Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
Coronavirus is America's "Pearl Harbour" Moment, There Will be a Reckoning With China - 6th Apr 20
Coronavirus Crisis Exposes Consequences of Fed Policy: Americans Have No Savings - 6th Apr 20
The Stock Market Is Not a Magic Money Machine - 6th Apr 20
Gold Stocks Crash, V-Bounce! - 6th Apr 20
How Can Writing Business Essay Help You In Business Analytics Skills - 6th Apr 20
PAYPAL WARNING - Your Stimulus Funds Are at Risk of Being Frozen for 6 Months! - 5th Apr 20
Stocks Hanging By the Fingernails? - 5th Apr 20
US Federal Budget Deficits: To $30 Trillion and Beyond - 5th Apr 20
The Lucrative Profitability Of A Move To Negative Interest Rates - Pandemic Edition - 5th Apr 20
Visa Denials: How to avoid it and what to do if your Visa is denied? - 5th Apr 20 - Uday Tank
WARNING PAYPAL Making a Grab for US $1200 Stimulus Payments - 4th Apr 20
US COVID-19 Death Toll Higher Than China’s Now. Will Gold Rally? - 4th Apr 20
Concerned That Asia Could Blow A Hole In Future Economic Recovery - 4th Apr 20
Bracing for Europe’s Coronavirus Contractionand Debt Crisis - 4th Apr 20
Stocks: When Grass Looks Greener on the Other Side of the ... Pond - 3rd Apr 20
How the C-Factor Could Decimate 2020 Global Gold and Silver Production - 3rd Apr 20
US Between Scylla and Charybdis Covid-19 - 3rd Apr 20
Covid19 What's Your Risk of Death Analysis by Age, Gender, Comorbidities and BMI - 3rd Apr 20
US Coronavirus Infections & Deaths Trend Trajectory - How Bad Will it Get? - 2nd Apr 20
Silver Looks Bearish Short to Medium Term - 2nd Apr 20
Mickey Fulp: 'Never Let a Good Crisis Go to Waste' - 2nd Apr 20
Stock Market Selloff Structure Explained – Fibonacci On Deck - 2nd Apr 20
COVID-19 FINANCIAL LOCKDOWN: Can PAYPAL Be Trusted to Handle US $1200 Stimulus Payments? - 2nd Apr 20
Day in the Life of Coronavirus LOCKDOWN - Sheffield, UK - 2nd Apr 20
UK Coronavirus Infections and Deaths Trend Trajectory - Deviation Against Forecast - 1st Apr 20
Huge Unemployment Is Coming. Will It Push Gold Prices Up? - 1st Apr 20
Gold Powerful 2008 Lessons That Apply Today - 1st Apr 20
US Coronavirus Infections and Deaths Projections Trend Forecast - Video - 1st Apr 20
From Global Virus Acceleration to Global Debt Explosion - 1st Apr 20
UK Supermarkets Coronavirus Panic Buying Before Lock Down - Tesco Empty Shelves - 1st Apr 20
Gold From a Failed Breakout to a Failed Breakdown - 1st Apr 20
P FOR PANDEMIC - 1st Apr 20
The Past Stock Market Week Was More Important Than You May Understand - 31st Mar 20
Coronavirus - No, You Do Not Hear the Fat Lady Warming Up - 31st Mar 20
Life, Religions, Business, Globalization & Information Technology In The Post-Corona Pandemics Age - 31st Mar 20
Three Charts Every Stock Market Trader and Investor Must See - 31st Mar 20
Coronavirus Stocks Bear Market Trend Forecast - Video - 31st Mar 20
Coronavirus Dow Stocks Bear Market Into End April 2020 Trend Forecast - 31st Mar 20
Is it better to have a loan or credit card debt when applying for a mortgage? - 31st Mar 20
US and UK Coronavirus Trend Trajectories vs Bear Market and AI Stocks Sector - 30th Mar 20
Are Gold and Silver Mirroring 1999 to 2011 Again? - 30th Mar 20
Stock Market Next Cycle Low 7th April - 30th Mar 20
United States Coronavirus Infections and Deaths Trend Forecasts Into End April 2020 - 29th Mar 20
Some Positives in a Virus Wracked World - 29th Mar 20
Expert Tips to Save on Your Business’s Office Supply Purchases - 29th Mar 20
An Investment in Life - 29th Mar 20
Sheffield Coronavirus Pandemic Infections and Deaths Forecast - 29th Mar 20
UK Coronavirus Infections and Deaths Projections Trend Forecast - Video - 28th Mar 20
The Great Coronavirus Depression - Things Are Going to Change. Here’s What We Should Do - 28th Mar 20
One of the Biggest Stock Market Short Covering Rallies in History May Be Imminent - 28th Mar 20
The Fed, the Coronavirus and Investing - 28th Mar 20
Women’s Fashion Trends in the UK this 2020 - 28th Mar 20
The Last Minsky Financial Snowflake Has Fallen – What Now? - 28th Mar 20
UK Coronavirus Infections and Deaths Projections Trend Forecast Into End April 2020 - 28th Mar 20
DJIA Coronavirus Stock Market Technical Trend Analysis - 27th Mar 20
US and UK Case Fatality Rate Forecast for End April 2020 - 27th Mar 20
US Stock Market Upswing Meets Employment Data - 27th Mar 20
Will the Fed Going Nuclear Help the Economy and Gold? - 27th Mar 20
What you need to know about the impact of inflation - 27th Mar 20
CoronaVirus Herd Immunity, Flattening the Curve and Case Fatality Rate Analysis - 27th Mar 20
NHS Hospitals Before Coronavirus Tsunami Hits (Sheffield), STAY INDOORS FINAL WARNING! - 27th Mar 20
CoronaVirus Curve, Stock Market Crash, and Mortgage Massacre - 27th Mar 20
Finding an Expert Car Accident Lawyer - 27th Mar 20
We Are Facing a Depression, Not a Recession - 26th Mar 20
US Housing Real Estate Market Concern - 26th Mar 20
Covid-19 Pandemic Affecting Bitcoin - 26th Mar 20
Italy Coronavirus Case Fataility Rate and Infections Trend Analysis - 26th Mar 20
Why Is Online Gambling Becoming More Popular? - 26th Mar 20
Dark Pools of Capital Profiting from Coronavirus Stock Markets CRASH! - 26th Mar 20
CoronaVirus Herd Immunity and Flattening the Curve - 25th Mar 20
Coronavirus Lesson #1 for Investors: Beware Predictions of Stock Market Bottoms - 25th Mar 20
CoronaVirus Stock Market Trend Implications - 25th Mar 20
Pandemonium in Precious Metals Market as Fear Gives Way to Command Economy - 25th Mar 20
Pandemics and Gold - 25th Mar 20
UK Coronavirus Hotspots - Cities with Highest Risks of Getting Infected - 25th Mar 20
WARNING US Coronavirus Infections and Deaths Going Ballistic! - 24th Mar 20
Coronavirus Crisis - Weeks Where Decades Happen - 24th Mar 20
Industry Trends: Online Casinos & Online Slots Game Market Analysis - 24th Mar 20
Five Amazingly High-Tech Products Just on the Market that You Should Check Out - 24th Mar 20
UK Coronavirus WARNING - Infections Trend Trajectory Worse than Italy - 24th Mar 20
Rick Rule: 'A Different Phrase for Stocks Bear Market Is Sale' - 24th Mar 20
Stock Market Minor Cycle Bounce - 24th Mar 20
Gold’s century - While stocks dominated headlines, gold quietly performed - 24th Mar 20
Big Tech Is Now On The Offensive Against The Coronavirus - 24th Mar 20
Socialism at Its Finest after Fed’s Bazooka Fails - 24th Mar 20
Dark Pools of Capital Profiting from Coronavirus Stock and Financial Markets CRASH! - 23rd Mar 20
Will Trump’s Free Cash Help the Economy and Gold Market? - 23rd Mar 20
Coronavirus Clarifies Priorities - 23rd Mar 20
Could the Coronavirus Cause the Next ‘Arab Spring’? - 23rd Mar 20
Concerned About The US Real Estate Market? Us Too! - 23rd Mar 20
Gold Stocks Peak Bleak? - 22nd Mar 20

Market Oracle FREE Newsletter

Coronavirus-stocks-bear-market-2020-analysis

Gold Price Blast Off to Mind-boggling Levels for Good Reason!

Commodities / Gold & Silver 2009 Nov 25, 2009 - 02:44 PM GMT

By: Lorimer_Wilson

Commodities

Best Financial Markets Analysis ArticleArnold Bock writes: We are staring at a nascent but potentially and probably startling increase in the price of gold and precious metals mining stocks and warrants. Gold will reach mind- boggling levels because the actions of our political leaders and their academic and credentialed enablers are virtually guaranteeing it with their current actions.


Currency Traders Strengthening Price of Gold
The US dollar has and continues to be pummelled by currency traders because they see the US Treasury and FED working overtime to deliberately devalue the dollar in response to politicians who think that spending money the country doesn’t have on programs it doesn’t need is the answer to the continuing economic malaise. Setting interest rates at near zero percent obviously exacerbates the dollar problem.

Carry Trade Supporting Price of Gold
The dollar has now replaced the Japanese Yen as the favoured currency of the carry trade. Borrowing US dollars at nominal interest rates is the hedge fund manager’s most obvious go-to strategy. Currency traders will be most reluctant to allow a sudden rise in the US dollar to cut the legs from beneath the carry trade of which they are participants. Consequently, there is little reason to think a rise in the US dollar will interfere with the consistent and persistent rise in the price of gold.

Supply and Demand Ratio Increasing Price of Gold
Couple these currency issues with the limited supply of above-ground gold and the fact that mine production has been reducing year over year and the inevitable consequence is demand exceeding supply resulting in gold being bid to ever higher prices.

Loss of Safe-Haven Status for U.S. Dollar Supporting Price of Gold
Perhaps the most significant new factor in the gold price equation is that the US dollar is no longer perceived as the automatic safe haven harbour for concerned investors around the globe. While this statement cannot be made definitively, the fact is we are already a long distance from the fall of 2008 when global investors reflexively flocked to the US dollar as a safe haven in the face of the global financial turmoil.

Increased U.S. Budget Debts Strengthening Price of Gold
Needless to say, scepticism about the merits of the dollar mounts monthly. The actions of the US administration and Congress place it on an unprecedented spending binge organized by the Treasury and FED which dishes out vast quantities of new digital dollars designed to mop up the flood of new and maturing debt.

This revolting process is causing foreign central banks to rapidly lose their appetite for US Treasury bonds. The expanded FED balance sheet coupled with monetizing debt inherent in quantitative easing is the boogeyman of international finance.

Increased Investment Demand Maintaining Price of Gold
That leaves us with gold, the only safe haven refuge of undisputed value. It is real money, and everyone knows it instinctively. That is why many foreign central banks are quietly and actively accumulating it. Investment buying, especially by the big money players as represented by central banks, sovereign wealth funds and leveraged hedge funds inevitably spring into the purchase mode whenever price weakens, even modestly. They provide a floor price for the metal on its inexorable trek northward.

This means you and I can invest with confidence knowing that major pullbacks almost certainly will not happen. Moreover, if and when they occur, it will be purely a very temporary, brief and shallow phenomenon.

How high will precious metals equities and the gold price go?
My sense is that it will be in orders of magnitude far greater than most analysts allow themselves to state or believe. We frequently see price projections of 20 or 50 percent higher than today.

Some even allow themselves to suggest that gold will double in price before it has reached its cycle high. We may even see a rare analyst allow himself to speculate that gold prices may find and end at the $3,000 an ounce level. Of course a few discredited gold bugs suggest numbers even greater.

So why am I so optimistic about the eventual price of gold?
It is because an affinity for and an understanding of the political mindset causes me to understand what decision makers will do…and why. Because a politician follows the political calendar, s/he only concerns himself/herself with the time horizon leading to the next election.
Anything requiring decisions beyond the date of the next election will be the responsibility of whoever is on the next watch. If the politician in office today is in office after the next election, a shrug of the shoulder indicates that worries of that kind can be dismissed for now to be dealt with later.

So major and difficult, but necessary, decisions are inevitably deferred. In their place spending money gives the appearance of concern and of doing something to fix the apparent problem. Aren’t those elected officials doing what we elected them to do? It certainly looks as if they are.

More cynical observers would characterize these actions by the political class and their senior bureaucratic minions as buying time hoping that something positive might magically emerge.

Those who are super cynical would even conclude give-away programs are designed simply to bribe the voters in order to curry goodwill for another term at the levers of power.

What all this means is that there is no discipline or inclination to do anything of real value in fixing the core economic and financial problems. That being the case, new programs, more spending stimulus and money creation will always be the order of the day. Hence the currency will devalue and investors will find gold as their best safe-haven refuge.

The dollar will devalue because massive dilution caused by incessant money creation allows future obligations to become more manageable – for government – because it is the only way that it can meet its future obligations for employee pensions, accumulated debt, Medicare and social security.

A nominal dollar which buys much less in the future than it does today is still a dollar. Unfortunately the holders or recipients of those devalued pieces of paper will find they are essentially fraudulent promises.

These realities make gold the closest thing to a sure-bet investment. They are also the reasons why gold will go much higher than most of us allow ourselves to contemplate.

Buckle your seatbelts and enjoy the ride ahead!

Arnold Bock is a Guest Contributor to the two sites mentioned below:

  1. www.PreciousMetalsWarrants.com provides a free one-of-a-kind database (updated weekly) on all commodity-related warrants trading on exchanges in the United States and Canada. PMW also offers a modestly priced subscription service that ranks all warrants according to our proprietary leverage/time calculations at four projected stock price appreciation levels. You can also sign up for a free weekly email highlighting events in the precious metals marketplace and in the wonderful world of warrants in particular.
  2. www.InsidersInsights.com, another modestly priced subscription service, alerts subscribers as to when corporate insiders of a limited number of junior mining and natural resource companies are buying and selling.

© 2009 Copyright Lorimer Wilson- 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.

Lorimer Wilson Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

The Chairman
27 Nov 09, 02:07
Gold at risk

Really, Mind-boggling... is that so? What will you be writing if it goes the other way in a big hurry... that you were WRONG? Yeah, buckle your seat belts for its coming decline, and enjoy the ride!


Common Sense
28 Nov 09, 04:57
Gold is such a common sense topic

I find GOLD recommendations are almost in every corners, from top investment strategists to the ocassional writers. It is strange really, like everyone is arguing vigorously that you and me should be buying nothing but GOLD. It just sound like position talks to me; I think the reality is many people are LONG on GOLD and feeling highly insecure.

Best Regards


Jim
29 Nov 09, 02:28
Supply and Demand

ALL commodities are subject to supply and demand. Any item that is a commodity can also be used as a unit of exchange between parties. Any item used as a unit of exchange between parties can also be viewed as a commodity. Its a two way street.

Presently we are seeing the market value two differing commodities. One is the USD and the other is Gold. One has counterparty obligations while the other doesn't. One has unlimited supply and a strong allbeit falling demand. The other has a moderate demand although steadily growing.

You too, can participate in the markets valuation. Acquire whichever commodity you believe will do better.

And have a nice day.


Phil
29 Nov 09, 19:08
Gold Price Blast Off to Mind-boggling Levels for Good Reason!

Jim seems to have it summed up, I just felt the need to support his understated viewpoint.

I am "slightly" less understated and feel that Gold's bull run is now starting it's full swing and is unlikely to slowdown for the next few years. $2000 per Oz will sound like a bargain before Gold's journey back up to it's rightfull place has ended.

To the neighsayers above; please sell me any gold you no longer wish to own, thanks.


Post Comment

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

6 Critical Money Making Rules