For the week, spot gold closed at $1,134.65 per ounce up $17.05 or 1.53 percent. Gold equities, as measured by the XAU Gold & Silver Index rose 5.84 percent for the week. The U.S. Trade-Weighted Dollar Index nudged at bit higher, gaining 0.12 percent.
Strengths
- Despite a slightly stronger U.S. dollar, gold, silver and platinum group metals all made good gains this week.
- The gold stocks also followed through with many stocks posting returns twice what the commodity gained.
- Copper prices were also very strong, rising 4.31 percent.
Weaknesses
- The S&P 500 closed the week at 1138.7, posting a gain of 3.10 percent.
- Some investors question why they need gold exposure if broader equity markets seem to be showing strength. Historically, the S&P 500 and the price of gold have traded at a ratio of one-to-one over the long-term. Gold currently is at 1,134.65.
- The credit crises of the private banking sector is now a sovereign debt problem which may not disappear in the near term unless spending is cut or taxes are raised substantially, The most stealth solution would be a program of inflation.
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Opportunities
- Record demand for U.S. Mint silver coins shows no signs of abating. For the first two months of the year, sales are up 40 percent over the prior year.
- Gold coin sales fell almost 18 percent for the same timeframe. However, there have been some constraints on meeting consumer demand on the part of the U.S. Mint for gold coins.
Threats
- South Africa is expected to have enough power generation capacity in 2010, but lingering electric power issues should mean a tighter market in 2011.
- Seasonally we should expect a correction in gold, but this has not materialized.
- For most of the past 2000 years, China was the biggest economy in the world; for the last 200 years, though, it has lagged because the country didn't pursue the path of industrialization. That has changed and models that are U.S.-centric just may not matter anymore.
