romans holiday

I think the more uncertain and unstable markets and currencies become, the more stable the price of gold [in dollars] will be. What looks a paradox isn't really when you consider that gold thrives on uncertainty. If one wants to trade, silver looks to be a much better bet than gold as being a commodity it will move much more violently with the market.

Excerpt Gold's rise is due primarily to uncertainty and with it instability. Investors/ nations are just plain confused as to whether there will be an inflationary or deflationary outcome. Valuation in assets prices and currencies have been problematized by first a deflationary collapse in assets, and then an inflation in currencies and public debt with QE and stimulus. Investors are left scratching their heads as to whether reflation will stick or not. Bull market or bear? Gold is the solution to the increasingly perceived problem of valuation, where everything is now on shifting sand.

No need to worry about bubbles and exits if a new gold exchange standard is required in order to stabilize currencies and restore trade.

Surprised that Roubini is taking such a strong view here. He has never really talked that much about gold. Also, I thought he was half-expecting a "double dip" recession. As for the price, I wonder if he is missing a third reason as to why the price would go higher, that of currency debasement.

Wouldn't take much to see $20 would it. If we get the last hoorah in the inflation trade, gold could go to $1200 and silver to say $22/23 with the ratio near 50.

I lightened up a little a while back. But am looking for the ratio to improve before I "take profits" by swapping to gold. Not too concerned about having a large position in silver here... as bought at good prices... and will look to buy further with Yen and dollars should the market crash.

Why hasn't silver and gold exploded to the upside as hyper-inflationists have been predicting for the past year? Why do prices limp at these levels looking susceptible to falling when massive inflation expectations should send them rocketing? Rather than something being wrong with the prices, it seems to me there something is wrong with hyper-inflationary theory which calls for unrealistic prices. Gold is doing what it should do as currencies, along with all asset classes weaken. Yes, currencies, that cash you sit on, is also an asset now that it is a freely floated and traded commodity. Theories should live and die by the sword of experience and hyper-inflationary theory looks to be taking a hammering. So how about theories which makes sense, ones that explans what gold is in fact doing and one that can predict where the price will go. Isn't that what a theory is for? A theory which does not give both clear explanations and predictions but instead exhortations and edifications is not a theory at all but a dogma. That said, neither has gold prices collapsed to the downside as the conventional deflationists have predicted. It remains relatively stable and strong at these levels. What the deflationists often fail to see, along with the inflationists I might add, is that gold is not necessarily just an inflation hedge, or a commodity. Today it is morphing into a currency, or being "re-monetized" due to the efforts of CBs to debase the currencies. Gold will strengthen slowly as currencies weaken slowly... no surprises, no moon shots, no parabolas, no hyperinflationary holocaust, no hyperbole.. just a slow incremental mundane move to the upside, though perhaps with increasing volatility to both the up and down side as markets swing between inflation/ deflation trades. Back to the quote, I quite agree. A more sober prediction for gold is an incremental move to the upside though it will only move to the upside in first this currency, and then in that currency, though the overall aggregate movement will be higher. This will be due to capital flowing form the centre to the periphery on the reflation/ inflation trade and then as capital reverses and flows back to the centre on the deflation trade. Think of the market as an unballasted ship populated by a seasick crew. These lurches in the market will create further instability in currencies which will be to gold's benefit. In a volatile, uncertain and unstable market as this, the trend is definitely not your friend. Better to hold on firmly to contrarian positions which should keep you high and dry on the whiplash moves likely to be seen. Only the die-hard gold bug should be 100% invested in gold and silver here, as they will have the zeal and faith to ride out stormy patches [they will also be right in the end though for the wrong reasons]. The "less seasoned veterans" would do well to hedge in various currencies including gold, silver, dollars, Yen and maybe some other currencies. The more adventurous could then, if they so decided, swap/trade strengthened currencies for weakened ones. That said, and with the investor's hat on, you would not want to be all lost at sea here without a compass. The investor's compass or aim, where eventual profits are to be taken at a future date, should be in the accumulation of the strongest currency, that of gold. This chart, comparing gold with both the dollar and the Euro, portrays well the way in which currencies will wax and wane and how gold will gain in the aggregate. I predict something of a repeat performance in the following year.

It may sound like rot to some. Depends on your perpective really. I like to use Occam's razor and excise all unnecessary though commonly held beliefs such as dollar destruction, price suppression, elitist conspiracy etc [some of which I remain agnostic about]. I then just look at it within the macro-economic sphere.

Yep, who can be sure what the price of the "Bernanke dollar" will be.

I choose $2000 because this would reflect an eventual 50% devaluation of the dollar... who knows, maybe it will be closer to $3000 US dollars when they stabilize and peg the currency. Keep in mind that in this scenario, US assets/houses would also have devalued against the dollar with prices halved [most likely the same in the UK]. If the currency in turn halves against gold, then the value of assets/ houses would have quartered against gold, which is a quadrupling of gold's present purchasing power. I think these future dollars [$2000 buying an ounce of gold] are still very valuable in a future environment where there is scarcity of money and an abundance of cheap assets.

Perhaps. But the reason I buy gold is not as an investment, commodity, inflation hedge... yadeyadeya.. but because I see a restoration of the gold standard in the wings. If economic conditions get to a point where a new gold exchange standard is required, in order to stabilize currencies,.... then talk of a bubble is irrelevant.

"most of the public will not buy... they will just think it always looks bubbly, too expensive, and at every point susceptible to crashing." Another go. It can only be a bubble if the public already have over-valued it and bid the price up. Bubbles teach us that perception is not reality.

For sure. When there is a bubble [over-valued asset] the public doesn't see it, which is how it came to be over-valued in the first place. The "dead cat bounce" in housing, in certain countries such as the UK, reflects uncertainty by the public whether houses actually are in a bubble, and hence continued support at current prices. Though the seeds of doubt have been sown, it may take some time for this bubble to well and truly pop. Back to gold. How can gold be in a bubble and be over-valued if it is to become itself the very standard of value?

It depends on whether the asset in question is in a bubble or not. If it is in a bubble, the public are right to be wary, if it is not, then they are right to buy. Many have commented on how the public do not see bubbles when there are bubbles, and then are quick to see bubbles everywhere once the previous bubble has popped. Anyway, this is a bit besides the point as I do not look at gold as a conventional asset. I see it as a currency and it's rise, when priced in other currencies, is only reflecting the degradation of those currencies. Increasing currency instability will lead to increasing instability in international trade,and then gold will be formally restored as a measure of value in order to stabilize currencies. From this perspective, GOLD CAN NEVER BE IN A BUBBLE. Essentially I see it is a problem of valuation. Value is doubly eroding out of assets and out of currencies now that the system is destabilized. The prime mover and bedrock of monetary value is gold, and I think the only way they will be able to stop the slide and restore some "ballast" is by re-institutionalizing gold.

I do not think there will ever be a gold rush moment. Many here are waiting for that manic bubbly parabolic phase in gold... and then are anxious on how and when to "exit" gold. This is muddled thinking. Gold will only slowly and incrementally rise over the next few years and remain volatile in specific currencies.... think frogs and pots and why most of the public will not buy... they will just think it always looks bubbly, too expensive, and at every point susceptible to crashing. When gold is around $2000 in a few years time, I reckon it will be formally monetized in the backing of a new international currency. Only $2000 you say? But consider that asset prices would have halved and you have a four fold increase in "purchasing power".

I am happy to report my sister and her husband have sold their wickedly over-valued property in NZ to rent. My next summertime mission is to convince them to secure some of that realized equity in gold...... while the kiwi dollar is still flying high. Incredibly, gold was priced at near $2000 last summer with it now at near $1400. Unfortunately, I was all too convincing with another [very wealthy] brother-in-law last summer. He grumbles a bit, but I keep telling him the bull market in gold will "rescue" him.

Interesting to take note that gold has strengthened approx 28% against both the US dollar and the Euro over the past year. Not just a "dollar story" with the longer term in view. That said, it also does not look like gold is about to go "parabolic" anytime soon. I expect to see a similiar continued steady rise over the next year... though there will no doubt be punctuating periods of volatility to both the up and downside...especially in certain currencies.

Cool, I haven't heard that term before. Does that have more to do with orthodoxy, or with multi-sided geometrical shapes? Yes, I think it is crucial to draw a distinction between silver and gold in today's uncertain environment. On the inflation swing/trade, silver will outperform gold... as it has been doing. Yet, when this reverses on the lurch back to the deflation side, silver will likely tank. In contrast, gold should remain relatively stable as it is being bought largely as an alternative currency and a hedge against uncertainty. My strategy will be to swap silver [which I am heavily in at the moment] to gold as the peak of the inflation trade. I suspect we will get another wave up with the ratio nearing 50. If the market reverses I will not be too concerned and wait for the next wave. Call me silver surfer. On the deflation trade, if it comes, I will be loading up with cheap silver compliments of Mr Market, wait for the next inflation trade, and then swap to gold. The potential here, if the market remains undecided and volatile, and silver is used as a trading vehicle, is to be able to buy near half-priced gold.

This got me thinking. I wonder if this is why gold is doing well today. No-one has any proof whatsoever about what the future will bring. I have a theory, that of hyper-deflation, but it is only a theory and could be false... as all theories could be. As opposed to theory, I think many are buying gold today due to this primeval underlying uncertainty. This kind of uncertainty is corrosive of economic activity, people become less certain about the future, or should I say start thinking about the future having been rudely awakened from the perma-present and semi-comatose state of continuous consumption. So yes, uncertainty dictates the buying of gold being the strongest symbol of money and the effective "prime mover" of monetary values. But this uncertainty also dictates a hedging policy as volatility is likely to dominate an uncertain market. It is likely to lurch from one side to the other, like a boat having lost it's ballast [throw overboard yesterday's mantra that "the trend is your friend" and hold on to a contrarian position]. But if I take the principle of uncertainty one step further then it could be I am wrong about gold. Therefore I should hedge a solid gold position with a "contrary" currency. That way, if/when the market lurches against my gold position [silver would work better here actually], I will only finally be 100% in gold when I buy at this lower price. Having bought at a low price, and only then being in 100%, there is less chance of it losing further market value.... should the market in its wisdom deem it so. There is then not so much concern and a lot less anxiety about what a sea-sick and increasingly irrational market will do.

As I said, it is all about hedging against uncertainty [in short term silver prices]. My favorite Mongold is Kublai Khan... who kept all the kingdom's gold in his own palace and gave his population paper to use as money. Worked very well indeed and well impressed Marco Polo.... though he didn't stop to consider that this paper would be worthless in Europe.

Even more interesting in CAD.

Well, I do not wait for lower gold prices. I have a very good core position in gold.... if I didn't, I would buy irrespective of the gold price... a hundred dollars here or there is irrelevant if you do not have a solid position. I have consistently repeated this time and again. Comprendo? I wait for lower silver prices which I think are very resaonable to expect. Cheap dollars? I am looking to buy some cheap dollars [with another peripheral currency that is strengthening at the moment]. I have already bought Yen when it was cheaper than now [shows something of a good track record I think]. This is to hedge against a reversal in the market which I think is quite likely at some point. No hidden agenda here but a clear cut purpose based on macro-economics and market phenomonology. For myself, I am very overweight in silver and want to SWAP TO GOLD before the deflationary episode hits the market. Once again, I have clearly explained the strategy.... nothing untoward, no hidden agenda. no conspiracy, no fear... just a common sense hedging with the goal to accumulate gold. Period. Avoid stereotypes. The puritanical approach does get a bit tedious.

With quite large cash reserves at the moment, I'd consider buying a little silver should the price dip to around 1,350 Yen/ $15.

See post 552.

Secondsies. http://www.greenenergyinvestors.com/index....st&p=133053