December 16, 2005

Carrying Gold is not that Hard - especially at $1,000/oz.

From The always thorough Bill Cara:

Gold rally this morning, Fri., Dec. 16, 2005, 9:19 AM
Gold is up about $3.50 this morning. This week’s wave of selling has apparently stopped, as I suggested it would. The low point was last night when the spot price traded down to $492.70. Presently spot is $504, and the major Feb-06 contracts at $510. The market is moving higher.

Today, the whole metals complex is trading higher. Silver is up about 7 cents, copper up 2 cents, and both platinum and palladium up $3.00. To this point.

Obviously futures trading that is linked to forex markets are major influences in gold trading day to day. But, the gold trade today is I think mostly driven by the middle class of India and China who want to hold a tangible asset that they think will keep its value and can be physically moved fairly easily (in small quantities) by a travelling family.

Say gold goes to $1000/oz. That would mean that 1000 oz (62.5 pounds) = $1 million. For a family of six that's just 6 pounds each to carry.

My point here is that precious metal and diamonds will gain in currency as middle class people in the emerging economies prepare to move their families locally and abroad, if, as and when they decide that might be appropriate.

There is no tax on gold. There are no financial records. The precious assets can be sold at a global market price anywhere in the world. That is a currency that many people in the emerging world want.

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