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Asset or monetary?

Under the collateralised lending model. the 'danger' fretted about is both.

http://www.telegraph.co.uk/finance/comment...d-unravels.html

Citigroup says gold could rise above $2,000 next year as world unravels

Gold is poised for a dramatic surge and could blast through $2,000 an ounce by the end of next year as central banks flood the world's monetary system with liquidity, according to an internal client note from the US bank Citigroup.

Problem is that these threads have turned into a short term/trading discussion.

 

I might soon start a new thread where I will discuss longer term issues only, like the one I have on GIM.

I think that is a great idea.

EDIT: By the way DOW tanking - down c.670 points - c.8%

Can I make a humble suggestion?

All I hear is that gold is a long term investment and is the ultimate store of value...it does not change value - things only change value against it. Or that the fiat system will blow up and gold is an effective insurance policy - hence physical.

But people are forever fretting about its price in dollars, or Sterling if dollars don't work, or even houses as they are now going down and makes it look good.

So - bearing that in mind, why not try just not looking at the price of gold for say a year.

People sound too desperate trying to bolster their own 'investment' decisions by looking for agreement with others.

It really doesn't matter - just look at some of Goldfinger's long term graphs, lay it down like a good wine and forget it. Or just treat it as the ultimate form of insurance. The rest is noise. Unless, of course, you really think of it as a form of investment?

EDIT: By the way was that girl in the ad trying to make a deposit in the Envirolet compost toilet?

I think the markets are as confused as you!

 

Your avatar cracks me up.

Thankyou. I chose it to match.

Looking at the behaviour of gold over the last day, do you think the markets are:

1. Frightened the bailout won't go ahead.

2. Frightened the bailout won't work.

3. Relieved the bailout may not go ahead.

Surely, we had 10-15 years of massive money supply, which was bound to cause inflationary pressures. Then came the credit crunch...

 

Things that had been inflated before the credit crunch started to deflate (e.g., houses, and commodities to a degree), but these will now deflate less or maybe no further due to the latest injection of new money.

 

And things that were still only part way through their necessary inflation (e.g., cost of living items, wages) will now have their ongoing inflation dramatically accelerated.

This is the key cgnao, goldfinger point I believe. "It's baked in the cake".

The massive lending that went into housing is about to be visited on us. Ordinarily that credit creation would be destroyed by default as house prices go down. But by bailing the banks, they effectively 'monetise' that past inflation and rather than flowing back into housing where it fails to get measured - it flows into other assets driving inflation. And if the government can't afford the bailout from its resources, well, printing merely adds to the problem.

Though it is all happy days now, I believe this could all happen again. Look what happened to the 180 billion odd that was supplied to foreign CBs. It was simply swallowed up in one big black hole. Look what is happening to money markets.... we effectively saw a run on them. These are massive deflationary forces which have forced the Fed's hand in nationalizing everything. I am wondering if all the "printed" money to come will likewise just feed one big nasty hungry hole without making its way into the main stream of the economy.

Good point. You can't look at the injections of money without understanding what it is they're trying to replace.

And with a number of organisations either out of business, nationalised or merged with others, will those companies be lending as much as before?

"I am become death, the destroyer of worlds" - Robert Oppenheimer, Trinity 1945

The video ....(very moving - I often think of it in terms of what we have been witnessing).

http://www.atomicarchive.com/Movies/Movie8.shtml

Depositor worries in Ireland. (Mention of gold near end of short audio piece).

http://dynamic.rte.ie/av/230-2424303-320-180.smil

This sounds the most likely cause for today's moves.

 

http://www.reuters.com/article/idUKN1752966920080917

From the article...

Potential upfront costs to the government of maintaining financial stability could reach 24 percent of gross domestic product in the case of a "deep and prolonged recession," the S&P report said.

On Wednesday, Chambers compared the U.S. rating to a lobster cooking in a pot of cold water.

"The lobster is still in the 'AAA' pot and still moving," Chambers said. "The heat is turning up, but the water is still 'AAA' stable."

I haven't seen it on here - apologies if I've missed.

Channel 4 news stated that one of the credit rating agencies is threatening to review the US Government's AAA rating.

I think this has been part of the flight to quality.

Secondly - if they do get downgraded, presumably that affects things like AIG - see what I'm getting at?

FT Alphaville on gold and its safe haven status in recent days.

http://ftalphaville.ft.com/blog/2008/09/16...s-cash-round-i/

Gold definitely has a "safe haven" image, which silver does not seem to share in the eyes of the market. It is still just tracking commodities, as far as I can see. But folk here are bullish on commodities, so I guess that's just fine.

It does but the Daily View for yesterday was surprised at how small the move was...

http://www.ft.com/cms/8787ae00-2a26-11dc-9...mp;fromSearch=n

The history of sterling is facinating, I have one of the 4d silver coins, it's tiny like a 3d but thicker.

 

Fiat currency has a poor record and a fiat global reserve currency is IMO a risky unknown never tried before concept.

Gold/silver didn't have a great history either with successive debasements of the coinage throughout history.

Basically governments want to spend more than they have - especially at times of war when anything goes.

1. You could argue that since WW1 sterling has traded against the dollar which was until 1971 on a gold standard thus that we have only been totally fiat since 1971.

 

2. Since 1971 we have had two major currency crises and devaluations.

1. Excellent point.

2. I assume you are referring to the European currency snake and the later ERM exit? These 'earthquakes' were a function of their fixed structure.

In terms of value, you could argue that the latest episode for Sterling has been the third. And even starker if you consider oil as a currency of sorts (it has been behaving as one) as opposed to the $.

As I said earlier, I agree with Dr Bubb's view that there is really strong support for oil coming in at $100 and this could, as he says, provide the platform for a bounce. However, we need to be aware of the risks too...

Crude hasn't really moved that much today (currently 100.26) esp. since Hurricane Ike is about to hit. Also the dollar could strengthen if the Lehman issue is resolved this weekend.

I think there is a reasonably high risk that oil could drop sharply through the $100 mark next week (poss. as early as Monday).

Not looking good priced in £s at the moment.

I thought that made gold cheaper to buy which is a 'good thing'.

I have to agree with Dr Bubb. There seems to be extraordinary resistance at $100 oil (although Brent trading at c.$98/$99 right now). I think this is the most important support to gold right now.

I have to say I think going into the OPEC meeting the Saudis were looking for a settlement at about $80 per barrel as fair value and no explicit cuts in production - but may have come out with an agreement to target $100 alongside the announced cuts.

Poss. they are trying to manage an orderly transition to a new price level - one that would optimise revenues by not leading to excessive demand destruction.

But 1) I think one can accept that there are short term manipulations but say that long term the price can't be manipulated - in other words the price will on average be where the market would leave it, even if manipulations push it above or below that point temporarily. So I can accept that silver has been pushed below its natural price right now, but I don't think that means that its natural price is massively higher than the current level. I also think it might have previously been pushed over its natural price during the boom period.

The biggest influence on future price is expectations driven by current prices. Prices do have a certain amount of inertia (some markets more than others) and require changes in supply/demand to effect price changes. Consequently a short term manipulation can have effects over and above an alteration of the supply/demand equation. It can effect long term expectations of price levels.

And finally the commodity cycle chart:

 

 

-----------------------

Looking at that chart, it seems to me you tend to get more bangs for your buck on the upside if you invest in oil.

I know that I if given the task of getting and keeping the gold price down would suppress the price in such a way as to produce bearish charts.

Classic.

Looks like we are going to have to take some pain until the dollar weakens - US election is 4 November

Good point.

John Authers with an interesting graphic re fuel prices and Republican support.

http://www.ft.com/cms/bfba2c48-5588-11dc-b...mp;fromSearch=n

Just signed up after having been on the other place for a few years. Haven't had a chance to read all the gold threads here yet, but one thing that should be noted, as a percentage drop, what has happened in the past couple of months is less than the drop that happened in mid-2006. People seem to forget that. Last gold I bought was at circa US$850 towards the end of last year...which was then about £404. In terms of GBP and AUD (the 2 currencies that affect me), it has still been a good investment. Having said that, what has been going on the past few days (not just gold and silver) since the FM bailouts is puzzling...and I think further falls are possible in the near term.

 

One question that I would like to know the answer to: has anyone tried to buy allocated silver at the Perth Mint in recent times...and if so what happened?

Welcome Doh.

Maybe two seperate threads are needed here? A "trading" thread to discuss short term movements (mainly TA), and an "investment thread for the longer term (mainly FA)?

 

Then, when one of the active traders/investers posted, it would be more obvious what timeframe they are talking about.

Very good.

The trouble with 'scale' though, it is retro fit.