lorddarley

The Arithmetic of Gold: Why Its Price Has No Ceiling

What perplexes me is that there continues to be such demand for the dollar. The interest rate at the last 10 year auction went down.

So who is spending the massive amounts necessary to finance the US debt? Someone is wildly wrong.

My theory is that people see the dollar at a much higher level next year than at present. There will begin to be a cut back in military commitments. There will be a modest raise in interest rates and tax rates because economic activity will pick up. There will be capital inflows back to the US, simply because the EURO is hardly worth its present price and US assets are on sale. The government will also be restricted in discretionary spending due to its assuming so many of the problems of the last bubble.

I'm not down on gold, but it is just one of many commoditis, and they are all having a good run during fearful times. With a return to normalcy, which the bond buyers anticipate, I don't see it behaving better than its asset class.

The Vicious Cycle of a Falling Dollar

As an investor, I have trouble making a case for broad equity commitments to the US. It's a great country, but the mandates for its aging and immigrant populations are not affordable, and politicians will resort to currency manipulation to postpone the bad news. The government debt structure essentially makes it impossible for government to overhaul aging infrastructure, and I don't see the terms to finance such projects being attractive to private capital.

Brazil seems the best place to invest at present: (1) resources, (2) a young population (3) decreasing government debt as a percentage of GDP, and (4) relative stability politically. With an election coming up, look for "Lula" to prime the pump for Brazilian consumers so that his favored successor can take over. BRF, the recent ETF which is made up of consumer-based Brazilian stocks, looks like a better candidate for investment dollars than what I see in the US.

Bom Dia !

How Does $9000 Gold Sound?

Gold can be mined for about $500/oz, or less. To get to $9,000 gold, there would need to be a huge new source of demand. Although I have been buying a lot of GDX, the goldminers' ETF, I just don't see the world going "all in" on gold.

More realistically, diversified baskets of commodities are a better protection for those who (justifiably) mistrust fiat currencies.

Technology has eroded gold's claim to be the sole source of "real value." ETFs are the way most individuals own gold. An electronic device is now the accepted substitute for the real metal.

So, if ETFs are the way (and it's the only practical way in which gold could be thought of as a substitute for trillions of fiat currency), why not a more diversified and sophisticated mix of commodity ETFs, rather than just gold?

I see gold doing well in the inflationary future. That's why I own GDX. However, its days as a sole alternative for "money" are over, thanks to technology. The demand for gold will remain the same as for other commodities, a bit above production costs.

LordDarley

U.S. Dollar Strength and Implications for Gold

I think we are in for massive deflation. If inflation were even a remote possibility, the US treasury would be issuing long bonds at today's "low" rates.

The appetite for long bonds is enormous, due to pension liabilities. So why don't they issue them?

They don't issue the long bonds because they know there is no inflation in the future, and that interest rates will get even lower, and stay low.

It's a great privilege to sit on your backside and collect interest when you do nothing. Billions of people now have money, and would like to collect interest, and do nothing.

Surprise. People will be underemployed and interest rates will stay low for the forseeeable future.

LordDarley

Headwinds for Gold?

To evaluate gold in the short term, don't you have to consider the much lower cost of production?