mattyboy

Think of capital flow. The money is flowing from the centre to the periphery on the risk trade. This pushes up commodities, commodity currencies, and stocks in especially emerging countries and "commodity" countries such as Australia.

 

The high [uS dollar] price of gold is just reflecting a weakened dollar as capital moves out of it.

 

Priced in Austrlian dollars, gold is down a little.

That's exactly my point. Gold is down in AUD, but the rise in USD is also causing the Aussie miners to rise in Australian dollars. It doesn't really make sense since their profits are not really going up in AUD. I am based in Aus and although my physical gold is down from its highs, the shares are doing very well recently - some have 5 bagged off their lows, althoug unfortunately for many that just brings them back to what I paid for them in 07/08

Gold is a lot more stable post QE. It has effectively been monetized and is being bought as a currency [or currency hedge]. As others have pointed out it is not making highs in a range of other currencies. The action in gold, as priced in dollars, is primarily reflecting dollar weakness here.

what is interesting tho - and this may have been discussed on the gold stocks threads - is that my (mostly Australian) gold stocks seem far more responsive to the USD price of gold than in AUD. At the moment there is effectively a double effect of rising prices of these stocks in AUD whilst the currency itself is strengthening against the USD and GBP. It doesn't really make a lot of sense to me.

Did you know you are member 1000? It's a sign.

you are member 1622 - woah! Let's go!

nice dow/gold chart from today's daily reckoning email - see here http://www.dailyreckoning.com.au/ if you don't subscribe

a ratio of 1 really did seem improbable to me not so long ago, but I don't know now

Dr Bubb - I am inclined to agree with you re: the altogether too great a consensus emerging in the MSM on the predicted increase in the gold price - here is another example in the Telegraph today:

Questor: how to play the coming gold price jump

Questor explains why it thinks gold is a good investment and the options available to those looking to invest.

http://www.telegraph.co.uk/finance/markets...price-jump.html

what to do?

Also note that Goldman sachs have followed UBS and upped their '09 average price prediction for gold to $1000 from $700 - doing the opposite of what Goldman say is usually the go!

Of course on the forex markets just as soon as the press all decided the AUD would break parity with USD (at 98c) it promptly dropped to 60 odd, same story GBP/EUR.

Still - I am not selling my gold. Maybe this really is where it goes mainstream.

matt

Nothing here we all haven't read already, but it is always nice to see these articles popping up in the MSM - feels to me as if there has been a bit of an upsurge of late.

http://online.wsj.com/article/SB123284319920613125.html

What You Need to Know About Gold

 

* Article

* Comments

 

more in Investing »

By JEFF D. OPDYKE

 

Gold shined in 2008. Could 2009 be as bright?

 

Of all the major assets -- stocks, corporate bonds, cash and others -- gold was one of last year's few standouts. While so many investments collapsed amid the turmoil, the price of an ounce of gold posted a gain of about 4.3%.

...

Same, been a strange week all in all, not sure my nerves can take this for much longer. What with watching PMs, PMs in $, PMS in £ and £ vs $ and Yen my head feels like it's going to explode.

Zen out man - take break. Don't try and trade any of this. That's what I and most on here (I assume) are doing. I know its hard not to look, but I am much less troubled now by these big moves than I was. So long as you know you are not trading, whatever happens to the price (for now), there's no need to worry

ah redemption is at hand though from mattyboy:

 

h'mmm

 

is this mattyboy from here here btw ?

roger that

I really appreciate Ker's work for to help maintain a balanced view. Trouble with the internet is you get a whole load of people thinking and promoting the same thing, especially on forums like this!

 

Theres a phrase that I can't remember at the moment for when you get a whole group of people thinking the same thing because everyone else does, it can be a dangerous thing.

 

For every one of Ker's missed calls, I'll find you 10 failed 'rocket' calls from this board (well, maybe not 10, lets say 5!)

 

 

A balanced opinion/debate is healthy and deserves to be promoted

I don't want to ge tinto any sort of sh!t fight here, but I just fail to see how TA of any sort can be applied to the markets (and not just the PM markets) at the moment. OK maybe a bit of resitance/profit taking at key psychological levels but I would be interested in just how many of the charting calls have been anywhere near the mark (better than chance?) . I have bought and I am holding - doing OK in my current local currency (Aussie). I think things are just starting to get interesting.

Nothing anyone one here doesn't know already I guess but this guy is watchable http://au.youtube.com/watch?v=4xxs4W-O9OM and a good jump off point to link to other vids in the related videos section.

I'm feeling a bit deflated today - pun intended

Aussie Juniors took another beating ! I think my average must be -70%, so what's the point in selling?

Marc Faber - gold bullish, his biggest holding is atm is physical bullion but he expects it to go down before it goes up.

http://au.youtube.com/watch?v=-6r1jjkp0-U

sorry if this has been posted already - I am not totally up to speed on the gold thread atm as I am not reading it at work with the Russian porn popups!!

I have a few of these Canadian trusts and enjoy the distributions - the yields seem pretty steady and were great when I bought them. Now they are ridiculous. Of course the distributions may fall with the price of oil, but firstly I don't see that as a certainty and secondly even if some of them halved they would still be good

No vested interest of my own other than that I have a few - look at Penn West (PWT.UN) yielding over 25% ! http://tools.trustweb.ca/acb_001/tools/dis...tions/?fundid=8 at CDN$17 right now, others I have like Pembina Pipeline (PIF.UN), Precision drilling trust (PD.UN) both 15% odd. The list goes on I am sure. I have a bit of dry powder and wouldn't mind snagging a high yield on it (with I think real capital gains probability on these trusts at 52 week lows some 50% off in some cases). Any other trusts come recommended??

matt

Has anyone talked about the Bullionvault disconnect? As I type all visible bid depth in New York is above spot - highest bid $892 and 1.3kg so not nothing. And no one has hit this all day - its been there a while. $917 to buy in NY. I know there are shortages there right now, but no one is arbing this as far as I can see - what is going on?

A mate of mine sent me this today - sorry, he did not include a link so no idea who's 'thought for the day' it is!

Comment of the day, 9 October 2008

 

The last carry trade.

Today’s commentary is a follow on from yesterday’s blog. It concerns the last carry trade left in the markets, i.e. gold. Gold peaked at $1032 in March this year; however since then it has fallen steadily, trading as low as $734. While this fall has been in line with a rising USD dollar, it has also been orchestrated.

Gold has been falling in an environment of rising inflation and rising uncertainty, and previous comments of the day have in the past talked about gold de-coupling from the USD correlation one day.

At this point in time we need to distinguish between different types of gold, i.e. physical gold and paper gold.

Central banks hold a lot of physical gold and it just sits there earning nothing. As we know central banks have been pumping money into the markets for 13 months now, what has not been reported is that they have also made their holdings of gold available for lease for about 0.25% for a month.

A short seller in gold can sell spot and lease the gold from the central banks at a nominal interest rate of 0.25%. If you sell gold you receive USD; the cost of borrowing USD is therefore 0.25% (the gold lease rate) - so as long as gold doesn’t go up it is a cheap source of funding.

The central banks don’t mind this, especially when they want the USD up and as a rule they always want gold to fall. A falling gold price is a sign that everything is ok.

However, as you can imagine this is a time bomb because they are leasing physical gold to a paper gold market. At some point in time paper gold will not trade the same way as physical gold.

The demand for physical gold is the highest it has been for years, and this is the problem. Without the paper gold carry trade you could argue that gold would be a few thousand dollars higher right now.

Yesterday’s blog mentioned all is not well in the paper gold market. And that this is a sign of an impending big rally in gold.

Lease rates have been skyrocketing over the past month. For the past six years the 1 Month Gold Forward Lease Rate has chopped about at levels below 0.25 percent. Higher volatility over the past year has seen the rate move as high as 0.5 percent, but only in recent weeks have we seen rates greater than 2.5 percent (see chart below).

 

 

On a global scale, the gold market is unregulated and opaque. No one really knows the size of the worldwide short position in gold, but it exists and it is large (at least 10,000 tonnes). Unlike financial markets, there are few rules and regulations on selling gold short. For years, a dark pool of short sales is believed to have been suppressing the natural ascent of gold prices.

The current spike in gold lease rates indicates that demand for physical gold is extremely high and growing quickly. We may well be witnessing the first seeds of the gold price breaking free from the short sellers and the end (death) of the gold carry trade, which so many bullion banks made such large profits on in the 1990's.

The lease rates (available on thebulliondesk.com) will be the key indicator to watch. If the short sellers in the gold market cannot afford to roll over their positions, they will be forced to close out their trades by buying gold. This could be one potential catalyst (there are many others) that sparks a major gold rally in the months ahead.

Oh, and on the subject of the price of gold... HOLY COW!

 

(I'm particularly looking at it in GBP...)

try AUD!!

I get the impression we are witnessing something right now.

Am I the only one getting a funny feeling about this ?

 

£516.10/oz

US$909.15

 

Next leg up.....

I know what you mean. Everything is happening very fast now.

I just want to say - not that I'm getting sentimental - that I'm glad I own gold and silver right now, and even tho this is not the end (and we could always see those gut wrenching down days again) that it was this forum in particular that I read to keep my confidence in S&G and it kept me in the game. Cheers guys!

ps yes I have been absolutely slaughtered on juniors and resource stocks, but in AUD things don't look quite as bad (so long as I don't leave the country for a while! )

I don't know where to post this !

 

US$JPY is dropping quite fast. Now 103.61.

 

Amazingly gold hasn't moved. If anything a slight fall :blink:

 

GBPJPY is also dropping, at 181.93.

 

NZ$ is also dropping NZ$JPY down to 67.25.

 

EURJPY is aklso down to 140.79.

 

So the JPY must be rising, and all the debt currencies are falling.

 

You'd expect gold to be passing the moon at this point !

I know this has been touched on here and on the financial sense but are we witnessing a massive short squeeze in USD - and to a lesser extent in GBP? Todays moves, particularly the one I've been watching which is the AUD - have been pretty spectacular.

edit: not a literal short squeeze, just a rush to buy $ to pay down $ denominated debt

Australia checking in. Get in there!

HISTORIC

Speaking of gold mining shares, the current ratio of XAU to the price of spot gold recently moved below 0.16--its lowest point since its all-time record depressed reading in November 2000. This means that if the price of gold is still in the low $800s a half year or so from now, while this ratio returns to its average historic level, gold mining shares and funds such as GDX will rise by 30%-35%.

 

/see: http://www.kitco.com/ind/Kaplan/sep082008A.html

ouch - so I'd still be under water on my gold shares by- lets see, well over 50%!

here's a quite bizarre piece I picked up from the kitco forum - link to $ to gold at $500 per ounce? I wouldn't have thought there was anything like enough gold for that..

http://www.realclearmarkets.com/articles/2...ize_the_do.html

Congress Must Stabilize the Dollar

Rep. Ted Poe

On July 31, I introduced H.R. 6690, the “Sound Dollar and Economic Stimulus Act of 2008”. It is vital that this bill become law.

 

The U.S. dollar affects every American citizen and every American business. Our economy is totally dependent upon the dollar. To have a stable economy, we must have a stable dollar.

 

Unfortunately, for many years we have not had a stable dollar. Today, people are angry and afraid. The crumbling, gyrating dollar has created an economic crisis.

 

I was a judge for 25 years. I believe in law and order. The U.S. Constitution is the supreme law of the land. Article I, Section 8 of the Constitution provides that: “The Congress shall have Power…To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures…”

 

So, what has Congress been doing about the dollar? Nothing. Since 2001, Congress has stood idly by while the dollar has lost almost 70% of its value, whether measured against gold or retail gasoline.

 

When a currency begins to lose value, the effects show up first in the price of gold, followed quickly by other commodities, such as oil. However, eventually the inflation works its way through the entire economy, raising prices across the board. In the process, the hard-earned savings of Americans are devalued—or, the way I look at it, stolen.

 

Inflation creates turbulence in financial markets and provokes conflict between economic groups. People become angry because they feel that they are being robbed. They become afraid because they know that unchecked inflation can lead to economic collapse.

 

In 1913, Congress delegated its power over money to the Federal Reserve. Unfortunately, the Fed has been preoccupied with manipulating interest rates. Since 2001, the Fed has lowered its Fed Funds rate from 5.00% to 1.00%, raised it to 5.25% and then lowered it to 2.00%. Meanwhile, the value of the dollar has declined by nearly 70%.

 

Trying to regulate the value of the dollar by manipulating the Fed Funds rate makes no sense. The Fed Funds rate is the price of one type of capital. Because the Fed cannot supply capital (real resources) to the economy, it is not clear why it should be in the business of setting interest rates. Logically, interest rates should be set by the market—by the supply and demand for capital.

 

Unlike capital, the amount of money in the economy should not be limited by anything physical. It should be determined by the demand for money, which depends upon the transactions people want to do and how much money they want to hold.

 

What matters about money is not its quantity but its value. In this, dollars are no different than foot rulers. No one cares how many foot rulers there are in the world. What matters is that each one is the length prescribed by the U.S. Bureau of Standards.

 

My bill directs the Federal Reserve to bring the price of gold down to $500/oz and then to keep it there. The Fed would do this by announcing that its Open Market Desk was prepared to sell government bonds and contract the monetary base until the price of gold falls to $500/oz.

 

At last measure, the monetary base was about $872 billion. In December, 2005, which is the last time the price of gold was at $500, it was $827 billion. So, it is possible that the Fed might have to sell as much as $45 billion worth of bonds to implement the new policy. Because this is only about 0.8% of the total amount of bonds currently outstanding, this should not be a problem. However, I believe that the demand for the newly-stable dollar will be so great that the Fed will actually have to expand the monetary base to keep the gold price from falling below $500/oz.

 

Once the Fed implements its new directive from Congress, every dollar in the world will have the same market value as one five-hundredth of an ounce of gold. From then on, the monetary base will expand and contract automatically in response to market demand.

 

Why gold? My bill defines the value of the dollar in terms of gold because the financial markets want, and the American people deserve, a dollar that is “as good as gold”.

 

Why $500/oz? At $804/oz, the current market price of gold reflects the expectation (and fear) of future inflation. I believe that fixing the value of the dollar now in terms of gold at $500/oz will stop the current inflation without causing deflation. However, my bill also provides a powerful supply-side stimulus, in the form of first-year expensing of all capital investment, to ensure that economic growth accelerates at the same time that inflation is being stopped.

 

Bringing the dollar price of gold down to $500 will bring the price of gasoline down from its current $3.50/gallon to less than $2.50/gallon. It will strengthen the dollar against foreign currencies. Most important, it will prevent Americans’ incomes and savings from being stolen by inflation.

 

My bill will not put America on the gold standard, like we had in the early part of the 20th Century. Under the old gold standard, gold was money. Limiting the supply of money to the supply of gold was a huge mistake. It was the basic error that caused the Great Depression.

 

Under my bill, our money will be the same “legal tender” currency that we have now. There will be no limit on the number of dollars except market demand. The big difference will be that every dollar will always be worth the same as one five-hundredth of an ounce of gold.

 

When I became a Congressman, I took an oath to uphold the Constitution. The Constitution commands Congress to regulate the value of our money. My bill will do this. This is why it is essential that it become law.

Representative Poe, a former judge, is a member of Congress serving the 2nd district of Texas.

Anyone who did their homework on gold should not too concerned with the volatilty we have seen. Rather, it was to be expected. We will continue to have a deflationary period which will most probably be followed by an inflationary period after the election.

I believe it was Jim Sinclair who used the term 'esoteric volatility'. He got that right!

And of course fiat currencies don't go up and down short-term either

exactly - I mean the AUD has lost nearly 20% against USD over more or less the same time frame that gold has (gold is still above AUD900) - but you don't hear people to get out of AUD, end is nigh, all over etc etc.

OK - so we're all a bit bruised.

Here's a hypothetical question:

If you could get back all your losses on PM's and Juniors now, but only on the condition that you put all the money into a bank account and left it there (GBP, AUD or USD let's say) - would you do it?

I also ordered 100 silver from coininvest, can I cancel if the price drops without any bother?

I don't know about coin invest having not used their service but I find these questions on this thread bizarre! If the price doubled and they cancelled your order before delivery, I imagine you would be somewhat peeved!

When you placed your order, you took a price - live with it!

Hold on to your hats guys, have you seen those unemployment figures, especially the revisions

small point but worth mentioning just before I hit the hay - gold is now back above $1000AUD. Good night all!