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Link between IT outsourcing and gold prices?

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  • Link between IT outsourcing and gold prices?

    I just made a comparison between GLD and IBM price charts over the last 10 years on Google finance and there appears to be a positive correlation between the two at least since 2007.

    A proof that the gold bull run has something to do with IT outsourcing?

    http://www.google.com/finance?chdnp=...UrDJDMuPkgXFJA


  • #2
    Re: Link between IT outsourcing and gold prices?

    I think you need a few more comparisons to establish that IBM was doing something the rest of the business world was not doing. It's interesting, but what about other IT companies? And any other sector, for that matter?

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    • #3
      Re: Link between IT outsourcing and gold prices?

      How about a very simple hypothesis for the Gold bull market? Asian countries like India, China and Vietnam ran big current account surpluses in the 2000s. As a result the domestic money supplies in Asian countries grew, putting a large amount of cash into the pockets of traditional gold retail buyers. This is why the price of Gold grew for the past 12 years. It had nothing to do with hyperinflation, debt default, or peak oil. India's exports were driven by IT outsourcing. China's by manufacturing. Both markets were fueled by easy credit policies that led to big trade deficits that led to Asian reserves and money supply growth.

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      • #4
        Re: Link between IT outsourcing and gold prices?

        The charts below strongly support EJ's thesis that oil prices and gold prices move together:

        http://www.wtrg.com/prices.htm

        http://www.macrotrends.net/1317/hist...ld-price-chart

        http://www.usagold.com/reference/prices/history.html


        Last edited by vt; 10-09-13, 03:47 PM.

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        • #5
          Re: Link between IT outsourcing and gold prices?

          Originally posted by fengguo1 View Post
          How about a very simple hypothesis for the Gold bull market? Asian countries like India, China and Vietnam ran big current account surpluses in the 2000s. As a result the domestic money supplies in Asian countries grew, putting a large amount of cash into the pockets of traditional gold retail buyers. This is why the price of Gold grew for the past 12 years. It had nothing to do with hyperinflation, debt default, or peak oil. India's exports were driven by IT outsourcing. China's by manufacturing. Both markets were fueled by easy credit policies that led to big trade deficits that led to Asian reserves and money supply growth.
          Yes, this was a part of the causation behind the later moves in gold prices, but it began long before 2000, and it is not the real story of why we expect gold to do well.

          Having a credit fueled boom created the possibility of eventual inflation. It was built in the moment the government refused to pay attention to reality, back in 1971, when the credit bomb we face started to accumulate beyond our ability to every pay it back. So, Nixon started borrowing, and not attempting to reform the banking laws, or deal with paying our country's day to day bills. With the laws allowing banks to wildly speculate loosened along the way, the Banksters and the Government, and our Creditors created and encouraged large bubbles that they made a lot of profit on. People were happy to lend to us because it made sense then. They too could use the situation to their advantage.

          But in encouraging more and more borrowing, we created an inescapable problem. EJ saw it first, so far as I know, and the rest of us woke up to reality as gold prices began to move upwards.

          The debt is owed, and continues to increase. It must be paid, or defaulted on. If the government continues to not rein in spending, or actually have a real budget consistent with our national cash flow, the debt will never get paid, more debt will accumulate until people refuse to lend us any more, and inflation will be used to reduce the actual value of the dollars being paid. Then the economy will face rising interest rates to rein in the inflation, (as we recently have faced) which slows the economy, and creates a bit of deflation in the economy, hence pulling the price of gold down a little.

          Our creditors are aware of the problem, which is why China bought so much gold to buy oil with, and is moving the Yuan to a world wide currency for debt payment. They don't need our dollars as much as they did. However, the US is still the most stable market economy, so they haven't kicked us out of the worldwide market yet. Instead, the whole world followed our example, and started printing too. Then interest rates rose, and began slowing the economies more, which caused them to get out of their currency, and buy stuff in our currency, and in our country. That kept the dollar up, and gold and oil prices down.

          Then America discovered fracking, and the dollar was strengthened again, causing more disinflation despite rising interest rates. People started to see their economies fail as the Euro began to fall apart, and they dumped their cash into American Real Estate, releasing a lot of cash that no one has a place to put just now. The world wide pressures on the market balanced things out a bit.

          So we wait, and watch it all move a little up, or down. Corrections in price are normal as the markets change how they are doing things.

          It is very unlikely that we will default...we do not have to, since we can print as much money as we need, and the economy is not completely trashed yet. We will however have inflation continuing that must be dealt with by raising interest rates, yet other people buying the $Dollar, or $Dollar based assets restores amount the $Dollar can buy by creating deflation again.

          Still, we keep printing, and the Government is not changing a thing...still no budget in the 5 years of Obama's administration. And expensive programs like Obamacare, and out of control pensions, and outright corruption...well, the economy will continue to spiral downwards until enough people notice and a change is made in how we tax and spend, borrow, and lend.

          This does mean high gold prices in future...just not yet, as the debt problem has not yet exhausted all it's opportunities to make Banksters a lot of profit. In addition, not enough people have caught on to the scam the Federal Reserve and our Government are running with our tax money. The media is doing great with their cover-ups and propaganda.

          When people do realize that the $Dollar is not worth as much, inflation will rise above controllable amounts, and we will have a lot of people trying to get out of the $Dollar and into Gold in order to have their savings protected. There is only so much profitable real estate to buy into, or the people who have no desire for running the real estate/farms/agriculture, and being afraid of stock prices being puffed up with air, will sit in cash so long as it is a deflationary market. Most people are seeing the current deflation due to the worldwide economy slowing down, and hence not buying more gold.

          If you do not have thousands of ounces of Gold to trade, it is too expensive to sell high and buy low, and pay the taxes on selling your gold to make money off of gold's gyrations in the market with the risks in the current market. Once bought up to your insurance comfort level, it is best to simply wait for the final trade.

          Until then, a lot of people are keeping a lot of cash handy. We want to know more about what is likely to happen before we buy more gold than we need than to protect our portfolios. I at least, want to see that we are actually facing the final leg up before I toss more cash than I need for insurance into gold. In the meantime, I can at least invest for income while I wait. The price may drop a bit more, or it may just drift sideways until the debt/interest rate problem comes to a head. And it will, when people see a stampede into gold as the last place to put their cash.

          All the variables have to be in place, including the supply and cost of obtaining oil, employment levels, government interventions, and so forth, and I rely on EJ to figure that part out, and any other variables that may come up in our very messy world economy.

          I want more gold if I can get it without messing up the rest of my life, but the insurance I have is enough to save me from a sudden collapse...if I can survive all that comes with such a frightening end game.

          I'd rather have stability, and a little less profit.

          Comment


          • #6
            Re: Link between IT outsourcing and gold prices?

            Originally posted by Forrest View Post
            All the variables have to be in place, including the supply and cost of obtaining oil, employment levels, government interventions, and so forth, and I rely on EJ to figure that part out, and any other variables that may come up in our very messy world economy.

            I want more gold if I can get it without messing up the rest of my life, but the insurance I have is enough to save me from a sudden collapse...if I can survive all that comes with such a frightening end game.

            I'd rather have stability, and a little less profit.

            A great post! I also believe gold price will rebound but the hardest part is determining at what level to get in. $1200? $1000?

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            • #7
              Re: Link between IT outsourcing and gold prices?

              I truly believe it will drop to $1100.00 briefly, but catching that will be difficult. If I can get more at $1200.00 I'd be quite pleased, but I'd have to pull money from income producing investments that I will be living on, so it would also need to be nearer the end of the game, and that price is unlikely at that time.

              I don't like to tell anyone to wait ever...If I had cash I didn't need for any other purpose I'd buy today, and get the matter off my mind, but I'm only buying as a safety blanket, not to make a fortune. I will never make a trader...I have no risk tolerance.

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