Gold Marks Two Important Milestones 9 comments
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In the past week, gold quietly marked two important milestones.
First, as of Monday the price of gold is now showing a gain for the year. The closing price of gold on December 31, 2007 was $833.75. The price of gold today is $854.60. That makes gold up 2.5% for the year to date. If gold can hang onto this gain into the end of the year, this will also mark the eighth year in a row that gold has had a positive return. For the year and for this decade, gold has humbled its naysayers and rewarded its investors.
Second, on Tuesday the price of gold exceeded the price of platinum. The two metals now trade within a few dollars of each other with gold at $854.60 and platinum at $858. This is a big change from earlier in the year when platinum was trading over $2,200 per ounce, more than double the price of gold. If I’m not mistaken, the price of platinum has been higher than the price of gold for this entire decade. Not since the 1990s has gold been more expensive than platinum. Considering that platinum is thirty times scarcer than gold, this makes a strong statement about the demand for gold.
Disclosure: Author is long physical gold and platinum
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This article has 9 comments:
It also makes a strong statement about the demand for platinum. Platinum being a major ingredient in catalytic converters. As the car markets are plunging there is little need for these devices. Rhodium is also a component of catalytic converters ans we have watched as the price of rhodium has plunged as well.
Gold at $850 isn't the metal itself, it's COMEX gold. Paper gold if you will. Real gold as in bars or coins sells above $1000 most anywhere.
If it can hold above the 50 day average it will bode well for future increases in price.
So what is better to own? "Safe" treasury bills that yield zero interest while dollars fly off the printing press by the trillions or gold? An easy choice in my book.
Also, gold is a relatively small asset class compared to the value of holdings in stocks, real estate, money funds, etc. Even a small reallocation of funds from paper assets to gold would have a huge impact. At some point i would not be surprised to see the value of gold quickly double in a short period of time.
Not exactly when I would be a buyer.
The advantage of gold stocks is that they can't be confiscated the way FDR stole the citizen's gold in the 30's (yet). The dollar isn't tied to gold anymore, but if the FED needs the money, they may confiscate any gold assets under the excuse of "national emergency" which would spike the price thereby increasing the value of what they hold and confiscate to pay for spending programs.
Physical assets are what will count. What did all those Madoff investors have? Nothing. Numbers on a piece of paper. Any precious metals or goods you can barter (liquor, tobacco, guns) will be valuable in this depression.
Kondratieff Winter coming...