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Buy, Sell or Get out of the way: May be for Stocks but not for Gold!
Long, but very informative article. Not much most of us don't already know, but good for the newbe and a refresher for us all to stay the course. Charts didn't paste, they (and original article) are at link below if interested.
http://www.kitco.com/ind/Khan/may212010.html
Buy, Sell or Get out of the way: May be for Stocks but not for Gold!
By Dr. Atif Khan, Ph.D.
May 21 2010 4:41PM
Gold is a precious metal commodity which avails the direct result of the global GDP. The whole world works to elevate the prices of Gold in the longer run. On the speculative domain, Gold being the real indicator of value cross sustains the pitfalls of other securities, financial tools and currency devaluation. This cost sustained behavior in shorter run transcends into the gain as the opportunity cost of all other economic activities. For one thing remains sure for Gold, no one can control or lead the prices of gold in any environment or time. The reason is simple while the inferior policies governing financial tools such as stocks, bonds and currency lose their value; Gold remains intact only to gain with the deteriorating outcome of these tools. The only direct impact gold really can exhibit is when the GDP of the world declines and gold then exhibits correction (which it had gained against the poor trail of other financial tools). The truth remains that gold has the real inherent value which has continued to grow powerful over the period of time.
The Trail of Stocks vs. The Rally of Gold:
Stocks are reliant on the constant activity or transactional trades. Stock brokers are more interested in making commission out of their speculative advice. That is, their policy is based on the principle of “more trades better the turnover”; for gold it is aptly contrary because if you sit on gold- better, and if you lose on speculative price correction, you can still wait for the prices to appreciate back to its actual. The gold formula is thus based on the global productive efficiency, if you own gold you must know- the whole world is working for you. They are always geared to work harder and smarter than past; thus they are working towards pushing the prices of gold to the next level, consistently.
International GDP vs. Independent Corporate Decisions:
International GDP is the production possibility frontier of the whole world, which is reliant on nothing else but the operational conditions on the economic front. Gold on these grounds remain oblivious of other economic (governmental level) impacts and thus represents globalized (true) performance capacity. On the other hand if we study the trading activities of stocks or bonds-the recent global meltdown provided numerous examples where bonds and stocks failed immensely and gold got privileged (and capitalized) because of their loopholes.
It’s a regular question by potential investors-“Where to put the money?” Stocks or Gold. Our comparison would tell you the story in a profound yet simple manner.
A potential investment in Gold in 1999 of US$ 10,000 would have elevated to US$ 38,000 by 2009. That’s a marked increased in from of 283%.
A careful evaluation and cautious estimate of the same in stocks would have deteriorated by US$ 1,400. A loss of 14%.
The above analysis is in a situation where other influencing factors in the environment remains constant such as currency and fiscal policies. Gold as we know is not affected much by anything else but its intrinsic value (it's not someone else's liability) and thus displays a great depth, for investors as well as speculators (around the shortcoming triggered by regulators of other financial products).
Whether it is a new legislation by FED or a war hastening the stock market; gold pertains only to the global economic outlook of productivity. Because where you see a deteriorating economy tarnishing the value and purchasing power of dollar, you’ll see Gold profiting through the early recovery and full throttle economic activity on various fronts of multiple economies which are oblivious of US fiscal measures and its corresponding amendments. Infact be it Euro or Dollar they (emerging economies) are capitalizing on the mistakes of big wigs and adding on their reserves as their consequent focus on Gold.
Financially Educated class trusts Gold:
“This system that we have since 1971 is non-viable, that’s what this whole story is about” says, Ron Paul congressman from Texas. “I’d rather be early than late, you know, I got worried about this in 1971, when Bretton Woods broke down”, he explains. “When your theories are right you never get hurt”, Ron warns.
“I have got literally thirty seconds left, and in these thirty seconds will you give our viewers investment advice, and is that investment advice to buy gold”, newscaster Fox Business Varney & Company provoked Ron.
“I just tell you what I do, I think gold is good insurance policy (against inflation) & I personally buy my gold to protect my family”. Ron proclaimed.
Gold is a long term securer for your long term commitment that is family. Congressman Ron Paul is considered an authority in economics, governmental regulation and policies analyst. Being the most financially educated and aware as he is, he suggests general public to invest in gold.
“A RECIPE FOR DISASTER? The global economic and financial market climate looks increasingly precarious. Financial imbalances have never been greater following an extraordinary period of easy money. Many countries have experienced housing bubbles and massive increases in leverage, and global trade imbalances are at unprecedented levels. Rising U.S. interest rates and high oil prices now threaten to push the system to a breaking point.” (BCA Research)
Economic indicators why Gold Rally is better than Stock Trail:
Insurance against inflation
Insurance against currency devaluation
Optimal security against geo-political and financial market instability
Independently based on its own demand and supply
Inherent intrinsic value
Portfolio diversifier & stabilizer
No other commodity, financial product or tool can provide this level of composure with respect to your present and future, referred on the past of consistent soaring over the period of time.
Gold in comparison with other precious metals:
There is a huge gap between other precious metals such as silver (actually silver is an exception to some extent here because of its monetary history), palladium, platinum, copper and gold. The reason is simple and the reason is all other metals are produced for consumption in their related industries while gold is produced comparatively more for accumulation, the higher graded relative justifier of worth against value. The demand of all other metals fluctuates on the basis of their demand in their respective industrial applications. Gold’s movement is not primarily based on its usefulness or principal demand in industrial or consumable applications. Its monetary worth is fundamentally a constant for worldwide demand of stored value.
Old is not Only Gold:
Subsequently, in comparison to other commodities, gold does not perish, tarnish or corrode. Gold mined two centuries ago is still interchangeable and exchangeable or bartered today with newly mined stock.
1980s posed a scenario of once in a lifetime opportunity to buy stocks for financial stability and prosperity. Though that was an inadvertent effect of dollar control and US policy agenda on global canvas, while today the worth of dollar is exhausted since before Bretton wood was abolished. Now the weak and digressing economic measure to sustain dollar is adding the supplement worth on gold to cash on, both on short as well as long term.
In the coming decade, as the dollar suffers one of the great meltdowns in monetary history, gold will reclaim its place at the center of the global financial system. Gold’s value, relative to most national currencies, will soar.
“When East Central Bank buying outstrips West Central Bank selling, and it will in the not-too-distant future, the other remarkably bullish fundamentals for gold will take over and drive the gold price to levels that most people can scarcely imagine today.” (John Embry, Investor’s Digest, March 4, 2005)
Gold’s vitality in the portfolio of an investor:
Stocks have lost their face value since late 2007, their monetary worth too have crippled manifolds. The dollar based economy of US has lost it potency due to the crashes in Washington and Wall Street. The current government is thus printing dollar desperately trying to save the banks and rescue economy, both of these measures are going to further diminish any chances of revival in longer run by triggering hyperinflation.
As a consequence Gold is likely to upsurge again over the next several years.
Gold demand in India & China
India is the biggest gold consuming economy in the world. China is the fastest growing economy in the modern world. Both India and China are in the process of furthering laws relating to free import, sale and purchase of gold on grand scale.
China currently provides gold backed loans to its consumers through banks soon it is planning to introduce the legislated gold bar sale through banks.
These two economies at the forefront of the BRIC group will add absolute power gearing the enormous growth in the gold market and thereby affecting its sale on the gigantic magnitude.
Portfolio security through tangible assets:
The key to reduce risk factor in your investment portfolio is to create diversification. By diversification we mean to minimize the factor of correlation between various types of investments. This decreases the risk factor because if you are losing on one end, you’ll be gaining on the other side. So it is always vital and valuable to diversify your portfolio through tangible assets.
Paper based securities have a certain relativity in their own, various types of bond and stocks have a range of similarity that can be implicated in their cycle of movement and the way they succumb to the impacts of market changes. Tangible assets like gold have a historic tendency of negative correlation to paper based assets, this will re-emphasize the effect decreasing your risk factor through active diversification. This way you can control and diversify your portfolio risk through a variety of investments allocated in non-closely linked securities.
Let’s get back to basics-hold your worth in your hand:
Confiscation of your gold when it is deposited in banks or with your gold agent is a risk that's been forecasted recently. Governments are going desperate to limit their diminishing effects of unfavorable outcomes in regard to their policies. Citibank has already announced that they have the power to hold back your funds for at least 7 days without any prior notice, and maximum can be any amount of days, months and years. As an investor or as an individual purged by the meltdown, you can’t afford to be withheld from your funds without proper access or allocation.
Therefore the best advice that every gold guru is giving these days is to put your precious metal into lock and key that is in your very own possession for your very own interest.
Dollar Index, Inflation:
If we study the movement of Spot Gold from 2003-2009, we will see a gradual appreciation of the prices - especially in context of decreasing $ index, increasing inflation. Trading is more of an intuitive art than analytical science; trends tell you more than just simple implications. You have to read between lines of our executive summary and based on your measures deduce your very own advice that you’d like to capitalize on for future trading. The future of gold looks stellar, the future of S&P and dollar index looks bleak, use the power of inflation to reclaim the positive edge on your gold assets. Speculation or longer run, keep your senses on red alert, your eyes wide open, and ears fully attentive.
The future of gold might reshape the world, to some for good, to some for bad. Many economies such BRIC (Brazil, Russia, India and China) are working hard to shift from dollar standard to a new currency and chances are worthwhile to move towards gold to keep everyone happy (just like before when Bretton Wood was abolished in 1971). If you follow gold and silver your chances to survive will definitely be for good. Even in the positions when Gold prices end unchanged, they are always supported by safe-haven buying due to volatility in other markets like currency (various) & stocks market.
Trading in Gold or other precious metals needs high level of expertise with decisive implications that demands careful yet conclusive watch; analysis, evaluation and more importantly experienced professional advice. Sign up today for free our expert insight to gauge the future trends of the market and take advantage of these seasoned studies. As a serious trader you might like to subscribe to our “Elite Money-Minded Offer” that might help you in gaining consistent profits over regular time frames.
Thank you for reading.
Atif Khan, Ph.D.
Sunshine Profits Contributing Author
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