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Sep 03, 2014

Jeffrey Nichols, Senior Economic Advisor to Rosland Capital had the following comments on the current gold market situation and outlook:

Gold continues to disappoint as recent attempts to rally have been frustrated again and again. And, once again, it has been institutional speculators – traders with no long-term allegiance to the yellow metal but an uncanny ability to trade both sides of the market – who are responsible for gold’s failure to move higher.

What the gold market needs to move higher is a good dose of Zoloft or perhaps, even more extreme, a high-voltage jolt of electroshock therapy to jog the metal’s price out of its current state of depression.

Perhaps this will come from across the Atlantic – where recessions are worsening, social discord is on the rise, and the euro appears vulnerable to further capital flight.

Maybe, unpredictably, it will come from some geopolitical upset – on the Korean Peninsula or in the Middle East.

Or, possibly, it will come from Washington’s inability to deal with its mountain of debt, lack of fiscal restraint, or the insidious and still barely apparent effects of sequestration on economic activity and employment.

More likely, the jolt needed to set gold firmly on its long-term upward trajectory may come from a renewed recognition by the Fed and the financial markets that still more monetary accommodation is needed to prevent the economy from stalling. That’s what fueled the September 2011 run to record high gold prices . . . and this may be what does it again.

For now, gold’s short-term prospects remain uncertain. We could very easily see a further retreat, possibly to $1520 or even lower . . . but much of the recent selling is also price-sensitive -- coming from gold ETFs and "paper gold" products in futures and other derivative markets -- and will diminish quickly if prices dip much lower and traders begin to bet on the long side of the market. 

Meanwhile, physical demand from China and other Asian markets remains strong and can be expected to strengthen further if prices continue their retreat. As in the past, price-elastic physical demand will provide some downside insurance. 

Gold's short-term direction may depend largely upon the flow of outside news rather than the internal fundamentals of the gold market. Indeed, there is no telling whether the next move will be up or down. 

What I can say, however, is that the long-term bull market remains intact . . . and there will be sizable rewards for those with patience who stay the course. 

I can also tell you that central bank reserve managers are not worried their gold assets will depreciate. Indeed, they continue to buy more. But many are, most definitely, worried about the prospective depreciation in the value of their U.S. dollar holdings – and maybe you should be too.

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 investing in gold bullion, numismatic gold coins, silver, platinum, palladium, and other precious metals. Rosland also helps people who wish to protect their wealth by including a gold or precious metal-backed IRA in their asset portfolio. Click here for more information or contact Rosland Capital.

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.