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Gold and money in the news

According to analysis of a Gold Field Minerals Services (GFMS) release, gold purchases in India are up to 300 tons this year, more than double the gold purchased in India this time last year. India is the world’s largest consumer of gold, using 600 to 700 tons a year. However, Indian production of gold is only about two tons a year, which means India pulls a lot of gold off the world market.

Also bullish for gold, according to a article, “there are 34.2 million ounces left in forwards, loans and options, with a negative mark-to-market of $8 billion” still left to be unwound. GFMS said that the net gold de-hedging in the second half of 2007 will be between 1.5 million and 2.5 million ounces globally. Newmont Mining, the world’s second largest producer, is one of the major players in the on-going de-hedging. Annual gold production is about 80 million ounces. See GFMS release for a detailed report on de-hedging.

For years, gold producers were delighted, even bragged, about being short gold. Now they are closing out their short positions, a move that puts upward pressure on the price of gold.

In another article, Gene Arensberg, in his biweekly Got Gold Report, paints a really bullish picture for gold. One observation:

Fundamentally gold remains on very solid ground. Want some examples? Well, the Chinese have a love affair with yellow gold. A little less than two billion Chinese can legally own gold again and can even buy it through their government-sponsored banks. They may not buy much per capita, but there are a bunch of per capitas’? in China. That’s probably going to end up being demand on steroids in the not-too-distant future.

Arensberg makes other interesting points about the gold market. His Got Gold Report looks at many aspects of the gold market and is excellent reading for investors who want to be closely attuned to the gold and silver markets.

Meanwhile, Gary North has written a piece on the Fed. For persons trying to grasp the idea of central banking, it is a good read. I noted my thoughts on Gary North’s qualifications to write about the Fed and money in my August 24 post. In today’s economy, it is nearly impossible to invest successfully without understanding the functions of the Fed. As North sees the Fed, it is an “immoral hazard.” Murray Rothbard called the Fed a counterfeiting machine. When you understand the workings of the Fed, you know why Rothbard was so critical of the Fed and central banking.

Finally (I couldn’t pass up this one.), has posted a 1959 National Review article about “funny money,” as a visitor to the Chase Manhattan Bank Museum of Moneys of the World in New York Rockefeller Center describes the exhibits. This is a humorous and an enlightening piece on money.

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