Gold is in the $1,700 per oz range currently. There is a divided view on whether it will rise to $5,000 an ounce, or fall to $500 an ounce.
The Fear and The Media
The most widely held view over recent years, is that because Western societies have printed money (thanks to Alan Greenspan – the great destroyer), currencies have to lose their value, and precious metals have to rise in value.
A common view is that the current price of gold at $1,700, is nothing other than a pull back, in a relentless rise in value of gold, and this rise will continue when this retrenchment is over.
This view is manna to the media who use it for headlines and promote the view of instability. It is almost like the freak show at carnivals in years gone by. People have a curiosity in the unusual and scary and the media feels this need for the scary.
The Alternate View
Some believe that gold has risen in value to unsustainable values because of irrational fears. Societies worldwide will continue and currencies will continue to be a normal medium of exchange. They feel that as fear moderates, gold will fall in value
In previous dramatic rises in the price of gold, dramatic rises in value have always failed and gold has always returned to a metal that earns no interest, and sits dormant in safety deposit boxes.
The Effect of Current Events
What is a bit disturbing to the Gold Bulls, is the limited effect on the price of gold of downgrades by the credit agencies of government debt, of downgrades of the US debt, of possible defaults in Greece and Italy, and of other disturbing events.
Consider that the price of gold hit $1,900 in August and again in September 2011. Gold bulls saw this as the platform for another jump in value to at least $2,500 per ounce. Yet the price plummeted in Sept to $1,600 and has since remained somewhat range bound. If the fear generated by the European crisis, and all of the other recent events, has not prompted any increase in the price of gold, perhaps gold is losing its allure.
Consider that the stock markets in this same period have been very weak, and some fear a return to the dramatic drops in value as seen in 2008. Yet throughout all of this, the price of gold was not much affected.
Stability Returns
This weekend, the Eurozone appeared to have reached the first major agreement among 26 of the 27 Euro Countries, with the exception of Britain. The deal calls on members to limit government deficits to no more than 3%, together with initiation of a super council that will have the authority to oversee the budgets and certain activities of member countries. Sort of the beginning of an overseeing governing council.
Chinese Debt
There also seems some moderation coming in China. Various governmental officials have warned of over spending, and as pointed out in recent blogs, some of the vacant cities are starting to experience abandonment. The foolishness is moderating.
The USA Situation
Polls show that almost 90% of voters think that Washington is just not working and have lost confidence in their government. Extreme right wing politicians debating in the Republican primaries are losing ground. There is a protest vote growing for Ron Paul, who simply wants to withdraw from everything and let every person fend for himself. The appeal of Ron Paul is actually quite enticing. If one throws up one’s hands and gives up in frustration, the appeal of Ron Paul is undeniable.
The Effect on the Price of Gold
While it is impossible to accurately predict the future, as we have predicted throughout the last year, the world will return to stability. All signs point to a return to normality.
Perhaps an Indicator?
American Gold and Silver Eagle bullion sales plummet to 2008-lows, MINING.com News | December 3, 2011
Coin Update reports for November 2011, sales of the United States Mint’s most popular gold and silver bullion coins fell to their lowest monthly levels in years after first slowing down in October.
Sales of the one ounce American Silver Eagle coins were 1,384,000 for November, down by more than 50% from the previous month and down by nearly two-thirds from a year ago while the American Gold Eagle coin sales totaled 41,000 ounces for November 2011, down from 50,000 ounces in the previous month, and down more than half last year’s monthly sales.
Gold may again spike, but it is not a bet to rely upon. As we pointed out in a recent blog, betting on an illogical event, is not something that the odds support.
The views expressed in this blog are opinions only and are not investment advice. Persons investing should seek the advice of a licensed professional to guide them and should not rely on the opinions expressed herein. This blog is not a solicitation for investment and we do not accept unsolicited investment funds.
