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Where are Gold Prices Going ?
- December 15th, 2008
- Posted in WTC Coin News
I found this story this morning it is quite technical but its a good view of what is happening with the gold prices and why. The article predicts gold prices above $1,250 per oz. Please have a read.
I never thought I’d see the day that gold markets went into backwardation (spot prices higher than futures prices). However, the seemingly unthinkable has indeed happened. Of course, I’m not suggesting that backwardation will be a permanent feature of the market, as the misalignment of interest rates that theoretically caused gold backwardation is most likely not a permanent feature, either. Nonetheless, the question remains: Where do we go from here? This writer speculates that gold could very well turn out to be in a win-win situation, whether there is deflation or inflation. How is this possible? Adam Smith told us that gold is a barbaric relic, although it is more commonly known as the metal of kings. I remind you all that the world is still full of barbarians.
The above-ground stocks of gold, presumably available for disinvestment at any time, are some 60-fold of annual production of about 2,500 metric tons. This is why gold has never been in backwardation. Unlike any other commodity, all gold that has been mined throughout the ages is still out there somewhere. At an estimated 150,000 metric tons, this above-ground stock of gold–with most obvious portions in private hands or tucked away in central bank vaults–dwarfs annual production. Unlike industrial commodities such as copper, aluminum, or zinc, where prices can go into backwardation at the slightest hint of a temporary supply disruption from major producers, contango pricing has always been the norm for gold, where futures prices exceed the spot price.
Earlier this month, however, for the first time in history gold prices went into backwardation. Put differently, physical demand was to be met only by higher prices; those that held gold appear to be more reluctant to part with their hoard today than they may be in the future. Naturally, one wonders why it is that gold is now dearer in the face of what could turn out to be a potentially painful deflationary environment ahead.
Historically, it is understood that the role of gold is more of a hedge against inflation. Accordingly, the usual cadres of gold bugs have been telling us that gold strength reflects the enormous sums of money that are being printed and spent to bail out failing financial institutions and to shore up the flow of credit to prevent the economy from falling ever more deeply into recession. The inflationary implication of printing so much new fiat money is clear-cut to gold bugs; after all, Milton Friedman taught us that inflation is always and everywhere a monetary phenomenon. Most gold bugs equipped with charts showing money supply going through the roof see this as the precursor to runaway inflation ahead.
The flaw with that rationale, however, is that while it is true that money supply has increased significantly and inflation is a monetary phenomenon, it is the velocity of money that matters. And velocity has decelerated dramatically–a natural outcome of deleveraging. That’s why I speculate that the deployment of monetary tools, including reducing the cost of credit through the Fed window to prevent deflation, is akin to pushing on a string. As long as the velocity of money is decelerating, one should expect that nominal economic growth will remain at best anemic worldwide, even if the cost of credit gravitates toward zero (and for all practical purposes is there already).
However, should the Fed decide to monetize debt, then inflation would become a threat. For now though, given the subdued velocity of money, swapping financial institutions’ illiquid assets for liquid Treasuries to stimulate credit flow can hardly be viewed as inflationary, and it’s not even having much success yet as financial institutions appear to be hoarding liquidity.
The last era of any significant period of deflation was in the 1930s. Although gold was fixed for a long time at $20.67 per ounce, in 1934 a massive devaluation of the U.S. dollar saw its fixed price jump to $35 per ounce. During this period of entrenched deflation, and in spite of the fixed price of the metal, gold proxies saw a dramatic rise in price. The NYSE-listed shares of Homestake Mining Company rose from about $4 to $500 from 1929 to 1935; the company operated for some 120 years until its flagship Homestake mine in Lead, S.D., ran out of economic reserves a few years ago and the company ceased to exist.
From my perspective, we dare not expect such returns from gold producers’ shares, but I remain confident that our revised target price of $1,250 per ounce (our previous target of $1,000 was met) has a reasonable probability of panning out. That would likely result in handsome returns for gold producers
That said, we could very well experience some deflationary forces first, before inflation (or more precisely, reflation) changes the course. Surely, a fast cure for deflation may simply be another major devaluation of the dollar, however unthinkable this may seem. Perhaps the following excerpt from Fed Chairman Ben Bernanke suffices as support for my take on gold prices:
“Although a policy of intervening to affect the exchange value of the dollar is nowhere on the horizon today, it’s worth noting that there have been times when exchange rate policy has been an effective weapon against deflation. A striking example from U.S. history is Franklin Roosevelt’s 40 percent devaluation of the dollar against gold in 1933-34, enforced by a program of gold purchases and domestic money creation. The devaluation and the rapid increase in money supply it permitted ended the U.S. deflation remarkably quickly. Indeed, consumer price inflation in the United States, year on year, went from -10.3 percent in 1932 to -5.1 percent in 1933 to 3.4 percent in 1934. The economy grew strongly, and by the way, 1934 was one of the best years of the century for the stock market. If nothing else, the episode illustrates that monetary actions can have powerful effects on the economy, even when the nominal interest rate is at or near zero, as was the case at the time of Roosevelt’s devaluation.
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Why Invest in Gold and the Many Ways to Invest in Gold
- August 6th, 2008
- Posted in Uncategorized
CoinsBullions asked:
The price of gold itself is up more than 50% from its low in 1999. The gold coins are classified on 70% during the last three years. The future and options on gold have risen. Who knows how many thousands of percentages you 'd made investing in gold? There are many factors that make gold at a major investment now. The sale of gold coin is still cheap, while stocks are expensive. In January 1980, both the Dow Industrials that the price of gold was at the same level: 800. Now, almost 24 years later, the Dow is close to 10,000, while gold is less than half its value in January 1980. There are some great opportunities in gold stocks. Governments will make our money worth less to pay off their debts record. Governments can print money to pay off their debts. But can 't generate the gold. The supply of paper money can be infinite. But the supply of gold is extremely limited (they say that the entire production of gold in the history of the world could fit on basketball. Gold should do well in extreme bear markets. Argenti more than doubled in value as from 1932 to 1936 during the Great Depression (the price of gold was fixed by the government). The long bear market of 1968-1980 was the following. The silver has risen from around $ 2 for 1968 close to $ 50 peak in Action 1980. Gold will rise during the? Of inflation | and during deflation. Investing in gold is good? Protection of inflation | gold increases while the value of the dollar falls. While the government significantly lowers interest rates and printing money sfrenatamente ( generating inflation) to offset that? of the deflationâ | leading to gold prices substantially higher. This is where we are now and the fact that gold has it 's supposed to do. When you buy gold coins, reduce the risk in your investment. In the past, gold has tended to do the opposite of | of it? of stocks rose to the stars in the 70s, when stocks were horrible. Then in the 80s and 90s, when stocks are rising, gold has lost more than half its value. Now in the new millennium gold rose while stocks are still below their levels of 2000 that I consider these as the best chance hours . While gold stocks are up almost 500%, the investment of money in gold investment grade (those that carry a rating of the condition of mint (ms) 63 or higher rating agencies PCGS or NGC) is' only 'on 70%. These coins have turned up in value in 1989. Then I fell by 85%, basing in 2001. There is still above 100% on the table here and your downside is limited (by you' Re near value of the merger). At its gold directly, you can buy common gold coins or small bars of gold. The gold coins are known as' bullion 'coins. These include the popular currencies such as Krugerrands or Canadian maple sheets and cost just a few dollars more than the current price of gold. They don 't have the upper hand extraordinary or not, simply move with the price of gold. You are ready to invest in precious metals? coins and bullion bars are choice of all smart investor in present financial circumstances of the world. While the dollar is devaluing paper yet, your investment risks only increase in value. The estimable online sellers can provide direct access to the your immediate investments in precious metals such as gold bars.
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Credit Suisse Gold Coins
- May 13th, 2008
- Posted in Uncategorized
CoinsBullions asked:
The gold bars of Credit Suisse are refined to pi? high levels of gold of 99.99% fees?. Each bar of gold? 24 carats of gold purity and the purity and exact weight stamped on each bar of gold, then sealed for your protection and security. The pure gold content of each bar of gold of Credit Suisse completely? supported by the Bank of Credit Suisse renowned World Switzerland.The that the gold bars popular Pampa Suisse are refined purity 99.99%,? analyzed, stamped with an exact dell'oncia troy weight? certificate and sealed the refinery in a plastic card with the notice certificate of analysis and the serial number on the certificate / card. The "distinctive; Gold Dream" The Pampa Suisse mark? accepted by wholesalers and traders of gold worldwide that make these bars are easy to sell gold during the years to come. The products are accredited Pampa good as over by the Swiss National Bank and the market ingot London Association.Investing of gold coins in American drama is not the stock market, you do not have to follow the minute by minute price movements or be cautious what the flow of news to transmit action upward or downward. It also does not have the staidness of parking your money in products of long-term debt. The gold prices have been volatile, but in accordance? to the ranges and bench? the metal had a strong operation in 2006 and prices were reasonably high, analysts predict that there is a further appreciation. Prices of gold are linked to the strength of the dollar. With the dollar weakens and that foreseen to continue to do so, the demand and the price of gold would increase only. The central banks of several countries have begun adding to their gold reserves. While China is certainly going to increase its reserves and match the ingot and other countries of Organization for Economic Cooperation and Development Economic, Russia and Australia are looking to double its reserves and began buying. The Chinese currency can be bought in various forms and the decision should be based on reason that you need for gold. If you see this purely as an investment, you can buy them in the form of bars or coins of physical gold. The bars of Credit Suisse and Pampa are because suggest? ? better to be invested and you can be reassuring that gold? pure. Most sellers of estimable ingot will always these bars of gold available in a form certified sealed.
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Gold Investments: A Few Helpful Tips
- May 3rd, 2008
- Posted in Uncategorized
Jamie Clark asked:
Through history, the gold? a substance was highly estimated. It 'the property? if only to the relative scarcity led almost every crop of the world to use them as a form of money, what? as a way to "store" value. Although he lost a lot of relative importance as a form of currency, gold investments still provide a great way to protect your money and differentiate a folder. During recent years, gold prices are rising steadily. There? a Probability? very good that this trend continue? over the long term, making it a good idea to put the hours some money in gold investments. In addition, gold buying? a great way to protect themselves from other investments. caused uncertainty in the stock market value of the dollar and U.S., It 'good idea of SA put 10-20% of your money in a fund managed alternative to protect themselves. Gold and silver have always been regarded as among the best forms of investment because of the barrier? values are relatively stable (because very small changes in supply). How to invest in GoldBefore buy gold, it 'good idea of SA get the help of a consultant on investment. There? ? Especially if you bring 'the VE not never before invested in gold. He or she can? help you determine the best movement to make based on your own goals and tolerance for personal financial risk. If gi? you have a personal financial adviser, dicagli that you 'd Gradica use the gold to protect your folder. If he or she doesn 't have much experience in the trade of gold investments that can want to find someone who does. If you 're interested in profit from price movements of gold coins buying gold of the rod are an excellent choice. The best choices are the American eagle, the Canadian maple leaf, the Britannia and the currencies of the Australian Pepito. You can buy the currencies of the rod of gold bullion and currency traders, is out of line in line. Before the manufacture of rod of gold purchases always around for the best prices, because? the profit margin on the coins varier? by the merchant to merchant. Also, do everything possible to make sure the merchant you 're the purchase? been in business for an po'ed to have a good reputation. If you can keep your gold coins in mint original pack proteggale from scratches and to raise the resale value. The gold bars are another option for gold investment that you want to look at. The pi? small bars are usually pi? expensive (per oz) that large bars but are more often? easy to sell. The bars usually carry a premium price pi? high that the coins. As with coins, only the business and trade of the rod with gold traders estimable.