Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24
US House Prices Trend Forecast 2024 to 2026 - 11th Oct 24
US Housing Market Analysis - Immigration Drives House Prices Higher - 30th Sep 24
Stock Market October Correction - 30th Sep 24
The Folly of Tariffs and Trade Wars - 30th Sep 24
Gold: 5 principles to help you stay ahead of price turns - 30th Sep 24
The Everything Rally will Spark multi year Bull Market - 30th Sep 24
US FIXED MORTGAGES LIMITING SUPPLY - 23rd Sep 24
US Housing Market Free Equity - 23rd Sep 24
US Rate Cut FOMO In Stock Market Correction Window - 22nd Sep 24
US State Demographics - 22nd Sep 24
Gold and Silver Shine as the Fed Cuts Rates: What’s Next? - 22nd Sep 24
Stock Market Sentiment Speaks:Nothing Can Topple This Market - 22nd Sep 24
US Population Growth Rate - 17th Sep 24
Are Stocks Overheating? - 17th Sep 24
Sentiment Speaks: Silver Is At A Major Turning Point - 17th Sep 24
If The Stock Market Turn Quickly, How Bad Can Things Get? - 17th Sep 24
IMMIGRATION DRIVES HOUSE PRICES HIGHER - 12th Sep 24
Global Debt Bubble - 12th Sep 24
Gold’s Outlook CPI Data - 12th Sep 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

The World According to Gold, $1500 by Year End

Commodities / Gold and Silver 2010 Oct 21, 2010 - 08:04 AM GMT

By: Midas_Letter

Commodities

Best Financial Markets Analysis Article$1500 by year end. That’s what the price of gold is going to be. If you buy an ounce of bullion today, you’ll sell it after the Christmas holidays for a profit of 8+%. The gloves are off in the ring of major global currencies, all the pretence is gone, and it’s a horribly blatant competition to devalue currencies that’s now underway. The disconnect between the actual purchasing power of the increasingly worthless dollar, pound, euro, yen and yuan and their near future purchasing power is the latency inherent in a globalized economy in terms of time. Price inflation is coming: it is the absolute outcome of monetary inflation in the absence of real stimulus (supply shortage and demand increase based on actual economic consumption growth – not rampant counterfeiting)


What we have is artificial stimulus (monetary inflation). This creates the short-term appearance of robust economic health because it enables the banks and their associated derivative businesses to report massive profits, which induce buying of their widest of widely held shares, which gives you Dow 11,000+. The 100,000 Americans tossed out of work and home each month can’t eat Dow 11,000. For them, the number is a slap in the face. It’s the proof in the pudding that their leaders have abandoned them in favour of optics. The optical band-aid ultimately diminishes further the condition of the already compromised system by drowning it in the substance upon which it now chokes. Wealth preservation can only be accomplished with precious metals in such an environment.

It is a favorite statement bandied about by government economists that never before in the history of humanity have so many people enjoyed such a high standard of living. What they fail to mention and choose not to notice is the millions upon millions for whom the quality of life has dramatically fallen. On Main Street, and yes even on Wall street, thousands of people are losing their jobs and their homes. Meanwhile the high standard of living referenced by economists means a piece of meet with the previously drab and ubiquitous beans and rice, and a cell phone to boot. Wow! Now that’s a high living standard!

If you’re wondering who isn’t seeing their quality of life deteriorating, and who are, in fact, thriving despite the wider economic woes, look no further than the business of mining and exploration. I’m on a site tour in deepest darkest (well actually, wind-iest) Patagonia, where the company hosting the analyst tour has been busily shuttling our group of about 50 all over the Desdeado Massif, as the geological structure underlying Santa Cruz province is called, to view drill core, diamond drill rigs at work, vein outcrops, and lots of barren landscape. The company is encountering very high grade drill holes with grades like 56 grams per tonne gold with over a kilogram per tonne of silver, and the development of a mine is imminent.

This morning we watched gold tumble $38 on our blackberries and we chuckled at the prospect of the media and other uninformed personages declaring an end to the gold bull market. On this bus, nobody is out of work or out of a home. Rather, the talk is of upcoming rugby championships and flats in Buenos Aires, great restaurants and who’s got the best and worst business class. These are investors in gold and silver, who have been quietly prospering for the last ten years, having embraced the idea that deficit spending by governments would bring about a general devaluation in currencies, which is clearly underway.

The youngest member of our group posed a seemingly innocent enough question. “Why is gold so important….I mean, why gold, and not something else?”

There are those who argue that gold, apart from some excellent physical and chemical characteristics that make it unique, is completely undeserving of its status as the most stable instrument of value exchange in the recorded history of humanity. Still others declare it completely worthless. The fact of the matter is that gold has been the instrument of trade for 5,000 years among humans. Paper currency was originally a note from your banker advising the note reader that the bearer was in possession of the stated quantity of gold, and therefore the note was representative of that value in goods, which the bearer could then trade for said goods.

That doesn’t really explain why gold. Rather, it just underscores the ‘how’ of it. They why is attributable, in my mind, to nothing more than the fact that we value shiny things that are hard to come by. Gold fits the bill perfectly!

There was a lively discussion about when the bull market in gold would end. I find the idea of gold in a “bull market” misleading, as if its something consumable like oil or coffee or pork bellies. Gold is the standard against which the value of all things are measured. The apparent increase in the price of gold as expressed in currencies is as much a reflection of currency’s vanishing purchasing power as it is in the increased preference for wealth preservers to hold gold over currency in recognition of currency’s debilitation.

Because gold is not consumed, and its rate of disappearance is minute and results only from micro quantities lost to ablative processes and during recycling, it can’t be considered a commodity according to the definition of that word. Commodities, like steel, copper, grain, potash, sugar, rubber, etc are the raw materials which are consumed in the process of manufacturing or just living. Cars consume gasoline. People consume coffee and sugar. The Chinese appear to consume copper, but nobody consumes gold. It is hoarded. Exactly why is a philosophical question. Why is no longer important in the case of gold…only that it is what it is. Any attempt to further clarify gold’s raison d’etre will only complicate that essentially simple fact. Gold is money. It was the first money, and will be the last money. Everything else is an imitation. End of story.

So when you see gold swoon down into the $1100’s, as is likely, don’t panic. And don’t make the mistake of thinking that the “bull market” in gold is over. It’s not. Gold will resume its patient rise in price as expressed in currencies as long as currencies continue to be indiscreetly mass manufactured.

Gold could theoretically return to a state where the integrity of currency once again is preferred over gold as a mechanism for trade and wealth preservation, but that would mean that we would have collectively, as a species, stopped competing to devalue our currencies and consume all the commodities in sight, and instead somehow managed to cooperate to manage our money, our resources, and our exhaust. I don’t really see any chance of that happening any time soon. I think a return to tribal albeit high-tech warfare will be the ultimate outcome of our current situation. I think there is going to be a general and incremental deterioration over all of living conditions for the majority, while an increasingly tinier ratio of lucky and smart people live the high life.

If you want to count yourself a member of the latter group, you’d better start educating yourself on how to profit through gold and silver exploration, mining and investing. If you don’t, you’ll have nobody but yourself to blame.

www.MidasLetter.com

James West writes the MidasLetter at MidasLetter.com where subscribers learn about emerging companies in the junior resource sector.
© 2010 Copyright Midas Letter - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Midas Letter Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in