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Gold/Mining/Energy : Gold Price Monitor -- Ignore unavailable to you. Want to Upgrade?

To: PaulM who wrote (7755)	2/21/1998 10:57:00 AM
From: Michael	Read Replies (1) \| Respond to of 116762

Paul, Re: Money Supply and Price Inflation. Your post prompted to go look for some historical data to see if the statistics supported my conclusion. The best site I could find for historical data was this one. chdwk.com If anyone has a better one I'd be grateful to hear of it. For the commodities I downloaded here are the results. Note: The 830111 Date is the earliest price they have for oil. I therefore took that as the comparison point for the others. Similarly the 950131 was the latest date they had so I use that figures for the others (except cotton which stops at 950227) * Corn 830311 284.00 950131 255.00000 Crude 830331 29.40000 950131 18.48000 Cotton 83033 72.95000 950207 76.10000 Coffee 830331 123.75000 950131 75.85000 So its clear Oil is not the only commodity that doesn't reflect money supply growth. (Couldn't find anything on heads of lettuce though. Sorry <g>) While I don't have the figures I know that Copper recently hit a 22-year low so it doesn't only apply to agricultural commodities either. It is a bit of a mystery where all the extra money has gone, though your definitely on to something with financial assets. Look at the equivalent figures for the S&P. S&P500 830331 155.95000 950131 481.30000 (and of course on and on to where it is today). Oil is lower than anything except coffee, but I don't think there is any mystery there. The Oil crisis prompted exploration and development on a massive scale and once you have paid the capital costs the operating costs are fairly low. In fact I'd bet the average cost gives a better profit than the GoldMiners are getting now. I don't know the industry figures but last time I looked in Saudi it was about 2$ per barrel, so there is lots of room for prices to fall there before operations would be uneconomical on a cash basis. Why are foreigners willing to hold so much of the greenback ? The US is still the largest, most vibrant and most transparent economy in the world. I know that doesn't say great things about the rest <g> but its one explanation. Also most International trade (and all commodities) are denominated in Dollars so that's an additional demand factor. But your right it is a mystery (at least when your looking for a logical explanation). But isn't that what manias about. Finally re: Saudi purchases of Gold. I know the common perception in the West is that the Arab Oil states are loaded, but that is simply out of date. The earlier posts on the economic strains they have been experiencing is absolutely true. I experienced it first hand. They simply do not have a lot of bucks to stash away in Gold for a rainy day. Regards, Michael