Why Gold & Silver Prices Will Continue to Explode Higher

The price of gold reached a new record high Thursday at 1354 dollar per ounce, silver touched a new all time high at 23,5 dollar an ounce.

J.S. Kim at SmartknowledgeU.com on why gold/silver prices will explode higher in 2011 and coming years, and the fraudulent nature of the global monetary system:

Market Snap Shots

Gold: Slightly down after the new record, however, RSI is still tending up.

Here’s the last six week’s chart:

And here’s the last 48 hours:

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SILVER: Seem to follow the gold price pattern. However, the last six week’s chart show – as opposite of gold –  a slightly downward tending RSI.

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Gold Demand Rose By 36% In Q2, Gold ETF Demand Up 414%

Total gold demand1 in Q2 2010 rose by 36% to 1,050 tonnes, largely reflecting strong gold investment demand compared to the second quarter of 2009. In US$ value terms, demand increased 77% to $40.4 billion, the World Gold Council reports. Demand for paper gold – ETFs – rose by 414%.

“European retail investor demand has increased significantly.”

Marcus Grubb

“Economic uncertainties and the ongoing search for less volatile and more diversified assets such as gold will underpin investment demand for gold in the immediate future. Further, in light of lingering concerns over public debt levels and the euro, European retail investor demand has increased significantly,” Marcus Grubb, managing director at World Gold Council, says in a statement.

Demand for gold will remain robust during 2010 as a result of accelerating demand from India and China, as well as increasing global investment demand driven by continuing uncertainty over public debt and economic recovery, the World Gold Council (WGC) says.

According to the WGC’s Gold Demand Trends report for Q2 2010, published today, demand for gold for the rest of 2010 will be underpinned by the following market forces:

• India and China will continue to provide the main thrust of overall growth in demand, particularly for gold jewelery, for the remainder of 2010.

• Retail investment will continue to be a substantial source of gold demand in Europe.

• Over the longer-term, demand for gold in China is expected to grow considerably. A report recently published by The People’s Bank of China and five other organizations to foster the development of the domestic gold market will add impetus to the growth in gold ownership among Chinese consumers.

• Electronics demand is likely to return to higher historic levels after the sector exhibited further signs of recovery, especially in the US and Japan.

Demand For Gold ETFs Up By 414%

Total gold demand1 in Q2 2010 rose by 36% to 1,050 tonnes, largely reflecting strong gold investment demand compared to the second quarter of 2009. In US$ value terms, demand increased 77% to $40.4 billion, according to the WGC report.

Investment demand2 was the strongest performing segment during the second quarter, posting a rise of 118% to 534.4 tonnes compared with 245.4 tonnes in Q2 2009.

The largest contribution to this rise came from the ETF segment of investment demand, which grew by 414% to 291.3 tonnes, the second highest quarter on record, WGC points out.

Physical gold bar demand, which largely covers the non-western markets, rose 29% from Q2 2009 to 96.3 tonnes.

Global jewelery demand remained robust in Q2 2010. In the face of surging price levels, consumption totaled 408.7 tonnes during the second quarter of 2010, just 5% below year-earlier levels. Gold jewelery demand in India, the largest jewellery market, was little changed from year-earlier levels, down just 2% at 123.0 tonnes. In local currency terms, this translates to a 20% increase in the value of demand to Rp216 billion.

China saw demand for gold jewelery increase by 5% to 75.4 tonnes3. While growth in demand in tonnage terms was hindered by extreme weather conditions, the growth in the local currency value measure of demand was 35% to RMB 19.8 billion.

With the return of demand for consumer electronics, industrial demand grew by 14% to 107.2 tonnes, compared to Q2 2009.

Flight To Quality

“While many investors turned to gold as a ‘flight to quality’ in response to the uncertain financial environment, this interest has proved resilient even though a sense of optimism has started to return to some sectors of the investment community. In addition to the ETF market and physical bar and coin market, the demand for gold through internet based investment platforms is likely to provide further sources of investment demand,” Marcus Grubb, managing director at World Gold Council, says.

“Economic uncertainties and the ongoing search for less volatile and more diversified assets such as gold will underpin investment demand for gold in the immediate future. Further, in light of lingering concerns over public debt levels and the euro, European retail investor demand has increased significantly,” he adds,

“Over the past quarter, demand for gold jewelery in key Asian markets has been challenged by rising local prices. Nevertheless, we are seeing a deceleration in the pace of decline in demand, providing a strong outlook for ongoing recovery in this crucial market segment,” Mr. Grubb says.

Price of gold over the last two years. (RSI still tending up).

Here’s a copy of the full Q2 report from World Gold Council.

Related by the Econotwist:

Mike Krieger Discusses Politics, Economics, And Gold On Keiser Report

Want To Be Covered In Gold?

Gold and Silver: Avoid Bandwagon Jumpers at All Costs

The Safest Bet During Uncertain Markets

Civil And Criminal Probes Against JP Morgan For Silver Manipulation

Gold Coin Sales Surge

The Great Golden Lie

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Gold and Silver: Avoid Bandwagon Jumpers at All Costs

I guess we’ve all noticed the increased amount of “Buy Gold&Silver” adds with reference to the rising prices of the precious metals. And if you’re not an expert it can be difficult to find a serious dealer. In fact, the odds of being swindled rise just s fast as the gold price. But here’s J.S, Kim at SmartKnowledeU with a few guidelines.

“When investing in gold and silver, be sure to steer clear of the bandwagon jumpers because in all likelihood they will cause you to lose money even as you should be making it.”

J.S. Kim

“Would it be possible to convert such big picture macro thinking into successful portfolio management? I thought this was particularly tricky since getting both the timing of big macro changes as well as the market’s recognition of them correct has proven at best a difficult proposition. Smart investors had been complaining about the housing bubble since at least 2001. I ignored Stan, rationalizing that even if he were right, there was no way to know when he would be right. This was an expensive error. The lesson that I have learned is that it isn’t reasonable to be agnostic about the big picture. For years I had believed that I didn’t need to take a view on the market or the economy because I considered myself to be a “bottom up” investor.”

David Einhorn, the President of Greenlight Capital, a long-short value oriented hedge fund, conveyed these thoughts at a Value Investing Conference in October of 2009.

Get the big picture wrong during the second phase of this monetary/economic crisis and you may never financially recover during this lifetime. That said, beware the bandwagon jumpers! Who are the bandwagon jumpers? The bandwagon jumpers are the antithesis of the big picture advisers. When traces of the smallest new uptrend appear, they are there to tell you this is the “next” big thing and that you will lose out by not hopping on board the bandwagon right now. When US, European, and Asian markets rose during the beginning of the year, the bandwagon jumpers were the first ones on your doorstep to sell you the false story of economic recovery instead of revealing the horrible fundamental economic conditions and the monetary debasement policies that were being pursued by Central Banks inside the US, European and Asian nations.

The bandwagon jumpers screamed that a new bull market was here and that time was slipping away as you stood on the sidelines. When the major markets started to fail and gold and silver started to perform, the bandwagon jumpers were the ones that bombarded you with emails about investing in gold and silver, even though five years ago, four years ago, three years ago, or even two years ago, they had never mentioned gold and silver to you a single time. The bandwagon jumpers were the ones screaming about prolonged deflationary periods three months ago but now scream about inflation concerns. “Gold and silver are hot now, so climb on board!” they yell.

It’s easy to separate the big picture guys from the bandwagon jumpers because the big picture guys’ story has remained remarkably consistent for the past five years as the bandwagon jumpers jump from hot item to hot item to sell you. This is not to say that the big picture guys won’t adjust their game plan to changing market conditions because if they are smart, they will. However, ever twist and turn in market conditions does not threaten their resolve or their understanding of the big picture so that they need to change their tune every two months to pitch the “hot” sell just to make their next buck as is always the case with the bandwagon jumpers.

Of course, through the luck of pure mathematical probabilities, the bandwagon jumpers will occasionally be right about their “hot” ticket item, but here is why you still want to avoid bandwagon jumpers at all costs. Bandwagon jumpers will push the idea of the next great bull market, and then two months later, when the stock market falters, they will change their minds and warn of a stock market crash. They warn against a gold bubble onemonth, and then two months later, recommend that you buy gold when gold continues to rise significantly.

Bandwagon jumpers, by nature, search for the best performing asset class over the previous six to twelve months, then develop marketing materials that falsely present themselves as experts in that asset class, and finally bombard potential clients with emails about this particular asset class until they receive multiple bites on the hooks they throw out there. Bandwagon jumpers are perpetually narrow sighted and react to changing market conditions instead of focusing on the big picture and planning for the likely direction of future market conditions. Because bandwagon jumpers are reactionary in their marketing versus pro-active, they are perpetually behind the performance curve, always suggesting assets after they’ve risen significantly or recommending selling assets after they’ve fallen significantly, and never quite understanding the proper reasons for executing either action.

Worse yet, bandwagon jumpers may even instruct you to purchase the worst possible vehicle in a good investment, such as the GLD ETF for gold or the SLV ETF for silver. Furthermore, their timing, due to their lack of understanding of the big picture, is likely to be atrocious and they are far more likely to steer you into buying assets at peaks instead of bottoms, and into selling assets at bottoms instead of peaks.

In conclusion, if you’re seeking to buy gold and silver now and have been bombarded by gold and silver investment opportunities from a company within the past 12 months that never urged you to buy either precious metal before 2007 or even before 2008, then you will know that this company is a bandwagon jumper, as the big picture of the global monetary crisis has been quite clear for at least five years now to anyone that has deemed it important enough to understand the big picture. When investing in gold and silver, be sure to steer clear of the bandwagon jumpers because in all likelihood they will cause you to lose money even as you should be making it.

JS Kim

Managing Director & Chief Investment Strategist

SmartKnowledgeU

Related by the Econotwist:

Stock Market Guru: Sell Everything!

The Safest Bet During Uncertain Markets

Civil And Criminal Probes Against JP Morgan For Silver Manipulation

Gold Coin Sales Surge

The Great Golden Lie

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