Thursday, 10 April 2008

Pt for St. Valentine's > $2000. 2008-01-15.

Friday 15th February 2008 7:52 p.m.

Well, after fighting my way past the front hallway yesterday trying to squeeze through the enormous pile of Valentines cards that the postman brought to my door in his specially modified 32 ton truck, I finally get to see that gold is basically flat to down a bit for the week.

However, if I was marriage-minded in the Western world these days, I would be looking at a very expensive Platinum wedding ring at the moment. Do you think she would settle for palladium? I have a few 1 ounce bars that I could have melted down in to a decent ring. A band of palladium, a band of platinum, neither really has the ring of a band of gold now does it? Fancy how daft it would be to spend all that money on platinum because gold "isn't good enough" for her, only to be divorced and stripped of the rest of your wealth by her perhaps a year later! Aren't men really stupid? The money spent on wedding paraphernalia only seems to be inversely proportional to the sticking power of the participants and the length of the marriage! (Have you seen the Heather Mills' settlement from Paul McCartney?)

By the way, what I meant to say was that Platinum made a new record of $2055 per ounce today, now clearly more than double the price of gold. At this rate a new Kitco platinum site may be coming out soon. Take a look at some of the industrial platinum crucibles that they sell. I remember we had one at work in the early 90s and I used one at Aberdeen University in 1989. The one at work cost about £7,000 Sterling. It would cost a lot more than that now. It would have probably been a better investment for the company just to buy 1,000 of those than to waste all that time manufacturing lightbulbs and the other stuff that we made.

Meanwhile at Kitco and on the Korelin Economic Report last week John Nadler has been doing a bit of gold bashing, suggesting that $900 is a lofty price above the 650-700 'clearing price' for gold as he calls it may re-assert itself. This is the main reason for his lower gold forecasts for this year (lower than the spot price is right now, that is). He seems basically to be talking from the jewellers' and fabricators' points of view, thinking that it trumps investor demand, the state of the economy and geopolitical factors. On the other hand, he is good to remind us that jewellery demand is still a key factor and not to be ignored. So maybe a balance is needed and he is just pointing that out.

It's an interesting point of view though. Also he has seen the IMF announced gold sales as being a negative factor on the gold price, as well as the spectacular fall off in Indian gold imports last month (Jan '08).

However, we have seen this all before. The IMF has been pulling this rabbit out of the hat for years, as did the Bank of England in 1999, etc. This time it had no immediate effect - maybe there are plenty of US Dollar holders waiting eagerly to buy up all this gold. Once the IMF is stripped of its gold, it is a dead duck.

Then the Indian gold demand issue - well, we saw massive fall of in Indian gold demand as the gold price spiked up from $470 in late 2005 to $730 in May 2006. This was followed by a massive increase in demand as the price fell to $550-600 for a short while, follwed by a record high demand year in 2007 when the price averaged around $650. Demand for 2007 reached nearly 1,000 tonnes, only scuppered by the end of year rise in price to $900.

So we may see the same thing repeat itself in 2008, a spike in price, a fall in demand from India, followed by a price correction, followed by a rise in demand at a new but higher equilibrium than last time. Perhaps?

There is nothing new under the sun.

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