Everyone knows that gold is down – but one investment CEO cautions that you shouldn’t be viewing the situation in a vacuum, but instead take into consideration the entire commodities market.
“Recently I fielded a lot of calls asking what was happening with gold. My response was the issue wasn’t the precious metal itself but the entire commodity sector,” says Gary Ng, the chairman and CEO of Chippingham Financial Group. “I went on to explain that if we took a few steps back from the canvas, we will observe that almost all commodities are down sharply this year.
“Gold is not an exception to this.”
Ng points out that the Canadian commodities markets are tied to the greenback.
“As we in Canada know very well, the U.S. dollar has been strengthening and not just against the Loonie but against almost every major currency be it the Euro, British Pound, Japanese Yen, or Swiss Franc,” he says. “As such, as the world comes to the market to buy commodities – and the U.S. dollar has appreciated so much – the price of these commodities will adjust as well; in this case, lower.”
What Ng describes as adding “even more flavour” to the already complicated currency paradigm, is the lower demand and greater supply on many commodities; “and I’m not even talking about the headline grabbers such as crude oil.
“Everything from soybeans, to sugar, to yes, even gold – there’s just a lot of it going around and not everyone is buying as much as one would expect,” continues Ng. “Case in point with gold, almost everyone on the street was expecting the Chinese to be hoarding gold in droves, but it turns out they weren’t buying nearly as much as people were expecting with reserves only being the fifth largest in the world, behind even France.”
What is Ng’s response to all the chatter about gold falling below $1,100?
“I simply ask investors and traders to take a step back and take a panoramic prospective,” he says. “If we really are in a General Commodity Bear Market and this game we play is a ‘zero-sum’ one, allow me to answer your question with a question: which side of the equation are you on?”