Gold: The Price Is Surging Higher So Fast, Its Hard To Keep Up
Rob Mackrill - Wed 07 Nov, 2007
The price of gold is surging higher so fast, it's hard to keep up. At time of writing it is at $843, only $7 short of its all time high. The price is being stoked by Morgan Stanleys talk of a more violent correction in the dollar, says a note from Gold Investments. Also, comment from Cheng Siwei vice-Chairman of the National Peoples Congress, that reserves should be diversified out of the dollar into other stronger currencies. That is expected to include gold - an intention that will be helped by its increasing domestic mining production.
‘Oil and gold leap as investors flee the dollar,’ reads the Reuters headline.
Ah, the meat and two veg of the Daily Reckoning…
US light crude is just two bucks shy of the centurion. That is to say $100. Will it make it, we wonder?
Yes, said my oil trader friend last night. It will then fall back below, regroup and head higher still. Well that’s his bet anyway. But we tend to listen to his views closely given the last call was bullish at around the $60 level.
Worse he sees war coming and notes the oil coming out of Saudi is heavier these days, suggesting they’re getting towards the bottom of their vast but aging reservoirs. Saudi accounted for 13% of world production last year, but total production declined 2.3% over the previous year.
As for gold, the price is surging higher so fast, it’s hard to keep up. At time of writing it is at $843, only $7 short of its all time high. It’s already at all time nominal highs (ie not adjusted for inflation) and pushing higher against both the euro and pound, having hit €575 and £402 respectively.
The price is being stoked by Morgan Stanley’s talk of a more “violent correction” in the dollar, says a note from Gold Investments, as an FT headline warns of a possible fire sale of mortgage-backed securities. Also, comment from a senior Chinese politician, Cheng Siwei vice-Chairman of the National People’s Congress, that reserves should be diversified out of the dollar into other “stronger currencies”.
That is expected to include gold - an intention that will be helped by its increasing domestic mining production. The Chinese Gold Association expects to become the world’s number two producer this year, says an FT report and eventually top South Africa’s long held position as the world’s largest producer.
News of Cheng Siwei’s comments saw the dollar sink to 1.46 against the euro and $2.10 against the pound. This is the pound’s highest level against the greenback since 1981.
*** Yesterday was a pretty good day to hold a conference devoted to ‘poor man’s gold’. As silver hit a 27-year high at $15.50 there were some cheerful faces at London’s Silver Summit. It did even better this morning, topping $16.
With gold making the headlines, silver doesn’t get a lot of attention. You may be surprised to learn that the its price appreciation in the past couple of years has actually exceeded that of gold claims Rolf Nef, a Swiss fund manager with the kind of jumbled English and wild glint in his eye that makes you think... here’s a maniac. However, from what we could make of the quickfire slide show we certainly suspect he’s on to something...
Nef is a Swiss money manager and runs a fund which boasts 50% of its holdings in physical gold and the balance in silver options.
His fund fact sheet begins:
“Investment Idea: The world is swimming in a sea of debt (circa. $120trn), growing every day, which creditors think is money. The most practical money without a counter party is gold and silver.”
You get the picture... He presented for the second year running. And his message was the same this year as last. Sell your house and buy gold and silver. He even asked the audience whether anyone had taken him up on the advice from last time. One hand went up… and he was smiling.
Regards,
Rob Mackrill
The Daily Reckoning UK
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