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LONDON (Mineweb) - Despite the gloom being felt by gold and silver investors as theprice continues to be pushed downwards, the more level headed willrealise that the price is still above that prevailing at thebeginning of the current year and over $100 higher than at thistime a year ago, which might not be considered a particularly poorperformance overall. Nevertheless the big fallbacks in gold inSeptember last year from the probably then-overdone peak of around$1900 down to below $1550 in late December, followed by anothersharp fall from the $1790 level achieved at the end of Februaryfollowed immediately by a $100 crash down in price after which thegold price has struggled ever since, will certainly have tested thestaying power of precious metals investors. The pattern of some of the heavy, almost instantaneous, sharp fallsin price have led many of gold's proponents to cry foul, and it'snot hard to see why. Whether these unusual price movements areseen as big players trying to drive the price down, perhaps to pushthe weaker investors out of the market, enabling them to buy backat lower levels, or whether there are deeper government (with theaid of the bullion banks) moves afoot as the gold price suppressionaficionados would suggest, remains a point of contention. Howeverthere have indeed been some very big selling contracts put in (inpaper gold rather than in bullion) the size of which would runcounter to what might be considered sensible trading practice. Draw your own conclusions here. Given the main price drivers which have seen gold through itseleven year bull run - global economic turmoil and theout-of-control money printing by Central Banks to try and bringsome support to the crumbling system - are all still in place, thelogic to a pragmatic non-economist would seem to be that externalforces are indeed trying to control the price - but to what end isalso obscure. There are indications that Central Banks are nowbuyers rather than sellers, although a single month's figures,which some commentators eagerly extrapolate to suggest this levelof purchases will extend month by month for the full year, isperhaps too early to call. We need a few months more heavypurchases to really understand the trend. If indeed theextrapolators are correct in their forecasts then the fact ofCentral Banks buying at these levels should perhaps give someencouragement to the gold lobby. But this theory presupposes that Central Banks are any better intheir judgement than anyone else, and that is not necessarily afact borne out by recent history. For most of gold's latest bullrun, Central Banks have been heavy sellers of gold and it is onlyin the last couple of years that they have apparently moved in theother direction. Perhaps one should be a contrarian with respectto Central Bank gold purchase initiatives! If one looks at the silver chart over the past year, it is a bitlike that of gold on steroids. It rises more steeply when the goldtrend is strong and falls more sharply when gold is weak. Thesilver bulls are strong on the gold:silver ratio (GSR) returning to16:1, its historic level - when silver was part of the monetary system (the ratio is, at the time of writing around 55:1). Things dochange and a material change of this nature in silver's prime usagedoes, to this observer, suggest that the historic GSR is no longerrelevant. They also point to silver's peak of around $50 an ounceback in 1980 suggesting the metal should be aiming for a peak ofperhaps $150 in today's money, but conveniently forget that the $50peak was itself a total anomaly in that it came at the time theHunt Brothers had almost, but not quite, cornered the silvermarket. It does not suggest that such a level in today's money isnecessarily likely to be reached in the near term. Don't get me wrong here. I'm not suggesting that silver isoverpriced at current levels. Indeed given its propensity tofollow gold's movement in a more volatile manner, if one feels thatgold still has a way to run upwards too, and, as pointed out above,the key economic drivers for this remain in place, then silvercould also appreciate nicely - but not necessarily to anywhere nearwhere the ardent silver bulls would suggest. The other big positive game changer for both gold and silverremains China and, to a lesser extent India, although the latterhas always been at the forefront of gold purchases as the yellowmetal is inbuilt into the psyche there. Both these countries aregrowing, and continuing to grow, at what in the West would be seenas an enormous rate (even taking slowdowns into account) and theaccumulated wealth of their citizens is growing alongside theircountries' economic advance. China too has a historic associationwith gold as a store, and indicator, of wealth, but which had beensuppressed up until recently. Now the Chinese are allowed to buygold the impact on the market should not be under-estimated. Ifthe country's Central Bank is also expanding its gold reserves atan ever-increasing rate, as many are assuming, then this shoulddefinitely underpin the sector. But the extremely astute Chineseprobably have no wish to drive the price upwards. If they can keepit relatively steady they can expand their reserves even fasterwithout causing a huge price surge. Overall it would appear to the pragmatic observer that gold andsilver are not through their bull runs yet as the global financialturmoil is far from over. The current gold (and silver) pricehiatus is because many see the Eurozone crisis, which is the mostnewsworthy at the moment, as deteriorating further, but thosefleeing it financially are putting their trust in the US dollarrather than gold. Given the U.S.'s own economic problems, whichare neatly being hidden from public perception in the runup to thisyear's Presidential election, this has to be a pretty shortsightedviewpoint and will surely come to an end before too long. When itdoes both gold and silver will likely resume their overall upwardstrend - but probably not as rapidly as the major gold and silverbulls would have you believe. SUBSCRIBE to Mineweb.com's free daily newsletter now. I am an expert from industrial-lightingfixture.com, while we provides the quality product, such as Led Torch Flashlight Manufacturer , China Led Commercial Lighting Fixtures, Mine Safety Lamp,and more.
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