Author: Julian Phillips
Posted: Friday , 27 Sep 2013
JOHANNESBURG (GOLD FORECASTER) -
This is a series on how and why the gold markets fail to reflect the true balance of demand and supply in gold and silver prices. Many investors expect and believe that the gold price is an accurate reflection of demand and supply, but it isn’t.
In a perfect market the exact weight of demand and supply on a daily basis would be reflected in the daily prices. In both gold and silver markets this is just not true. Many of these factors are common to all markets, but in the gold market the different factors on a broad front are wider and more complex than most. The extent of market liquidity is a key factor in the efficiency of markets so we need to know just how responsive to prices is the liquidity of the gold market.
It’s naïve to expect markets to be perfect in a very imperfect world and where large investors have a disproportionate power to influence precious metal prices –aided by the different structures of different global markets and their relationships to each other—so the most important point for both traders and investors is that they realize this and adjust their trading and investment with these factors in mind. Of course, the real skill is being able to synthesize these factors into an understanding of where gold and silver prices will go and when.
But this subject has major relevance today. We know that global demand for gold is as strong as ever right now, if not stronger, so why isn’t this being reflected in the gold price? ...