Gold has steadily advanced over the last 60 days from $1,600 to this morning’s $1,767. Which is making some people a little nervous.
For instance: “Can you comment,” a reader asks, “on what you think might happen to the price of gold if Romney gets elected?”
We’ll answer that question today in the course of examining some longer-term trends that will prove immune to whatever happens [checking the calendar] 25 days from now [thank God].
One of the most respected gold fund managers sees gold reaching for a new high inside the next 12 months.
In his latest shareholder letter, Tocqueville Gold Fund chieftain John Hathaway bases that forecast on continued negative real interest rates: That is, as long as central banks push interest rates below the rate of inflation, gold performs well.
“Some suggest,” Hathaway writes by way of answering the reader’s question, “that a Republican victory in November would be a game changer for gold. It could bring about the dismissal of Bernanke, the taming of fiscal deficits, the painless elimination of excess liquidity from bloated central bank balance sheets and the restoration of robust economic growth.”
[Pausing while your editor guffaws…]
“All of this,” Mr. Hathaway goes on, “would need to occur within the four years allotted to a new administration while voters patiently awaited the magic to take effect. While this rosy scenario is possible, we believe it would be a long shot.
“Therefore, we regard any possible pre-election weakness in gold and mining stocks based on such a possibility as a buying opportunity.”
A few mainstream analysts, believe it or not, are one-upping Mr. Hathaway.
Bank of America Merrill Lynch has assembled an intriguing chart tracking the expansion of the Federal Reserve’s balance sheet going back to the first round of “quantitative easing” in early 2009… and the price of gold. The chart yields a target both for next summer and the end of 2014.
Those numbers might prove conservative. “This target doesn’t take the love trade into consideration,” writes Vancouver favorite and U.S. Global Investors head Frank Holmes, who brought the chart to our attention.
The “love trade” is his term for the centuries-long affinity that Chinese and Indians have had for gold, in contrast to the Western-minded “fear trade.”
In recent months, Indian demand has slumped as the local currency weakened, driving the rupee price of gold to all-time highs. Now that trend is starting to reverse: The exchange rate is now back where it was six months ago, and UBS reports Indian gold demand at a five-month high.
“In addition,” says Mr. Holmes, “Diwali will be celebrated in November. The Festival of Lights is India’s biggest and most important holiday of the year and is celebrated by almost 1 billion Hindus around the world. Traditionally, on the first day of Diwali, it is considered auspicious to clean the home and shop for gold.”
And what of China, the other emerging-market driver of gold demand?
China’s gold imports via Hong Kong — an imperfect measure, but it’s as transparent as the Chinese get about these things — fell 29% between July and August. But it’s the year-over-year trend that matters… and at 53.5 metric tons, it’s up 22%.
Another way to look at it: In the first eight months of this year, China has imported 512 metric tons of gold — more than the total for all of last year, 428.
“What’s happening in precious metals,” says Gary Dugan, “is that they are becoming more mainstream.”
Mr. Dugan is the chief investment officer for Asia and the Middle East at Coutts — the private banking arm of the Royal Bank of Scotland.
Ten years ago, investors rarely held any gold in their portfolios. Now, he tells Reuters, “We are going back to normality, and the normality is that precious metals are the core part of your portfolio.
“Some of the clients ask where gold prices are going, and I say don’t even think about prices. It’s a store of value.” Music to our ears…
Here’s another way to look at how Fed action is driving gold: It’s called the gold coverage ratio.
It measures the amount of gold on deposit at the Fed against the total money supply. “This ratio,” writes Guggenheim Partners chief investment officer Scott Minerd, “tends to move dramatically and falls during periods of disinflation or relative price stability.”
You might not think we’re living in a period of “relative price stability”, but we’ll take Mr. Minerd at face value: The gold coverage ratio is currently at an all-time low of 17%… yielding two tantalizing possibilities.
“The historical average for the gold coverage ratio,” Minerd writes, “is roughly 40%, meaning that the current price of gold would have to more than double to reach the average.”
It gets better: “The gold coverage ratio has risen above 100% twice during 20th century,” most recently at gold’s 1980 peak. “Were this to happen today, the value of an ounce of gold would exceed $12,000.”
Addison Wiggin is the executive publisher of Agora Financial, LLC, a fiercely independent economic forecasting and financial research firm. He's the creator and editorial director of Agora Financial's daily 5 Min. Forecast and editorial director of The Daily Reckoning. Wiggin is the founder of Agora Entertainment, executive producer and co-writer of I.O.U.S.A., which was nominated for the Grand Jury Prize at the 2008 Sundance Film Festival, the 2009 Critics Choice Award for Best Documentary Feature, and was also shortlisted for a 2009 Academy Award. He is the author of the companion book of the film I.O.U.S.A.and his second edition of The Demise of the Dollar, and Why it's Even Better for Your Investments was just fully revised and updated. Wiggin is a three-time New York Times best-selling author whose work has been recognized by The New York Times Magazine, The Economist, Worth, The New York Times, The Washington Post as well as major network news programs. He also co-authored international bestsellers Financial Reckoning Day and Empire of Debt with Bill Bonner.
Pingback: medicine Joshua Jacobi()
Pingback: the walking dead video game()
Pingback: jazda konna()
Pingback: Surveys For Money()
Pingback: come fare soldi facili()
Pingback: how to make mobile apps()
Pingback: free tips on how to win the lottery read the full guide()
Pingback: Flyer erstellen()
Pingback: windshield repair atlanta()
Pingback: reverse shoulder replacement()
Pingback: online casino()
Pingback: find people for free()
Pingback: Samsung Galaxy S3()
Pingback: buy ageless male()
Pingback: coal miner song()
Pingback: Carl Grimes()
Pingback: epromos marketing products()
Pingback: visit website()
Pingback: lotro power leveling()
Pingback: click here()
Pingback: meine Website()
Pingback: my website()
Pingback: rs 2007 power leveling()
Pingback: RaiderZ GP()
Pingback: view more()
Pingback: runescape 3 gold()
Pingback: tsw power leveling()
Pingback: affiliate marketing()
Pingback: Click At this website()
Pingback: click the following internet site()
Pingback: click through the next post()
Pingback: Look At This()
Pingback: resource for this article()
Pingback: simply click the following internet page()
Pingback: simply click the next web page()
Pingback: simply click the up coming website page()
Pingback: This Web site()
Pingback: visit the next post()
Pingback: related webpage()
Pingback: similar site()
Pingback: please click the following webpage()
Pingback: helpful hints()
Pingback: Recommended Internet site()
Pingback: supplemental resources()
Pingback: This Internet site()
Pingback: Suggested Looking at()
Pingback: click the following page()
Pingback: click through the up coming article()
Pingback: Full Article()
Pingback: mouse click the following web site()
Pingback: just click the up coming internet page()
Pingback: Elder Scrolls Online Power Leveling()
Pingback: mouse click the next web page()
Pingback: Going at()
Pingback: More Info()
Pingback: simply click the following webpage()
Pingback: mouse click the up coming post()
Pingback: click the up coming website page()
Pingback: Extra resources()
Pingback: related web site()
Pingback: click through the following article()
Pingback: Full Record()
Pingback: Recommended Resource site()
Pingback: Suggested Webpage()
Pingback: relevant site()
Pingback: mouse click the up coming article()
Pingback: simply click the next internet page()
Pingback: path of exile power leveli()
Pingback: just click the up coming website()
Pingback: mouse click the up coming webpage()
Pingback: just click the following internet site()
Pingback: Suggested Browsing()
Pingback: please click the next web page()
Pingback: Read Significantly more()
Pingback: related resource site()
Pingback: relevant webpage()
Pingback: simply click the following page()
Pingback: Read Far more()
Pingback: visit the following website page()
Pingback: Go Here()
Pingback: helpful resources()
Pingback: please click the following article()
Pingback: Recommended Online site()
Pingback: This Site()
Pingback: visit the next website()
Pingback: More about the author()
Pingback: similar resource site()
Pingback: eq2 power leveling()
Pingback: the secret world power leveling()
Pingback: klicken Sie hier()
Pingback: archeage power leveling()
Pingback: neverwinter power leveling()
Pingback: èˆžç¿”ä¼ è‚²æˆä»£è¡Œ()
Pingback: wow gold()
Pingback: PSO2 è‚²æˆä»£è¡Œ()
Pingback: TERA è‚²æˆä»£è¡Œ()
Pingback: Wizardry è‚²æˆä»£è¡Œ()
Pingback: FF14 è‚²æˆä»£è¡Œ()
Pingback: Diablo 3 è‚²æˆä»£è¡Œ()
Pingback: wow power leveling eu()
Pingback: ãƒ©ã‚°ãƒŠãƒã‚¯ã‚ªãƒ³ãƒ©ã‚¤ãƒ³ è‚²æˆä»£è¡Œ()
Pingback: ã‚¢ãƒ©ãƒ‰æˆ¦è¨˜ è‚²æˆä»£è¡Œ()
Pingback: ãƒ¬ã‚¸ã‚§ãƒ³ãƒ‰ ã‚ªãƒ– ã‚½ã‚¦ãƒ«ã‚º è‚²æˆä»£è¡Œ()
Pingback: ä¿¡é•·ã®é‡Žæœ› è‚²æˆä»£è¡Œ()
Pingback: diablo 3 power leveling()
Pingback: ãƒ©ã‚¹ãƒ†ã‚£ãƒãƒ¼ãƒ„ è‚²æˆä»£è¡Œ()
Pingback: How To Buy diablo 3 Power Leveling?()
Pingback: MHF è‚²æˆä»£è¡Œ()
Pingback: guild wars 2 power leveling()
Pingback: ArcheAge è‚²æˆä»£è¡Œ()
Pingback: ï»¿çœŸãƒ»ä¸‰åœ‹ç„¡åŒ è‚²æˆä»£è¡Œ()
Pingback: Diablo 3 RMT()
Pingback: ãƒ‰ãƒ©ã‚´ãƒ³ã‚¯ã‚¨ã‚¹ãƒˆX è‚²æˆä»£è¡Œ()
Pingback: FFXIV è‚²æˆä»£è¡Œ()
Pingback: FF14 ã‚®ãƒ«()
Pingback: æˆ¦å›½ixa è‚²æˆä»£è¡Œ()
Pingback: World of Tanks Power Leveling()
Pingback: FF11 ã‚®ãƒ«()
Pingback: ãƒ‰ãƒ©ã‚´ãƒ³ãƒã‚¹ãƒˆ RMT()
Pingback: ãƒ©ã‚°ãƒŠãƒã‚¯ã‚ªãƒ³ãƒ©ã‚¤ãƒ³ RMT()
Pingback: ä¿¡é•·ã®é‡Žæœ› è²«()
Electric cars are proving to be far cheaper to operate than anyone could have guessed. In fact, many people are now just getting the equivalent of thousands of mpg to their electric cars. And that's presenting a unique profit opportunity. Stephen Petranek explains...
The world's most successful investors almost always think differently. That's nowhere more apparent than when you're trying to invest in health care. Today, Paul Mampilly - one of the world's top biotech analysts - reveals one "secret" for making money from a predictable cycle in the industry. Read on...
America's shale boom shows no signs of slowing...and there's still massive profit potential in U.S. oilfields. Matt Insley offers an inside look at an exciting opportunity in America's next big shale play…
Right now, the city of Buffalo, NY is covered in five feet of snow. And while that may be bad news for those poor folks, it could be good news for you. Because now that another harsh winter is upon us... you have a massive opportunity for quick double-digit gains. Greg Guenthner explains...
Warning: The following article is not for the puritanical. Today, Chris Campbell shows you three "dirty" health boosters you can use tonight to raise your immune system... improve your outlook on life... and make your partner a happy camper. Read on...
When some event - be it a terror attack, financial panic or natural disaster - upsets the status quo, people are more willing to relinquish their freedom in favor of a greater sense of security. And that's when ambitious political leaders make their move... And as Jim Rickards explains, another such event could be right around the corner. Read on...