The precious metal market has been under pressure again this week, with the price of gold dropping back below USD $1200oz, whilst silver is back below USD $16oz.

The majority of the pullback occurred earlier in the week, when the market began pricing in a ‘resolution’ in Greece, though expectations that a deal between the Greek government and the EU-IMF was imminent have since been dashed, with the latest headlines suggesting talks are ‘going backwards’.

Renewed tension on that front has not been enough of a catalyst to boost the precious metals market though, with the US Dollar index rallying, and gold prices still subdued.

For Australian dollar investors – the local currency has been relatively stable – trading around the USD 0.77 cent range, with the price of the yellow metal still sitting above AUD $1500oz, whilst silver is AUD $20.68 as we write.

Data wise this week, we’ve seen durable goods orders in the United States fall by more than expected, though the less volatile ex-transports figure was more in line with expectations. GDP figures for Q1 also confirmed the slowdown in the economy, though personal spending figures for May were up strongly, perhaps suggesting some much delayed real wage growth is finally flowing through to spending.

As it stands today – the precious metal market is still delicately poised, and a move back down towards USD $1150oz is not impossible to rule out. In AUD terms, we maintain our previously asserted conviction that we are close to a long term bottom, something we discussed in detail in this report from the 29th May.

As such, we think it remains prudent for medium to long-term holders to use this time as an opportunity to dollar cost average and build up a core position in the metals, for the fundamentals remain sound, despite the current volatility.

In Gold We Trust

Most regular readers of ABC Bullion’s market reports will be aware of Ronald Stoeferle, managing partner and investment manager of Incrementum AG, and an analyst I hold in very high regard. Ronald made his name as it were by first publishing the now annual In Gold We Trust report 9 years ago, when he was working for Erste Bank.

Overnight, the latest edition was released to the market, and as usual – it is packed full of great charts, research, analysis and quotes, including a couple from myself if i may be so bold.

I have personally read it word for word, and was honoured to contribute some research to the publication. There are two parts to the report I wanted to briefly mention. First is the number of observations the report contains on how far out of favour gold has fallen as a potential investment.

The following illustrates it nicely.

This is a without question a great sign for contrarian investors, for there really is very little opportunity in buying assets that are popular. Those of you looking to maximise returns for the next few years should see opportunity in the above comments, even if there’s been some pain or discomfort with your existing holdings over this period.

The second point to briefly mention was the chart on the global gold price, which looks not at gold in just USD, but in the trade-weighted external exchange value of the dollar. You can see it below, and it’s clear that a potential new uptrend has emerged.

That is important to keep an eye on too, for it is very easy to become USD obsessed when looking at the gold market. Reality is though that it’s the local currency price that matters to the end investor, and the outlook is definitely looking more favourable, something that reinforces my view expressed earlier regarding the outlook for AUD investors.

As the latest IN GOLD WE TRUST report is a hefty read, we’ve deliberately kept this weeks market report shorter than usual.

I highly recommend followers of the gold market download Ronald’s latest work, which you can do by clicking on the Incrementum logo below. Enjoy!

Until Next Week

Disclaimer

This publication is for education purposes only and should not be considered either general of personal advice. It does not consider any particular person’s investment objectives, financial situation or needs. Accordingly, no recommendation (expressed or implied) or other information contained in this report should be acted upon without the appropriateness of that information having regard to those factors. You should assess whether or not the information contained herein is appropriate to your individual financial circumstances and goals before making an investment decision, or seek the help the of a licensed financial adviser. Performance is historical, performance may vary, past performance is not necessarily indicative of future performance. Any prices, quotes or statistics included have been obtained from sources deemed to be reliable, but we do not guarantee their accuracy or completeness.