Gold
ended 2014 essentially breakeven, being slightly down (1½%). It was a choppy
year for gold and a bad year for gold shares.
But it
looks like the bear market may now be coming to an end. In fact, it could
happen at any time.
The
seemingly never ending fall in the oil price, the plunging euro and petro
currencies, and weaker stocks all pushed safe haven buying to bonds and gold
as the new year got started.
It's
interesting to note that the soaring U.S. dollar ceased to keep downward
pressure on gold.
We
already started seeing this last month. And essentially the strength in the
dollar has not affected gold since November.
This
alone shows that a subtle but positive change has started.
Demand is Solid
In
addition, gold demand has been up, and it continues to grow.
Hedge
funds became the most bullish on gold since August.
And
while fears that Russia will sell their gold prevailed, the contrary
happened. Russia has been buying more gold.
We've
been seeing the physical demand for gold increase around the world as central
banks add to their gold reserves, with China leading the way.
And,
according to our dear friend Chuck Butler, the NY Fed had a huge drop in
physical gold last month.... down by 42 tonnes, leaving the Fed with the
lowest amount of physical gold since the turn of the century!
It
seems the Fed is giving gold back to several European countries who had their
gold stored there.
Global Inflation?
It's
certainly no secret that many central banks have been on an unprecedented
stimulus program, like Japan. China is joining in too and so is Europe.
This
rekindles concerns that global inflation could rise, in spite of ongoing low
inflation around the world. But either way, the global situation is bullish
for gold.
The big
question on all gold investors' minds is, are the lows in the bear market
behind us?
Only
time will tell, but the strong start this year gives us the feeling that the
lows are in (see Chart).
What To Watch
For
now, if gold's firmness since November continues, and gold stays above $1200,
it'll be doing fine. But if it stays above $1265 (the 65 week moving
average), it'll be turning bullish, reinforcing that a further decline is
unlikely.
Gold
would then turn super bullish if it can manage to rise and stay above $1300,
its mega moving average.
