>>how the euro/gold price is so stable>> It appears that gold will now follow the Euro, and if the dollar continues to drop against the Euro, gold will cost more in dollars.
The long term trend is for the Euro to INCREASE in value against the dollar because of the huge and increasing U.S. government debt, and the unwillingness of foreign investors to risk putting funds into dollar denominated securities, especially Treasury bonds. Waning interest in treasuries will affect long term interest rates, putting further downward pressure on the dollar (and maybe on interest sensitive stocks as well).
Rather than buying gold bullion, I have been holding Freeport McMoran preferred "B" shares, which pay dividends based on the price of gold, and which will be called this coming August at a price equal to one-tenth the price of gold. In other words, owning this particular stock issue is just like owning bullion, with the added advantage that you also get a dividend (yield is currently about 3.5 percent). If I decide that the dollar will continue to fall against the Euro, I may extend this strategy by buying the Freeport McMoran preferred "C" shares, which are identical to the "B" except that they do not have an early call date.
Any comments or suggestions?
Art Bechhoefer |
