|
|
| *Ostroff, Fair and Company>>>Investing |
Do you think gold is dead like a lot of people have said this weekend if it can't break 700 it's down to 550?? |
what will that do to silver? This is not an easy question to answer. The problem is that the price of gold is set by psychological factors more than anything else. Indeed $700 is a resistance level psychologically speaking. If it does break through it is very likely to continue for a ways. Now, fundamentally what might cause this to occur or might cause the price to drop? Here are a couple of factors to watch. cause the price to drop: 1. change in the situation in Iraq for the better. 2. rise in interest rates (gold becomes less advantageous) 3. U S government raises taxes in order to balance the budget. (the dollar then becomes a stronger currency) 4. price of oil drops by $10 a barrel (a psychological factor). 5. balance of trade deficit drops dramatically (fat chance of that happening). 6. major oil discovery outside of Opec. (again psychological) cause price to break through $700. 1. U S bombs Iran. 2. price of oil goes to $90 a barrel. 3. Nigeria breaks out into total conflict. 4. Iraq situation gets worse and worse 5. Putin flexes his muscles 6. China stops buying U S government paper. 7. This next one I am not too sure what the ramifications might be but an increase in gold is a possibility as is also a drop in the price. The housing market completely collapses and mortgage defaults cause a major economic collapse in the U S. People might flock to gold for safety as the government churns out dollar bills and drops interest rates to zero and causes the worse stagflation since Billy Carter became a celebraty. Or the collapse might bring down the price of gold as people liquidate the holdings to put bread on the table or to buy a tent to sleep in. Let's hope the over inflated prices of all metals drops!!! Not likely but if it ever does I can do my street with style in yellow bricks. Despite the hype, gold has NEVER been a smart place to invest money. Even as a hedge against financial collapse, it is basically useless; if there were ever another "Great Depression", you'd want cans of tuna fish and bottled water, not gold bars! I doubt it. I am sure you will like the following link http://www.resourceinvestor.com/pebble.a... Below is an excerpt Gold Commentary RESOURCE INVESTOR: You have been saying that gold will test the old highs of $850 probably in the next couple of years, (BMO 鈥?Commodities Conference) but did you also say that you think that gold will be going well beyond that figure by 2010? ROB McEWEN: Yes, I think it鈥檚 fair to say that you could have a lot more people crowding around the gold market than are there today. The move we have seen in the gold market was first driven by the U.S. audience when they saw gold going up in dollar terms, but the other currencies really didn鈥檛 see that. Since the start of 2005, however, gold has been moving up in all major currencies and people are now saying, 鈥淚 should have some gold in my portfolio.鈥?When that number becomes large, you have an industry that is consolidating, annual production that is decreasing, and the cost of production that is going up. So, there is less gold being produced, it鈥檚 costing more to produce it and there are more people coming into the market wanting to buy it. RESOURCE INVESTOR: Previous bull markets for gold were driven by speculation and actual physical gold demand. In the 1970鈥檚 and 80鈥檚, for example, individuals had to actually take delivery of gold in order to invest in it, or arrange for secure storage for a fee. With the advent of the new gold ETFs, do you see the potential for many more investors to participate in this gold bull? ROB McEWEN: Definitely. RESOURCE INVESTOR: Is it correct to say that you have not been a big fan of the World Gold Council in the past? You have called them 鈥渢he home of the hedgers鈥?among other things. Now that they have sponsored most of the new gold ETFs and increased the focus on gold as an investment has that changed your views any? ROB McEWEN: No. I believe the ETFs have exceeded all of their expectations, that they were created to sop up some of the demand but not to cause gold to go to the sky because you have to remember, as you pointed out, most of the people who are members of the World Gold Council were hedgers and remain hedgers. So there would be little interest in seeing the gold price going up $50 or $100 or $200 above their hedge book because that annual production fee they are charged (for membership) would be a very expensive initiation for a hedge book getting off side by a billion dollars. As is the case of Barrick [NYSE:ABX; TSX:ABX], which is off side more than a billion dollars. So you look at that and just go, 鈥榓lright, why would you want the gold price to go way up there?鈥?鈥?I think what they have created is a wonderful vehicle 鈥?I won鈥檛 take that away from them, but I think it鈥檚 eating them for lunch right now. |
| Tags |
| Renting & Real Estate Personal Finance Investing Insurance Credit |
Finance Categories--Copyright/IP Policy--Contact Webmaster |