John Embry: Big Summer for Gold


"Gold tends to take a breather during the summer, but this year should be different."


Traditionally, gold tends to take a bit of a breather during the Northern Hemisphere summer. But, there are some, like Sprott Asset Management chief investment strategist, John Embry, who believe this year might be a little different.

Embry said because of what is going on at a big-picture level geopolitically, gold is likely to have a big summer.

"I don't like putting numbers and dates in the same sentence because you always make yourself look bad—but I would be very surprised if it doesn't take out $1,650 this summer and maybe headed towards $1,800 over the next three months," he said.

To back up the statements, Embry points to a number of macroeconomic factors that are likely to have a bearing on gold prices over the next few months.

Firstly, much of the seasonality that is traditionally associated with the metal comes from Asia where gold purchasing is strongly related to the wedding season and, in India because much of the demand traditionally comes from rural areas, the sowing cycle.

"People forget," Embry said, "that the gold market is changing fairly significantly from traditional sources of demand into investment demand as an alternative to currencies… investment demand doesn't know seasons—it buys gold because it is fearful of other assets."

Fear is a dominant theme in another of this summer's big economic events—the end of quantitative easing in the U.S and worries about the country reaching its constitutionally mandated debt ceiling.

The third reason for gold's likely strong performance comes from Europe. "Neither of these currencies are attractive," he says.

Beyond the summer, Embry continues to remain positive on the outlook for precious metals, but he does caution that it can never be only way traffic.

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