On 28 Dec 2011, when gold touched a low of USD 1,520, I had suggested to buy more and more Gold...in US dollars or AUD or CAD so you get double profits of appreciating currencies as well as rising gold!
Today Gold has touched USD 1,760, which is a profit of 15.7%, or a minimum of 14% depending on price purchased or if purchased on average basis.... in less than 2 months!
All below mentioned reasons of gold price rising continue to remain valid.
However, another reason is bailouts of banks, airlines, oil companies, real estate companies and various other companies globally by the Governments.
The more the Governments 'bail out'or give loans to companies, the more the gold will rise.
Please see attached chart of Monetary Base of the USA. It was rising gradually from 1981 until 2008 when the bail outs began in USA.
The monetary base jumped from USD 863bn to USD 2.66 trillion which is a rise of USD 1.8 trillion and is 208% rise in 3.5 years.
Since June 1994, when monetary base was at USD 404 bn, it took 14 years during a BOOM period with Middle Eastern wars in Iraq and Afghanistan which took 3.5 years in percentage terms to rise by an equivalent percentage.
This debasement of money and printing of dollars by the US Govt at a much faster pace has led to more and more money supply in the system and despite ZERO interest rates, the global trade or global GDP refuses to rise significantly while gold continues to rise at a similar faster pace.
In 2008 until 2010, US Govt bailed out their companies, In 2011 and 2012 Europeans and China bailed out their companies, now India is just starting up bail outs of their own companies. Just the country changes but the bailing out continues with global monetary base rising faster than ever!
This is a solid reason to buy more and more gold if you believe US and Europe and Japan etc will continue to spend more to make GDP grow, or bail out failing companies or give tax reductions to public, or reduce unemployment then gold will be the investment that will continue to rise.
If you missed the boat in Dec, there is still time to buy gold to hedge your positions, not against inflation, but the growing list of global companies who get bailed out and hence reduce the purchasing power of USD and all major currencies, which can be protected by investing in gold and silver only, which do not have Govt risk and combined with the buying power of the ever rising population, the price of gold/silver continues to rise.
It used to be US and Europe were large consumers of gold and other metals and commodities which has now been replaced by China, India, Brazil and other Asian nations over the last decade.
Stay tuned....and buy Gold and protect and grow your hard earned savings!
----- Original Message -----
From: MANOJ NATHANI
At: 12/28 12:38:59
Gold is down today to USD 1,587 due to new rules from China to control the gold speculation.
If we look at the attached chart, we see that Gold has been consistently rising since 2001, when it touched USD 280 levels.
We can also see a downward blip in Sept 2008 when the world's financial system was almost about to collapse and only Lehman Brothers went bankrupt but various other 'insolvent' banks of the USA were allowed to continue at the cost of the American taxpayer and the '99%' masses who continue to pay the price for the high handedness of the American banking system through more debt, more job losses, weak real estate pricing, no lending, weak stock and bond markets and insolvent businesses. We have entered a vicious cycle of DEBT - BANKRUPTCY - JOBLESSNESS -
Until Lehman collapsed in Sept 2008, we can see gold rising gradually, however, thereafter, as Governments around the world started printing more and more money, Gold started rising in a parabolic manner instead of a gradual arithmetic rise. Hence, we can actually time the rise of gold and show high degree of correlation to the 'bailing out' of privately owned banks and other large financial companies despite allegations of wrong doing and fraud.
Gold has always remained over its 50 day average and now is at that level again. This level indicates strong support and gold has remained above this level since 2002 except for the 5 month period Aug 2008-Dec 2008.
Of course, if gold drops below its 50 day average of USD 1,583, then it may go slightly more lower, but chances are quite low.
Next support of 100 day average is at USD 1,414 and 200 day average at USD 1,173.
Meanwhile, Historical price of Gold and US 10 year bond yield:
Dec 96 - USD 367 6.41%
Dec 97 - USD 289 5.74%
Dec 98 - USD 288 4.64%
Dec 99 - USD 288 6.44%
Dec 00 - USD 272 5.11%
Dec 01 - USD 278 5.05%
Dec 02 - USD 348 3.81%
Dec 03 - USD 415 4.24%
Dec 04 - USD 438 4.21%
Dec 05 - USD 517 4.39%
Dec 06 - USD 636 4.70%
Dec 07 - USD 833 4.02%
Dec 08 - USD 882 2.21%
Dec 09 - USD 1,096 3.83%
Dec 10 - USD 1,420 3.29%
Dec 11 - USD 1,587 - as on date...US 10 yr Yield 2.00%
There is a strong negative correlation between interest rates on USD bonds with Gold, when USD 10 year bond yields go down, gold rises.
Meanwhile, doubling of Gold price took over 8 years from 1997 to 2006.
From 2006, gold doubled only in less than 4 years from 2006 to early 2010.
While from Dec 2008, it took only two years to double up, from USD 882 to USD 1,600 levels today.
Point here is that gold is doubling up due to:
1. More money in circulation and debasement of the 'value of money' in almost all currencies. More money in reality means higher national debt, which is the cause of problems in Ireland, Greece, Portugal etc and ultimately leads to higher prices in precious metals. US debt is over USD 15 trillion and rising while Eurozone debt is at USD 3 trillion and rising. Japanese debt is legendary and the highest.
2. Rising global population of upto 7 billion now, which was 6 billion only until 12 years ago, 1999, hence rising demand.
3. Declining mining and exploration of all major commodities such as oil, gold, silver etc.
4. 'Safe haven' status of gold since it not backed by any 'unstable' or 'risky' sovereign Govt.
5. Until the 'real' rate of return, i.e. actual/nominal yield on US bonds less inflation which is running high due to oil and other increases such as fertilisers, food, pharmaceuticals, car prices etc. This applies to all countries where inflation is higher than both GDP growth or respective yields.
In my view, today and this week is a great buy of physical gold and averaging it on purchases on a weekly or bi weekly basis, at every dip and holding it over the next few years until the global crisis can be controlled and some sort of stability and growth is seen.
I expect gold to rise to USD 2,000 levels shortly as most major banks such as UBS (USD 2,050), Barclays (USD 2,000), Goldman (USD 1,810), Citibank, JP Morgan, Morgan Stanley (USD 2,200) have already said in their research over the last few weeks! Some of these banks may be wrong or trying to 'cheat' their clients, but all cannot be wrong!
Stay tuned....
