Friday, April 29, 2011

Gold, the Silent Success Story

As I write this, gold is breaking $1560 an ounce, a new record. The price rose $25 an ounce today. That is stunning. People were talking about $1500 gold by Christmas. It hit that figure before Good Friday. It is now more than half way from there to $1600 within the following week.

This should be front page news, not only because it is a rip-roaring good investment, but also because gold prices move inversely with the value of the dollar. A rapidly rising gold price means a plummeting dollar. Surely that's news.

So I wrote my column this week on gold and the U.S. economy ("Whither Gold Prices?"). Not that I am an economist or a gold market analyst, but I talk to people who understand these things, I digest the principles, add the politics, and put it all together. Badaboom, badabing...I'm a prognosticator.

When the Republicans retook the House, commissioned by the voters to reign in government spending, had Obama tacked to the center as Bill Clinton did after his 1994 midterm defeat, we would perhaps have a sign that precious metal prices were soon on their way down. But the president has signaled no such change in course. In fact, in his budget-cutting plans, he has signaled his continued determination to raise taxes on the job-producing class.

...there is every reason to believe that there is a lot of upside to precious metal prices. That’s the good news if you still want to get into the market. The bad news is unemployment, inflation, and a huge, tragic waste of human potential as we flounder in this ideological soup of Obama’s wealth redistributionist fantasy.

Track precious metal prices at

Consider the front page of today's Wall Street Journal: "Officials Unfazed by Dollar Slide."

The U.S. dollar fell Thursday to its lowest point since the summer of 2008, but officials aren't showing signs that they are alarmed by the currency's descent or acting to stem it. In recent days, the nation's top two economic policy makers—Federal Reserve Chairman Ben Bernanke and Treasury Secretary Tim Geithner—have publicly expressed their desire for a strong dollar. But there is little indication of a change in policy from either the Fed or Treasury—or in underlying economic conditions—that would alter the currency's downward course.

 This well known analyst gives advise on bubble and silver prices:

Legendary global investor and chairman of Singapore-based Rogers Holdings, Jim Rogers warned that if silver continues to go up like it has been over the past 2 or 3 weeks and reaches triple digits in 2011, he will probably start to think about selling because then 'you've got a bubble'.

Speaking to Financial Survival Radio, Rogers said: " My hope is, silver and gold and all commodities will continue to go up in an orderly way for another ten years or so, and eventually the prices will be very, very high".

"I hope something stops it going up in the foreseeable future and we have a correction," he added.
Explaining his wish, Rogers warned that "a parabolic move and all parabolic moves end badly".

"Eventually, everybody’s going to be owning gold, and then we’ll all have to sell our gold.  But that’s a long way from now, he predicted.

The legendary investor doesn't consider the recent increases in precious metals as parabolic. "If silver continues to go up like it has been over the past 2 or 3 weeks, yes, then it would get to triple digits this year.  And then we’ll have to worry.  It’s not parabolic yet".  

Here is an overview of, as the article puts it, "How gold went from $251 to $1,500."

P.S. Gold hit $1570 an ounce today. Silver still came shy of $50.

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