Axstones notes technical and fundamental analysis on GOLD

[axstone]

In this Thread I will post links that I think are relevant to the GOLD market.. using Charts.. fundamental analysis. and expert opinions that I personally use for my entry and psychology

We are in a long Term Bull market where gold can appreciate 30 % per year from now to the end of the Bull market somewher between 5 - 9 more years IMHO

Cheers
AXSTONE

[axstone]

WHY TO INVEST IN GOLD

1. Global Currency Debasement
The US dollar is fundamentally and technically very weak and should fall dramatically. However, other countries are very reluctant to see their currencies appreciate and are resisting the fall of the US dollar. Thus, we are in the early stages of a massive global currency debasement which will see tangibles, and most particularly gold, rise significantly in price.
2. Investment Demand
When the crowd recognizes what is unfolding, they will seek an alternative to paper currencies and financial assets and this will create an enormous investment demand for gold. Own both the physical metal and select mining shares.
3. Alarming Financial Deterioration in the US
In the space of two years, the federal government budget surplus has been transformed into a yawning deficit, which will persist as far as the eye can see. At the same time, the current account deficit has reached levels which has portended currency collapse in virtually every other instance in history.
4. Negative Real Interest Rates in Reserve Currency (US Dollar)
To combat the deteriorating financial conditions in the US, interest rates have been dropped to rock bottom levels, real interest rates are now negative and, according to statements from the Fed spokesman, are expected to remain so for some time. There has been a very strong historical relationship between negative real interest rates and stronger gold prices.
5. Dramatic Increases in Money Supply in the US and Other Nations
US authorities are terrified about the prospects for deflation given the unprecedented debt burden at all levels of society in the US. Fed Governor Ben Bernanke is on record as saying the Fed has a printing press and will use it to combat deflation if necessary. Other nations are following in the US’s footsteps and global money supply is accelerating. This is very gold friendly.
6. Existence of a Huge and Growing Gap between Mine Supply and Traditional Demand
Gold mine is roughly 2500 tonnes per annum and traditional demand (jewellery, industrial users, etc.) has exceeded this by a considerable margin for a number of years. Some of this gap has been filled by recycled scrap but central bank gold has been the primary source of above-ground supply

7. Mine Supply is Anticipated to Decline in the next Three to Four Years
Even if traditional demand continues to erode due to ongoing worldwide economic weakness, the supply-demand imbalance is expected to persist due to a decline in mine supply. Mine supply will contract in the next several years, irrespective of gold prices, due to a dearth of exploration in the post Bre-X era, a shift away from high grading which was necessary for survival in the sub-economic gold price environment of the past five years and the natural exhaustion of existing mines.
8. Large Short Positions
To fill the gap between mine supply and demand, Central Bank gold has been mobilized primarily through the leasing mechanism, which facilitated producer hedging and financial speculation. Strong evidence suggests that between 10,000 and 16,000 tonnes (30-50% of all Central Bank gold) is currently in the market. This is owed to the Central Banks by the bullion banks, which are the counter party in the transactions.
9. Low Interest Rates Discourage Hedging
Rates are low and falling. With low rates, there isn’t sufficient contango to create higher prices in the out years. Thus there is little incentive to hedge and gold producers are not only not hedging, they are reducing their existing hedge positions, thus removing gold form the market.
10. Rising Gold Prices and Low Interest Rates Discourage Financial Speculation on the Short Side
When gold prices were continuously falling and financial speculators could access Central Bank gold at a minimal leasing rate (0.5-1% per annum), sell it and reinvest the proceeds in a high yielding bond or Treasury bill, the trade was viewed as a lay-up. Everyone did it and now there are numerous stale short positions. However, these trades now make no sense with a rising gold price and declining interest rates.
11. The Central Banks are Nearing an Inflection Point when they will be Reluctant to Provide more Gold to the Market
The Central Banks have supplied too much already via the leasing mechanism. In addition, Far Eastern Central Banks who are accumulating enormous quantities of US Dollars are rumored to be buyers of gold to diversify away from the US Dollar.
12. Gold is Increasing in Popularity
Gold is seen in a much more positive light in countries beginning to come to the forefront on the world scene. Prominent developing countries such as China, India and Russia have been accumulating gold. In fact, China with its 1.3 billion people recently established a National Gold Exchange and relaxed control over the asset. Demand in China is expected to rise sharply and could reach 500 tonnes in the next few years.
13. Gold as Money is Gaining Credence
Islamic nations are investigating a currency backed by gold (the Gold Dinar), the new President of Argentina proposed, during his campaign, a gold backed peso as an antidote for the financial catastrophe which his country has experienced and Russia is talking about a fully convertible currency with gold backing.
14. Rising Geopolitical Tensions
The deteriorating conditions in the Middle East, the US occupation of Iraq, the nuclear ambitions of North Korea and the growing conflict between the US and China due to China’s refusal to allow its currency to appreciate against the US dollar headline the geopolitical issues, which could explode at anytime. A fearful public has a tendency to gravitate towards gold.
15. Limited Size of the Total Gold Market Provides Tremendous Leverage
All the physical gold in existence is worth somewhat more than $1 trillion US Dollars while the value of all the publicly traded gold companies in the world is less than $100 billion US Dollars. When the fundamentals ultimately encourage a strong flow of capital towards gold and gold equities, the trillions upon trillions worth of paper money could propel both to unfathomably high levels.
Conclusion
Gold is under-valued, under-owned and under-appreciated. It is most assuredly not well understood by most investors. At the beginning of the 1970’s when gold was about to undertake its historic move from $35 per oz to $800 per oz in the succeeding ten years, the same observations would have been valid. The only difference this time is that the fundamentals for gold are actually better.
Quotes
“Investors continue to chase overpriced technology stocks when they should be getting in on the early stages of the bull market in gold.” – John Embry, Chief Investment strategist of Sprott Asset Management Inc. – Investor’s Digest of Canada. June 6, 2003
“With the monetary system we have now, the careful saving of a lifetime can be wiped out in an eyeblink.” – Larry Parks, Executive Director, FAME
“Gold is the buy of a generation.” – Walter Murphy, Merrill Lynch analyst

[axstone]

5 Step program

---

One GOLD is Manipulated.. lots of evidence
Two. GOLD is way undervalued to its peers.. like Nickel Copper Lead
Three The US dollar and Other FIAT dollars are way over valued
Four Gold has been rising for 6 years now while fighting the Manipulation
Five.. Gold is going to spring like the last run from 420 - 720 This time to 960


50 Minutes into the Interview Jim sums up everything about the gold market this time

http://www.netcastdaily.com/broadcas...007-0217-2.asx

Jim Puplava:
“You have a situation today where there’s growing demand for precious metals base metals energy and there is a lack of supply and the one best mechanism for creating a balance between those two forces of supply and demand is the market place and that’s the pricing mechanism but as Bill Murphy was commenting earlier we do know that these prices are artificially being manipulated either through the paper derivative market or central bank leasing or central bank selling of gold and whenever you manipulate a market try to keep is prices suppressed you are creating distortions so demand keeps increasing because prices not as high as is should be what happens is eventually we know you cant suppress a market forever and when it does take off and the pricing mechanism moves forward and correct this imbalance it can be explosive as we saw in the later part of the 70’s anyone want to comment on this?”

[axstone]

[____hoot____]

Axstone, if you carry the progressive steps in this HUI chart forward it puts the next big rise somewhere around the 2008 elections and the POG peak will be somewhere in the $1250 range. I was clued into this by an article written by Terry Krohn[aka PMTrader]published at 321gold.com on 2/27/06, and I saved his HUI chart showing these same HUI steps going back to 2001.

My own thoughts move this timetable forward six-eight months to late winter/early spring 2008 because of the US election cycles and plans for a attack on Iran.

[axstone]

Adrian Douglas .. from Market force analysis
has a patent formula for showing the bottoms of huge uplegs

I believe there is a good change we grind higher here .. starting with some real momentum around September

[axstone]

http://goldnews.bullionvault.com/node/922

The spot gold price rose throughout the first-half of London trade on Friday, touching $651 per ounce by lunchtime – a gain of 1.6% from Tuesday's low – before pulling back to $650 at the US open.

The AM Fix has earlier come in at $648.50, the highest Fix for physical gold bullion since Tuesday's sharp sell-off.

"I own gold and I don’t plan to sell my gold ever," says leading commodities investor Jim Rogers in an interview with India's Financial Express today. But if Rogers were looking to trade – and given a choice between buying base metals, energy and precious metals such as gold right now – "it'd have to be precious metals," he adds, "because gold has gone up much less than the base metals [so far].

"Of those three, that’s where I will put money."

Still trading well below the $692 level hit in April, the gold market looked set to end the second quarter of 2007 nearly 2% lower against the US Dollar. But for the year since January, gold bullion prices have now added more than 1.9% as the US Dollar has dropped 2.2% versus the Euro.

"The Euro-Dollar exchange rate is still the main driver for gold," reckons Michael Widmer, an analyst at Calyon in London. The Euro rose fast on Friday to break above $1.3500 for the first time since June 9th – and that kept the Euro price of gold flat between €480 and €482 per ounce.

The Sterling price of gold for British investors rose to £324.50 per ounce, more than 1.2% higher from Tuesday's low.

"Prices below $650 will definitely attract physical buyers and underpin the market," says Widmer, "but I see a rangebound trade in the coming weeks."

Gold's ongoing recovery from Tuesday's $10 sell-off came as European stock markets held flat and Wall Street opened lower. London police reported defusing a car bomb in the British capital's theatre district. Oil prices held above $70 per barrel.

Despite the threat of resurgent inflation, the US Federal Reserve chose to keep Dollar interest rates on hold on Wednesday. In the accompanying statement, however, "they poured cold water on the idea that the inflation battle has been won," notes Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi in New York.

"No rate cut is being considered in the near future," he believes.

Friday's opening bell on Wall Street was greeted by US Personal Income data for May. Running at 0.4% against 0.6% forecast, its dip was matched by a slowdown in Personal Spending, up 0.5% for the month against 0.7% forecast. Core PCE Inflation, the Fed's preferred measure of the cost of living, ran 0.1% higher from April as expected.

Whatever happens to the official rate of US inflation today, Bill Gross – the head of Pimco, the world's largest bond fund – expects the Fed "to issue an insurance policy" against the widening collapse of subprime US mortgage debt "in the form of lower Fed Funds at some point over the next 6 months."

Nearly 65% of the bonds tracking subprime US mortgage debt no longer meet the credit-rating criteria in place when they were floated, reports Bloomberg. "Downgrades by S&P, Moody's and Fitch would force hundreds of investors to sell holdings, roiling the $800 billion market for securities backed by subprime mortgages and $1 trillion of collateralized debt obligations, the fastest growing part of the financial markets," the newswire warns.

"You'll see massive losses from banks, insurance companies and pension managers,'' says Joshua Rosner, managing director at Graham Fisher & Co. in New York. He accuses the leading credit-rating agencies of underplaying the risks in subprime mortgage bonds.

Indeed, "Markets fear global credit crunch," reports The Daily Telegraph in London after new bond sales worth more than $3 billion were pulled around the world by companies including Kia in Korea, US private-equity fund KKR, and steel giant Arcelor Mitta.

If you're at all concerned about the potential fall-out from a collapse in the global debt markets – currently valued at one-third of the entire world economy – you may wish to consider a position in physical gold bullion, owned outright with no credit risk.

[naccarato]

Thanks for posting here axstone, I have been reading your thoughts on another PM forum. Don't want to mention there name, but we use there site for quotes.

[axstone]

Dear CIGAs, They can manipulate as much as they want but it is all in the US dollar! It is my opinion that those powerful short interests -- both legal and illegal -are frantic to cover and are therefore pulling out all the stops. Dirty tricks, use of media pals, and all the usual underhanded methods seem to populate everything these days from gold to gold shares of good value. Using the baseball analogy, "Three strikes and you're out," I rate today as strike number two at the .8050 to .8150 range on the USDX. The interesting part of this is that commentators are looking at the differential rate between the US Fed and other Central Banks. My comment is, "Like hell that is the reason." The real reason is a meltdown of sub prime mortgages that appears to have caused Bear Stearns more of a problem than was first thought. When you see a new man come on board at Bear Stearns who specialized in asset maximization of corporations you know the horse dung has hit the proverbial fan. I believe that Over the Counter Derivatives are now melting down, threatening many other well known international investment firms. And that is why the dollar looks like death warmed over. In addition, that is why the price of gold is under the great power of manipulation to hold it down so as not to reveal the degree of the problem. Remember this about Over the Counter Derivatives: They have no regulation. They have no standards. Without standards there can be no viable market. They are unlisted They are traded by private treaty negotiation They are valued by "Mark to Model" which is a total cartoon. They have no financial guarantee such as a clearing house. They are unfunded special performance contracts floating in cyberspace. All funds in the OTC Derivatives are taken out as spreads and commissions. More than 50% of the earnings of major international investment banks come from granting in private treaty negotiations these instruments of mass financial destruction. The financial performance of the specific performance contract called OTC Derivatives depends on the financial capacity of the loser in the transaction. Control has been loose in the interest sensitive OTC Derivatives because of multiple dealings outside of the initiating two until no one knows who has what. The replacement value of these instruments is in the multi trillions of dollars. Interest rate differential would not hammer the dollar as we are seeing today. Remember that three strikes and the US dollar is out. Expect every dirty trick and media negativity towards everything gold as quiet but frantic insiders attempt to offset a panic by subverting early warning systems. Those in the know are frantic to cover their short positions which can only be accomplished if they stampede you by every means possible. They are going to fail. You are not. If you wish to screw the shorts royally - simply do nothing. They can make price but they cannot make cover as long as you are not spooked into selling everything gold. The gloves are off and the major battle between longs and shorts in gold is here! Gold is going to $682 - $761 and then to $887.50 - $1000 plus The bear market in gold shares is a total construction of bear raiding hedge funds that is doomed to failure Their really bad day is close at hand!

[axstone]

Lift Off!

-- Posted Friday, 29 June 2007 | Digg This Article On Wednesday gold and silver selling exhausted at 640.00 and 12.00. There are a number of bells ringing this morning (AM Thursday), that tell us it’s ‘safe to get back in the water’. Charts courtesy www.stockcharts.com Featured is the daily gold chart. The circles draw our attention to the fact that the last two dips in the price of gold were not confirmed by the three supporting indicators. This is bullish. The overall uptrend channel was never really violated (red and green dashed lines). Featured is the GDX electronic gold unit. The upside reversal (green arrow) that ended trading on Wednesday is bullish, coming as it did right near the 8 month old support zone. All three of the supporting indicators (blue dashed lines) also remained positive during the past month. Featured is the index that compares the XAU mining index to the gold price. Generally speaking, when this index is rising, it is a bullish signal for gold and gold stocks. The index has been in ‘uptrend’ since March. Wednesday’s ‘outside reversal’ (green arrow), is another bullish sign, another ‘bell being rung’! The three supporting indicators are positive. Featured is a long-term chart that compares gold to oil. The 19 year mid-point is 15 barrels of oil pays for one ounce of gold. Today it only takes 9.35 barrels. GOLD IS A BARGAIN COMPARED TO OIL! (And the trend is up!) Summary: Gold bells are ringing again. Its time to cover shorts and go long. The COT report due out Friday is expected to be very bullish. Silver is suffering from ‘chart damage’ that occurred on Wednesday, but silver will be pulled along by strength in gold. Oil is supported by the massing of sea power in the Persian Gulf (currently three carrier forces, with a fourth on the way). DISCLAIMER: Please do your own diligence. I am NOT responsible for your trading decisions. Happy First and Fourth of July! Peter Degraaf

[mispillion]

welcome here axstone. in general people keep things infinitely more courteous than the other forum you reside(d) in. hope you'll be comfy here.

[axstone]

[axstone]

I wanted to go back and look at what he was saying because it was a time gold was bottoming for the last time before the major bull run


http://www.netcastdaily.com/broadcas...005-0528-3.asx

[naccarato]

You thinking we are in Nov. of 05 axstone?

[axstone]

I would Say September 05

That means I think a minor bear trap here though.. then we run up and test the 2006 May Highs of 730.. consolidate or run right through to 761

consolidate.. then 825.. 887.50 then High consolitation

[naccarato]

I can accept some consolidation in the 800's, I'm not greedy.

[axstone]

changed

[bjgnome]

Thank you Axestone for posting!

Keep it coming.

[axstone]

In the 70s.. we were a creditor nation
now we are a debtor

You have the Middle East buying GOLD.. China.. ETf's
Asia.. and India

US is not even in the Market .. they cant spell GOLD

they think its a commodity...


You have peak oil and America is very dependent on it..

OIL demand wont slow down that much for a while.. because even you still have government needing oil police cars.. garbage men.. ambulence
snow plows.. if people lose their houses they will move back home but still drive to work..

We have Peak oil..

In the 70s the US was self sufficient in OIL

This is going to be a more powerful Bull Market in GOLD

[axstone]

http://www.marketforceanalysis.com/

SPAM, Please refrain from using a sites promo lit for a post. Bringing over charts, data, links and so on is of course ok.

Our members contribute to keep the place ad free, so please help us out by editing posts instead of doing the cut and paste thingy.

Thanks!

Scorp

[RossL]

Originally Posted by axstone

WHY TO INVEST IN GOLD

In the space of two years, the federal government budget surplus has been transformed into a yawning deficit, which will persist as far as the eye can see. At the same time, the current account deficit has reached levels which has portended currency collapse in virtually every other instance in history.

This quote must be really old. There hasn't been a real budget surplus in 38 years.

[RossL]

Peak oil BS.

Peak oil is not proven. It's a theory.

Gold fundamentals are strong without a lot of bullshiite about "peak" oil.

[RossL]

Originally Posted by axstone

http://www.marketforce___xxx__-.com/

Hey, are you just another spammer for a pay website?




take that crap elsewhere

[axstone]

I gather info about gold from wherever I can

Adrian Douglas and I have corresponded via Email for some time Met him through Bill Murphy

Adrian Doesnt charge for anything:

here is is resume:
About the “Market Force Analysis” Proprietor

Adrian Douglas was born in 1957 in England. He graduated from Cambridge University in 1980 in Natural Sciences. He worked for 20 years in the Oil & Gas Industry with Schlumberger where he reached senior management positions in Marketing and Sales. In 2000 Adrian established a highly successful consultancy business specializing in pricing and marketing called InnovoMark -Innovative Marketing (www.innovomark.com). He developed unique methodologies related to pricing and marketing which have been incorporated into proprietary training programs.

The study of commercial enterprise pricing led to a deep interest into the market pricing mechanisms of financial assets. As a result Adrian developed a unique algorithm and methodology for analyzing financial futures markets, and in particular identifying appropriate entry and exit points. The technique has been named “Market Force Analysis” (MFA) and a provisional US Patent has been filed to protect the intellectual property. The market calls that Adrian has made using his proprietary MFA have attracted much attention. In particular, John Embry of Sprott Asset Management, spoke very favorably of the technique on ROBTV on Canadian Television.

Adrian has made almost a daily contribution to the website www.lemetropolecafe.com commenting on precious metals and the financial markets in general. Many of his specialized articles that have been published at www.lemetropolecafe.com can be found in the “published articles’' section

[des00s]

Originally Posted by axstone

changed

For those of you that think high interest rates will kill the gold bull... imagine what will happen when the Fed starts cutting rates again.

Prime Rate

1971 5.73
1972 5.25
1973 8.03
1974 10.81
1975 7.86
1976 6.84
1977 6.83
1978 9.06
1979 12.67
1980 15.26
1981 18.87
1982 14.85
1983 10.79

"The gold bull market will end when there will be lines of people in front of gold shops buying gold because they want to move out of cash... when they really become afraid that paper money loses all its value."

Marc Faber

[mispillion]

Originally Posted by RossL

Hey, are you just another spammer for a pay website?

no, he is definitely not a spammer. a true goldbug and TA whiz. fwiw

[RossL]

Originally Posted by mispillion

no, he is definitely not a spammer. a true goldbug and TA whiz. fwiw

I see posts advertising for "market force" whatever. That is SPAM for a pay web

[axstone]

My number one Mentor is lessons From jessie Livermore

I email Jim Rogers.. Jim Puplava, Jim Sinclair,
Adrian Douglas, Richard Daughty, Goerge Soros.

I have done technical analysis for 10 years now

I compile info from assorted GOLD Bulls and experts that read data

Adrian is one of the Best for reading Open Interest

I love trend trading.. I draw long term trend lines then notice patterns inside the trendline

definately not a spammer. but I quote and use some material from newsletter writers.. and post them so I can look back at their fundamental or TA analysis

[silverwood]

Let's not forget about gold's little brother here...

Silver Coiled and Ready to Spring

By: Roland Watson, The Silver Analyst



-- Posted 29 June, 2007 | Digg This Article | Discuss This Article - Comments: 0




Back in the middle of April I wrote an article that suggested a price pattern for silver that has not been publicized much. In an often polarized area of debate, it was a position that was neither bullish nor bearish but rather a suggestion that silver would drop into a channel formation prior to its next price explosion. I quote from the article:



Note how after the big drop in April 2004, silver also advanced in a similar fashion to our current moves on a rising trend line until the old highs of $8.50 were nearly taken out in December 2004. However, this trend broke to the downside to begin a channel movement for silver for some months before the true breakout occurred in September 2005.

Will our current rising trend line support the price of silver or will we see a temporary breakdown? That previous rising trend line lasted 8 months. This current one has lasted 10 months. Once again, a breaking of the previous high of late February is required to maintain the bullish sequence of higher highs and invalidate that analysis.



The updated chart is shown below to show how the late February high was not taken out and we may have descended into a tighter price range. I have subsequently also noticed an interesting pattern during the previous silver correction in 2004-2005 that may repeat here. Note my first comment on how the rising support line was not only broken but became a line of resistance to further price rises.










Twice (possibly three times) silver tried to penetrate back through the support line but failed. Thereafter it did not crash but satisfied itself with merely forming a slowly narrowing channel until the next price breakout occurred. How does that compare with this current correction?



We note that just with the previous correction, silver broke down, rallied to retest the support line, failed to breach it and has just fallen back again. Technical analysis history has repeated itself or at least rhymed.



If that pattern repeats again, we may see one or two more retests below the extended support line and then a fall back into a narrowing channel prior to breakout. The last channel lasted nine months but there is no rule that demands this potential channel lasts the same period of time. The last breakout occurred in the month of September 2005.



A look at a seasonal chart for silver suggests June to September are weaker months for the price of silver. We also note that the previous breakouts for silver (see chart) occurred towards the end of the year. We already mentioned September for the $15 run up, but the $8.50 run up started in early October 2003. So far our analysis suggests an autumn breakout for silver.



One final question is regarding the possibility of silver breaking down to form a double bottom of $9 to $10 before its final run up. It may happen but I put it second in probability to what I have described above. The reason is that silver’s volatility tends to force it to exhaust its price correction quickly. On a forty year silver chart, I see that silver corrections tend to be a one shot affair that rebounds or drags on a bit (as with the last major correction). Nevertheless, anyone who wishes protection against such a scenario may wish to average in their silver purchases over the next few months.

[axstone]

The dollar, which is said to be a "unit of account",
no longer has any accounting!

They are accountable to you, but only if you do something about it, such as buy gold and silver!

Central banks are running short on gold, and are starting to buy gold again. Currently, the U.S. officially has 261 million ounces of gold.

If U.S. money, $11.5 trillion in M3, were backed by U.S. gold, there would be over $44,061 dollars for every one ounce of gold!

The total value of all the paper money and bonds in the world is about $100 trillion, and all the gold ever mined in all of human history is just under about 5 billion ounces. So, world money divided by world gold gives a figure of $20,000 per ounce!

World central banks are running out of gold, and some are starting to buy gold, such as Russia, China, South Africa, South Korea, and more! The central banks claim to have about 30,000 tonnes of gold, but they may have less than half of that, as most has been lent or leased into the market over the past ten years.

In sum, at $700/oz., there is about $3.5 trillion dollars worth of gold in the world, but there is $50 trillion worth of bonds, and $40 trillion worth of paper money! So, bonds and paper money must go down, and gold must go up!

Gold is money, because of its fundamental nature. Gold is money because it is liquid and easily tradable, with a narrow spread between the prices to buy and sell (about 1%). Also, gold is easily transportable, because it has a high value for its weight. This makes gold an excellent medium of exchange. Gold is money because it is divisible, you can divide it into coins, or re-melt it into bars, without destroying it. Also, gold is fungible, where each unit of .999 fine gold (99.9% pure) is similar enough to another unit so as to be easily interchangeable. Gold is also nearly impossible to counterfeit, as genuine gold is easily recognizable. When measured by weight, gold is easily countable, and verifiable. These properties make gold an excellent unit of account. Gold is money because it is a great store of value. Gold is not subject to decay, rot, or rust. Gold has an intrinsic value, because it is rare, highly coveted the world over, and is a luxury item. There is not a single other commodity with those attributes, except, perhaps, for silver. But silver is substantially heavier for the same value, and not really suitable for transactions in excess of $1 million. Platinum and palladium may come close to gold, but they are not so easily recognized by the masses, and are used mostly by industry.

About 10 years ago, M3 was about $4 trillion, and silver was at $5/oz. By April, 2007, M3 is exceeding $11.5 trillion, and silver is at $14/oz. Relative to the recent increase in money supply, silver today is about as cheap as it ever was!