Being relatively new to all this I'm getting a bit confused.
With these assumptions:
1. Gold should go up (for a variety of reasons)
2. A$ getting stronger
3. Decoupling of US$ from commodities (in med-long term)
Does this mean that it's GOOD to buy gold/gold miners or it's BAD because as the Aussie gets stronger the value of gold (for the same price in US$) goes down. Then what happens if commodities cut away from the $US?
Can someone smarter than me please comment.
nobody can advise you on what is a good or bad thing to do - i.e. you have to read and make your own judgement - but we can express opinions.
My view is that the printing of massive amounts of money backed by dubious quality debt has a twofold effect - it undermines confidence in the USD as an asset - it is no longer AAA rated debt backed by quality productivity but is now a minefield of junk debt. The secondary effect is that it creates a USD supply that will be inflationary inside the US and again has the effect of creating an oversuppply of USD investments which is deflationary for the US dollar. Thirdly by not taking the pain early and quickly it will prolong the recessionary impact of the US malinvestment in sub-prime mortgages and construction of property for no purpose.
Thus at some stage a flight of capital away from the USD into more tangible investments is likely to occur (note this is
opinion only). Tangible investments may be other currencies, other commodities, oil or gold. History shows us that when people are very unsure about the stabilty of a currency and/or an economy or government then gold takes the limelight.
Thus my view is that the current situation will have an effect of devaluing all currencies - primarily because the USD is also a reserve currency. So the USD will fall, but the flight of massive amounts of capital out of the USD into the very small pool of gold investments that are available will cause the gold price to rise much faster than the USD will fall.
How gold juniors will fare depends entirely on the randomness of the market, and when or whether sentiment takes hold - so if you are an investor of my ilk you are looking for investments that will give a return (i.e. generate cashflow/dividends or become a cashbox) regardless of what the market decides - that means quality explorers with a clear path to production or new producers with reasonable reserves, good prospects for increasing their reserves and resources and operating margins that can withstand some input cost increases and production/operating delays/issues, and that also have strong cash positions.
Short summary - in my view if/when the gold run starts the price will rise faster than the USD will fall because there will be many fleeing the USD room through the door into the gold room and the gold room is much smaller than the USD room. At some point the market will no longer ignore a running gold price and it will look attractive for investors fleeing the USD to put money into stocks that can give them the gold they are after by pulling it out of the ground.
If things get bad enough a paradigm shift can occur - at the moment we price things (gold, oil etc.) in terms of the USD and think of 'money' as the valuable thing. Once upon a time long ago people viewed 'gold' as the valuable thing and the money was only a representative of the gold that backed it. We've come along with the money illusion and that has allowed the USD bubble to grow to the extent that it has.
Now there's a ramble for the morning.