Date: 5/21/12
Price: Free
SmallCap Network provides comprehensive research and opinions on GLD, ABX, NEM, CGR and GG.
Donald Trump Can't Keep Gold Bubble Inflated (GLD, ABX & CGR)
Not Even Publicity from The Donald Can Keep Gold Up
Not even publicity from Donald Trump can keep gold investment vehicles such as Newmont Mining (NYSE: NEM), Claude Resources (AMEX: CGR), Barrick Gold Corporation (AMEX: ABX), Goldcorp (NYSE: GG) and gold (NYSE: GLD) from declining. This is further proof of the bubble forming in gold as an asset class. This was reviewed in a recent article on www.smallcapnetwork.com.
Peter Grant of The Wall Street Journal recently wrote about how Donald Trump accepted $176,000 in gold as a security deposit for an office lease. In the article, "Trump's New Gold Standard," Apmex, a precious metal dealer gave three 32-ounce bars of gold as the security deposit for a 10-year lease on a building owned by Donald Trump at 40 Wall Street in Manhattan's Financial District. Trump remarked that, "It's a sad day when a large property owner starts accepting gold instead of the dollar. The economy is bad, and Obama's not protecting the dollar at all...If I do this, other people are going to start doing it, and maybe we'll see some changes."
It was a sadder day for gold owners, however, as GLD fell by $1.33 yesterday. Once at $185, GLD closed at $177.21. It is trading beneath its 20-day moving average and there is a short float of 7.67%. A short float of over 5% is viewed as being high. In the Journal piece, Trump admitted to owning gold in his personal portfolio, but declined to say how much. Whatever the amount, it is declining in value.
A decade ago, gold was at $270 an ounce. It is still the same same precious metal, with little use other than as an investment when the threat of inflation is strong and the regard for fiat money is weak. Also driving up the price of gold is further speculation, not investment. The central banks of Thailand, Mexico and South Korea have been buying as a reserve asset. Venezuelan President Hugo Chavez has ordered the repatriation of all gold assets, now being held at the Bank of England. None of these events has anything to do with the fundamental economic demand for gold. Less than 10% of gold goes for anything other than investment purposes.
The absurdity of accepting gold as a security deposit manifests the bubble aspect of the commodity. If there is damage to the rental and the price of gold collapses, then it does not cover the repairs. It is worthy of note that gold hit its all time high in 1980 (about $2400 in today's dollars), due to the commodity bubble creatded by the Hunt brothers attempting to corner the silver market. As with all asset bubbles, it burst due to a lack of fundamental economic demand.
Peter Grant of The Wall Street Journal recently wrote about how Donald Trump accepted $176,000 in gold as a security deposit for an office lease. In the article, "Trump's New Gold Standard," Apmex, a precious metal dealer gave three 32-ounce bars of gold as the security deposit for a 10-year lease on a building owned by Donald Trump at 40 Wall Street in Manhattan's Financial District. Trump remarked that, "It's a sad day when a large property owner starts accepting gold instead of the dollar. The economy is bad, and Obama's not protecting the dollar at all...If I do this, other people are going to start doing it, and maybe we'll see some changes."
It was a sadder day for gold owners, however, as GLD fell by $1.33 yesterday. Once at $185, GLD closed at $177.21. It is trading beneath its 20-day moving average and there is a short float of 7.67%. A short float of over 5% is viewed as being high. In the Journal piece, Trump admitted to owning gold in his personal portfolio, but declined to say how much. Whatever the amount, it is declining in value.
A decade ago, gold was at $270 an ounce. It is still the same same precious metal, with little use other than as an investment when the threat of inflation is strong and the regard for fiat money is weak. Also driving up the price of gold is further speculation, not investment. The central banks of Thailand, Mexico and South Korea have been buying as a reserve asset. Venezuelan President Hugo Chavez has ordered the repatriation of all gold assets, now being held at the Bank of England. None of these events has anything to do with the fundamental economic demand for gold. Less than 10% of gold goes for anything other than investment purposes.
The absurdity of accepting gold as a security deposit manifests the bubble aspect of the commodity. If there is damage to the rental and the price of gold collapses, then it does not cover the repairs. It is worthy of note that gold hit its all time high in 1980 (about $2400 in today's dollars), due to the commodity bubble creatded by the Hunt brothers attempting to corner the silver market. As with all asset bubbles, it burst due to a lack of fundamental economic demand.
Jonathan Yates is a paid contributor of the SmallCap Network. Jonathan Yates's personal holdings should be disclosed above. You can also view SmallCap Network's complete disclaimer and disclosure.
