Post by
PGMBOY on Jan 11, 2006 7:09pm
Thoughts on gold by Dr. Stephen Leeb,
I’d like to put below the thoughts on gold by Dr. Stephen Leeb, Editor for The Complete Investor, from his January 9th market update:
“Despite being at generation highs, gold gets nowhere near the headlines and coverage of stocks like Google.
Even more glaring, the recent Fed meeting notes made absolutely no mention of gold. This neglect is striking because for the past 2,000 to 3,000 years, gold has been the best long-term indicator of inflation. Inflation, as you know, means the declining value of money. And when people realize the value of paper money is falling, they generally switch their savings from paper to gold.
When the Fed fails to mention gold when discussing inflation, it’s a bit like complaining about the service on the Titanic while ignoring the fact that the ship is sinking (Italics added for emphasis). For if they did mention gold…The price of gold, and market forces, would become more important than Fed policy. If that happened, the most influential force in the American economy would become the government of China, which could affect the exchange rate between gold and the dollar with a bat of an eye…To acknowledge gold’s importance would be to hand monetary policy over to forces outside the Fed’s control. It would be the last thing any government official would want.”
Looking at the trend in the CPI on a year-over-year basis shows a clearly upward trend, obviously from a spike in energy after the hurricanes last year.
Source: Econoday.com
The potential for another spike in energy prices this year seems almost inevitable. Weather forecasters are calling continued above-average hurricane activity due to multi-decadal fluctuations in Atlantic hurricane activity, with alternating periods lasting several decades of generally above-normal or below-normal activity. Adding to a high likelihood of above-normal hurricane activity that can raise oil prices is the geopolitical risk of Iran. Iran recently restarted its nuclear research after a two-year freeze by the U.N. despite Western opposition. Iran’s President Mahmoud Ahmadinejad shrugged off the international outcry saying his country will not be bullied and would push ahead with the program. An even sharper tone came from former President Hashemi Rafsanjani who said, “If they cause any disturbance, they will ultimately regret it. Even if (the Westerners) destroy our scientists, their successors would continue the job,” in a speech aired on state TV.
As the political climate heightens over the middle-east and another strong hurricane season on the horizon, energy companies and alternatives stand to post another strong year and should be watched closely along with gold.
Market Summary