From TheGrowthStockWire
Weekend Edition
TheGrowthStockWire
Saturday, November 1, 2014
The dollar staged a strong rally following the Fed's announcement this week that it would end quantitative easing... And commodities, once again, got crushed.
The dollar and commodities have an inverse relationship... As the dollar goes up, commodity prices generally go down, and vice versa.
The main reason for this relationship is simple: Commodities are priced in dollars. A stronger dollar means it takes fewer dollars to a buy a given commodity. Likewise, when the dollar rises against a basket of foreign currencies, foreign buyers have less buying power.
The dollar's recent parabolic move has crushed gold and silver. Gold and, to a lesser extent, silver are particularly vulnerable to dollar fluctuations. As we saw during the subprime crisis, gold prices soared as the world feared a collapse in the dollar.
Take a look at this chart of the dollar versus gold and silver over the past four months...
Even with the massive selloff in gold stocks, is it time to buy? We asked S&A Resource Report editor Matt Badiali for his thoughts...
Citing geology expert Brent Cook's presentation at the recent New Orleans Investment Conference, Matt noted that all-in gold production costs for major developers are more than $1,400 an ounce today. Meanwhile, the price of gold is less than $1,200 an ounce. Gold companies are selling every ounce of gold at a large loss... And miners are trying to stop the bleeding by cutting exploration and development costs. Think about that for a minute...
The only way these mining companies make money is by selling gold. Today, they're cutting spending on finding and building new gold deposits. Their shortsightedness today will ensure that when the market finally moves higher, they will have little gold to sell on the upswing. It's the classic commodities cycle.
Read more from TheGrowthStockWire >>
Weekend Edition
TheGrowthStockWire
Saturday, November 1, 2014
The dollar staged a strong rally following the Fed's announcement this week that it would end quantitative easing... And commodities, once again, got crushed.
The dollar and commodities have an inverse relationship... As the dollar goes up, commodity prices generally go down, and vice versa.
The main reason for this relationship is simple: Commodities are priced in dollars. A stronger dollar means it takes fewer dollars to a buy a given commodity. Likewise, when the dollar rises against a basket of foreign currencies, foreign buyers have less buying power.
The dollar's recent parabolic move has crushed gold and silver. Gold and, to a lesser extent, silver are particularly vulnerable to dollar fluctuations. As we saw during the subprime crisis, gold prices soared as the world feared a collapse in the dollar.
Take a look at this chart of the dollar versus gold and silver over the past four months...
Even with the massive selloff in gold stocks, is it time to buy? We asked S&A Resource Report editor Matt Badiali for his thoughts...
Citing geology expert Brent Cook's presentation at the recent New Orleans Investment Conference, Matt noted that all-in gold production costs for major developers are more than $1,400 an ounce today. Meanwhile, the price of gold is less than $1,200 an ounce. Gold companies are selling every ounce of gold at a large loss... And miners are trying to stop the bleeding by cutting exploration and development costs. Think about that for a minute...
The only way these mining companies make money is by selling gold. Today, they're cutting spending on finding and building new gold deposits. Their shortsightedness today will ensure that when the market finally moves higher, they will have little gold to sell on the upswing. It's the classic commodities cycle.
Read more from TheGrowthStockWire >>
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