Gold rallies thanks to tailwind from Swiss Central Bank
InvestorIntelReport: Last year on November 30th, Switzerland held a referendum that could have, for all practical purposes, restored something akin to the gold standard, potentially allowing for gold prices to soar. The referendum did not pass; however, last week, the Swiss government played another wild card, suddenly deciding to de-peg the value of the Swiss Franc (CHF) from the Euro. The move essentially removed the CHF from the control of the Swiss central Bank, which, in expectation that ‘bulls’ would prevail, reduced interest rates allowing for market forces alone to account for the higher comparative value of the currency. The effects were especially good for gold, because lower interest rates tend to help its price to increase. The InvestorIntel Gold, Precious and Base metals index, in fact, registered a healthy 5.96% increase for the week ending on January 16. Wall Street closed the week up 1.10% and European indices were also up by over 1.5% in many cases.
It is useful to place this relative recovery in the appropriate context, to see if this is a passing or more structural and permanent phenomenon, or trend. Despite, the risk that the Greek government would pull out of the Eurozone, should the Left win a forthcoming election — the European Stock Exchanges seem to have reversed the polarity of the medium term from bearish to bullish. Any assumptions now as to the timing are premature, though there seems a good chance that the trend has definitely turned upward in medium and possibly even the long term, are high.
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The Euro continues to weaken while gold and silver have taken up to ‘soaring”, the oil that seems to have reached a level from which to bounce at least short, and European stock markets that have broken upward levels not touched in months. Meanwhile, oil continued to drop but the collapse of the price of an oil barrel has already triggered strong reactions (and potentially very bullish) in the sector. As companies shut down in the United States and Canada – as well as Norway, a shortage of oil will develop, setting the seeds for the bullish run where North Sea oil has become almost impossible to produce, given the costs involved; moreover, as Christopher Ecclestone noted in an article outlining the winners and losers of the falling oil prices, there is a massive transfer of wealth going on from the oil producers to the Japanese, to China, to Brazil, to Europe and to India.
Oil consumption is also rising, in response to signs of economic improvement, even if progress is limited mainly to the US, where the economy is in better shape. However, commodities are still struggling, even if there are some underinvested’ commodities that still have great potential as noted by Chris Ecclestone and Tracy Weslosky, Editor and Publisher of InvestorIntel in an article presenting five of the critical commodities themes for 2015.
The Graphite sector dropped 5.96% and the Agribusiness sector was down 5.88% while Rare Earths lost 3.88%. As for the latter, sector InvestorIntel’s Chinese correspondent, Hong Po, suggested a market tightening is coming as the People’s Republic (PRC) should unveil a series of new regulations for rare earth mining, processing and exports in the country after the Chinese Lunar New Year. ‘Kung-hei fat choi’ indeed, as Chinese papers reported that the Ministry of Industry and Information Technology (MIIT) has approved the formation of six big REE conglomerates by the end of 2015. In the Graphite sector, Deveron Resources Ltd. (‘Deveron’, TSX-: DVR) announced the continuation of an acquisition campaign as it started the new year by acquiring 66 additional unit claims related to its zinc and graphite rich Rockstone Property, near Thunder Bay, Ontario. Graphite will have an ever more important role to play in the green-tech or alternative energy field for the production of batteries.
Chris Berry, who is a well-known writer, speaker, and analyst — and now, a new Sr. Editor of InvestorIntel, and who is interested in Energy Metals, introduced InvestorIntel readers to the mineral ‘perovskite’, a calcium-titanium-oxide mineral that can greatly enhance the power an efficacy of solar cells. Jack Lifton argued that western leaders and economists reacted in the wrong way to the Chinese dominance of the global rare earths markets, misreading their more market friendly approach.
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