Anyone who tells you that the US dollar is an attractive investment and gold has weak fundamentals understands no economy of interest rates, and less about gold. They call themselves technical indicators dot com, but all they can talk about are the fundamentals. Sort of lets you down about their underlying philosophy. Bottom line? Another CNBC-type new-age gold bashing group. In fact, physical demand for gold is rising. They disparage the fact that futures buying is driving the price up. Who cares? Industry is short? When are they not, when selling forward? It is a hedge anyway. Another thing they miss is the chiefest long term technical indicator is gold's tendency to rise in long 7 year cycles one of which it is undeniably on at present.
A fundamental they fail to come to grips with is the all time low of interest rates, which cannot go any lower. In addition they omit the fact that war has always driven up interest rates to double digits for up to 4 years at a a time resulting in a surge in inflation and gold. This has only happened about ten times in the last 500 years, so it is a "weak" fundamental,<sarcasm> but its still there. A third fundamental relationship they fail to come to terms with is the weakness in the Dow, which although hardly front page news anymore, has been a long term worry of about every speculator.
What anti-gold bugs fail to see is gold's traditional inelasticity and the fact that gold climbs a wall of equity and dollar worry, and not that it is in itself anything to worry about. Physical supply has not as much to do with price as physical as was amply demonstrated in the early 1970's and early 1980's. The "true" trade in gold is all paper. 6 to 7 times the physical trade. In this kind of atmosphere, it is hardly the physical demand by itself that is, or will be, changing gold, but the paper demand. As hedge books unwind, as they must as gold rises, the paper goes to the demand side and price rises still more.
The increase in physical demand in the 1970's might have had something to do with Nixon de-outlawing ownership of gold. On the other hand, just as much was sold as bought :) Was it supply increase met by demand, or vice versa? The only way you know is by which way the price goes. Right now it's up.
EC<:-} |
