The author of this needs a crash course in classical economics. The demand for gold is insignificant compared to the supply. We could meet global demand for gold for decades and decades without mining another ounce of the precious metal.
Other gold purchases, such as those of China and elsewhere, are for monetary purposes. They are not demand. The basic problem is that the Federal Reserve is issuing far too many FRNs than the economy needs. When monetary investors see the increasing ratio of FRNs to ounces of gold, the price of gold goes us. And that has nothing to do with demand.
I have been chastized for using economic terms with too much precision in the past on FR. But it is an economic fact that demand for gold is insignificant compared to its supply (including inventories). An increase in the demand for gold would have an imperceptible effect on the price of gold.
I disagree. Classical economics, supply and demand. The author also left out new investment products that buy gold bullion. Investors are buying it up in the US.
If supply and demand don't affect the price of gold, 'splain something to me. I was long gold futures sometime in the late 80's. Overnight the Russians sold 15 metric tons in the open market. The next day gold was down limit and I was handed my ass. Supply = loss of ass. How can you say supply and demand don't affect the price of gold?
Other gold purchases, such as those of China and elsewhere, are for monetary purposes. They are not demand. The basic problem is that the Federal Reserve is issuing far too many FRNs than the economy needs. When monetary investors see the increasing ratio of FRNs to ounces of gold, the price of gold goes us. And that has nothing to do with demand.>>>>>>>>
I am not an economist but it would seem to me that any purchase of gold by anyone constitutes demand, whether for monetary purposes or otherwise. If you are saying that the whole reason for the increase in the POG is the devaluation of the dollar then I agree to the extent that I believe inflation is actually considerably worse than the American government admits.
For some years we have had an unusual situation arising from increases in productivity coupled with imports from low wage countries in which the price of discretionary purchases have dropped while the price of necessities keeps rising. It is my humble opinion that the easy availability of entertainment has numbed most people in this country to the fact that they are paying ever higher prices for necessities. I see young people with low paying jobs sporting cell phones and buying big color televisions and home computers but depending on their parents for a roof over their heads and most observers seem to think this is just because they want to live off their parents. A little cost comparison reveals that a 27 inch color television can be had now for about one third of one month's remtal on the cheapest apartment in this area. Forty years ago a color television would have cost the same as about one year of rent on the cheapest apartment in this area. I think all this has a bearing on what the younger generation is choosing to do. If we had a two-tiered consumer price index which seperated necessities from non-necessities I think most people would be astounded by what is revealed.