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| Updated: Apr 23,2006 |
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(Apr 23, 2006) |
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Facts are (1) 70% of gold is used in the production of jewellery. (2) Central banks have indicated a friendly attitude towards gold, but have shied away from purchasing more than they have been selling. (3) Investors have been flocking to gold like flies to a picnic. (4) As the price for gold topped $550/ounce, consumer demand for jewellery has fallen off, each month, as most have decided to purchase less or no gold jewellery at all. Politics and fear over everything from high oil prices, inflation and further possible hostilities in the mid east has driven the investment crowd to seek shelter and possible high returns in gold. Without the 70% of the market purchasing jewellery, this sudden price spike is short term. Demand will continue to diminish from the consumers that have sustained every gold market since it was removed from an official monetary unit years ago. So, if the current gold price rise is not a bubble, what is it? Granted, due to the current fixed supply of gold, long term (next 3-5 years) looks bright for the yellow precious metal, but until the consumers come back to the yellow metal, sudden rises in price are short term and can not be sustained by spooky investors. Remember the Hunt brothers? They went broke trying to buy all of the silver and control the market. And silver has been in the tank since then, but has recently climbed a bit, partially on the coat tails of gold and the other commodities surge. I can only recall sage advice from a wiley investor, who said "the time to take a neutral position is when the masses are buying frantically, for the correction is near." On the positive side, the US Geological Survey has all known gold reserves pegged around 90,000 metric tons, and at current consumption rates, this is only a 36 year supply. So, in the long run, gold has definitely only begun to rise in value, unless a couple more South African size gold fields are discovered soon. -------------------------------------------------------------------------------- But that's just my opinion. Charles Kubach Mine-Engineer.Com |
