Perfect Scam: Central banks Print money & buy bullion with it

He who trims himself to suit everyone will soon whittle himself away.
Raymond Hull

Perfect Scam: Central banks Print money & buy bullion with it

Gold has closed above $1230 and indicating that a bottom is in or that one is close at hand.  The trend has turned neutral from negative thus giving Gold a much-needed boost to potentially test the $1350 ranges. India however, dealt the gold markets a negative blow by maintain the tax on Gold and suggesting that they would increase it slightly.   This development could be overshadowed by a more positive development that concerns central bankers.  Central bankers overall have been purchasing Gold rather aggressively over the past 24 months.  However, the biggest buyers are not from the west; they are Russia, China and Kazakhstan.  Central bankers in the West are embracing negative interest rates with open arms.

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Central Bankers are loading up on Gold.

Source: www.bloomberg.com

According to the World Gold councils’ report for the 4th quarter of 2015, three factors stood out:

  1. Mining production fell for the first time since 2008
  2. Central bank buying remained strong – up 25% from Q4 2014.  Q4 was the 20th consecutive quarter of net purchasing by central banks.
  3. The ETF market saw a slowdown in outflows: 133t in 2015, compared to 185t in 2014.

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Euro and Dollar

The trend in the Euro has turned neutral from negative and until it turns positive, all rallies are destined to fail. The Euro and Gold tend to trend in the same direction, and as the trend in the euro is still neutral, we have to assume that Gold will start to face some headwinds soon. However, there is a silver lining; Gold and the dollar have trended in unison in the past and hence a weak euro does not mean that Gold cannot continue trending upwards in the face of a stronger dollar.

The trend in the dollar, on the other hand, is neutral, but not too long ago it was up (bullish), and until it turns negative, the outlook favours a resumption of the dollar bull.

Negative interest rates major hurdle for Gold

Negative rate wars have started and in such a low-interest climate Gold does not tend to fare well, so it will be interesting to see how Gold holds as the negative rate wars gain traction. The action looks promising so far as Gold is holding up well and several Gold stocks have experienced strong moves. Here is a list of the top 10 stocks in the Gold market based on price action. 

TOP Gold stocks 2016

Lists such as these can be useful as you can see how the stocks hold up when Gold bullion pulls back.  The top players will shed the least and vice versa.

Please all, and you will please none.
Aesop

Other articles of interest:

Achieve Financial Independence & retire Young by not being a Lemming  (March 9)

Fed Will Shock Markets; Expect Monstrous rally in 2016 (March 6)

How to Profit from Misery & Stupidity (March 4)

Religious wars set to Rip Europe Apart  (March 4)

Oil prices: bottomed out or oil prices heading lower (Feb 28)