romans holiday

Got through the first one. 7% growth per annum leading to dire consequences in just 10 years. That confirms it then... China with its 10% growth is a doomed bubble!

Hi Steve, I'm going to have to give this some thought. Of the top of my head, I'm not sure if the "% of growth" is really that central to gold. For example you could talk about the exponential increase in the crime rate, or the population... but it could be quite a different kettle of fish when talking about the increase in the price of gold. Because it is the denominator, ie the dollar which prices, that could also be shifting [not itself some mathematical constant]. Going beyond the mathematic numbers [or delving beneath them], they merely represent the shifting of that elusive idiosyncratic quality we call "value" from one currency to the other. If the shift ever was completed then the price of gold would go parabolic as something increasingly less valuable, the US dollar, tried to measure something increasingly more. It would be futile. IMO the linear graph suffices because the price of gold can not carry on exponentially. At some point the dollar price [and by implication the dollar itself] would threaten to become meaningless. Before this happened, when gold threatens to go parabolic, the gold price would be capped, or should I say the dollar fixed. I have a target of 2000/ 3000 for this, with the 10,000 + targets unlikely because meaningless. But all this looks likely to be a few years away. There's still some life left in the dollar yet. To put it another way, I'm more interested in the exchange rate between gold and the dollar, and here am considering gold as a currency alongside the dollar [would you use a logarithmic with US dollar/ kiwi dollar?]. I guess this is why I'm not concerned too much about using a linear chart.... because it just represents two currencies in flux one against the other. Will have a look at those vids though. Here's the logarithmic:

Oh right. Looking at in the "long" term perspective, who would be wanting to sell gold here? Looks like a steady and incremental rise..... though I have to admit it looks like it's about to go parabolic...... but perhaps only in the next year or two. I think an eventual parabolic rise would be the end game having to involve a re-institution of a gold standard. This will be forced on government/ Washington Consensus and market fundamentalism as capital is sucked into gold away from economies. The fix will be to stabilize currencies to gold at the appropriate levels, sorting out the trade/ currency imbalances at the same time. For those that can only see a bubble in the below chart, consider Copernicus. This great astronomer was one of the first to state the earth revolves around the sun, rather than the generally accepted converse. It was very difficult for contemporaries to think in terms of a heliocentric system as they'd been habituated to a geocentric one. Today likewise we have been habituated to think of terms of our own currency. A Copernican revolution in economic terms would involve gold, as opposed to our currency, becoming central. Money is primarily a practical thing, and naturally this will happen in the real world first [with the informal monetization of gold]. Only at a later date will it become cognized... or recognized in a gold standard.

From the 2008 lows, platinum and gold have risen a similiar amount. And once again gold is holding up better than it. Those that were buying gold as a commodity and an inflation hedge [the hot money], will no doubt start selling if they think deleveraging in is setting in [though the gold bug community is generally in the "gold is an inflation hedge" camp, their strong hand convictions will most probably help when confronted with the exact opposite of which their inflationary theory predicts]. Yet, there are many other investors/ CBs [the smart money] who will not sell, with both strong hands and clear-headed views on why they should hold. They'll hold, without anxiety, because they consider gold as an alternative and prime currency when modern currencies are showing all the signs of increasing instability.

Compared to the other metals, gold held up reasonably well during the last round of deleveraging... because it's more than a commodity now. Being more "monetized" in the minds of investors/ CBs it should hold up relatively well should we see another bout of deleveraging proper.

If "the thin blue line" [long term trend] is anything to go by [representing a strengthening currency], then it should provide the support. It also suggests that gold will break out to a higher level towards the end of the year, or early next. This would also fit in with an extended period of deleveraging lite. Whether we see deleveraging proper or not.... I think gold would recover nicely like last time anyway.

Yep, there's deleveraging and then there's deleveraging. Investors took the Bernanke bait and levered up again with cheap yield-chasing money. Doesn't take much for a bit of deleveraging once the market turns against you... and then there are those just avoiding risk. I don't know if it will turn into the 2008 kind of deleveraging [super deleveraging?] but it's possible. If deleveraging is to last for a year and a half as T O'Brien suggests, then it would presumably be the first "garden variety" kind... more of the same. I wonder if the frequency of volatilty might pick up a bit though. Rather than a year and a half of leveraging up and then the opposite, whether these periods might consolidate into 3-6 months.... as the market gets even more chaotic.

Indeedy, the lower RSI peak and with deleveraging looking to settle in for a few weeks, one wonders how low it'll go. 1000 is certainly conceivable. Currencies are going crazy. I had a rather large pay day, with some extra bonuses added in. Woke up to check the exchange rate [Korean Won to dollars] and holy cow... lost near 10% and still sliding! Jumped on the bank internet site to transfer pronto but some glitch in the system [capital controls?] put a stop to that. So jumped on the subway to the other side of town to do it manually at the bank....only to find the bank closed for Buddha's birthday.

My American colleague asked me today how much gold he should buy given he has $10,000 sitting in cash. Instinctively, I said he should put half of it into gold.

It's a fair question. Perhaps it comes down to how much you already own. I basically have 50% of my worth in gold [buy and hold], and the other 50% as a hedge in dollars. Deleveraging obviously remains a risk. So it then makes sense to have a decent position in the currency which would most benefit, namely dollar [perhaps Yen]. The aim of course would be to jump from dollar to gold when/ if we get the "big one". Or alternatively, buy silver, then double your dollars once silver recovers. If it does or doesn't happen, you are still doing well to hold the two strongest currencies. Holding gold, while perhaps trading dollar for silver on silver weakness.

Waiting to buy gold? I've said all along the currency to wait in is the US dollar. Reason being, when investors retreat from risk and liquidate, it will be the central funding currencies such as dollar and Yen which benefit most..... and at the expense of other currencies. Peripheral/ commodity currencies such as the Aussie dollar will weaken. So even as the price of gold becomes cheaper in dollars, it becomes more expensive in, for example, the Aussie.

hey gf, what about those into cometology?

Gold being the weightiest will be the last to get caught up in a dollar vortex. It might slide, but only a little and reluctantly. Most else, including silver, is likely to go on a tear. For this reason, I shifted most of my silver to gold recently. Any silver bulls, with exposure to only silver, considering putting a chunk of it into gold?

Ground hog day. A sea of red everywhere. Check out platinum. It might take gold to go a little lower before we see a real slide in silver.

Why bet for or against it? There is obviously a real risk that deleveraging will happen. There is obviously also no absolute certainty that it will happen. Just as there is no certainty that it will not. There is no certainty period. The point is to be hedged in case it does happen. But then if it did happen and gold/ silver quickly recovered like last time, should that really bother the buy and hold camp [which I have a foot in btw]? PS. I don't think "newbies/ lurkers" are as impressionable as you think. We're all big boys who should be doing our own due diligence and making our own decisions. It is healthy to have the full spectrum when making investment/ disinvestment decisions.

You're not getting it Jake. When silver was low, I had both a core position in both gold and silver. With the risk of deleveraging ahead [which we're seeing now] I decided silver was too risky and moved most of it to gold, so all core bullion is only in gold now. But then gold should be hedged with a dollar position [which has always been maintained] in case we see super-deleveraging where everything slides including gold. But this dollar position can also be traded conservatively against silver when the risk trade in the market is on and deleveragng looks unlikely. The silver I still had was thus traded, going from 15 odd and sold for dollar at 17.90. As I said conservatively; the aim is not to accumulate silver here [that pertains to gold] but to increase and maintain your dollar hedge by dipping in and out of silver. I'll be happy with a gain of 15-20% each time, but if we get the big one [with silver recovering afterwards] I could double my dollar hedge. Even a 15% profit though is a good one when you consider that asset prices are deflating. In real terms [against assets] your profit will be even greater. Too many investors can not see that money illusion cuts both ways. They think they see the illusion with their inflation expectations, and hence seek large [and very risky] nominal gains. That silver has continued up well past 17.90 doesn't really matter because my bullion position is in gold, which picks up these gains and then holds on to gains better than silver. I expect silver to come back below 17.90. If it doesn't and breaks out to a new high, neither does this really matter. It should remain volatile and dip back to near what I sold it for. Once again buy on dip and sell on a modest gain, aim being to increase the dollar hedge. I reckon silver looks vulnerable here. I'm now only in gold and dollars. Looking to swap dollars for silver at a lower price, but only for a short term trade.

How's this for a moderate position between the trading instinct and the gold bug one? Gold to hold and silver to trade!! Simples. Of course, you'd have to be trading silver for dollars, and looking for dollar profits... in order to hedge against lower prices in your core position of gold.

Indeedy... a glitch in photobucket preventing me from posting the chart. Dollar/ euro has retraced back to the levels seen in extremis on the deleveraging bout of '08... and to levels seen earlier before it got so "over-valued". I wonder how long it will be before the commodity currencies follow suit.

EURO/ USD 1.22

Could even go to 3 digits, but I don't think I'll bother selling any gold as my main aim is to accumulate gold. The alternative is to have a decent dollar hedge. I've kept a good dollar position, and will buy both gold and silver on deleveraging. Gold to continue accumulating, and silver to trade back to dollars on its recovery.

Gold makes for excellent mirror material. Most often we read what we want into it.

Just as likely to contniue higher here as correct a little. I'll buy a few ounces at the end of the month. At some point though... maybe later in the year or next, we'll see everything liquidate. The contra currency to be in for this is the dollar... in order to buy lower gold. Pound, Euro, near everything will be caught up in a dollar vortex.

Gold could go above 1000 in both Sterling and Euro and stay there, while at the same time going back below 1000 in US dollars. Forced liquidation in the equity/ commodity markets/ peripheral countries later in the year would do it. Interesting times. Why be Euro/anglo-centric in a global monetary crisis.

Yep, that was a quote from last year, when most were thinking that dollar and gold must be inversely correlated.

May not see the dollar down through 80 again. Just about through 86 now on its way to 90. As I've been banging on for a while, if you want to hedge/trade volatility, the contra-currency to be in is the dollar.