Hello LLCF,
Thank you for the welcome to the thread...
To paraphrase, what do I think of the price of gold, and its recent upward momentum?
Let's start by giving some background on what I think of gold...
I belong here:
goldprospectors.org
and here:
goldprospectors.org
Even though both organizations are found at the same web site, they are essentially separate organizations though related. Both organizations promote recreational mining throughout the United States, and to a lesser extent other global locations. I have belonged to both organizations since about 1979, so you can see that a form of the gold bug hit me many years ago. I fondly remember gold at around $800 an ounce.
I have no current investments in any metals. No mining companies, no mutual funds, no options, no shorts...
I am impressed with the price movement in gold over the past few months. But the $64,000 question is whether gold is presently peaking or does the current price movement have stronger legs...
Another question to be answered is whether gold or some other precious metal(s) should be the hedge investment of choice for the coming months...
Let's start with the latter question first. Which precious metal to choose? Given that relatively easy liquidity is desirable, I think that only platinum and gold deserve to be considered. Of those two, my preference is for gold, though a strong argument can also be made for platinum. Gold is more well known, and more globally accepted by individual end users of the product. Whether the gold is used in minted coins, dental procedures, electronic applications, or beautiful adornments for the body, the world appreciates gold as much now as it did during Biblical times. Gold has survived wars, floods, earthquakes, pestilence and the greed of humanity for centuries. I see no indication that man's love affair with gold will cease in the near future. So, gold is my precious metal of choice as a hedge investment.
Now for the former question, which was will the price of gold continue its upward momentum... My response is yes, the momentum has barely begun... Why?
One strong indicator is that many Central Banks are unloading their gold stores, questing after something more liquid; perhaps the US dollar, or the Euro... It makes no difference why they are unloading, merely that they are. Central Banks have a long and documented history of being late to the party and among the last to leave, not unlike the Japanese (as pointed out earlier by Jay) who have a long history of buying (stocks, bonds, real estate, etcetera) at market tops... So using the Central Banks as a contrary indicator, one might reasonably conclude that they are mistakenly taking this minimal price rise as an opportunity to unload gold, whereas they should be in an accumulation mode.
Next we have the hedged positions of the gold mining firms themselves. As I see it, they actually stand to lose money this year because of the hedged positions. So I suspect that they'll do everything within their power to meet their obligations and not exceed them, thereby stretching out the time frame for gold production, and hopefully extending the market price of gold higher.
Lastly, we have been in a bear market for gold for over 20 years now. A pendulum swings both ways, and I suspect the pendulum is now swinging strongly towards a bull market for gold. While gold is no longer as popular an investment in the USA as it was perhaps 20 or 30 years ago, the remainder of the world still regards gold as an unmatched asset to see a family through hard economic times. Gold will be found in every dowry in India, in most jewelry in China, and in many private portfolios throughout Europe and Asia and Africa.
I have contemplated the purchase of some gold bars solely as a hedge investment for a poorly performing stock market. I see the stock markets as being overvalued in the extreme. I see corporate bonds as being somewhat risky given that I cannot discern which companies will default and which will not (other than the entire telephony sector which I view as a dead man walking). I already own my own home, and real estate investments (other than REITs) have no appeal to me.
But I hate buying what I can obtain through a little sweat equity, which is why I have memberships in LDMA and GPAA. I can go to our claims anytime I want and with a little sweat equity extract a small amount of gold from the ground which easily satisfies my "gold fever" whenever it should strike.
That said, I may still hedge and buy some gold bars simply for the "insurance" value it provides. Yes, I think gold has a long way to go yet. I have seen some "experts" calling for $400 and $500 an ounce. I won't make a dollar call, but I believe that $350 is not where the price rise ends...
KJC |
