<b>Gold</b>: More Than A Real Store Of Value - Recent Evidence [ETFS <b>...</b> |
- <b>Gold</b>: More Than A Real Store Of Value - Recent Evidence [ETFS <b>...</b>
- The Real <b>Price</b> Of <b>Gold</b> Since 1791 | Zero Hedge
- The <b>Gold Price</b> Closed at $1283.40 This is a Great Place to Buy
| <b>Gold</b>: More Than A Real Store Of Value - Recent Evidence [ETFS <b>...</b> Posted: 31 Mar 2014 11:35 AM PDT Summary
I often like Barry Ritholtz's thinking. A March 28, 2014 article in Bloomberg on the long term real price of gold however, needs re-framing in a global context. Since Roy Jastram published his deservedly esteemed "The Golden Constant", gold has been viewed as a (constant) store of real value. A wealth of statistics presented by Jastram seemed to show this. An update of some of his analysis in a LBMA article by Jill Leyland has this graph: In his article, Barry Ritholtz presents a graph from Catherine Mulbrandon of Visualizing Economics: This chart includes the market price of gold as well as the U.S. government pegged price. Sure enough, the real gold price seems to be going nowhere in the long run; a store of value. In this SA article, I have argued that gold in fact is more than a store of value; it earns a real yield and thus gains in world purchasing power in terms of goods and services per unit. Rather than use my data, I thought I would show some relevant and interesting findings from others. A recent BusinessInsider article has this chart from Ian Bremmer of Eurasia Group showing national shares of world GDP: (click to enlarge) Now, let's consider the implications of a quintupling share of U.S. world GDP over the period of time when the USD real price of gold remained constant. The two main world economic powers were the United Kingdom and the U.S. The USD purchasing power in terms of pounds sterling remained fairly constant since 1820 before nearly tripling since the early 1900's. The purchasing power of the dollar moved much higher against other world currencies, however. Further evidence of this comes from a graph in Barsky-Summers' seminal 1988 paper on the Gold Standard Gibson's Paradox "Gibson's Paradox and the Gold Standard". Their chart of the world price index during this time is declining. Since most of the world in terms of GDP was on a fixed gold standard, the price is in terms of gold - meaning, that the purchasing power of gold in real terms, against a basket of world goods and services - rose. (click to enlarge) The inescapable conclusion is that a constant real USD gold price actually gained in world real purchasing power. Jastram and other analysts fell into the mindset of viewing gold through pricing in the two strongest currencies of the time - not in terms of world purchasing power which is what matters for an asset traded in a world market. I made precisely this critique of the gold-as-a-store-of-value belief in my eBook showing how gold is actually valued. Investment Considerations Contrary to World Gold Council research, store of value graphs and popular belief based on statistics showing the price of gold in dollars, gold obtains an increasing global real yield and return. In the long run, a unit of gold will earn in real terms exactly what other long term investments return including stocks and long bonds. The logic, match and evidence for this is beyond the scope of this brief article but is more fully discussed in the referenced book and a number of journal publications. Disclosure: I am long DUST. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. Seeking Alpha PRO helps fund managers:
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| The Real <b>Price</b> Of <b>Gold</b> Since 1791 | Zero Hedge Posted: 29 Mar 2014 06:06 PM PDT With gold's last few days of weakness being extrapolated to the end of the precious metal once again, we thought a look back at 220 years of military spending, economic growth, presidents, and inflation may be a useful comparison to the 'real' price of gold... (35 votes) |
| The <b>Gold Price</b> Closed at $1283.40 This is a Great Place to Buy Posted: 31 Mar 2014 04:48 PM PDT Gold Price Close Today : 1283.40 Change : -10.40 or -0.80% Silver Price Close Today : 19.734 Gold Silver Ratio Today : 65.035 Silver Gold Ratio Today : 0.01538 Platinum Price Close Today : 1418.50 Palladium Price Close Today : 777.50 S&P 500 : 1,872.34 Dow In GOLD$ : $265.08 Dow in GOLD oz : 12.823 Dow in SILVER oz : 833.97 Dow Industrial : 16,457.66 US Dollar Index : 80.240 Mercy! I hope y'all are listening to me, because silver and GOLD PRICES look prettier than a new puppy here. What! Have you lost what little mind you ever had, you nacheral born durn fool from Tennessee? Maybe, but maybe I ain't that big a fool after all. The GOLD PRICE lost $10.40 (0.8%) today to $1,283.40 but the SILVER PRICE only lost 3.8 cents (0.2%) to end at 1973.4. This disagreement shows up in the GOLD/SILVER PRICE, which fell from 65.436 on Friday to 65.035 today. Now I don't know nothin', not a durned thing, but I can look at a chart and report. The gold price has fallen back a little more than 50% of its December-March rise, right back to the running together of the 200 and 50 day moving averages, back to lateral support around $1,300 - $1,295. Stay with me now. From November through February gold traced out an upside-down head and shoulders reversal pattern. The neckline of that pattern strikes gold's price graph today about $1,283. So what? So after a breakout from that pattern, the market often trades BACK to that neckline for one final kiss good-bye, then turns around and races out the door. Other indicators are more oversold than government lies and propaganda. AND gold is skidding along, sliding down its lower Bollinger band. What about silver? For the first time today I looked at both silver and gold and saw a similarity in the charts. If you call silver's reversal range from November through February an upside down HandS, and you have to look very hard to see it, a line drawn across the shoulders (not the neckline) stands about 1950c. So, too, the downtrend line from April hits there, the line silver broke through and above in April, so right now it is kissing back to that line -- WHOOPS, which just happens to coincide with the 75% correction point. Put it on the razor's edge. Neither silver nor gold can fall much further than this without asking to fall a lot further. They will either stop and turn here or within a few points, or fall much further. I believe they'll turn. I believe this is a great spot to buy. I have to get out of here. I love y'all, but we have a Hereford sow that gave birth to 10 piglets over the weekend, I haven't seen them yet, and the sun is about to go down. Shucks, I forgot to tell y'all one more thing: Platinum and Palladium rose strongly today after falling hard last week. One more good sign. Mother Janet today made a speech in which she tried to un-say her mistake at the last FOMC press conference. Y'all may remember -- or y'all may have already purposely forgotten it as an item too silly and disgusting to bother cluttering your cerebellum with -- that Mother Janet made the false step of alluding to letting interest rates rise in six months. Mercy! It was like giving bad whiskeyand downers to a depressive -- stock market swooned at the prospect. So today she tried to correct that by speechifying that the Fed would have to keep interest rates low to help the job market. Stocks went manic. All this sounds a bit like Louis XIV worrying how all his illegitimate children are going to make a living. Why does that concern you NOW? Isn't it a little late for that? Besides, what does an academic and long time banking apparatchik like Yellen know what it means to strap on a tin bill and peck in the dust with the chickens? When did she ever meet a payroll? Or work two jobs just to keep food on the table? Or survive on unemployment? Ahh, yes, the little pee-puhl! Before you talk about 'em, you ought to know at least one, maybe two. Our nobility is just as arrogant as aristocrats of the French Ancien Régime, but not nearly as classy or good looking. In the end they are just nouveau riche Lumpenproletariat who've been to college, or Jeeter Lester enriched by usury. So Mother Janet's speech goosed stocks, but not enough. Harken, I will elucidate. Dow climbed 134.6 (0.28%) to 16,457.66 while the S&P500 leapt 14.72 (0.8%) to 1,872.34. That sounds like hearty progress, 'cept it did no more than propel both indices to the top of that even-sided triangle and stop. Now maybe they jump through tomorrow, but they're needing larger and larger clouds of Fed hot-gas to inflate them. 'Tain't progress. But with a drop in metals, today's Yellen-spellin' was enough to drive the Dow in metals up further. Dow in gold rose 1.7% to 12.82 oz (G$265.01 gold dollars). This corrects a little better than 50% of the fall from End December to mid-March. Garden variety correction. Dow in silver rose 0.12% to 833.21 oz (S$1,077.28 silver dollars), correcting about 75% of the December - February fall. Both indicators have stretched way up into overbought territory, which hints they will unstretch soon. The fabulous US dollar index, robber of widows and orphans, despoiler of nations, global parasite, betrayed its fans again today. It broke out upside from the little consolidation or flag it had formed, ran through its 50 DMA above with an 80.57 high, then sank like your glasses fallen out of your shirt pocket when you looked over the edge of the bass boat. Closed lower by 10 basis points (0.12%) -- puking sick weak action. Next move ought to be down. And this one was thanks to Mother Janet, too, since interest rates figure large in determining exchange rates, and Mama Janet said she intends to keep 'em low a long time. Hard not to conclude that the establishment WANTS the dollar to fall largely. Euro poked up its head 0.16% to $1.3770, but remains in its trajectory off the cliff. No big comeback there. Yen fell 0.3% to 96.88 c/Y100, trying to break out of its trading range to the downside. Argentum et aurum comparenda sunt -- -- Gold and silver must be bought. - Franklin Sanders, The Moneychanger © 2014, The Moneychanger. May not be republished in any form, including electronically, without our express permission. To avoid confusion, please remember that the comments above have a very short time horizon. Always invest with the primary trend. Gold's primary trend is up, targeting at least $3,130.00; silver's primary is up targeting 16:1 gold/silver ratio or $195.66; stocks' primary trend is down, targeting Dow under 2,900 and worth only one ounce of gold or 18 ounces of silver. or 18 ounces of silver. US $ and US$-denominated assets, primary trend down; real estate bubble has burst, primary trend down. WARNING AND DISCLAIMER. Be advised and warned: Do NOT use these commentaries to trade futures contracts. I don't intend them for that or write them with that short term trading outlook. I write them for long-term investors in physical metals. Take them as entertainment, but not as a timing service for futures. NOR do I recommend investing in gold or silver Exchange Trade Funds (ETFs). Those are NOT physical metal and I fear one day one or another may go up in smoke. Unless you can breathe smoke, stay away. Call me paranoid, but the surviving rabbit is wary of traps. NOR do I recommend trading futures options or other leveraged paper gold and silver products. These are not for the inexperienced. NOR do I recommend buying gold and silver on margin or with debt. What DO I recommend? Physical gold and silver coins and bars in your own hands. One final warning: NEVER insert a 747 Jumbo Jet up your nose. |
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