3 Positive Long-Term Charts for Precious Metals
By Casey Murphy
Source: Investopedia
http://www.investopedia.com/news/3-posi ... yptr=yahoo
To be clear, gold belongs in your portfolio. Gold and gold mining stocks make for excellent trading vehicles.
But gold shouldn’t be your portfolio. If gold is the only thing you’re invested in, you’re not diversified. And worse, you’re missing out on income-producing stocks, bonds, real estate and other assets.
The first time was in 1933 when President Franklin Roosevelt ordered an increase in the gold price from $20.67 per ounce to $35.00 per ounce, nearly a 75% rise in the dollar price of gold.
The second time was in the 1970s when Nixon ended the conversion of dollars into gold by U.S. trading partners. Nixon did not want inflation, but he got it.
Gold went from $35 per ounce to $800 per ounce in less than nine years, a 2,200% increase. U.S. dollar inflation was over 50% from 1977-1981. The value of the dollar was cut in half in those five years.
Right now, the Fed’s gold certificate values gold at $42.22 an ounce. That’s not anywhere near the market price of gold, which is about $1,330 an ounce.
Now, the Treasury could issue the Fed a new gold certificate valuing the 8,000 tons of Treasury gold at $1,330 an ounce. They could take today’s market price of $1,330, subtract the official $42.22 price, and multiply the difference by 8,000 tons.
I’ve done the math, and that number comes fairly close to $400 billion.
There’s a lot of moving parts here, but they all point in one direction, which is higher inflation. It’s the only way to keep America from going broke. Unfortunately, it will also make your money worth less.
Gold hit its highest mark in more than a year on Sept. 8, ending at $1357.74 an ounce as investors retreated from riskier assets amidst mounting tensions in the Korean peninsula, fears of a possible U.S. government shutdown and uncertainty about the impact on U.S. growth of hurricanes in Texas and Florida.
Goldman Sachs is tipping a year-end price of about $1,250 an ounce, almost 5% below its current level.
His conclusion was that the dollar could decline for the next two years.
If that’s true, then gold could be starting a multiyear bull market.
'You see central banks accumulation, they bought more gold in the last couple of years than they bought U.S. treasuries so they think it's money,'
'They use it as a reserve because it is a reserve asset.'
1. Charts look ugly
2. Low inflation
3. The prospect of further Fed tightening
4. Not-so-bullish price targets
5. Risk-on market environment
6. Risk-off geopolitical environment
7. The bitcoin effect
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