romans holiday

Hello, and thanks for the compliment. I feel relatively confident that silver should be on a decent up leg for the next year or two, and so the 'sit and hold' position in AGQ should be that long [that said, am also hedged against this]. I then plan to sell the lot on some spike as these funds are ear-marked for property. In the past, silver spiked to 20, retraced to 10 then spiked near 50. If that is matched in the next leg up, silver should strengthen from 25 to above 100. Even with the element of time decay taken into account, the instrument should at least perform as well as silver. Take the element of time decay out, and calculate AGQ with silver at 100, and the number is a bit mind-numbing.

Thanks for the thoughts PD, but I think you haven't understood my over-all strategy. It is a hedging one, in the full sense of the word, so I should not find myself tied up in a psychological knot about whether to sell or not. Your reply is to a post where I was wearing my bullion bull hat. If you look at the following two posts of mine, I am wearing my dollar bull/ trading hat. To clarify, here are the two aspects that hedge each other: 1] Stay long AGQ. Even with time decay, the double leveraged instrument should do at least as well as silver. Here I am wearing my bullion bull hat. 2] Trade another AGQ position where I am concerned solely in using the volatility in silver to increase US dollars. Here there is not too much concern about the price of silver going higher when I sell as the long position covers that. The point is to identify reasonable/ good enough entry and exit points. I'm thinking at this stage of selling each time on a 70-100% gain. I am wearing my dollar bull hat here. On the face of it there is a straight hedge here. But over and above this, and with the macro theory of hyper-deflation in mind, the long hold and the short trade of AGQ can also be considered complementary; the expectation being both positions appreciate in value due to the fact that silver will remain volatile to both sides against the dollar.... though appreciating in the aggregate. It will be interesting to see whether the trade will outperform the hold. PS, I've never followed James Turk, nice enough guy but he has his own wheel-barrow to push being in the bullion business.

No, it means selling half the position, and realizing a gain of 50% on that in US dollars. And then recycling those funds into AGQ at an opportune moment, on a correction, and re-selling on a spike etc. The reason being to reduce risk in an instrument where there is uncertainty about long term performance, ie, time decay. I do this because I am at the moment very heavily in an instrument which leverages the volatility of silver.

Comparing AGQ to silver, you can see the 'time decay' element in the leveraged ETF. Though excellent for short/ medium term volatility, time decay may make it more problematic for sititng on. To hedge the risk of this, I've decided to trade half the position; take a 50% profit on half, and re-invest after a period of consolidation. Even though this may mean buying at a higher price, the point of the hedge trade is to increase a US dollar position.

Sure, but a Jesse Livermore quote comes to mind... something along the lines of letting your winning position run. And this from a trader.

Perhaps the hardest part of the trade, besides having sat in dollars and waited for the spike to correct, will be holding on to the position, It will be very tempting to sell at 80, or 100, or then again at 200 and then 400. My exit plan consists of being able to buy an apartment in the capital, and with plenty of capital spare. Could be another year or so in the camper..

After the correction of '08, gold steadily strengthened 50%, over a couple of years, before breaking out of the trend on its spike to 1900. If gold 'rhymes' here after this correction, it should steadily strengthen to 2700 [1800 + 50%] over the next couple of years.... before breaking out on a new spike. That spike could see the price go briefly to 3400 odd.

http://news.goldseek.com/BullionVault/1347284340.php Investment bank UBS today raised its one-month gold price forecast from $1700 per ounce to $1850 per ounce, and its silver price forecast to $37 per ounce, up from $32 per ounce. One Citi analyst meantime says gold could rise to $2500 per ounce in the first quarter of next year, the New York Post reports.

Looking at the 5 year log chart, gold only a smidgen of its high.

Thanks Klogger. That's the chart screaming bullish. Yes, reading in a similiar way; I reckon the next year will see silver push back to 50, and then a year or so after that break out and spike to 100. I heavily bought silver on this dip, and will be putting in sell orders on silver at 90 or 100 once silver strengthens to 50 odd. Because taking the previous pattern into account silver could easily spike to 100 only to consolidate back to 50.

Nice chart. Any chance of doing it on a log chart?

I kind of hope so, but doubt it. An elderly aunt asked me about investing in silver, and I told her to think about it a bit as one has to be careful about financial things with elderly relatives. Anyway sure enough, silver wakes up and heads north a bit; and though it may consolidate, it may equally carry on slowly upwards as it has been in a downward consolidating trend for so long, and now the season is right for it to start strengthening.

Inflation? Deflation? All this flip-flopping derives from the lack of a unifying clear idea of the big picture. Identifying inflation/ deflation with higher or lower prices was always considered a newbie error. In order to avoid what the economists termed 'money illusion' we have to focus on monetary value, which is at a more fundamental level than the surface of units and prices. I think investors struggle with this today because our thinking tends to confine itself to 'appearances'. There are not many 'metaphysicians' left who see beyond the short term flux. The way to unify the appearances of both inflation and deflation is to view all things, currencies included, deflating relative to gold, the most powerful symbol of money. The deflation/ depreciation of currency relative to gold + the deflation/ depreciation of assets relative to currency = hyper-deflation.

Early spring for silver?

GSR still relatively low, suggesting a bit more to the downside for the metals:

GS ratio is also suggesting a further wash out. A spike above 60 could see the end of this current down swing. Am hoping to convert the few ounces I hold at Goldmoney to silver once the ratio is above 60.

Who knows for sure, you could be right. Yet I think there's a strong case for arguing the long term trend for silver is still alive. Premissed on the following: 1] Silver leverages the volatility of gold [not simply a leverage on gold]. 2] Gold looks clearly to still be on its long term track of appreciating around 20% annually. In the short term I think you'll right where silver will bob around in a boring range [remember the drawn out doldrums in silver before it broke out and spiked]. So it may be a good six months or a year or so until silver builds up a bit of excitement. Then its off to the races. Putting in a bet?

Anything can 'be' money... or more strictly, used as money [its basis is functional... the abstraction comes later]. Money itself is just an idea, and then the various forms it takes in the real world are currencies. A currency is an institution, and institutions create order out of chaos. There would be no trading public, no markets without institutions. They are the condtions which make civil life possible [just been reading Vico ]

It's a non-sovereign currency. But that could change easily with the re-introduction of a gold standard, where it would be a super-sovereign currency once again. There's no 'natural' money. In a more 'natural' state you just have barter. Money per se is fiat.

After a year's consolidation on a spike, looks ready to run up to 1800. This would also put it on the long term trend line.

Yes.... against your real bread and butter stuff. But against over inflated asset prices it's quite another story... potentially. If/ when property prices come off, gold relative to them could appreciate that 23% yearly. And then if commodities continue to be unstable [and the kiwi dollar with it] then the cost of real stuff could even fall by that much. Over say the next six years, in this deflationary* environment, the purchasing power of gold could easily double against everything. *'hyper-deflation' where everything, currency included, deflates/ depreciates relative to gold.

Sure, strictly speaking, I don't think it's an investment either. I see it as a 'non-sovereign' form of liquidity. Roughly speaking, I call it an 'investment' though...in so far as it is something that can be held over the medium/ long term. Sure, but I reckon people will get excited when it goes through 2000, just like they did when it went through 1000. It's all relative isn't it. If gold is falling/ depreciating against gold, then gold is rising/ appreciatng against 'paper'.

Hi goldfinger... good to see you post updates on the ratios. Any update on the hyper-inflation model?

Hi Steve, good to see you post again. 'Goldbugs' left? On the next spike up there's a good chance a few will be back.... thats' volatility for you. So, what do you think of the long term log chart? Convinced yet about gold appreciating 20% year on year?