Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
Junior Gold Miners: New Yearly Lows! Will We See a Further Drop? - 23rd Jul 21
Best Forex Strategy for Consistent Profits - 23rd Jul 21
Popular Forex Brokers That You Might Want to Check Out - 22nd Jul 21
Bitcoin Black Swan - Will Crypto Currencies Get Banned? - 22nd Jul 21
Bitcoin Price Enters Stage #4 Excess Phase Peak Breakdown – Where To Next? - 22nd Jul 21
Powell Gave Congress Dovish Signs. Will It Help Gold Price? - 22nd Jul 21
What’s Next For Gold Is Always About The US Dollar - 22nd Jul 21
URGENT! ALL Windows 10 Users Must Do this NOW! Windows Image Backup Before it is Too Late! - 22nd Jul 21
Bitcoin Price CRASH, How to SELL BTC at $40k! Real Analysis vs Shill Coin Pumper's and Clueless Newbs - 21st Jul 21
Emotional Stock Traders React To Recent Market Rotation – Are You Ready For What’s Next? - 21st Jul 21
Killing Driveway Weeds FAST with a Pressure Washer - 8 months Later - Did it work?- Block Paving Weeds - 21st Jul 21
Post-Covid Stimulus Payouts & The US Fed Push Global Investors Deeper Into US Value Bubble - 21st Jul 21
What is Social Trading - 21st Jul 21
Would Transparency Help Crypto? - 21st Jul 21
AI Predicts US Tech Stocks Price Valuations Three Years Ahead (ASVF) - 20th Jul 21
Gold Asks: Has Inflation Already Peaked? - 20th Jul 21
FREE PASS to Analysis and Trend forecasts of 50+ Global Markets by Elliott Wave International - 20th Jul 21
Nissan to Create 1000s of jobs with electric vehicle investment in UK - 20th Jul 21
Bitcoin Halvings Price Forecast and Stock to Flow Analysis - 18th Jul 21
Dell S3220DGF Unboxing and Stand Assembly - 32 Inch 165hz Curved Gaming Monitor Amazon Discount - 18th Jul 21
What Does The Fed Mean By “Transitory Inflation” And Why Is It Important To Understand? - 18th Jul 21
Will the US stock market’s worsening breadth matter? - 18th Jul 21
Bitcoin Halving's Price Projection Forecasts Trend Trajectory - 18th Jul 21
Dell S3220DGF Price CRASH to £305! 32 Inch 165hz Curved Gaming Monitor Amazon Bargain - 16th Jul 21
Google, Amazon and Netflix are Scrambling For This Rare Gas - 16th Jul 21
Sheffield Millhouses Park New Children's Play Area July 2021 Vs Old Play Area - Better or Worse? - 16th Jul 21
Inflation Soars, Powell Remains Unmoved. What about Gold? - 16th Jul 21
Goldrunner: Gold Could Jump To $1,900-$2,100 In Next 30 days – Here’s Why - 15th Jul 21
Tips For Finding The Right Influencers - 15th Jul 21
ECB Changed Monetary Strategy. Will It Alter Gold’s Course? - 15th Jul 21
NASA And Big Tech Are Facing Off Over This Rare Gas - 15th Jul 21
Will the U.S. Dollar Lose Momentum In the Second Half of 2021? - 15th Jul 21
Bitcoin Stock to Flow Model Forecasts Infinity and Beyond! - 14th Jul 21
Proteomics: The Next Truly Massive Investing Opportunity - 14th Jul 21
Massive Solar Storm to Hit Earth 2025, Coronal Mass Ejection (CME) Danger and Protection Solutions - 14th Jul 21
Is This The Best Way To Play The Coming Helium Boom? - 14th Jul 21
Meet SuperMania and its Ever-Present Sidekick, SuperMeltdown - 14th Jul 21
How NFTs Are Shaking Up Arts Trading - 14th Jul 21
Gold: High Time to Move Out of the Penthouse - 13th Jul 21
Climb Aboard! Silver Should Run Up To $38 In Next 30 Days - 13th Jul 21
How Will Remote Work Impact the U.K. economy? - 13th Jul 21
Why Helium Stocks Are Set To Soar in 2021 - 13th Jul 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

For Americans Buying Gold and Silver: Still a Big U.S. Pricing Advantage

Commodities / Gold and Silver 2018 Jan 19, 2018 - 10:39 AM GMT

By: MoneyMetals

Commodities

David Smith: Two years ago, in this space, I penned an essay discussing how Americans - and other countries that are "dollarized" - where the local currency is either the USD or pegged to it - had a significant advantage when it came to getting the most for their money when exchanging dollars for precious metals.

Lately I looked into this issue again and the good news is - it's still a good deal. In relation to a lot of other folks, even better than before! But the bad news is that this might not be the case much longer...


The Cando Disadvantage

The Canadian Dollar is known in the trade as a "Cando". In 2008 it traded at US$1.10, which meant that at the time, Canadians could buy 10% more metal than Americans. In 2012, it had a high of US$1.01. In 2016, it bottomed at US$0.58 (ouch!), and today still trades at about 80 cents on the dollar. As the chart shows, Canadians get about 20% less gold and silver for their money than their southern neighbors (us).

Courtesy stockcharts.com

Zim and Ven, racing for the bottom.

Then there's the perennial currency basket case Zimbabwe - now entering its second hyperinflationary blowout in just the last couple of decades. Zim is currently playing touch and go with Venezuela to see if the latter's "bolivar fuerte" (strong bolivar), transacted by the pound on a produce scale rather than from a wallet, will incinerate itself first.

Zim's previous "Paper Promise"- Angling for a rematch?

Back in the day when the term "strong bolivar" meant something...

But not now... (Courtesy Sources listed)

Emerging Markets Purchasing Power Disadvantage

Buyers in Emerging Markets, in which gold prices are making new highs relative to their own fiat paper, are also paying more for their stash. Nevertheless, demand there is rising as well - which as previously noted - is an important "tell" regarding the health and durability of the ongoing bull market. This is because even when facing a less advantageous exchange rate, emerging market gold customers are still solidly on the buy.

Additional evidence indicates that we are just now entering the second year of what could become a lengthier - and considerably more powerful than-expected upside run.

Courtesy allstarcharts.com

We say this in part because of some serious work done by Bob Hoye's Institutional Advisors along with the Technical observations of Ross Clark They note that for the last 50 years, important lows for gold have taken place on a regular basis, stating, "The most recent (low) was in December 2016, one year after a premature low at 7.2 years in December 2015."

In a January 2018 public domain post, they stated,

After an initial surge off the cycle lows, the price tends to move methodically higher for the first two years. During that period, we have found that a lower 20-week moving average envelope provides support. This was most recently tested in December 2017... Except for 2002, a trailing one-week stop after the 55th week, kept participants in the market until the first week after the top.

You might want to commit that last part to memory. If the 8-year cycle pattern continues to play itself out, not only could this nascent gold bull have a long ways to run in terms of time and price, but an attentive investor could use the kind of trailing stop-loss discussed, in order to stay with the trend as long as possible, holding onto significant gains before offsetting all or most of their holdings for a good profit.

Now for the Bad News...

The U.S. dollar has been "king of the hill" since its establishment as a backstop for the so-called petrodollar, in an agreement with Saudi Arabia and other oil producing countries as a result of the 1970's oil spike. That idea was to create a stable and reliable revenue stream for oil exporters. The price of oil was thus set in dollars, in the process establishing the unit of account as the world's reserve currency. Even so, the petrodollar's purchasing power is, to some extent, predicated upon the rate of inflation and the value of the dollar on the FOREX.

Things worked well for quite a while, but in recent years, for a number of reasons, the status quo has been increasingly called into question. A detailed rationale is beyond the scope of this report, but here are a few of the elements:

  • Profligate creation of dollars by the Federal Reserve, many of which have "migrated" offshore, driving down the recipients' purchasing power.
  • Massive debt growth at all levels of the U.S. body politic - leading inevitably to more dollar creation in an attempt to pay the bill.
  • Unnaturally low interest rates since the 2008 melt-down, obscuring the "signals" given by rates that indicate if a given investment makes "dollars and sense", leading to soaring mal-investment and speculation.
  • A changing geopolitical landscape, wherein the BRIC countries - Brazil, Russia, India and China (plus others) - have tired of the constraints placed upon them by restrictive U.S. policies.
  • The launch and coming build-out of The New Silk Road from Asia to Europe and the Middle East, encompassing 40 per cent of the world's population in an economic-financial-political paradigm less-incumbent on the West's wishes.
  • Lessening dependence on the US dollar as the world's reserve currency in favor of loans and payments denominated in Chinese yuan, Russian rubles, commodities...and gold.

All these factors and more, mean that right now and continuing during the coming years, the U.S. dollar is going to be buying less of just about everything, and that includes precious metals. The key elements of this sea-change as they relate to you?

  • Lower U.S. dollar-denominated gold and silver purchasing power.
  • Increased global demand for these metals, especially in the many countries seeing their local currencies strengthen vis a vis the dollar.
  • Depleting gold reserves due to a lack of big discoveries.
  • Lower head-grades across the board.
  • Increased cost of production due to environmental and "country risk".

And this...

Note established 50-day MA (blue line) "Golden Cross"

While just about everything in life is based upon probabilities, the odds right now strongly favor that the next leg of the secular bull run in the metals is underway. Four years of a cyclical bear market 45-50% retracement (2011-15); an 8-month initial bull counter-trend rally (most of 2016); and finally, 18 months of retracement and consolidation (mid-2016 to December 2017) have already taken place.

Taken together, this alignment of factors makes a compelling argument for completing your metals' acquisition plan in a timely manner. And if you still have yet to get started... what's your excuse?

David Smith is Senior Analyst for TheMorganReport.com and a regular contributor to MoneyMetals.com. For the past 15 years, he has investigated precious metals’ mines and exploration sites in Argentina, Chile, Mexico, Bolivia, China, Canada, and the U.S. He shares his resource sector findings with readers, the media, and North American investment conference attendees.

© 2018 David Smith - 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.


© 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