These 3 Recent Events Will Impact the Price of Gold

Jul 1, 2020

Vijay Bhambwani, Editor, Fast Profits Daily

This video is a continuation of the video I recorded in April titled - A Timely Warning About Gold.

Before you form any opinion without having watched the entire video, which is what unfortunately some people did, let me clarify that I am not bearish on gold. I am not telling you that gold is about to collapse.

But as a responsible, mature trader, it's my job to watch all kind of news developments which might impact the price of the asset in which I have put mine and my family's hard earned money.

Wouldn't you want to do the same?

In this video I'll share my thoughts on gold, especially in view of three events which have recently transpired in the gold market.

Let me know your thoughts in the comments section. I love to hear from you.

Hi, this is Vijay Bhambwani and I'm back with you recording this video from my residence. I hope you're keeping your finger on the pulse of the market and watch what is happening in the world around you.

This video as a matter of fact, you could count as a continuation of the video that I recorded on 14th of April 2020 and it was titled A Timely Warning About Gold.

Before you, form any opinion without having watched the entire video, which is what unfortunately some people did and commented likewise before they finished watching the entire video I am not bearish on gold. I am not telling you that gold is about to collapse.

But as a responsible, mature trader, it becomes my job to watch all kind of news developments unfolding of events which might impact the price of the asset in which I have put mine and my family's hard earned money.

Anything that impacts my asset I want to know. I want to factor in an act accordingly. I don't have any room for unpleasant surprises. I'm 54.I expect a lot more maturity from myself and I am about to share my thoughts on gold, especially in view of the three events which have transpired in the gold market.

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First and foremost, Russian President Vladimir Putin is enacting a law and has already put in place the machinery to track each and every transaction that is initiated in the precious metals market, gems and jewellery market and allied wears as per the media statement. Now Russia is one of the top 10 producers of gold and the fact that the Russians would want to keep tabs on where the gold is moving within and maybe even outside of the country has huge ramifications.

In some of my earlier videos on gold and I have recorded a lot of them if you scroll down this list, in my earlier videos on gold, I have said gold is not only a store of value, it's also an internationally recognised method of money changing hands. So gold is a precious metal, not just in Asia but in Africa, in Australia, in America, in Europe, so you can also use it as a transactional kind of commodity. Now, the fact that the commodity can be used for transacting also means that there would be by default, unaccounted wealth being stored into gold. Now that is something that Putin is basically going after.

Let's not get into good thing bad thing. Let's stick to the basics here. Will it impact the price of gold? Possibly, yes, because Russia is a major domo player, a swing producer, and therefore it might cause turbulence in gold prices.

The second aspect, which I talked about in my 14th April video that there would be in some cases selling by people, organisations or maybe even governments, for that matter, central banks and governments who might want to sell their hoard of gold, their reserves of gold, to be able to raise cash, to stimulate their economies and or for political reasons.

Now this is a very possible happening and as we have seen in the past, as we have seen countries which have in the past been distressed, for example, South Africa and Mexico, etc, they have resorted to selling below market prices to be able to raise cash, which means I as an investor or a trader will have to face a downward pressure on my portfolio if it all I am holding gold. So this is another aspect that you have to keep in mind.

The third aspect, which actually concerns you and me a little more than the other two aspects. A Bloomberg article in the recent past in the last two days mentioned about you know, world wide Dubai is famous for shopping, but to Asians, especially Indians, the Dubai gold souk brings dreams of cluttering tonnes and tonnes of glittering yellow metal gold in showcases in a market that caters only to gold and nothing else. Consider the gold souk as the Zaveri Bazaar of Dubai. Zaveri Bazaar is the bullion market. The Dubai Gold souk has reported a huge amount of selling from retail investors as soon as the price hit 2,000 dirhams for 10 grams.

Now do remember that the Corona virus infection has changed the dynamics a lot more than what people have imagined. Your livelihood or your earnings are either zero or stagnant. They might even fall in case you've taken a job cut but your expenses have gone up. There is a slight premium on many things of daily consumption. There might even be a slight availability problems or supply problems and therefore some cash premiums on many things. So your expenses may have gone up slightly, but your income is either down and out, or maybe compressed.

Which means that there is a possibility that there would be some selling from the retail segment as well, which is what the Dubai Gold souk has reported to Bloomberg and this again tells you that a cash crunch, especially if this Corona pandemic is to continue, will mean that they will either be some amount of selling from the retail guys or at least when you and I are not sure of having a job having a business or having a constant stream of revenue, believe me, the last thing on my mind would be to buy gold before Diwali, which is a traditional period when all Hindus normally tend to buy gold, ranging from a token one gram to maybe whatever it is that their pockets will allow. I think buying buy the retail guys, especially in this part of the world, might just be a little patchy this year before Diwali.

So these three events, if you do not factor in into your metrics or your computation of where gold is headed, I'm afraid you're in for a surprise. So what am I basically trying to tell you? Am I trying to put you off from gold? No, not at all. Not at all. If you are looking at a larger picture spanning, say, a couple of years, this is nothing more than a storm in a teacup. This is something like, you know, you're travelling in a train and you're trying to have a cup of tea and there is just a little bit of rattling and shaking along with the movement of the train. It's not really mission critical. You're not really going to burn yourself. You just might have to be a little more careful. That's it.

Over a long period, I think create currencies are going to lose value. Fiat currency is your paper money is going to lose value going to lose purchasing power. Which means ultimately you're gonna come back to buying precious metals, especially gold as a store of value. So the longer term picture, mercifully so far, still remains bullish. Nothing to worry about.

But your waiting period might just get a little longer and I thought I was duty bound to come and convey this to you. How long will this persist? There are a couple of things that you need to know and compute. Basically, unfortunately, we have no control over how long will the Corona pandemic last? No clear answer there. How long will the cash crunch of the central bankers and governments last? No clear answer there.

But what we do know is that the US Presidential elections will be done and dusted by 3rd November 2020. After that, a concerted effort to boost the dollar and subdue gold prices would have hopefully ended. Which means that your waiting period might just be prolonged by another 6 to 8 months max. Your long term picture still remains intact.

So hold on to your gold guys. There's not really any not really any cause for panicking. It's just that you might have to sit and control of patience or rather, impatience a couple of quarters longer. On that bullish note, let me say goodbye to you in this video till we meet again in my next but before I sign off, a reminder to click like on this video and subscribe to the YouTube channel.

In the comments section, do let me know what you think about this video and what else you would want me to record in my are forthcoming videos. Unfortunately, no individual trading or buy and sell calls no individual price targets as per regulations and compliance requirements by SEBI. Do subscribe to my channel and do refer these videos to your friends and family and help me spread the cult of knowledge based investments.

I hope by now you joined Equitymaster's Telegram channel with the handle Equitymaster official, wherein I put in a couple of posts every evening Monday to Friday, which would help you trade the markets better and I would love it if you could read them everyday. Do take very good care of yourself, your trades, your investments. Vijay Bhambwani signing off for now till we meet again in my next.

Thank you for watching my video. Bye.

Stay safe and have a great trading day!

Warm regards,

Vijay L Bhambwani
Vijay L Bhambwani
Editor, Fast Profits Daily
Equitymaster Agora Research Private Limited (Research Analyst)

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1 Responses to "These 3 Recent Events Will Impact the Price of Gold"

Ashok karunakaran

Jul 1, 2020

Hi Vijay
The post was really informative . One question that I have is regarding the Gold ETFs and many associated Gold funds operated by the MF companies. No doubt these are very convenient for investors to invest in Gold and avoid the problems of handling physical Gold. However,Do these companies really fully invest in physical gold and have in their possession adequate quantity of the precious metal matching their declared asset value. Is it possible that the investors can be left holding units of Gold in paper form which are worthless or valued less than what they are supposed to be worth.
Do regulators like SEBI monitor this aspect ? A video explaining how they do this this would be very helpful

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