Why the gold price is not (yet) breaking out to the upside
Industry agrees that demand for gold will remain at a high level
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The ongoing fiscal and monetary support from governments and central banks will continue for some time. On the question of why the price of gold is not yet higher, analyst Craig Hemke recently made an interesting comment. The price of gold and silver, Hemke said, is not determined by physical action as it was decades ago. The price is determined by trading in digital derivate futures contracts in New York and futures contracts in London, he said. Accordingly, the price of gold goes up when derivatives demand exceeds supply.
Also, trading is mostly done through trading programs, and economic considerations are not taken into account. The gold price could therefore be kept artificially low. Time to invest. After the record high investment demand last year, similarly high demand is expected for 2021.
For gold coins and bars, for example, Germany was second behind the leader in demand. And as the U.S. Mint reports, January 2021 was the best January for gold coin sales since 1999.
Looking at the seasonality of the gold price, it seems that things are not going as usual. January was this time not the best gold month in the course of the year, a small minus was recorded. Actually, February is the third best month of the year, but the laws of seasonality do not seem to work so in these particular times.
In order to hedge with gold in the long term, it is necessary to strike while the gold price has not yet gone through the roof. With a leverage on the gold price, this is possible with promising candidates from the gold companies, for example with OceanaGold or Victoria Gold.
OceanaGold - https://www.youtube.com/watch?v=Pepo7cpjLvU - is a mid-tier gold producer with projects in the Philippines, USA and New Zealand. The Wharekirauponga property in New Zealand has high-grade gold and silver mineralization (up to 169 grams of gold per ton of rock).
Victoria Gold - https://www.youtube.com/watch?v=VnKfKu9ho9A, also a producer, extracted just over 42,000 ounces from its Eagle Gold Mine in Yukon in the fourth quarter of 2020.
Current corporate information and press releases from OceanaGold (https://www.resource-capital.ch/en/companies/oceanagold-corp/) and Victoria Gold (https://www.resource-capital.ch/en/companies/victoria-gold-corp/).
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