romans holiday

I think it is likely that at times gold will be a dollar story where the two move inversely... and then at other times it won't. At some point, most probably the next liquidity crisis, the dollar and gold could well move up together..... and then they could both move down together for a period if the market was optimistic enough about the economy. But thinking doesn't make it so.... not in the long run anyway.

There was a similiar convesration along these lines on Bubbs diary a while back: http://www.greenenergyinvestors.com/index....mp;#entry144311 The discussion was about whether governments would necessarily be hostile to private gold with a restoration of a gold exchange standard. Personally, i think it will be a simple case of the price being capped/ fixed at a certain point... which would effectively mean the fixing/ stabilizing of the currency... with holders of gold simply swapping for the new sound currency. Good deal all round.

Is gold still a dollar story? Dollar looking strong today and gold down a little. Will be interesting to see how much the dollar can strengthen without some dramatic and pivotal event to push it up. The blunt message Bernanke has sent the market looks to maintain dollar weakness. I doubt gold will sell-off much here. http://www.bloomberg.com/apps/news?pid=206...id=a8AIcmYws37s Looks like a re-run of the Japanese show to me... with the West exporting its inflation to the East this time. The question remains as to whether the export-driven Asian economies can soak up the liquidity and continue their hyper-growth.....now that the GDP of western economies is contracting. Or will they pop.

I think bickering often arises from people being emotionally attached to not only their investments, but also to the ideas on which their investments are based. When the ideas are criticized/ discussed etc, this can be taken personally. The way I see it, a forum such as this should be about detaching yourself to a certain extent and discussing differences in views and ideas on an impersonal and rational level. If the liquidity trade - compliments of Bernanke - is back on, gold could carry on to new heights here.

He'll cut his hair if gold doesn't crash?

You missed my point. Dogmatic certainty leads to scrapping. It's when we see our ideas as limited and uncertain, and take them with a pinch of salt, that we end up with progress. The lady in blue probably has an unfair advantage with gold bars in her bag.

The last couple of pages have got a little off topic... which does happen from time to time to threads... but these anomalies are also known to self-correct.

Good point. I like to draw a distinction between base money and then the [real] money supply..... which has to be something that is actually supplied to the real economy. OK people, can you please consider this point?

I can see why an investor sees, or imagines, an abundance of money. But ask yourself what the in-debted consumer sees. I'd say from their perspective, they see scarcity and will behave accordingly. I guess where we differ is that I put more emphasis on consumer behaviour in its efficacy to shape the economy than that of monetary theory and central banks. If there is excess supply, and accordingly less demand... then prices will fall... and cash will come to be considered more valuable by the general population [thinking makes it so]. This is how cash stops becoming worth...less, contra to [legally restrained] CB efforts.

I half agree with you. In the short term, investors are/ will be pressured to get out of cash... or even carry on leveraging up... but I think that economic fundamentals will at some point trump investor "psychology/ ideology". By only going into new asset bubbles, the money will not filter down to the real economy and consumers, which will continue to exhibit deflationary behaviour. I think it reasonable to believe that the debt/ credit deflation will overwhelm the finite resources of CBs to reflate. Basically, I think the greater population, if not investors, have woken up from their monetary slumber. Investors are, by and large, still under the spell of monetarism.

How far it goes, nobody knows..... any guesses? I am thinking this might not be the "big dip" but a smaller intermediate one. Am thinking of buying with a little at 17... no 16.

Not quite following you... if liquidity was infinite wouldn't that mean the currency is worthless... or would soon become worthless? Maybe you just mean if liquidity remained high, or there was constant excess liquidity. Then I guess asset prices would keep rising.... following by a general inflation in everything, wages, consumables etc. Hyper-inflation. Do you think it is possible for CBs to maintain excess liquidity? I'm thinking it is only a short-term fix as investors are fooled into spending/investing.

It depends on whether you see a future of abundant liquidity or one of scarce liquidity, doesn't it? I have my chips placed on the latter. The CBs are attempting the former but I think they will fail.

http://www.greenenergyinvestors.com/index....st&p=146311

Well, whenever we present our opinions they tend to come across as "facts".... this is just the nature of argument. I am sure you would agree that arguments for hyper-inflation also comes across as a "fact". I always try to make it clear that my opinion is theoretical and not a dogma... that I could be wrong. I think this is an important point, that we should be pragmatic about our opinions and only hold them as provisionally true until future experience either corroborates or falsifies them. I also put the principle of uncertainty at the centre of my investment strategy. I would be the first to admit that hyper-inflation is a possibility... but I think it is also unlikely.

Hi dtm, not sure if there is any such thing as an expert when it comes to gold. But there certainly are a lot of opinions. It is quite hard to say which way gold will go here... there are good arguments for both directions.. and then trumping the arguments altogether is one very unpredictable market. One thing I think most here agree on is that in the long term gold looks to be a great buy. If you are the buy and hold investor type, I think you will not regret buying gold here... even at what seem to be highish prices. If the price does fall, the bull market in gold will "rescue" you as it goes on to new heights. Personally, I will not be buying here as I already have quite a large percentage of my worth in gold, and feel I can "afford" to wait for a dip. If I didn't have a good position and had say "only" 10% in gold, I would feel a little "exposed" and would buy... peace of mind and all that. So I guess, in my opinion, it comes down to how much [percentage wise] you already own, and what you feel comfortable with.

Have I made personal attacks on posters? I don't think so... more of an objective discussion on ideas and beliefs. I like the pragmatic way you have framed it here.... whether prices will go hyper... because at the end of the day, besides being night time, we all know that hyper-inflation would have to involve this as the currency went towards zero. A few observations as to why the prices will not go hyper: - there are now laws in place that prevent central banks in developed countries from printing willy nilly... they are now mostly borrowing and expanding the debt bubble even further. - this debt bubble is contracting and is causing a debt/credit/asset deflation [monetary "hyper-inflation" was seen at an earlier period where bank credit inflated asset prices- I know you do not see credit as money... but I'd argue, on pragmatic grounds, it is definitely a monetary phenomenon]. -the behaviour of banks and consumers is influenced by the deflation in assets and collateral leading to a reduction in borrowing and lending levels. This deleveraging will continue to exert deflationary forces as both banks and consumers seek to restore there balance sheets. - the CBs are resorting to such desperate monetary policies because they see themselves fighting deflation and not chasing after windmills. -the amount of money printing is insignificant to the amount of debt that is contracting. If the economy was not debt-based then an argument could be made for hyper-inflation... but as it stands any new money creation is swallowed up in one very large hole of debt. - Political developments could just as well enforce fiscal prudence as they could bring about money printing to the nth degree. - Bond markets would be punished if buyers think government debt might be unpayable. Though the increased savings of Americans might help here as it did in Japan. - Commodities and equities are only going up in price because Bernanke is threatening inflation and printing. There is an ideological bias here [monetarist theory] for investors to spend/buy investments. Consumers on the other hand are guided more by the real world and not by theory and will be saving not spending. This means the real economy will continue to contract. At some point the real economy will no longer be able to support/ sustain the financial economy, with prices collapsing. -Current asset inflation in emerging economies is based on the US cheap dollar carry trade. All it is achieving is over-valuation in economies which already have over-capacity in production. GDP in developed countries is contracting not expanding. This malinvestment will come to a screeching halt as the China bubble burst leading to further rounds of foorced liquidation and dollar strength. -If worst came to worst, governments would default rather than destroy their currency. - Before it came to that, international government [iMF etc] would institute a gold-backed currency to which other currencies would be fixed and stabilized. Just a few brief reasons [all of which have been gone over ad infinitum on other threads] on why hyper-inflation of prices is far from a foregone conclusion.

Not really attacking anyone... more stating an ideological fact. It would be futile to argue with hyper-inflationists as long as they insist that inflation/ deflation is by definition an increase/decrease of base money supply. And this is my point, that hyper-inflationism can not be argued with as long as it is based on this self-contained "platonic" truism. From that perspective, I may as well be arguing that 2 + 2 doesn't equal 4.

My point is that a theory about the world is something that should be open to criticism by the real facts of the world, and even perhaps falsified by real world events.... rather than be considered a priori true/ certain on abstract principles [hardly sophistry]. Some people have become so emotionally attached to hyper-inflation theory that it has become a dogma functioning almost like a religious belief.... nothing in the real world could falsify it... it is a matter for faith not uncertainty or doubt. Anyway, back to gold.... I do not think the performance of gold is tied to a hyper-inflationary outcome. There are other reasons why it will continue to be a good "investment".

It's different this time. My predictions might be wrong, but it will be the future not the past that would falsify them. http://www.greenenergyinvestors.com/index....st&p=115476

Gold could easily weaken by 10-20% [i am sticking to a floor of 900 for now]. But it would soon strengthen again imo. Gold looks to be all things to all people at the moment. Some buy it on the safety trade then sell when the risk trade is on again. Then we have others buying it on the risk trade [as an inflation hedge] who might sell it on the return of the safety trade. So we have gold being bought on both the safety and risk trades.... and in the aggregate it might end up being sold off less than it would if it was monopolized by a single trade. Of course, this doesn't mean that it can not be momentarily volatile. As for the other currencies, I tend to agree with you. The dollar is the lynch pin of our monetary system, and until that system is changed it should be a major beneficiary as the global economy deflates with money moving from the periphery to the centre. This does not necessarily put gold in an anti-thetical position to the dollar. The way I see it is the inverse correlation between the dollar and gold will break down, and they will both be bought as safe havens in the end. The strongest currencies [in the aggregate, taking volatile swings out of the picture] could be as follows: Gold at the top, US dollar, Euro, Yen, Pound, Commodity currencies, Other currencies This could be the order of currencies in a stagnate global economy where deflation reigns. I reckon a new monetary system would be required to break the Yuan/dollar peg and rebalance currencies in order to reflect the fundamentals of economies.

I am not so sure that we do view things so differently. I also think the US will become less dominant in the political and economic sphere with the world becoming multi-polar once again.... decline of empire sounds about right. I just do not think that the dollar will be hyper-inflated away, or wilfully destroyed. The US woould default before they let that happen. The dollar could eventually be debased, reduced by half, lose its reserve status etc... while in the meantime it could well spike, double, become the "go to" currency due to certain real world processes. I just think hyper-inflation is a misnomer, and the process it describes/ predicts is unrealistic. A better word would be hyper-instability.

Ummm... what's going on in the real world? Hyperinflation is nice in theory but does not cut it in the real world [which is there by the way to substantiate or repudiate theory]. This is because money primarily has a practical basis and not a theoretical one. We were all told when growing up that money makes the world go round, that money moves the world. But this hard-headed abstract maxim is being falsified before our eyes… money is not moving. Why? Because the exact opposite is nearer the truth, that the world makes money go round, that the basis of money is practical. It can never be analyzed in isolation in a set of theorems, but rather has to be observed within concrete circumstances. This is what muddle-headed monetarists have got so wrong. It is the same mistake the quants made. They were so obsessed with the elegance, beauty and certainty of their a priori principles and rational models, that they allowed those theories and models to become reality. Of course, this is the very definition of madness, when the figment of your imagination supplants reality. The reality was that the madness of the quants led to an economic ruin still playing out today. When you consider and observe the way in which money behaves in the real world, it is absurd to think hyper-inflation could happen to the central reserve currency. What I am more interested in is why hyper-inflationists cling to this belief. Perhaps the basis of hyper-inflation lies in the enthusiastic imagination of its adherents. Clear and distinct ideas are provided by authoritative figures. The ideas are easily understood along the lines of mathematical theorems. The ideas are essentially simple and not complex proceeding along axiomatic lines and generally agreeable to the more rationalist and mathematically minded. They provide certainty and a guaranteed eventual outcome in an uncertain world. The real world may fly in the face of hyper-inflation, but this is of no consequence as an eventual hyper-inflation is as certain as the second coming. This makes hyper-inflation more of a world-view or a faith than a provisionally held theory which would be open to being falsified. Beyond the hype of hyper-inflationary theory, gold can be bought as a sound currency and a hedge against uncertainty.

Even better. My blue line was put in quite generously for putting a trade on silver. As I posted here: http://www.greenenergyinvestors.com/index....st&p=145531 Before piling into silver with most of my reserves I'd want to see a bigger pullback along the lines you have traced in... or even lower.

Gold down, treasury yields up. They both look to be well correlated as safe haven assets. But gold also part of the risk trade, so I doubt it would sell off much short of forced liquidation/ deleveraging.