gold market fundamentals
derryb
Posts: 36,792 ✭✭✭✭✭
Often referred to as the reason to be in gold, the "fundamentals" are really not clear to many investors. Jeffery Nichols at Nichols on Gold does an excellent job of reminding us what they are:
Gold's key price drivers:
-past and prospective U.S. Federal Reserve monetary policy
-U.S. federal government budget impasse, rising U.S. sovereign debt, and eroding U.S. creditworthiness
-the expected future depreciation of the U.S. dollar in world currency markets
-the growing insolvency of some European nations
-the expected acceleration of global inflation, fueled by excessive monetary creation
-political instability in the Middle East and North Africa
-the growing affluence of the “emerging-economy nations” and the associated growth in both jewelry and private investment and savings demand for gold
-emerging-economy countries that are over-weighted in U.S. dollars and underweighted in gold are diversifying into gold
-development and popularity of new gold investment vehicles and channels of distribution
-legitimization of gold as an investment class and rising investor participation
-shrinking of the available “free float” in the world gold market means that less metal will be available
-world gold-mine production, although growing, will not keep pace with demand
Gold's key price drivers:
-past and prospective U.S. Federal Reserve monetary policy
-U.S. federal government budget impasse, rising U.S. sovereign debt, and eroding U.S. creditworthiness
-the expected future depreciation of the U.S. dollar in world currency markets
-the growing insolvency of some European nations
-the expected acceleration of global inflation, fueled by excessive monetary creation
-political instability in the Middle East and North Africa
-the growing affluence of the “emerging-economy nations” and the associated growth in both jewelry and private investment and savings demand for gold
-emerging-economy countries that are over-weighted in U.S. dollars and underweighted in gold are diversifying into gold
-development and popularity of new gold investment vehicles and channels of distribution
-legitimization of gold as an investment class and rising investor participation
-shrinking of the available “free float” in the world gold market means that less metal will be available
-world gold-mine production, although growing, will not keep pace with demand
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
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Comments
2011 may be the first year to eclipse the gold production from 2000-2001. 10 yrs of a gold bull market and production has stayed basically flat.
Another interesting factoid is that from 1959-2010 annual world gold production has increased 1.9X and population around 2.17X. In that same period
M3 increased 35X.
roadrunner