Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Boris Johnson Hits Coronavirus Panic Button Again, UK Accelertoing Covid-19 Second Wave - 25th Sep 20
Precious Metals Trading Range Doing It’s Job to Confound Bulls and Bears Alike - 25th Sep 20
Gold and Silver Are Still Locked and Loaded… Don't be Out of Ammo - 25th Sep 20
Throwing the golden baby out with the covid bath water - Gold Wins - 25th Sep 20
A Look at the Perilous Psychology of Financial Market Bubbles - 25th Sep 20
Corona Strikes Back In Europe. Will It Boost Gold? - 25th Sep 20
How to Boost the Value of Your Home - 25th Sep 20
Key Time For Stock Markets: Bears Step Up or V-Shaped Bounce - 24th Sep 20
Five ways to recover the day after a good workout - 24th Sep 20
Global Stock Markets Break Hard To The Downside – Watch Support Levels - 23rd Sep 20
Beware of These Faulty “Inflation Protected” Investments - 23rd Sep 20
What’s Behind Dollar USDX Breakout? - 23rd Sep 20
Still More Room To Stock Market Downside In The Coming Weeks - 23rd Sep 20
Platinum And Palladium Set To Surge As Gold Breaks Higher - 23rd Sep 20
Key Gold Ratios to Other Markets - 23rd Sep 20
Watch Before Upgrading / Buying RTX 3000, RDNA2 - CPU vs GPU Bottlenecks - 23rd Sep 20
Online Elliott Wave Markets Trading Course Worth $129 for FREE! - 22nd Sep 20
Gold Price Overboughtness Risk - 22nd Sep 20
Central Banking Cartel Promises ZIRP Until at Least 2023 - 22nd Sep 20
Stock Market Correction Approaching Initial Objective - 22nd Sep 20
Silver Bulls Will Be Handsomely Rewarded - 21st Sep 20
Fed Will Not Hike Rates For Years. Gold Should Like It - 21st Sep 20
US Financial Market Forecasts and Elliott Wave Analysis Resources - 21st Sep 20
How to Avoid Currency Exchange Risk during COVID - 21st Sep 20
Crude Oil – A Slight Move Higher Has Not Reversed The Bearish Trend - 20th Sep 20
Do This Instead Of Trying To Find The “Next Amazon” - 20th Sep 20
5 Significant Benefits of the MT4 Trading Platform for Forex Traders - 20th Sep 20
A Warning of Economic Collapse - 20th Sep 20
The Connection Between Stocks and the Economy is not What Most Investors Think - 19th Sep 20
A Virus So Deadly, The Government Has to Test You to See If You Have It - 19th Sep 20
Will Lagarde and Mnuchin Push Gold Higher? - 19th Sep 20
RTX 3080 Mania, Ebay Scalpers Crazy Prices £62,000 Trollers Insane Bids for a £649 GPU! - 19th Sep 20
A Greater Economic Depression For The 21st Century - 19th Sep 20
The United Floor in Stocks - 19th Sep 20
Mobile Gaming Market Trends And The Expected Future Developments - 19th Sep 20
The S&P 500 appears ready to correct, and that is a good thing - 18th Sep 20
It’s Go Time for Gold Price! Next Stop $2,250 - 18th Sep 20
Forget AMD RDNA2 and Buy Nvidia RTX 3080 FE GPU's NOW Before Price - 18th Sep 20
Best Back to School / University Black Face Masks Quick and Easy from Amazon - 18th Sep 20
3 Types of Loans to Buy an Existing Business - 18th Sep 20
How to tell Budgie Gender, Male or Female Sex for Young and Mature Parakeets - 18th Sep 20
Fasten Your Seatbelts Stock Market Make Or Break – Big Trends Ahead - 17th Sep 20
Peak Financialism And Post-Capitalist Economics - 17th Sep 20
Challenges of Working from Home - 17th Sep 20
Sheffield Heading for Coronavirus Lockdown as Covid Deaths Pass 432 - 17th Sep 20
What Does this Valuable Gold Miners Indicator Say Now? - 16th Sep 20
President Trump and Crimes Against Humanity - 16th Sep 20
Slow Economic Recovery from CoronaVirus Unlikely to Impede Strong Demand for Metals - 16th Sep 20
Why the Knives Are Out for Trump’s Fed Critic Judy Shelton - 16th Sep 20
Operation Moonshot: Get Ready for Millions of New COVAIDS Positives in the UK! - 16th Sep 20
Stock Market Approaching Correction Objective - 15th Sep 20
Look at This Big Reminder of Dot.com Stock Market Mania - 15th Sep 20
Three Key Principles for Successful Disruption Investors - 15th Sep 20
Billionaire Hedge Fund Manager Warns of 10% Inflation - 15th Sep 20
Gold Price Reaches $2,000 Amid Dollar Depreciation - 15th Sep 20
GLD, IAU Big Gold ETF Buying MIA - 14th Sep 20
Why Bill Gates Is Betting Millions on Synthetic Biology - 14th Sep 20
Stock Market SPY Expectations For The Rest Of September - 14th Sep 20
Gold Price Gann Angle Update - 14th Sep 20
Stock Market Recovery from the Sharp Correction Goes On - 14th Sep 20
Is this the End of Capitalism? - 13th Sep 20
The Silver Big Prize - 13th Sep 20
U.S. Shares Plunged. Is Gold Next? - 13th Sep 20
Why Are 7,500 Oil Barrels Floating on this London Lake? - 13th Sep 20
Sheffield 432 Covid-19 Deaths, Last City Centre Shop Before Next Lockdown - 13th Sep 20
Biden or Trump Will Keep The Money Spigots Open - 13th Sep 20
Gold And Silver Up, Down, Sideways, Up - 13th Sep 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Driving Forces for Gold for the Rest of 2008

Commodities / Gold & Silver Sep 08, 2008 - 03:10 PM GMT

By: Michael_J_Kosares

Commodities Best Financial Markets Analysis Article"The next Fourth Turning is due to begin shortly after the new millennium, midway through the Oh-Oh decade. Around the year 2005, a sudden spark will catalyze a Crisis mood. Remnants of the old social order will disintegrate. Political and economic trust will implode. Real hardship will beset the land, with severe distress that could involve questions of class, race, nation, and empire." -- William Strauss and Neil Howe, The Fourth Turning , 1997


When IndyMac Bank collapsed in early July, USAGOLD-Centennial Precious Metals logged the largest single week volume in its 35 year history. And that was just the beginning. By mid-August gold coin demand had become so strong globally that U.S. Mint and South Africa's Rand Refinery announced they could no longer keep up with their orders and promptly shut down operations. Soon thereafter, the U.S. mint resumed gold coin production, but explained that they would now be forced to ration output. Much of the demand that spawned the mints' problems came from individuals around the globe concerned about the safety of their banks and financial institutions -- a worry not likely to dissipate anytime soon. 

Conclusion: Thus far the gold industry has done a good job addressing the gold coin shortage problem. Adjustments have been made, and the flow at this writing has returned to some semblance of normal. Though there is no guarantee that we won't revisit the problem of shortages later in the year, the most likely outcome will be higher gold prices and higher premiums on coins and bullion until market equilibrium is regained. As a matter of fact, premiums have already risen on most gold coins.

Recommendation: Please keep in mind that the word "shortage" is not defined as a complete absence. Shortages are not cause for undue alarm, but do warrant decisive action. We expect demand to continue at a steady pace no matter what the price does, particularly if systemic risk remains in the headlines.

The economy has replaced the Iraq war and gasoline prices as the centerpiece issue for this election, yet neither candidate comes off as economically astute enough to deal with its complexities. There was some talk about oil at the party conventions, but the trade deficit was skipped over, and neither party talked very convincingly about smaller government, or balanced budgets, or the future value of the dollar. The Fannie Mae and Freddie Mac debacle wasn't even mentioned, nor was the Misery Index -- the combination of inflation and deflation -- which over the past year has gone into double digits and remains a primary concern for all Americans.

Conclusion: If you count yourself among the growing list of those who feel that neither party can deal effectively with the growing credit crisis, you are not alone. It's one thing to make promises about the economy and taxes. It's quite another to deliver, especially when those promises involve increased military commitments overseas and bigger and better social programs at home. Let's not forget that the same president who promised to retire $1 trillion of the national debt in his first four years (GW Bush), managed instead to add $4 trillion over his term in office.

Recommendation: Looking back, the conventions did as good a job selling gold to the American public as they did selling their respective presidential candidates. Rather than waiting for Washington to deliver on the economy, you might be better served by taking matters into your own hands. Take to heart this issue's masthead quote from Strauss and Howe's The Fourth Turning .

A well-oiled and functioning market for paper instruments depends in the end on faith and trust. Value in one financial house depends upon performance from another financial house which depends upon performance from still another -- a seemingly infinite web of interlocking counterparties fully dependent upon each other for their existence. A breakdown in one major institution, we are told, could lead to a domino effect and collapse the entire system. As a result, the Federal Reserve and U.S. government have no other choice, the logic continues, than to bail out the institution in trouble and shift that loss to the taxpayer. Fannie Mae and Freddie Mac, the mortgage-backing behemoths, have rewritten the book on bailouts, and who's to say that it ends there. It is important to keep in mind, though, that Fannie and Freddie are only part of the problem. There are other credit land mines buried about this economy that could be tripped at any moment.

Conclusion: The good news (if you happen to go to work every day on Wall Street like the fellow in the Stein cartoon above) is that you are likely to get bailed out if your balance sheet is reduced to a puddle. Fed chairman Ben Bernanke was serious about those money-dropping helicopters after all. The bad news is that there is a significant downside to the Fed's Magic Money Machine. Runaway stagflation becomes a distinct possibility. Already the Misery Index (the combination of inflation and unemployment) is in double digit territory at roughly 12%. And that's the misery level utilizing the government's numbers. It could be even worse if you use Shadow Government Statistics. (Please see #5 "Lies, damn lies and statistics" below.)

Recommendation: Systemic failure meets the printing press and for those who keep their savings in dollars, and dollars only, the risks are evident. Closely monitor the credit crisis and how it is handled by the Washington authorities. Commenting on the Fannie/Freddie government bailout, Robert Bruner of the Darden School of Business at the University of Virginia said, "If anybody thought we had a pure free-market financial system, they should think again."

**Ed Stein cartoon published with permission.

When the New York Times reported that China's central bank was running out of capital, some took the report as preposterous. How could a country have so much money and be broke at the same time? To answer that question all one has to do is to hold in his or her hand a stack of the multi-million mark notes issued by Germany in 1923 . Technically, what you have in your hand qualifies you as a multi-millionaire, possibly even a billionaire. There's one problem: That stack of notes wouldn't have bought a cart full of groceries.

For China ultimately it will get down to the value of the money it takes in after it ships something out. As the Times reported, "Victor Shih, a specialist in Chinese central banking at Northwestern University, said that when he visited the People's Bank of China for a series of meetings this summer, he was surprised by how many officials resented the institutional losses. He said the officials blamed the United States and believed the controversial assertions set forth in the book Currency War , a Chinese best seller published a year ago. The book suggests that the United States deliberately lured China into buying its securities knowing that they would later plunge in value."

Conclusion: Doesn't that sort of thinking qualify China's central bank as a potential gold owner? There were reports earlier this year that Robert Mundell, the Nobel Laureate in economics, was advising China's central bank. Mundell has always believed that gold should play a strong role in central bank reserves because currencies issued by nation states are always subject to depreciation and even the prospect of total collapse. Any significant sale of gold by the central banks will likely be met by significant purchases from other central banks. And The Peoples' Bank of China likely sits at the top of the buyers' list. 

Recommendation: Keep a close eye on China because it now holds the key to the U.S. Treasuries market. Its decisions could become a major influence on U.S. interest rates, as well as to what degree the U.S. budget deficits will need to be financed with printing-press money.

If you would like to broaden your view of gold market news and analysis, please feel welcome to join our free NewsGroup to receive by e-mail periodic gold news alerts, plus timely notice of our VideoBriefs and USAGOLD Market Updates featuring relevant commentary like this one!

More and more, I find myself relying on the economic numbers posted by Shadow Government Statistics (SGS) over those by the U.S. federal government. For my money, and I mean that quite literally, I rely on SGS numbers for the real story on the economy. Here are some examples of the differences. Let's start with the inflation and unemployment rates -- two figures near and dear to the hearts of all Americans. SGS, going by the same Consumer Price Index used during the Clinton administration, pegs the inflation rate at roughly 9% -- dangerously close to the double digits. The Labor Department has consumer prices up 6.2% over the same period. The official unemployment number is running around 6%. SGS' number is closer to 15% -- a 9% difference! If you combine the two to get the old Misery Index, it is 11% by the government's calculations, and 24% by SGS'!! (Please see graphs below.)

Conclusion: Which numbers, in your opinion, are closer to fact and which are closer to fiction? Decisions cannot be made in a vacuum. Nor can they be made using bad numbers. If a 24% Misery Index doesn't elevate your level of concern, nothing will.

Recommendation: A visit to Shadow Government Statistics web site

Recently the Bundesbank, Germany's central bank, delivered a lecture on the role of gold as a central bank reserve item. "National gold reserves," instructed Bundesbank, "have a confidence and stability-building function for the single currency in a monetary union. This function has become even more important given the geopolitical situation and the risks present in financial market developments." France and the European Central Bank, both primary sellers of gold over the past several months, might take note. I cannot remember a more direct statement from a central bank on the role of gold in the modern era, and a more direct assault on the "barbarous relic" description made famous by John Maynard Keynes.

Conclusion: Germany holds the world's second largest gold reserve next to the United States and plays a special role in the European Union as its largest single economy. The Bundesbank's caution will raise a few eyebrows across Europe not just in the official sector but the private sector as well.

Recommendation: Like millions of private investors across the globe, Germany holds gold as a form of savings impervious to currency depreciation, systemic failure and geopolitical instability. By its example, it has delivered an important message.

By Michael J. Kosares
Michael J. Kosares , founder and president
USAGOLD - Centennial Precious Metals, Denver

Michael Kosares has over 30 years experience in the gold business, and is the author of The ABCs of Gold Investing: How to Protect and Build Your Wealth with Gold , and numerous magazine and internet articles and essays. He is frequently interviewed in the financial press and is well-known for his on-going commentary on the gold market and its economic, political and financial underpinnings.

Disclaimer: Opinions expressed in commentary e do not constitute an offer to buy or sell, or the solicitation of an offer to buy or sell any precious metals product, nor should they be viewed in any way as investment advice or advice to buy, sell or hold. Centennial Precious Metals, Inc. recommends the purchase of physical precious metals for asset preservation purposes, not speculation. Utilization of these opinions for speculative purposes is neither suggested nor advised. Commentary is strictly for educational purposes, and as such USAGOLD - Centennial Precious Metals does not warrant or guarantee the accuracy, timeliness or completeness of the information found here.

Michael J. Kosares Archive

© 2005-2019 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

6 Critical Money Making Rules