April 26, 2018

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Gold Readies for Another Upsurge

Gold Surge

The gold price seems to have been slowly but relentlessly sliding since it peaked at $1,920 in September 2011. This has been the strongest of the four corrections in the soaring bull market that began 12 years ago, with a fall of about 13 per cent. [Read more…]

Thirst for Gold

Gold stocks

Gold stocks

According to Tyler Durden, writing in Zero Hedge, analysis suggests that China is buying almost 1,000 tons of gold a year and is well on the way to achieving the target admitted by a State Council adviser in December 2009 of 6,000 tons in foreign reserves within three to five years, and perhaps 8,000 to 10,000 in eight to ten years. [Read more…]

Metals or Paper for Long-Term Asset Value

Gold Investment

Gold Investment

Gold has made idiots of the Swiss, French, Dutch, Portuguese and British central bankers, who sold off 2,671 tons of their holdings at low prices between 2000 and 2009. And of mainstream fund managers who have shunned the asset for decades, misquoting economist John Maynard Keynes as dismissing it as “a barbarous relic” (he was writing in 1924 about the gold standard, not about gold itself). [Read more…]

Gold Isnt Money, Say Dutch Judges

Gold Isn’t Money, Say Dutch Judges

Gold Deposits

Gold Deposits

Gold’s fan club is rightly outraged by the report that the Dutch glassworkers’ pension fund has been forced by court order to sell most of its highly profitable investments in the yellow metal, for which it had a 13 per cent allocation, and put the proceeds into government bonds. [Read more…]

Survive and Prosper in the Grim Decade

Survive and Prosper in the Grim Decade Ahead

Commodoties

Commodoties

Looking ahead, the key long-term strategy issue for investors is whether we face inflation, deflation… or something in-between.

Inflation favours equities, commodities, real estate and gold.

Deflation favours bonds, bank deposits, but also gold.

Something in-between – that is, low inflation interspersed with periods of a little deflation, what I have dubbed “noflation” – favours blue chips with solid income yields, rental property, and medium-risk bonds.

The current majority view is that inflation is coming, which is why the equities of the developed economies are strong, while bond values have been falling.

Long-time followers of my views will know that I am a noflationist. I don’t buy the story that inflation is about to bloom because of excessive money creation. But could I be wrong in under-estimating the contrary risk of deflation?

Gary Shilling, an American economist with an impressive record for predicting financial catastrophes such as the dot-com blow-off, the collapse of US housing prices and the easy-credit bubble, makes a strong case for believing that we do face deflation and a decade of slow economic growth in his new book The Age of Deleveraging*.

Most hostile comment on massive stimulus programmes by governments and central bank policies of nearly-free credit and money printing is based on belief that such excesses must lead to inflation.

That ignores history. The clearest example is from Japan, where even decades of easy money, at times relatively far greater than we are now seeing in the US, have failed to do much to boost economic growth.

The key to inflation isn’t money abundance, but the balance between demand for goods and services and their supply.

If demand remains sluggish, perhaps because of unwillingness to borrow to finance spending, and/or if supply remains excessive, there’s an imbalance that presses down on prices. You may get some pockets of inflation, such as we’re now seeing in food and energy. But overall, you don’t get inflation.

Although “government spending is the root of inflation,” Shilling writes, “it’s excessive only if the economy is already fully employed – as in wartime.” Currently

there is “clearly” an excess of supply in the world economy, “and getting more so” in the second largest economy, China.
For years a combination of positive factors has boosted the world’s productive capacity:
• Globalization has made it possible for businesses to mobilize the under-employed human resources of the emerging economies, creating in them vast new industries.
• There has been a productivity revolution flowing from implementation of major developments in information technology, which has encouraged heavy investment in new and much more efficient industrial capacity.
Shilling makes the interesting point that there have been several historical examples of earlier technology revolutions that boosted productive capacity to the point where it caused serious over-supply, such as railways in the 19th century, and mass-production of motor vehicles and telecoms in the 1930s.
• There has been an abundance of capital thanks to very high savings rates in Asia, the surpluses of oil producers, the absence of major wars and money printing.
• There has been an ideological revolution that in a large part of the world has replaced low-efficiency planned economies with high-efficiency alternatives combining the best aspects of free enterprise with the advantages of state power.

That has been most obvious in China, where in response to the global crisis of 2008 the government instantly mobilized the world’s fastest-impacting, largest and most effective stimulus package.

CopyRight – OnTarget March 2011 by Martin Spring

see the next article – A surfeit of leading-edge production plants

The Case for Optimism

The outlook for equity markets is good, the well-known analyst and commentator David Fuller of Fullermoney newsletter told the Annual Contrary Opinion Forum in the US last month.

Positive factors include accommodative money policies with low interest rates, low inflation, what David likes to call the “progressing” (developing) economies are healthy, the West’s recovery is only 15 months old, household savings are rising, equity valuations are reasonable and corporate balance sheets are mostly strong. [Read more…]

Gold Rides High on Investment Demand

Gold Investment

Those of you who have been reading my analysis and comments for some time will know that, like most South Africans, I am a gold bull.

My first successful investments were in the yellow metal in the 60s. After a long period of caution in the 80s and 90s, I turned optimistic again in 2002 after my old friend, the German expert Bruno Bandulet, and myself, decided that the total pessimism of all those at the FT’s last annual gold conference in Rome had the smell of a market bottom – which it was. [Read more…]