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British Treasury urges IMF to sell gold for debt relief, asset diversification
Is Gold the Next Asset Class to Boom?
By James McInerney, News Editor
AME Info, Dubai
Monday, April 4, 2005
http://www.ameinfo.com/news/Detailed/57055.html
In the 1970s oil prices soared but were still below the heights
reached today. But gold prices peaked in 1979 at more than twice
their current levels. So is buying gold the next big investment
opportunity?
Around the world commodity prices have been moving up over the past
three years. It is not a straight line, but the trend is very, very
clear.
Oil is easily the world's most important industrial commodity, and
its price spike last week to almost $58 a barrel came as Goldman
Sachs pointed to an upcoming multi-year period of high prices with a
potential $105 per barrel peak.
Yet this investment story is well known. The art of good investment
is to spot the asset class that should have risen with oil but has
not yet done so.
Gold is the obvious candidate. In the 1970s when oil prices surged
to levels comparable with today and well beyond in relative rather
than absolute terms, gold prices shot from $100 to $850 an ounce in
1979.
The link between black gold prices and the yellow metal is well
established. What appears to have been holding gold back in recent
years -- although it is up by more than 60 percent in three years --
is a perceived connection with the dollar as a proxy currency: If
the dollar gets weaker, then gold gets stronger, and vice versa.
This link will surely break down soon. The price of oil in terms of
gold is still very cheap. It maybe that disruption in global capital
markets due to higher oil prices is the catalyst that will change
this relationship. It is certainly overdue, and an anomaly that
markets will correct.
Then the investment funds that have driven commodity prices higher
and higher this century will fasten upon gold as the missing
commodity and take prices very much higher.
How high could gold prices go? Well, to reproduce the previous high
of 1979 -- and most commodity cycles do eventually retrace a
previous high before going higher -- then gold would need to be
$1,600 an ounce compared with $426 an ounce at the time of writing.
Interestingly gold is still very much out of favour in financial
circles, and the conventional wisdom is that gold is for jewelry and
not much else.
But any contrarian investor would also seize on this as a further
endorsement of the case for gold, given that the experts are usually
wrong and generally miss out on the next investment theme until it
has past.
For anyone who doubts the undervaluation of gold at the present
time, I recommend Dr. Marc Faber's excellent book, "Tomorrow's
Gold," which explains the macroeconomic argument in some detail.
But basically the creation of credit is out of control in the world
and paper money can be printed while the gold supply is fixed; hence
the value of gold relative to an expanding paper money supply just
has to go up.
Thus for investors looking to diversify risk and tap into the next
major investment theme, acquiring a little physical gold or shares
in top gold mining companies is worth considering before everyone is
doing it.
The downside risk is also limited as gold always has a residual
value, unlike shares, and is practically indestructible.
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RECOMMENDED INTERNET SITES
FOR DAILY MONITORING OF GOLD
AND PRECIOUS METALS
NEWS AND ANALYSIS
Free sites:
http://www.cbs.marketwatch.com
http://www.usagold.com/amk/usagoldmarketupdate.html
http://www.capitalupdates.com/
http://www.silver-investor.com
http://www.thebulliondesk.com/
http://www.goldismoney.info/index.html
http://www.minersmanual.com/minernews.html
http://www.a1-guide-to-gold-investments.com/euro-vs-dollar.html
http://www.investmentrarities.com
http://www.kereport.com
(Korelin Business Report -- audio)
http://www.plata.com.mx/plata/home.htm
(In Spanish)
http://www.plata.com.mx/plata/plata/english.htm
(In English)
http://www.resourceinvestor.com
Subscription sites:
http://www.lemetropolecafe.com/
http://www.interventionalanalysis.com
http://www.investmentindicators.com/
Eagle Ranch discussion site:
http://os2eagle.net/checksum.htm
Ted Butler silver commentary archive:
http://www.investmentrarities.com/
----------------------------------------------------
COIN AND PRECIOUS METALS DEALERS
WHO HAVE SUPPORTED GATA
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BY OUR MEMBERS
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1-800-869-5115
http://www.USAGOLD.com
Michael Kosares, Proprietor
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222 South 5th St.
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info@gold.ie
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178 West Service Road
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Fax: 518-298-3457
and
620 Cathcart, Suite 900
Montreal, Quebec H3B 1M1
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Toll-free:1-800-363-7053
Fax: 514-875-6484
http://www.kitco.com
Lee Certified Coins
P.O. Box 1045
454 Daniel Webster Highway
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Ed Lee, Proprietor
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leecoins@aol.com
Lone Star Silver Exchange
1702 S. Highway 121
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Contacts: David Schectman,
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Missouri Coin Co.
11742 Manchester Road
St. Louis, MO 63131-4614
info@mocoin.com
314-965-9797
1-800-280-9797
http://www.mocoin.com
Resource Consultants Inc.
6139 South Rural Road
Suite 103
Tempe, Arizona 85283-2929
Pat Gorman, Proprietor
1-800-494-4149, 480-820-5877
Metalguys@aol.com
Swiss America Trading Corp.
15018 North Tatum Blvd.
Phoenix, Arizona 85032
http://www.swissamerica.com
Dr. Fred I. Goldstein, Senior Broker
1-800-BUY-COIN
FiGoldstein@swissamerica.com
The Moneychanger
Box 178
Westpoint, Tennessee 38486
http://www.the-moneychanger.com
Franklin Sanders
1-888-218-9226, 931-766-6066
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