It has become apparent that the gold jewelery downturn has begun, but what does it portend for the price of gold? We look at the gold jewelery downturn and explain why it is positive for the price of gold.
The sideways trading range is holding it’s own as the markets struggle to stay away from the free fall zone, or the breakout zone if you have a positive outlook. Considering the bad news that is a daily chorus, sideways action is pretty impressive. As of this moment, the DOW is up 65 at 8,022, the NAS is up 34 at 1,549, the dollar is down .09 at 85.68 and gold is up $9.00 at $914.90. Gold’s move above the $910 level is encouraging, but let’s wait and see what gold closes at before we start to predict the next leg up.
Gold futures rose for a second session Thursday, after the Bank of England cut its key interest rate to 1%. The mad scramble to have the lowest interest rate in the global banking community continues. By lowering interest rates to these levels, the central banks are putting firm support under gold, while they ignite the fires of future inflation. Gold for February delivery rose $21.30 (2.4%), to $922.90 an ounce on the Comex.
India’s Gold Jewelery Sales Slow
India recently reported slumping jewelery sales and now Dubai reports that retail sales of jewelery fell by 60% in January despite the continuing Dubai Shopping Festival (Which runs January 15th through February 15th). Gold sales in Dubai’s jewelery market have slowed dramatically because of the decline in tourist arrivals. Tourism has been hit hard by the global credit crunch and the first thing to fall of in hard times are the luxury items.
Will Jewelery Sales Slow Down Effect Gold Price?
I have read many articles that put forth the position that the slow down in gold jewelery sales globally portend a drop in the gold price in the future. I would like to offer another theory. It is my belief that the drop in gold jewelery sales is the beginning of gold’s move into the currency realm. As the dollar begins it’s decent and the ever increasing amounts of printed money come on line the financial crisis will worsen and gold will establish itself as a store of wealth, in other words as money that is not debt. Gold will uncouple itself from the dollar and from jewelery sales.
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We are in the very early stages of this change in gold’s role as money. Smart investor’s have been moving into gold and gold stocks for some time. This will accelerate in the months to come. Preparing for this sea change in the financial world is an imperative. The sooner that you start to prepare yourself the better off you will be.
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Stimulus Redux
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One quick note on the “stimulus” bill. Whatever the final bill looks like, it will not do what it is named for and will definitely smack down the dollar. It most likely will not do any thing to shorten the “recession”, or “depression” if you prefer, but rather will extend the duration of the current economic event. Congress is so detached from reality (and I am speaking about both parties), that it is incapable of doing what is necessary to shorten this financial malaise. I hate to say this because I love the US of A and don’t want to see it go the way of the rest of the socialistic nations in the world.
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That being said, all of this mismanagement will be extremely gold positive going forward. Let’s hope that Congress grows some and comes to it’s senses before the opportunity is squandered!
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Till next tine, good luck and good trading!
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