Posted on 01/15/2014 7:33:03 PM PST by Publius
Well, then, I’m all ears!
Explain it to me!
You forgot to factor in the fact that there are lots of paper claims to gold not backed up by the real thing.
In COMEX alone it is 80+ paper claims to each real oz. of gold:
You might also want to ask Germany how their effort to repatriate their claim to 700 tons of gold:
When one factors these facts into the price of gold (and silver I would add) it is clearly undervalued on a historic basis. Smart investors are ignoring the propaganda and loading up on the physical gold/silver as well as the mining shares now.
I think it will be when a GOP is elected President....then they can blame him...
I call BS. This is reverse psyops.
The Chinese have been huge buyers of gold.
The writer of the article is voicing understandable confusion and frustration of Chinese gold bugs who were given to understand that the US dollar was in a death spiral because fed printing fiat dollars. Even the Chinese central bank stopped buying US bonds two years ago and then announced a month ago that they would stop buying US bonds in hopes that that would mean something. But it didn’t mean anything.
The US dollar has been going essentially sideways since 2008
http://www.macrotrends.net/1329/us-dollar-index-historical-chart
and now all the talk is that the next direction for the dollar is up.
Why. Why is the dollar showing strength and why is the price of gold going down.
The reason is pretty simple. For the last three years, —every year—the USA has been pumping an additional 1 million barrels @ day of oil. The EIA expect that the USA will pump an additional 1 million barrels @ day in 2014 and 2015. Oil and natural gas have so far added an addition 400 billion to the US economy annually. In 3-4 years that number will rise to 1 trillion dollars annually. Oil is shrinking the US trade deficit and shrinking the federal budget deficit. The added inflow of revenue to the federal government is so significant that the if it continues at the rate it has between 2012-2013 when the federal deficit shrank from 1 trillion dollars to 650 billion dollars—in three years the federal budget will balance.
One last thing. The fed has been creating some 8 trillion dollars ex nihilo from nothing. Right? Now consider the fracking revolution has added something like 40 trillion dollars worth of oil and gas reserves to back the dollar. You better believe that oil acts just like gold as a backer of currency.
Oil exporters tend to have strong currencies.
The value of a currency is much like the value of a stock. A stocks value is principally based on its future earnings plus earning growth plus current assets. The value of a currency is based on similar considerations. Companies like Microsoft and Intel split their shares 10 times in 20 years. Highly dilutionary... right? The price of the stock stayed relatively stable while the number of shares increased exponentially. Why didn’t these stocks go to penny stocks? Because the companies experienced significant earnings growth in the years their stock prices split many times.
Right now the dollar is still going roughly sideways because the downward pressure of the federal reserve printing dollars is being met by the upward pressure of increased oil production.
When the fed stops printing money—the dollars natural direction will be upward because of the upward pressure on the dollar of increased oil production.
A rising dollar pushes down the price of gold.
A rising dollar also pushes up the value of the dollars held in the vaults of all the world’s central banks. Including China—which has some of the largest reserves of dollars.
Finally, the author of the article concentrates on Warren Buffet. But the billionaire who knows his currency is George Soros. He sold his gold position back in early 2012. Now he is bullish on the USA. Anyone who recalls how he screamed about the demise of the dollar back in 2008, should know what a profound turn around this guy has experienced to be bearish on gold and bullish on the US economy. Its not unreasonable to assume that he was seriously burned where it hurt. In his pocket book.
But of course while the legendary Warren Buffet has always hated gold as an investment vehicle ,maybe the Chinese gold bug has never heard of George Soros.
If its tough on US gold bugs, its even tougher on Chinese gold bugs. They’re still learning the ropes.
Interesting post!
Has the Administration decided that oil shale gives them the money they need for all their utopian dreams?
Has the Administration decided that oil shale gives them the money they need for all their utopian dreams?
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Its the pubbies that need convincing. They are not convinced.
Basically what’s happening is the same thing as happened in the late 90’s. At that time the booming stock market and low gas prices sent 100’s of billions of dollars worth of new revenues to the federal government while Newt’s congress kept the federal government from growing. New’t congress didn’t cut the budget. They just kept it from growing. But that was enough. The budget balanced. Clinton of course fought tooth and nail to grow the budget and creamed newt for curbing growth. But in the end Clinton took credit for the balanced budget and that became his legacy.
Something similar is in the works for Obama.
Hmm. Enjoy a buoyed economy, while Zero gets the credit? I think they will still screw the pooch with torrential spending that will overwhelm any oil boom over the long term.
HISTORICAL GOLD PRICES- 1833 to Present
Cherry-Picker. It was in the 200s as recently as 2001.
Hmm. Enjoy a buoyed economy, while Zero gets the credit? I think they will still screw the pooch with torrential spending that will overwhelm any oil boom over the long term.
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The pubbies are not going to allow anything like “torrential spending”. They control the House so they control the purse strings. Its likely too —as of now — that the fall elections will crush the dems in both houses of congress. That means that Obamacare comes closer to being defunded.
If Obamacare is defunded, then the economy really takes off.
Its also possible that the oil deal with the Iranians will result in the Iranians pushing 2 million barrels a day on to the international market and driving the price of oil down to $70@ barrel. Which curtail much of US oil production growth.
There are a lot of possibilities here.
All very interesting. I’m definitely hoping for a solid win in both houses of congress. Pack them both with Tea party members committed to fiscal restraint, even if that lends O the illusion of success. As for the current gop leadership, feh!
If you don't physically hold the gold, you don't have gold.
Thanks!
The day the dollar stops being the world reserve currency is the day the current deficit gravy train collapses. Our debt IMMEDIATLY becomes toilet paper.
Thanks for that.
Ah, gold'n'silver in demand means dollars out the window. Everyone knows that --ok so it never actually happens that way in real life but everyone still knows it anyway.
The big question is how do we work with when only gold or only silver's in demand when the other's being dumped?
The pubbies are not going to allow anything like “torrential spending”. They control the House so they control the purse strings.
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The House just approved a $1.1 trillion spending bill. How can that not be considered torrential spending? In effect, it was the un-sequester bill.
Thanks for the education.
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