For centuries, buying gold has been recognized as one the best ways to preserve one’s wealth and purchasing power. Gold is a unique investment, one that has served mankind well for thousands of years. From the times of ancient Egyptians, Greeks and Romans to more modern times, man has been fascinated with the beauty and magic of gold and with its power to change men’s lives.
Gold bullion is real, honest money….and, many say, the best form of money the world has ever know. It is a store of value and a safe haven in times of crisis. Gold is rare, durable and does not wear out. Gold is universally accepted, and can be easily bought and sold around the world.
The consumption of gold produced in the world is about 50% used in jewelry, 40% in investments and 10% in industry. The greatest consumption in the world today is India with the purchase of 745 tons in 2010 up 69% from 2009. Russia with the second largest consumption of 428 tons and the United States with128 tons.
At the end of 2009, it was estimated that all gold ever mined totaled 165,000 tons. At $1,600 per ounce, this would have a value of $8.8 trillion dollars.
Beginning in Phase I Maxam will be purchasing Gold from the local natives and then shipping it to NTR Metals in Doral, Florida on a weekly basis.
- Miami has the most direct regular shipping routes to Nicaragua and the facility there is dedicated to the needs of Latin American clients.
- Shipping will be via Fedex and insured for safety.
- Maxam will get 100% of the payout the day they receive our shipment.
- Rates are locked in for 5 days, simply by calling the day we ship.
- All legal documentation will comply with both the USA Patriot Act of 2001 and the Nicaraguan laws.
- Maxam banking in Nicaragua will be with Bank Central in Managua and Chase Bank in the US.
- Maxam will have legal and accounting assistance in both the United States as well as Nicaragua.
Gold may outperform other commodities as the bull run in raw materials pauses amid slowing economies, while grains and oilseeds may jump on weather disruptions, according to participants at the World Commodities Week conference.
Commodities will likely lack direction for the next 12 months, meaning investors will focus more on relative-value trades, according to Tiberius Asset Management AG. Deutsche Bank AG favors precious metals and is neutral on oil and industrial metals, Michael Lewis, head of commodities research at the bank, said today at the conference in London. Bullion isn’t in a “bubble” at current prices, he said.
“The markets will go sideways in a volatile environment” in the short term, said Christoph Eibl, a founding partner of Zug, Switzerland-based Tiberius.
Commodities erased their gains for the year on Oct. 23 on concern demand for energy, industrial metals and some agricultural products will slump as economic growth decelerates. Raw materials, as measured by the Standard & Poor’s GSCI Index of 24 commodities, made annual advances in 11 of the last 13 years. The gauge’s last annual drop was in 2008.
The International Monetary Fund cut its 2012 global growth forecast to 3.3 percent on Oct. 9, compared with a July prediction of 3.5 percent, and expects the euro area to contract 0.4 percent. Growth in China, the biggest user of everything from copper to cotton, has slowed for seven consecutive quarters.
The S&P GSCI gauge is down 1.2 percent this year and the MSCI All-Country World Index (MXWD) of equities gained 10 percent. The U.S. Dollar Index, a measure against six major trading partners, fell 0.3 percent.
While many of us at Casey Research don't like making price predictions, and certainly ones accompanied by a specific date, it's hard to ignore the correlation between the US monetary base and the gold price.
That correlation says we'll see $2,300 gold by January 2014.
There are plenty of long-term charts that show a connection between gold and various other forms of money (and credit). Most show that one outperforms until the other catches up. But let's zero in on our current circumstances, namely the expansion of the US monetary base since the financial crisis hit in 2008.
Here's the performance of the gold price compared to the expansion of the monetary base since January 2008.
You can see the trends are very similar. In fact, the correlation coefficient is an incredible +0.94.
Since the Fed has declared "QEternity," it's logical to conclude that this expansion of the monetary base will continue. If it grows at the same pace through January 2014, there is a high likelihood the gold price will reach $2,300 at that point. That's roughly a 30% rise within 15 months.
One of the points we've made several times over the last year is that traders stuck in an old paradigm are frequently selling gold for the wrong reasons.
he most egregious (or just plain silly) example is that gold often drops when the euro drops.
This happens, not because there's anything wrong with gold at such times, but because gold is priced in dollars. Instead of being thought of as a store of value in many investors' minds, gold is viewed as a hedge against weakness in the dollar.
But what are dollars priced in?
Purchasing power is the underlying reality any "price" for dollars should get at, but that's hard to measure – and the government can't be trusted to report the truth about this.
Unfortunately, in today's world currencies are valued in many people's minds by their "strength" in foreign exchange markets
Maybe that's in part because nobody believes CPI statistics anymore.
At any rate, the dollar is frequently valued in relation to its main competitor for reserve currency status. In other words, to many players in the market, the dollar is priced in euros.
So when the euro gets slammed, the dollar rises, and this apparent "strength" of the dollar makes gold seem less attractive as a hedge, and gold sells off.
You can see this inverse correlation between gold and the dollar – as well as a very tight correlation between gold and the euro – in this chart of recent price action.
The pattern is very strong. The inverse correlation between the dollar and the euro is extremely high, at -0.92. The inverse correlation between the dollar and gold is not as high, but still very strong: -0.78. And the correlation between gold and the euro is also very high: +0.74.
In our view, this set of relationships clearly shows the error of those caught in this trading paradigm.
The euro is not backed by gold, nor anything at all.
It's a floating abstraction, even more nebulous than the dollar. Gold is a solid commodity, the ultimate safe haven people all around the world turn to when the acceptance of paper currencies and other assets is in doubt.
There's no valid reason for gold to gain and lose value in concert with the euro – it's merely an artifice of both gold and the euro being "not the dollar."
This point is clearly evident in a longer-term chart of the same variables as above.
As you can see, while in the short term gold and the euro seem alike (alternatives to the dollar), over the long term, the euro and the dollar are much more alike, while gold is a beast of an entirely different nature. The euro and the dollar take turns winning and losing against each other, but both are being debased, both are losing ground in the real world, and both have lost a lot of ground against gold.
Now, which of these three would you like to trust your savings to?
And which would you like to speculate on, going forward?
The answers are crystal clear to us here at Casey Research, and they form the basis of our recommendations in our metals newsletters.
Holding precious metals is an excellent way to preserve wealth. Investing in specific mining companies that are poised for growth and/or a takeover by a larger company can be a way to increase your wealth many times over. But not every junior mining company offers such promise... and timing is an essential key to successful investing with this strategy.
Louis James, Casey Research's metals and mining investment strategist, knows the ins and outs of the junior mining sector and has an uncanny ability to sniff out the best prospects. Learn how he does it – and more important, how you can put his expertise to work for you.