Forum Archive Index - January 2004

["G Stolwyk" <stolwyk@wave.co.nz>]

Hi Allan,

 

There are a number of ways to invest and what I have done is to  buy into promising junior  stocks. That way, although the gold price may temporarily  decline, the price holds up or increases in some cases. 

 

A good example is ADU which is still rising. I don't believe in holding physical gold. Gold shares can rise by 100% or a great deal more within a short time but you got to know what you are doing.

 

Neither do I favour tracking the price of gold using Gold funds of any description.

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As to the outlook of Gold, nothing has changed in my opinion. It is not just the US deficit but all the problems associated with it. Bush' predecessor left the country in very good shape and this President is hell bent trying to get himself elected I suppose.

 

And every device is being tried to achieve that, regardless. The bad days are to come once a new President is elected  for he won't be "inheriting the earth ", only the cumulative excesses of very poor handling of the US economy over a long time.

 

How would you feel supplying oil in debased US dollars? Or lent the US money -The US is a massive user of foreign capital to shore up its deficits- and then find after a short time that you have lost 20% or more in a bad currency?

 

The problem is that as money flows out of the US, the problem with a falling dollar is exarcebated. It becomes a self fulfilling prophesy.

 

So, from time to time, the Central Banks support the $US by buying it but what use is that if these same dollars of any description keep flowing out?

 

One would think that selling US assets is a way out, but foreigners would like to buy these when the dollar has hit the bottom, not now. 

 

Another problem is that China and India are being used to produce goods and services in a massive way. 

 

So, I can't see any improvement at all, athough the dollar's fall is being masked by Central banks from time to time; that can be very expensive as there is little to hold up the dollar.

 

The time will come when these Banks are loath to  repeat this too often and want the US to take some very unappetizing measures.

 

To do so however, could cause stagflation for some time to come and a drastic lowering of US living standards and will affect others as well.

 

Once the dollar finds a bottom, then the foreigners will move in and buy US exporters at a discount price. And that in turn will contribute also to a hefty lowering of US living standards.

 

My opinion is that Bush is unwilling to change and that ought to be promising for gold. After all, the dollar has gone down faster than the Gold price has risen so there is some leeway to make up here.

 

That is my opinion,

 

Gerry

Readers, please do your own research and you will be responsible for any actions you want to take.