k-os
17th September 2010, 09:04 PM
By John Carter 09/17/10 - 04:45 PM EDT
If Federal Reserve Chairman Ben Bernanke could sweep gold under the rug and make it disappear, he would. As central bankers the world over, particularly in the U.S., continue a stance of quantitative easing to prod the economy, they are able to communicate these measures in such a way as to make them sound logical. Even sensible. After reading a few articles on the economy, most people temporarily forget the reality that is their own life and feel almost optimistic enough to think about buying a new set of golf clubs. But, unfortunately for the central bankers of the world, gold does not lie.
Governments around the world are creating literal and figurative piles of fiat currency. Although it is dressed up in lipstick and called a stimulus program, it is really an effort to boost exports, a number not as dependent on quality as affordability. That is, the more affordable the export, the more of that export a country is going to sell. And there is really only one way to control the price of exports -- through a cheap currency. In a world where countries are struggling to keep their citizens employed -- less they get unruly -- cheap currency is a sure way to generate at least some jobs as well as some tax revenue. In a world with few choices to get things moving, it is the only choice.
The problem with this logic is, if everyone wants to be competitive, then all countries will have to make a deliberate effort to cheapen their currency through the act of creating more and more of it. That is exactly what is happening today. Imagine these as great piles and stacks of paper currency, standing as high as the eye can see. Perhaps a more apt visual would be great mounds of paper currency that peak at the top much like a mountain . . . or in reality more like great piles of manure. Just sitting there with nowhere to go. The banks will not lend it. And no one wants to spend it. As the saying goes, "You can't shove that stuff back into the horse."
Gold is watching all of this from its quiet safety haven in its own corner. And as it quietly watches this process, it is also quietly making new all-time highs. Gold is trading at $1,279.00 an ounce, at the time of writing, after U.S. gold futures for December delivery rose 0.6% to $1,280.90, in the pre-market. In an era where all currencies around the world continue to get cheaper and continue to lose buying power, the one constant bedrock is gold. Governments cannot print more of this yellow metal. If they could, they would. In the meantime, they do not breath a word of its price action and they certainly downplay its importance. Gold does not mind. It will continue to call them out in its own quiet way, making new highs, as more and more currency is created. Gold knows what is going on and its not susceptible to a PR campaign.
One of the easiest ways to participate in the advance of gold prices is through either the gold exchange traded fund, the SPDR Gold Trust ETF(GLD), or using leverage via longer-term options on GLD or through the CME Group Futures contract, GC. Both GLD and GC move in lockstep with the price of gold, and are easily converted back to dollars. This liquidity is important. After all, the urge to get that new set of golf clubs may one day get too strong to contain.
Edited to add the link:
Link (http://www.thestreet.com/story/10864858/1/gold-doesnt-lie.html)
If Federal Reserve Chairman Ben Bernanke could sweep gold under the rug and make it disappear, he would. As central bankers the world over, particularly in the U.S., continue a stance of quantitative easing to prod the economy, they are able to communicate these measures in such a way as to make them sound logical. Even sensible. After reading a few articles on the economy, most people temporarily forget the reality that is their own life and feel almost optimistic enough to think about buying a new set of golf clubs. But, unfortunately for the central bankers of the world, gold does not lie.
Governments around the world are creating literal and figurative piles of fiat currency. Although it is dressed up in lipstick and called a stimulus program, it is really an effort to boost exports, a number not as dependent on quality as affordability. That is, the more affordable the export, the more of that export a country is going to sell. And there is really only one way to control the price of exports -- through a cheap currency. In a world where countries are struggling to keep their citizens employed -- less they get unruly -- cheap currency is a sure way to generate at least some jobs as well as some tax revenue. In a world with few choices to get things moving, it is the only choice.
The problem with this logic is, if everyone wants to be competitive, then all countries will have to make a deliberate effort to cheapen their currency through the act of creating more and more of it. That is exactly what is happening today. Imagine these as great piles and stacks of paper currency, standing as high as the eye can see. Perhaps a more apt visual would be great mounds of paper currency that peak at the top much like a mountain . . . or in reality more like great piles of manure. Just sitting there with nowhere to go. The banks will not lend it. And no one wants to spend it. As the saying goes, "You can't shove that stuff back into the horse."
Gold is watching all of this from its quiet safety haven in its own corner. And as it quietly watches this process, it is also quietly making new all-time highs. Gold is trading at $1,279.00 an ounce, at the time of writing, after U.S. gold futures for December delivery rose 0.6% to $1,280.90, in the pre-market. In an era where all currencies around the world continue to get cheaper and continue to lose buying power, the one constant bedrock is gold. Governments cannot print more of this yellow metal. If they could, they would. In the meantime, they do not breath a word of its price action and they certainly downplay its importance. Gold does not mind. It will continue to call them out in its own quiet way, making new highs, as more and more currency is created. Gold knows what is going on and its not susceptible to a PR campaign.
One of the easiest ways to participate in the advance of gold prices is through either the gold exchange traded fund, the SPDR Gold Trust ETF(GLD), or using leverage via longer-term options on GLD or through the CME Group Futures contract, GC. Both GLD and GC move in lockstep with the price of gold, and are easily converted back to dollars. This liquidity is important. After all, the urge to get that new set of golf clubs may one day get too strong to contain.
Edited to add the link:
Link (http://www.thestreet.com/story/10864858/1/gold-doesnt-lie.html)