Blanchard & Company, the New Orleans-based specialist retailer of American rare coins and precious metals has an Economic Research Unit which is reckoned to be a key source of precious metals market analysis and continues to be an important resource for financial and consumer media throughout the U.S., thus its findings—although perhaps a little precious metals biased - are always worthy of note.
In its latest analysis of the gold market, it notes that gold has largely been out of the headlines recently despite the fact that it has nearly doubled in price since its breakout four years ago and that as it enters its strongest season of traditional growth, the analysts suggest that factors are in place for gold to hit new record highs into 2013 and beyond.
Over the past decade, the analysts note, gold has experienced double-digit percentage growth during the July 31-December 31 period in seven of those years, increasing 11% per year on average over the entire time period. If gold performs on this average in 2012 as they expect, it could easily retake the $1,800 level over the balance of the year.
Last year, when gold fell over this period, might be considered an anomaly with a run up to the record above $1900 an ounce occurring over the summer, with a sharp fall coming in immediately after the Labor Day holiday at the beginning of September. So far this year the pattern has been much more normal with the gold price effectively flat from May through to the current time, yoyoing mostly between $1550 and $1620 over the period.
However, many gold and economic analysts anticipate additional quantitative easing from the Fed coming in the last four months of the year and if this does eventuate they see it pushing gold back into record-level territory above $1,900.
"Gold has grown steadily for nearly a decade now, and while much of that growth can be attributed to supply and demand fundamentals, loose economic and monetary policies have only added fuel to the fire," says Donald W. Doyle, Jr., chairman and CEO of Blanchard and Company. "At one point analysts and investors were debating whether Google or gold would be the first to $1,000. That discussion seems silly now, but $1,600 gold during the thinly traded summer months hasn't generated much chatter in the news for some reason."
While gold finished 2011 in consolidation mode after reaching a record nominal high above $1,900 in September, Doyle and his firm's analysts see the stage being set for another robust advance through the remainder of the year and beyond.
"The trend is established. With stagnant economic growth in the U.S., financial crisis in Europe, and an ongoing devaluation of currencies across the globe, gold remains the ultimate safe haven to protect and grow capital," Doyle says. "Investors and central banks have increased global demand for gold at the same time new and existing sources of supply are contracting. It's an equation that computes a higher long-term price for gold."
Indeed, in the past few days we have seen renewed Central Bank buying - notably from Korea, and another major influx of gold imports into China via Hong Kong, which seem to have picked up after a short hiatus and a pick up in ornamental gold sales in India for the Raksha Bandhan festival.
The price pattern of late has also suggested the market is poised for an uplift with strong resistance from falls seen in the upper $1500s. Gold has fallen back several times now on disappointments—notably from Bernanke, the Fed and most recently Mario Draghi—none of whom have actually committed to the anticipated additional monetary easing. But on each successive occasion the fall back has been less and the most recent time gold only fell below the $1600 level for a couple of days—and that following the double whammy of immediately consecutive disappointments from the FOMC and Draghi.
With the potential for a $2,300 price tag—the equivalent of the 1980 record high for gold—$1,600 still represents a good value entry point with strong potential upside, Doyle says, particularly as the strong seasonal investment period just has begun.
Gold aficionados will hope he is correct.