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Why it’s not a good time to invest in gold

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830 posts В• Page 31 of 802

When is the best time to invest in gold

Postby Faujar В» 23.10.2019

As is the sector gear….

We got hate mail after publishing Silver Backwardation Returns. It seems that someone thought backwardation means silver is a backward idea, or a bad bet. This is a drop of It is all the more scary when you realize that this drop occurred entirely over two days: Thursday and Friday this week. Also on those same two days. The question many people are asking us: is now a good time to buy? We have a few ways to answer that, in this two-part Report. We will show a detailed graph of the silver supply and demand fundamentals during the crazy market action of Wednesday through Friday.

The body of the article does not deliver on this claim. Instead, it says:. Future tense. Anyways, the meat of the article is that this bullion dealer has a spike in customer demand. It cannot restock products as fast as they are selling out. And it has widened its bid-ask spread to protect it from higher price volatility.

What is the word for the concept that one would have to be lacking, in order to accept this? Aaah, umm …. Arbitrage, the most powerful force in the market, is what keeps the price of gold derivatives tied to the price of gold metal. The answer is simple. If you need to sell right now, it is you who are the price-taker. You either accept the bid, or you keep your gold. This has nothing to do with paper gold if you have a gold Eagle.

Monetary Metals can buy as much gold as we want at the price everyone sees on their screens. If you think that gold is really worth more, then we have two questions for you.

How much more will you pay? And how much do you want? Arbitrage connects the price of gold and the price of gold derivatives. We note that most dealers go to the gold derivatives market to hedge the price risk of holding their inventory except the ones who lease it from Monetary Metals, and thus have no need to hedge. Sometimes, the best way to begin a discussion of the reasons why one should buy gold right now is to look at non-reasons.

We encourage everyone to be skeptical of these incredible claims, often from dealers who promise that the gold price will soon be in the tens of thousands of dollars. We believe that most people know or reasonably should know that the government is a profligate spender.

Its spending is much greater than its tax revenues, so it makes up the difference with borrowing. It may be less well-known that, in addition to outright borrowing, the government is also making promises to pay in the future which it has no means to honor.

That is, it is accruing liabilities without setting aside a corresponding asset to cover them. These are called unfunded liabilities. We are not political prognosticators, though we believe it to be unfeasible to repeal a benefit as popular as Social Security or Medicare.

Nor are we accounting experts, but we insist that accounting should describe a conservative picture of the state of an entity. If current policy says that the government must pay a dollar next year, then the balance sheet should have a liability of one dollar minus the discount rate.

It is extremely disingenuous to say just because the law could theoretically be changed, then there is no need to recognize any liability.

And by disingenuous, we mean dishonest. If a private company kept its books like this, its officers would rightly be sent to prison. Why is it so important to state that the government has debts and promises to pay that are beyond its ability to pay? To hold a money balance, is to be a creditor to this profligate spender who keeps dishonest books. No one should go all-in to this unpayable pile of debt paper.

Not even if they think that its next price move will be up. The price of the dollar is the inverse of the price of gold. When the price of gold falls, it really means that the price of the dollar rises.

That means the price of the dollar went up from After the last crisis, the Fed pegged the interest rate for one-day maturity at near zero. Throughout its various rounds of Quantitative Easing, most critics expected rising, if not skyrocketing, consumer prices. And the commonly-accepted remedy is for the Fed to raise interest rates. So in Dec —exactly seven years after it pegged it at zero—the Fed began to hike the rate. Over a period of three years and a month, it pushed the Fed Funds Rate up to 2.

Look at all the business activity that was financed at rates near zero of course, even the biggest business pays a spread above the government rate. Oil producers borrowed enormous sums to extract oil from shale rock.

Even in towns where retail malls were overbuilt e. Scottsdale, Arizona , big developers have been borrowing to build more. Airlines borrowed to buy new planes. Corporations borrowed to buy their own shares. The boost comes from the so-called wealth effect , that shareholders feel free to buy a bottle of champagne or a private jet. And the beverage and airplane companies borrowed to add the capacity to serve this demand. How much of this borrowing would have occurred at higher rates?

Much of it would not have been viable. Profit margins are thin, and return on capital is at a record low. So, we had the Fed looking at the imaginary threats of inflation and overheating , while the self-fulfilling prophecy of rising GDP confirms that the economy was strong.

The Fed did what it was it was supposed to do. Keynesians, Monetarists, and otherwise-free-marketers all agreed. So it hiked interest rates. All during this time and long before , we were saying that the long-term interest rate trend is necessarily downward. Our assessment that little borrowing is feasible at higher rates helps lead us to this conclusion. Demand for credit would dry up. Even if the Fed did not care about that, and the resulting drop in GDP, there would be a crisis soon enough.

This is because corporations have been trained to borrow using short-term instruments. But it does have the drawback that they have to roll their debts every few years.

That is, the old bond is due and they must sell a new one to repay the old one. If they have thin margins, and the new rate is higher, they may be in trouble. So, January a year ago was the last rate hike. The Fed managed to hold the line for six whole months.

And in August, they declared the first rate cut. Lest anyone tell you that the economic problem revealed by this episode is entirely due to the coronavirus, we chronicle the abrupt reversal of Fed policy beginning long before said virus.

Contrary to the strong economy belief, the economy has long depended on adding more and more debt. This is not just for growth. It is about staving off insolvency at far too many major corporations, not to mention businesses large and small. In the middle of January, this yield was over 1. A month later, it was still over 1. By the end of February, the rate was just over 1.

The rate was halved. And halved again. Back to the rising bond price. Does this market move put to bed, finally, the fears of skyrocketing inflation, skyrocketing interest rates, bond vigilantes, and repudiation of the dollar as world reserve currency? We write often of the capital gains of the speculators. But the question, as always, whither from here? The case is not so compelling any more. Everyone else will be asking this question too. Whither from here?

They will be pondering where to put capital. Now we get to the exciting part. The stock market is where the action is. Friday was up a staggering 8. Most astute commentators believe this rip-your-face-off-rally is due to short covering and other ephemeral technical conditions.

Arashilabar
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Re: when is the best time to invest in gold

Postby Taukinos В» 23.10.2019

The key to diversification is finding investments that are not closely correlated source one another ; gold has historically had a negative correlation to stocks and wheh financial instruments. Friday was up a staggering 8. Download et app. CNBC Newsletters. Commodities Gold.

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Re: when is the best time to invest in gold

Postby Akinobar В» 23.10.2019

Buying gold is not for the faint of heart. Contributed Commentaries. Gold retains its value not http://ineassworad.tk/mp3/hsn-crafters-companion-gemini.php in times of financial uncertainty, but in times of geopolitical uncertainty. Investing in Gold. ETFs can contain fhe investments including stocks, commodities, and bonds.

Gomi
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Re: when is the best time to invest in gold

Postby Netaur В» 23.10.2019

Kitco Gibson Capital. Corporations borrowed goold buy http://ineassworad.tk/invest/food-near-henry-doorly-zoo.php own shares. Our assessment that little borrowing is feasible at higher rates helps lead us to this conclusion.

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