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Gold/Mining/Energy : Gold Price Monitor

GDXJ 94.04

+0.6%

Nov 21 4:00 PM EST

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To: Hawkmoon who wrote (57727)	8/30/2000 8:31:39 PM
From: The Vet	Read Replies (1) of 116764

Thanks Ron - it seems that you have some appreciation of what the PPP is good for. To quote the site you posted and felt was interesting pacific.commerce.ubc.ca "When a country's domestic price level is increasing (i.e., a country experiences inflation), that country's exchange rate must be depreciated in order to return to PPP." My point on the PPP is that the current exchange rates when referenced against the USD indicate that inflation in the US has risen significantly more than most other countries than would be inferred by the market exchange rate. However "official" statistics have been telling us that the US inflation rate is LOWER than the rate in those other countries. Something does not add up! I am not disputing that the USD is the currency of choice for investment simply because it has the backing and the momentum at the moment. I have the majority of my assets in USD. However the PP data and exchange rates tells us that the relative strength of the USD is not likely to continue and at some time either inflation will have to increase a lot in the other countries, become negative in the US or the USD will be significantly devalued in order for parity to be restored. Many poster here believe that a devaluation of the USD is likely to be the trigger to a serious unsettling of the US and in turn the world's economic system. That's why we should be keeping a weather eye out for the PPP as it is an advance indicator for the future direction of exchange rates. Sure it's not a major indicator but it is an advance indicator and those are hard to find. By the way it is far cheaper to live in most of Canada than it is in much of the US. I spend almost equal time in three countries during the year and purchase many goods in the US. I have assets denominated in four currencies and I often buy and sell in three different currencies. The significance of the PPP came to me when I accompanied my wife shopping for the basic necessities of life in a Florida supermarket. Almost every item was dearer than the identical item sold in a Western Canadian supermarket including Florida Orange juice. That is almost impossible to explain but I assure you that it is true and the price difference was quite significant. Until then I believed that exchange rates largely compensated for purchasing power differences and that USD converted into another countries currencies at the going rate would buy me a similar quantity and quality of goods in that country as the USD did in the US. I found that that is simply not true. When a tourist from the US changes his dollars for Canadian dollars he not only gets a greater number of CAD but he also gains in purchasing power. As gold is also a currency and does have a PPP then the overvaluation of the USD means that gold must be undervalued when the price is expressed in USD terms.

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