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January 19,
2006
Gold breaks the glass ceiling. What
does this mean for the average investor?
by Michael J. Kosares (1/19/06; 12:39:38MT - usagold.com
msg#:
140640)
Centennial Precious Metals, Denver
There's one thing we
have to keep in mind as gold breaks through the glass ceiling:
It has been artficially held down through one machination or
another for a good many years.** Those numbed by gold's rise
and unable to act should keep that historical fact in mind. Under
any of the correlations we hold dear with respect to gold price
analysis, where would gold be trading today if nothing would
have stood in its way over all these years? THAT above all should
be primary in any potential gold owners analysis. $600? $700??
$800??? $2000???? The number is essentially irrelevant. Please
read on!
As I have mentioned here before,
the cyclical retracement for which some might be hoping may not
come until we once again attain the old highs near the $900 mark.
The slight retracements -- like the one before this rocket shot
-- should be viewed as purchasing opportunities. The real mission
for most investors is to protect one's hard-earned (won) wealth
through the ownership of the most direct representation of wealth
itself -- gold.
 Those
waiting for that long, deep correction may be waiting a long
time simply because rising gold could very well be part of a
much bigger cycle than most market observers have factored-in.
As Elliot taught us there are cycles, cycles within cycles and
then cycles over the long term which over-ride all. We are likely
in one of those super cycles now.
Gold is now reacting to a confluence
of factors -- too numerous to summarize without diluting my essential
message. Let's look at the bigger picture. Those of you who know
me and have read my work over the years know that I put a great
deal of stock in the notion that markets, including the gold
market, are largely governed by crowd (mass) behavior, and that
overrides all else, including government intervention (any government's
intervention). Charles Mackay's "Extraordinary Delusions
or the Madness of Crowds" remains now -- 250+ years later
-- the seminal work on market behavior as an integer of human
behavior (It is available at our Gilded Opinion page linked above)
for anyone looking for some grounding on this subject. The changes
in progress now having to do with the dollar, gold -- in fact
all paper currencies -- is pervasive, a generational change in
attitude a long time in incubation but now making itself known.
That is why you have so many msp's commenting on gold's "inexplicable"
behavior.
Along these lines, the stock
market panic in Tokyo over the past two days took the financial
community by surprise and showed just how vulnerable stock and
bond markets really are -- including the U.S. markets. We also
have the reports of the losses at JP Morgan's trading desk in
this morning's reports. Why did this loss occur? It occured,
in my view, because some fundamental changes have taken root
in the financial markets and JPM was taken by surprise. The way
the players used to play the game no longer produces the same
old winning percentages. JP Morgan was playing the old market;
we are in a new market. The result has been and will continue
to be a change of psychology and strategies more suited to the
new venue. Without putting too much emphasis on this change with
respect to the complexities of the gold market, my take is that
this will be enough to put a rising floor under the gold market
which will likely cover a great deal of price territory on the
upside.
I said gold was cheap at $250;
repeated that at $350 and $450 and say the same as we blow past
$550. These are cheap prices relative to the massive dollar obligations
and balances at loose in the world economy; cheap compared to
the changing international financial psychology.
 I was interviewed
by CBS News (for gold market background) a couple of days ago
and was asked when should an investor buy gold. I answered that
the way I always answer it: Gold is not like other investments;
in fact it isn't really an investment at all. It is an insurance
policy against the deprivations and dangers of politically motivated
paper currency values. One doesn't buy gold to make money. One
buys gold to preserve what one already has.
There is no right price. The
only real question is whether or not one has enough to weather
the storm. If you have no gold or you need more, it is ridiculous
to think that this price is too high in the fact of what is happening
in the world economy. Price is relative, but gold's mission is
unchanging. If you believe that the world economy will stumble
through just fine, stick with your dollar (yen, euro et al) savings
and investments. If you believe otherwise make the change. Price
is not an issue. Your financial well-being is.
** I don't want to once again
enumerate those machinations. If you are new here and in the
dark on this subject, I would suggest a visit to our archives,
the Gilded Opinion page, the Gold Trail, et al for background.
For a more detailed treatment
of the role gold can play in your portfolio, please visit The ABCs of Gold Investing: How to Protect
and Build Your Wealth with Gold by Michael J. Kosares.
TownCrier
(1/19/06;
22:32:12MT - usagold.com msg#: 140672)
A
tale told by numbers
http://www.usagold.com/germannightmare.html
The Wholesale
Price Index as documented for the fateful decade preceding the
"Nightmare German Hyperinflation" provides a sobering
reminder, as recently reiterated by MK [commentary above], that
waiting to choose an auspicious entry point (a 'cheaper' gold
price) can easily become a fool's errand when, in fact, the more
important task at hand is simply to accomplish (without any further
excuses for delay) ownership of gold metal commensurate with
a level of savings (true savings) actually befitting your life's
achievements. Otherwise, procrastination and a 'trading' mentality
can put it all up in smoke like so much paper and ill-founded
promise.
Turning now to the German example, with July 1914 as the benchmark,
one ounce of gold had a corresponding price of 86.8 marks from
the Reichsbank.
To show how quickly things got out of hand, and the relative
futility of "bargain shopping", the following is a
tabulation of what the price of single ounce of gold would have
been at steps along the way were it to be floating independently
right along in response typical with other wholesale prices of
the period.
July 1914 -- 86.8 reichsmarks
Jan 1919 -- 225.7 reichsmarks
July 1919 -- 295.1
Jan 1920 -- 1,093.7
Jan 1921 -- 1,249.9
July 1921 -- 1,241.2
Jan 1922 -- 3,185.6
July 1922 -- 8,732.1
Jan 1923 -- 241,735
July 1923 -- 16,839,200
Nov 1923 -- 63,016,800,000,000 reichsmarks
During the eight year period from July 1914 to July 1922, the
reichsmark price of gold increases 'only' by a factor of 100
(and dissuading how many from choosing "expensive"
gold, we wonder), but during the short timespan of the following
singlular year, to July 1923, the price of gold jumps by an additional
factor of nearly 2,000!
And then, in the following blowout to November 1923, with one
look at the price it should become very apparent that all former
thoughts of trading in and out of gold in pursuit of a paper
(monetary) profit were but a frivolous misplacement of understanding,
and that any given currency unit, receivable at it's price for
gold, is somewhat superficial like the number of candles and
color of icing on a cake -- whereas the gold itself IS the cake
AND the icing AND the candles.
The choice is yours. You can wait, foolishly cakeless, until
there are more and more candles on the cake and the baker has
a long waiting list, or you act now with aplomb and put your
current currency's purchasing power into action -- by using it
to buy gold you can HAVE your cake, and EAT it, too.
("Eating" it means you've successfully consumed/used/digested
the purchasing power of your holdings of money which was otherwise
at risk of wasting away; and still "having" it means
that your ownership of gold metal always provides you easy access
to full-bodied purchasing power at any future time that you might
desire to tap into it.)
--Randy Strauss |
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