Gold & Silver revisited.

[terry5732]

Gold finally hit $700 again today. That will buy you 233 gallons of gasoline per ounce !
Back in '80 an ounce woulda bought 800 gallons.
I see petroleum doing better than metals for the 25 year period.

[jim_mich]

Terry,
Using your figures, for gold to be the same value relative to gasoline it would need to peak at about $2403 per ounce, which shows how the gold price has been suppressed over the years. Given time gold will again buy 233 gallons and gasoline will probably be about $7 a gallon. The suppression of the gold price is at an end. The "strong dollar policy" is over. The U.S. dollar is toast. The turning point was 2002. For 21 years (1981 to 2002) gold was a bad investment. After 2002 gold and silver are an excellent investment and should continue to be excellent for the next six to ten years.

[jim_mich]

Buffett loses his silver.

May 8, 2006

The recent revelation that the renowned investor Warren Buffett sold his silver was a mega-event. It was big news when Mr. Buffett bought silver some 8 or 9 years ago, and its sale is also big news. Let me state the facts as I know them, and then IÂ’ll speculate.

Mr. Buffett always said he would make it known when he sold his silver and he kept his word, using the occasion of his companyÂ’s annual meeting to tell of the sale. While he did not reveal the exact amount, time and price of the sale, he indicated that he "sold too early" and did not profit from the sale. I found that very surprising and particularly unusual for Buffett.

According to public statements, Mr. Buffett had amassed a large chunk of silver (between 90 and 130 million ounces) by early 1998 at low prices (under $6). Mr. Buffett was very clear as to why he purchased the silver, citing the fundamentals in the same manner that I have described them and professing to be in for the long term. I wrote several articles at that time, praising and congratulating Mr. Buffett on his investment acumen.

Silver has hit recent highs amid those fundamentals playing out almost exactly as anticipated by Buffett and myself and others. Why would Buffett sell the silver too early and how could he not profit from the recent spectacular price rise the way so many others have profited? After all, this man is an investment legend.

HereÂ’s what I think happened...

Click here for the rest of the story as posted on http://www.investmentrarities.com and elsewhere.

[ken_behrendt]

The "Wizard of Omaha" does occasionally "take a bath" on an investment. But, all one needs to be a "successful" investor (or gambler) is to be right more often than wrong. The problem with investing is that whenever someone convinces himself that he's found the next bull market in anything, there's another guy, just as convinced, that it's the next bear market! I gave up trying to "time" markets a long time ago. But, I am and remain very bullish on precious metals.

Anyway, I noticed that the US dollar took yet another beating on the International currency markets today. It's now down about 7% against the Euro since the beginning of April. I expect this to result in another quantum leap in the price of gold during the next few days. $1000 USD per troy ounce is right around the corner...


ken

[Wheeler]

I am disturbed by this.

If you and I could extract 500 tons of gold or silver from some place on Earth, and the amount of money we would then posses would indeed reflect the find.

Would we consider the Earth, our planet?
Or would we just go for it, like no tomorrow and simply say that what we will do with the money will make the world a better place?

Even if it puts a large hole as big as a mountain in a glacier.

Below is a something a friend sent to me, and I would like everyones opinion.
________________________________________________

Judge for yourself if you want to take action. In the
> Valle de San Felix, the purest water in Chile runs
> from 2 rivers, fed by 2 glaciers. Water is a most
> precious resource, and wars will be fought for it.
> Indigenous farmers use the water, there is no
> unemployment, and they provide the second largest
> source of income for the area. Under the glaciers has
> been found a huge deposit of gold, silver and other
> minerals. To get at these, it would be necessary to
> break, to destroy the glaciers - something
> never conceived of in the history of the world - and
> to make 2 huge holes, each as big as a whole mountain,
> one for extraction and one for the mine's
> rubbish tip. The project is called PASCUA LAMA. The
> company is called Barrick Gold. A multi-national
> company plans the operation. The Chilean
> Government has approved the project to start this
> year, 2006. The only reason it hasn't started yet is
> because the farmers have got a temporary stay of
> execution. If they destroy the glaciers, they will
> not just destroy
> the source of specially pure water, but they will
> permanently contaminate the 2 rivers so they will
> never again be fit for human or animal consumption
> because of the use of cyanide and sulfuric acid in the
> extraction process. Every last gram of gold will go
> abroad to the multinational company and not
> one will be left with the people whose land it is.
> They will only be left with the poisoned water and the
> resulting illnesses. The farmers have been
> fighting a long time for their land, but have been
> forbidden to make a TV appeal by a ban from the
> Ministry of the Interior. Their only hope now of
> putting brakes on this project is to get help from
> international justice. The world must know what is
> happening in Chile. The only place to start
> changing the world is from here.

[ken_behrendt]

Wow! Today was a really weird day on the New York Stock Exchange.

They had wheeled out a giant birthday cake to celebrate the 214th anniversary of that stock market. How did the exchange respond? By posting a 214 point drop in the Dow Jones Industrial Averages! Talk about strange and ominous synchronicities!

Apparently, investors got really spooked when the latest inflation report noted that consumer price are up much higher than expected. Surprise! But, was it really all that surprising considering what has happen to the price of oil worldwide? That increased fuel price is starting to show up in practically everything an American buys from the price of food to rent to interest payments. With the Federal Reserve determined, apparently, to "cool" the fires of inflation with more future interest rate hikes, expect the Dow to continue to slide.

Meanwhile, the price of gold is about $700 USD per troy ounce and shows no signs of being ready for a "correction"...



Wheeler...

It sounds like those indians in Chile are getting a "raw deal" when it comes to that gold under the glacier.

As a kid I used to pan for gold nuggets in the mountainous streams of NJ and know all too well the excitement that can follow seeing a bright little speck of the yellow metal suddenly emerge from the muck.

However, the gold I found was already mostly extracted by Nature for me. I did not have to dump a lot of toxic chemicals into the biosphere to obtain it. I say that if they can not commercially extract the gold under that glacier without using chemicals, then they should just let it be. We need unpolluted air, food, water...and people more than we need gold.


ken

[terry5732]

The extraction company uses these chemicals and has to pay for them. They have no interest in dumping them in a river. There are no chemicals released from modern practices. I have my doubts as to whether they could actually try to mine through a moving ice sheet and still turn a profit. Were they to find a way, these dirt farmers would suddenly find themselves part of vast prosperity.

[ovyyus]

Jim, considering the hammering that Gold and Silver have taken over the last couple of weeks I was wondering what your current thoughts are for their short to mid term movement.

[ken_behrendt]

Bill...

Although you addressed your question to Jim, let me tell you my opinion of the situation.

It is true that the spot market price of gold dropped from about $720 USD/troy oz. to about $640 USD/troy oz. lately, but such "volatility" is to be expected in markets trying to decide which direction to go in.

There's obviously some profit taking going on that is dropping the price of the yellow metal, but you may notice that everytime their some sustained bad news from the Middle East, the price rises again.

Well, with the Taliban making a comeback in Afghanistan and this thing brewing with Iran, the potential for sustained bad news is a LOT greater now than for sustained good news. I expect the price to top $1000 USD/troy oz. before the end of this year. I think at the moment I view any dips in price as a "buying opportunity". Yes, $600 to $700 USD per troy oz. seems like a lot, but those who get in now will count themselves lucky when the price surges over $1000 USD per troy ounce sometime next year...


ken

[jim_mich]

Bill, sorry I missed your post last evening (or morning on your side of the world).

I think gold and silver have fallen as far as they are going to fall and both have started moving back up now. There will be many more ups and downs before they reach the top. The next big peak (before a big pull back like we just had) will be around $830 gold and about $17 to $20 silver. The silver ETF makes silver harder to predict. Silver will be more volatile but I expect it to climb faster then gold. I don't know how high they will eventually go but I do know they will continue to climb for many (6 to 10?) years.

[jim_mich]

Bridgewater's Hennecke Comments on Asian Stocks, Gold, Silver
2006-05-29 02:47 (New York)

May 29 (Bloomberg) -- Martin Hennecke, a senior manager at independent investment adviser Bridgewater Ltd. in Hong Kong, comments on Asian stock markets and his outlook for prices for gold and silver. Hennecke spoke in German in a television interview today.

Â…On prices for gold and silver:

``The price for gold is still about 70 percent below its fair value adjusted for inflation, and silver is about 90 percent below that fair value. In addition, gold and silver reserves are small and thus those commodities remain a very attractive investment.''..

Translation... Gold's fair value = $2181 and Silver's fair value = $130.20

[ken_behrendt]

In case nobody happened to notice, the US stock market's performance in May was the worst in the last two years!

I suspect, of course, that it's all related to the elevated price of oil and the uneasy suspicion in the back of people's mind that it has the potential to climb even higher. Of course, the ongoing collapse of the US dollar is not helping either. Personally, I favor a strong dollar rather than the shrinking one that some economic geniuses in Washington have decided is going to stimulate our exports so that we can begin, slightly, to reduce our status as the world's leading debtor nation.

Where will it all end? When push comes to shove, those with gold on hand will be the survivors and those holding IOU's and other paper promises, at least, have something to burn in their fireplaces to stay warm with in the winter...


ken

[jim_mich]

Ken,

Can you explain a "strong dollar policy". How does our government make the US dollar 'strong'? They have never revealed how they do it. Some 'gold bugs' such as GATA have determined that a 'strong dollar policy' means manipulating the price of gold and by necessity silver also. By keeping the prices low it makes the dollar look stronger than it is. This has made the dollar look strong for the last ten plus years but it is deceitful and eventually prices will seek their true value as the manipulators run out of central bank gold to sell. That time has now arrived. Unfortunately it's time to pay the piper.

[racer270]

What's really going on is your dollar buys one half of what it used to just three to four years ago,....It's a jungle out here--
right now we're advising "
put all you can into,..." canned goods and shotguns!"

A home in San Diego cost twice what it did just four years ago.....!
gasoline has almost doubled in four years.
And now they're talking about controlling inflation.......LOL
Gold is just a hedge against inflation,.... when you buy gold you're buying it with dollars, then hoping to sell it later on down the road and turned it back in the dollars......?
if the dollar buys 50% less than it did four years ago........ gold had better double..... just to stay even.
You can't eat gold or IOU's.
In my opinion:
what is really going on, is a fight over the control of the world's resources.....!
and the players in this saga, are just fleecing the country....!

I think my next piece of property will be a farm...!
gordy

[ovyyus]

I think my next piece of property will be a farm...!

The ultimate hedge :D