Gold is $700 per ounce!!!

[k3nt]

[JJSCOTT2]

[NWCougar]

[T-Rod]

Gold is a tricky thing. It really plays two roles in the financial markets. Gold is both a hedge against inflation and also a raw material/commodity used in production of various things (most of all jewelry).

So at times gold acts as a refuge for those fearful of the economy and most particularly inflation. Inflation makes currencies lose purchasing power (essentially prices go up) while gold itself gains in relative purchasing power. Do we have high inflation today? Absolutely not and the Fed is going to raise rates again this afternoon to bring us to 8% prime interest rate. Pretty standard.

So why is gold booming? The answer is the same reason why zinc is booming, why silver is booming, and just about every other precious metal (and even oil): a lack of supply relative to demand. In the past 5 years, China has become a huge consumer of raw materials like gold, silver, oil, natural gas, etc. Their economic growth is double digits every year. Think about that. A country that big, with that many people, all flocking to the cities and their economy soaring. So we have a huge demand for raw material type things like gold, oil, etc.

What about supply? Well quite frankly the mining companies just haven't been able to keep up. For gold in particular, I understand that finding enough of it has been difficult.

Another component to the rise in the price is speculation. When commodities like gold spike, they attract lots of speculators. The price of gold is set in futures contracts. Speculators buy and sell these contracts (like day traders used to buy and sell stocks) and their mere activity can drive a price up. The problem is they inevitably cannot sustain this, and prices crash. Natural gas has crashed from $15 down to 6 recently.

SUMMARY: Gold is not up because of economic or inflationary fears. It is up because of huge world demand from China, an inabiltiy to extract enough supply, and from pure specuation.

T

[k3nt]

Hope you're right, trod.

Another thing that occurred to me is that $700 per ounce in 2006 is a lot less than $700 per ounce in 1980. Been a lot of inflation since those days. I don't know why reports on the price of gold don't seem to mention that.

[Big_Leon]

[T-Rod]

[bobby]

I trade the markets EVERY day...Generally speaking, I don't give a shit about anything except "trade with the trend" and the trend is obviously up in Gold, so I look for support areas to buy...It is just another market---It could be mustard seeds for all I care...

These comments make my stomach churn---"The popular wisdom is that gold is headed well above $1,000 per ounce. " Every Gold bug in the last 20 years has been saying the same thing, and NOW they are experts?? Consider the source, and use your own common sense!! and BTW, 850$ Gold in 1980 dollars would equal over 2000$ of today's value ! Popular wisdom also said the Dow was going to 30,000 !! If you saw and read this stuff everyday, you would likely be as cynical as I...

Having said all that, and while I agree 99% with Trod and his comments about China, the "gold scenario" and our economy may have some other items to think about...

How about these realities...

The government no longer publishes the M-3 figures---You may want to ask "WHY??"

This administration (in 6 years)has spent more money than all the administrations COMBINED between the years 1776 and 1980.

The USA is the world's largest debtor nation (about EIGHT TRILLION) not including liabilities such as social security etc.

The printing press continues on (it has to), as our debt is growing 2 1/2 BILLION A DAY

As far as inflation goes, did you know that energy prices are NOT part of the equation? It has to make you LOL...

I am not a doom and gloomer by any means, but the above are things to be aware of...

[MVPSPORTS]

[Big_Leon]

[Allstar7]

[Big_Leon]

Awe man, I forgot all about my boy Wooderson. Sorry about that!

That's what I love about these high school girls, man. I get older, they stay the same age.