Posted on 06/03/2010 6:42:21 AM PDT by SeekAndFind
Gold added another $11.30 Tuesday to hit $1,226 an ounce, and although the yellow metal is still well off its nominal all-time high of about $1,240 set just a few weeks ago, you don't have to be a member of the build-a-bunker-in-Montana crowd to believe gold could hit $2,500 in the next couple of years.
David Rosenberg, chief economist and strategist at Canada's Gluskin Sheff, tends to be pretty bearish, but he's also about as dispassionate and data-driven a guy as you can find. In other words, he's hardly some kooky gold bug. And if past relationships among data sets hold up, gold fever is just getting started, Rosenberg says.
"There is no doubt that when benchmarked against the CPI, money supply and GDP, gold can easily double from here," Rosenberg told clients in a Tuesday report. "Demand is always difficult to forecast, especially for jewelry, but we do know that central banks have very deep pockets and bought more gold last year (425 tons) than at any other time since 1964."
A Simple Matter of Supply and Demand
Which brings us to the issue of stagnant supply, and that too favors a sustained bull market in gold, Rosenberg says. Global mined production of the ductile metal hasn't increased in a decade -- and has actually declined outright in five of the past eight years. Furthermore, almost all the gold that's easy to dig up -- and therefore cheaper to get at -- has been unearthed. Gold companies in South Africa have to drill as much as 2.3 miles to get to new deposits. Meanwhile, all Federal Reserve Chairman Ben Bernanke has to do to create currency "is press a button," Rosenberg says.
"What makes gold different is that, unlike paper money backed by the good word of the government, it has withstood the test of time for thousands of years," Rosenberg writes. "It is not the liability of any government. It has an inelastic supply curve. How many times is gold mentioned in the Old Testament? Try 391 times. How many times is paper currency mentioned from Noah, to Abraham, to Moses? None. Nada. Efes. Gornisht. Nihil. Rien. Nichts. Niente."
Some strong technical forces also bode well for the long-term trajectory of the price of gold, as DailyFinance's Charles Hugh Smith wrote recently. For better or worse, gold does double duty as a safe haven in times of volatility and as a hedge against inflation. Anxiety is gold's friend, and for that reason its future gleams bright -- at least until the next global financial panic scares the punters out.
Gold Trade: Not as Crowded As You Think
Perhaps most interesting, this is the time of year when gold prices are supposed to be in decline -- at least until demand picks up again in September for India's wedding season. (India is the world's largest consumer of gold.) Furthermore, lest we forget, gold is priced in dollars, which means that as the greenback rises (and it's been shooting higher for months), gold is supposed to fall. But neither of those relationships is holding up much these days.
"We have not experienced the typical gold price and related equity weakness that the charts depict should happen, at least not yet," wrote Haytham Hodaly and David West, analysts at Salman Partners, in a Tuesday report to clients. "Although the European economic uncertainty has caused many currency investors to speculate positions out of the euro, it has also proven a positive for gold...with only short-term weakness despite the U.S. dollar strength."
Lastly, let's not overlook market sentiment. Perhaps the best case for being a gold bull these days is made by the horde of bears drawn to the scent of the seemingly overripe state of the yellow metal. As Rosenberg says: "Bulls need skeptics -- there is nothing worse than universal beliefs as they lead to overcrowded trades."
I like silver better. It will be easier to deal with if/when the SHTF. More important than gold is non-perishable food and fresh water supply.
Beck hornswaggled me into buying at $770.00. That Charlatan!!
>>A Simple Matter of Supply and Demand
LOL.
Of what - “paper” gold?
Goldbug ping
Well the NY gang beat down gold good and hard right at the open at 8:15 NYT. I think yd’s stop-runs at the NYSE open for silver down to about $18.10 and gold down to about $1214 are the short-term lows for a while, but I don’t see much energy above $18.50 and $1220 at the moment.
Mail me to get on or off the Free Republic Goldbug Ping List.
The gold bandwagon 24/7 reminds me of the same touting of real estate 24/7 in 2006 ;-)
There seems to as much touting to get you to sell your gold to meet Chinese demand.
Out in the southwest, where water can be an obsession, it is also vital that it be potable, and that can be problematic, because of contamination.
An old trick used in Mexico to filter water was to pour water into a large, hollowed out block of limestone. Limestone removes carbonate hardness from the water, arsenic (III) and (V)(an alternative is iron oxide coated sand for that), de-acidifies water, it raises the pH of the water to 10.5-11, which controls most bacteria and viruses, phenols (often as a byproduct of chlorination), most heavy metals, silica, manganese, fluoride, organic tannins and iron.
It takes a while for the water to percolate through limestone, but unless you want to spend a fortune on Zero Water filters, it is a very handy field expedient.
The Germans are giving up on their increasingly worthless euro savings and buying gold.
I see %1500 easily. Not sure about $2500, especially if the Republicans win in November and mount a battle against Enemy Occupied Washington.
I’ll tell you who I don’t trust.
I don’t trust someone who tells me my green paper is going to be worthless very soon but the yellow metal they own is going to be worth more and more everyday. But, they will trade me their ever increasing value yellow metal for my soon to be worthless green paper.
How nice of them!
>> The gold bandwagon 24/7 reminds me of the same touting of real estate 24/7 in 2006 ;-)
It’s not a bubble, though. This Time Is Different!
Gold will ALWAYS go up; it will NEVER go down.
If the yellow metal is only going to increase in value, and green paper is only going to lose value, why would anyone sell the yellow metal for the green paper?
If you have a long horizon, Real Estate is still a good investment. If you follow the crowds and buy and sell on rumors of up or down it doesn’t matter what you buy or sell, you will lose.
” OK, so by implication, you’d rather ignore the STEADY increase in the price of gold for the past 6 years “ S & F
“This time its different!!
Gold only goes UP...it never goes DOWN “ Nervous Tick
Hmmm...remember what gold was selling for in the beginning of the 1980’s? Then what was it selling for a couple years later?
” If you have a long horizon, Real Estate is still a good investment. If you follow the crowds and buy and sell on rumors of up or down it doesnt matter what you buy or sell, you will lose. “
WINNER!
>>If you don’t trust gold
Fiat Gold?
Unless you’ve got it physically secured somewhere... that’s all it really is. And even then, the value is rooted in an abstract idea which is only as valid as the morally corrupt financial infrastructure’s ability to maintain the facade.
No sale.
“The gold bandwagon 24/7 reminds me of the same touting of real estate 24/7 in 2006 ;-)”
Apples and oranges.
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