Gold vs. U.S Dollar - 500 Beiträge pro Seite

[peter.wedemeier1]

Gold vs. U.S Dollar
Once gold starts to trade like a cuurency will be a one
way street up,once it replaces the U.S $ so called
safe haven status.

What is more safer than a hard asset like gold,it has
no debt,or swelling trade deficet!
It is not corrupt ,only the central bankers playing with it.

What would a lousy trillion $ in the world flight to the
real safe haven currency gold do to its price.It hasnt
happened yet,but as U.S assets continue to melt lower
and people start to dump U.S dollars and seek the
real safe haven gold ,this way the euro and yen dont
worry about not having surpluse with u.s trade cause
its going into safe haven gold,therby outsmarting greenspan
and his cronies.

Central banks should be filling their vaults with gold ,not
U.S paper and U.S insolvent debt in high tech and etc,its
the only thing that makes any sense to me.

Question is not will we see 500$+ gold one day but when?

U.S economy cant go forever,look at japans sorry state a
U.S junkie.

[peter.wedemeier1]

GOLD AND THE U.S. DOLLAR--AND THE "SURVIVOR CHALLENGE"

Earlier in this piece, I mentioned that the recent weakness in the dollar had been mentioned as one reason for gold’s upward move. Without a doubt, that has been true. Yet, keep in mind that most of gold’s move since re-testing its lows early last year has occurred in a different environment; one in which the dollar continued to strengthen against most other currencies.

Some of the pundits pointing to dollar weakness now can be forgiven. After all, even Yours Truly has said on prior occasions that a reversal of the dollar’s bullish run since 1995 was a prerequisite to a sustained bull market for gold. It is still an important ingredient.

However, there have been times in the past where weakness in the dollar did not directly relate to strength for gold--provided that some other currency is sufficiently attractive to be viewed as a "safe haven." I have often cited the example of the Gulf War over a decade ago as proof of this. At the time, the dollar AND gold briefly rallied at the start of hostilities. Within just a few days, however, both lost ground to the German mark, which at the time was already viewed with the same comfort level as the dollar has been in recent years.

Exactly a year ago, CIBC’s Barry Cooper and Ayesha Hira wrote a lengthy research report entitled, "Gold Versus The Dollar--Our Choice for the Survivor Challenge." To my knowledge, they were the first to ask the rhetorical question (in my paraphrase), "What happens if there is NO currency that can be turned to as a refuge one day?" Writing a take-off of sorts on the TV show "Survivor," they started with the premise that neither the Euro nor the Yen were anywhere near the point where global investors would take them seriously as a replacement for the dollar (I invite you to refer back to my January issue, where I gave some of the reasons for this myself.) The question then remained whether the dollar or gold would ultimately win out over the other as a safe haven, as economic and political woes intensified.

One by one, Cooper and Hira "kick off the island" those factors which have combined to give the dollar virtually unchallenged hegemony for the last seven years. Productivity gains reported by the government were coming into further question. The low wage concessions exacted of laborers in America in recent years will become a thing of the past as basic living costs begin to rise further. Oil prices--though they have come off their peaks--remain higher than their average of the last few years, constituting a "tax" on incomes and a drain on savings.

As I have myself pointed out, they also discuss how real interest rates have turned negative, with the cost of living rising above the Fed’s key short-term interest rates. Virtually every other time this has happened, gold has risen and the value of the dollar has declined.

The big one that everyone is talking about, of course, is America’s current account deficit; that difference between our imports and exports of both goods and capital. Cooper and Hira can’t help but mention this. The deficit--which requires the U.S. to import $2 billion a day in foreign capital simply to maintain equilibrium--has long been viewed as the Achilles’ heel of the great U.S. growth story. Much the same as the Nasdaq ran on to greater--and more unsustainable--heights due simply to the sheer volume of money pouring into technology stocks so, too, has the dollar become a "momentum play," especially given the lack of a more inviting playground elsewhere in the world.

But that is changing. Over the last few months, while they have still shown net inflows, foreign investments into dollar-denominated assets have been conspicuously declining. Keep in mind that--in order for the dollar to go into a steady decline of some magnitude--it is not necessary for foreign money to be yanked willy-nilly from the U.S. All that is necessary is for new money to start drying up--and it is. This does not yet mean that the most dire predictions of the dollar’s demise and implosion will imminently come true. In fact, I’ll address this issue in June’s newsletter in much greater detail. What it does mean, at the least, is that the dollar’s reign as King of the Hill has now been called into more serious question than at any time during its reign.

Next, Cooper and Hira turn their attention to gold; and, one by one, they "vote off" those factors which had contributed to the metal’s long bear market. Much of this, I have already addressed, so I wont repeat it all here. In the end, as you may have already guessed, these folks predicted that this game of Survivor would ultimately see gold as the last man on the island.

(NOTE: Always wanting to pat someone deserving on the back--besides myself, of course--these good folks at CIBC were almost alone a year ago in forecasting a longer-term price of $325 per ounce by as early as this year. However, they added that, "We stand ready to move these figures up." Hopefully in the near future, I’ll be able to share with you their latest gold price forecast.)

In one of his recent CBS Market Watch columns appearing daily on the Internet, Thom Calandra suggested that--even if the euro and yen do appreciate significantly against it--a falling dollar would, in the end, translate into a much higher gold price. "A month from now, a year from now, five years from now - you choose the timing, because I won`t - the price of an ounce of gold will be three to six times what it is now," he writes. "By then, the world`s money flows will have stopped way short of the fiber-optic fork in the ocean that leads to New York. By then, the euro will be worth a ton more than 91 cents. So will the Canadian dollar and the Australian dollar. By then, overseas investors long will have stopped hoarding U.S. securities in their digitized central banks or their frosted chalets. (As I write this, the flow of fur-ner money into dollar-denominated assets is falling sharply, to well less than half the average monthly flow of $44 billion we saw last year.)

"The world`s battered economies, the ones that rely on metals and other natural resources for their livelihoods, like Ghana, Australia, South Africa, Chile, Canada, even Russia, will be less battered. . .By then, the paper wealth that is the industrialized world`s stock and trade will be more paper and less wealth. America`s current account deficit, the best way to judge this country`s money flows, already will have surpassed an annualized $450 billion. (See definition below of the ticking time bomb called the current account deficit.)

"There are some who believe that when the red ink in the U.S. current account surpasses 5 percent of gross domestic product, all heck will break loose in financial markets. Stephen Roach at Morgan Stanley is on record saying a "hard landing" for the dollar, and with it the boatloads of U.S.-linked securities in foreign portfolios, may be inevitable. ‘A crisis of confidence is not inconceivable,’ Roach writes. . .

"I submit that with that swollen account deficit and the dollar`s decline will come (has come and is coming) an explosive move up in the price of gold. The $310 metal, up almost 20 percent this year, one day will sell for a price that reflects a cascading American balance sheet. With U.S. households living off their spree of credit-card and mortgage debt, the perpetual stock and housing market bubbles in this country (and in most of the world`s major cities) will hiss, hiss, hiss. . ."

Now, you might not get quite that bearish a prognostication from me on the greenback in June’s issue. After all, most all other central banks are loathe to see their own currencies appreciate very much against the dollar; most recently, in fact, Japan and Switzerland have been aggressively trying to cap their own currencies’ rallies against the buck. However, and not to beat a dead horse (and needing to move along) it’s safe to say that the dollar may have seen its best days even if it doesn’t go into a free fall quite yet. And, all this can’t be anything but bullish for gold.

[peter.wedemeier1]

South america should go to a gold standard and dump those
greenbacks or better yet,burn them.

The only safe haven currency will one day be gold.

World trade should be done in hard currency not paper greenbacks which greenspan can print truckloads as he
pleases.

Why doesnt he send thes printing presses to everyone on
the planet and we`ll just print this monopoly money and
do business.


Why can he only print endless amounts of greenbacks that
the world has to accept as the world monetary paper standard
,why not go back to a gold standard after all what is backing
up that huge u.s debt,what claim to assets do i have,none.

U.S defaults on their debt and world will be crying then for
a gold standard but then it will be to late all currencies
will be in collapse,all 80%lower compared to eachother
and gold will be the winner then and the new world order
of god,i mean gold will be born.

Money is the root of all evil in the world and a gold standard
will make things alot more fairer as opposed to enslaving
it to greenbacks and their will for everyone concerned,so
far its brought only misery,despair,injustice,anarchy,corruption
you name it ,they brought it,judgement day will come and
it will be gold.

[peter.wedemeier1]

Money isn`t the root of all evil
I wouldn`t say money is the root of all evil. I would say some human minds are the root of all evil. Money is just a thing neither good nor bad and of it`s self. What is the root of money? It`s men if the men that have the power to create the money are evil, then they have the power to take values (someone else productive labor) by only printing up a meaningless piece of paper. If the men that create money are good then they are going to do productive work to gain a value (i.e. mine and mint gold). To say money is the root of all evil is a cop out. Evil people are the root of all evil.

[peter.wedemeier1]

"Greenspan buying gold,increasing his reserves in line with
the massive money supply he creates?

J.p and other bullion banks starting to cover their short positions
before the big U.S dollar dump to come?

U.S likes strong dollar and benefits it brings to financing this
huge,enormous trade deficit ?

Central banks of world still holding to many greenbacks in
reserves to help finance greenspans and washingtons
objectives worldwide?

Does anyone really believe the U.S economy or markets have
bottomed?

How much are those bullion banks short anyway at moment,
and is their any hope whatsoever that they could possibly
buy back that much pyhisical gold without suffering some
nice big losses,but not worrying about how many co`s they
destroyed in mining sector all those years to make %interest?

Gold moving higher and higher will be a good equalizer for
their misdeeds they enflicted on others in past and will be
stuck with a depriciating greenback?

What is needed is a gold standard in world finance apart
from the western paper standard (u.S$) being inflicted
world wide and the misery,corruption,imoral behaviour,etc.
it brings?

When will greenspan start to pay down the huge growing
u.s debt?

Who`s going to pay for this Iraq war,not the u.s they`re broke
but printing presses keep running and someone is finnancing
them?"

[Guru-Schreck]

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