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Investment News and Wealth Report

Blanchard Economic Research Unit:
America’s most trusted gold investment resource.

Blanchard and Company, Inc. has reformed our economic research unit and the work is being headed up by Blanchard Chairman and CEO, Donald W. Doyle, Jr. and Neal R. Ryan, VP and Director of Economic Research.

Should you have any questions, comments or suggestions for our economic research team, please email them at BERU@blanchardgold.com.

Blanchard Sees Five Factors Driving Gold Higher in the Coming Months


Ongoing inflationary pressures, the massive U.S. trade deficits, and the move away from the dollar as the global reserve currency will all work in favor of higher gold prices in 2006. Will the Fed battle inflation by continuing to raise interest rates while choking off economic growth or grow more tolerant of higher levels of inflation in order to keep a satisfactory growth rate? It’s not an easy situation to gauge, but past Ben Bernanke speeches hint at him being much more afraid of deflation than inflation, so we believe a quicker end to rate increases is in store, which in turn will further boost metals and tangible asset prices.

2. Indian and Asian Markets

Gold ownership for Chinese citizens was legalized in 2004. A system for selling bullion to the largest population in the world is getting off the ground and the effect on gold demand will be staggering. Rumors abound in the gold market about covert Chinese bank purchases that are not yet reflected in Central Bank totals.

3. Central Bank Sales Slowing and Producer Dehedging

Central bank gold reserve sales in the first half of 2006 have been significantly below activity in 2005 according to the World Gold Council, and the continued reductions of hedge positions by producers (dehedging) are creating a solid base price for gold. On the flipside, some central banks (Russia, Argentina, South Africa) are buying more gold to hold in reserves. Rumors regarding diversification into gold by other Asian central banks are helping support prices.

4. Gold Mining Production

Nearly every major gold producer missed production targets in 2005. As a result of mine disruptions and increasing production costs, global production is continuing to sag. South Africa, the leader in global production, has seen annual gold-mining output fall at an average of 4% a year over the last 25 years. Bringing new mines on-line is a time consuming and at times economically prohibitive process that adds years onto potential supply increases from mining production. Combining these economic constraints on production with few meaningful discoveries in the last decade has created a void in mine production that will not easily be made up in the next five to ten years... if ever.

5. Investment Demand

According to the World Gold Council, demand for gold in 2005 hit a record of $53.6 billion with a 26% rise in investment demand in tonnage terms in 2005. The major focus on the WGC’s year-end investment demand report is on the total rise in demand, the emphasis on new demand entering gold markets around the globe, growth in investment demand specifically from India and China, as well as the endorsement that Central Banks are "looking at gold" for diversification purposes.

Read More... Are you Prepared to Act? >

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Mar 27, 2015 04:13PM CST.
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