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If we could write the script for the perfect backdrop to a true bull
market environment for precious metals let see where we stand.
IF ONLY....
By: Richard J. Greene, Thunder Capital Management
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Government spending is out of control with little regard for bringing budget deficits into balance;
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Trade deficits are mounting toward new records despite a more than 30% decline in the value of the dollar;
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Inflation rates and
employment statistics were actually much worse than the Government reported figures;
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Real interest rates were to remain negative for an extended period of time, not only destroying the purchasing power of savings, but also encouraging the misallocation of capital to assets with artificial demand;
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Government sales of gold and silver were to subside or diminish;
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Production and Demand annual amounts are bullish for both gold and silver;
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The trend of the Dow/Gold Ratio is
bullish for gold;
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There are huge
short positions in gold and silver that could not be delivered;
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Loose regulations on the CFTC to encourage dangerous short positions existed;
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A major
lawsuit was underway to uncover the manipulation of gold and silver prices from attaining true market prices, (allowing us the gift to purchase almost unlimited amounts of gold and silver now at what is surely below market prices);
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The masses, particularly in the US, were so uneducated in the histories of
fiat money systems and historical prices of gold and silver, allowing for the buying opportunity of the millennium;
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The true meaning of the word
inflation
was widely mis-understood;
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The size of the gold and silver markets compared with all of the existing
asset bubbles would be insignificant;
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Gold and silver stocks had a negative beta, making for the perfect fit in a diversified portfolio or fund-of-fund to increase risk-adjusted returns;
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Foreign governments would get in the spirit and competitively devalue their currencies against the US dollar, where gobs of paper have recently been printed;
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The idea of once again
backing currencies with precious metals
got underway;
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Armed conflicts are underway with their never-ending budget busting calls for more inflationary spending to achieve their military objectives at any cost;
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There existed incomprehensible leverage in the financial system, largely in the form of financial derivatives, (last estimated by the BIS at $234 Trillion notional);
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The biggest savers in the world, Asians, believed in gold and silver;
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Other commodity prices such as gas and oil are soaring.
http://www.goldinfo.net/silver600.html
Historical
price of gold in 1998 dollars.
Relax precious metals investors. While there are many things to worry about in this world, including many of the things listed above, your choice to invest in precious metals is hardly at risk. Most of the things on this list have already occurred or are in the process of happening. These are the very reasons you would want to invest in precious metals in the first place. In the past few months, there are undoubtedly investors of precious metals fleeing the market; prices have come down. Many do not understand why they were there in the first place and are selling because they stopped going up, technical chart patterns have broken, etc. etc., but the fundamentals have NEVER been better and are getting better every single day. Just look at their selling as your opportunity to buy at a generous discount to true value. You are among the few who are buying true value in the markets today.
Richard J. Greene
May 28, 2004
(Other articles by the author can be accessed by the Research Articles choice at:
http://www.thundercapital.com )
-- Posted Wednesday, June 2 2004
Previous Articles by Richard J. Greene, Thunder Capital Management
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