A detailed explanation for a link to oil and gold in the purchasing power …..

Gold price technical analysis 30 - May, 2013

– What is the purchasing power of money and how to simplify for me and the readers of Dear, I am an accountant I do not know only the language of numbers the purchasing power of money is the ability of money to buy goods and services, for example if the price of one kilo of meat 5 Riyals, sugar, 2 SR, the purchasing power of the SR using the basket of goods is five kilo half a kilo of meat and sugar. Reflect the purchasing power of money is one of the basic functions of money are as a “store of value”, according to this function is supposed to keep the money its power purchasing power over time, ie during the period of time that elapsed between the receipt of money and spending, for example, in the first month when we receive our wages and the length of time which we spend the salary.

Now, if we assume that the price of one kilo of meat became SR 10 and the price of a kilogram of sugar has 4 riyals, in this case is deteriorating purchasing power of money in half, where it becomes for the basket again tenth kilogram of meat and a quarter kilo of sugar. Course that can improve the purchasing power of money if commodity prices tended to decline, with high purchasing power of money in this case. From the above it is clear that the purchasing power of money linked to prices of goods and services that we buy, or in other words, the inflation rate, when the rate of inflation tends (high prices) to increase, falling purchasing power of money and vice versa in the case of tendency of the rate of inflation to decline.Therefore tend central banks in the world today, wishing to preserve the purchasing power of their currencies to adopt the target levels of inflation, Target inflation, for example, 2%, then monitor the rate of inflation in real terms if within the limits of the target rate (2%), they Do not do anything, but if the inflation rate began to rise, the central bank takes measures to curb inflation and vice versa.
– Gold metal itself and linked currency is over or, rather, it ended the old States of America and was replaced by the dollar to hedge what these countries and the fate of the gold stock of it at the return of the economy in 2012 or 2014 to the normal position – is going to buy?When you look closely at the central banks that buy gold will not find, including the central bank follows the developed countries, these countries have experience with gold and you know that gold reserve asset has become expensive (the cost of storing and guarding .. etc), without giving anything of the national currency, no longer gold reserve asset determines the value of national currency of the country (see my articles on the economic reserve for gold as an asset). On the contrary, before the wave of the current high gold prices made sure the central banks of several developed countries to sell their gold. Central banks that buy gold are central banks that follow emerging or developing countries, ie countries that have no experience with gold as an asset reserves, or the countries that huge surpluses and trying to maintain the purchasing power of these reserves of deterioration if they are retained in the form of currencies deteriorate such as the purchasing power of the dollar.

What do you do these countries gold when the explosion of a balloon gold, of course, will develop a loss of huge is the difference between the purchase price of the gold and the price of the metal in the market, Moreover, these countries will continue to afford to keep this metal, but most likely they will retain the metal in its stores of time as does much of the world until you get rid of it some day. – The demand curve for oil as a commodity, a higher drying threatened with the possibility of storage for years to come of it, production is limited and its price is denominated in dollars so why not keep pace with gold in the same relationship to the old against the dollar. Gold demand is quite different from the demand for oil. Oil demand is mainly to meet the demand for energy, and then associated mainly levels of economic activity and expectations, the higher the level of economic activity as increased demand for oil and then increase the price of oil, as well as the outlook for oil prices, which are reflected in the form of speculation in it, the more tended projections for oil prices tended to rise in oil prices rise and vice versa. Of course the demand for oil also depends on the price of its alternatives, which, fortunately, there is no alternative to him even now full. Demand for gold and put a different side is the demand for gold is for jewelry industry, jewelry and industrial purposes, and this demand is not affected by crises or expectations of prices to a large extent.

The problem now is that the bulk of new demand for gold extracted from the mines are for speculative purposes it has recently spread in the speculative funds in the metal that deals in gold bullion for the sole purpose of speculating on the rise, taking advantage of the circumstances of the crisis and the lack of any signs of near the exit of the world is full of them. Speculation in gold is characterized as a speculative cause more disruption of the gold market and not a speculative run on the stability of the gold market, in other words, the supply of gold tends to be a negative correlation with the price, not on a direct correlation, as is the case with all commodities, as they tend quantity supplied of gold to decline with the increase in price (the opposite of what it is supposed), to dealers expect that the price will be the largest increase in the future, and vice rising supply quantities of gold with a tendency towards lower prices for fear of the deterioration of prices in the future. If the market conditions to take this approach, the market does not tend towards equilibrium at all, and this of course is due to factors associated with speculation.

So I expect to get speculators to trade gold funds and huge losses in the metal with the explosion of a balloon gold because they speculate the origin is very dangerous as we have said. – Why rose oil (Brent) to the top of the $ 140 at a time has not changed supply and demand and price of the dollar is not as much Barbah. To answer this question, we must link the price and the conditions and circumstances of the global oil market at this time. The price of oil reached in August 2008 to $ 148, the highest price reached a barrel of oil at all, at this time spread speculation in the oil and the price expectations upward, at the time were not crisis housing market in the United States has reflected on the path of economic activity in the world, particularly emerging countries (China and India). Incorrect to say that demand conditions have not changed, the contrary has been a big increase in demand for oil from non-traditional sources in the world, particularly China and India, and these countries were almost self produced self, but a flurry of economic activity and growth rates mighty, which was achieved by These countries have taken the request of these countries on oil significantly, which confused the market, of course, taking aspects of the speculation in the commodity, thus increasing the price to this level.

But the genius of Bush to allow the collapse of Lehman Brothers without any attempt to save the bank a huge shock in the latest global financial markets and then caught a spark of the global financial crisis and the rest you know.
– In the event that the U.S. Federal (By the way, see the U.S. government can not have owned it for (…) decided not to proceed with the plan of the third stimulus quantitative (bad checks), or printed dollar call it what you want what is the fate of gold Do you believe that Technical Analysis Summit gold between 1590 and 1620!!! my objection in favor of the phrase (bad checks), I know that this statement false rumor, which reflect the severe lack of information on the economics of money and the dynamics of money supply in the economy. stimulus quantitative, and health of quantitative easing, it is not worthless checks, it is money and have a balance, and balance is U.S. bonds. and explain the issue simply, the Federal Reserve the facilitation quantitative through the purchase of bonds from financial institutions and is in contrast to calculate these institutions have, any that raises money and uses bonds as a cover to it.

But why do Federal Reserve that the benefit?, it aims to strip these institutions of the tools of investment (bonds) to put their hands cash to force them to lend to consumers and businesses to stimulate aggregate demand in the economy and come out of the U.S. economy out of recession and addresses the problem of unemployment. When the plan of quantitative easing the Federal Reserve will re-sell the bonds and write off the money. There is nothing with central banks name checks without balance, this only happens in countries that do not have a monetary system as he did Mugabe in Zimbabwe to print trillions of dollars in Zimbabwe every day without any cover, such the currency is what would be worthless checks, and the U.S. dollar is not a check without balance. Federal Reserve, in spite of all what is being an independent institution. evidence reminded that if the quantitative easing worthless checks for caught fire of inflation in the United States with two plans to facilitate the quantitative result they raised about $ 2 trillion of cash basis (rather than printing the dollar the way). inflation figures, which comes from the United States to demonstrate that the quantitative easing did not result in any increase in the rate of inflation. see the latest Tdoinata on the rate of inflation in the United States. and now I go back to your question, what the fate of the gold when that happens?, that’s what wary of it always, when it reflected the conditions responsible for the bubble, the current will collapse gold and break down with him the wealth of many of the speculators when, just as happened to the gold and silver in the early eighties, where we are now living conditions are quite similar, But when will that happen?, the answer is no one other than Allah Almighty knows when that will happen, The situation is responsible for the bubble is still present, but that things at the moment are going worse, it is possible to increase the gold in the largest, which will bring the , in my opinion, the risks surrounding investing in gold. – Why is sold price square meter of land at third of the price per ounce of gold in the largest country area compared to the population where the law of supply and demand, it really can supply less than demand and how it is measured in case of real estate prices?

We are talking about markets different valid, the laws of supply and demand exists and works affected by several factors the most important entry and price expectations (speculation), and land prices in the Kingdom could drop significantly if chronicled the state restrictions on the supply of land through the creation of more areas of land suitable for building, and raising the cost of maintainingland space to speculation, or what is called the ground white. comparison between native aims only to the statement of developments in rates of return on the native (square meter of land), and an ounce of gold. However, the native different significantly, in the sense that the price of gold fluctuates up and down, and can fall apart or of the sky, while the price of the land has one direction in the long term, a rise. of course the land as an asset much better than gold as an asset. – What is the current situation in Saudi Arabia in terms of purchasing power in the sense Is the Saudi citizen triggered higher spending at the moment stronger before answering I hope Visit analytical art of gold plus a basic titled “Are you finished a rally gold” 1 and 2. with some reservation on the method of formulation of the question, particularly the Saudi citizen triggered higher spending, can not answer this question directly in favor, one must follow the developments of real income of the citizen (nominal income adjusted to inflation), and to determine the general trends of the real income and then levels of prosperity enjoyed by the road compared to other countries in the region and the world. – the largest owners of gold reserves is America with 8 thousand tons – Germany 4 thousand tons – the IMF – Italy – France – China – Switzerland – Russia – Japan – Netherlands – India 558 Did you mean that America and Europe raise the gold Mdharbaa? sell for these prices to the Indians and Chinese?
Wording of the question this way for error, these countries except for China is not a major producer of gold, and the conflicts of the countries do not even raise the price of gold in order to sell them later to other countries. Reserves, America or other countries of the gold is not for sale in most cases under any price of gold, in other words, if America, for example to raise the price of gold to sell their reserves they would have done so far, but they do not even think of that.