Chart Of The The Day: Real Gold Prices, 1970-2011

Record-high gold prices have been in the news lately, here’s an example of a new story today from Bloomberg titled “Gold Advances to Record for Second Day“:

“Gold for immediate delivery in London rose to an all-time high of $1,462.30.“ The chart above displays real, inflation-adjusted gold prices back to 1970 (data are from Global Financial Data, paid subscription required), and shows that the real price of gold peaked on January 21, 1980 at a closing price of $892.10 per ounce in current dollars, but that’s more than $2,500 per ounce in today’s dollars.  Compared to that peak real price, the price of gold today at $1,462.30 per ounce is 42.5% below the 1980 peak.

Gold Gains Strength As The Dollar Grows Weak

Elizabeth Kraus While silver continues its meteoric rise, investors often wonder what exactly drives the movement of such an important and financially sensitive commodity, and how bullion trade impacts the mid-term outlook for the U.S. dollar. As gold prices respond to inflation expectations, and central banks being the largest holders of gold, the biggest players in the market impacting gold, a correspondent on Bill Murphy’s LeMetropleCafe site snarled: “The Gold Cartel showed up, and punished both gold and silver in the past four days, and gold was bombed going into an option expiry on Monday … same tricks (tactics) time and time again.” (It is a fact that CME gold-option expiries seem to attract heavy selling pressure.) “Enter the Fed officials today and yesterday. Apparently the strategy was to get several of the FOMC governors to hit the airwaves talking about ending the QE program. … Result? Up goes the dollar and down goes the precious metals market. Coincidence? I hardly think so.” The specter of a determined official-sector effort to cap the gold price is alarming for the gold bulls — especially as a credible rumor of it is likely to attract opportunistic profit-motivated sellers and be self-fulfilling. But this time the fear may be overblown.
For another thing, physical-market premiums as tracked on Le Metropole Café have improved lately. Partly this stems from the U.S. dollar decline, and partly from the recent start of a rally in emerging-market equities. This is firming up such currencies as the Indian rupee, and consequently strengthening their bid to the global gold market. Consequently, the assessment posted Friday on the Jesse’s Café American website deserves attention: “I suspect strongly that when gold breaks out, we will see another fast move higher, because so many in the markets are not positioned for it. After at least one serious ‘gut check’ on the longs, gold will most likely move fairly quickly to $1,590. Depending on what happens, I will not be surprised to see gold hitting $2,000 by year end.”
With dollar decline, add to that, gas prices at two-year highs, and food prices at record levels, the value of a dollar just does not go as far today as it did a decade ago. “Get used to it,” says Peter Schiff, CEO of Euro Pacific Capital. “If people think that gas prices are high now and that food prices are high now, just wait for another couple years,” he tells Henry Blodget. “Prices are going to be up in the stratosphere.” Schiff blames the Federal Reserve’s loose monetary policy for the debasing of the U.S. dollar, rock-bottom interest rates coupled with QE1 and then QE2. If the Fed keeps this up, and continues to print money, he says the U.S. dollar could be worth less than toilet paper…and moving there already.
Last week Federal Reserve Bank President Dennis Lockhart echoed Ben Bernanke’s call to end quantitative easing this summer and said he would “support a change of policy if evidence accumulates that the low and stable inflation objective is at risk.” Schiff is calling both Bernanke’s and Lockhart’s bluff. Without question, the Fed will undergo QE3 and will keep interest rates low for fear of killing the U.S. recovery, he says. If the debt ceiling is hit it could prove disastrous for the U.S. economy. The bottom line, expect the dollar to continue losing value while the price of food, gas and other commodities continue to rise. A longtime dollar bear and gold bull, Schiff foresees gold hitting $5000 per ounce “in the next couple of years.” Schiff’s forecast is based on his view the U.S. dollar is going to collapse under the weight of our massive deficit and reckless policies of the Obama administration, which he compares to the massive spending programs of the 1960s, which paved the way for gold’s ascent in the 1970s. “Obama is making the same mistakes as Bush, but he’s doing them on a grander scale,” says Schiff. In addition to gold, Schiff remains bullish, most notably on China. Regal Assets top analyst says “There is bound to be a QE3 in the near future this tactic has been employed since 2008 and there is no letting up in sight”.
Source: http://goldcoinblogger.com/gold-gains-strength-as-the-dollar-grows-weak/#more-2937

Why gold prices and US interest rates move in tandem

Why gold prices and US interest rates move in tandem
Shanmuganathan N.



Every time the Fed announces a decision on the US interest rates, gold prices also react. If interest rates are increased, gold prices go down, and vice-versa, indicating a negative correlation. The explanation offered is that when interest rates rise, the higher returns attract foreign capital and demand for dollars. The higher demand for dollars raises the US dollar-exchange rate. This increased return on the dollar makes gold less attractive and, hence, the gold price falls.
This theory is what is put forward by television channels and economics courses around the world. For lack of a better phrase, one may refer to the above as the "Maggi Theory of Gold", that is, the theory is valid for the first two minutes of trading after announcement of an interest rate decision. Beyond that initial speculative sentiment, the historical evidence has been quite contrary to what is suggested by the above theory.
The Evidence

1971 was when the US went off the gold standard and thus, that would be a good starting point for this analysis. In January 1971, gold prices averaged $37/ounce and interest rates were 6.24 per cent. For the next 12 years, both increased gradually. Gold averaged $673 by September 1980, while interest rates peaked a year later, at 15.32 per cent.
For the next two decades, there was a bear market in the precious metal, in conjunction with declining interest rates. Gold prices bottomed by April 2001, at $260, and interest rates bottomed out by June 2003, at 3.33 per cent. From the bottom, both have been increasing steadily and, by June 2006, gold averaged $600, and the interest rate was 5.11 per cent
Indeed, barring very short-term time-frames, the correlation is actually a strongly positive one — higher interest rates mean higher gold prices. But why is this so?
"Real" Theory of Gold

For one, gold is not an interest-bearing instrument. So "other things being equal", any interest-bearing instrument should be preferable. It does not matter whether the interest rate is 0.5 per cent or 50 per cent — one would be worse off holding gold. So it is not the interest rate that influences gold prices, but the "other things" that is assumed to be equal.
So what are the "other things"? Let us get to the basics of investing to answer that. According to Benjamin Graham, "an investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return". Most people would agree that it should at least be equal to the risk-free interest rate and a risk premium for holding a risky asset class.



But what happens when real rates of interest are negative? Then, an investment operation, even when it fits in with the above definition, would fail to maintain the purchasing power. So a more appropriate definition would be as follows: "An investment operation is one which, upon thorough analysis, promises safety of principal and a return that at least ensures maintenance of purchasing power over the period invested". Consequently, when expectations of inflation are high, investors prefer gold as a mechanism for protecting their purchasing power. Thus, when confidence in a currency is high (low inflation), then gold prices would be low and, for the same reason, interest rates also would be low. The best explanation for the gold standard was, ironically, given by the former US Fed chief, Mr Alan Greenspan, in his speech "Gold and Economic Freedom" in 1966:
"Under a gold standard, the amount of credit that an economy can support is determined by the economy's tangible assets, since every credit instrument is ultimately a claim on some tangible asset... The abandonment of the gold standard made it possible for the welfare statists to use the banking system as a means to an unlimited expansion of credit. They have created paper reserves in the form of government bonds which the banks accept in place of tangible assets and treat as if they were an actual deposit, that is, as the equivalent of what was formerly a deposit of gold. The holder of a government bond or of a bank deposit created by paper reserves believes that he has a valid claim on a real asset. But the fact is that there are now more claims outstanding than real assets."
Of course, the Maestro managed to unlearn this virtue by the time he reached the Fed, where he began the biggest money printing exercise ever witnessed. He did exactly what he had said would happen in the absence of a gold standard.



The effects of that can be observed in the Graph that shows how chocolate prices moved before and after the era of easy money. Chocolate is just an example, but it's true of almost every other consumer good. The Fed-doctored CPI or core rate will never tell you the true story.
Gold as leading indicator

While the positive correlation between gold and interest rates is obvious, the peaks and troughs do not exactly coincide.
If we plot gold vs 18-month future interest rates (that is, gold of January 1970, matched with the interest rate of July 1971), then the lines coincide almost exactly as shown in the Graph.
What this means is that the yellow metal has been a very good indicator of interest rates. Given the fact that gold has been going up sharply in the recent past, one can expect the interest rates to follow soon.
In an earlier article titled "The Inflation Game" (Business Line, July 21, 2006), this writer had explained why interest rates are set to increase. The current surge in gold just goes to confirm that.
The Golden Future

An interesting exercise would be to estimate how high the precious metal would go up in the next decade of rising interest rates. In the previous interest rate cycle of 1970 to 1983, prices went from $35 to about $675 (it touched $850 for one minute) — an increase of nearly 20 times. This time around, we started from $260, so will we exceed $5,000?
One could argue that the gold price, as fixed by the US Government in 1970 at $35, was artificially low and, hence, the move appears exaggerated.
On the other hand, one could make a case that in every economic aspect — fiscal deficit, consumer debt, trade deficit, debt-to-GDP, etc — the US is much worse than it was during the 1970s and so gold could be headed for an even greater move.
A more fundamental reasoning would be that the 35-year (or 85-year experiment, as some Austrian Economists could rightfully claim, since we went off the true Gold Standard by 1920) experiment with the ultra loose monetary system with Fiat currencies has to end "eventually".
Subsequently, when we go back to the "Classical Gold Standard", Gold would have to be priced at $30,000 to account for the Dollars in circulation today. Thus, using a Gold standard to define the intrinsic value of Gold, $5000 would indeed be cheap.
(The author is a Director at Benchmark Advisory Services and can be contacted at shanmuganathan.sundaram@gmail.com)

Gold May Go Even Higher on Fed's Stimulus

By Daniel Kruger and Tom Keene - Apr 6, 2011 4:19 AM GMT+0800
 
Gold remains an attractive investment even at record prices, fueled in part by the Federal Reserve’s $600 billion of Treasuries purchases through June, according to Bianco Research LLC in Chicago.
“I think the path of least resistance for gold is higher,” said James Bianco, the firm’s president, in a television interview on “Bloomberg Surveillance” with Tom Keene.
Gold futures for June delivery rose $19.50, or 1.4 percent, to settle at $1,452.50 on the Comex in New York, the highest closing price ever.
“Quantitative easing has been an inspiration for the massive, record speculation that we’ve seen for a lot of these commodities,” Bianco said.
Inflation may return to the economy by the end of the year, Bianco said. An end to the Fed’s asset purchases may lead to a rise in short-term yields relative to longer-term yields, Bianco said.
A difference of less than 1.5 percentage points between Treasuries maturing in two- and 10-years may hurt financial stocks, Bianco said. The gap is 2.66 percentage points, and has not been below 2.5 percentage points since Dec. 6.
“Financials are a large carry trade,” Bianco said. “They borrow at the short end of the curve, they invest at the long end of the curve. As long as it’s very steep they make money.” The yield curve is a measure of the differences between short- and long-term interest rates.
Policy makers should address the growth in the outstanding Treasury debt before it expands further, Bianco said.
“It’s going to be problematic as we move forward from here, especially if we continue to run big budget deficits,” Bianco said.
(In the U.S., hear Bloomberg Radio on satellite radio: Sirius Channel 130 and XM Channel 129. In New York City, tune to WBBR 1130 on the AM dial.)
To contact the reporters on this story: Daniel Kruger in New York at dkruger1@bloomberg.netThis e-mail address is being protected from spam bots, you need JavaScript enabled to view it ; Tom Keene in New York at tkeene@bloomberg.netThis e-mail address is being protected from spam bots, you need JavaScript enabled to view it
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.netThis e-mail address is being protected from spam bots, you need JavaScript enabled to view it
Source: http://www.bloomberg.com/news/2011-04-05/gold-may-go-even-higher-on-fed-s-stimulus-bianco-research-says-tom-keene.html

MONETARY DISASTER is around the corner

Geithner warns U.S. to hit debt ceiling by May 16 - Reuter 
 
WASHINGTON (Reuters) - The United States will hit the legal limit on its ability to borrow no later than May 16, Treasury Secretary Timothy Geithner said on Monday, ramping up pressure on Congress to act to avoid a debt default.
"The longer Congress fails to act, the more we risk that investors here and around the world will lose confidence in our ability to meet our commitments and our obligations," Geithner said in a letter to congressional leaders.
"Default by the United States is unthinkable."
Previously, the Treasury had forecast that the $14.3 trillion statutory debt limit would be reached between April 15 and May 31. As of Friday, Treasury borrowing stood just $95 billion from the ceiling.
Some Republican lawmakers have sought to use the need to raise the debt limit as a lever to pressure the Obama administration into agreeing on large-scale budget cuts.
The debt-limit showdown comes as Congress struggles to complete a spending package that would keep the government operating beyond Friday.
Republicans are seeking to use that bill to enact deep spending cuts and lawmakers are focusing on a proposal to trim this year's budget by $33 billion, a relatively small amount compared with a projected $1.4 trillion deficit.
Geithner said a failure to raise the debt ceiling in a timely way would push interest rates higher and spark "a financial crisis potentially more severe than the crisis from which we are only starting to recover."
Both Geithner and Federal Reserve Chairman Ben Bernanke have said a failure to raise the ceiling could have "catastrophic consequences."
BUYING TIME
As the government nears the debt ceiling, the Treasury has authority to take certain extraordinary measures to postpone the date the United States would default on its obligations.
However, those actions would be exhausted after about eight weeks and there would be "no headroom" to borrow after July 8, Geithner said.
Some lawmakers have called for legislation to force the Treasury to first pay interest on U.S. bonds before other obligations, such as unemployment benefits and Social Security and Medicare payments, as a way to stave off a debt default.
They have also asked Treasury whether financial assets such as the country's gold reserves or the government's portfolio of student loans could be sold to avoid raising the debt ceiling.
Treasury has rejected the proposals as unworkable.
"To attempt a fire sale of financial assets in an effort to buy time for Congress to act would be damaging to financial markets and the economy and would undermine confidence in the United States," Geithner said.
Based on estimates last year from the International Monetary Fund, U.S. debt as measured against the size of the economy is higher than in France, Canada and Germany, but less than in Italy and Japan
Geithner said that while the debt ceiling projections could change, the Obama administration does not believe they could change in a way that would give Congress more time to raise the debt ceiling. He said Treasury would provide updated projections in early May.
(Editing by James Dalgleish and Jan Paschal)
Source: http://mobile.reuters.com/article/topNews/idUSTRE7335BY20110404

USD disaster sign

Gold will achieve new record highs this year - Blanchard

Blanchard and Company's research analysts see gold achieving further new highs in 2011 as little has changed in the drivers which have brought gold to its current levels.

Author: Lawrence Williams
LONDON - 
According to coin and precious metals dealer Blanchard and Company's research arm, the continuation of gold's strong bull run through during Q1 2011, with the metal hitting a new nominal high above $1,440 last week, will see more new record highs likely to be achieved this year despite some analysts' predictions that gold will plateau.

"After the economic implosion in 2008, investors are fatigued by negative indicators that show more financial weakness on the horizon and naturally gravitate toward signs they see as positive, but right now that's just not an accurate reflection of reality," says David Beahm, Blanchard's Vice President of Marketing and Economic Research. "In the first three months of 2011, the Fed has printed about half as much money as it did in all of 2008. That's not a sign that QE2 is coming to a halt sooner rather than later because the chart is parabolic."  A graphic of the money supply increase is shown below courtesy of the St. Louis Fed, indicating the huge and steep rise seen in the past two years of ‘Quantitative Easing'



Beahm reckons that much liquidity will continue to dilute the dollar's value, keep interest rates near historic lows, and contribute to a financial mess that has buoyed gold investment demand and prices to levels that have not been realized before. He also says there are other factors that will push gold higher, and most of them are likely not going to change in the foreseeable future.

"When you hear economists say they see European rate hikes on the horizon when three EU countries are on the verge of defaulting on their debt with no lenders in sight, that makes me question the accuracy of those predictions," Beahm says. "The U.S. faces a similar problem, but there's an exception - it just borrows money from itself. This will ultimately create a hyperinflation scenario that is extremely bullish for gold."
The parlous financial situation of some of the U.S.'s largest states and municipalities almost parallels the European situation although little is mentioned about this in the financial press.

Add the expansive and expanding tensions in the Middle East and Northern Africa, and the crisis at Japan's Fukushima Nuclear Plant to the mix, and Beahm sees a scenario where gold's status as the ultimate financial safe haven will be reconfirmed.

"At this point, as in the past, investors will continue to look to gold as one of the best vehicles to both protect and grow their wealth," Beahm says.
Beahm's opinion is shared by some other specialist gold analysts who have been pointing out that the financial and political problems which have brought precious metals to the levels they have reached so far are virtually all still in place.  The apparent recovery in the U.S. remains a little precarious and it may only take some other major unforeseen event to give gold another sharp upwards kick.
Source: http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=124229&sn=Detail&pid=102055

You need to buy gold

"You Need to Buy Gold" - 13 May 2010

"You need to go and Buy Gold" says one US economist...

"WE'RE HEADING towards government devaluing its currency to devaluate its debt in order to survive," says Bud Conrad of Casey Research.

"That means you need to protect yourself. You can't just have savings accounts paying no interest."

Here, in this interview with the Gold Report, Bud Conrad explains his grim outlook for the US Dollar and other paper currencies worldwide, plus why – as he showed at the recent Casey Research 2010 Crisis and Opportunity Summit – you can still prosper and protect yourself during the coming economic storm...

TGR: Today we are talking with Casey Research Chief Economist Bud Conrad who recently presented a riveting talk during Casey Research's 2010 Crisis and Opportunity Summit. Here are four major points from his talk:

1. The world economy is in a calm between a credit crisis turning into a currency crisis as the collapse of the private debt bubble is replaced by a government debt bubble that will also collapse;
2. The world is at a point of no return for government debt as debt-to-GDP approaches 100%. When debt becomes too big, governments cannot control the interest rates and currency. The lead warning is Greece, much the same as Lehman Brothers was in the credit bubble crisis;
3. Peak oil. The wealth of humanity has been built on energy. Half the world's conventional oil supply is already used. That means that the quantity of oil produced each year will not increase much from the current level even as demand from developing countries like India and China increases. Wars over oil have already started. Energy prices will rise. We will see a substantial rise in the cost of food, as food production requires energy;
4. The US can prosper and stay ahead of the rest of the world by developing and investing in three forms of technology – the internet and cell phones, new medicines through biological breakthroughs and new sources of energy. All are good investment opportunities and are necessary for human expansion.

Bud, what lens were you using as you developed these themes?

Bud Conrad: I was trained as an electrical engineer and I spent much of my career in the computer business, so I look at things from a total system point of view. Whenever somebody has an issue I say, 'let's look at the data'...

We have sort of a blue sky overhead right now, as people think things are improving, but I think we're in the eye of the storm. We had heavy winds blowing from the credit crisis and we all know what happened. The governments came along to bailout the problems and purchase all the toxic waste of sub-prime mortgages and bad debt from too much private lending. Governments now have a huge credit bubble, just like we had with the housing mortgage bubble. I think that the government debt bubble will burst and that will be the other side of the hurricane, as the winds swirl around and hit us from the other direction in terms of a currency crisis and government debt collapse.

TGR: Are you at odds with the strategy the US government is using to stave off the recession?

Bud Conrad: If we decide we're going to build a few roads, maybe build a bridge, hand out some money for basketball programs or some other idea that seems to be part of large government programs, then we won't have achieved much. Last year, the government spent about $1.5 trillion more than it collected in taxes. The Federal Reserve also spent $1.5 trillion buying mortgage debt to keep that market from further collapse.

So the government spent $3 trillion Dollars to give us the current blue sky of a small recovery. The current blue sky could be measured as 3% of GDP. GDP is about $14 trillion, so that's about $400 billion of economic growth. Well, $3 trillion spent for $400 billion of economic growth is a pretty bad return on your investment. Add to that several trillions of guarantees and future government obligations for Fannie, Freddie, FDIC, PBGC etc., and I have the basis for believing that these obligations are big enough to cause the collapse of the sovereign debt of the United States Furthermore, I don't think it's just the US; I think it's worldwide. In other words, we're going to have debt crisis in the US and Europe and other countries that have expanded their government debt too.

TGR: Is Greece the bellwether for this potential doomsday scenario?

Bud Conrad: Greece is being bailed out, but it's one set of governments bailing out another set of government debt. Pretty soon the question is who's going to bailout whom? The US debt is getting out of control at a spending rate approximately equal to Greece's (in terms of percentage of GDP per year.) I think we're in a far more precarious position than most people realize.

TGR: Did people examine similar themes at the recent 2010 Casey Research Crisis and Opportunity Summit?

Bud Conrad: I think there was a general attitude in the conference that our government debt is so serious that we can't recover to as stable level. I call it "beyond the point of no return" because interest on the debt continues to grow even if the government tries to cut spending. Other speakers like Sprott Asset Management's John Embry and Bill Bonner, who heads the AGORA set of newsletters, worry about our government and the debt. Bonner talks about the "collapse of empire." Embry talks about the corruption in our banking system. And we had a whole section on energy.

TGR: Let's go back to your "point of no return."

Bud Conrad: The point of no return is when government debt gets so big that it can never be paid off. That's the problem that happened in Greece. Government debt is so big that the other countries of the European Union have had to come in with a $110 billion bailout, which I believe is probably not enough, over a three-year period, to try to put the Greece situation back on track. What happens when Spain, Portugal and Ireland are added to Greece?

TGR: And in the US?

Bud Conrad: In the US I think we are past the point of no return in the sense that the government debt and obligations for retirees from baby boomer times of $75 trillion Dollars cannot be paid off with Dollars that are now denominated at the value that most people think they should be. In other words, we're heading toward government devaluing its currency to devaluate its debt in order to survive. That means you need to protect yourself. You can't just have savings accounts paying no interest and the purchasing power of these Dollars declining. You need to Buy Gold.

TGR: Is peak oil another reason to Buy Gold?

Bud Conrad: One of the best discussions in our conference was about how the explosion of the offshore oil rig in Louisiana is much like what Three Mile Island was for nuclear energy. This kind of deep water oil drilling is potentially far more dangerous than we thought it was; not only dangerous in the short term for the investors who build rigs and spend hundreds of millions of Dollars putting these things together, but now for the environment. It's going to affect our ability to do offshore drilling, which we had hoped could be one of the new sources of oil to keep the wealth of the planet and humanity growing.

TGR: Explain the role energy plays in the growth of humanity.

Bud Conrad: We have grown to 6.5 billion people from 1.5 billion people over the last century because we could take the work off the backs of men and animals and put it onto machines. We created electronics, computers, medicine and so forth to improve our lifestyle. We have lived truly in the most abundant time for humanity, but we have used up half of the oil. You cannot grow energy production at the level that Asia and India would like in order to have the kind of lifestyle we have here in the West. The result is a worrisome situation politically because it can lead to wars over resources. It could also lead to starvation because the production of food is dependent on energy. Energy is used to provide everything from fertilizer to diesel fuel to food storage to transportation. Energy has allowed us to move from my father's time of 50% of the US population scratching food out of the surface of the earth to only 3% of the population producing food, much of which we export.

TGR: Why aren't more people talking about the dearth of oil and the collapse of the paper money?

Bud Conrad: The combination of energy as a problem and the financial collapse of paper money systems are a reason for much more concern than is generally disseminated in the normal business news. This is really important. We really need to find new sources of energy.

TGR: Yet in the midst of all these looming crises, you see opportunities for investment. Tell us about some of those.

Bud Conrad: The basic question of most investors who come to our conference is: What should I be doing in terms of investment opportunities? Casey Research focuses heavily on extracting resources. We have two newsletters talking about gold, one on junior mining stocks and one more about big stable mines. We offer similar services in the energy sector. The point of these is to give people the ability to protect themselves from what governments are doing to us.

TGR: But in terms of a sector, what is one that you focus on?

Bud Conrad: One of the most important things to think about is the future of technology. In some sense, technology is the savior for mankind. It's brought us this great abundance and I think can continue to do so.

TGR: With that in mind, what are some specific ways one can invest?

Bud Conrad: I don't usually pick companies myself because I tend to look at the macro-picture. I think it's necessary to have a good understanding about how all these things tie together. My new book Profiting from the World's Economic Crisis: Finding Investment Opportunities by Tracking Global Market Trends gets to how this whole system works and how can find ways to protect yourself. For example, I believe the Dollar is doomed; and, along the way to its collapse, there will be much higher interest rates to compensate lenders for the potential inflation. You should expect interest rates to rise, and there are ways to invest in that either through futures or ETFs.

TGR: What about opportunities in high-tech?

Bud Conrad: We've just gone through a credit crisis. We've watched General Motors collapse. We've watched the airlines struggle for decades. One of the things that is nice about technology, for example, is that Apple (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), Google Inc. (NASDAQ:GOOG) and Intel (NASDAQ:INTC) all have cash in the bank. They have no debt. Apple just blasted through to being the third-largest company in the US in market cap. I'm not making Apple a recommendation for investment as it is already so high, but it shows how important technology can be with new iPads and so forth. For anybody who wants to see how these forces all hang together, I have five chapters of recommendations in my book. My message is to fear for the Dollar and prepare for a future wherein stagflation is the watch word for guiding your investment principles.

TGR: Won't the collapse in the value of the Dollar drive the technology companies that you just listed to move to other countries? Aren't we at risk there?

Bud Conrad: They've already gone. There is no production of anything done in Silicon Valley; all the plants for semiconductors and so forth are in Asia. But there will be competition for intellectual resources in the future. I think we have an edge on the front end of the invention of technology. There are plenty of foreigners here in Silicon Valley. Indians and Chinese are starting their own companies. I think we still have the leading edge in our education and development of new things; and I think we should emphasize and support it. I'm even going to take a libertarian's antithesis here by suggesting government support of our invention and creativity would be a very good investment. If we don't, Asians are no dummies. They'll figure out how to do things on their own and, in fact, they are.

TGR: How so?

Bud Conrad: One of the reasons for China's great leap forward was active participation in new technologies. China moved from being the low-cost producer to doing their own offshoring to Indonesia where they get cheaper labor. They're trying to move up the food chain to the more complex things like electronics rather than cheap consumer goods. Watch the sweep of anointed society moving from the West toward the East.

TGR: What about other sectors where technology is key?

Bud Conrad: We need a new way to do medicine. If we actually push forward on biotechnology, I think there are opportunities for humanity. Cracking the genome means that we have figured out how to use biological methods so that people can repair parts of their bodies with living tissue rather than pills. Pills are based on chemistry that, hopefully, has some kind of molecule that makes us feel better. There is a whole new trajectory for the biological sciences that can be used to improve the human condition.

You can see an overwhelming need for new energy sources. We need new ways to absorb the sun's energy to extend humanity's position on this planet. The US is in the best shape technologically to prevail and keep its empire from collapsing in the way so many large and successful collections of society and empires have in the past. I'm not sure we will, but I think that's the best opportunity for us both as a nation and as individuals. If we invest in finding the right technologies, we will all do better.

TGR: Where is a low-risk place to put your money?

Bud Conrad: I think you'll do well by investing in gold. In some sense, gold is just plain a stable island. It doesn't change when you invest in it; you are really just making a solid savings position.

TGR: Are there any other metals that you see as being a safe harbor?

Bud Conrad: All of them. Silver is a cheap man's gold but more volatile. As gold goes up, silver goes up more. As gold goes down, silver goes down more.

Think about energy. Oil is often called "black gold." I think of it as an opportunity for investment that isn't just about savings, particularly if you're investing in not just the material but also the new ways of generating energy. Perhaps then you are adding to humankind's knowledge about how to improve its situation, as well as getting good returns.

TGR: What were some major investment themes in talks during the summit?

Bud Conrad: Gold, energy, interest rates rising, agriculture, water, methods of investing, personal considerations of living in the US or other countries and how to do it, how to handle passports, how to handle your money in a different country than where you live, etc. Most people said it was one of the best conferences they had ever been to.

TGR: Great, this has been very informative. Thanks so much for your time, Bud.

source:http://goldnews.bullionvault.com/buy_gold_051320102