There is an undeniable correlation between the soaring level of the US national debt and the rising price of gold. With the debt ceiling being raised again in the United States, the exchange traded fund for gold, SPDR Gold Shares (NYSE: GLD), is up in double digits for 2014. John Ryan, Chief Executive Officer of Premium Exploration (OTC: PMMEF), a promising gold exploration company with operations in Idaho, expects the weakness of the US Dollar to keep the price of gold rising.
Mr. Ryan is right so far as the value of the exchange traded fund for the US Dollar, PowerShares US Dollar Bullish (NYSE: UUP), has fallen along with the price of gold and the GLD rising (chart below).
That is the history of the gold. Traditionally, it has been a safe haven asset. When the US Dollar and other paper currencies fall in value, the price of gold rises. From that, there is a trading correlation between the UUP, the GLD, and other assets based on fiat money and gold, silver, and other precious metals.
For long term investors, there is a wide range of opportunities in the precious metals sector.
As detailed in many previous articles on this site, there is a premium now for those operating in the United States in the natural resources group such as Premium Exploration. With seasoned leadership and rich holdings in Idaho, Premium Exploration is positioned well to prosper from the rising price of gold. In addition, the history of mining in Idaho along with the pro-industry position of the political leadership in the state makes small caps like Premium Exploration very attractive to larger entities.
That has certainly been the story with the Chinese spending billions to gobble up national resource assets around the world!
A Wall Street Journal article reported that China has spend over $40 billion on oil and natural gas holdings in North America since 2008. The Chinese spending on gold and other metals is soaring, too. The purchases of gold by the Chinese were at a record level in 2013. As debt spending in the United States increases, so should the prices for securities in the gold sector such as the GLD, Premium Exploration, and others.