Why gold is still undervalued – MoneyWeek

Itisclearthattheflightoutofthedollarcontinues。

Butarecommoditiesstillasafehaven?

Inmyview,theanswerisaresoundingyes。

First,commoditiesareatangibleassetandthereforedonothavecounterpartyrisk。

Apoundofcopper,bushelofwheatorounceofgoldisnotdependentuponanybanksorgovernmentspromise。

Thevalueofacommodityarisesfromitsusefulness,forexample,copperinwiring,wheatinbreadandgoldasmoney。

Theabsenceofcounterpartyriskmakescommoditiesanincreasinglyvaluableformofwealthtodaybecausesomanyofthepromisesunderlyingfinancialassetsarebecomingunreliable。

Butcommoditiesarestillasafehavenforanotherreason。

Despitethebigincreaseinpricesinrecentyears,commoditiesarestillundervaluedbecausemuchofthepriceincreaseresultsfrominflation。

Iuseanumberofmodelstodeterminerelativevalue,butheresasimpleone。

LetsstartwiththeNovember2003prices。

OneounceofgoldcouldbuytheCRBIndex1。

5-times($383。

30/251。

03)。

Atyesterdaysclosingprices,oneounceofgoldboughttheCRBIndex1。

8-times($922。

70/503。

27),soclearlyrelativevaluationshavechanged。

ButattheJanuary1980peak,oneounceofgoldboughttheCRBIndexnearlythreetimes,andwearestillfarawayfromthatlevelofrelativevaluation,whichisonesignalthatgoldpriceshavemuchfurthertorise。

Thefollowingchartisalsopointingtothatsameoutcome。

Comparethegoldpricewithinthethreeredovals。

Intheearly1970s,whengoldstartedpullingawayfromthegreenuptrendline,itcontinuedupwarduntilreachingalevelofovervaluation。

Goldthenretraced,pullingbacktothegreenuptrendline。

Goldthenrepeatedthissamepatterninthelate-1970s。

Nowlookatthecurrentredoval。

Goldisagainpullingawayfromthegreenuptrendline。

Wewillseeinthemonthsaheadwhetherhistorywillrepeatthepatternsofthe1970s。

Iexpectitwill,justlikehistoryseemstoberepeatinginsilver。

Theparallelsbetweenthetwopennantsinthefollowingsilverchartarejusttooobvioustoignore。

InoteabovethatmoneyisfleeingtheUSdollar,buttheflightintogoldisactuallyfromallnationalcurrencies。

Forexample,goldisatarecordhighagainsttheeuro。

Whileonthishistorydoesrepeattheme,itappearstomethat2008isshapingupmuchlike1974。

Therearemanysimilarities。

TheseincluderapidlyrisinginflationandgrowingmonetaryproblemsnotonlyintheStates,butacrosstheglobe。

Infact,thelastseriousglobalcreditcrisisbeforethepresentoneoccurredin1974。

ThatwastheyearwhenHerstattBankfailedinwhatwasthenWestGermany,bringingtheinternationalbankingsystemtoanearstandstill。

Acoupleofmonthslater,FranklinNationalBankcollapsedinNewYork,whichatthattimewasthelargestbankfailureinUShistory。

Slowingeconomicconditions(thenasnow)causedloanstogobad,causinglossesanderosionofessentialcapital。

Also,linesofcreditnotpreviouslydrawnuponduringgoodtimesstartedbeingusedin1974,withtheresultthatbanksbecameover-leveraged(again,thenasnow)。

Givenwhathappenedin1974,thereisonepieceofadvicethatIcanrecommend。

IfhistoryisanyguideandIreallydobelievethatitisthenthecurrentbankingandcreditcrisisisgoingtogetmuchworsebeforeitgetsbetter。

Yearsofimprudentrecklesslendingistakingitstollontheglobalbankingsystem。

Thereisonelastpointworthnoting。

In1974goldrose72。

8%,whilesilverjumped84。

1%。

JamesTurkistheFounderChairmanofGoldMoney。

Heistheco-authorofTheComingCollapseoftheDollar

NakedTextNakedText


bck体育app靠谱么_bck官网注册账号申请_bck体育官网手机版b