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“This

is the first time since 2001 that gold and silver stocks have been reasonably

priced. Not cheap. But reasonably priced in terms of the underlying economic

projects at current gold prices.”

These

were the words of Mr. Rick Rule, Chairman and Founder of Sprott Global Resource

Investments, as he spoke with SmallCapPower.com

in a recent interview (watch

it here). His words seem to be a call for investors to carefully

scrutinize the gold investing world. In his interview, he discusses that

precious metal prices have only ever been reasonably priced twice in his career

and both times they were indicators for investors to take action. But Mr.

Rule’s words were just that – they were words. Investors should always do their

own lengthy due diligence before looking into investing. So the question

begs to be asked: Does the market reflect opportune conditions for gold?

The

answer is likely “yes.” The market is quite favorable for gold for a number of

reasons. Primarily is the growing influence of Russian troops on the border of

Ukraine. Simply put, the increase in Russian involvement with the Ukraine

border has put investors on edge. Add to the phobia the recent Canadian

sanctions on Russia accounts for investors seeing certain stocks as risky and

selling them for a safer option (gold and bonds). This of course contributes to

a rising gold price. On Wednesday, the TSX gold sector was up about 1.6%. The S&P/TSX

composite index rose 14.38 points to 15.202.09. This accounted for investors

pushing the December bullion ahead US$22.70 to US$1,306.70 an ounce. What we

are seeing is an array of external geopolitical issues affecting the price

range where gold is currently operating in. Since mid-June, investors

have seen gold fluctuate in the midst of tensions in the Middle East as well as

Ukraine. The cherry on top was really speculation over U.S. interest rates.

Some data would hint at a higher interest rate, making gold fall while the

aforementioned macro issues would accelerate price.

As

of Thursday, buying has stagnated in compliance with prices trading at north of

$1300 an ounce. Speculation is really the main proponent behind a sluggish

summer. Investors are expecting the prices to drop in the coming months and are

holding off purchases for the immediate future. According to CNBC, holdings

SPDR Gold Trust, which is the world’s largest gold-backed Exchange-Traded Fund

fell 2.4 tons to 797.55 tons yesterday.

Speculation

isn’t only coming from investors. On the contrary, what we are seeing are

precious mineral analysts predicting the opportune and idealistic conditions in

which gold will thrive. Commodity strategists Mr. LaForge and Mr. Pies

highlighted that low gold volatility and a declining interest rate may be the

right recipe for higher gold prices. On a blog on Barron’s, both Forge and Pies collectively wrote that low

volatility in gold prices has meant good things for investors. It is high

volatility that is bad for gold. This year, the prices have been very closely

bracketed between a certain range. The duo also details that gold has

traditionally been a “haven trade” in the sense that investors usually turn to

gold post unfavorable stock conditions.

The

bottom line boils down to one factor. Speculation. No one can say for certain

when the exact appropriate time to sell or buy would be. If we look at the

situation in Ukraine, it is clear that right now people are opting out of stocks

and investing in gold and bonds but who is to say that conditions won’t improve

next week? How many days or weeks the tensions will endure is really anybody’s

estimate.

Disclaimer: This article was posted with the permission

of a third-party contributor and the opinions contained therein do not

necessarily reflect those of Smallcappower. Smallcappower does not endorse

any investment advice provided by these third-party contributors.

Please consult your investment advisor before

making any investment decisions. Ubika Corporation and its divisions

Smallcappower, Ubika Communication and Ubika Research are not registered with

any financial or securities regulatory authority in Ontario or Canada, and

do not provide nor claims to provide investment advice or recommendations to

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