The Short and Long Term Outlook for Gold, Silver 16 comments
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In order to determine the relative value of gold and silver, we can put both commodities in ratio. It was the lowest in the last century at 14, compared to current levels around 70. This would suggest that gold is currently overvalued.
Since 1980, the ratio of the price of gold/silver ranged between 30 and 100 and the average was 65. Last time it reached 100 was in 199 after Iraq's invasion in Kuwait, which raised concerns about rising oil prices that could lead to rising inflation. Gold will serve as financial security.
The current massive pumping of money into the economy by central banks and government spending could lead to similar concerns about the price level. In the next few years, this could support the prices of both precious metals.
In the short term, both gold and silver prices may drop slightly, as investors move to riskier assets such as shares, due to expected economic growth and industrial production.
If indeed there is a revival of the economy, the price of silver will not be so much affected because it is used in industries such as electrical engineering, aerospace and defense industries. The value of gold will suffer more than silver.
It is expected that industrial demand for silver will constitute about 65 percent of the total world supply, estimated at 895 tons, while industrial and medical uses of gold is estimated at 11 percent of total supply (3880 tons).
For easy investment in both precious metal commodities, there are already several exchange traded funds.
Gold ETF
streetTRACKS Gold Shares (GLD)
PowerShares DB Gold (DGL)
Market Vectors Gold Miners ETF (GDX)
iShares COMEX Gold Trust (IAU)
Silver ETF
PowerShares DB Silver (DBS)
iShares Silver Trust (SLV)
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Gold is still very cheap now comparing to 1980.
"1980's legendary gold close of $850 translates into $2358 in today's dollars! So what the financial media is gleefully calling an all-time high today, insinuating gold is radically overbought and due for a plunge, isn't even halfway up to this metal's real all-time high. As of Wednesday's $1018 close, gold had merely climbed to 43% of the climax of its previous secular bull."
Still a long run to do.
From the article (worth reading) from Adam Hamilton
www.gold-eagle.com/gol...
On Sep 22 09:23 AM Vuke wrote:
> Your first paragraph says it all. Why would you conclude gold is
> over-valued when it's more obvious, in light of the following paragraphs,
> it is silver that is under-valued?
But I agree with you that gold has further to run, certainly long term. I'm long gold - and silver too.
On Sep 22 09:48 AM Clint007 wrote:
> Gold "overvalue" big laugh / lol, lol
> Gold is still very cheap now comparing to 1980.
> "1980's legendary gold close of $850 translates into $2358 in today's
> dollars! So what the financial media is gleefully calling an all-time
> high today, insinuating gold is radically overbought and due for
> a plunge, isn't even halfway up to this metal's real all-time high.
> As of Wednesday's $1018 close, gold had merely climbed to 43% of
> the climax of its previous secular bull."
>
> Still a long run to do.
>
> From the article (worth reading) from Adam Hamilton
> www.gold-eagle.com/gol...
Disclosures: Long PRPFX, GLD, AEM
"... It's like looking at stocks post 1929 and
> saying "look how cheap they are!". Gold was so over valued in 1980
It is look like you havn't read the article!
----------------------...
"Since January 1980, the CPI has multiplied by 2.8x. This equates to a compound annual growth rate of 3.5% over the 29+ years since. Meanwhile, the broad MZM money supply has ballooned by 11.2x since January 1980! This requires a compound annual growth rate of 8.5%. So obviously the US money supply has been growing at a much faster pace than where Washington claims inflation is running. This monetary growth rate, less the economic growth, is much closer to true inflation than the lowballed CPI.
All over the world, broad money supplies nearly always grow by at least 7% annually. So over the 29+ years since early 1980, a conservative 7% average growth rate yields a 7.4x multiplication of the global supply of fiat currencies. Meanwhile the above-ground global gold supply, since this metal is so incredibly challenging to find and mine, tends to only grow by about 1% a year. This is why gold is so valuable. 1% growth over this same span yields a gold supply today about 1.3x as large as January 1980's."
----------------------...
But, in 1980 (not 1929) the main reason for the price of Gold to rise was the sudden high price of Oil
But today there are 1000 reasons to have the price of Gold to go much higher. Don't forget the $US could be devalued because : DEBT and who own the US debt? China
> It is look like you havn't read the article!
It looks like you didn't read my comment. My comment was about the valuation of gold in 1980 and the futility of using that as a benchmark. Nothing in your comment or the article (sales pitch actually) that you refer to, makes a case for gold being anything but poor value in 1980. That's because gold WAS very poor value in 1980. As I said, you had to wait 28 years just to break even. To be kind I'm not including carry costs - which would be significant over that time. Also, I'm obviously only talking about breaking even on a nominal basis. If you want to break even in real terms then keep waiting. That's not just because of a few years bad luck in the market - it's due to fundamental valuations.
Your second comment gives reasons why gold is NOW good value (although still mistakenly basing this on the value in 1980). I'm not disputing that gold is now good value - that's why I own it. But I don't base that evaluation on a price of $850 in 1980, like you or the sales pitch you refer to, because I believe that to do so would be an error of judgment. How about using some of gold's other benchmarks such as $35 in 1970, $20.67 in 1930, or $19.39 in 1830?
Gold at $35. x Oz, I remember very well; at work, at that time, there was a guy was taking order for Gold buyer, he then order them by mail. But Nobody was interested. Short time after that floor price, the US politics (Nixon) change that and the Gold $ was start flying. Everybody wanted to buy at $35. from that guy. Oups! too late and no more easy delivery by mail.
Gold at $35. x Oz, I remember very well; at work, at that time, there was a guy was taking order for Gold buyer, he then order them by mail. But Nobody was interested. Short time after that floor price, the US politics (Nixon) change that and the Gold $ was start flying. Everybody wanted to buy at $35. from that guy. Oups! too late and no more easy delivery by mail.
it was not over valued in 1980, neither is it today!
On Sep 22 07:27 PM oenphile wrote:
> peter schiff would vomit over this moronic view,