| ||
|
| ||
|
| ||
|
| Updated: June 10, 2007 |
|
 |
 |
 |
 |
 |
|||||||||||||||||
 |
|||||||||||||||||||||
 |
|||||||||||||||||||||
Charles Kubach, Mine-Engineer.Com 10 June, 2007 Most of the gold experts will say the value, or lack of value of the dollar drives the price of gold. To say this, and exclude all other factors, such as supply and demand and turmoil in the world, is a bit like closing both eyes and proclaiming "I see only darkness". Advice from such people is a bit like advice I received when I lost a bundle in the commodity market in the 1980's. I have done my own thinking on the subject ever since, and remarkably, I have not lost a dime. Yes, it is true, when it comes to your money, you are your own best friend. I would like to make it clear that I am not giving advice, nor do I give advice on investments, I am simply presenting facts to prove my point that at least three factors determine the price of gold at any time. To begin, I made a scale that fit annual gold supply in tons for each year, the US dollar Index on the first business day of January and the price of gold on the first business day of January all on a neat graph. I used a period, which included the dog days of gold, when it was in the $260/ounce range (1999) and brought it to 2007, with the supply for 2007 being a projected number. To me, it is perfectly clear, that supply and demand played the major role in gold's rise from the $260 range to 2002, when it was over $300/ounce. It was only beginning in 2003 that the USDX began its decline, and began to be a minor factor in the price of gold. I say minor, because gold's supply and demand was increasing dramatically during this period, so supply and demand was the primary mover in the price of an ounce of this yellow metal. However, things changed a bit in 2006, as supply and demand dropped considerably, but gold's price continued to climb. For these two years, the experts were probably right, the value of the dollar was probably the largest factor in the rise of the price of gold, but supply and demand remained relatively constant. If supply and demand had increased during the 2006 - 2007 period, one could not say that the dollar value was the primary mover in gold's price. Other factors also influenced the rise in gold during the 2006-2007 period, such as the crisis in Iraq, the rapid increase in the price of oil, Iran's bullying threats of nuclear war, etc. The dollar's declining value and the perceived decline of the buck was probably the largest factor involved in the continued increase in the price of gold during this period, though. The question everyone wants answered is "what will it do next year?" No one knows That is the honest answer. However if, as all factors indicate, the dollar continues it's decline, and supply does not dramatically increase, gold will definitely go higher. All of the gold ever mined is still here, and it is estimated that there is currently 155,500 tons of gold in vaults and jewelry all over the planet. It is also estimated that, based on current gold reserves and current gold consumption rates, that there is only a 36 year supply left in the ground. That can only mean one thing, long term. Gold will become more scarce, and more valuable in the future. The long term trend has to be up, the only question is how fast will it go up and how high will it go. The future of gold is brighter that the reflection from a highly polished bar in the bright sunlight, that is a certainty! 
|
| But that's just my opinion. Charles Kubach Mine-Engineer.Com |
