Monday, January 18, 2010

There's Still Optimism, Long-Term

Despite gold's tepid performance recently, optimism for the longer term is still out there. For example, this Mineweb report opines that gold's been held back because some investment demand's been siphoned off by the new platinum and palladium ETFs. The author, David Levinson, is still a bull long-term:
Once again there is talk that gold is forming a bubble at these levels. Like I've stated many times, I heard this when gold went from $250 to $500. I heard it again when gold moved to $700 and then to $900. And, once it traded above $1000 I heard many analysts state that gold had peaked. As far as I am concerned, the fundamentals driving the yellow metal are all still intact, and this market has a long way still to go.

Even if the dollar stages a comeback in the short-term, with US national debt approaching USD12 trillion, interest rates at around zero, unemployment at 10%, how is the dollar going to reverse its downward spiral? As the rating agencies continue to downgrade countries in the Eurozone we may see some pressure on the Euro which may in the short-tem boost the dollar, but ultimately, the continual problems facing these fiat currencies will push the gold price to new levels....

One important fact in this article is 2009 gold production. Despite production declining during the last decade, as noted in this interview with a managing director of the World Gold Council, 2009's went up. The same Mineweb report pegs '09 gold production as 2,553 tons, an increase of 144 from 2008's 2,409 tons. Levinson's argument is based on monetary debasement, not declinign production, so his bull case is demand-centred.

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