Will Gold Prices Basics Trend Forecast Still Be Rising In 2012? George Soros Bailed Out!

Oct. 22, 2011 - PRLog -- In the event that the basic value of gold measured in US-Dollars wasn’t a mystery prior to; then the past couple of weeks have added an additional dimension to the confusion. Supposedly gold is really a “safe haven”, so when the rumors of Armageddon started circulating concerning the Euro, the price “ought” to have gone up? It didn’t, it went down…by 20%...so a lot for that theory. Will be the newest story that the Euro-refugees figured the 10-Year Treasury was a better bet than gold…even following the downgrade? Go to http://silver-dollar-values.com for profitable investing ideas.

Significantly also for the thought that gold is an inflation hedge that fairly a lot went out the window following all of the QE didn’t trigger hyperinflation, but even so the price of gold, as measured in dollars doubled. Marc Faber says he will maintain purchasing gold till Ben Bernanke stops printing; nicely Ben appears to be saying that he does not believe any more QE will help and it is time US Congress grew up and started performing their job rather than just milking the cow for their very own account, so is Marc nonetheless purchasing?

All right, the thought that gold is somehow driven by exactly the same thing that drives the price of oil (whatever that is) nonetheless sort of holds. Sort-of…at least on that score the spikes in gold prices do seem to follow spikes in oil prices even though by that metric the price ought to be a lot less than now, as in about $1,000 according to historical trend-line correlations in between gold prices and oil. There once more, the dramatic decoupling of WTI from Brent beginning in 2009 is confusing, as in which one ought to we be tracking now, if either? Go to http://silver-dollar-values.net for profitable investing ideas.

Setting aside what’s driving the basic it looks like there may have been a bit of a bubble and bust in gold 2008/9 (or perhaps a bust along with a bubble in the dollar if you're an Austrian), and also the recent events look suspiciously like that too? If those had been indeed bubbles-and-busts, then if the bust was totally expressed, one would anticipate the “fundamental” in the moment of time in between the bubble and also the bust, to have been somewhere in-between, as in the square root of the leading multiplied by the bottom? If that’s right we can draw two “fundamentals”, put a line through them, and Voila!!

In the event you purchase that logic then the line A-B will be the trend, and if indeed “the trend is your friend”, then gold at $1,600 was a fantastic chance to exchange some more worthless fiat dollars for some more gold, after which wait contentedly like a fat cat licking milk off your whiskers, for the globe to totally disintegrate?

Possibly…. even though you will find occasionally risks deciding on the direction of a trend from just two points of information. Certain some thing clearly occurred in the start of 2009, and indeed George Soros famously purchased gold at that juncture whilst telling everybody it was a bubble; but now according to the reports he has sold, even though that might merely be because he liquidated his fund and retired, or maybe the maestro-bubble-surfer bailed just-in-time?

Returning to the thorny question of the “fundamental”, one irritating thing is the fact that the last time anybody attempted really-hard to totally destroy the US (and also the globe) economy by making uncontrolled credit, which led up to the stock marketplace crash of 1929, the price of the dollar was pegged to the price of gold (the Austrians would have approved of that), and therefore there's no clear precedent for what occurs to the “real” price of gold following you drip-feed bankers LSD for an extended time period. Go now to http://www.silver-dollar-values.com for profitable investing ideas.

Yet maybe the price of gold in dollars has got some thing to complete using the level of recourse debt that the US government has been piling up; “recourse” as in there's no collateral but the borrowers have the choice of trashing your credit score in the event you do not pay the cash back, or even when you joke that you simply may not?

Beyond writing IOU’s to the widows and orphans fund, and municipal debt (not counted as government debt in USA but counted in Europe), you will find two essential measures of US government debt:

(1): The total value of US Treasuries outstanding; those are primarily owned by Americans (or American-based pension funds and insurance businesses, and also the Fed)…and those are fairly benign because if no one desires to roll them over you are able to pay them off merely by printing more dollars.

(2): The total outstanding value of US Treasuries purchased by foreigners, primarily so as to finance the present account deficit which is basically the trade deficit, and in recent years has been largely on account of America purchasing oil from “aliens” at somewhat unattractive prices. The issue with that sort of debt is in the event you start printing-to-pay, word gets about so it is hard to roll it over, and so if there's any suspicion you may do that the aliens may start altering the dollars for some thing else (gold maybe), after which you get a run on your currency, and more essential, you can’t purchase any oil, and so you have to bicycle to function (assuming you got a job).

Placing aside whether or not or not the price of oil expressed in terms of gold may have anything to complete using the pathological aversion of typical Americans to walk anyplace except on a treadmill or to go bicycling, or even to take public transport, what occurred since gold in dollars was $250 in 2000 was that each those numbers went up significantly:

For ten-years as much as early 2010 all 3 lines moved sweetly in tandem having a correlation of over 90%, after which gold and total US Treasuries shot up, but America started to sell less Treasuries to foreigners (primarily because the trade deficit went down so they didn’t need to borrow so a lot to pay their oil-bill).

Therefore which will be the right line? If indeed the cumulative collective incompetence of the US Government, as measured by how far they trash their fiat currency by getting into debt that will only be paid back by printing (as opposed to the conventional method of collecting taxes)…which will be the primary driver for the price of gold, then which element of that's the real “fundamental” driver?

If it is total US Treasuries outstanding then gold is priced properly now, if not and also the real driver is merely America’s dependence on foreigners to borrow cash so they are able to purchase oil, then gold looks pricey now, as in a bubble compared to the dollar. And now we all know what occurs when reality hits. Either way the trend-line of US Treasuries outstanding appears to be flattening off, that may be great for America, however it might not be great for gold.

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