Posts Tagged ‘History Gold’

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Where are Gold Prices Going ?

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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Gold Investing – “Times Are Changing”

gold eagle invest
Brooke Hayles asked:

Remember your history lessons in school? 've Been paying attention? You remember the lessons that have discussed the weight of gold or the history of gold in the world. The gold? been used for the purchase, barter and collection through history. The gold even? been a barrier against inflation and helps to preserve and protect the gains of Americans.Today future, we can buy, sell or make an investment of gold in various ways. Gold is generally in two forms, also known as ingot, these forms are bars or coins made of gold. With the trade, the majority investor in the future of gold sells on the market. The investments often are made of gold holdings in mining and refining. If you look at history, start to notice that gold was very useful entirely with the changing times. It provided an avenue safe during periods when the world 's economy was unstable. Investors important for gold, gold pu? improving a folder and decrease in the quantity? risk. There are several avenues when the investment of gold. The options are to invest, gold coins, bars, customers declaration, programs Accumulative parts of the mine and mutual investment funds. Possibly the avenue pi? People of gold? in coins and bars. There are different sizes and weights available to invest inside. Some of the weights include 1 gram, 1 kilobar and international bar. But that 's not all. An investment in gold bars? unidirectional produce cost-efficient methods of investment in gold. There? ? perch? commissions of the Ombudsman are minimal for the sale and purchase of gold bars. The gold coins are as popular among small and medium investors. The reason for this? one in the country of publication, gold coins are considered a legal tender currency and are guaranteed for their face value through economic change. Some of the major gold coins include: Aquila * The American? available in weights of 1 / 10,? of? of? of? and 1? * Canadian paper that? available in weights of 1 / 10 to? maple dell'oncia troy of? of? and 1 troy oz *? of South African?, 1 / 10 in the weights available? of-Kruggerand,? of? English and 1 troy ounce dell'oncia-Britannia? available in weights of 1 / 10? of? on? of? and 1 * Australian kangaroo? available in weights of 1 / 20, 1 / 10? of? on? of? Panda-1 * Chinese? available in weights of 1 / 20, 1 / 10? of?,? of? and 1 troy ounce dell'oncia troy dell'oncia * Austrian Philharmonic dell'oncia troy? available in weights of 1 / 10,? of? and 1 * Mexican family of Centenary dell'oncia troy? available in the following 2, 2.5, 5, 10, 20 and 50 weights. * Onza-Mexican? available in weights,? of?,? of? and 1 troy ounceAs that you see above, gold coins are a popular form of gold investing and good planning for the future. The gold will? a good investment with the changing times perch? continue? its value. SUMMARY: The investment of gold? was the best form of investment through history. Today, gold pu? be bought in two types of ingots. You can also invest in "accounts" for a declaration of gold;, "plans" accumulation;, "shares" of mining;, "options" and "funds" mutual;. The investment of gold ensures that your future? sure.

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Gold Investments: A Few Helpful Tips

gold eagle invest
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.

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