romans holiday

Why don't you buy some US dollars at goldmoney the next time we see dollar weakness/pound strength? Then you will be in a much better position to buy gold on weakness.

Steve, have you been reading anything I wrote this last year? Past conventional macro-theory is limited in explaining the present novel circumstances. The inflation/deflation debate is redundant. I choose to focus on the underlying value of all assets [cash included] rather than prices which will only serve to mask what is really happening. If I had to focus only on prices, I guess I would be a biflationist. Yet, theory always seeks to unify disparate appearances. Accordingly, I sketched out a theory of hyper-deflation: http://www.greenenergyinvestors.com/index....t=0&start=0 When I say I am a staunch deflationist, I see deflation and wealth destruction as being the big story... currency depreciation is just a sub-text.

You have a goldmoney account right? Why not use a few currencies available there [bit expensive to trade between fiat there... but good for holding fiat and going into metals at certain times]? Personally, I want to always have some dry powder in US dollars. Maybe will even buy stirling if I get the chance and if it is cheap enough at the time. I have also been buying NZ dollars, a commodity currency [i guess the Aussie and Canadian are also OK.. I think the canadian dollar is on goldmoney]. The key for me is to buy into weakness and sell strength. For example, the kiwi had slumped to .50 against the US dollar but recently came back to .57 [13% swing]. imo opinion it is fine to do this with a portion of your gold also. There is no risk involved if you take a position in a currency when it is weak... sit on it [no need to worry about timing]... then once it strengthens swap for a currency you have more long term confidence in [hmmm... now which ones could they be? ] I do not want to swap fiat for fiat but be in a few fiat currencies [only buying them when they are weak] so as to be hedged and also to be able to swap for gold/silver when times suit. Seems to me the only constant is volatility these days, why not use it?

Yep, imo we are in a period of wealth destruction now. Wealth is doubly vanishing in asset deflation and the depreciation of currencies. How is that for nonsense! Capital will flee from assets and currencies eventually going into the most powerful symbols of money, that of gold and silver in the "big squeeze". Before that I expect massive volatility - while the dollar remains strong - which is perhaps a good reason to be in some other currencies as well as the metals for now. Diversity of currencies is also a good hedge given the fallibility of all opinions.

imo, QE put a bit of a floor under pog for the time being. I think the old seasonal patterns have gone out the window and that we should see a new seasonal pattern unfold as investors go from inflationary expectations to deflationary ones and back again. I think short term we will see pog go down below 900 but perhaps not too far. This may coincide with a continued rally in stocks. Keep some powder dry. As a staunch deflationist, I think QE will have no effect. The only effect it is having now is the news has caused an inflationary scare. This move in the markets is motivated by ideology [investors simplistically equating inflated money supply with inflation proper] and nothing real. Notice that investors are not really that convinced about inflation [the big picture is still the credit crisis]... just a little nervous. When investors see QE having no effect they will go back to selling risk and buying safe havens. As a safe haven currency, gold will again pick up here and could even spike again. The big move in pog will probably come in a year or so when the dollar finally devalues. Until then expect continued strength in the US dollar and gold [as they compete for safe haven status] and massive volatility. I plan to buy and swap only currencies... buying weakness and selling strength. Base currency being gold of course.

I think things are being blown out of proportion here. A depression is not Armageddon... it's just a....depression. We will survive and no doubt keep posting. Talk of dams collapsing was just an expression of hyerbole.

They will be outflanked by a collapsing economy and a crashing stock market. Control? It is has got beyond that... think fingers/dams.

pog looking indecisive here... could break either way. I am staying half dollars and half gold with my "fishing line" account at the moment [i use the Jim Sinclair term as some here seem averse to the term "trading" ] A win win situation; if gold spikes can sell and if it tracks down again can buy. I hope others here are keeping some serious powder dry.

Geitner misreported on SDR. Once the comments were clarified, panic over. Market is as nervous as a stable of fillies.

most inflationists are always banging on about ignoring prices and looking solely at money supply.... until it suits them to do otherwise. fwiw, shop inflation just reflects a depreciated currency.

That is kind of my point....that it is early days. But because of this timing is important. Most here are agreed on the fundamentals for gold so it goes without saying that gold will perform. Of more importance is the question of when it will perform. If it fails to perform in these early days all the better for us as we accumulate it. Most agree on this also. Where people do not agree is on the imminent hyperinflationary destruction story.... which I would add panics people into buying as much as they can now, leaving no powder for later.

A contrarian's view might notice that commodities are stirring now. Investors are starting to move into them. Considering pog was driven up in large part by fear, it might be a little vulnerable to a temporary return of investor confidence. So where might pog go? Investors might look at the gold/oil ratio which historically averages around 14:1 I believe. With oil at around 55 that would put pog at 770.

Did you even consider the post?? Why would I put all my money into gold now if most probably I could buy more of it at a later date. Also, would it not be prudent to keep some money in another currency as a hedge? You know, no certainties in life and all that. Edit: on second thoughts, perhaps you were being sincere. If so, thanks.

I do not see it as an either/or situation. I am invested in metals. I also have a "trading" account. I interrogate the word because I wonder if it is really trading. Not wanting to be in one single currency [gold] it makes sense to be in a few currencies. One of those other currencies is US dollars. If pog tanks, I have another currency in order to buy it. Once gold again peaks, it makes perfect sense to diversify some of it into another currency. The practicality is that fully buying into the pending hyperinflationary scenario may limit a lucrative option. As for instincts, I agree they are important. They should always trump ideology anyway.

No, they can't. I agree, buy gold. But consider you are not buying it as an inflation hedge, but as a currency to preserve your capital.

This is exactly my position. I am also a long term investor. My point is that in so far as we try to justify our belief [that gold will ultimately perform for fundamental reasons] with theory, the standard [hyper] inflationary story, which focuses solely on money supply, is frankly hopeless. It has not predicted pog nor been able to explain it. Any theory or justification for holding gold should be more comprehensive than just being solely fixated on money supply. Some have a gut feeling and are sceptical of all reasons which is just fine... but most of us do employ theory to bolster our investment decisions and if that theory is inadequate it could potentially lead to disillusionment. A theory which can explain massive volatility and predict ultimate performance is required for many to buy and hold gold for the long run.

My view has been the same for a year or so.... that the gold market will be incredibly volatile within a range for quite some time until the dollar finally rolls over. The dollar could well strengthen before it finally rolls over. This may take a year or two. The crux of the matter is not the fundamentals but the timing.

It matters if you have false expectations. To psychologically weather the vagaries of pog in the future, it would be best to have realistic expectations and a theory which can account for reality... as reflected by investors in the market. A more pragmatic view would also help in predicting the behaviour of that market.

Yep, the way I see it is we are in a period of wealth destruction akin to the thirties. This is deflationary. What is really crazy is that the amount of printing might be just drops in a very leaky bucket. At best zero sum game. Looks likely that currencies are caught up in the deflation this time round as unbacked by anything real. They will depreciate. I see gold as the strongest currency and the strongest symbol of money. I would definitely want a decent proportion of my worth in it... and silver.. and perhaps a couple of other fiat currencies for that matter to hedge against my hedge. Diversity in currencies not diversity in assets. If you manage to preserve your capital, buy assets after they have deflated and the storm is over.

The converse is also true; money supply does not determine whether we have an increasing or decreasing pog. There are a lot of other factors involved... which are deflationary. Don't get me wrong, I think pog will ultimately perform... just not so quickly, easily and fantastically. Adding to the Dire Straits collection:

Errr... how about massive credit/asset/debt deflation? Sure, you can always define/restrict the word deflation to mean what you want it to... but that would just be ...well, ideological. Mind you, ideologies are useful for absolute certainties. Problem is [hyper] inflationary theory predicts pog to either rocket or track steadilly upwards. This has not happened and is not likely to. Much more likely is an extended period of volatility with perhaps higher peaks and who knows also lower dips. Another theory is needed with some explanatory power to "save the appearances". The history of cosmic theories can be called, without exaggeration, a history of collective obsessions and controlled schizophrenias, and the manner in which some discoveries have been made resemble the conduct of a sleepwalker, rather than the performance of an electronic brain. —Arthur Koestler, The Sleepwalkers A central theme of The Sleepwalkers is the changing relationship between faith and reason. Koestler explores how these seemingly contradictory threads existed harmoniously in many of the greatest intellectuals of the West. He illustrates that while the two are estranged today, in the past the most ground-breaking thinkers were often very spiritual. Koestler also casts doubt on the firm beliefs that today people hold as truth without even understanding them. For instance, he says, "I am sitting on a chair made of molecules, which consist of atom, which are formed by subatomic particles, but the distance between these particles (he refers to protons, neutrons and electrons) is so huge relative to their sizes that it would be better compared to the distance between stars. So basically I am sitting on a chair made of nothing" To this point is important to note that another recurrent theme of this book is the breaking of paradigms in order to create new ones. People - scientists included - hold onto cherished old beliefs with such love and attachment that they refuse to see the wrong in their ideas and the truth in the ideas that are to replace them. "The conclusion he puts forward at the end of the book is that modern science is trying too hard to be rational. Scientists have been at their best when they allowed themselves to behave as "sleepwalkers," instead of trying too earnestly to ratiocinate."[1] http://en.wikipedia.org/wiki/The_Sleepwalkers

It is all about deflation at the moment. Most inflationists are ideologically driven. In the real world and for all pragmatic purposes, deflation is in the driver's seat for now.

Why Hasn’t Gold Caught Fire? By: Rick Ackerman, Rick's Picks http://news.goldseek.com/RickAckerman/1237788797.php

How crucial? Crucial enough to change your mind on the hyper-inflationary hypothesis. http://en.wikipedia.org/wiki/Crucial_experiment

I am going to sit it out for a while [with trading fund]. Hope to be buying at around 800. In the coming months, renewed deflationary concerns could even drive pog lower.