Weak Gold Price - strong Entry Signal?

In July 2015, the price of gold – while still very high – decreased to the level of 2010 and has since made little effort to reach the record levels of 2012. In recent months, neither the threat of the Grexit nor the stock market crash in China would change that. Has gold lost importance as a proven safe haven in times of crisis? Of course not: there are other factors that are currently putting pressure on the gold price. On the one hand, the sword of Damocles of the Grexit is no longer viewed as threatening as it had been a few months ago, since more and more voices from politics and industries are putting the consequences of the Greek abandoning the euro into perspective. On the other hand, Chinese investors have lost so much capital in recent months that many of them were forced to sell parts of their gold reserves to secure their liquidity. Also, the recently released data on the gold reserves by China's central bank did put the gold price under pressure additionally, since the figures were lower than many investors had expected - despite the fact that the Chinese gold reserves have increased by a whopping 60 percent since 2009. Moreover, many investors are speculating on an imminent increase in US interest rates by the FED, making fixed-income investments more attractive again.

Which way will the gold price develop in the foreseeable future? The fund manager and author of the widely acclaimed report 'In Gold We Trust 2015', Ronald-Peter Stöferle, pointed out that the price of gold is on an all-time low compared to the base money supply, a temporary anomaly, in his opinion. Just the same goes for the price of gold in relation to bonds, equities and real assets: gold is currently very cheap, a condition which Stöferle interpreted as an entry signal for gold. The futures market data from the Commitment of Traders report which have improved recently do point in the very same direction.

Arnulf Hinkel
Financial journalist