RE: RE: RE: RE: RE: RE: RE: RE: Ernie LaLonde - BN Gold demand for jewlery declines in hard times just like the diamond industry does.
Demand for gold for investment, is almost a non-issue, because hedge funds etc. buy gold futures or certificates, and not pure gold itself. The only people who buy gold in the physical form for investing, is the Mom and Pop investor, who has to pay a fee to store it somethere, or risk loosing it to fire theft, etc. Most Mom and Pop investors, buy gold when it has already risen because of the fear factor in hard times, and sell it after the economies recover for a loss because of the storage fees.
The largest demand for gold for practical uses is for electronics, and much of that gold is recovered and re-used... thats why you old iphone, etc. is worth so much when it dies. Here the three Rs come back and bite you in the az$, because it already has been mined... you can't say that about oil and gas, NG, beans, pork, etc.
The largest demand for gold by far is for hoarding, and with the loss of the gold standard and all Nations simply printing money as needed; its not even required for that.
I'll put this another way. Let's say you are righ, and gold recovers to $1,500.00/oz. Then by the end of the year, it goes to $2,000.00/oz. Congrats, you've made 25%, to which you have to deduct the storage fees... the less gold you own, the more it costs per oz.
Tell me, what reasonable and knowledgeable investor couldn't do the same rate of return on a selection of Blue Chip choices purchased during the upcoming summer doldrums?
Now lets look at the exchange rate, seeing that we are on a Canadian BB. When the American economy rises, the Canadian dollar slides. (Somewhere between 10-30%, sometimes more) This tends to happen to most currencies against the American dollar when the American economy is booming. Now instead of having $2,000.00 gold, you have upwards of $2,600.00 gold because gold is priced in U.S. dollars!... plus broker fees, and storage fees (I never mentioned storage fees before) This is all fine IF you already own the gold, because you will realize a 30% gain (in this example) over the price of gold based on the exchange rate... BUT!... it sure kicks the 4ell out of the demand from the Mom and Pops WORLD WIDE, and there is gold's real Achillies heel.
But on the plus side, it's easy to dump through a bank or a broker if you are in a major center... if you aren't, the gas to go to them has to be factored into the loss as well.