GOLD PRICE IN 2014 - Should You BUY OR SELL GOLD in 2014? Is BITCOIN the FUTURE?
you're like me, you've bought gold due to the money printing policies
of most developed countries and the effect those policies will have on
the future purchasing power of our paper money. Probably also because
there's no viable way for governments to escape the consequences of all
the debt they've piled up. And maybe because politicians can't be
trusted to formulate a realistic strategy to avoid any number of
monetary, fiscal, or economic crises going forward.
valid, core reasons to hold gold in a portfolio at this point in time.
But a new trend is under way, and someday soon it will be just as much a
driving force for gold prices as anything else: a good old-fashioned
The following four factors are combining to
diminish gold supply. While we've touched on some of them before, put
together they're creating a perfect storm that will, sooner or later,
impact the gold market in several powerful ways. As these forces gather
steam, you'll want to make sure you've already built a substantial
position in physical bullion.
Factor #1: Production Pullbacks, Development Delays, Exploration Cancelations
producers don't operate in a vacuum. If the price of their product
falls by 30% over a two-year period, they've got to make some
adjustments. And those adjustments, more often than not, result in lower
production, delayed mine development plans, and cuts in exploration
budgets. The response is industrywide, and even low-cost producers are
The drop in metals prices means some mines can't
operate profitably, and if the losses exceed the cost of closure (and
possibly, restart in the future), these mines will be shut down. As
operations come offline, global output falls.
While lower metals
prices are not what any of us want, they're long-term bullish because,
as they say, the cure for low prices is low prices. If prices drop
further, a greater number of projects will be unable to maintain
production levels. For example, we know of several operating mines that,
in spite of large reserves, will be forced offline if the gold price
falls to the $1,100 level.
The impact on development and
exploration projects is even greater—it's easy to postpone construction
on tomorrow's new mine when you're worried about cash flow today. As a
result, many companies have cut drilling projects and laid off
The chart below shows the precipitous decline in the number of drilling projects around the world.
In an interview with Talking Numbers' Brian Sullivan, Faber offers what he thinks is next for the world in 2014:
says: "My sense is that at the present time, the US market is
relatively expensive compared to foreign markets, especially to European
markets and to emerging markets. On a cyclically-adjusted P/E
[price-to-earnings] basis, it is actually going to return very little
over the next seven to 10 years
Faber says: "If you look at the
entire market, some stocks are not terribly expensive and some stocks
are very expensive. It's like in year 2000, not every stock was
overpriced. At that time, the NASDAQ was grossly overvalued but, say,
resource shares and so-called 'old economy' companies were relatively
inexpensive or absolutely cheap. In the present instance, I think that
stocks like Facebook, Tesla, Twitter, Netflix, [and] Veeva Systems are
grossly overvalued and that the basket of shorts in these stocks will
return you at least 30% next year."
3. Best longs for 2014: Gold, gold shares, and Vietnamese stocks
says: "Given all the money printing that is going on globally -- and
not just in the US -- and given that the total credit as a percent of
the advanced economies is now 30% higher than in 2007 before the crisis
hit, I think that gold is a good insurance."
"I'd rather buy
something that is reasonably priced. And, I think gold shares are very
inexpensive. So a basket of gold shares I think next year could easily