The Case for Gold
Topics
PLEASE NOTE THAT THIS INFORMATION EXPRESSES THE VIEWS AND OPINIONS OF SEABRIDGE GOLD MANAGEMENT AND IS NOT INTENDED AS INVESTMENT ADVICE. SEABRIDGE GOLD IS NOT LICENSED AS AN INVESTMENT ADVISOR.
Basic Facts About Gold
There are about 5 billion ounces of above ground gold supply worth about USD 5 trillion at current prices. Perhaps half of this is in deliverable, investment-grade form. The above ground gold supply is growing at about 1.5% annually, the 300 year average.
Shift in Investor Sentiment
In the past quarter, gold has performed unusually well in all major currencies, suggesting that a shift has taken place in investor sentiment. We believe the shift reflects the growing fact of inflation, not the kind that can be measured on the supermarket shelves [yet] but rather the inflation of money supply and liquidity that depreciates the perceived future value of fiat money... in other words, currency debasement.
The End of the Recession
If you watch financial television, you know that a new consensus has developed…the recession is over and the world is about to return to normal. The stock market, corporate bonds and many commodities have soared in price
Credit Bubble No More, But Systemic Rick Lingers
Financial markets during the last six months have been as volatile and difficult to read as any in history. The massive credit bubble which we had described in our Shareholder Reports for the last five years finally burst and the response by governments and central banks has been much as we predicted, only more so.
The Collapse of the Historic Credit Bubble
As we have argued for many years, the world economy has been in the grip of an historic credit bubble. This bubble is now collapsing faster than we could have imagined, thanks in large part to the erratic policies of the U.S. Treasury and Federal Reserve who saved a number of institutions from bankruptcies before inexplicably losing their nerve on Lehman Bros., much to the detriment of confidence in the world financial system.
The Expect Short-Lived, Perfect Storm
The drop in gold prices and gold equities over the past month has been precipitous. From its recent high above US$960, the gold price has fallen by about 15% at the time of this report.
Is the Worst Over?
Over the past several months, events have unfolded much as we had predicted. The impact of years of lax and excessive lending in the U.S. residential real estate market finally started to come to light in the form of accelerating delinquencies and foreclosures. All it took to expose the weakness of the financial system was a U.S. housing market that was no longer rising
What's Next: Collapse in the U.S.?
Re-reading the gold market report from our June 30, 2007 report, even we are surprised by the prescience of our comments.
Long-Term Outlook for Gold
As we write this, the mood is somewhat sour in the gold market. Gold has failed to reach the highs of last May, never mind the 1980 record high. Recently, other investment classes which are normally countercyclical to gold such as equities and industrial metals have performed better than gold although the gold price remains in an up-trend against the U.S. dollar. In general, gold shares have underperformed gold itself for more than the last three years, with notable exceptions such as Seabridge.
Commodity Bull Market
Gold continued its downward trend in the third quarter, reaching a low of US$560 per ounce in early October. A great many self-appointed experts declared that the bull market in commodities had ended and applied this assessment to gold as well although there is very little evidence to support the notion that gold is a commodity like any other.