Talking Numbers

Watch: Gold is flashing a secret buy sign

Talking Numbers

Gold has risen almost 10% in the last three weeks. According to one respected source, there are two very big signs that it may be getting better.

Quietly, gold has risen almost 10% in the last three weeks, its best stretch in the past two years. And, according to one respected source, there are two very big signs that the yellow metal may be getting better.

Juan Carlos Artigas is World Gold Council Global Head of Investment Research, points to two indicators he believes investors should look at in making a decision to buy bullion.

(Related: Gold's sub-$1,200 bottom will hold, Gartman says)

Artigas’ believes the first sign is in the technicals. Since the start of the millennium, gold has dropped more than 10% seven times. Including the current fall from 2011 highs, the average time it has taken gold to recover has been 293 days. The longest period was during the start of the last decade, when it took gold 538 days to get back to its 2000 highs.

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Gold prices and pullbacks since 2000.

As of now, gold is in the midst of its most severe pullback in the past 13 years, having fallen 37% since 2011. “Pullbacks in the gold market are natural and even healthy,” says Artigas. “Those who don’t currently own gold, or wish to increase a position, can benefit from this opportunity to buy at lower prices.”

(Related: Gold down 1% but set for weekly gain, Fed eyed)

Artigas believes the second indicator making the case for gold is the fundamentals, specifically, increased demand versus constrained supply. For example, the China Gold Association estimates an increase of demand by nearly 30% to 1,000 tons in that country alone.

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Global gold demand (in tons) and supply by miners

However, on the supply side, the two types of gold suppliers – miners and recycled gold – are both expected to decrease output due to lower gold prices. “Mine production will likely be cut if prices remain at current levels,” says Artigas. “Recycled gold, which has accounted for about a third of supply over the past five years, is likely to contract by 300 to 400 tons as fewer people are selling gold jewelry and coins.”

But are these two signs enough to push gold back up to its previous highs? Watch the video above to hear Artigas’ interview and decide for yourself.


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