We have seen a recent sell off in Gold Bullion, but with the following stimulus measures occuring in the global economy, you can understand why Gold Traders expect the price of gold to rally in 2013.
We are seeing the beginning of a new bull market for commodities which started back in September 2012. China's economy is still "only" growing by 8%, and the PMI is just over 50.7, well below their 2010 10.8% GDP growth rate and PMI of 55, yet the price of iron ore as well as other commodities have risen to within 20% of their record highs.
The reason for this is that China's economy grows by $500-650Billion per year every year, and a more moderate increase in economic growth to 7.5-8.5% will demand higher and higher quantities of iron ore, coal, copper, nickel, zinc, rare earth, graphite etc.
The price of iron ore has risen to $145 per tonne this week in China on the back of restocking by Chinese steel mills. We can expect to see iron ore range between $130 per tonne during and $190 per tonne during peak years.
China's economy grew by the slowest levels in 13 years in 2012, the US grew by 1.5-1.8% in 2012, Europe fell back into recession and Japan's economy grew by 0.2%. This is why the ASX and Materails/Energy Sectors performed poorly last year. Yet minerals prices were still within 25% of their record highs, and still over 200% above their long term prices.
We still haven't had a period of growth where China's growth averaged 8.5% and the US averaged 3.5%(high growth for USA) and 2-3% for Japan and S Korea....yet! I'm expecting to see this eventuate by the end of 2013 early 2014 with all this stimulus now!
Even with Europe languishing at 0-1% growth a scenario above will mean record high minerals prices for Australian miners. By late 2013 and early 2014, we should begin to see such a scenario. With share prices smashing record highs depending on the company's own performances.
In 2012 the market performed poorly due to money sitting on the sidelines in Bonds/Term Deposits/Cash due to fears of a Greek exit and Euro Break Up didnt eventuate, neither did the US falling back into recession neither did China's economy falling back to 4% GDP growth and the Fiscal Cliff didnt eventuate. All this cash is now earning less due to lower interest rates and we will see money inflows back into equities over the next few weeks and months to ensure "they don't miss out on the next upswing in the markets".
These major events have now passed, and what we are now seeing is the following stimulus measures:
1.$1Trillion being Printed by US Federal Reserve during 2013 2.Over $500Billion worth of Yen being printed by bank of Japan in 2013 to lift their inflation rate to a long term 2% CPI after the new Govt was elected purely on the basis of promising to print as much money as needed to lift Japan's inflation rate, but more importantly depreciate their currency to lift their exports....same as what the US is doing :) It is basically a Race to the Bottom for these nations' exchange rates to help their exporters sell more goods overseas. 3.Bank of England is printing between 30-45billion Pounds every two months 4.China has reduced their RRR and interest rates, which has lifted their economic growth from 7.4% in 2012 to 8.1% now, which should peak at 8.7-8.9% by the end of 2013
All of these Rounds of Quantitative Easing will lift the price of gold well above $2000/oz in 2013.
In 2009 when the US Fed printed $480Billion the price of gold rose from $650/Oz to $1200/Oz, in 2010 when it printed another $480Billion the price of gold rose again from $1200/oz to $1900/oz.
The price of gold is now $1650/oz, with $1trillion about to be printed by the US Fed during 2013, coupled with the largest amount of Money Printing in history by world economies. Where will it head to by the end of 2013?
We just need to take advantage of the largest round of stimulus by investing now, so that over the coarse of 2013 we can profit from the situation.
Cheers Nectar IDC.AX
Fed Dealer Survey Showed QE3 Purchases Continuing Into 2014 By Caroline Salas Gage - Jan 5, 2013 6:00 AM ET
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Primary dealers expected the Federal Reserve to continue with its asset-purchase program for more than a year in a survey conducted by the central bank before its Dec. 11-12 meeting.
The median respondent in the survey by the Federal Reserve Bank of New York predicted that the central bank will continue with is asset-purchase program until the first quarter of 2014. Fed 'Moving Steady Forward' on Jobs, Swonk Says 4:52
Jan. 4 (Bloomberg) -- Diane Swonk, chief economist at Mesirow Financial Holdings Inc., talks about the December U.S. employment report. She speaks with Deirdre Bolton and Sara Eisen on Bloomberg Television's "In The Loop." (Source: Bloomberg)
The results showed dealers may have been expecting the central bank’s third round of asset purchases to last longer than Fed officials anticipate.
“Several” members of the Federal Open Market Committee said it would “probably be appropriate to slow or stop purchases well before the end of 2013,” according to minutes of the meeting released yesterday. A “few” others were willing to let the program run to the end of the year while “a few others” didn’t give a time frame.
Dealers projected the Fed raising its benchmark interest rate in the third quarter of 2015, the same median response as in the surveys before the central bank’s September and October policy meetings, the results showed.
The Fed’s 21 primary dealers trade government securities with the central bank and are obligated to bid in Treasury auctions.
To contact the reporter on this story: Caroline Salas Gage in New York at [email protected]
To contact the editor responsible for this story: Christopher Wellisz at [email protected]
