Lear Capital: Syria and the Gold Price

2010_01_05_17_53_260001If I have been asked once I’ve been asked 50 times to weigh in on the effect Syria is having on the Gold price.  Of late, the geniuses have attributed gold’s recent 18% rise in price to Syria.  That would render any argument that suggests otherwise, irrelevant.  Never mind that physical gold demand is rising, central banks are still accumulating gold and gold is trading precariously near its cost of production. Oh, and let’s not forget the fact that our national debt is even more unpayable now than it was before the 2008 crisis that saw $7 trillion of wealth vaporize and the gold price double..

To throw all those arguments aside now would be to say that if we go to war, gold prices will skyrocket higher.  And, if we do not go to war they will plummet.  It’s all on Syria.  I think not.  Sure, some investors, more likely the paper gold and silver traders, will trade on the news and cause some price spikes and dips.  But, it is not the “end-all” to determining the trend.  If there were an end-all it would be debt.  We can’t pay it!  But, there is so much more.

Don’t believe me?  Gold and silver prices started moving significantly higher at the end of June.  At that time, Syria wasn’t even a headline.  From its low of $1180, on or about June 28, the gold price moved up 11% in less than 30 days.  Back then, the heat wave in northern Montana was much bigger news than Syria and gold prices had no problem finding other reasons to move 11% higher.

Not to suggest Syria is not a serious issue, but Syria alone is not driving the gold price higher.  It may be an excuse for some to own more gold or trade more gold and it may serve as cover under which those thirsting for more gold will satisfy that thirst. But, by far, it is not the best reason to own gold now.  Don’t be distracted from those reasons as cited above.

In the days ahead we will come face to face with another debt battle.  In that regard, there is but one certainty – DEBT IS GOING HIGHER!  If, as in the words of the Highlander “there can be only one” reason gold is headed higher, debt would be it.  Too much debt leads to only two possible outcomes – Default or Inflation!  Either way gold wins!

As always, this is just my opinion and you are FREE to choose whether you agree or not.

 

 

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