MAYBANK GOLD SAVING ACCOUNT (MALAYSIA)

Prediction: Gold will hike 3rd attempt to USD2,000

>> Sunday, June 3, 2012

4th June 2012
 

Interest in the precious metals has waned in recent months and as a result prices have been range bound. Although further weakness would not be a surprise, lower prices are expected to attract bargain hunting.
Gold prices have tracked sideways in a $70/oz range either side of $1,650/oz. Downside spikes suggest good underlying buying.

  • Prices have struggled to get much lift even though the dollar has been weak.

  • The range bound market is also attracting less fund interest with both the long and the short positions reduced.

  • Prices are under pressure, but given all the uncertainty in the markets underlying support is expected to be strong.

Technical – The uptrend line on the daily chart puts support at $1,630/oz, whereas on the weekly chart, the long term uptrend line puts key support around $1,614/oz. The recent failed upside break above the resistance line around $1,660/oz suggests prices may well retest underlying support again. The turn down in the stochastics supports this view too. Overall, we would not get too bullish for Gold until prices move back above $1,700/oz, while on the downside we would get increasingly bearish as each support level is breached – these are at $1,630/oz, $1,623/oz, $1,614/oz and $1,612/oz. A drop below the latter is likely to prompt a fall back towards to lower blue horizontal line, which is at $1,522/oz. That said, moves below $1,550/oz may well turn into spike.

Bullish Line: USD1,980
Moving Average: USD1,650 - USD1,850
Bearish Line: USD1,580

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20 REASONS TO OWN GOLD

1. Practicality: Gold is still by far the optimal choice for most investors


2. Protection: Likely ruptures in the stability of the U.S. dollar standard


3. Profit potential: Gold prices will eventually peak well above $2,000/oz.


4. Inflation hedge: The most powerful factor affecting gold is monetary inflation.


5. Supply/Demand: 2009 gold supply/demand dynamics: irreversible changes.


6. Low risk: Gold’s downside risk is paltry compared to the upside potential


7. Privacy: Numismatic coins offer private ownership benefits over bullion


8. Central banks buying gold: To diversify reserves away from U.S. dollars


9. China: Chinese quietly buying gold / commodities to hedge U.S. paper


10. Secular Bull Mkt: Shortest commodity bull market 15 yrs, longest 23 yrs


11. Gold is money: Gold now accepted as 4th global currency (with $, Eu, Y.)


12. Gold going mainstream: This is still a relatively stealth gold bull market


13. Good timing: Investors should not worry about good/bad gold entry points.


14. Commodities an accepted asset class: For the first time in recent history


15. Price corrections: A sure sign of a healthy bull market, buy on the dips


16. Geopolitical risks: Gold/oil prices reflect rising nuclear threat


17. Gold you hold in your hand: Numismatic coins or bullion are best


18. ETFs: Gold gaining strength from ETFs, corporate and pension money


19. No gold bubble yet: 5-7 years out could launch gold above $5,000/oz.


20. True value: Regardless of what the media says, gold offers true value

THE HISTORY OF GOLD

While bits of natural gold have been found in the remains of inhabited caves dating back as far as the Palaeolithic Era around 40,000 B.C., there is some agreement that gold was first used as adornment in the temples of ancient Egypt. Interestingly enough, gold was not used as money at that time. Instead, the ancient Egyptians used barley as their exchange medium. By the 7th century B.C. gold was used as money in Lydia. Gold has been used for ornaments and decoration and as money for over 5,000 years. Gold leaf has been used for the decoration of tombs and statues, cathedrals and temples, fine books, and picture frames since Egyptian times. Many Egyptian burial cases, including King Tutankhamun’s (1352 BC), were overlaid with beaten gold (called gilding). Gold leaf is still often preferred for adorning the domes or ceilings of buildings (such as the Metropolitan Opera House in New York) because its resistance to corrosion means that it will outlast paint by many years.

Gold was made into jewellery long before it was used as currency. The earliest gold jewellery dates from the Sumeric civilisation around 3,000BC. For centuries, gold has meant wealth, prestige, and power, and its rarity and natural beauty have made it precious to men and women alike. Owning gold has long been a bulwark against disaster. Many times when paper money has failed, men have turned to gold as the one true source of monetary wealth. What is gold and why is gold so important?

Gold is a rare metal. It has the chemical symbol Au, named after Aurora, the Roman goddess of the dawn. The purity of gold is described by its ‘fineness’ in parts per 1,000 or by the carat scale which is parts per 24. The word ‘carat’ derives from the Italian carato, Arabic qirat or Greek keration, all meaning the fruit of the carob tree. Ancient traders used carob seeds as the means to balance the scales in oriental bazaars. Pure gold is 24 carat or 1,000 fine. The price of gold and other precious metals is quoted in terms of troy ounces. The term ‘troy’ is derived from Troyes, France, a major trading city of the middle ages. One troy ounce equals 31.1 grams.

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