Tuesday, September 20, 2011

Gold Fundamentals Strong

Gold was down 2% last night. Gold is trading in a narrow range between $1770 and $1820. Apparently this is completely normal and it is no sign of weakness. With all that is going on in Greece and Europe, let alone the US, the fundamentals for gold are good.

Here's the first reason. If you take the money base of the US and divide it into their gold reserves, then gold could conceivably be around $10,000 per ounce, easily.

Remember gold is just a hunk of metal, it has as much value as people put in it, like sea shells or cows. It may just be a nice looking door stopper after all said and done. But tell that to all cultures with their combined monetary history over the last 5000 years. They have all eventually accepted gold and silver as being the best value preservers for their labor. (See at the base of this blog for other reeasons why gold and silver are considered best.)

Inflation is also a pointer to higher gold and silver prices. Inflation is around 3% in the US and around 5% in New Zealand. You may be old enough to remember the panic that such high inflation rates caused in the 1970s when President Nixon brought in wage and price controls to suppress it. Now the reverse is true. The Federal Reserve is printing money in a high inflation environment, like a drunken sailor. Eventually this inflated money supply will show up in the price levels that you and I pay at the supermarket or gas station. This is bullish for the price of gold. Inflation is not going away anytime soon.

And let's not forget, that all major Central Banks have promised 'unlimited' funding for European Banks!

This from The Daily Reckoning today:
"But it is what it is. We have to live (for now) with the Fed and the ECB and their dogged determination to persist living in an alternate monetary reality. To be sure, the markets have already spoken about Europe's financial and monetary reality. Greek default is almost 100% certain according to credit default swap markets. And the fact that US money market funds won't lend to European banks at the moment is another market reality.  
Yet Europe and the Fed keep doubling down on the basic premise that more debt is the solution to a solvency problem. We reckon they have two more chances to recapture the confidence of the market. If they don't, they will have to borrow money from China and post central bank gold as collateral."

As far as purchasing precious metals go, if you wait to buy on dips, then perhaps you shouldn't wait too long. Yes, gold could correct still to $1600 and below, but it simply cannot, bar a bit of Central Bank selling of paper gold, go down for too long. The fundamentals, that is the real base reasons that things go up or down, firmly point to gold and silver prices much higher than present.

(Note you can purchase physical gold and silver here on my website)

We are in a highly volatile worldwide economic situation. Where would you like to 'safe harbor' your wealth in a situation like this?

Gold in New Zealand dollars: $2176.03 per oz
Previous all time high: $2284.16 per oz (19 Aug, 2011)

Silver in New Zealand dollars: $48.43 per oz
Previous all time high: $59.19
per oz (30 Apr, 2011)

The Anglo-Far East Company
The Original Private Gold and Silver Bullion Custodian
Your reference: an-001

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