January 31, 2011 – Gold and silver investment analysts like to show us how smart they are by burying us under mountains of statistics that back up dubious inferences drawn from daily events. Such is the case with the uprisings in the middle east. Within just a few days we have seen knee jerk reaction followed by a tempering of reasoning followed by doomsday predictions of the closing of the Suez Canal. Granted, closing the canal would be disastrous, but whoever is left in charge of Egypt is most unlikely to cut off the country’s lifeline for an extended period.
The long term drivers of the gold and silver markets are all that really matter, but for the sake of argument I’ll toss in a comment about McClellan cycles. If you look at the gold price charts for the past five years you will see cycle lows occurring every 12.5 months. The McClellan Market report first uncovered the cycles, which predict a bottom in early February. The point is that irrespective of the current market and global events gold prices consistently have done what they are doing this year. We can logically assume that the cycle lows occur simply because that is the nature of investors – no further analysis necessary.
Analysts can take a condition such as China’s gold acquisition policy and reach vastly different conclusions. The bears’ twisted logic, for example, says that the influx of gold increases wealth and sparks inflation, to which the government responds by raising interest rates and ultimately driving down the price of gold. I prefer to take the direct approach – in the long term increased demand for gold drives up its price.
Long term trends in gold and silver prices depend on global social and economic conditions that in the aggregate changes at a glacial pace. When you look at the big picture, gold and silver investment is not so complicated.
Senior Staff Writer – GoldSilver.org