Gold. Yes, gold again

Have you been watching the stock markets of late? Then you must have noticed that there is spring in the air. It seems that within the short space of a few months, we have climbed the economic mountains, not fallen over the fiscal cliff, and looking down from our perch it seems we can just about spy in the distance the tragic crisis of Greece, the economy disaster in Spain and the muddle in Italy. In a few short months, storms seem to have abated. It is all quiet on the Western front – for now – but therefore why not jump on the bandwagon while the calm weather lasts?

The US mint ran out of 2013 American Eagle Silver coins last week- Neville Curmi

What about our insurance, our old friend – gold? Let us examine a few facts which are not easy to notice unless you can follow the metal and other commodities closely.

Last year 11 commodities rose in value with wheat rising as the top crop, followed by lead, zinc, natural gas and platinum all climbed double digits in 2012. Gold also rose seven per cent. Coal was the worst performer falling 17 per cent. For the first time, natural gas provided more electricity and power than coal did in the US in 2012.

Gold has been a consistent performer over the last 12 years in a row. The chart maps the last 10 years and easily demonstrates this phenomenal rise. We are now undergoing a period of consolidation. It is normal to stop for breath after climbing a steep mountain. But there are other peeks to conquer, so the show goes on.

Considering the global easing cycle is still very much in evidence, and considering that the monetary printing presses are still very much in demand and doing good business, and considering that our escape backwards from the fiscal cliff is still very clear in our vision, the fear trade will continue to prevail over 2013. Interest rates of course cannot encourage much excitement at their prevailing low level. So gold is still in our sights.

Central banks have been the biggest players in the market. (I wonder if our own bank features here). The Central Bank of Russia bought 650,000 ounces of gold in December alone. The US mint ran out of 2013 American Eagle Silver coins last week due to extra strong buying. Last year, for example, the brigade of the world central banks bought the most gold in nearly 50 years. How is that for confidence?

How is this for the fear factor? The German Bundesbank has decided to relocate and repatriate all its gold now held in France and 300 tons of its gold held in the US, back home to Frankfurt. There is no better and safer place than home.

Having said all this, remember gold does not give out any interest, so any profits would be provided by trading or via capital gain. But like all commodities, gold is a volatile metal, so holding for the long term may prove its worth overtime. Holding to trade will by far outweigh in profits made.

The chart shows no price rises in a straight line. So there will be plenty of chances to take profits and buy back at lower levels. Gold shares have lagged behind the gold price and are expected to show a better performance than gold starting as they are from a much lower ‘level’. Silver is also very much in the same vein.

Will we hit the $2,000 mark this year? It is not easy to say, of course, but my guess is that we should get much closer than we have ever been.

www.curmiandpartners.com

Curmi & Partners Ltd is a member of the Malta Stock Exchange and licensed by the MFSA to conduct investment services business. This article is the objective and independent opinion of the author. The value of investments may fall as well as rise and past performance is no guarantee of future performance.

Neville Curmi is a director at Curmi & Partners Ltd.