Tuesday, February 17, 2009

The Gold Price to Move UP

The gold price could easily double this year.

Marc Faber thinks that if the US Treasury does not default on its debt, there will be serious price increases, that the Zimbawe school of economics is opperating in the US, and that features of a banana republic are not quite there in the US yet but doubts that the US will fail to arrive at a banana republic state.



Peter Schiff explains why these "stimulas" packages are putting gasoline on the fire.



Gold, silver and the related shares are the no brainer way to invest for the next few years. They will become the "go to" investment category.

7 comments:

D SENTHIL ANAND said...

Hi Bob,

I have be reading your column and is quite interesting as your predictions are coming true almost on a daily basis. I am having a doubt as to whether you are dictating the gold markets!. I would appreciate if you can let me know what effect will be there on the price of gold considering that demand has totally disappeared in India and the Middle East, the largest consumers of gold in the world. I am sure the loss in these markets cannot be compensated by the buying in Europe and US. Appreciate your feedback

Anonymous said...

D SENTHIL ANAND,

I'm no expert, but my understanding is that while gold jewelry purchases are down in India, bullion is still being purchased in large amounts.

Richard

Billoo Barber said...

Bullion purchases too are smaller than normal but its the funds that are mopping up bullion that is moving the price sky-high.

Also, coupled with that is the fact that there are almost no sellers in this market so every small incremental demand translatest to a substantially higher price increase than it would, if people were offloading their stock as well. everyone si waiting for hte next 20 dollar increase before they sell.

I'll tell you, I sold some gold at USD 943 and im feeling mighty stupid right now.

Anonymous said...

I think it is anticipated that gold will rise in part because of a weak dollar. When the dollar drops in value, the cost of gold in dollars goes up to compensate. Demand may not play as strong a role as inflation in determining the future price of gold.

D SENTHIL ANAND said...

Hello,

Thanks for the interesting observations. If gold is increasing due to a weak dollar, then over the past six months, the dollar has actually strengthed by more than 20%. Hence, if the value of gold is $970, its actual value in dollar terms is $1164 today. I strongly believe that a product is priced based on supply and demand. Data shows that in the month of Jan 09, India imported 1.8 tonnes gold. In Feb 09, it had zero imports. It means there is no demand for bullion and traders are sitting with their inventory. The next point is that news reports say that people are lining up to sell their old jewellery.Please recall oil touched $147 and today languishing at $36. Do you think what happened to oil will happen to gold as well?. I think we will come to know the truth when gold mining companies declare their financial results for the Ist quarter of this year end 31st March 2009. Till then speculators will have their heyday. Appreciate your comments.

Anonymous said...

Hi D,

" ... what effect will be there on the price of gold considering that demand has totally disappeared in India and the Middle East, the largest consumers of gold in the world. I am sure the loss in these markets cannot be compensated by the buying in Europe and US."

Yes, probably not, but who knows what government central banks around the world are doing, or any of the large private sources of capital.

Fear of, lack of trust in the world's financial system is building/increasing in most parts of the world. Maybe a little fear here, a little fear there and pretty soon it all adds up to big demand or at least increasing demand despite India and the Middle East.

I don't know all the forces in the markets for gold and silver. I can only watch.

Bob

Anonymous said...

I assume that when you say the dollar has gained 20% you mean the us dollar index has increased. The us dollar index is a very bad way to measure the buying power of the dollar. It only measures the dollars' relative strength against other currencies, mainly the euro. An increase in the us dollar index does not indicate an increased buying power. It just means that another currency is inflating against the dollar. To say that the us dollar index is 'rallying' is stating that the rest of the world is falling. The price of gold has been constant for a good part of history. You could buy a nice suit and shoes with a 1 oz gold coin in rome. The same holds true today. Any increase in the price of gold is a decrease in the value of the dollar.

"The stock price of this gold mining company soared relentlessly upward during the entire bear market. Homestake Mining stock rose continuously from $80 in October 1929 to $495 per share in December 1935 - which represents a total return of 519% (excluding cash dividends) during the devastating bear market period."
http://www.gold-eagle.com/editorials/great_crash.html
Unemployment durning that time surely destroyed demand yet the price of gold grew ever higher.