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Ilan Babaji's  Instablog

Ilan Babaji
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Writer, filmmaker, soul who is travelling around the world to give peace a chance. Also, a contributor of Seeking Alpha.
  • Gold Situation 0 comments
    Sep 26, 2009 8:04 AM | about stocks: GLD, SLV, AGQ, ABX

         It finally came the time when precious metals react and find out about the trust crisis over currencies, over a world looking for a value protection. Right now, gold and silver are in backwardation (when the sot price today is higher than the future price) and everyone is wondering where it is heading to.

    Next, I’ll show you a couple of bullet-points with news and information of interest on precious metal.

    ·      The first piece of news circulating around the globe –though I heard it in the U.S. media and not in the Chinese one - is that China is encouraging its citizens to accumulate gold to repatriate their metal possessions in London. In the past, the private possession of this metal was forbidden in the country and they are now encouraging the opposite.

    ·      Barrick Gold Corp. is reducing its coverage positions over the metal and increasing its gold possessions.

    ·      COMEX traders are doing the opposite; over the last weeks, they have increased their short positions against gold and silver.

    ·      Gold finally broke the barrier of $1,000 per ounce; however, there was no record of a major leap in the implicit volatility of its financial by-products.

    ·      India’s gold demand (one of the major players) is pretty low compared to previous years (if they start buying they will put pressure on the rise over the metal’s price).

    ·      The sale of the famous U.S. Eagle Gold Coins (gold coins that the U.S. makes and sells to its citizens since 1986) has softened lately (in 2008 it grew over a 450 percent and from that peak it has dropped almost a 40 percent).

     

         Both gold and the rest of commodities have many factors in favor: the dollar’s weakness, Asia’s rebound leading the rest of the world, policies being implemented globally (protectionism?), too much liquidity, and metal holders who don’t want to sell it (I’ve had a gold  Mexican for years and I cling to it with tooth and nail!).

     

         Next, I’ll show you a highly interesting chart: it shows us the ratio evolution between the Dow and the gold price since 1999. It shows us that the Dow lost more than 60 percent of its value regarding gold over the last ten years (this is great for those who consider gold to be the real money).


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