ROSS NORMAN - SHARPS PIXLEY : The Gold Train Is Leaving The Station
A wealthy Turkish client of Sharps Pixley recently recounted how financial crises evolve first hand - initially there is deteriorating market news, coupled with rising prices as the local currency falls ; a sense of indignation and disbelief sets in.
As thing start to spiral one’s mind turns to wealth protection and the option to move savings into gold. Hell, gold is already at an all-time high in Turkish Lira terms - gold has anticipated things and moved ahead of events in a stealth rally. He decides to hold off - who would buy at a record high … and then things worsen and correspondingly gold accelerates away. The train has left the station and he is locked into watching his savings and other assets dissolve as inflation soared to over 20% … and gold in Lira goes through the roof.
Much as we all like to think of ourselves as individuals … our behaviours are all remarkably consistent … the notion of us being frogs in warming water when trouble abounds, holds true.
Market observers have hitherto condemned gold for a lacklustre performance over the last few years, seemingly oblivious to the headwinds it has faced from a strong US dollar and a few other factors. That is to say simply that the US dollar price has not fared too well - yet in 72 currencies gold is now at or at least within a few percentage points of being at an all time high. We seem to forget that US citizens represent only 4% of the planet’s population.
Perhaps most significantly, gold is only 2.5% from a record high in Indian rupee terms. This deeply important and highly price sensitive market should perhaps be the most keenly observed barometer of gold sentiment.
Indians are cany - in gold, they are the ‘smart money’.
Well in May 2019 we saw gold in rupees trading at a premium of $16.6 over loco London DESPITE price strength (a level not seen since late 2014 when prices were 20% lower in local terms). In short, it appears Indians are buying on price strength and not the more traditional bargain hunting - that suggests to us a fundamental shift and augers well for further gold price gains.
And then there is Central Banking gold acquisition which is running at the fastest rate since 1967 - what do they know, that you don’t ?
As gold sellers we understand that cynics might see us as “ambulance chasers”, seeking to profit from bad news and apparently encouraging you to buy gold - talking our own book if you like. Well get over it, we say as we see it.
It is our view that the whistle is blowing and the gold train is leaving the station … are you on board because it is certainly not turning back for you.
21 Jun 2019