November 15, 2014
In a normal year, the end of the year is typically good for gold, as the Indian Festival Season causes a buying frenzy for gold. However this year is not normal. the World Gold Council announced that China's gold consumption for the 3d quarter of 2014 was down 37%. China was the largest consumer of gold, until this quarter, now India has regained this position, for now. What does the near term future hold in store for gold?
Well, it appears that gold will his the low $1,100/ounce range in the next couple of months. The dollar is very strong and shows no signs of weakening in the near future. The strong dollar makes it more expensive for foreign buyers to purchase gold, and that almost always means they will purchase less. Inflation, globally, is so low, many fear deflation, and have been dumping government funds into the economies at a alarming rate. Alarming, because most European countries are already up to their ears in debt and this will only increase their debt. Socialist economists tend to not understand economics, which says excessive debt is like a stone around their country's neck. If it gets large enough, they will sink. But they fear deflation so badly, they are willing to venture a trip to the bottom, apparently.
Also, many European countries owe large sums to the European Central Bank, so they have been selling one of their assets actually worth something, gold, to make payments on this massive debt, incurred by pouring trillions of $$ into their economies. Apparently they forget that businesses make economies grow and employ people, so they have neglected this important aspect of the economy, like all socialists tend to do.
In Europe, will the future "strong" economies be measured by the Least Bankrupt Country? At the current rate of government debt, it may very well be so.
Alas, the light at the end of the 2014 Gold Tunnel is definitely the train. We can only hope that gold can hold above $1,100/ounce, because if it does not mine closures are the only resort gold miners have, since they have already shed everything they can to reduce operating costs. If mine closures do occur, the supply of gold will dramatically be reduced, and prices will again rise, but at what cost? Tens of thousands of good jobs, trillions of dollars in lost income for the economies, and government revenue. Some may go out of business altogether, since they may have too much debt already and can not weather a downturn lasting very long.
But there is always next year and hope that good sense returns to governments, and they address fundamental aspects that will make their economies grow, and the global economic funk begins to recede.
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