Economic wars and hot military wars increase debt and commodity prices. Gold and silver will see another rally, probably one that surprises almost everyone.
Gold vs Grandma
Let me start with a observation, that while obvious, is seldom mentioned – An ounce of gold purchased in 1990 is today worth exactly, an ounce of gold, while a dollar saved in 1990 is today worth about 33 cents. In early 1990 a barrel of oil cost $21 dollars (19 barrels for 1 ounce of Gold) – today a barrel of oil costs $60 dollars (20 barrels for 1 ounce of Gold). Even diehard believers talk about Gold’s value in Dollars – It’s going to $3000.00 they proclaim. That would probably only mean that the Dollar has fallen against other currencies.Would it not be better to see an ounce of Gold go to 60 barrels of Oil?
All these prognostications one sees about Gold going to $5000.00 and beyond are actually propaganda for the Dollar. The implication is that Gold is just a vehicle to obtain more Dollars and if it did go to $5000.00 you would sell it and declare victory. Gold could go to $5000.00 USD and still only be worth 20 Barrels of oil.
We only judge currencies against one another – like kids in the tub comparing rubber duckies bobbing up and down while ignoring the declining water level. Meanwhile, central planning has pulled the drain plug and added more bubble bath. Not to worry were told, the water isn’t going down – the tub is getting bigger.
There are many good charts on the oil – gold ratio, what I cannot find is a Global Gold index. A real barometer of what Gold is worth in paper currencies on a truly global basis. It would illustrate that Gold’s exchange rate against paper is far more stable than it appears when compared to the U.S. Dollar or any single currency.
Consider the last twelve months (March 2014 through March 2015). The US Dollar Index has gone from 80 to 100 – a 25% move, while in the same period Gold in Dollars went from $1310 to $1200, an 8% move. Meanwhile over the same time span, Gold in Swiss Franc’s declined only 0.55%, and in the Singapore Dollar and the Argentinean peso it moved even less while in the Euro it went up 6% from €940 to €1100 euro. So what did Gold really do against global paper in the last year? As best I can surmise, gold actually went nowhere against paper. Better stated, paper went nowhere against Gold.
A global valuation will become more important as the so called «competitive devaluations» accelerate. Call me suspicious, but they appear very coordinated to be competitive, maybe it is just a coincident that they take turns with Q.E. If they are indeed taking turns it would appear the Fed is up next. Orchestrated global gyrations require a better valuation method, at least until we arrive at the mother of all debasements – Maximus Printus – Global Q.E.
If nothing else a Global Gold Index would provide spine stiffening support for those valiant souls still holding leveraged gold positions. Many of us have no parachute.
UBS believes something is coming down the pike – they just raised margin requirements on Gold by 25%. The last time they raised margins the Swiss Franc peg was cancelled. Mish has an interesting story about UBS predicting more Q.E.
Here at Hide-It we also believe something is coming down the pike. Not sure what it is, but it appears to be disguised as a tiny grandma – traveling with a boatload of rubber duckies. Let’s hope she’s got enough bubble bath.
Have no fear, Grandma’s here.
Buy it. Hide it. Wait.
Un poco más de lo mismo. A veces el sentimiento contrario ayuda 🙂