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James Turk: Silver''s potential for price appreciation is greater than gold''s
9:27p ET Friday, January 6, 2006
Dear Friend of GATA and Gold:
This is, as the legal jargon goes, neither an offer
to buy nor an offer to sell. It's just damned
interesting. ...
People now can buy silver through GoldMoney.com
just as they have been buying gold there.
GoldMoney founder and GATA consultant James
Turk advises:
"The silver our customers purchase is in allocated
storage in a specialized bullion vault near London,
and their silver is insured by Lloyd's of London.
The same governance procedures GoldMoney applies
to gold are also used for silver, so our customers
know their metal is safe.
"Purchases can be made in U.S. dollars, Canadian
dollars, euros, and British pounds. Also, existing
GoldMoney customers can use their goldgrams to
purchase silver."
BusinessWeek just interviewed Turk in its Jan. 3
issue. It's appended.
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
* * *
Through a Gold Bug's Eyes
Author James Turk thinks the metal can shine
brighter still, maybe even hitting $850 in 2006
BusinessWeek
January 3, 2006
http://www.businessweek.com/investor/content/jan2006/pi200513_8038.ht
m
Don't pity gold hoarders. Sure, when it's slumping, as is often the
case in boom years and when the U.S. dollar is strong, they're
ridiculed as eccentric and archaic. But this year they've enjoyed
plenty of vindication. Earlier in December the yellow metal topped
$540 per ounce, a 24-year high. Closing the year around $519, it has
plenty of analysts jumping on the bandwagon.
A sign of growing interest was the launch within the last year of
two exchange traded funds (ETF) that track gold: iShares Comex Gold
Trust (IAU) and streetTracks Gold Shares (GLD). Still, there are
skeptics who think gold won't continue its bull run (See BW,
12/26/05, "Hedging Against Inflation").
James Turk, author of the newsletter The Freemarket Gold & Money
Report, is a gold bug of long standing. A specialist in
international economics, he penned the 2004 book "The Coming
Collapse of the Dollar and How to Profit from It: Make a Fortune by
Investing in Gold and Other Hard Assets" with John Rubino. Turk also
founded GoldMoney.com, a Web site that gives analysis and investment
advice on precious metals.
Turk recently spoke with BusinessWeek Online reporter Alex Halperin
about how high gold will go, who's buying it, and why. The following
are edited excerpts from their conversation.
Q: Why has gold climbed in the past few years?
A: Gold responds to monetary problems. For the first few years gold
was rising only against the dollar. The dollar had obvious problems
in terms of the trade deficit and the federal budget deficit. But
what has happened over the past years is that gold has been rising
against all national currencies, and that's significant.
What happens when there are problems with a national currency is
that people begin to worry about the value of their money, whether
they're going to lose purchasing power because of inflation or other
problems. As a consequence, they look for safe havens.
Initially, when there were problems with the dollar, people saw the
euro as safe. But in May, after the French and Dutch votes that
rejected the European constitution, people began looking at the euro
and realized it wasn't the haven they thought it was. Since then the
riots in France and all the other bad news coming out of Europe have
reinforced that view. Consequently, money has been moving to gold.
Q: But haven't European countries been selling their gold?
A: They have, but they haven't been selling enough to keep prices
from rising. The demand for gold has been very strong worldwide, and
it's going to get stronger. Gold has reached the $500 level, which
has eluded it for the past 24 years. Everyone who has bought gold
over the past 24 years is making money.
It's still below its high in January, 1980, of approximately $850.
In today's dollars [taking inflation into account], to match the
purchasing power, you need $2,200 and gold's only at $519, so we're
well below the 1980 high.
Q: How high do you think it's going to go?
A: My expectation is that we're going to see $600 in the first
quarter of 2006, and some time over the course of 2006 we're going
to touch that $850 level.
Q: Why is it such an unusual view that gold is going to keep rising?
A: Gold has been off everyone's radar screens for the past 20 years
because it has basically been in a sideways trading range. As a
consequence, a lot of things changed. People have been focusing more
on financial assets than on tangible ones. Just like we had a
movement at the end of the 1960s bull market from financial assets
into tangibles, over the past few years we've had a movement from
financial into tangible assets as well after the stock market peaked
in 2000. ... We're up now five years in a row. I think 2006 is going
to be the sixth.
Q: People aren't oblivious to it. For example, The Economist called
gold a "barbarous relic." Why is there such hostility?
A: There's a lot of anti-gold propaganda, partly because economic
theories don't explain what gold is and how it works. It became
politically incorrect to think of gold as money once it had
supposedly been demonetized in 1971, when President Nixon closed the
gold window. But the reality is, monetary theory is one thing and
the way gold works in the real world is entirely different.
Q: You mentioned that gold isn't politically correct. What do you
mean?
A: In 1971 Nixon closed the gold window -- he said that gold was
being demonetized. The reality is that gold still is money, but
what's being demonetized is the dollar. Every year the purchasing
power of the dollar is being eroded by inflation.
Q: Why is gold still a safe haven?
A: The way it works is gold is money. Gold is the only asset we
produce for accumulation. Every other good and service we produce is
consumed. Gold is hoarded. Essentially all the gold ever mined
throughout history currently exists in above-ground stocks. That's
not true for anything else. Even copper is consumed in the sense
that it is dispersed in millions of applications around the globe.
The fact that gold is hoarded is what makes it money. And it's very
useful for economic calculations for prices of goods and services
over long periods of time.
Q: Wouldn't it be better to invest in something like copper, which
is so useful? You know that eventually someone's going to want to
buy it.
A: Copper has use in terms of industrial applications. Gold has use
in monetary applications. So you'd buy copper if you want to build
engines. You buy gold if you want to have a safe haven for your
money.
Q: Who is interested in buying gold these days?
A: The most significant buyers over the past few years have been
individuals. Gold goes to where the wealth is being created. So for
example, the European central banks have been disgorging gold from
their vaults, and that gold is going to China and India because
that's where new wealth is being created. Gold is also going to the
Middle East with the rise in energy prices.
Q: So the central banks of China and India are accumulating gold?
A: The Central Bank of China apparently is buying. There has been no
evidence that the Central Bank of India is buying. But individuals
in those countries are accumulating the gold, and that's what
Americans have to be looking at.
Q: How can an individual invest in gold?
A: We use the term "investment," but that's a little bit misleading.
The amount of crude oil that you can buy with an ounce of gold is
the same as it was 50 years ago. So in that sense, gold hasn't
really provided any rate of return. What we call the rate of return
in gold is actually the loss of purchasing power of the dollar.
You can only have a rate of return when you take that gold and take
risks with it, as you would a normal investment. You either take
that gold and buy stocks with it, or you lend it to generate some
kind of rate of return. So when you look at an investment portfolio
and you have stocks, bonds, and cash, gold should be counted as part
of your cash. It should be that part of the portfolio that provides
liquidity.
Q: What do you think of the gold exchange traded funds?
iShares Comex Gold Trust and streetTracks Gold Shares are not an
alternative to owning physical metal. They're a convenient way to
speculate on the price of gold. They don't prove that the gold
actually exists in the vaults of the custodians and the sub-
custodians with an audit.
Q: If the dollar becomes stronger again or another currency emerges
as the sort of investment that people want to put money into, will
it affect the price of gold?
A: A few years ago when the dollar was beginning to fall of the edge
of a cliff, people started putting their money into the euro. But in
the past few years we've seen the price of gold rising not only
against the dollar but also against the euro, the Swiss franc, and
the Japanese yen. Gold is rising in terms of every major national
currency. You haven't had this since the 1970s. What happened then
was there was a flight out of national currency because people
became concerned about inflation and other monetary problems. This
is going to continue, in my view, in the years ahead.
----------------------------------------------------
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http://www.goldismoney.info/index.html
http://www.minersmanual.com/minernews.html
http://www.a1-guide-to-gold-investments.com/euro-vs-dollar.html
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Ted Butler silver commentary archive:
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----------------------------------------------------
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