“I have no issues buying at the low if I "believe" POG will turn back up. I just don't know when and no fundamental trigger to suggest anytime soon.”
AverageJoe, I’m not trying to get into an argument but I strongly disagree that there is no fundamental trigger for gold to go higher. Gold should reflect the increased money supply. Without the manipulation it would. Gold is money. Many larger central banks keep large amounts of gold as part of their reserves so they clearly see it as money. All else being equal with their economies (assume zero growth over the period for both), if the US increased its money supply by a factor of seven but another major country held its money supply constant, what would happen? The other country would see the value of its currency increase by a factor of seven. Simple maths. Most countries fight this by doing their own printing to stop their currencies from rising (currency wars). More gold is mined each year but its supply increase each year is at a very low rate and more than half of that goes into jewellery rather than into bars as a form of money. What is left is divided throughout the world, not taken up by the US. In fact official reserves in the US have not increased in decades. Therefore you would expect the value of gold to increase by the same factor as the increase of the money supply in the US. Since 1980 M2 has increased by a factor of seven. Gold was averaging around $400 after the 1980 $800 peak corrected. So since 1980 the POG is up by a factor of just 3 (no other asset price that I can think of is up by so little over a 33 year period) but the US money supply of M2 is up by a factor of 7. Gold needs to better than double to catch up to M2. M3 has risen by even more and more again for M3 plus total US debt. The other way to look at fundamentals is cost of production and a price that would encourage enough exploration and capital expenditure to replace depleted mines. That would be well in excess of $1500 (and stable above that price to encourage enough new investment). So the fundamental driver for a much higher POG is there but so is the manipulation for now. One of the most effective forms of manipulation right now is the use of media to brainwash the market into believing the fundamentals for gold are poor when the opposite is true. The fundamental trigger will be the market deciding gold has overshot far enough and the stampede to cover shorts and to build longs begins. That can happen at anytime considering the fundamentals. Will it be at $1000 like so many appear to expect because that is what a few of the big banks say it will be? Possibly but rarely is anything that black and white with markets. Price og gold should be keeping up with the rapidly rising M2. Notice also how M2 was rising rapidly well before the term QE became a common term. Why do people believe QE tapering will stop the growth in the money supply? It hasn't stopped since 1970 and it won't stop going forward. More media propoganda to talk gold down.
SLR Price at posting:
37.0¢ Sentiment: None Disclosure: Not Held
