... they'd be bidding up gold ands
silver - instead of oil!
If traders and investors were smart,
they would bid up the price of gold instead of oil. Likewise, if governments
and central banks were smart, they would take the lid off the gold price and
actively encourage investment in that most precious of all commodities.
Why?
Simple. Everybody can live with a high
and further rising price of gold - because such would not in any way drive up
the prices of other commodities, of transportation, of manufacturing
processes, and of all products that are either hydrocarbon based themselves
(like all forms of plastics or rubber) or that require hydrocarbon input
(such as heating/cooling energy).
In short, piling money into gold would
actually preserve the buying power of those worthless but over-hyped forms of
scrip and electrons we all refer to as "money".
As long as my fiat dollars buy
approximately the same amount of the things I need in order to just exist
next year, or five, maybe ten years from now, I can live with a high price of
gold even if I'm not a gold investor.
But I might become one, if I see gold
rising to fantastic heights relative to dollars.
However, if it's the price of oil that
gets bid up, things look different. More and more of my meager
paycheck will go to gasoline and heating/cooling my
home while everything else gets more expensive as well, and while the buying
power of my dollars drops against other currencies.
The problem is, of course, that neither
governments, nor banks, nor other large (oil) corporations benefit from
higher gold prices. So governments, their central bank paymasters, and the
large corporations that feed off of both institutions do their utmost to
suppress gold whenever they can and actually encourage speculation in oil and
related products.(1)
Why?
Why would they do this?
Most of them buy into the global
warming/Kyoto
treaty scam, so they think higher prices will cause you to drive less. As a
neat side-benefit, the oil companies get to make record profits.
What makes me think this is intentional?
Well,for one thing, oil inventories are actually
rising. Supply is up,demand is
waning - but prices are rising anyway. I see no underhanded attempts to
manipulate the oil price down.
As far as gold and silver are concerned,
however, demand is high and supplies are shrinking - but the price is falling
despite serious inflationary pressures and tremendous dislocations in the
debt-driven financial markets, all of which usually support gold. Hence,
underhanded downward manipulation of the gold price is occurring.
Doesn't take much to figure that one
out.
If you presume that central banks,
governments, and large corporations are all run by individuals who have the
best interest of their respective countries and their countries' populations
at heart, it really makes no sense at all.
But the title of this article isn't
"If Governments Were Smart ...". We already know they are
stupid - or at least that they have reasons for acting that are different
from those most people attribute to them.
So, let's get back to traders and
investors' mindsets:
Traders of course will put their
monetary electrons wherever they see a quick, "tidy" profit. Right
now, in the trading world, it seems as if oil is considered a better and more
sure-fire quick-profit deal than gold. Gold is being suppressed (or, for the
uninformed, "doesn't perform well"), and oil keeps on shooting up.
No problem. Oil makes sense for traders
- at least in the very, very short run, which unfortunately seems to be the
only time horizon they are mentally equipped to operate in. In the longer
term, this profit calculation is turning into a wash, however.
In the longer run, the precious
electronic currency units they earn with their tactics are buying less and
less of what they want in life, reducing their effective profit margin
considerably. The more this happens, the more they must rely on further
trading profits, just to be able to keep up, just to break even and eke out
yet another little bit more so they can brag about it - but the higher oil
goes, the more expensive everything else becomes.
Bad, bad traders.
How about investors, then?
Buying stocks in oil companies seems
like it would be all the rage, lately. Well, actually no. One look at two of
the largest oil companies in the world will show you that their stock price
has benefited little if anything at all from the most recent run-up in oil
prices.
Do the oil companies care, however? Uhm, no. Their profits are up, big time. Why their stocks
don't reflect that is yet another issue, but we will not deal with that in
this article.
So, if there is any such thing as
"smart money" out there, you know where it should be going - but it
doesn't. If there was any such thing as "smart governments" out
there, you know into what type of asset class they should be encouraging
investment - but they don't (except for maybe China, which actively
encourages its citizens to buy gold).
Where does that leave you, as a retail
investor?
Should you "fight city hall"
and put your money in gold rather than oil? Well yes, of course. (What was
that famous investment maxim, again? Buy low, sell high - right?)
The lower gold goes, the more you should
be buying. Why? Because you know it won't stay low. Besides, what we call the
"price of gold" is a complete mirage anyway, and the fact that it
is being manipulated downward in this worldwide financial crisis amid
heightened inflationary expectations should be seen as yet another indication
of official stupidity, and therefore as a gift from "stupid" -
straight to you.
Euro vs. Dollar Gold Monitor subscribers
are aware of technical warning signals of (yet another) impending precious
metals sell-off are mounting, but so what? All the more reason to buy in when
gold drops down to $800. If it drops even lower, the better. If the fiat
establishment feels compelled to let you buy the only thing that can be used
as physical money and that has real value for less and less worthless scrip,
so be it.
In the end, you'll have the gold, and
they will have the worthless fiat scrip. Now that's
what I call a "trade"!
Got gold?
Alex Wallenwein
Editor,
Publisher
The EURO vs
DOLLAR GOLD-MONITOR
Just like driving your car, investing only makes
sense if you can see where you are going. The Euro vs
Dollar Monitor is your golden windshield wiper that removes the media's crud
of financial misinformation from your investment outlook. Don't drive your
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