Silver and Gold - Happy Days are Here Again!
By Peter Degraaf Oct 11 2007 (article courtesy of kitco.com) and www.stockcharts.com
It will never cease to amaze me how many people who call themselves ‘gold bugs’, still don’t believe that the current gold move is for real. They worry about the central bankers, the plunge protection team, the COT’s and goodness knows who else.
It’s time to step away from the ‘daily noise’ and look at the fundamentals, and then see if the ‘technicals’ line up alongside, to provide confirmation.
The fundamentals are incredibly bullish!
The money supply worldwide is increasing about seven times faster than the supply of newly mined gold.
Much of the gold listed as inventory by central banks, has been leased out, yet still shows up as physical gold.
The gold at Fort Knox has not been audited since 1953!
New gold discoveries are few and far between.
Every gold mine is a ‘depleting asset’. Once it’s gone, it’s gone.
Due to rising energy prices, the cost of exploring and mining is making some projects uneconomic, even at 740.00/oz. In addition a lot of mining equipment is on ‘back order’ – tires, trucks etc.
There is a shortage of qualified mining experts. The good ones are all employed, and due to the fact that the industry went through a bear market from 1981 – 2001, not enough people graduated with mining degrees, to replace those who are now retiring.
Even if a new supply of gold were found tomorrow, it would take many years, dozens of permits, and possible court challenges from ‘tree huggers’ before this new supply could come to market.
There are several billion more potential buyers (think jewelry), on the planet who were not part of the consuming public in 1980, when gold rose to 850.00
Two of the fastest growing economies are China and India. It just happens that both of these groups of people have a love for gold. The middle class in both of these countries is growing by leaps and bounds.
Adjusted for inflation, today’s gold price of 740.00 compares to just over 300.00 in 1980 dollars. GOLD IS CHEAP!
Chart info: Featured is the chart that compares the XAU mining index to the gold price. When this chart pattern is rising, it indicates that gold and the gold shares are in ‘rising mode’. We are looking here at another bullish pattern called: “Cup with handle”. The blue arrow points to the handle. We can see it not only in the index itself, but also in the supporting indicators, RSI and MACD. This is very unusual, and the upside breakout pointed to by the green arrow, is a very bullish signal.