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Introduction
In the face of static performance, gold and silver have received constant advocacy to the point of crying wolf. As mentioned, gold and silver are vulnerable to technological advances and changing investment moods. In the old days, gold and silver were used to offset the effects of rising and falling interest rates.
In the wings, rapid information dissemination and processing also took a toll on gold and silver. While investors waited for facts and interpretations, gold and silver were comfortable places to store wealth. Consider that the majority of gold and silver holdings are held in central bank vaults.
What’s All the
Fuss About?
The trio of gold, silver and platinum represented the group of precious metals for most of the twentieth century. In addition to exploring precious metals investing, it is helpful to understand the metals themselves. Of course, the positions of precious metals on the periodic table are not the only basis for value.
I can assure even the most skeptical reader that my personal love affair with precious metals is shared by most of the world's population. Is it inconceivable to discover that precious metals are among the weakest hard assets. Understand that much of today's fuss about precious metals was spawned by just two events.
Monetary Roles
In the early eighteenth century, Sir Isaac Newton set the price of gold in pounds when he was mint master. At that point, gold may remain static in the United States because the same forces within the market are not at work. Sugar and coffee are traded in the United Kingdom as well as the United States.
As one of the largest commodity markets in the world, crude oil could yield tremendous currency arbitrage. What's all the noise?" The premise is that people get excited about gold because they are fascinated by its properties and excited by its beauty and rarity. Prechter Jr., the man credited with reviving Elliott Wave Theory, predicts the end of the economic boom and the arrival of a massive economic implosion.
Are Precious Metals
Investments?
Since physical precious metals have no yield, their value is based solely on supply and demand. As the role of gold and silver as a hedge against inflation declined, interest in precious metals declined. The subsequent Gulf War was a precious metal yawn compared to the reaction you would have expected in the late 1970s.
Those familiar with precious metals should know that gold mining stocks were among the best performers during the latter half of the 1980s, through the 1990s and into the new millennium. The key is to realize that the dynamics of precious metals markets have changed. You can see precious metals as money, investments, insurance policies, stores of value or collectibles.
New Strategies New Marketsfor
In addition, he committed to deliver a vehicle of the correct color at an agreed price at a "specified date" in the future. This means that the option holder (ie the person you sold the option to) had the right to buy. The goal is to put some space relative to the current futures price to reduce the likelihood that either the short call or the put offer will be well worth the money.
While the call or put would very likely be in the money by December expiration, the price would need to break above $5.30 or fall below $4.70 before the trade would start losing money after expiration. By selling the February gold short, you automatically make $5 more than the current sale price and have locked in the $455 price. The merger of COMEX and NYMEX allowed traders to economically "spread" platinum group metals against gold and silver.
Spreads involve buying and selling goods in anticipation of a change in the difference between prices. In the case of platinum versus gold, you would buy platinum and sell gold when the difference in price became small or negative. Technological advances in the use of palladium as a substitute for platinum in catalysts have raised the price ratio between these metals.
In fact, palladium achieved the highest price of any member of the Big Four precious metals in early 2001, as it broke above $1,050 an ounce. In the later part of the trading range, there may have been two more stops; depending on the specific months selected and whether the spread was rolled over if expirations forced liquidation. If you own shares, you are a participant, sharing in the rewards of production and distribution.
However, if a company has hedged, it may not share in the rewards of price increases.
Price Action
The Congressional Joint Economic Committee, Representative Jim Saxton of New Jersey, wrote a report in August 1999 titled "IMF Gold Sales in Perspective." The report discusses requests to the International Monetary Fund (IMF) to sell its 103 million ounces of gold. One of the interesting problems with the projected sale was the fact that the metal was booked at an official price of $48 an ounce. With the exception of price increases in 1979-1980, silver prices were held at less than $10 per ounce.
As the saying goes, "What goes up must come down." This is not necessarily an axiom that applies to commodity prices or paper investments. Once silver broke out, it rose steadily above its 30-day moving average until reaching resistance at 61,000. Of course, we must not forget that the price of gold was fixed during the first three quarters of the twentieth century.
Since futures contracts represent 100 ounces, there would be a purchase of three contracts - equal to 300 ounces. The stock market boom experienced in the late twentieth century raised the pressing question: "Why hold gold when paper is doing so much better?" The answer came after stocks began their infamous meltdown in the spring of 2000. Are you better off now than you were four years ago?” This question can be asked of industrialized nations in general.
With reasonable consistency, gold is sold in the first quarter as seen in 18 out of the 30 years. At that time we were in the accelerating phase of the Clinton boom and global conditions were improving. As emphasized at the beginning of this book, we have very little price history for precious metals because platinum and palladium are relatively new, while gold and silver were constrained by fixed prices until the latter half of the 20th century.
Using a 50-period moving average, see if a breach of the average line produces a follow-up decline in prices after 2004, as seen in Figure 5.13. With the exception of the 1990 Gulf War oil price spike, we see a correlation starting after 1995 as illustrated by Figure 5.17. As mentioned, the process is aptly labeled "cold fusion". The announcement quickly propelled palladium to highs of more than $180 an ounce in the cash market after falling below $80.
Fundamentals Gold
The device was supposed to have been developed in Israel, but the tests were conducted in the United States. Examine the pattern of the Dow and you see the same upward slope in the secular trend moving from 1986 to 1995. Given the religious significance of gold in the Muslim ceremonies of marriage and circumcision, I am inclined to believe that demand will grow as the prosperity of the Muslim population increases.
The same uncertainty about the Gulf War was reflected in the build-up of other Middle Eastern countries. There are two possibilities that could turn oil producers away from the US. The first is a complete collapse of the US dollar, which would make oil unreasonably cheap if priced in dollars. From the breakup of Bretton Woods until the turn of the millennium, the United States was widely regarded as the world's security blanket.
The non-participation of Germany and France in Operation Iraqi Freedom pointed to US misconduct. The unilateral move to disarm an unarmed dictator and hold the spoils hostage did not sit well with the two largest members of the European Union, which control the euro. The sudden drop in China's official accumulation to less than 10 tons per year at the beginning of the new millennium seems highly suspicious. Gold did not fall dramatically in response to actual selling, prompting the question, "Where is the demand coming from?" The metal was accumulated and included in the global private stockpile.
One was the introduction of an entirely new paper currency in the United States beginning in 1996 with the introduction of the. From virtual obscurity in the 1980s, Turkey rose to the fore with coins in leaps and bounds from 2002 to 2004. That's why companies like Toyota brag about using gold in the airbag circuitry of their Lexus cars.
Some analysts attribute this growth to the restoration of historic sites in China and other Far Eastern countries. price remains below about $450 per ounce, gold can be used effectively as an industrial ornamental material.
