Gold Bullion “Less Sexy” Than Bitcoin … For Now

Gold Bullion “Less Sexy” Than Bitcoin … For Now

– “There is a global financial bubble”
– Stock markets and bond markets at all time record highs
– Medium to long term, gold’s “fundamentals look very sound”

Wilfred Frost of CNBC:

Do you think markets are adequately pricing in the risks that are present around the world today, particularly in Europe and the gold price itself?

Mark O’Byrne of GoldCore:

No i don’t think so. I think in light of the “Grexit” which you just mentioned and also the “Brexit” and the overall debt positions globally – we would have a concern that there is a global financial bubble with stock markets at all time record highs, bond markets at all time record highs.

Meanwhile gold prices have traded sideways as you said for a long period of time. We have had a serious correction and we believe there is consolidation. It looks undervalued. At the same time it could go lower before it goes higher. I think technically there is a weakness there and I think there is support at $1140 so short-term there is weakness, quite possibly, but medium to long term the fundamentals look very sound.

Wilfred Frost of CNBC:

Do you think that’s because we have had a breakaway from the idea that gold remains a great hedge towards any risk that’s out there – whether that’s inflation, deflation or just big geopolitical crises or is it just because markets don’t understand that those risks are present and they are ignoring them?

Mark O’Byrne of GoldCore:

I think the latter…for the moment.

I think it’s very like the 2003 to 2006-2007 period. The imbalances were building up in the system – meanwhile stock markets kept galavanting higher and gold was a very under-owned asset and there wasn’t an appreciation of gold as a safe haven asset.

I think you are right.. I think that perception of gold … it has fallen out of favour. Sentiment towards gold is as bad as we have seen it since the 2003/2004 period.

Bitcoin is the more sexy thing. People want to talk about bitcoin and anything with “bit” in the name seems to be doing very well.

Whereas gold is very much less sexy. It’s less on the radar because it has performed quite badly in the short term. But, I suppose past performance is no guarantee of future returns and you have to look at the long-term store of value characteristics of gold as a proven hedging instrument and safe haven asset… over the long term. Not in the short term, obviously.

Carolin Roth of CNBC:

Mark, there simply is no inflationary pressure… I don’t see why gold should be moving higher at all. We are in a disinflationary or low inflation world. I don’t see why gold should be moving past the $1200 level that we’ve been bumping around over the last couple of months. And then we’ve got a dollar that’s moving higher. It’s a bit of a rough patch for the dollar right now but it’s still moving higher. I don’t see why anything we are seeing in gold is more than a dead cat bounce, essentially…?

Mark O’Byrne of GoldCore:

You’re right – there is no inflationary pressures … right now.

The question is “is that inflation building up?” and I think it probably is.

At the same time gold is not just a hedge against inflation – it’s actually not a really a hedge against inflation per se, it’s more of a hedge against serious inflation and stagflation. It’s also a hedge against deflation.

So when you have a Lehman Brothers moment or a potential “Grexit” there is that significant counterparty risk. And gold – because it has no counterparty risk if you own the actually physical asset – it is actually a hedge against deflation as well.

There is a huge body of academic research that shows that.

The CNBC interview, “Is Gold Becoming ‘Less Sexy’?” can be watched on CNBChere and on Yahoo Finance here

MARKET UPDATE

Today’s AM LBMA Gold Price was USD 1,209.60, EUR 1,084.36 and GBP 772.60 per ounce.
Yesterday’s AM LBMA Gold Price was USD 1,206.75, EUR 1,085.33 and GBP 777.57 per ounce.

Gold climbed $2.00 or 0.17 percent to $1,210.20 an ounce on yesterday, and silver remained unchanged at $17.12 an ounce. Overnight, gold in Singapore continued to flatline and near the end of day trading was steady at $1,209.60 an ounce.

Gold remained firm above $1,200 an ounce as yesterday’s Fed minutes contained no new information and showed that a June rate hike would be premature.

In spite of the news, outflows in the world’s largest gold-backed exchange-traded fund, New York-listed SPDR Gold  show bearish sentiment. The fund holdings fell 0.41 percent to 715.26 tonnes yesterday its lowest in four months. Holdings fell another 2.98 tonnes yesterday, bringing its total outflow for the month to just over 24 tonnes

Recent dollar strength after some positive U.S. economic data has capped gold’s recent rise . A strong dollar makes gold more expensive for holders of other currencies reducing its role as a hedge.

The government of India has released a discussion paper on the gold monetisation scheme that the finance minister had proposed in his budget. The paper outlines that citizens can benefit from a tax-free interest on gold that is deposited with the banks. It proposes individuals and institutions to deposit gold as low as 30 grams.

In the past gold deposit scheme the government only allowed a minimum quantity of 500 gms of gold. This allows Indians to use their wedding jewellery or other gifts to finance other business endeavors, family loans etc. However, Indians like to have take possession of their gold and wear it and keep it in the house due to a distrust of banks.

The new scheme to relief the Indians of their gold is unlikely to succeed due to their cultural preference to possess their gold – be that coins, bars and especially jewellery.

On the Comex in New York gold futures for June delivery tacked on $1.50, or 0.12%, to trade at $1,210.20 a troy ounce and futures were in a tight range between $1,207.70 and $1,212.30. Silver futures on the Comex for July delivery climbed 9.9 cents, or 0.58%, to trade at $17.21 a troy ounce.

In mid morning European trading gold is up 0.07 percent at $1,210.83 an ounce. Silver is up 0.53 percent at $17.19 an ounce and platinum is unchanged at $1,155.00 an ounce.

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