It seems that everybody is long gold these days. But why should the price of gold really go up – even if we are going to see higher inflation or currency crises?
Here a comment on gold from Warren Buffet: “[Gold] gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.”
Also, there is massive potential supply from distressed nations: the top 5 gold owners as of September 2008 according to Wikipedia are USA 8,133.5t, Germany 3,412.6t, IMF 3,217.3t, France 2,508.8t and Italy 2,451.8t.
Isn’t the price of gold already artificially inflated? Wouldn’t it be smarter to go long commodities that are of real use like oil, copper or zinc?
Feb. 10 (Bloomberg) — Aluminum Corp. of China, the nation’s biggest producer of the metal, may invest $15 billion to $20 billion in Rio Tinto Group to gain more access to natural resources, a person with knowledge of the matter said.
The talks involve Chinalco, as the company is known, buying bonds that will convert into Rio shares and purchasing stakes in Rio mines, the person said, declining to be identified as the details aren’t public. An announcement is planned for Feb. 12 when Rio publishes its 2008 earnings, the person said.
Rio said last week it was in talks with Chinalco to raise cash by selling convertible notes and parts of some units to reduce its $38.9 billion of debt. London-based Rio, which plans to sell assets and cut jobs and spending to lower debt by $10 billion this year, said Jan. 28 it was considering a rights offer.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aLErwtLyIV5o&refer=home
Yields are approaching zero and many have been saying it’s the short of a lifetime. I’m not sure. If we’re going into a deflationary environment, yields can at least stay here for a long time. However, wouldn’t that, coupled with the increase in government spending we are witnessing put a floor (at least) in gold? But gold is a retail product. It is not a necessary commodity, but rather just a currency play. In an environment where “need” trumps any currency, I believe it might actually provide a floor for the ag complex. Not sure how to play it, but just some food for thought.
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| Another food crisis year looms, says FAO
Thursday Nov 6 2008 15:20
The
world might face a repeat of this year’s food crisis as the credit
crunch encroaches on the agricultural market, leading farmers to cut
their planting because of falling prices and lack of finance to buy
fertilisers, the United Nations warned on Thursday.
“Riots and instability could again capture the headlines,” the Food and Agriculture Organisation said.
The warning was made despite a fall in the price of most agricultural commodities as farmers harvest bumper crops. |
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Posted by email from thehardtrade2′s posterous
Commodities/Futures, Strategy/Allocation | Rob | 
June 4, 2009 11:41 am | 
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