Jeffrey Nichols, Senior Economic Adviser to — Rosland Capital (www.roslandcapital.com), had the following comments:
Much has changed over the past two weeks in the gold market – especially the metal’s price, which has fallen some $65 to $75 an ounce. That’s more than five percent – but no reason to despair.
While the price has weakened, the metal’s fundamentals have continued to improve, so much so that some bounce-back now seems likely – with bigger gains due later this year.
The optimistic outlook about gold’s long-term prospects is, in part, a reflection of a pessimistic view on long-term U.S. and global economic prospects. Regardless, gold will still move much higher in the years ahead on the strength of long-term demand from the twin Asian tigers – China and India.
These gold-market drivers are likely to support a significant rebound in the metal’s price later this year. One timely factor especially worth highlighting is Indian gold demand, as it is pregnant with possibility. With a new government in New Delhi, the country’s restrictive gold import policies will almost certainly be relaxed in the weeks or months ahead, leading to a surge in demand ahead of this autumn’s festival season, traditionally a time of great gold interest across the sub-continent. Remember, until last year, India was the world’s largest gold-consuming market when a surge in Chinese demand and India’s own restrictive gold-import policies reduced it to second place in the gold world.
The Macro Economy – Bullish for Gold
Rosland Capital believes the macro-economy in the more advanced industrial nations will continue to be constrained by insufficient demand for goods and services – especially in the household and public sectors. Moreover, the latter – which could do much to bolster growth – continues to pursue inappropriate and misguided fiscal policies in the mistaken belief among some that cutting government spending will encourage private spending.
Instead, without any help from fiscal therapy (which would be more appropriate and more successful in ameliorating the pain of persistently high unemployment, especially when accounting for discouraged workers, who are dropping out of the labor force) the burden of stimulating the economy has fallen on the Federal Reserve and other major central banks.
Monetary policymakers – in expectation of a speedier recovery and a return to pre-2008 rates of economic growth – are already adopting less accommodative policies and have signaled a rise in short-term interest rates could begin by mid-2015. This situation, these expectations, have indeed weighed heavily on the gold market in past weeks.
Rosland Capital also believes financial market expectations built on these assumptions are overly optimistic . . . and this will be reflected in a variety of disappointing economic indicators over the next few months. As financial markets and central bankers at the Fed adjust to the reality that is expected – that is the reality of persistently disappointing economic growth, gold investors will be major beneficiaries.
About Rosland Capital
Rosland Capital LLC is a leading precious metal asset firm based in Santa Monica, California that buys, sells, and trades all the popular forms of gold, silver, platinum, palladium and other precious metals. Founded in 2008, Rosland Capital strives to educate the public on the benefits of buying gold bullion, numismatic gold coins, silver, platinum, palladium, and other precious metals. For more information please visit www.roslandcapital.com. Follow Rosland Capital on Twitter for company updates and industry news.
About Jeffrey Nichols
Jeffrey Nichols, Managing Director of American Precious Metals Advisors and Senior Economic Advisor to Rosland Capital, has been a leading precious metals economist for over 25 years. His clients have included central banks, mining companies, national mints, investment funds, trading firms, jewelry manufacturers and others with an interest in precious metals markets.
Release ID: 50910