Furthermore it is the very weakness of the dollar that makes the price of gold cheaper to countries with stronger currencies , especially as many nations emerge from poverty and can afford to buy some. Slowly ever as measured , gold is becoming regarded as a currency rather than as a commodity.
Meanwhile , other central bankers are watching the US dollar’s depreciation - the word “crash” so far this decade is more like it - with increasing concern a whopping loss as it is. How long it will take before they stop pricing their oil in a depreciating currency , such as the dollar , and stampeded to another currency or standard is unknown at present.
Nonetheless , unless there is an all out crash , the dollar will edge higher, if only because it has given the US exporters an advantage in trade.
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Sphere: Related ContentIt is especially impressive to bulls that gold’s soaring price comes despite the central banker’s having sold 460 or more tonnes of gold in the last year and at these heights every one of these sales can already be looked back on as a mistake. Truly, central bankers bring something extra to their jobs.
Counter balancing government gold sales - proceeds to be squandered by politicians or risked in U.S. government bonds that could be depreciated away by additional printing of dollars - Spain announced last year that it central bank and banker would not sell gold next year , which might be the beginning of a trend by other gold selling central bankers. Perhaps even the central banks will begin to buy back the gold they sold , albeit than at higher prices than they sold the precious metal for.
Offsetting central banker’s gold sales , is the fact that other countries are beginning to flee the U.S. dollar by transferring these dollars to gold bullion , especially oil and gas exporting countries that are awash in dollars , major players being China, Russia amd Qutar.
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Sphere: Related ContentCanadian Forex investors are now focused on the Loonie - the Canadian dollar currency. With the recent increases in the Canadian dollar to parity with the U.S. dollar it has been a long run up from a low in 2002 ofU.S. .62. Basically the increase in the value of the Canadian currency was attributed to climbing oil , petroleum and commodity prices.
Since the beginning of this year of 2007, however the primary drivers of the Canadian dollar’s success have been the stronger than expected Canadian economy and a new wave of merger and acquisition activities.
Of greatest significance is the dramatic change in the outlook for the Canadian economy over a relatively short period of time. The most recent economic data has consistently beaten expectations, in some cases with a wide margin.
The first quarter G.D.P. growth came in a blistering 3.2 % as compared to bank of Canada’s estimate of 2 %. At the same time inflation continues to be higher than the Bank of Canada’s targeted range.
In its most recent Monetary Policy Report - the Bank of Canada clearly has indicated and continues to indicate that its biggest concern is that of inflation and that further interest hikes are in the offing.
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Sphere: Related ContentOther than three days in a row over $ 700 in May 2006b , the only other time gold was at such impressive levels was for six days in January 1980. At that time gold closed above $ 700 for six out of seven consecutive trading days. It was in this earlier streak 27 years ago when gold’s all time closing high was achieved. And in Feb 1980 gold spent more days over $ 700 but they were not contiguous. It a truly rare and lofty level for gold - no matter what traders, gold and currency valuation and trading experts as well as naysayers will say.
At at time point in Febuary 1980, gold spent 2 more days over 700 dollars but they were not contiguous. Hence prior to Bernanke’s decision , gold was already over $ 700 nominal for the longest span ever. In adjusted - inflation adjusted real terms gold’s all time high valued today in 2007 equates to a near high of $ 2300 per ounce. Hence gold is nowhere near a new all time high when placed in current real value terms.
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Rookie Fed Chairman Bernanke ’s biggest test came early in the fall when the Fed decided to cut rates by a big percentage point. But half of September’s trading days came happened previous to the FOMC’s meeting. To best understand Bernanke’s impact on gold and the dollar, first consider their impact gold and silvers previous behaviours. Between the ugliness of August 16th and the end of that month, gold had already rallied 3 % to $ 673. This strength continued into September. Gold closed higher for the first six days in a row which left it at $ 715 a week before the rate cut. It traded sideways for the next week staying above $ 700 and closed on Monday before the fed acted at $ 716. With $ 700 + gold witnessed for seven trading days in a row, the metal was making history even before the Fed acted.
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Gold more than surged in currency values and valuations after the continual declines in the U.S. dollar and dollar posts with the Feds actions. Gold has also been save as a safe haven from the fluctuations of currency especially in times of turmoil , uncertainty and wars. In the end it always comes down to supply and demand or to inherent perceptions in supply and demand. Not unlike the fall of General Motors from grace as the car manufacturer of renown and prestige - into a bastion of union demands , health care costs and foolish top heavy - even stupid management.
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Perception is said to be anything and everything. The Pepsi generation pervails. Japanese Yen vs American dollars.
Japanese cars are king in the perception of the American as well as global consumers. Now its China . Will China drop the dollar instead of the Euro currency ? Will China abandon the dollar and drop its dollar reserves ? Who knows ? Certainly not the experts. Yet supermodels are demanding that their lucrative contracts be signed and contracted in Euro currency not dollars. It can be said that all businessman / businesswomen/ business people / politicians are little more than prostitutes.
The growing perception and perceptions are that somehow that that gold is at the mercy of the American Federal Reserve a.k.a. the Fed or the FEDS. Thanks to all the current action in the currency / currencies / financial / precious metals / gold / platinum / silver markets and trading traders and speculators are now attributing to the Fed than it actually deserves.
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The main focus of the U.S. economy continues to be associated with the housing market and associated difficulties in the market and markets for residential backed securities. The housing sector appears to be set for even more weaknesses in the upcoming future. Falling house prices are reducing the abilities of homeowners to extract equity and equities to support consumption as well as greatly pressuring those homeowners with little residual equity. The ongoing problems in the housing markets could well leave the U.S. economy vulnerable to oil shocks or further weakness in equity markets.
It may well occur that the U.S. market will continue on in the near future of 2007 until sometime in 2008 when a resounded sounder economy will continue stronger growth , without the major drag and emphasis of the housing and construction markets with their financial and currencies concerns.
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Sphere: Related ContentIn 1982 the US Mint changed the composition of the American penny currency from a composition of the penny form 95 % copper to only 2.5 % plus 97.5 % zinc in order to keep production costs of the Penny currency under 1 cent.
In 1982 , at that time, it was not appreciated in the least that the copper metal composition cost restraint reflected a corruption in the power and trend line of the U.S. dollar currency. Too much paper money and currency was being created by governments in relation to the true wealth and riches of the American society and economies were producing. American currency was being reduced and relegated to destructive forces. Gold , yet again , was on its historical march to the new champion and marker of real currency valuations.
Basically as more dollars get physically printed , the amount of gold owned by human beings remains the same. Hence more physical money - same gold as value. Hence it takes more dollars to buy a certain amount or measure of gold metal.
The British magazine “The Economist” charts economic valuations in relative costs of the Mc Donalds hambugers - Big Macs wheras others rank gold in relation to the price of a well maid tailored men’s suit. Such products now range in the $ 3,000 us dollar range. In the accepted ranking gold should be at the price of that $ 3,000 to an ounce of gold.
A similar comparison of the price of gold to the price of oil translates to a gold price of $ 4,000 .
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