James > I recommend it because it allows one to see what happened in the last gold bull
There is a fundamental difference between this gold bull and the one that happened in the 1970s and that is, then, it was driven by the purchase of actual gold and, now, predominately by the purchase of futures on the New York Mercantile Exchange. In other words, and despite all the talk about China and/or other investors moving big time into gold, there has been virtually no increase in demand for the actual metal.
technicalindicators.com
>>The number of long speculators in the gold market is near record highs, the latest report, as of November 23, shows over 265,000 long speculators. (Before the gold began to rise over 2 years ago, the average number of long speculators was closer to 60,000). Although there is no sign of it yet, if long speculators begin to liquidate there could be a downside reversal in the gold price
The demand for physical gold although increased a little in the 2nd quarter of 2004 did not show any significant increase in the 3rd quarter, suggesting the demand for physical gold and gold coins has not soared as it did in 1979-1980 period in which the gold reached $850 an ounce.
A very fundamental issue is whether the gold can continue to rise when supply is up and demand is down and remains at low levels (click for latest supply and demand figures). Although there has been a relatively small increase in demand in the 2nd quarter of 2004, demand remains at relatively low levels (so far) compared to the demand during the 1990's.<<
There is another difference between this "bull" market and the previous one. This one is about USD devaluation, pure and simple. The market of the 1970s was about world-wide inflation and was associated with rising and historically high interest rates. Interest rates, especially in the US, are now at historic lows indicating that there is little inflation (except presumably in the US as result of dollar devaluation) and far more concern about economic stagnation/deflation.
In a nutshell, in the the 1970s, the whole world was hedging against inflation, now, only those in the US need to hedge themselves against devaluation and inflation. Accordingly, and as the world economies are at present, there is no particular need for people outside the US to buy gold unless, of course, they wish to speculate. |
