"A Longer-Term Perspective On Gold" And More, From Nomura
While lately not much, if anything, has changed in our and the broader secular outlook on gold, which has been and continues to remain the only currency equivalent that isolates devaluation risk, and excludes counterparty risk while being an implicit bet on the stupidity of those in charge (the fact that various tenured "Ph.D. economists" hate what it represents for their tenure prospects of course only makes the bullish case far stronger). True, in the past month it has surged from $1520 to $1660 but only Ph.D. economists (indeed, that 200 DMA proved to be a complete non-event) could not have foreseen that year end liquidations in a desperate drive to shore up liquidity (as explained here) by institutions, always end, and the reversion to the above thesis sooner or later reappears. So while it won't say much new, below we present Nomura's just released Gold Sector Initiation, which is a must read for new entrants to the field of physical and paper representations of gold, as well as a timely reminder for everyone else that in the past 3 years nothing has changed with the fundamental thesis, and in fact recent actions have merely reinforced it (and if we indeed have a €1 or €10 trillion LTRO, then watch all resistance levels in the metal get blown off).
From Nomura:
A longer-term perspective on gold
Ineffective global governmental and central bank responses to the financial crisis of 2008 and the related sovereign debt crisis are causing investors to rethink some of the fundamental tenets of fiat currency systems. Associated with this, gold’s historical position of importance has the potential to re-emerge, with many important consequences for gold demand.
Gold has occupied a significant, yet constantly evolving place in the history of financial markets. Gold coins were first minted in ancient times, beginning gold’s tradition as the ultimate store of value. The use of gold coins as a mainstream currency persisted until the 16th century when significant discoveries of silver in Latin America saw a dual system develop; with gold and silver competing for use in international and domestic trade. By the early 18th century gold had re-emerged as the de facto monetary standard when Britain set a gold/silver ratio that eventually relegated silver from significant use. By the end of the 19th century most industrial countries adhered to a gold standard.
World War I and its associated pressures on government expenditures saw the gold standard end when major European countries halted the convertibility of their currencies into gold. The gold standard was generally restored in the post-war years; however, this return was short-lived, as leading economies once again suspended convertibility in order to devalue their currencies in response to the Great Depression. The US remained on a gold standard, although the 1934 Gold Reserve Act nationalised private gold holdings and devalued the gold dollar.
The end of World War II saw the implementation of what came to be known as the Bretton Woods system, a two-tiered gold-exchange system where the US dollar was backed by gold and all other currencies were pegged to the dollar. This lasted until 1971 when a combination of short-term pressures alongside the rise of German and Japanese economic power caused US president Richard Nixon to end the gold standard.
It has only been since 1971 that the world has shifted to a sustained, full-faith, fiat currency system. Between 1980 and 2000 the gold price fell as economic prosperity and contained inflation expectations led private investors, institutional investors and central banks away from gold. The 2000s saw gold demand rebound as lower interest rates and strong growth from Asian economies started a bull market that is ongoing today.
Nomura’s Quantitative Research report, Why gold is cheap in Asia, dated 16 August 2011, on why Asian nominal income growth and not US CPI has been the driver of the gold bull market. It provides a crucial perspective shift in understanding that gold has become a global commodity with global demand drivers and has been heavily influenced by Asian economic growth.
Gold has moved in and out of vogue many times over the past 100 years. Figure 6 provides perspective to the drop in gold prices that occurred at the end of 2011. A price correction was arguably overdue, especially in the context of the cyclicality of certain demand segments and the above-trend price increases in mid-2011. That said, our analysis suggests that the forces that have pushed gold up by 480% in the past 10 years are still in force and could well be exacerbated over the medium term.
Gold price appreciation has increased exponentially since the market stabilisation following the initial impact of the 2008 financial crisis. Concerns around the stability of fiat monetary systems in conjunction with exceedingly high sovereign debt levels are leading investors to review alternative stores of value, increasing gold investment demand.
Gold certainly has a long and well-established pedigree when placed in the context of its historical role in financial markets. We expect this re-emergence of gold as an asset class to persist over the medium term even as the world emerges from the sovereign debt crisis and continued shifts in the global economic landscape will see further shifts in reserve currency systems.
This is likely to have important implications for the gold producers. Figure 8 shows global P/E multiples for gold equities remain remarkably constrained despite the shift in gold prices seen over the past 10 years.
The practical constraints of re-implementing a gold standard system after the financial innovations of the past 40 years make a return to a Bretton Woods type system unrealistic, especially when we consider the gold standard’s lack of flexibility in implementing Keynesian or monetarist economic policies. However, it is important in the light of the current fragility of the world’s financial system and the ongoing paradigm shift with regard to the value of fiat currencies, to analyse gold from a broader historical perspective. This time might not be different.
In addition to the paradigm shift questioning faith in fiat currencies and longer-term shifts in world reserve currency systems; from a fundamental perspective, various longer-term trends are supportive of the gold price including:
- secular demand growth from Asia,
- a lack of flexibility in medium-term mine supply growth potential; and
- a shift in emerging market central bank attitudes toward gold as part of reserves
Short-term volatility drivers
The exogenous risks are likely to favour gold prices, as well, in the context of a limited response from near-term new mine supply. There are a number of factors that could cause gold to trade above our estimates in the short term. These include:
- the perceived threat from elevated inflation expectations from potential further quantitative easing,
- the potential for a lack of alternatives to the eurozone crisis, other than monetisation of debt and
- an increase in investor activity in an era with expected near-zero real interest rates.
The speed of the changing fundamentals within various sub-segment demand categories will no doubt add volatility to the gold price. Current weakness in the Indian rupee has seen Indian gold imports fall sharply. Financial system deleveraging can place pressure on investment demand for gold, which tends to be a larger proportion of demand than for other commodities.
Overall, our analysis suggests that the gold price remains well supported over the medium term, albeit with potentially high volatility from the demand perspective causing wide potential swings.
For Nomura's forecasts on future gold prices, supply and demand trends, and what this means for gold equities, read the full 105 page report below.
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Gold should be at $3,000. Market forces are strong, eventually it will get there.
Actually, the $ should not have a bid in gold but it does, such is the ignorance of the human race.
been doing some technical analysis on SPX priced in gold, looks like there will be few weeks or so and before SPX crashes in terms of gold. major wedge forming and MACD indicates SPX is way overbought. price SPX in silver and it is EXTREMELY overbought
If the Fed launches a massive open market purchase program aimed at agency mortgages and some agreed-upon CPI target, especially CORE CPI, precious metals should be back on track. I woudn't count on it though until it's announced. Ron Paul is stll in the race, and the Fed is not being forthright about their real objective, IMO.
The Fed has stated it wants to help the housing market, going so far as to send a list of suggestions to congress about what they might do to help the housing. This has become political discourse as Orrin Hatch sent the Fed a strongly worded response to stay out of the realm of fiscal policy. Whatever your feelings are politically on this issue, I do not believe the Fed's stated objective is their primary objective & obfuscates most of their real agenda. If they have a different motive for their action than what is publically stated, everyone of every political color should be concerned.
What does the Fed have in mind? Based on my observations, I believe the main goal of QE is to reduce financing costs for the Fed's constituent banks (& others that are marginally credit worthy, including European soveriegns). To be sure, there are other benefits & costs, but I find it somewhat appauling this very obvious goal is hidden under the guise of helping home owners.
Watching credit spreads over the last two cycles of massive QE, which were both dollar dillutive:
-- Yields for low risk securities, treasuries & agencies, ROSE over the duration of the purchases. At the 30 year duration, yields rose by over 100 basis points in each instance.
-- Over the same term, yields for high risk securities (bonds for financial instituions and lower grade / junk securities), FELL.
A change in direction and rate of change in interest rates, even one that is transitory, may lure a few new buyers into the market. This effect occured during QE2, but did not stop the longer-term trend of declining home prices. Basically, the Fed may have lured a few new buyers into a market that is still in decline.
Banks and nominal GDP may benefit from higher inflation, but for the average Joe, QE means declining real income and higher long-term nominal rates.
Prove me wrong Bernanke. END THE FED.
you're overthinking it.
the goal of the Fed is to control all americans with debt servitude and to continually implode the dollar so less and less people can afford to eat healthy foods and live healthy life styles
We are working properly in the other direction, paying down debt in a orderly manner, maintaining a positive budget and buying Metals against the eventual collapse of the dollar.
And yet The State and Country work against you, using your labor as their claim, the US Government uses you to shore up their 'full faith and credit'. In other words, when you hear "the full faith and credit of the United States", what they are really saying is the government's and Fed's ability to endlessly tax US citizens. Obviously the Fed and US Government are akin to a virus (or plague) on society.
True.
We are still running down the last few options to cut costs further and still the local, state and US costs increase slowly like a ... warming pot of water on a stove.
But to cut costs even more and lower our acceptable standard of living while meeting our annual goals? No. Not yet. We do wonder sometimes because more and more people in our area fight to hold on to what they have or otherwise prevent a eviction to the forest or street.
Does anybody else think the p/e chart in figure 8 looks off? I have trouble finding more than a handful of miners with low double digit p/e's.
Reuters News Agency: "Chinese Banks Lure Man On The Street To Gold"
"For Chinese shipping executive Ping Bo buying gold is the best way to protect his family's wealth and give his 10-year-old son a headstart into adulthood.
"For my son, the idea is that he will get a nice stash of gold that he can cash out when he turns 21 or when he gets married," said Ping, one of over 2 million people that have opened accounts in the past two years to accumulate gold at the Industrial and Commercial Bank of China (ICBC).
The ICBC launched the accounts in April 2010. The gold that it has bought to back them is only a fraction of total Chinese demand, but the explosive growth in the number of investors that have signed up is a symptom of the wider demand for the precious metal in the world's most populous country."
http://www.reuters.com/article/2012/01/19/us-china-gold-investment-idUSTRE80I08020120119
When all those people redeem the paper for actual gold after marriage or 21 is going to put a spike in the Gold price as China buys even more... not by backing up the truck but spotting railcars at any price.
What about supply and demand? When or if an entire generation of Chinese sells their gold, that sounds like a lower gold price to me.
Sounds like a nice tidy way to keep all the Chinese governments gold in one spot. whooppss, sorry everyone but the bank blew up. I would rather have the government working against me than with me. Someday the man on the street in China will figure that out. Probably ten seconds after there are only zeros in his account.
"Volume on gold derivative trades could be 15 to 20 times physical investment demand, Cheng said."
Only 20 times? Before the ICBC started selling, global physical-to-paper ratios were around 1:100 so, what multi-thousand-ton mine has been discovered in the last few years? It's going to the moon but it will be irrelevant, it will be illegal to own when we really need it... that said, I'm still a buyer, I'll take my chances with the barbarous relic.
The goal of the fed is to look in the rearview mirror to try and control a car going 100 mph on ice while smiling because they took a class in physics and know exactly how the car should react regardless of the hairpin turn 100ft away.
It's what happens when you are blinded by the Light.
Of gold that is.
ori
/shattering-midass-curse-gold-de-spell-ed/
ORI your perspective on gold belongs in the same category as "The Daily Astrology Stock Market Forecast" at a leading indian financial web-site...
Mumbo-jumbo snakeoil...
"Today, I finally understood, from my perspective, why I’ve felt this sure-ness of the collapse of Gold as a metal of value, in any of it’s forms that it is seen today.
Silver, the Feminine, Gold the masculine.
Men, we are meant to BE Gold.
Women, you are meant to BE Silver. "
It's all good Fink. We each need to hang our belief hats somewhere.
You feel free to keep hoarding gold, I'll spend my time trying to be it.
it's an existential question, not a monetary one.
ori
PS: It's Perspective Vs. Pursepective
;-)
I stopped buying gold , a year and half ago before the MSM "gold is going up/no down" (in india) news really kicked into gear. When the herd starts discussing it, it's probably isn't a good time to enter, they're liable to change direction at any minute.
BTW manged to fast forward through that last boring 55 min video of your's ... the whole "Industrial Society doesn't let us breathe" thing... is just Future Shock rehashed.
http://en.wikipedia.org/wiki/Future_Shock
ah, a fellow Indian, no surprise.
you are clearly a genius. I wish you luck during the coming future Shock.
ori
Dang straight buddy! Kinda funny how a 2 liter bottle of soda is cheaper than a head of lettuce thanks to all those corn subsidies and lobbyist fighting to keep everyone hooked on corn syrup getting fatter and fatter and needing more and more pills that cost a fortune. I love soda pop but the reality is if you take into account the tax money given to farmers to grow corn it isn't as cheap as the grocery store price makes it seem.
You can afford to eat healthy, that is crap. The average American spends far less of a percentage of their income on food than any other developed nation on the planet. The truth is people would rather spend their money on Playstations and big screen Tv's and cars than on good food. Not to mention if you ate well and got off the couch and exercised one in a while most people wouldn't need those crazy expensive pills to fight heart disease and diabetes from being so overweight. Maybe you should add the cost of those medications to your food bill and see how cheap eating all that fast food really is America!
About 15% depending on the survey.
http://www.bls.gov/cpi/cpid1112.pdf
http://www.bls.gov/cpi/cpid1012.pdf
America 34...
Giving up soft drinks/soda/pop, or whatever one wishes to call the sugar water, isn't that difficult. I used to drink perhaps 1 or 2 sodas per day. Then one day I decided to stop and after a couple of days I didn't miss sugar water at all.
That was 15 - 20 years ago.
I still drink a few beers per week... maybe a six pack during a week... far less than I used to consume.
Walking has been the key for me. If I walk 3.5 miles per day about 3 -4 times per week I feel really well and my mind functions better (I use the Sunday NY Times crossword puzzle as an informal yard stick).
I used to walk (and jog) higher milage and more often but as one ages everything becomes more difficult and harder on joints, muscles, etc.
It's amazing to me how much better the world looks after/during a nice walk. Perhaps this will not work for all, but there is no way for one to know until it's tried.
You may remember the old Fanta Grape soda.
Whew....
Not anymore.
God only knows what they used to flavor that panther piss....it was pretty unreal.
Y'all might also try Earthing or Grounding - a simple but new idea with not much hard research data yet but much anecdotal testamonial on the benefits. Our bodies are essentially electrets that have been pretty much insulated from the negatively charged earth since the demise of leather footwear which also corresponds with the rise of many modern maladies (type II diabetes, heart disease, MS etc,) see the research of bio-electric physicist James Oecshman and researcher Clinton Ober et.al. It would be difficult to go bare foot or leather moccasin clad these days but there are bed sheets available now with silver threading that that when grounded would allow your body 7 or 8 hours access for those free electrons to enter. BTW those electrons are natural anti-oxidants....and there are lots of data on their benefits in warding off disease due to inflammation etc. and a lot cheaper than COQ10 and reservatrol.
The only way I can drink coke is with a few shots of rum, not that that makes it any healthier.
double post
Some years back I decided to go on a healthy diet, hang the cost, even though it was winter and fresh produce was expensive. I filled my grocery cart with lettuce, apples, oranges, strawberries, celery, whatever caught my eye. The total came to $14. When I bought cheap pop, nacho chips, pies, ground beef, and macaroni my grocery bill came to $22.
You can see by the prices that this was a long time ago. But the principle remains true, it is actually cheaper to buy good food than junk food.
The reality is that unprocessed food is far, far cheaper. Folks are just too lazy to cook or even learn how.
The Fed exists to help Wall St and other Western central banks. Period.
Forget all that bull shit about 'the Fed's dual mandate'... cause it's just bull shit.
To the Fed, the citizens of the US are simply chunks of meat... and the US Main St economy doesn't mean shit to the Fed unless the population gets hungry and threatens the Fed's monopoly on money.
...and, every PHD economist that has wasted money while being indoctrinated into believing the 'bull shit dual mandate' of the Fed is totally out of touch with reality.
I wanted to weigh how many $100 bill are in one ounce of GOLD bar but have no $bills left to do that.
Each $100 US bill weighs 1 gram.
There are 31.1035 grams per troy ounce.
You would need a little more than 31 $100 bills to equal the weight of a 1 oz. gold bar.
Seems about right to me.
IRS.gov Stormtrooper: Let me see your gold.
Gold-B(ug)-Wan: [with a small wave of his hand] You don't need to see his gold.
IRS.gov Stormtrooper: We don't need to see his gold.
Gold-B(ug)-Wan: These aren't the barbarous relics you're looking for.
IRS.gov Stormtrooper: These aren't the barbarous relics we're looking for.
Gold-B(ug)-Wan: He can go about his business.
IRS.gov Stormtrooper: You can go about your business.
Gold-B(ug)-Wan: Move along.
IRS.gov Stormtrooper: Move along... move along.
The 40-year gold price chart scares the hell out of me. It looks parabolic and looks set for a mighty fall. Having said that I have an ETF Gold investment. It's an ETF because it's held in my UK SIPP (401K - equivalent).
I have tried to comprehend how heavy/light an ounce is. The best I could come up with is the weight of one Weetabix. Those who are familiar with a weetabix (http://en.wikipedia.org/wiki/Weetabix) will know that they are very light, just 18.75 grammes or 0.6614 ounces.
Using the gold price fix of the 19th January 2012 this is what one weetabix would be worth if it was gold:
$1100
£712
€661
Now that scares the hell out of me even more. Arrghhhhh!!!
The price of gold, real money, doubling in 30 years while the money supply created via the national debt is up 37 fold scares you? You must be really freaked out looking at the stock market which is up 20 fold since 1980.
It's a lot more than doubled.
I'm not making any comparison to your national debt or money supply or stock market but simply making a light hearted analogy of the gold price versus a Weetabix.
I'm sure I'm not the only person who has never had an ounce of gold in my palm.
So 800 to 1600 isn't a double?
Price on Jan 19th 1982 $375
Price on Jan 19th 2012 $1664
No that isn't double, it's a lot more. Try getting your facts even a little bit right.
LOL. I didn't say thirty years from today. Dude. Get your facts straight. Man how did you fall into that trap after such a wicked burn you thought you laid on me by not addressing the issue?
But this isn't' about facts and reality for you is it? The fact is gold is only a double while the money the US governrnent borrowed into existance is up around 37 fold. That is the issue that you need to address instead trying to score a rhetorical win that you couldn't even pull off.
+1
He swung and missed at your correct observation...
Oh I apologise. When you said "doubling in 30 years" I stupidly thought you meant 30 years.
My mistake.
My facts are right, yours are wrong. You really are a dickhead.
Nice try. Gold and silver are severely undervalued by numerous measures. Get a clue and come back with something better than this bullshit.
An ounce of gold is an ounce of gold.
Don't think in terms of 'dollars per ounce' as it leads people astray. Dollar is meant to be the measure of all things but it isn't a measurement of anything real.
An ounce is a measurement. A gram, a liter, a joule, a Sievert a millimeter. All of these are measurements. Time can be measured and value can be judged outside the demands (which is what they are, a form of indebtedness) of money.
An ounce of gold can be exchanged for what? A house, a yacht? A half-year's labor of a carpenter? What is a small silver coin such as an old dime worth? A meal in a restaurant? A gallon of diesel fuel?
Now your thinking! Forget that dollar or be enslaved to it.
The going rate for a Roman legionnaire was one Denarius a day. Now the Denarius started out at 6.8 grams, so for that amount of silver you could buy the services of one bad ass. Let's see in terms of today that would amount to 7 dollars. Me thinks silver is under valued! Of course the 6.8 grams over time turned into nothing because debasement has always been a trick of the rulers. Eventually the Denarius was changed to copper and soon after Rome ceased to exist.
Oh yes and after the 9th Legion got wiped out and the Senate saw what it will cost to replace it with citizens from the villages all around, they did not want to pay it.
If our Carrier or Carriers are lost in war, it will be 10 years or more before they are replace, provided Norfolk survives.
Just to point out regular grunts were pretty much slaves that were happy to get paid at all. Their silver didn't get them very far in life but to have a place to live and some entertainment...if they lived for very long that is. Seems like the "minimum wage" crowd today working to get nowhere.
That's 5% compounded. Nice, but not out of control. CPI (I know, I know) went from 94.3 to 225.672, or 3.0% compounded.
What was the fiat price of a single Weetabix ten years ago?
666 cornflakes.
Well, from what I can tell...2.40-2.70 a box for Weetabits. With 600 boxes of Weetabits (in trade for one coin) you're pretty much set for life.
If you don't mind stale Weetabits toward the end of it ;-)
All kidding aside, what drove you to make a fiat price comparison instead of a value comparison?
Because it was easy and at todays date and prices it is accurate :O)
I don't think I emphasised properly that I was trying to get the feel of what one ounce in the hand feels like. I used a weetabix because it is quite large and not dense. It was more fun too than say the weight of a coin.
And to emphasise why my money is in an ETF rather than physical, it is because you cannot have physical gold in a UK pension, well not a pension available to ordinary folks. Much like the restriction on a 401K unable to have physical gold in it?
For the record: You can buy a box of 36 Weetabix for 99 pence ($1.53) in the UK, but it's the equivalent of an OEM, the branded label is £2/24.
Cheers nmewn :O)
"Much like the restriction on a 401K unable to have physical gold in it?"
Very much so, even if they offered it to me I would not have it there. As we have seen, its not "really" yours unless you possess it.
Much better to have a noble cruise ship captain hold it ;-)
"For the record: You can buy a box of 36 Weetabix for 99 pence ($1.53) in the UK, but it's the equivalent of an OEM, the branded label is £2/24."
Thats more than enough Weetabits for me...lol.
Regards to you sir.
You actually can hold hard assets such as gold or real estate in a self-directed IRA in the US.
http://www.zacks.com/commentary/10121/How+To+Put+Gold+Into+Your+IRA
"You actually can hold hard assets such as gold or real estate in a self-directed IRA in the US."
......................................
Not without counter party risk. See MF Global for details.
No thanks.
We got out of the IRa, 401k's and any employer benefits. Zip, zero nada.
They warned us, begged us, pleaded with us, said they are working on a match etc etc etc
And finally just changed the employee rule book one day to state that all redemptions over 5000 dollars will be converted into Annuity.
And we have the Government pulling on the money stashed by it's own workers now? No thanks.
The penalties that year hurt, we got raped without a lube. But even that heals with time.
I guess when you don't have custody of your investment, and look to charts for comfort instead of the physical metal, scared seems a normal response.
Weetabix? You may want to fondle the real thing. Breakfast cereal has to many fillers. I assure you a gold coin doesn't.
Well if you'll kindly lend me an ounce I'll gladly fondle it.
Me? Are you kidding? I don't own any gold!!! I gifted it all out at Christmas.
I entrusted all mine to a cruise ship captain...someone honorable and beyond reproach!!!
Good choice eh? ;-)
Nice one! It's a bit suspicious how he tripped into a lifeboat though, probably weighed down with your stash!
At least you have the insurance claim to fall back on ;O)
lol...there is no end to the ways paper and its fine print can fool you ;-)
Blast that Purser and his practical jokes! He tied the Captain's shoelaces together...
I had a friend, Shelley, who entrusted her gold to a Reverend during her cruise. The Reverend came back but she didn't. Go figure. He gave some lame story about the ship capsizing, and her having a heart attack after bravely saving him. I been chasing the bastard ever since. All most finished him off in Islamorada the other day with my pickup!!
I'm thinkin, leave a trail of Weetabits to lure him into your lair ;-)
ROTFL
I am just lucky I gifted all my gold. You know how easy it is to mistakenly interchange them due to weight similarities. Being as thoughtless as I am, I would probably mix them up.
Gambling Debts.
Never get drunk then play cards.
Tyranny is Love... "gambling debts"...
Ah, very interesting this bit... While winnings in gaming must be reported as income and are taxed, losses cannot be deducted from other income.
Nice bit of info to keep in mind. Pick up all those old losing lottery tickets you see lying around... along with race track tickets, etc. After a while you will have proof that you lost all your possessions while gambling but could not claim the losses.
Even better than the boating accident story.
The Indian Nations have used Gambling as a means to collect money from the sheep and raise up towns, cities and eventually a united Nation state within our own USA.
Pretty cute way of getting off the reservation eh?
Me too. That's my story and I'm sticking to it...
/wink wink, nudge
The 40-year gold price chart scares the hell out of me
You are looking at the wrong chart. The one to look at is the gold chart overlaid with the US debt chart. They correlate very well. And does anyone think that debt is going to stop growing anytime soon?
I'm bullish on gold (and silver) for two reasons: 1) Debt. 2) Oil. If you look at how the western world has come to rely on debt to maintain our standard of living (beginning in the 1980s and steadily increasing), you come to realize we are in an insolvency countdown. Iceland, Ireland, Greece... the dominos are falling and will continue to fall. Eventually the US and Japan will reach their writedowns, and perhaps defaults.
Next, oil is steadily becoming the elephant in the room that nearly everyone is ignoring. I hear high 5's from everyone on Bloomberg lately about the markets, but it is a short term illusion. In the background, oil is steadily shrinking in supply, especially the export market. The amount of crude oil available for export is not growing, instead it it shrinking. We are offsetting this with Natgas, but it is just a matter of time before we have a severe energy crisis and energy shortages because of the declines in crude oil exports.
Here is a link to a chart of World Oil Exports. We peaked in 2005 and are down about 2 mbd.
http://www.theoildrum.com/files/WOE%5B02%5D_September2008.png
If oil is a shrinking commodity, can the US economy grow? And if we can't grow, can the debt be paid back? It seems pretty obvious to me: buy gold and silver related assets.
www.goldsilverdata.com
I'm invested in silver too and am about to triple my holding :O)
So why don't you buy an ounce of silver and fondle that? Do it now before you're unable to.
Newager 23... Excellent observations.
In addition we should keep in mind that the country/countries that can produce and export the most product from a bbl of crude oil will be the eventual winners in the world trade game.
Labor wages, somewhat like home prices, are 'sticky'. It takes quite a long time for a nation that has/had a vibrant middle class to readjust to living like a normal family in a average emerging market village.
Which all makes for a long period of extreme price swings, radical banking experiments, price controls, excise taxes, import restrictions and duties, wars, etc.
Sound familiar?
What me likes about gold-bugs is the stubbornness and stamina to twist any news in one direction aka stock market goes down - OHHHHH......the free funds are sloshing about - time to buy Gold/Silver as the money would be parked in PM, stock market goes up - AHHHHHHH....this is a sign of inflation- time to load on Gold/Silver as the market so SURE about to crash, Oil production is falling - UHHHHH..time to buy Gold/Silver - not couple barrels of crude? You sure? It's black and shiny and so soon to be high in price? Gold price falling - buy a dip, Gold price sky rocketing - load some Gold it's just about to blow higher.
For those who is keeping Gold/Silver for emergency aka hyperinflation scenario I am afraid to disappoint you. Accordingly to my personal experience living in Soviet Union in 90s ( having it all, fiat collapse, hyperinflation, US dollar as a black market currency) gold trading moved very soon under criminal hand. There was a chance to sell a wedding rind 14 -18 K for a 60% of scrap value, but oh boy if you would turn about with the 1 OZ 24K pure stuff chance to get home alive and with the money or gold was about zero. Silver - nobody was interested at all. In most difficult times where after initial blow off in hyperinflation and following hoarding and shortages the most common medium of exchange was Vodka, canned meet (Tushonka), condensed milk (Sgyschenka), cigarettes (Kurevo), petrol/diesel measured in Jerry cans.
I had a chat with a guy from Argentina (memories exchange) he has reconfirmed gold in pure form as coins or bars was useless in Argentinian hyperinflation or currency collapse. After all staff on his must have List, the gold is about last item and he would rather have a bag of cheap rings (wedding rings are ideal - don't cost much to make plus all look the same).
For those who wants to preserve the value for time to come. Invest in sustainable ways of life, knowledge and self-education, people around you (community).
If the economy was an internal combustion engine gold would be the exhaust and as exhaust it seems to have a power, temperature and pressure but is only a useless byproduct.
Just to consider in 2011 median price of gold extraction was about 620 USD where the average gold price was about 1340 USD if you would follow the curve of extraction cost increase in USD that will give you an idea about inflation( or so I would think considering raw materials, energy and labor involved in extraction) however the curve of gold price increase is much steeper which in my humble opinion is a struggle of the unflexible gold mining output to catch up with temporary increasing demand - the demand is apriory temporary as gold has no use in industrial terms (or let say very little ).
As a speculative asset I would agree Gold and even more Silver do have a huge potentials ahead but as a matter of survival I don't think so.....
While I value your observations on the hyperinflation and currency collapse(s) you experienced in the Soviet Union, I think it is ignorant in the extreme to blithely claim that gold and silver are "worthless" in such scenarios, for several reasons.
For one thing, holding gold and silver bullion had been ILLEGAL and prohibited in the Soviet Union in the first place, so naturally very few people had any significant amount to trade or sell to begin with. However, most if not all political jurisdictions today allow the private possession of gold and silver, so the precious metals are much more widely spread and owned than they were in the USSR. Also, given the effective Soviet prohibition on owning gold and silver, there was no network of precious metals dealers or even a knowledge base to support such a network, but that is NOT the case in most countries today.
For another thing, it always seems to be the average person, fundamentally ignorant of gold and silver (such as you appear to be, or have been) who stupidly claims that gold and silver are "worthless" --- the old "you can't eat it" argument being a classic example of that. However, just because YOU are ignorant of gold and silver, and their trading possibilities, does not automatically mean that EVERYONE ELSE is in the same ignorant state. Are gold and silver "worthless" in the USA today merely because the average (utterly ignorant) person would not know what to do with them in a time of crisis, or whom to turn to in order to buy and sell them, or how to even find the spot prices of gold or silver, or knows that a spot price even exists, or understands ANYTHING about trading precious metals under any circumstances at all?
I do not happen to know anything at all about buying, selling or holding commodities futures, nor do most people, I think it is safe to say --- are they therefore automatically "worthless"?
Also, your guy in Argentina (Ferfal) has admitted that he knew NOTHING about gold and silver bullion, or trading precious metals, before or during the financial and monetary crisis there in 2001-2002, and only mentioned the trading of gold rings because he had happened to observe it firsthand. Naturally he would NOT have been witnessing the higher-level, more informed buying and selling of gold or silver bullion in the informal markets which sprang up in Argentina post-collapse --- just as one would not expect to buy or sell diamonds or fine wines in a flea market. To claim that "gold and silver were worthless" merely because one is ignorant of the established dealers or networks dealing with them is to display an embarrassing level of not just ignorance, but outright stupidity.
It's scary because the chart is in nominal terms. Adjusted for inflation it's not quite so bad. We are in phase two of the gold bull market... timing for phase three will be critical if you hold gold.
This is an excellent report, overall IMO... more conservatively realistic and less sensational than 90% of the gold bug crap you read online
Thanks for that, I hadn't considered that the chart wasn't adjusted for inflation, that makes it much less scary :O)
"We are in phase two of the gold bull market... timing for phase three will be critical if you hold gold."
.................................
...and, you figured out what 'phase of the gold bull mkt we are in' by what method?
Crystal ball? You know the Oracle of Delphi? You had a vision?
Truth is, no one knows if we are in a 'phase' of a gold bull mkt or if gold is going to rise to some new, very high plateau and remain there.
Unless a new commodities backed currency is introduced and people believe that central bankers will not devalue this new currency gold could continue to climb indefinitely against the current crop of fiat currencies. This is a fact that few of the 'old time' gold bugs fail to realize. The 'old time' gold bugs are really thinking too small when they estimate the possibilities of price rises in gold vs fiats that are being printed beyond belief.
Got physical PMs?
Well said Snidley. Some here are thinking way too small...and then criticizing those who don't.
Measure gold against cereal as trillions are being printed? WTF?
how about aapl from 90 to 430 in 2.5 years
"The 40-year gold price chart scares the hell out of me"
adjust it for inflation. real inflation, not bullshit cpi changed since 1980. see shadowstats.com for the real inflation data.
This report somehow presented here as a confirmation of hyperbullish views on gold price promoted on this website. In reality
(see p. 11) the report suggests that the Gold price peaks around 2000 US per ounce in 2013 and then go down to around 1300
level. This forecast definitely does not fit the Armaggedon picture portrayed over here by various (false) homegrown prophets... but seems pretty realistic to me...
Gold is not a commodity, it IS money.
In case you didn;t get that, I shall repeat:
Gold is not a commodity, it IS money.
You're right. The report has this to say:
"Our gold price forecasts remain near 2012 consensus at USD 1,788/oz, and slightly above 2013 consensus at USD 2,063/oz. Importantly for the gold equities, we expect the gold price to stay above 2010 levels through 2015 and expect long-term equilibrium prices of USD 1,200/oz".
Some people seem to think I'm anti gold because of my weetabix analogy above. They don't seem to comprehend that I am invested in gold.
This really puzzles me. If they expect 'long term' prices of USD ~1,200 toz, the 'real' inflation adjusted price must be alot lower (what do you think actual $ inflation will be 10 years from now as compared with its buying power today?)
I'll guess - (barring a hyperinflationary event) let's say 6-9% pa - that's an effective halving of ~1,200 USD real value to $600 (or less) after/around 2020
Do they think the P.A.G.E. & Chinese/Indian gold buyers will stil value the $ so highly over their gold with such a reduced buying power? Do they think the US & other declining Western economies will have so grown GDP & paid back debt (in a world with 'cheap' oil of course!) that the US$ & nu-euro will represent such value as to make the 'barbarous relic' obsolete as real money?
- which at $600 per toz (inflation aadjusted to today's price) would be barely worth mining @ extraction cost.
Nonsense in my view. Latching on to a near/medium price of ~$2000 is easy - I could do that, it's the conclusion (and implications) long term that look daft to me, with all due respect.
"Some people seem to think I'm anti gold because of my weetabix analogy above."
..................................
I think you are simply one more troll on this site...and, your weetabix analogy has nothing to do with my conclusion.
The only reason that citizens around the world use their government's fiat currencies is that they are forced to use them.
The only reason that the prices of all commodities has not risen sky high is that all commodities mkts are manipulated by paper commodities mkts.
The manipulation of commodities is in it's death throes and is being destroyed by the transfer of PMs from West to East. Once the West cannot meet physical delivery (see MF Global), the jig is up for the paper traders.
New commodities exchanges are being set up right now in the East and will be available as competitors to the Crimex and London scams.
Take your trolling ass into your bosses office and take a copy of this response with you.
World War I and its associated pressures on government expenditures saw the gold standard end when major European countries halted the convertibility of their currencies into gold.
I don't think they've established the correct causal relationship...
who are nomura's counterparties?
Hmm. Good question.
OT, watched Rollover tonight, this was the top link on the sidebar:
http://www.youtube.com/watch?v=NOzR3UAyXao&feature=related
Only 3 minutes, well worth it.