Gold is once again edging toward $1,000 an ounce, and several banks are predicting spot gold well over $1,000 by the end of the month (BarCap predicts the price to breakout over $1,033, for example). While this is good news for gold bugs, it signals a lack of confidence in the recovery among other things.
http://www.reuters.com/article/usDollarRpt/idUSN0…
I'm also personally aware of at least one major gold outfit quietly predicting $1,300 an ounce by year end. The reason? Inflation, plain and simple.
While many will claim that deflation is the primary concern now, experts refuse to ignore the massive amounts of money created out of thin air to combat this financial crisis.
Here is an interesting graphic on the decline of the value of the dollar over the history of our country:
http://www.zerohedge.com/sites/default/files/imag…
I think the most telling statistic is the fact that the U.S. Dollar is worth 92% less today than it was at the creation of the Federal Reserve System in 1913. That's right, kids. A dollar today has 8 cents worth of purchasing power compared to a dollar 100 years ago.
Look for spot gold to continue to call bullshit on the recovery.
I started a thread on this a couple of months back (http://www.wallstreetoasis.com/forums/thoughts-on-gold) with very bullish views on precious metals and I still feel the same way I did then - he's called "Helicopter Ben" for a reason.
Neat graphic on the greenback.
I think it's a very bullish sign that gold has held onto almost all of its big runup this week. And seasonality is also in gold's favor, as September is historically the most bullish month by a factor of approximately 2 relative to any other month. Also gold has held up much better than any other asset class over the past few years, since the bear market in equities began in the fall of 2007.
And given the Fed's all out war on deflation, the huge increase in the money supply is bound to lead to considerable inflation down the road.
However, I would also point out that numerous DeMark sell signals are close to perfecting on gold, and this could be a sign of near term top.
Nonetheless, fundamentals remain in gold's favor.
Over the weekend I was doing some more reading on gold and came across some articles here that have more information on some of the macro factors affecting the gold price, and some information on gold mining companies that could benefit if gold keeps going higher: http://www.goldalert.com/ I at least found this to be helpful.
Thanks for the info, Edmundo, but I call bullshit on your zerohedge graph.
What about the graph don't you believe?
We don't even need to go back to 1913 and the creation of the Fed.
In 1950, the average home price (for a NEW home) was $8,450 and the average car price was $1,510.
Today, those numbers are in the ballpark of $299,000 for the average home and $20,000 for the average mid-size car.
The WSO Guide to Understanding TARP
http://www.telegraph.co.uk/finance/economics/6146957/China-alarmed-by-U…
The WSO Guide to Understanding TARP
thats the same site that wrote this article http://www.telegraph.co.uk/news/newstopics/celebritynews/5122031/South-…
...gold probably isnt going down until the fed proves that they will not make a policy error in exiting QE...given the bleak employment picture and the fed's focus on CPI which is likely to remain tame, I wouldnt expect this type of hawkish Fed-speak for quite some time. I think really the only risk to gold is that it is probably very crowded with longs, but other then that I like the trade alot. I also like it against GBP...sterling has most of the same central bank irresponsibility problems as USD but if we get a sell-off in risk assets generally sterling is likely to take it worse then gold whereas the USD will likely strengthen and gold vs USD will weaken.
I called bullshit on the graph because it is not meaningful.
Whatever does that mean, "the dollar lost 96% of its worth"?
Worth to buy what? A comparable basket of consumer goods?
Of course there's the inflation tax. Compounded over centuries, a dollar in 1800 is indeed worthless in 2009. The graph doesn't even what line is plotted. Is it the inverse of the CPI, with 1800 as the base year? In any case, that is not alarming.
Your analysis is interesting, I just think it is not well-served by the graph.
But that's fucking awesome.
The WSO Guide to Understanding TARP
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