bowman711

Precious and Base Metal ETFs Draw Attention During Turmoil

At some point, when the some $3.5-trillion of 'new' money thoroughly works it way into the economies of the world, people will realize that those 'dollars' they rushed into for safety are only worth some cents. At that point there should be a rush into the only entities that have held value for thousands of years - gold, and to a lesser extent, silver. The only wildcard is if governments evil enough to destroy the world economy in an effort to concentrate power will be evil enough to confiscate the world's gold without paying what it is worth. If that happens, one might as well be holding acorns or pretty sea shells as either dollars (or Euros, pounds, yaun, yen, etc) or precious metals.

Weaker Expectations for Gold and Silver - TD Newcrest Analyst

Who cares what the PRICE of gold (or silver) is? What is important is the VALUE of gold relative to the rest of the economy. How much is gold down when compared to the stock market? The DOW & S&P-500 are down about 40% while gold is down 30%. How many companies will/are going bankrupt, leaving the stockholders with nothing? Every day we hear of familiar companies calling it quits. Gold can't go bankrupt, and has never been worth nothing. Which investor is in the safer position, the stockholder or the goldholder?

Why Gold Will Rocket

There is one possible wild card to the normal economics of gold. I don't know if you noticed that another $600-Billion was thrown at 'the crisis' this week (or late last week) to bail out money market funds. Two-plus weeks ago a $700-billion bailout was headline news for days; this one barely made the back pages of the newspaper. Frankly, these bailouts have been so reckless that I am leaning toward the idea that it doesn't matter to the G-7 governments how much of their dollars, yens, Euros, pounds, etc. they print because they are planning for a new world currency to replace the dollar. Time will tell how well all these 'strong' dollars would fare in any conversion. This morning this new 'Bretton Woods' summit was announced for November 15, the first of a series of expected summits to deal (on a world-wide basis) with the current economic meltdown..

There is talk that the new world currency WILL likely be backed by gold. Both China and Russia are certainly talking of tying their currencies to gold. Therefore, it would be in the interest of these new Bretton Woods governments to drive the price down as far as possible before they outlaw private ownership of gold so they can use it to partially back the new currency. [I don't think they would dare try to take gold without payment because there are too many people who own gold who are also stocking up on food and weapons to protect what they hold.]

Personally, I think the flap over Joe Biden's comments about a huge crisis coming if Obama is elected is not referring to a terrorist attack, but to a monetary meltdow - a planned meltdown - to introduce a new world currency. Yesterday, Obama himself said this expected crisis would not just be for his administration, but for anyone who is elected. Biden pleading with his Tacoma crowd to stick with them because they would not understand (at first. at least), and probably not like what the solution would be, gives more credence to the possibility of a new, gold-backed world currency.

After the history, especially the recent history, of all fiat currencies, I don't think the G-7 could get Russia, China, or even most ordinary U.S. citizens to accept a world, Euro-like currency, unless it is backed up by gold (or, possibly, a basket of precious metals.).

Time will tell.

Where Will Oil Go From Here?

One needs to keep in mind that oil will produce the same number of miles traveled or pieces of plastic, etc. per barrel whether the price is inflated or deflated. Therefore, my contention is that when whichever scenario takes place, oil should eventually find its same relative value in the 'new' economy. It may take a few years to find that level, but stocks where the bulk of its value consists of oil in the ground should find the same relative value to the rest of the economy as 'always.'

I'll throw into the discussion one other scenario that hasn't received much, if any, discussion. What if the U.S. Government, looking at the $10+trillion national debt, and with the Baby Boomer's greatly increased Social Security benefits looming, defaults on its obligations? Unlike with Mexico twenty years ago, there won't be any 'super economy' to bail out the U.S. In my reading, over the past few weeks I'm seeing more and more tiny hints that something huge is coming in relation to the monetary system. It could be described as a tectonic shift.

One possibility is a U.S. default on its national debt, along with the creation of a new currency to serve world trade. Such a default could be whole or partial. Would China accept, for example, accept a partial default in exchange for making the Yuan a major part of the new world currency? The G-7 countries are said to be discussing a world currency that would replace the dollar in trade. This past weekend Joe Biden said that in the first few months of an Obama administrations there would be a huge test, and then went on to say that what Obama's solution would be would seem wrong at the start, but that his listeners should stick with them. Everybody seems to be thinking such a test might be a terrorist attack. It could just as easily be a U.S. Government default on its financial obligations.

At any rate, I thought I'd throw into the discussion an 'unthinkable' event that could also affect the price of oil . . . and of gold.

Gold ETFs: What Went Wrong With Conventional Wisdom?

I think one other element can be added to the discussion about gold. The PRICE of gold does not necessarily reflect the VALUE of gold. Historically, gold has been considered to be a store of value. That means that no matter whether there is inflation or deflation, gold will eventually find its same level in relation to the rest of the economy. Therefore, if 500 ounces will buy a$400,000 house at a gold price of $800/oz it will still buy that same house (now a $200,000 house) with with 500 ounces of gold at $400/oz.. This is what is meant by saying that gold will hold its value.

Conventional wisdom would say that the massive 'bailouts' by the U.S. and most of the rest of the world would be highly inflationary. I think the reason that gold isn't responding to this is because of two reasons; first, it takes time, many months, before newly 'printed money' is reflected in the economy. Second, it looks to me like no matter how much governments introduce 'liquidity' into the economy, it is done through the banks, and they aren't lending it. Therefore, there is none (or very little) of these new dollars that is making it into the larger economy. Until that money makes it way into the larger economy, is won't create inflation.

Actually, we are right now in an historic fight between inflation and deflation, and so far it seems deflation is winning. Look at how much the stock market has deflated in the past few months. Consider how the real estate segment of the economy is being deflated. One could say that energy is also in an historic time of deflation from its highs.

If the economy is being deflated, gold will go down in price. However, once everything washes out, gold should find it historic value in relation to the rest of the economy. So, don't be too dejected if your hold holdings go down in price. If you hold them until the economy stabilized, you will probably own relatively the same portion of the economy, the same value, as you did when gold was much higher in price.

Why Gold Stocks Failed (And Why I'm Still Holding On)

Gold holding is value in times of deflation does not mean it will hold its price, just at it doesn't hold its price during times of inflation. However, at whatever price it is - higher during inflation, lower during deflation - it will eventually find its historical value against the rest of the economy. Therefore, if 500 ounces will buy a$400,000 house at a gold price of $800/oz it will still buy that same house (now a $200,000 house) with with 500 ounces of gold at $400/oz.. This is what is meant by saying that gold will hold its value.

I know there is manipulation of the COMEX gold price, but it could be one reason that gold is not responding to all the money pumped into the economy is that we actually are experiencing deflation. We certainly are seeing deflation in the stock market; the drop in price is certainly much greater than can be accounted for by the drop in business or even the expected drop in business during a recession.

Bullion Shortage and Spot Prices Tell Two Different Gold Stories

Beabaggage - and anyone else interested in CEF - This Canadian precious metals ETF is made up of approximately half gold and half silver. So, when you own CEF you are playing both gold and silver. One other thing - since the Canadian dollar plunged to about 85-cents U.S., and nobody expects it to stay that low, you should benefit when the Canadian dollar goes up. Therefore, CEF is a play on gold, silver, and the Canadian dollar!

[Disclosure: I have 1,000 shares/units of CEF.]

Bullion Shortage and Spot Prices Tell Two Different Gold Stories

If there could be a regularly reported 'street price' for gold, in a way that would equal or even replace the NYMEX/COMEX spot price, it would be interesting to see what the retail free market price of gold is. I have a feeling that would more closely give the 'real-life' value of gold. It doesn't make sense, really, that gold seems to be going down or at best treading water when on Friday people were lined up outside the doors of gold dealers in London. We need some reporting of the free-market price of gold.

Gold dropping in price on Friday and Monday does have a rational explaination, however.

On Friday, the hedge funds and mutual funds were facing unprecedented withdrawals as ordinary people want out. Probably a huge majority of the larger funds have been investing in foreign stocks. Even today I read an article of why one should invest in China. In their efforts to meet the withdrawal demands, these funds have been selling their foreign stocks and bringing the funds home to meet the withdrawal demands. The mad effort to convert the funds back to dollars has driven the cost of dollars up significantly. Of course, these funds were selling their gold to raise cash as well.

My thought is that on Monday gold went down further because of the European plan to 'do whatever it takes' to solve the crisis. This means printing more money., the only tool governments have. I read that they were throwing something like two to three times as much money at the crisis as the U.S.'s $700-Billion. So, when they announce they are inflating their currencies two to three times Uncle Sam's rate, that would drive the value of their currencies down in relation to the dollar, making it appear that the dollar is rising in value. Since gold is prices in dollars and the dollar was 'rising,' gold seemed to go down when priced in dollars.

Gold / Silver Ratio Tops 80 to 1

Between Friday and Monday, I'd say there are two reasons why gold seems to be responding contrary to what gold bugs would expect.

On Friday, the hedge funds and mutual funds were facing unprecedented withdrawals as ordinary people want out. Probably a huge majority of the larger funds have been investing in foreign stocks. Even today I read an article of why one should invest in China. In their efforts to meet the withdrawal demands, these funds have been selling their foreign stocks and bringing the funds home to meet the withdrawal demands. The mad effort to convert the funds back to dollars has driven the cost of dollars up significantly. Of course, these funds were selling their gold to raise cash as well.

My thought is that on Monday gold went down further because of the European plan to 'do whatever it takes' to solve the crisis. This means printing more money., the only tool governments have. I read that they were throwing something like two to three times as much money at the crisis as the U.S.'s $700-Billion. So, when they announce they are inflating their currencies two to three times Uncle Sam's rate, that would drive the value of their currencies down in relation to the dollar, making it appear that the dollar is rising in value. Since gold is prices in dollars and the dollar was 'rising,' gold seemed to go down when priced in dollars.

If there could be a regularly reported 'street price' for gold, in a way that would equal or even replace the NYMEX/COMEX price, it would be interesting to see what the retail free market price of gold is. I have a feeling that would more closely give the 'real-life' value of gold. It doesn't make sense, really, that gold seems to be going down or at best treading water when on Friday people were lined up outside the doors of gold dealers in London. We need some reporting of the free-market price of gold.

Economic Outlook: Is It Safe?

The quotes would be more useful if they included a date. Were they made on October 12 . . . . or, say, October 2? I can't tell if they are talking about (forecasting) what happened last week, or what is about to happen in the next week.

Is Gold A Sucker's Bet?

There are few couple of points I'd like to add to this discussion. The first is that there are TWO golds - one is the NYMEX/GLOBEX 'paper gold' and the second is the 'street price' physical gold. On Friday, while the 'paper gold' was plunging $107 from its Hong Kong high to the GLOBEX low, people were lined up out the door of London physical gold dealers. They weren't selling; they were buying. To get a more accurate picture of the free market gold price, I'd like to see GATA or some similar group set up a 'street price' gold index. Then every day - or hour - gold dealers from New York to London to Johannesburg, to Hong Kong to Rio de Janeiro could report their price they are selling gold for, where it would be tabulated for a current 'street price' of gold. I have a feeling that would soon become the preferred barometer of the gold price.

The huge drop in gold on Friday was due to a 'perfect storm' affecting gold. The first was the liquidation of gold by the mutual and hedge funds trying to raise cash to meet the redemption requests of thousands of investors. The second leg was those same funds selling their foreign investments and then trying to convert the foreign currency into dollars. This, of course, made the dollar spike up from demand for dollar being greater than the demand for the currencies they were trying to convert. Since gold is priced in dollars, this was reflected in the price of gold.

Finally, free market gold is a safe store of value whether there is inflation or deflation. If the currency is inflated gold will eventually find the same level when priced in that currency. Or, if the currency is deflated X%, then free market gold will eventually find the same $X level in the deflated currency. The main wild card is how much governments meddle in or intervene in the gold market.

[The same could be said for oil, and that is why oil and gold have such a close proportional relationship. It doesn't matter if oil is priced in inflated dollars or deflated dollars. One barrel of oil will produce the same number of miles traveled, or pieces of plastic, no matter how it is priced. So, owning stocks in companies where the vast majority of their value consists of oil reserves in the ground will eventually find its same free market price relative to the rest of the economy no matter whether it is priced in inflated or deflated dollars. This is assuming that the demand in terms of petroleum for those miles traveled or pieces of plastic remains constant. ]

Since the jury is still out as to whether governments will be able to inflate our way out of the current economic crisis, or if deflation will win over, or, for that matter, the total breakdown of the current monetary system which is then replaced by a new system, gold will eventually settle at relatively the same value in the new system as it was in the old one. There may some minor variations in the relative value of gold, but sooner or later it will once again settle back to its historic value.

The only question now is just exactly where is gold priced today in comparison to its historic value in relation to the rest of the economy. If it is lower, then sooner or later it will shoot up to find its historic value. If gold is priced higher than its historic value, then it will go down. It is up to each investor to determine where he or she thinks gold is price when compared to its historic value, and act accordingly.

What are McDonald's and Wal-Mart Telling Us?

Talking about mutual and hedge fund redemptions, I think that explains the jump in the dollar as well. Logic would suggest that a melt-down of the U.S. stock market, and the unprecedented inflating of the dollar would send investers fleeing the carnage. But, these large funds have a large part of their investments in foreign companies. With so many people demanding their money - what's left of it - out of these funds, the funds have had to sell their foreign stocks. Then, they have to convert the foreign currencies into dollars so they can meet the demands of their customers. With so much demand for converting foreign currencies to dollars, there has been a spike in the dollar.

At least, mutual and hedge fund redemptions is the only way I can logically explain why the dollar, with its recent fundamentals is rising, at least short term, and not plunging like the drop in the stock market. . . . And it applies just as well to explain the drop in WMT and MCD.

Examining the "Unprecedented Demand" for Gold Eagle Coins

Don't forget that gold started the day at $912.40 and went up to $933.60. As of 3:40 EDT gold was down $67 from yesterday's close, but down $88.30 from this morning's high. The vast bulk of the drop came after New York opened this morning.

I would like to know any possible logical explaination for such a drop in this uncertain of a market.

A Chart From Our Anxiety Closet

'Oil, of course, is a bellwether of industrial and consumer expansionism. Falling oil prices reflect waning fuel demand . . '

Since oil is the 'lifeblood' of the world's economies, it truly is a bellwether of economic contraction and EXPANSIONn. Don't forget that no matter where the current situation takes us, at some point the economies will have to start producing new goods to replace those that have worn out during the downturn. It will take oil to get industry running again. Even getting raw materials to the factories will take oil. So, I think a better store of value than dollars, Treauries, etc. would be to own the stock of oil companies whose assets are oil in the ground.

No matter what oil is priced at, or in what currency, it still will produce the same number of miles traveled, pieces of plastic, etc.

Examining the "Unprecedented Demand" for Gold Eagle Coins

It looks to me like 'the bullion bank boyz' are really at it again; gold, after drifting down in London subsequent to reaching a Hong Kong high of $933.60, then gold started dropping like a rock as soon as NYMEX opened. It doesn't make human nature or economic sense that investors are fleeing into dollars that are being inflated into oblivion. With gold going virtually nowhere during a 22% crash of the DOW this week, the only thing I can think of is that 'the Select,' those behind 'the boyz' at the bullion banks, are planning to default on U. S. dollar debts (or something of similar magnitude) which would result in a complete breakdown of the monetary system, leaving those holding dollars with virtually nothing. I would not be surprised to see that sometime between the election and the inauguration in January.

I learned today that the major countries are talking about suspending all equity trading for however long it takes for them to develop new 'trading rules.' It would take just such an international meeting for the current monetary system to be replaced with something else. Something absolutely stunning will cause people to try to get out of their dollars, euros, pounds, yens, etc., leaving them worthless.

It looks like 'the Select' are driving as many people out of gold (and silver) as possible, which they are buying at fire sale prices. No matter what form the new currencies take, they will sooner or later have a price in gold. Then, they can convert to the new money and buy up the stock market at salvage, fire sale prices.

Right now, I'd say that it is absolutely essential for one to have their house (& cottage) completely paid off so they own it outright. In fact, later today, I am going to call my county to see if I can even pre-pay my property taxes for the next couple of years. [During the Great Depression, most people lost their homes to tax delinquencies.] Then, I'd get everything else you can into gold or silver. Best would be the actual gold coins or bullion, but that is virtually impossible to find now, so the next best is to get the gold and silver ETF.

Any group evil enough to crash the monetary system, and steal the wealth of virtually everyone in society, is evil enough to outlaw gold for anyone except 'the Select,' but I can see no other option but to try to survive with the only store of monetary value that could be counted on for the last six thousand years.

I see a situation that is unprecedented in its seriousness - and in its evil. I can't think of any other scenario to explain why gold would go down during a financial panic, can you?