dietcolaaddict

Quite balanced article from the Independent on Sunday, although I disagree with the last paragraph, which forgets to mention how bleak the economy is at the moment.

Julian Knight: Tread cautiously if travelling in the realms of gold

http://www.independent.co.uk/money/invest-...old-906790.html

It is not just in Beijing that Britons have struck gold. In what has been a bleak couple of years for investors, the most precious of precious metals has been a runaway success.

 

With a rising oil price, an unfolding credit crunch and – inevitably – a slowing world economy, gold has been the investment of choice for many canny operators. Prices have more than doubled in the past three years and are predicted to rise further as economic storm clouds continue to gather. In short, there has been a return to the idea of gold as the last refuge, the fail-safe. The independent financial advisers I speak to tell me that a fair few of their clients have seen it glittering and sprinkled a little into their portfolios.

 

But as with all things investment related, as soon as something looks a sure-fire bet, it could be time to consider hightailing it out. From its mid-July high, the price of gold has come off to the tune of 16 per cent. HSBC last week shifted its view on gold, saying that it could lose between 25 and 35 per cent of its value – equivalent to what is likely to happen in the UK housing market once that particular horror show has played itself out.

 

The bank's analysts reckon a speculative bubble has formed in gold – another similarity with the housing market – and could now be about to burst, with some early movers shifting out of the precious metal and into, of all places, the US stock market.

 

But who is to say that HSBC is right? Just to muddy the waters, the investment bank Investec predicted last Thursday that the gold price would soon resume its march upwards. There is, it says, an undersupply; one leading gold mining company reckons production could fall by between 10 and 15 per cent over the next five years.

 

It's the age-old quandary for the investor: what do you do when you're hearing mixed messages from the so-called experts? To be frank, both HSBC and Investec's arguments make sense, and if I were to put any number on the future price of gold it would be pure guesswork. However, there are warnings to be had for the private investor if we consider the last gold rush, in the late 1970s.

 

Back then, prices rose sharply as the world economy reeled from higher oil costs – sounds familiar? – but once the dust settled and speculators saw opportunities elsewhere, the price of gold went on a 20-year slump. Twenty years – now that's a long time for any investor to keep the faith.

 

When all else is going wrong, gold tends to do well as an investment of last resort. But being a good backstop doesn't mean that it delivers the sort of long-term growth that can help fund your retirement or pay for the kids to go to university. Put simply, despite its glittering performance in the past few years, gold should never be more than a small part of a long-term saving and investment strategy.

This looks like an interesting graph:

 

 

From the following article:

 

http://www.kitco.com/ind/Radomski/aug152008.html

HPCsoYESTERDAY, a good find! The comparisons between the 2006 and 2008 corrections are very spooky...

* 80% of peak price at c. 150 days

* gold-to-oil ratio bottoming (perhaps) at c. 110-130 days post-peak

I've put my money where my mouth is and bought more physical - I'm guessing this is a bottom. It's also the best time to buy from a historical perspective as I've demonstrated in this thread before. For a third reason, I read Greenspan's quote last week as a coded message of further banking trouble ahead “Home prices in the US are likely to start to stabilize or touch bottom sometime in the first half of 2009 but prices could continue to drift lower through 2009 and beyond ”.

My suspicion is that gold price has been engineered downwards recently so that the big boys can load up and hold physical in the economically testing times ahead.

Speaking to the bullion dealers, it is clear that gold coin stocks in the UK are now very low. This forced me to eventually settle on ugly Krugs rather than my favoured Britannias – an unpatriotic but necessary compromise under current circumstances.

I hear Team GB are replenishing HM Treasury's gold reserves!

Seriously did you know there's only 6g of gold in a 'gold' medal? It's actually gold-plated silver. Cheapskates!

Great info, I was wondering this just the other day. Mr Phellps is a member of the 1 oz club then.

I've been away on business and then on holidays, I have only just caught up on the threads.

One more big boy smackdown (Friday?) and then I reckon its Shorterz Shooting Season for a few months.

Ladies and Gentlemen, stay patient. ‘Shorterz Shooting Season’ is only a few weeks away and they are going to be well-fed this year.

Season starts on the glorious 25th of August –the historical optimal date for gold purchase over the last 10 years.

The six best months of performance will soon lie ahead. Take the present now on offer at $900 (if you can, my funds are a few weeks away )

OT but the amazing part of that story was that regular swimmers at the pool at 6am (whilst it's still dark...) turned up as normal and swam without knowing.... I was wondering just how hungry that shark may have been having not had his breakfast !

Sharks are greatly mis-understood creatures. Like bears, they only require food intake once or twice a week.

Bump into one after it has just eaten, and it will pay you no attention. However, encounter one after a fortnight of famine, and it will show you aggression in nature's purest form.

As many property and market investors are about to see, the 2008 bear is very, very hungry.

Wow, what a day to have my internet down at work. Look at the news on my home PC homepage, Yahoo UK.

5 seriously bear items.

Meanwhile in other news......Shark found in Sydney swimming pool

"The same sort of thing happens in markets. It is the source of the saying that “markets spend 90% of the time making up their minds and 10% of the time doing what they have to do”. Countervailing pressures build up causing minor tremors. Then pressures continue to build until there is a major change in the market place, the equivalent of an earthquake.

Yes, well phrased. As Steve points out, the market conditions are more positive than 2006. So I guess the similarity we are seeing is down to market machinery, habit and psychology.

I'm reckoning late August onwards for the take-off, as my previous analysis showed the months after to be the optimum season for gold price gain, certainly in the last decade. However I'm biased - as that's my next buying opportunity.

Here is the updated chart from my comparison of the gold price peaks in 2006 and 2008 (and their subsequent corrections).

To recap, I have normalised both peak values (dated 12 May 2006 and 17 Mar 2008) as 100% price at the time point of day 50.

The 2008 peak/correction is clearly less volatile, but its price at days 100-120 remains very similar to 2006. We want to see gold getting into the $950 price range soon to avoid this being a case of history repeating itself.

Based upon increasing popularity of gold and improving sentiment, plus the inflation story, plus the long term chart technicals (price got ahead of itself at 1030, needed to ease off, but is now back to its trend line) then I think we're at the start of a big move. However, it won't be a straight line - we'll probably range a bit between 900-950, with the latter taking a few tries to pass. But by late summer we will be past 950 and on the way to 1000, such that the September boost will mark the real take off.

 

I feel that gold is some 6-12 months behind oil, and may line up the charts with a timeshift if I have a chance this weekend.

Bigtbigt, I agree with your comments. I still see September as the most likely timing for the next leg up, based on the historical performance of gold over the last eight years (my graph enclosed).

I'd be interested in your oil and gold time lag findings, and I'd be keen to do some analysis that expands on the results you post.

Being the end of the month they may try to smash it back. BTW Eric King on FSNH was saying something about options being closed at the end of June so expect a drop at the beginning of July. I don't trade, just buy and hold but I wonder if selling, say, 10% today to buy back in a couple of weeks might be a bit of fun... I must say I'm tempted.

Big smackdown possibility on NY opening, I feel.

I'd love to see a nice V pattern over the next few hours to confirm growing bullishness in PMs

Great last few pages of commentary!

New York opening time is certainly the time to gold-watch at the moment.

I’m interested in the historical seasonality of gold price. I can’t find a good article, so have done my own research for this post. The fundamentals for gold remain very strong, but the market price is not (currently) playing ball with the fundamentals. So there is great potential for some ‘catch-up’ action in the near future, but when?

This approach looks at the recent historical data in a scientific way. These two charts characterise this seasonal effect, and show a clear pattern.

From the 1999 price dip (unfortunately known in the UK as the “Brown Bottom”) I have calculated the monthly fractional change in gold price (obtained from World Gold Council download files). I have then ranked annually the months in terms of best performance (value 1) to worst performance (value 12) within each year. Note that the middle rank value would be 6.5. This right chart shows a clear split between a below-average season of Mar-Aug and an above-average season of Sep-Feb. The trend is so clear that certain months are close to statistical significance at p<0.05 (Jul, Mar on the bad side, Sep on the good side).

To put this another way, look at the left chart. It shows the averaged gain in value of $100 gold purchased at the start of the good season on 1 Sept. There is steady accumulation of value up to February when stagnation sets in.

So in conclusion – seasonal trends of gold price over the last 9 years suggest that the sideways summer may end around late August.

I think the point is we need to really break our habit with dollar pricing things. This involves a paradigm shift, which most here have already evidently made. Some commentators refer to a paradigm shift in the world, which really means to say the world has changed. I think this word is more aptly used in referring to our own "world view". The volatility of currencies, commodities and the general price of things will confuse the hell out of people in the next few years, that is, if things unfold as I think they will. People will continue to be confused; tossed by this wave and blown by that wind, in so far as they are stuck in the old paradigm of the dollar.

 

I believe the Dow/gold ratio will provide an effective compass when navigating the financial storm to come.

Welcome romans holiday. Great first post.

gold likes it (or has taken very little notice)

The sideways summer continues....one step forward, one step back.

With my amateur-analyst’s hat on, I have come up with these charts. They analyse a theory of mine, which others here have also noticed, that current gold price pattern (peak and fallback) may have some similarities to 2006. I’m trying to use this to judge when the sideways action might end (I’m frustrated at the moment as I cannot buy in this dip and am a few months away from new funds).

My analysis has normalized the peak price from each year (on 12 May 2006 and 17 March 2008) as 100% and defined the peak price day as day 50.

The second chart (days 1-100) shows that the 2006 peak value was much more of a spike than the 2008 peak. In 2008, values >75% peak were seen in the 50 day run-up while in 2008 values >85% were found. Post-peak, 2006 was more volatile (believe it or not!). Also notice in the post-peak stage how the 100 day prices are very similar for both years at c.85% of peak. Things could go either way from here……

The first chart (days 1-400) shows the same analysis up to day 400 – day 400 was when the 2006 peak price (100%) was surpassed. If gold slides to 80% ish of peak in the next few weeks (c. $800), then we may be replicating 2006 over again, and it may a long drawn-out recovery as per 2006. If gold holds above 90% (c. $900) then things look more optimistic.

Best wishes for the weekend.

Any comments or critique are, as always, welcome.

Data source :

world gold council , daily London pm fix

http://www.gold.org/deliver.php?file=/valu...s/web_daily.xls

I'm gutted I wasn't here to add to what sounds like it was a heck of a party on GEI - a good few pages of quickfire posts complete with a rollercoaster of emotion. A genuine pleasure to read

 

I did, however, have a cheeky buy stop order on WTI come in at $134.55 with an 85pip trailing stop which took profits at $137.50. A fantastic Friday night on the lash in Bangkok and a nice profit at the expense of the greenback as well . . . perfect.

A great day for gold and silver!!

There are great scaremongering stories of oil price crisis leading the BBC evening news

(but apparently it's concerns over relations between Israel and Iran, not the weak dollar )

Gold and silver still need careful nursing and observation for a while yet though.

This is what I prescribe to keep prices heading upwards for the rest of 2008........

PMs all on Viagra today. Up, up and away.

just bought some more gold and silver

I'd love to join you if I had the money right now.

My next gold buying opportunity is going to be late August. Alas I think the sub-$900 (and sub-$950) boats will have sailed by then.

thanks Steve!

If you ever lose focus, this is how the gold and silver charts will look in a few years.

 

That's also the heart rate monitor readout of the new Bradford&Bingley chairman while first viewing their loan book!

Does anyone have an opinion of the quality of analysis on marketoracle.co.uk?

They publish quite a lot on commodities and do make bold financial predictions which seem well researched.

http://www.marketoracle.co.uk/Topic3.html

I think the argument for gold as insurance looks better than the argument for gold as a store of wealth, to be honest.

I see gold as an insurance and an inflation hedge.

But if your aim is to buy a house in the UK, its a handy way of building up a deposit given the housing/finance conditions likely over the next few years.

(for the record, my plan is to emigrate the UK)

A quick calculation.....the result makes sense with the consensus of the board so I though this worth sharing.....

Enclosed is a chart projecting UK average house prices (in £) into the future. The quarterly percentage drops are equal to those of the early 1990s crash (RPI at 4.2% factored in)

As you can see, nominal house prices bottom at around £110,000 in 2014 assuming the same crash kinetics (it may well be worse this time).

Assume gold price of $1650 by then (good consensus of that as a long term target).

Assume 1.8 dollars to the pound (my personal opinion, I think the pound will weaken even more horribly than the dollar long term).

2014 UK average house price in Troy oz gold:

110,000 / (1650/1.8) = 120 oz

120 troy ounces is close to the 100 oz historical value mentioned by a few veterans on here, such as Goldfinger.

Old news, and not very surprising to those in the UK, but Northern Rock 2 is now imminent.

http://uk.news.yahoo.com/rtrs/20080601/tts...ey-a8bf950.html

Monday's update from Bradford and Bingley, Britain's largest buy-to-let mortgage lender is likely to warn on 2008 profits, rekindling concerns about short-term prospects for the bank and the wider UK mortgage market amid rising arrears and bad debts. "We can confirm that, due to a serious cardiovascular condition, Steven Crawshaw is stepping down as chief executive with immediate effect," the bank said in a statement.

Rats fleeing the sinking ship. While Bradford and Bingley is a global stickleback, who knows what other dominoes it will knock over as it falls.

PS Good to see you back Marceau!

REAL money.

Miss World

Miss Canada

Miss Clacton-on-sea (reserve)

High oil prices, high food prices, rising inflation and house price falls are all mentioned in the first 10 minutes of BBC Question time!

The UK public are awake.

The electorate, through necessity, are becoming more and more interested in economics. "Commodity bubble" or "Extra demand from china", and "peak oil", already introduced to the debate by the invited members of the public.

Now why is gold falling in price?????

I thought £5k in coins would be a reasonable start from coininvest.com.

There's better experts around here than myself but here is a few starters, from my experiences with coins

(anyone have a different experience, please let me know, buying coins can be a lonely experience):

+Gold coins have a lower dealer spread than silver coins and are also VAT exempt upon purchase.

+Silver price is more volatile than gold - risk vs benefit according to your personal circumstances.

+Hiding £5k or £10k of gold bullion in your house is easy, the same amount of silver is less so.

+You can sell your gold coins for circa spot value, but you buy them at a coin premium: Krugerrands have the lowest coin premium but are butt ugly if aesthetics is your thing. Smaller coins (1/2, 1/10 oz etc.) have a higher coin premium.

+Britannias and Sovereigns are very pretty and are also UK legal tender so are exempt from Capital Gains tax, means-tested declarations of income and savings, border customs declarations (within limits), inland revenue notification by a bullion dealer below 10K etc. etc.

+Krugs, Brits and Sovs are 22 carat gold, and are tough and knock resistant. 24 carat coins (e.g. .9999 Canadian maple) are really soft and easy to scratch or worse carry the risk of being purchased in a scratched or damaged state by a novice. This reduces their value.

+New edition coins (i.e. 2008) carry a higher coin premium on purchase because of collector demand, but this counts for little on selling them back to the dealer who will only offer around spot.

+Dealers like you to keep your receipts of old purchases. Knowing a dealer face to face can get you a better deal (i.e. older edition coins at less premium)