| ||
|
| ||
|
| ||
|
| Updated: May 23,2006 |
|
 |
 |
 |
 |
 |
|||||||||||||||||
 |
|||||||||||||||||||||
 |
|||||||||||||||||||||
|
Ah, yes, as many dive into near $700/ounce gold, citing that it is not subject
to supply and demand, that magical fairries will determine its ultimate value,
they dream of golden returns the size of Texas. There is no doubt that gold
will go higher, but until the market can sustain the actual need for gold, it
wont happen overnight. The question is when will it rise up into the
stratosphere? In order to answer this question, one must understand that 70% of all gold is used for the production of Jewelery. This is a fact, not a dream. The first quarter statistics show that gold used in jewelery is down 20.5%. All gold consumption is down 10.5%. Another fact, not a dream. The reason gold is in less demand for jewelery is it's price, its high price. Another fact, not a dream. To emphasize this point, jewelery manufacturers have recently begun manufacturing jewelery from a PGM metal, palladium. Another fact, not a dream. Palladium is selling for $356/ounce, while gold is selling for $673/ounce. Another fact, not a dream. Using palladium for jewelery will boost the lagging palladium industry, if it is acceptable to consumers, and only time will tell the answer to this. So, in my opinion, the better precious metal to buy currently is palladium, if it rises with the expected increased demand. The potential is there and it is much more likely to rise in the next 6 months than gold is, due to decreased demand for gold and increased demand for palladium. Now for the dream part, gold will rise to $1,000/ounce. True, but when? Next year? Not likely, but for the sake of argument lets say in 2 years gold is $1,000/ounce. If purchased today at $673, that would be a increase in value of $327 or 48.5%over 2 years. Now if palladium rises to $600/ounce during the same period, that is a increase of 68.5% over the same period. Gold bugs will say not much difference, but if it is my money it is 20% more in my pocket and that is a lot of money. What is the probability that gold will reach $1,000 vs palladium reaching $600/ounce? Well for the dreamers, it is quite good. But for the realists, it may take 3 or so years for gold to reach this lofty height, while with real increased demand for palladium, it is very likely to reach its $600 figure much sooner. So there you have it, dreams versus reality. Take your pick, and live with your returns. -------------------------------------------------------------------------------- But that's just my opinion. Charles Kubach Mine-Engineer.Com |
