Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Gold is into new territory and looking robust today at $1,456 and in the euro €1,018.18. Be careful though, such statements can be misleading, for the dollar is weak at $1.43: $1 as a ¼% to ½% rise in the European Central Bank interest rate is due tomorrow. In the euro gold at €1.018 is still €47 from its high in that currency. If it does rise to that peak at the current exchange rate in the dollar gold will stand at $1,523.
What does this tell us? It tells us that if we want to understand the gold price, we have got to stop looking at it in the dollar and to start looking at the dollar in terms of the euro and in terms of gold. This adjusted perspective then starts to tell the story of gold and silver and what is really happening to them. In short the record gold price is a weakening of the U.S. dollar. Its value as a measure of gold’s value is inadequate, so look at the dollar and gold in the euro for a clear picture on gold.
The gold price was Fixed at $1,457.00 and €1,019.02. After the Fix, but ahead of New York’s opening gold attacked the $1,460 level.
While the oil price does continue to creep up, this is not the cause of gold and silver’s rise.
Gold – Very Short-term
The gold price at record levels is still looking positive and should rise today in New York.
Silver – Very Short-term
Silver is galloping nowso should move to higher levels today in New York.
Silver & Gold Price Drivers
To make sense of gold’s current rise in the U.S. dollar it is time as we said above to change one’s perspective when it comes to gold and silver. For years now they have been moving as monetary metals not as simple commodities. By this we mean that the daily prices have reflected moves in currencies on a moment to moment basis. Yes, the fundamentals in the commodity aspect have supported these moves, but by no means have they led them. While the head of the World Bank suggested that gold be used as a ‘value reference’ for currencies [and then seemingly quickly silenced] it was a recognition of what is happening in the gold and silver prices.
The cessation of gold sales by the signatories of the Central Bank Gold Agreement ahead of the third agreement [ignoring the inclusion of the I.M.F. in that program] told us that European central banks although a third Agreement was signed it was based on no proposed sales as history has shown. The purchase of gold by so many central banks, particularly Russia and China [we believe], tells all that gold remains a key monetary metal. We will be issuing an article on this aspect of gold in upcoming issues of the Gold Forecaster shortly.
While interest rate rises [on deposits as this is the rate that affects investors] globally, remain below inflation levels and yield negative real returns the fact that gold offers no income return remains irrelevant. The capital gain on gold ensures that it is ‘total return’ that is the relevant fact in investment decisions.
Both gold and silver markets will remain attractive for the foreseeable future, not because of their profit potential, but for their immunity from devaluation.
[The Gold Forecaster and Silver Forecaster are a “must-read” for all who want to understand why the gold and silver prices are moving as they are and why.] Subscribe at www.GoldForecaster.com or for silver at
