Egon von Greyerz of Matterhorn Asset Management lays out his reasons for investing in physical gold. You may or may not accept his argument, but his analysis of worldwide economic problems is deeply troubling.
Whether or not gold is the right prescription, I am very much afraid that he may be making the right diagnosis and prognosis. Do have a look.
DISCLAIMER: Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog.
Showing posts with label Gold & Silver. Show all posts
Showing posts with label Gold & Silver. Show all posts
Thursday, February 18, 2010
Sunday, January 31, 2010
Gold: NOT a no-brainer choice this time? The Chinese may not agree...
Australian blogger The Contrarian Investor points out differences between now and the 1930s that mean gold is merely another speculative investment, not the sure-fire winner it was then.
Having said that, there is a strong psychological / political / historical / economic strand in gold, and it is significant that central banks are now net purchasers. And China recently announced its intention to increase holdings from 1,000 tonnes to 6 or 10 times that over the next decade, having already boosted them from a level of 600 tonnes in 2003. China is now the world's largest producer of mined gold.
DISCLAIMER: Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog.
Having said that, there is a strong psychological / political / historical / economic strand in gold, and it is significant that central banks are now net purchasers. And China recently announced its intention to increase holdings from 1,000 tonnes to 6 or 10 times that over the next decade, having already boosted them from a level of 600 tonnes in 2003. China is now the world's largest producer of mined gold.
DISCLAIMER: Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog.
Sunday, December 20, 2009
More on gold
During this crisis, we hear more from the "gold bugs" - people who are convinced that most modern currencies will become worthless, because they are "fiat money", i.e. the government can make unlimited amounts of them since they are not related to anything in fixed supply, such as gold (or land, when the Nazis restructured the mark).
One such is an American called Jim Willie. He reminds us of debt problems, not only in the USA and Britain, but Spain, Greece etc. Even Swiss banks are under pressure, because of loans to small European countires whose currencies have since devalued. Willie thinks the Euro will unravel because of the difficulties of a number of its member economies, and that Germany will reintroduce the mark, perhaps under some reassuringly Euro-like pseudonym.
Germany happens to have the world's second-largest official holding of gold - 3,400 tonnes compared to the USA's 8,100 (assuming we are being told the truth about how much the USA actually has in its vaults, and that is a matter of serious debate). This article reports China's ambition to increase its own holding of gold, from around 1,000 tonnes now to perhaps as much as 10,000 tonnes in 10 years' time.
The gold mania is not universal. Writing in the Daily Telegraph, Ambrose Evans-Pritchard predicts that the price of gold will actually fall next year - among other bad things such as the collapse of America's social security pension fund. He may be right. In a panic, people want ready money, so maybe cash will (for a time) be king. But when an economy is in dire straits, its government will do whatever it can to ease the pain, and many think that the strategy will be to increase the money supply, or even introduce a new form of the currency, as has just happened in North Korea.
The attraction of gold is for pessimists. It doesn't earn any interest, so mainly it is seen as a last-resort store of value when the money system breaks down (and it's nice to wear and show off). It is perfectly possible that you could make a loss on gold, but it will never be worth nothing at all, unlike the old US Continentals, or Confederate money after the North won the Civil War. In this context, it's worth noting that Reuters news agency reported back in September that Hong Kong moved its gold reserves out of London and into the gold depository at its Chek Lap Kok international airport. A sign of something, but what?
Gold is not the only tangible store of value, of course. Agricultural land, houses, food, medicines etc all have intrinsic value, i.e. they are worth something because of what they can do for you themselves, not just because they can be exchanged for something else.
Inflation remains a serious long-term threat. Comparing the past and present value of cash is difficult, because the economy has increased in size and changed in nature; but depending on the measure you use and looking at what has happened since 1971 (when I started at college), the British pound has lost 90% - 96% of its buying power. It's still (until April next year) possible to retire at age 50 in this country, so if history repeats itself, you could see a similar devaluation during a long retirement.
In short, it's not about the value of gold, but the unreliability of money.
DISCLAIMER: Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog.
One such is an American called Jim Willie. He reminds us of debt problems, not only in the USA and Britain, but Spain, Greece etc. Even Swiss banks are under pressure, because of loans to small European countires whose currencies have since devalued. Willie thinks the Euro will unravel because of the difficulties of a number of its member economies, and that Germany will reintroduce the mark, perhaps under some reassuringly Euro-like pseudonym.
Germany happens to have the world's second-largest official holding of gold - 3,400 tonnes compared to the USA's 8,100 (assuming we are being told the truth about how much the USA actually has in its vaults, and that is a matter of serious debate). This article reports China's ambition to increase its own holding of gold, from around 1,000 tonnes now to perhaps as much as 10,000 tonnes in 10 years' time.
The gold mania is not universal. Writing in the Daily Telegraph, Ambrose Evans-Pritchard predicts that the price of gold will actually fall next year - among other bad things such as the collapse of America's social security pension fund. He may be right. In a panic, people want ready money, so maybe cash will (for a time) be king. But when an economy is in dire straits, its government will do whatever it can to ease the pain, and many think that the strategy will be to increase the money supply, or even introduce a new form of the currency, as has just happened in North Korea.
The attraction of gold is for pessimists. It doesn't earn any interest, so mainly it is seen as a last-resort store of value when the money system breaks down (and it's nice to wear and show off). It is perfectly possible that you could make a loss on gold, but it will never be worth nothing at all, unlike the old US Continentals, or Confederate money after the North won the Civil War. In this context, it's worth noting that Reuters news agency reported back in September that Hong Kong moved its gold reserves out of London and into the gold depository at its Chek Lap Kok international airport. A sign of something, but what?
Gold is not the only tangible store of value, of course. Agricultural land, houses, food, medicines etc all have intrinsic value, i.e. they are worth something because of what they can do for you themselves, not just because they can be exchanged for something else.
Inflation remains a serious long-term threat. Comparing the past and present value of cash is difficult, because the economy has increased in size and changed in nature; but depending on the measure you use and looking at what has happened since 1971 (when I started at college), the British pound has lost 90% - 96% of its buying power. It's still (until April next year) possible to retire at age 50 in this country, so if history repeats itself, you could see a similar devaluation during a long retirement.
In short, it's not about the value of gold, but the unreliability of money.
DISCLAIMER: Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog.
Thursday, December 17, 2009
The inflation-deflation debate
Sheffield-based analyst Nadeem Walayat demonstrates that, apart from a blip a few months ago, the long-term inflationary trend in prices continues. Whether you look at CPI or RPI (the latter includes mortgage costs), household bills are rising.
He also examines the trend in UK public debt, which again seems to be rising unstoppably. The Chancellor has predicted growth for the UK economy, but that growth is more than paid for by borrowing, so overall we will be worse off. Controversially, Walayat suggests that the motive is political: deliberate damage to the economy in order to leave the next (presumably Conservative) government "scorched earth". We must hope that British governments do not really operate so irresponsibly.
Walayat concludes with a look at some commodities that investors may choose as hedges against inflation: energy (natural gas), gold and silver. He offers some technical comments on fund charges and whether the way the fund invests is likely to track the real progress of the commodity's price. He feels that gold and silver funds correlate better with actual prices in these markets, though he warns that theft and fraud are always possible.
But the readers' comments are worth looking at, too. "Raleigh" points to an estimated $6 trillion reduction in the value of US housing, which more than offsets the recent $1 trillion increase in US government borrowing as a result of the banking crisis. His view, if I understand it correctly, is that such net deflation will put a downward pressure on prices and wages.
DISCLAIMER: Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog.
He also examines the trend in UK public debt, which again seems to be rising unstoppably. The Chancellor has predicted growth for the UK economy, but that growth is more than paid for by borrowing, so overall we will be worse off. Controversially, Walayat suggests that the motive is political: deliberate damage to the economy in order to leave the next (presumably Conservative) government "scorched earth". We must hope that British governments do not really operate so irresponsibly.
Walayat concludes with a look at some commodities that investors may choose as hedges against inflation: energy (natural gas), gold and silver. He offers some technical comments on fund charges and whether the way the fund invests is likely to track the real progress of the commodity's price. He feels that gold and silver funds correlate better with actual prices in these markets, though he warns that theft and fraud are always possible.
But the readers' comments are worth looking at, too. "Raleigh" points to an estimated $6 trillion reduction in the value of US housing, which more than offsets the recent $1 trillion increase in US government borrowing as a result of the banking crisis. His view, if I understand it correctly, is that such net deflation will put a downward pressure on prices and wages.
DISCLAIMER: Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog.
Tuesday, December 15, 2009
Janszen: Gold is not overpriced
"Gold ads bug us from the TV and radio. To the new gold experts this means gold sentiment is now too bullish. We’re due for a crash.
Have they noticed that the gold ads are about selling not buying gold?"
In a long but well-worth-reading article, Eric Janszen of iTulip maintains that despite eight years of rising prices, gold is not undervalued, because the economic system is unstable. He points out that, for the first time in many years, central banks have started to buy gold.
Unlike many commentators, he doesn't support the notion that the dollar will collapse, because other major economies (e.g. China and Japan) have become dependent on the USA to buy their exports. Global inter-linking means that the coming bust will not take the same form as previous ones.
DISCLAIMER: Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog.
Have they noticed that the gold ads are about selling not buying gold?"
In a long but well-worth-reading article, Eric Janszen of iTulip maintains that despite eight years of rising prices, gold is not undervalued, because the economic system is unstable. He points out that, for the first time in many years, central banks have started to buy gold.
Unlike many commentators, he doesn't support the notion that the dollar will collapse, because other major economies (e.g. China and Japan) have become dependent on the USA to buy their exports. Global inter-linking means that the coming bust will not take the same form as previous ones.
DISCLAIMER: Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog.
Tuesday, May 22, 2007
Dollar to rise against the Euro; gold against BOTH
Goldseek.com today gives an extract from Steve Saville's 6 May article in "Speculative Investor", explaining why he thinks the US$ will rise against the Euro - he thinks the latter should depreciate relatively by 20%.
Again, read more closely - Saville says he expects both currencies to drop against gold, it's just that the Euro has further to fall.
All original material is copyright of its author. Fair use permitted. Contact via comment. Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog; or for unintentional error and inaccuracy. The blog author may have, or intend to change, a personal position in any stock or other kind of investment mentioned.
Again, read more closely - Saville says he expects both currencies to drop against gold, it's just that the Euro has further to fall.
All original material is copyright of its author. Fair use permitted. Contact via comment. Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog; or for unintentional error and inaccuracy. The blog author may have, or intend to change, a personal position in any stock or other kind of investment mentioned.
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