RE: Try not to let gloomy forecasts of17 Jun 2018 15:18
Well our cey shares have certainly been risky recently - the unexpected often happens with miners from the political to geology, and as to the metal although holding gold itself in the extremely long term is not risky, and a brilliantly consistent hedge against inflation, within our lifetimes it certianly is risky. If you cna make a real rturn with cash why risk it, you havent been able to for the past few years with QE, hence the rise in gold 3year ago, but this has petered out as buyers have seen interest rates rising and qe ending. Another thwack on Fridya with Draghis announcement.
For me the only two questions are first if Cey can increase production and reduce costs to increase profits, without politics upsetting the apple cart, and second where is the price of gold going, it seems to mainly be affected by where REAL interest rates are expected to go - politiclal worries also have an affect but seems to be very short term often justifying what the market wnats to do, unless an armageddon war. See the following:
“In the second half of the 1970s, both nominal interest rates and inflation rates were high. What is important, is that inflation exceeded the nominal returns on bonds, therefore investors shifted their capital into gold. While real interest rates were negative, the price of gold rose, reaching its ultimate high. However, as soon as Paul Volcker hiked short-term nominal interest rates and real interest rates came back into positive territory, the gold boom ended. Interestingly, the significant downtrend in the gold market continued until 2001, when the Fed, trying to reinflate a stock bubble, cut nominal interest rates so much that real interest rates fell to zero. As we can see in the graph, the consolidation from mid-2006 was caused by the hike in real interest rates. However, in late 2007 the Fed cut nominal rates again, and then real rates plummeted and the gold price simultaneously soared.
Chart 1: Real gold prices and real interest rates (as yields on 3-month Treasury bills less CPI inflation) from 1973 to 2013.
Gold price and real interest rates
Source: gold.org
Summing up, changes in real interest rates are crucial to understanding movements in the price of gold.”
Us real interest rates are currently very low despite the rises so far, as inflation grows. Now we have been told lots of US interestrate rises over next 3 years, but whta about inflation’s direction with dollars being torn up instead of printed.
Hence FT
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