romans holiday

Unless risk aversion returns. If/when the markets next sell off, gold may go down a little against the dollar but the pound may retrace ALL the gains made against the dollar and perhaps worse. In that scenario gold will be more expensive in pound terms.

Don't most fiat currencies devalue near this much under near "normal" inflationary conditions? The time line I have in mind for dollar/gold volatility is only a year or two... with the idea to get out of dollars when/if they spike on the back of de-leveraging round 2.. This is not gambling/trading but just being prudent. I recommend reading "The Art of War". Investors are in a psychological war and Bernanke and company, master manipulators, will be using all manner of dirty tricks. Keep some powder dry.

As a hedge for holding so much gold and silver already and to diversify my currencies. Though the outlook for the dollar looks pretty grim, we might see its swan song before its collapse. I am keeping some dollars in reserve in case we see another round of forced liquidation. Who knows, perhaps the Fed may be able to manipulate this if the dollar looks to be in danger of falling over; better to have crashing markets than a crashing currency. Also, because I do not see the currency being destroyed, just devalued by half [with gold doubled in dollar terms], it makes sense to buy discriminately. As the reserve currency, the dollar is perfectly capable of spiking [as gold is of "correcting"] before finally becoming a second rate currency. I hold dollars strategically, looking for an opportune time to buy gold. If I can buy gold cheaply, then not only can I accumulate more than I would if I bought indiscriminately, but I can also not be too concerned about whether the price will correct. Call me a pragmatist.

Seems to me the most likely outlook is gold moves sideways over the summer. I can't see it declining too much now that concern about the dollar has gone mainstream. Can't see it exploding upwards as long as the Dow and commodity rallies continue. I reckon the only thing that could take gold significantly lower... back into the 800s would be a massive sell off in everything with a deflation scare. I will be buying a little at the end of next month if the price is still at these levels... but keeping some serious powder in reserve [in US dollars] in case we see a correction and I wouldn't call that trading. If I did not already have the larger part of my worth in gold/silver I would be seriously buying now. I reckon whether you buy or not depends largely on how much you already own.

Further to what Lowrenty posted. http://news.goldseek.com/CliveMaund/1243318380.php

http://www.3news.co.nz/Video/Gold-fever-st...efault.aspx#top .

I agree that deflationary forces are dominating at the moment. The real economy is one thing but perceptions are quite another. Inflation fear refers to the perceptions of the mass of investors. Many perceive inflation to be coming which is exactly what Bernanke wants them to think as he threatens to print ad infinitum. I see this psychology being the prime driver of the rally as investors seek to get out of dollars and into equities, and I would add commodities. I doubt many are buying the Dow for fundamental reasons and because they see a rosy future for the American economy. Perhaps some are just buying because it looks cheap. The fundamentals are, as you suggest, deflationary which is not good for any economy. But where you see a small amount of deflation, I see deflation dominating the economy for a while to come. I guess it comes down to whether you believe the crisis is over. I don't think it is. I reckon we will see continued trouble with the banks and the economy morphing eventually into a currency crisis as Bernanke tries to delay the inevitable, namely that consumers and institutions need to deleverage. This debt deflation is not going away anytime soon. Dow could go to 10000 before turning. Back to gold. I also agree with you that it performs due to economic crisis, but would add it will ultimately perform with a currency crisis.

The dumb money would pile back into the dollar. The smart money will go to gold. This may entail a short term correction in gold before we see gold go to new heights in stronger hands..

So you are saying that most here are expecting a correction in equities and a rally in gold while the contrarian is expecting the opposite, a correction in gold and a rally in the equities. There is a third option, perhaps the contrarian's contrarian, that both gold and equities correct. The rationale for this is that we may be due shortly for another round of deleveraging/ forced liquidation. I think the above chart comparing the present Dow with the past is quite compelling. As others have observed, I doubt gold will go as low as the last correction as there are many smart money lining up to buy which would act to counter too large a sell-off. I think it will be unlikely to see gold correct while equities continue to rally. They should both continue to be the beneficiaries of inflation fear as long as investor perceptions remain fixed on Bernanke's money supply. The Dow and gold may well continue to rally together before they then correct together, which should come on the back of some economic news or event sparking a deflation scare. Gold would afterwards bounce back to a higher high as it is further monetized [bought as a currency] and be in stronger hands. The Dow should continue down to lower lows.

The Dow chart "bears" posting. What do you think will happen to the price of gold when the Dow tests new lows? Hint.... the smiley is giving the wrong hint.

Great article. Hope you don't mind me highlighting certain parts on my deflation thread.

It may keep going down presently but looks oversold at the moment. My point was that further out when/if we see a dip in gold this will most probably entail a spike in the dollar [the dollar and gold look to have returned to their inverse relationship]. If you think gold will dip some time in the next few months, it then makes sense to buy a few dollars when they are cheap. For the record, I reckon the dollar will go to .40..... in a couple of years. However, nothing goes in a straight line.

If we see gold dip at some point, it is likely that most currencies will weaken along with it. If you want to take advantage of this dip, you might need to be holding some US dollars or Yen.

Yep, and you should always keep something in reserve. Sun Tzu.

Exactly! This will be the time to buy silver.....when it is weak. Buy with a currency which is the beneficiary of deleveraging.

Today topped up on silver with the Canadian dollars I had at goldmoney [bought CADs when they were cheaper a month back]. Due to both silver and CAD reflecting dollar weakness, basically I could buy as many silver ounces with my Canadian funds as I could a month ago. I think it is definitely worthwhile to hold a variety of currencies if using goldmoney. By buying a commodity currency you can hedge if you are hoping for a drop in the bullion price. If it does not drop and continues up, a commodity currency will mostly match it. Unfortunately, there is only one commodity currency available at goldmoney. Also funded goldmoney further with US dollars today as they are currently cheap. Will buy metal with US dollars when/if the dollar next spikes on the next round of forced liquidation.

Weak dollar at the mo

Welcome to....

Near 940 now. Gold going strong due in part to a weak dollar at the moment. Also, I reckon there is a lot of money lining up to buy... given currency concerns. Add in the inflation hedge factor and I kind of doubt we will see much of a dip. Will be interesting to see if it can break above 950... I think it will likely range between 950 and 900 for the summer. Also, just about everything is up here. Gold Demand Surges 38% on Investment, Council Says http://www.bloomberg.com/apps/news?pid=new...id=a9KLEjc7x2ww

This makes sense if you think currencies will be destroyed and you believe prices are going to infinity and beyond. I do not believe they will be destroyed but will rather be debased to half of their former worth. Buying willy nilly will no doubt leave you in good stead at the end of the day. However, buying circumspectly may make quite a difference. For example, the difference between being able to own a suburban house on the one hand, or being able to own productive property on the other. I know which I would prefer.

At what level are people looking to buy silver? I am thinking of starting to pile in at around $12 - 12.50 if we see that soon. Metals look darn strong here. I think this is in large part due to the QE factor. I will start buying on smaller dips rather than just waiting for the big one. Though will be keeping something in reserve for a big dip if it does eventuate.

There are plenty of bulls around here. Perhaps you are confusing bugs for bulls and then I would agree there are a few less bugs about. Bugs being the simplest of species have been possessed of one highly excited thought; precious metal must always go up. This must get quite exhausting and some are now do doubt in need of rest. The bull, a more sobre and complex creature [though also excitable at times], sees the price of gold caught up in the matrix of market forces. The bull thinks about using these forces strategically to his advantage and is quite happy to wait for certain conditions to eventuate. I also wonder if bugs view gold as more than a mere means and as an end in itself......

Looks like both are shrugging to me.

Cheers. I agree and was using the same language a while back. All Bernanke can do is buy some time.