Thursday, March 2, 2017

Do Not Be Fooled - Precious Metals Market Looks Really Strong

I guess many investors are scared of the last underperformance in precious metals stocks. However, let me discuss two issues supporting a bullish thesis on gold and silver:

Physical accumulation

It seems that American investors are hoarding gold once again. For example, as many as 687 thousand ounces of gold were added to GLD vaults this year:

Since the beginning of February 2017 GLD has been reporting only inflows of gold (except for February 17 when 76 thousand ounces left GLD vaults).

Another iShares Gold Trust (IAU) added 194 thousand ounces of gold to its vaults this year.

Well, my readers know that I closely watch the data delivered by these entities because it is one of the best sources to get some idea about the physical demand for gold. In my opinion, both GLD and IAU confirm a bullish thesis on gold.

Gold strength

Since the beginning of February 2017 gold has been demonstrating substantial strength against the US dollar. Look at the charts below and the green, vertical line:

Usually, the inverted US dollar index should go in tandem with gold prices. However, since the beginning of February this relationship has been working in a different way. In other words, gold prices have been going up together with the stronger US dollar. It is not a common event. Until this phenomenon lasts the PM market is sending a bullish message.


1 comment:

  1. I for one believe Gold will move up in tandem with USD when we have a major crisis of confidence in global stock markets, bonds on any risk on assets.