LONDON (Commodity Online): Rising prices of precious metals led by gold and silver have led many to set alarm bells warning that both the commodities are in bubbles that can burst any time.
While global analysts like Nouriel Roubini have often cast aspersions on the continuing rise in the prices of gold and silver, there are some experts who insist that these commodities are not caught in price bubbles.
“Gold and silver price are not in bubbles,” says Folker Hellmeyer, chief analyst at Northern Germany's Bremer Landesbank.
He said while the prices of gold are silver are not bubbles, “the government debt is in a bubble.”
“If there is a bubble, it's in Triple A-rated government debt, whether from Germany or the United States,” he said.
Calling the reasons for the bull market in precious metals such as gold and Silver Bullion “very simple”, Hellmeyer – whose bank is 92% owned by Nord LB, one of the country's very largest commercial banks – identifies three key factors.
Debasement of the US Dollar is the most important driver of the Gold Price rise, plus rapidly growing wealth in emerging-market economies, and “smart central banks” Buying Gold rather than yet more debt from the United States.
“That means we have a strong demand growth with an inflexible supply. Those are the drivers of the Gold Price.”
On Wednesday, Comex gold futures prices closed solidly lower on heavy profit-taking pressure after hitting an all-time record high on Tuesday.
A firmer U.S. dollar and higher Treasury yields Wednesday added to downside price pressure in the gold market. Some near-term technical damage has also been inflicted in gold the past two days. February Comex gold last traded down $26.60 at $1,382.40 an ounce. Spot gold last traded down $19.50 at $1,382.00.
March silver futures closed down 160.7 cents at $28.17 an ounce Wednesday. Prices closed near the session low and saw heavy profit-taking pressure from recent gains. No serious chart damage occurred in silver Wednesday, but the bulls did fade badly and need to show fresh power soon. The firmer U.S. dollar index did help push silver down Wednesday.
