April has been a real roller-coaster of a month for precious metals, first falling by the steepest amount in 30 years followed by a quick rise that was the biggest weekly rise in 1.5 years. As we stand, the market in gold could not be further fragmented as a divergence in opinion exists that seemingly makes it impossible for the objective observer to decide where we are heading next.
You have investment banks and financial experts claiming that the bull market in gold is over and price estimates have consequently been revised down. On the other hand you have central banks who are buying up gold at a furious pace, clearly changing policies from the years before when they were net sellers.
In the futures markets you have paper gold being sold in gigantic chunks on the COMEX and the GLD gold ETF being drained every passing day. On the physical side, demand has never been stronger with most of Asia caught in somewhat of a gold rush as low prices combined with doubts about a recovering global economy is sparking purchases not seen in decades.
If we try to look at it from a fundamentals standpoint, it doesn’t get much clearer. The US stock market is making news highs every week and inflation, at least on paper, doesn’t seem to be a worry. However you look at the sovereign debt ratios, the amount of monetary inflation, and the cost of producing gold at $1200, and you start to think how gold could go any lower.
There is certainly a lot that is going on behind the scenes that we don’t get to witness, and that is a subject of wide speculation in the gold investing community. Some are convinced that gold is being manipulated while others view the accusations as baseless and without concrete proof.
It’s hard to remain objective in this war on gold, it’s almost as if one has to pick a side and stick with it. Luckily, the suspense is coming to an end as the days ahead are going to tilt this argument one way or another, and the truth will surface.