Gold

Is gold a commodity, an investment, or money?

Gold is all of those things.

At times, it behaves like a commodity, following the ups and downs of commodity indices. At other times, gold is viewed as a safe-haven investment. When there is market turmoil, investors flock to gold because it is ‘old money’.

Right now, gold is behaving more like money than a commodity or an investment. Central banks have consistently devalued currencies since the market crash in 2008.

That’s a big deal because it shows that people around the world are losing confidence in paper currencies.

What indications are there that gold is behaving like money?

For one thing, gold’s price action has diverged from the price action of other commodities. This divergence first appeared in late 2014, but has become more pronounced in recent months.

Right now, as investors around the world lose confidence in a long list of emerging-market currencies, preferences are shifting toward US dollars and gold. This accounts for gold’s out performance of the rest of the commodity complex when measured in US dollars.

And when the price of gold is measured not in US dollars but in rubles, yuan or rials, the percentage price increase in gold is even more impressive, because those currencies have all declined lately against the US dollar.

When you understand that gold is money and competes with other forms of money in a jumble of cross-rates with no anchor, you’ll understand why the whole monetary system is going wobbly.

It’s important to understand that all currencies are just one form of money.

It’s not necessarily the best for all investors in all circumstances, but gold is a strong competitor in the horse race among various forms of money.

Lost confidence in fiat money starts slowly, building rapidly to a crescendo. The end result is panic buying of gold and a price super-spike. Why? Because gold doesn’t have a central bank and associated risks. In addition, gold always inspires confidence because it is scarce, tested by time, and has no credit risk. That’s why investors tend to flock to gold during times of uncertainty.

Trump Boosts The Gold Price

The net short position in gold futures is now 26,500 contracts. At the depth of the bear market in December 2015, there was only two weeks where the positioning was more extreme, at 27,200 contracts.

What to Watch for with Aussie Dollar Gold

Today, I’ll take a look at the Aussie dollar gold price, which adjusts for the difference between the US and Aussie dollar exchange rate. This is a far more important price to watch for Aussie gold stock investors.

Where Do All the LNG Dollars Go?

The massive investment into liquid natural gas (LNG) over the past decade has resulted in the development of a new export industry. It may finally start to pay off over the next few years.

This Sector Is an AVOID!

There is a good chance that the long term impact of this royal commission will be a complete dismantling of bank business models. As I pointed out yesterday, banks are already starting to put their funds management businesses up for sale. Next, the rest of the wealth management arms (including the financial planning networks) will probably go too.

Who Wants Gold with Their Trade War?

US markets bounced back overnight. There was no reason in particular. Probably just that, on consideration, the previous day’s falls might have been a little excessive. Still, the market feels a little bit like the proverbial cat on a hot tin roof. That is, edgy, nervous, and ready to jump if need be. In my view, the risk of a trade war is higher than many people think.
Money Morning Australia