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Information on Gold

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Mikael Syding
6 Jan 2020 | 4 min read
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On November 12, the gold price bottomed out at about $ 1445 an ounce, and as late as the 10thDecember, ie less than a month ago, the gold was still trading at the level of 1460USD / oz. Last Friday, the price of real money, ie gold, closed almost 7.5% higher than in the middle of November.

Information on Gold

On November 12, the gold price bottomed out at about $ 1445 an ounce, and as late as the
10th December, ie less than a month ago, the gold was still trading at the level of 1460USD / oz.
last Friday, the price of real money, ie gold, closed almost 7.5% higher than in the middle
of November. The most obvious and intuitive explanation for the upturn is the unrest in Middle
East, but the truth is really another. I could even go that far such as saying that the underlying
cause is given by technical analysis of the price trend itself lately. The gold price in dollars has
been in a positive trend since the local bottom of $ 1160 / oz in mid-August 2018. On the way up
during the fall, the price broke among other aspects the key level which marked the start of the
strong rise in 2010 and which ended in an all time high 2011. The same level has effectively
acted as a ceiling on the gold price virtually every year from 2013 to 2018, but now this was
finally broken in May 2019, despite, for example, both shares and Dollars showed strength.

Technical analysis is a way of trying to measure the underlying attitude investors and their actual
financial flows to the asset. In the case of gold, the market has struggled to melt the crash of the
00's extreme bull market, but slowly found a psychological bottom up as money printing and
interest rates around zero have become the norm in ever greater part of the world. During the
past year, similar bull flags were created in the gold price during the early spring and late autumn
(and actually a little in August too). The eruptions upward from both formations are similar even
though the synchronous macro news has been different. It makes me think it's not worry about
war that really raises the price but there is logically a steadily growing interest for gold as a
hedge against the government's attitude that all problems in the real world can be solved by
registering more digital zeros in their virtual databases. In fact, it means just that the real values
are moved from one place to another depending on how you are positioned in the chain of
liquidity flow from the source (the central bank) via the banks, borrowers and investors, to the
final station (taxpayers, savers, pensioners, etc.). When the authorities print currency, the money
illusion first gives a positive impetus to the real one the economy and then increasingly to
equities and house prices. Historically, sooner or later the price of money and real assets has
always been adjusted to its normal relation to its inflated exchange rate. Of course, wealth and
real values cannot be created by adding zeros on banknotes or bank accounts, although
many have tried.

In the end, wages, raw materials and consumer prices are at a level that makes
it possible to eat and live. About the prices of equities and housing go too far from their
equilibrium level, either the price of shares and housing is adjusted down or wages and
consumer prices are adjusted up. And next to these factors are real money (gold) whose price is calculated in the current currency of paper periodically adjusted so that there is a stable base to anchor the currency experiments at. No, as you know, you can't eat gold or live in it in a practical way. You can't do that the state's fiat currency either. The great thing about gold is that it cannot be destroyed and or not created especially much more of. This means that gold is perfectly suited to use as a lifting base, "foot", when a state promises not to tax its inhabitants by printing large quantities of new currency.

Historically, the price of gold over long periods has gradually fallen in relation to the
amount of currency (accelerating amount), then during relatively short and intensive correction
phases is re-priced so that the value of the gold stocks corresponds to the value of (the greatly
increased amount) applicable state value. Gold never creates a "return" in the same way as a
wheat field or a company. Gold is by definition static and simply retains its position over very
long periods of time. Therefore, of course, there is no thinking person who believes that you
should place all your assets in gold in the long run and just wait. Then you get to both freeze and
starve and see everyone else running from one in prosperity. Instead, this is how it is: Since there
is about as much gold now as in previous relationships to the amount of clothes, people or
houses, a piece of clothing or a house costs as many grams gold today as thousands of years
ago - albeit adjusted for right now, gold is exceptionally cheap calculated in the amount of house,
cocoa or share of the stock market required to buy a kilo of gold. It is reasonable to assume that
the situation will still be the same in 10, 25 or 50 years. Precisely because of the static properties
of the gold, it is easy to measure whether the gold is high or low valuation in relation to other real
factors in society and see how great the potential is price change is for it to return to its historical
average (or temporarily postpone orbelow the target).

When the world, which has now temporarily raised the amount of currency and also affected the price ofassets such as housing and shares, but not gold, so it is a good idea to consider thatpark a significant portion of its capital in the static gold until the price has been adjusted accordingly reflects the amount of currency in circulation. Then the purchasing power of gold also returns in terms of quantity clothes, housing, transport and entertainment and more to their historical equilibrium level and you can change return the gold against real assets. You may think that the 00s and 10s were the decades of gold, and certainly the price went up then. However, given the amount of new currency and valuation levels in the stock market, it is likely that super-investor Ray Dalio gets it right in the 2020swhich will really be the decade of this century. Are you on the train?

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This information is in the sole responsibility of the guest author and does not necessarily represent the opinion of Bank Vontobel Europe AG or any other company of the Vontobel Group. The further development of the index or a company as well as its share price depends on a large number of company-, group- and sector-specific as well as economic factors. When forming his investment decision, each investor must take into account the risk of price losses. Please note that investing in these products will not generate ongoing income.

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