The valuation of a currency depends on a cycle specific function of the difference between interest rates and inflation in that country. Based on that, US Dollar is far below its real value.
WAIT A SEC! The dollar's Interest rates are going down (probably 1/2 %) AND the US Debt is INCREASING by more than 2 TRILLION DOLLARS THIS YEAR .... and it is undervalued???? ARE YOU KIDDING ME??
Once foreigners can exchange their trashy debt (that was sold to them by wall street) you can bet they wont be buying dollars.
This is VERY VERY DOLLAR NEGATIVE - Anybody who says otherwise has no idea how to value currencies...
Everybody knows about the inflationary effect this bill will have, but one thing I was just thinking about regarding the recent underperformance of gold is as follows - tell me what you think.
What a lot of people do not know in regards to the credit crisis is that MANY foreign banks have their reserve stuck in this TOXIC WASTE DEBT and they can not get their money back because they cant sell them. Thus the pressure is mounting from AROUND THE WORLD to pass this bill - not only to benefit financial markets BUT ALSO TO GET THEIR MONEY BACK.
So the question is what happens when they replace thier their toxic debt with treasuries? Will they hold those treasuries? ABSOLUTELY NOT! These countries have been burned by US debt in the past and they will not let it happen again especially since they were so close to losing hundreds of billions of dollars - I think they will diversify their holdings into gold as soon as they get those treasuries/sell their toxic debt to the US taxpayer. That is why other central banks have not been buying gold in mass before - THEY COULD NOT SELL THEIR DOLLAR RESERVES (AKA TOXIC DEBT) TO BUY THAT GOLD! Now they can.
What does that mean for gold? It means that starting next week (when their debt is replaced) they will be buying gold and thus the price will start to rise - I predict it will be slow and orderly but it will be an upward trend nonetheless.
Your Friendly Neighborhood,
Let me add to that something.
Once this 700+ Billion deal is passed (trash is exchanged with cash) A LOT of these countries that hold that trash (including Russia, China, & the Middle East) will now be able to liquidate those holdings which they CAN NOT do right now. Unbeknownst to most people many of the holders of that toxic debt are the central banks of foreign countries.
Anyhow, after they avoid a possible huge loss in thier wealth holdings, where do you think they are going to put their money afterwards? US debt/Dollars?? I think not - it will go into GOLD. The key is the exchange of that trash debt - that in my opinion will be the catalyst/turning point to begin the rise of gold and silver.
Are there people out there who think that a bailout is BAD for gold and silver???? Do they know that that bailout is another $700 billion (AT LEAST) added to the already shaky balance sheet???
Not sure about you, but if worldwide investors REFUSE to buy this garbage (that our gov't is buying) it doesnt sound like very positive news for our currency.
This is VERY INFLATIONARY and only LOWERS the value of the dollar long term!
The last few weeks GLD/SLV have been rising because investors were doubting the quality of the banking system - now they will start to rise because of their TRUE VALUE - to provide a hedge against inflation and the depreciation of the dollar.
Your Friendly Neighborhood,
I own both and I just wanted to make these comments.
First of all, the silver ETF is audited and has a record of ALL its silver - you can download the PDF from their website with all the serial numbers if you wish. Having said that, does that mean that there cant be fraud? No definitely not BUT it would be a major MAJOR event on an unprecedented scale. Plus the price of SLV tracks the silver price pretty well - if their is fraud in SLV you would imagine seeing a larger disconnect.
Physical silver is obviously preferred because you have no risk of fraud. Plus the REAL value is silver + premium so investors who bought physical at much higher prices still can sell that silver at around $17 while SLV can be sold only for spot. So as premiums increase the value of physical silver holdings increase as well - somewhat making up for a declining price.
Finally, I wanted to point people's attention to the fact that silver (including premiums) is still RIDICULOUSLY LOW! Now, I personally have been talking to people who want to get into precious metals now and they are favoring SILVER over gold because it is much cheaper - the ordinary Joe getting into PMs is looking at silver.
Now, world supply of silver is approximately 500 millions ounces - that works out to a little less than 2 oz PER AMERICAN or about $35. So if every American buys 2 ozs of silver THERE IS NO NEW SILVER FOR THE REST OF THE WORLD!!! Makes you wonder at how long the price can be manipulated so low...
If at all possible buy physical - the premiums are high but even with them Silver is much cheaper than it should be.
Your Friendly Neighborhood,
PS - www.apmex.com just received a new shipment of silver maples.
Excellent point - Inflation is probably going to be rampant in the near future. The debt ceiling will have to be increased WELL ABOVE $11 trillion - we currently have 9.5+ trillion in debt + FNM/FRE/LEH/BEAR/AIG (and whatever else needs rescue) will probably add another 1 trillion. Add in another 700 billion+ for this bailout plan (that is NOT ENOUGH by any stretch of the imagine) and you get over $11 Trillion.
Add in another $600 billion in this years deficit (or more if tax receipts are less than expected) and that takes us to $12 billion. The dollar has some MAJOR PROBLEMS on its hand - people just need to be patient.
On another note, i'd advise everybody to start buying that physical silver & gold - at these prices it is ridiculously cheap!
Your Friendly Neighborhood,
All we can do is wait our turn - look at some of these other miners and their big increases (PZG, NGD, RIC, etc) - I think its only a matter of time with MDW. Remember it could all happen in one trading day - I dont want to miss a 40% up-day because I got frustrated and sold...
Please mark all spam with 1-star (whenever/wherever you see it) so that after 3 markings it goes invisible to all those with their filter setting set to 2 stars.
PS - Go NOVAGOLD!
At least 1 TRILLION in debt overnight with this new facility??? That's the most BULLISH gold/silver news we've had yet! Knee jerk reaction today knocked gold down because people were going back to risk ... but gold was rising the last few days NOT because of inflation but because of its defensive value. Now, we are starting massive inflation with banks all over the world injecting billions into the markets and the US government possibly adding a trillion or more to its debt.
Now, that risk is supposedly "removed" what happens to all these billions that were loaned out to banks? They are going back into the markets into EVERYTHING - tech/financials/gold/commodities - EVERYTHING! Thats why you see the markets in asia rising 4-10% overnight!!!
That is the most inflationary thing i've seen yet. I'll keep my gold thanks!
Now maybe someone can enlighten me... isnt this in effect removing ALL THE BAD DEBT from the system and replacing it with NEW GOOD DOLLARS? Isnt that REALLY REALLY inflationary?
Is there any other way to look at this?
I'm trying to buy some physical, unfortunately I cant get it anywhere but ebay but i'm ready to bid up to $15 /oz. These prices are still ridiculously low and even though I hate to pay a $3 premium its the only way I can get some physical. It'll look a lot nicer if we get closer to $15.
People who were waiting on the sidelines or sold recently, dont think its too late. SILVER is at $12 - THATS IT!!!
It was over $16 a month ago, Gold/Silver ratio above 70 - look at the big picture and you'll see this thing may have much higher to go...G
I hope they take it down because it is still SEVERELY undervalued at these gold/oil prices. The majors who've been sitting on the sidelines may jump in quickly to get these beaten down companies before its too late - especially since their stocks have risen.
Well I got out a little earlier BUT I was in since $2 on the ABX taking a stake (at that price) so i've lost a bit in this. I got out because I figured ABX wouldnt buy on the merger, but now that it got nixed I have a feeling that maybe ABX may still be interested which would explain the sudden end to the merger.
Even though Gold & Silver are up these resource stocks have gotten hammered much harder than the two metals. In addition to that, oil the biggest mining expense is much lower than what it used to be - figuring those two into the equation I think there is still quite a bit of value here. Wouldnt put all my money into it but its worth a flier.
I think Miners have been waiting for the gold price to get a little higher - $50 in one day was more than they expected.
They may be making acquisitions VERY soon at these attractive levels. NG already said that they are open to sell so this company may be bought out very soon - ABX, GG, Someone else??? Solid reserves in a stable area for a little over $500 million - sounds like a steal!
I bailed out of this stock a little bit ago, but on the news that they cancelled the GP deal I bought back in. This may be a prime candidate for a ABX takeover - they already own a ton of MDW shares AND with MDW suddenly cancelling their merger (possibly because of a ABX buy???) they become alot more attractive. It was just an awfully strange thing for MDW to do...
What do people think?
This thing isnt going to last long by itself - may get bought out at around $700 million ($7 / share). 1 property about to produce (and create much needed cash flow), and 2 outstanding properties - a major could get a ton of value for $700 million here!
Either way management finally did something right in selling some assets off to add to their cash position and should help them survive through this tough stage. They also have rock creek coming online soon, so that will allow them some positive cash flow.
Lets see how the report for Galore Creek goes later this month.
Silver's paper price (aka SLV) is far below the REAL price, thats why we have massive shortage of silve bullion except with outrageous (40%) premiums.
Anyhow, investors are starting to turn to silver as an alternative to the plummeting DOW so we should be seeing a major rise in silver & gold prices. Not sure how anybody could possibly sell at these silver levels - but i'm happy to buy their shares!