Earlier this week, we talked about how January was the worst month in two decades for precious metals such as gold and silver. We also saw how hedge funds cut their bets on higher gold prices by a strong 42% since October last year. This obviously set a few tongues wagging. After all, if the smart money is not bullish on gold anymore, the gold story could well be on its way to fizzling out.
We however begged to differ on the issue. For the simple reason that the global economic problems are far from over and big economies such as the US seem to be living on borrowed time. Thus, the subdued outlook towards gold is either a short term thing or the hedge funds seemed to have gone wrong on this one.
An article on Moneynews has further reinforced our belief in the yellow metal. As per the write up, JP Morgan Chase, one of the world’s premier financial institutions has decided to accept gold as collateral for certain loans.
This huge change of heart does augur well for the future of the yellow metal. It means that big global firms are now beginning to understand the true value of gold. They are willing to have a look at it as a currency rather than just any other commodity that is fit for diversifying one’s portfolio and no more.
Meanwhile, gold has started making the moves yet again. Its price had been mired in a trading range in the past four months. But in the last few sessions, it has indeed rallied quite sharply we should say.
The fact that the news of China going in for another round of monetary tightening had a minimal impact on gold goes on to show the yellow metal’s increasing resilience.
We will not be surprised if like the past few years, it ends the current year as well higher than what it started the year with. After all, as we said, the problems of the global economy seem far from over yet. Thus, gold is most likely to be the last man standing.