Advertise | Bookmark | Contact Us | E-Mail List |  | Update Page | UraniumSeek.com 

Commentary : Gold Review : Markets : News Wire : Quotes : Silver : Stocks - Main Page 

 GoldSeek.com >> News >> Story  Disclaimer 
 
Latest Headlines

GoldSeek Radio: Dr. Raymond Moody and John Williams, and Chris Waltzek
By: radio.GoldSeek.com

Technical Scoop - Weekend Update September 24 2018
By: David Chapman

What Comes Next
By: Adam Taggart

China for the Trade Win?
By: John Mauldin

US/Global Stocks, Commodities, Precious Metals and the ‘Anti-USD’ Trade
By: Gary Tanashian

Central Bank Gold Purchases Now Control 10% Of The Total Market
By: Steve St. Angelo

Good, Bad and the Not-So-Ugly in Gold
By: Rick Ackerman

Gold Seeker Weekly Wrap-Up: Gold and Silver Find Modest Gains on the Week
By: Chris Mullen, Gold Seeker Report

Gerald Celente: Fed May Bring Down the Economy, Crash Markets
By: Mike Gleason

COT Gold, Silver and US Dollar Index Report - September 21, 2018
By: GoldSeek.com

 
Search

GoldSeek Web

 
Why Gold Will Rise When the Dollar Falls


 -- Published: Sunday, 10 August 2014 | Print  | Disqus 

By Jeff D. Opdyke

Investing is all about exploiting opportunities. And some of the most interesting exploitation in the market today is happening in gold.

Agnico Eagle Mines, Yamana Gold and other miners are snapping gold assets that larger players are casting off. So far this year, small- and mid-sized gold miners have spent $14 billion grabbing mining assets, the highest total in three years.

What makes this interesting to me — a fan of gold in the form of bullion, collectible coins and mining shares — is the message it sends: Gold is cheap … so grab you some today.

Corporate executives, particularly in the hard-commodity space, regularly use price weakness to their advantage. When prices tumble to levels that are irrationally cheap, they regularly step up to the plate, open up the corporate pocketbook and buy these assets while they’re on sale.

That’s what we’re seeing today.

And it’s a message that gold is not the dead asset class that too many in the media portray it as.

It is, however, cheap relative to America’s underlying financial fundamentals — and today, that’s the only reason you need to maintain a permanent position in gold. I use these two charts below all the time, because they pretty much tell you all you need to know about the dollar and gold’s relationship to it. And what they tell you is that gold is the antidote to the financial incompetence endemic in Washington, D.C.

Chart 1 shows nearly 40 years of the U.S. Dollar Index, as reported by the U.S. Treasury Department. I have annotated it with commentary to explain the decisive rises and falls that happened. The takeaway: When America is clearly working to improve its finances, the U.S. dollar rallies strongly. When America’s finances are going to hell — or are already there, as they are today — the dollar becomes little more than artistic toilet paper.

Image For Why Gold Will Rise When the Dollar Falls

Chart 2 plots the direction of gold relative to the Dollar Index. The take away here is that gold moves almost diametrical to the dollar. As the dollar tanks, gold rises. As the dollar rises, gold tanks.

Image For Why Gold Will Rise When the Dollar Falls

What we have, then, is the biggest, fundamental question in financial markets today: Where is the dollar ultimately going? Answer that, and you have the long-term direction for gold.

I am pretty confident I know the direction of the dollar, as Chart 1 so plainly indicates.

We all know that the financial situation in America today is the worst that it has ever been. I’m not talking about the economy or the jobs market or housing — all of which are, themselves, questionable, too. No, I’m talking about our country’s underlying finances.

If the American government were the typical American family, the country would be well past the point of bankruptcy. America’s annual income — the tax revenue and fees it collects — is in the range of $3 trillion a year. Its expenses — the equivalent of keeping the family fed, housed and clothed — are north of $3.5 trillion a year. That doesn’t seem so bad, except that the “family” has been spending above its means for years and has accumulated a $17.6 trillion debt on a series of credit cards and home-equity loans — nearly six times the family’s annual income.

And worst of all … the family has nearly $120 trillion in unfunded liabilities — costs for healthcare and retirement — that it knows it has to pay and which will utterly destroy the budget very soon.

In short, America’s financial future is a disaster in the offing. And that means the dollar, despite meaningless rallies here and there, is destined to continue on a downward slope unless Congress grows a pair and honestly confronts the reforms needed to fix a flawed taxation system, an egregiously generous and soon-to-be failing welfare and Social Security safety net and policies that encourage dependence on government.

Personally, I don’t see those changes coming anytime soon, and by “soon” I mean within the next decade. And that means there’s no impetus that will change the fundamental trajectory of the dollar.

Which means gold has a political tailwind.

It’s a Hell of a Trade …

Miners that are out buying gold assets today are making a brilliant decision. They’re buying gold in the ground at discount prices.

Gold today is at $1,310. For the better part of two years it has been bouncing around the $1,200 to $1,400 range, even though the economy is — in theory, at least — better off. Why hasn’t gold fallen off a cliff, then? If the economy is better and stock prices are stronger and bond yields are primed to move up (theoretically bad news for gold), why does gold refuse to fall out of bed?

Go back to Chart 1: The savviest money in the world knows that the dollar is deeply flawed because Washington, D.C., is deeply flawed in its addiction to living life on an I.O.U. — an addiction that will not change until a crisis (likely a currency crisis) forces a change.

Gold prices today reflect that. And they’re ultimately headed higher. The miners on their buying spree are an indication of that. They wouldn’t be so eagerly grabbing gold assets with prices at $1,300 an ounce if they thought, as some pundits do, that gold prices are headed toward $750 or below. They’re buying because they know they’re making a hell of a trade — giving up soon-to-be-cheaper dollars for soon-to-be-dear gold.

It’s the same trade you should be making today.

Until next time, stay Sovereign…
Image For Why Gold Will Rise When the Dollar Falls
Jeff D. Opdyke
Editor, Profit Seeker

http://thesovereigninvestor.com/

 


| Digg This Article
 -- Published: Sunday, 10 August 2014 | E-Mail  | Print  | Source: GoldSeek.com

comments powered by Disqus



 



Increase Text SizeDecrease Text SizeE-mail Link of Current PagePrinter Friendly PageReturn to GoldSeek.com

 news.goldseek.com >> Story

E-mail Page  | Print  | Disclaimer 


© 1995 - 2018



GoldSeek.com Supports Kiva.org

© GoldSeek.com, Gold Seek LLC

The content on this site is protected by U.S. and international copyright laws and is the property of GoldSeek.com and/or the providers of the content under license. By "content" we mean any information, mode of expression, or other materials and services found on GoldSeek.com. This includes editorials, news, our writings, graphics, and any and all other features found on the site. Please contact us for any further information.

Live GoldSeek Visitor Map | Disclaimer

The views contained here may not represent the views of GoldSeek.com, its affiliates or advertisers. GoldSeek.com makes no representation, warranty or guarantee as to the accuracy or completeness of the information (including news, editorials, prices, statistics, analyses and the like) provided through its service. Any copying, reproduction and/or redistribution of any of the documents, data, content or materials contained on or within this website, without the express written consent of GoldSeek.com, is strictly prohibited. In no event shall GoldSeek.com or its affiliates be liable to any person for any decision made or action taken in reliance upon the information provided herein.