The Korelin Economics Report
"How Can the Price
of Gold Do Anything But Go Up?"
Al Korelin
www.kereport.com
Jul 25, 2007
We have been discussing the
various factors influencing the price of gold on our internationally
syndicated radio talk show, The Korelin Economics Report, for
quite some time. Our guests, all of who are experts in the resource
sector maintain that the price of gold is dependant primarily
upon the value of the U.S. dollar.
My feeling is that, yes, the
value of the U.S. dollar is an important input, but that other
inputs provide buy signals for gold much sooner.
I believe that the overall
strength of the U.S. economy is a critical input as are political
conditions around the world. For the purposes of this article,
let's just consider the U.S. economy.
The value of the dollar, vis-à-vis
other currencies, is a phony number. I remember a few weeks back
when Roger Wiegand was a guest on the Korelin Economics Report
Daily Show the dollar was dropping substantially. We aired this
particular program on a Thursday and Roger said that he believed,
at the time, the dollar would be higher the following Monday.
I asked why and his response was, "You will see buying by
other central banks and sales of other currencies because if
the U.S. dollar continues to fall, the results would be catastrophic.
Guess what happened on the following Monday? In spite of absolutely
no positive economic news coming out of the U.S., sure enough
the dollar had strengthened against other currencies.
Now, I am aware that for all
practical purposes international cooperation has to exist in
areas of economic well-being. The U.S. economy plays a significant
role in economic matters on a worldwide scale. There is no telling
what the consequences would be if the U.S. dollar were to fall
below the magic "eighty level" and that is exactly
where it was headed on the day we interviewed Roger.
We were fortunate a couple
of weeks ago when Dr. Martin Weiss, www.martinweiss.com
and Dr. Steven Leeb, www.completeinvestor.com,
joined our show as regular guests. If any of you are not familiar
with these two economists, I would suggest that you visit their
respective websites, as you will find a host of valuable economic
information posted there.
Both Dr. Weiss and Dr. Leeb
agreed that the U.S. economy is not as strong as many would believe.
And, they both felt that gold related investments should be a
part of most people's investment portfolios as these investments
provide insurance against economic hard times.
Here is why I know that Dr.
Leeb and Dr. Weiss are correct:
The real estate situation in
California is absolutely abysmal. Mortgage defaults are currently
at 53,943. One year ago they were less than half of that number
at 20,909. Sales for June 2007 were down 36% to the lowest level
for that month in fourteen years. Sales in the California Bay
Area are down 26% and that represents a twelve year low. Most
of the defaults are in mortgage loans that were written between
July 2-5 and August 2006.
Stocks of homebuilders in the
United States that are included in the Standard and Poor's Index
are at their lowest levels since 2003.
The shares of Countrywide Financial
Corp., the largest mortgage lender in the United States, dropped
more than 13% on July 24, 2007 when the Company announced that
earnings were down a third straight quarter and that forecasts
for 2007 were also reduced because of the growing number of mortgage
defaults.
On July 24, 2007, the Dow Jones
Industrial Average had its worst day in four months.
Now, as of this writing, the
U.S. dollar is falling. On the Korelin Economics Report Daily
Show that aired on Tuesday, July 24, 2007, Jay Taylor and I spoke
with Congressman Ron Paul on the issue of the falling U.S. dollar.
He said that he felt there was almost no way that in the long
term that the U.S. economy could continue to operate as it is
today. His reasoning was that the amount of debt in the U.S.
coupled with the need by the Federal Reserve Bank to raise interest
rates in response to the falling dollar both spell "hard
times" for the U.S. economy.
These hard times for the U.S.
economy will be reflected by the U.S. dollar at some point in
the future. Maybe it will be reflected tomorrow and maybe months
from now. I can't predict the future because it does not follow
the economic principals that I learned in the university.
I believe that economic conditions
in the U.S. and political events around the world are giving
definite buy signals for gold. I have felt this way for a number
of years now. It all started when gold was trading at $254 an
ounce. We made the call on The Korelin Economics Report then
that the price of gold was going to trend upward for quite some
time. We were correct then and, with the help of the input from
guests on our program, I am convinced that we are correct now.
Listen to the interviews and then come to your own conclusion.
In addition to being heard on the thirty stations that carry
our program, you can also listen by going to www.kereport.com.
Al Korelin
email: alkorelin@comcast.net
website: www.kereport.com
321gold Ltd
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