In a previous article, "Short and Long Term Bullish News for Previous Metals," it was detailed how bullish the patterns were for gold and silver assets. The closing of the quarter has verified that outlook.
Based on recent events and continuing developments, the future is still positive for the precious metal sector. For the last quarter of market action, the exchange traded fund for silver, iShares Silver Trust (SLV), was up about 14%. The exchange traded fund for gold, SPDR Gold Shares (GLD), rose by nearly 6%. Stocks in the sector such as Barrick Gold (ABX) jumped more than 30%. Gold and silver assets still remain undervalued.
In a recent article in Barron's, it was stated by an analyst that Barrick Gold should be priced at $44 a share, based on its asset value. At present, Barrick Gold is trading for under $20 a share. Many other precious metal companies at trading at less than value by a variety of indicators. Gold Fields (GFI) is going for a price-to-book ratio of 0.77. The price-to-sales ratio for Anglo Gold Ashanti (AU) is just 0.87. With a current ratio of just 0.77, Wishbone Gold PLC (WISHY) is undervalued, too. Even the largest publicly traded gold entity in the world by market capitalization, Gold Corp (GG), is selling at less than book value.
Moving from the micro- to the macro-analysis, the two biggest consumers of gold in the world, India and China, have positive outlooks, again. The new Governor of India's central bank, Raghuram Rajan, is re-pricing the rupee. That should drive more Indians, already the world's largest consumers, into buying even more gold as the country's currency does not a have bullish destiny in the near future. Higher economic growth in China will result in the buying power that spends more on gold. Both central bank are major buyers of gold, too.
Shifting from positive to negative reasons for the rise of gold and silver assets in value, investor loss of confidence in the US Dollar should continue. That results in funds flowing from paper currencies to traditional safe haven assets, such as gold and silver. With the US Government shutdown and a debt default about two weeks away, gold and silver should do well from investors and speculators seeking more stable holdings.
Overall, the exchange traded funds for gold and silver will benefit from China and Asia buying more. With assets in Australia, Wishbone Gold PLC is positioned to gain from economic growth in Asia. As the biggest gold companies in the world, Gold Corp. and Barrick Gold will naturally prosper, too.