wren

A good essay. It sums up most of my opinions on the matter.

It is a useful and entertaining introduction to the monetary aspects of gold for those who are new to it (most of the general public).

You may know that in Finland in olden times squirrel skins were used as money (the Finnish word for money - "raha" is supposedly derived from a variant of the word for squirrel, "orava"). I read just recently that the skins were used in the clothing business so it was indeed a commodity currency.

Red squirrels are now very common in Finland, but prior to a hundred years ago they were much rarer due to trapping. In the city suburb where I live there are plenty of cute little squirrels as there are plenty of trees, Scots pines especially, between the buildings as well as park areas.

This blog article (July 5, 2009) about the fractal analysis of the gold price suggest that a hyper-growth period may happen in July or soon after. It draws a comparison between now and the previous patterns in '06 and '07.

http://goodstockinvesting.blogspot.com/200...tal-moment.html

I've no idea whether this fractal method is very reliable - the article claims that it is.

Does anybody know how the fractal dimension is actually calculated in these price analyses?

Korea needs more gold.

Bank of Korea Likely to Buy Gold for 1st Time in 11 Years

 

The Bank of Korea has not purchased gold for 11 years, but is expected to go on a gold buying spree, as the world’s central banks have bought the commodity since the global economic erupted in September last year.

 

A Bank of Korea official said yesterday, “The bank has begun to set up a plan to manage foreign exchange reserves for next year. It has also closely watched central banks in other nations and trends in the global gold market. Given the changing global financial environment, the bank`s management plan is critical.”

 

According to experts, the comment implies that the bank plans to buy gold soon. Korea has the world’s sixth most foreign exchange reserves but ranks just 56th in gold holdings.

<snip>

Kwon Sun-woo, the head of macroeconomic research at Samsung Economic Research Institute, said, “The Bank of Korea`s gold reserves are far less than enough. It should have bought more gold. Given the instability of the greenback, it needs to buy more gold.”

 

○ Lagging badly in gold reserve volume

 

As of late May this year, the Bank of Korea had 14.3 tons of gold, far less than that held by its counterparts in the United States (8,134 tons); Germany (3,413); China (1,054); Japan (765); Russia (537); Taiwan (424); the Philippines (154); Singapore (127); Thailand (84); Indonesia (73); and Malaysia (36 tons).

 

Worse, Korea is one of the world`s worst in the share of gold in its foreign exchange reserves -- 0.19 percent by market price and 0.03 percent by book value.

http://english.donga.com/srv/service.php3?biid=2009070411578

Silver down again today.

USD 13.24 and EUR 9.48 at the mo'.

I caught today's low buying some at about EUR 9.38.

So are people giving up on the idea that the average UK house will at some point, in the next 5 years, be below 100 ounces - or that the DJIA will equal 1 ounce.

I reckon an average UK house will go to 120 oz - very likely - 100 oz fairly likely, and lower than that possible.

The dow/gold will go to 2.0 - very likely - and 1.0 possible.

There's a not so outside chance that those ratios will go to extremes never seen before: like house 60 oz and doe/gold well below 1.0.

We need to be patient. The big ratios are going in the direction we expect but it takes some years of patience.

Off topic again, but I was just imagining the UK with a non-recourse home loan scenario .... oh boy!

That would be really something. So many of the poor old Brits are stuck as basically debt slaves with 20 or more years largely working for the bank.

I remember when I was about 15 I wondered about the total number of mortgages in the UK. I knew that some decades before (like 1950) most of the general population did not own their home. I also knew that many like my parents had "bought" a house and were paying off the mortgage.

So at that time about 1980 I began to wonder whether in time most of the housing would be owned by ordinary people and why there were still so many with mortgages and not fully owning.

I couldn't fathom out why. Of course, some who inherit would blow the money on booze, fast women and fast cars and probably waste the rest (RIP George Best) but most wouldn't.

I still don't have a model clarified in my mind. But little did I then know the secrets of money and financial manias which are a great way to get much of the population massively in debt. And nowadays there are credit cards too.

It's probably just as well that I had no understanding of the monetary and banking system otherwise I would have been tempted to become an evil bankster.

Just me rambling on.

The following page has a nice little video (6 or 7 minutes) which summarizes in simple terms the essence of the Crisis of Credit (tech bust, subprime mortgages etc.). It doesn't really belong in this thread but anyway.

http://www.tavex.fi/index.php?main=239&newsID=201

Silver is down quite a bit in the last couple of hours.

USD 13.47, EUR 9.57 at the mo'.

Including 4.25% fees it's less than EUR 10.00 per ounce at GM.

is the gold/silver ratio breaking out today, it looked like it on GLD/SLV

68.3 at the moment so it's edged up a bit.

http://www.24hgold.com/english/gold_silver...aspx?money=Euro

I'm still averaging in on silver (a small purchase most trading days). At my current rate of spending the cash will last until mid September. I'm trying to maintain self-discipline so I can benefit from any further correction.

Maybe this?

 

http://news.bbc.co.uk/1/hi/business/8117138.stm

 

$10 moves are so old hat now!

After making my post I thought to myself: hang on 10 dollars isn't much compared to what we were seeing sometimes before like 20 or 30 plus moves in a day.

I mostly watch the euro price which has been range-bound between EUR 650 and 700 for the last 3 months.

I'm beginning to get worried that the euro price may not have a good further correction this summer, having gone through a long solid period over 650, and maybe the euro won't continue to hold up against USD (it's USD 1.4027 right now).

Silver managed to get below EUR 10 yesterday but I'm still slowly averaging in over the summer.

Has there been any news to make gold jump up USD 10?

Or just the normal volatility?

USD 936.70 and EUR 667.06 at the mo'.

I didn't know that mish liked gold...

He's been long-term bullish gold but his short to medium term view varies with time.

Another good idea is once your account is linked to restrict withdrawals to any other account.

After restricting it to one account is it possible to change it, e.g. change to one other account?

Just a reminder about what the history says gold does during periods of deflation (whatever happened to Magpie? ).

Adrian Ash of BV has just published a gold article with this interesting table of the historical performance of gold and silver. As you see gold solidly does well in deflations (silver's performance is a bit mixed):

Here's the article (I haven't read the whole article yet):

http://www.gold-eagle.com/editorials_08/ash061709.html

In case you don't know, the tally sticks:

 

Gold doesn't burn.

Haha. I'd heard about tally sticks but didn't know they burnt down the parliament building.

The wrath of the (money) gods.

"The short end of the stick" makes sense now.

Russia Makes the First Call for the Monetization of Gold

June 17, 2009

 

Russia is proposing the inclusion of the ruble, yuan and gold as a part of a revised basket of currencies to form the valuation of the IMF’s special drawing rights seen as the coming new alternative global reserve currency, reported AP.

 

 

At a summit meeting yesterday, Russia and China challenged the reserve currency status of the dollar with two initiatives, while at the same time professing their support for the greenback in which both countries have huge bond holdings.

 

<snip snip>

 

That gold should be included in SDRs is a new proposal, and likely to be seen among Arabs and investors around the world as a further reason to buy gold at present prices.

 

All the studies into the monetization of gold have concluded that the value of the precious metal would soar under such a scenario because of its relatively tight supply. It would therefore seem logical for anybody planning to buy a few ounces or 100 tons of the precious metal to buy before prices start to really escalate.

 

For gold it would seem the only way for prices is up as it becomes part of the world’s fight back against inflation and devaluation of the US dollar.

http://seekingalpha.com/article/143662-rus...ization-of-gold

His screen name is Monkey from a quality show of the same name.

Thanks. I'd never heard of it.

@ dooferdog

Who's that bloke in your avatar?

The Royal Canadian Mint is scared of a run on gold "in their vaults":

Your gold is safe with us, mint tells clients

 

Reassurance comes amid fears there will be a 'run' on holdings

 

BY IAN MACLEOD, THE OTTAWA CITIZEN JUNE 13, 2009 COMMENTS (11)

 

 

To halt a possible "run" on the gold it safeguards for private businesses, the Royal Canadian Mint is reassuring customers their deposits are fully accounted for and in secure vaults as the investigation continues into as much as $20 million in lost precious metals.

 

Since the scandal broke last week, some precious metals market advisers have been trying to instigate "some kind of a run" on the custodial accounts of the Ottawa mint and other mints around the world, said Jon Nadler, senior metals market analyst with Montreal-based Kitco, one of the world's leading precious metals bullion dealers.

http://www.ottawacitizen.com/Business/Your...1879/story.html

So if all the deposits are in the vaults why are they worried?

So i am not sure about the limitations to mining more silver that people are claiming here. Maybe one third of silver comes from unique deposits that are no longer viable in a few years but 2/3 just arrives anyway from the demand for the other 3 metals. Given the massive demand for these other metals you can imagine that there is relatively a massive amount of silver coming on line also due to that other metal production.

It's true that today about 2/3 of silver production is a by-product of the mining of base metals. However, the distribution is not an even 2/3 across all sites. The base metals are themselves present in limited quantities and subject to depletion although expected to "run out" later.

As others mentioned, the fact that much silver production is a secondary by-product tends to support its price during economic recession as the demand for base metals is reduced so less silver is produced.

The estimated number of years silver would last "at present rates of consumption" is, I believe, based on total known deposits in the earth's crust. By-product or not, the numbers are the numbers.

But i cant really see why silver should be today a precious metal since other metals now rank along with gold as precious i would have thought. Silver today seems like an industrial metal to me. And its use in photography is going to be history soon?

Silver is certainly very much an industrial metal, but for investment also which might become more significant.

Remember that "at present rates of consumption" all known silver would be mined in about 11 years time (which of course won't actually happen either because of much increased price or rate of mining limitations).

IMO silver is very much a precious metal and its longer term fundamentals are great.

Although photographic demand is declining it has been claimed on this site that 70% of photographic silver is recycled which would tend to temper the drop in demand from that quarter.

Also new applications in medicine and hygiene are increasing in addition to the electronics etc. demand.

How much silver goes into a digital camera? Anybody know? Solar panels?

Betting is not normally my thing. I see the recent low was 8.47 on October 26th? 9.0 could be missable but 9.99 not. 8.47 must have really hurt after 21 so 9.99 could be safe either way inside 5 years and give a loser time to come to terms with their loss humilation and depression while providing widespread entertainment and amusement in a difficult time in history.

Over at kitco forums there seem to be more than a few who only started buying silver in the first half of last year so the poor so-and-so's have been nastily under water for months and I think some are just waiting to break even and get out. But there are plenty of long term "stackers" who just keep on stacking enjoying the lower prices.

As I said I'm hoping for a serious correction in silver.

USD 11.50 seems quite possible but why do people think below 10 dollars is likely?

On a technical basis or because of reduced industrial demand, or what?

I reckon if it gets to USD 10 again there could be problems getting hold of coins and small bars as happened late last year.

Silver correcting a lot today although less so in EUR than USD.

USD 14.07 and EUR 10.22.

I'm still slowly averaging into silver hoping for further correction before the autumn.

Here you go

 

http://www.youtube.com/watch?v=5xnIFzP2bTY

Nice video. I might add it to my signature at HPC to complement the "buying food with gold in Zimbabwe" video.