Gold Price - Where is it heading?

[TimeISmoney]

The US have the most to lose with their retirement funds, don't they?

​

 

[Craton]

Yes, Costello. Another sorry tale and one of the many reasons he'd never be our PM.

An ABC news article from 2010 about Costello's 1997 sell off of approx. two thirds of our bullion for $2B, reads that at the time it was said to have been a good call.

Not for too long as hindsight will differ and show it was a very bad judgement and decision, especially in light of the big buyer (and others) that's still gobbling up the yellow metal.

Article reads in part:

In the late 1990s gold was considered by Australia's economic movers and shakers as old hat, soiled goods. We were told our sophisticated financial system had moved on.

Well we all know where the system ended up - in the GFC without a paddle. Had you invested in some shiny stuff you would be well rewarded by now. This week the price of gold jumped by more than $19. It's sitting somewhere around $US1115.00 an ounce.

In November 1997 the then Treasurer, Peter Costello, shocked some people when he announced he'd signed off on the sale of $2 billion worth of Australian bullion. On the day he announced the sale the price was around $US306.00 an ounce. At the time, according to Mr Costello, gold "no longer plays a significant role in the international financial system".

Three days after the bullion was sold Australian gold shares slumped 16 per cent. With gold languishing there were more than a few people within government and the Reserve Bank congratulating themselves on such a prescient sell off.

But no-one else seemed to be selling, certainly not the US, and Robert Champion de Crespigny at the time expressed concern about Australia's ambitious move. The then executive chairman of Normandy Mining, Australia's largest gold mining group said:

"I think the Reserve bank has handled this extremely clumsily". Gold, he said, had a future if you took a long term view.

So here it was 1997 and Australia had sold two thirds of its gold assets in a single day, and sold into a buyer's market.

While the sale helped pay down debts, the deal was to cost Australia billions of dollars in the long run. But at the time people were lining up to congratulate the Treasurer.

 

[mullokintyre]

Yes, Costello. Another sorry tale and one of the many reasons he'd never be our PM.

An ABC news article from 2010 about Costello's 1997 sell off of approx. two thirds of our bullion for $2B, reads that at the time it was said to have been a good call.

Not for too long as hindsight will differ and show it was a very bad judgement and decision, especially in light of the big buyer (and others) that's still gobbling up the yellow metal.

Article reads in part:

There are still plenty of movers and shakers who believe that gold is old hat, or soiled goods.
these are the folks who argue that digital coins/currency is going to replace gold.
Mick

 

[Garpal Gumnut]

There are still plenty of movers and shakers who believe that gold is old hat, or soiled goods.
these are the folks who argue that digital coins/currency is going to replace gold.
Mick

I believe that Bitcoin is a load of bs. However investors around the world have been bidding it up over the last week and selling gold.

That is the problem. Not that BTC will replace gold.

gg

 

[mullokintyre]

The Name Judy Shelton may ring a bell for some.
She is an avowed Gold Bug, who has consistently called for a return to the gold standard for the US dollar.
She was nominated by Trump in 2019 for a seat on the fed , but could not get enough senators to agree to her ratification when a number of GOP senators were missing in action during the covid lockdown, and Biden eventually withdrew her nomination.
There is talk around Town that Trump will this time get her on the Fed, maybe even push to get her to replace Jerome.
That would be the biggest push for gold since the olympics were restarted.
mick

 

[ducati916]

The third millennium (assuming it started in January 2000; remember Y2K?) is almost 25 years old. And it makes a sensible landmark on many levels for anyone trying to understand financial history. Jan. 1, 2000, marked almost the exact top of the biggest stock market bubble to date. Vladimir Putin came to power in Russia, nearly to the day. The euro had been initiated a year earlier. China joined the World Trade Organization a year later. The twin towers of the World Trade Center would stand for only another 20 months. And in today’s polarized environment in the US, it’s handy that Democrats have been in power for 13 of the years and the Republicans for 12, so generalizations aren’t making a political point.

All this creates a great juncture for Jim Reid, Deutsche Bank AG’s resident financial historian, to make a fascinating study of the century’s financial returns so far. (The charts are from him.)

To start, the fact that the millennium opened with stocks historically strong means that they haven’t had that great a quarter-century. Gold leads everything else:


This isn’t just a trick of the starting point. When Reid takes a look at the longer history of the ratio of the S&P 500 to the gold price (or what the S&P would notionally be worth if it were denominated in gold rather than dollars), he reveals a marked trend. The story of the last 25 years has been the steady advance of gold. By this ratio, the only time in history that is comparable is 1980, when the inflation that followed the end of the Bretton Woods gold peg led to an all-time low. That milestone proved to be a signal that the old order couldn’t work, and we witnessed the growth of globalized finance underpinned by a Federal Reserve that determinedly stamped out inflation:


This does seem startling, given how well stocks have performed for the last 15 years. To understand the conditions that have favored gold, Reid’s extraordinary data on central bank balance sheets offers an explanation. There are numbers on the Bank of England’s balance sheet dating back to 1697. Since 2000, it has expanded in a manner that would previously have seemed impossible. Largely the same can be said for the Fed, even if it’s only been around since 1915:



Not only monetary policy went into overdrive. Fiscal policy has come as a very unpleasant surprise. At the beginning of 2000, the Clinton administration succeeded in eliminating the ongoing deficit, and there were plans to retire all US debt. That didn’t happen. At present, US government debt as a proportion of gross domestic product is almost as high as when the country was on a war footing in the 1940s, and is projected to go much higher:


The US and its Treasury market matter far beyond American shores, but the trend is worldwide. At the turn of the century, global debt was a bit more than double GDP. It’s now somewhat more than triple:


It can be irritating to hear pundits hyperventilating about risks of disaster and the unsafe foundations of finance, but there are reasons why they do. We don’t know how this story ends, but anyone shown these figures 25 years ago would have been horrified, and predicted very serious trouble.

Beyond the rise of global debt and printed money, the other most startling development has been the rise of China. Deng Xiaoping’s effort to open the Chinese economy and prioritize growth was already almost a decade old at the millennium, but the model was just beginning to get into gear. Accession to the WTO would make a difference. This is what has happened to China’s GDP as a share of the US economy since 1980:


China has managed to keep growing even though globalization, as measured by trade volumes, has stalled; roughly ever since the 2008 financial crisis. International trade had been one of the presiding trends of the 1990s, taking off after the Berlin Wall fell. It hasn’t gone into reverse, (though that’s a strong possibility with a new wave of Trump tariffs), but appears to have reached its limit:


There is very much more where these figures came from, including some alternative calculations starting from 1995 rather than 2000 to avoid the uniquely bad starting point for stocks. It waters down the findings somewhat, but still makes the current period look rather disappointing. All of this news, however, should be in the price. What really matters is what happens next.

One of the classic texts in finance is Triumph of the Optimists by the academics Elroy Dimson, Paul Marsh and Mike Staunton, a massive study of asset class performance in the 20th century across the globe. It gets its title from stocks’ fantastic showing from 1950 to 2000 — which happened largely because the optimists, from the standpoint of 1950, were proved right. The postwar miracles in Germany and China, the fall of the Soviet bloc, the rise of the Asian Tiger economies and then China all lay ahead. People in 1950 would have been glad just to know that nuclear weapons would not be used again that century. As a result, optimism triumphed; it was a great idea to buy stocks in 1950.

In 2000, we now know, it was a better idea to buy gold. Compared to the reasonable rosy hopes of the time, it’s the pessimists who have won. Those invested in stocks have done well, but largely because of the extraordinary increases in government borrowing and lenient monetary policy. It looks once more as though a concerted attempt to change the world’s economic model and fix what isn’t working is now underway. Let’s hope the next 25 years are another victory for the optimists.


jog on
duc

 

[Garpal Gumnut]

I'm practising my knife catching.

My Nana used sing this song ...



gg