the gold-acclaiming band wagon. In the last week alone, gold has received more winning endorsements than seemingly unstoppable superstar and Republican Presidential contender Donald Trump did following Super Tuesday’s mega blowout victory. Consider that Bear Creek Chair, HSBC the world’s largest international bank, and RBC of Canada have all come out with overwhelmingly positive comments in gold’s honor in the first few days of March. Clearly this all heralds that something significant has changed in the precious metals complex, but what is exactly causing the meteoric rise back to superstardom for the yellow metal? We will explore the somewhat negative and unsettling answer in this post.

Bear Creek Warns Other Miners About Complacency

The first ringing endorsement for the king of precious metals emerged at the 2016 BMO Metals and Mining conference held in Hollywood, South Florida. Precious metals miner Bear Creek’s Chairwoman of the Board Christine McLeod-Seltzer came out strongly in gold’s corner. She believes that rising gold prices are going, going, gone and are actually not coming back down. She stated, “The corner has been turned. I am optimistic.” Besides this, she is seriously worried about the declining reserves with which many mining companies do not appear to be so concerned about going forward. “If you are not replacing your mineral reserves, then you are coming closer to a finite end of life for your company,” she added.

HSBC Says That Gold ETF Accumulation and Especially Investor Uncertainty Are Fueling Current Gold Price Rally

HSBC the world largest international bank attributes the rapid recent rise of gold to two principal factors. They see a sustained and continuous accumulation period of gold going on by the major international exchange traded funds on the one hand. On the other hand and more worrying is their fear that global central bankers are rapidly exhausting their all-important arsenals for boosting national and worldwide economic growth. They note that despite the recent dollar strength and stronger than anticipated private sector jobs growth report in the United States, gold did not suffer any setbacks as would be normally anticipated by these turns of events. They stated that the daily movements in Forex pairs, bonds, and stock equities are not sufficient to explain away the totality of the gains for gold or the unexpected yet undeniable massive improvement in the psyche and confidence of the overall gold bullion market.

They point to the substantial and unanticipated sustained rise in Exchange Traded Fund gold holdings for all of the month February which then managed to jump still another 250,000 major ounces on the first day of March all by itself. HSBC also says that the recently warned about negative interest rates are becoming more and more entrenched in the major developed economies, and this is also a major player in gold’s corner causing it to rally on up. It is actually these negative interest rates that prove the wider financial market is nervously interpreting and signalling that they believe that global central banks are quickly running short on options to prop up the shaky developed nations and all around the world economy. In this day and age and environment where it appears more and more likely that the central banking authorities, long considered to be the reliable economic champions and financial world backstoppers of last resort, seem to have fewer and fewer alternatives remaining to them, gold has once again become an appealing asset of choice as a safe haven protection when all other alternative assets look increasingly unstable and unimpressive at the same time.

RBC of Canada Weighs In, Providing a Third Screaming Endorsement for Gold Prices and Trajectory

RBC is the next well-known and widely followed global bank to jump aboard the rising gold bandwagon so far in March of 2016. RBC’s Capital Markets states that they have witnessed a “huge uptick” of interest by investors in the precious metal gold market already this year. The net longs in gold futures positions that are speculative has risen at the same time as global gold inventory holdings held by the global exchange traded products have similarly roared ahead. The combined commodity assets under management, or AUM, have risen to be higher than $200 billion for the first time since December of 2015, presently standing at an impressive $206.7 billion in holdings.

RBC Capital Management astutely notes that gold has been the greatest stand out and leader in this trend too, mainly because of the inflows to the various Exchange Traded Products traded around the globe.  To this effect, they point out that the net inflows to the Exchange Trade Products have approached nearly 260 tons year to date so far. This rivals the last year of massive growth and appreciation in the commodities complex 2012 whole year inflows which were themselves at a near record year for gold, the precious metals, and commodities complex in general. This has catapulted the gold Exchange Traded Product net holdings back towards the end of 2014 holdings levels, per the research team at the Royal Bank of Canada Capital Markets.

The only caution offered by the bank’s precious metals research team is that such gold and other precious metals holdings did plummet from the November of 2012 peak of around $183.5 billion to the subsequent low of $86.8 billion that is currently held on account, meaning that they lost almost $100 billion in that time frame, or 53% of their assets under management in slightly more than two years time. They state that these massive gains in gold holdings are indeed welcome, but caution that this recently founded dramatic uptick in gold investor confidence and interest will have to be proven to be sustainable for it to amount to a long lasting and near permanent game changer for both gold, the complex of precious metals, and the commodities markets in general and all around.

Final Words on Gold’s Major Comeback

It is a positive sign that gold holdings and precious metals investor confidence is indeed once again rising after a nearly five year drought for the gold bull market. The downside to all of this is that it is largely explained by the seeming failure of the central banking cabal to reign in economic weakness and financial market instability despite their continuous years of sincere efforts and very best attempts over the past decade.  This signals that continued and even worsening global economic conditions may soon be in the cards. That makes now the best time ever to hold on to your retirement account and Gold IRA precious metals holdings. Do not be tempted to cash out now while the chips are only up a relatively small amount in the scheme of the universe. Thanks to the problems in the world economy and endemic in the global financial system as a whole, the best is still yet to come for international gold prices as measured against any profligate nation’s currency.

Wesley David

Wesley David is an American published author with decades of experience in financial writing. His areas of expertise include precious metals, commodity investing, economics, international relations, history and more.

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About Wesley David (9 Articles)
Wesley David is an American published author with decades of experience in financial writing. His areas of expertise include precious metals, commodity investing, economics, international relations, history and more.