mSparks

While I was there in 05, the medium term strategy we came up with was short builders, banks and interest rates, long copper, he undoubtably made even more than I did, because he was also managing other peoples money and had a BBerg terminal. I think it would make more sense for GM to buy as little gold as they can get away with and take a little more risk than the holders of GM accounts would wish (aka moral hazard) especially when the Jersey version of the FSA really don't care whether what they stick in their annual report bares any semblance of truth (which, imho is one of the reasons they are so reluctant to give it out). Once its held "as gold" they can trade the noise as much as they want, just like any other money changer, slightly more risky doing that with highly liquid funds, there is nothing, afaict, stopping the likes of GM or BV offering out of spot price, I'd be more worried if their bid/offer gap was expanding. My actual guess is they are actually an arm of Baird & Co. Limited, so basically all they are doing is selling the gold they refine themselves, just like the bankers of old. If they are short they can always buy and refine off j6P for well below spot via junk cos like "Cash4Gold" or "GoldBuyerMan"

does GM forward buy? How can we be sure given how lax Jersey financial reporting laws are?

If I thought the gold price was rational right now, I would absolutely agree with you. But right now the gold price appears to be skewed towards raping the buyers (aka holders of US treasuries), which is just another one of those "whos uncertainties" to add to the list. A Harvard prof explained it beautifully to me. Consider the graph you posted: Someone who has held onto gold since the start of the graph, may well feel quite happy with themselves. However the person that bought at the start of the graph @ 610, sold at 777, bought again @660 and sold @777 is laughing all the way to the bank. this is where "short termism" comes from. Yet another one of those "Don't do it because you'll make far more money than we want you to have" But there are much better assets to play this game with than gold. (Also, do not forget, shares pay dividends, a share paying 5% grows your assets by 5% per year even if the price remains the same. One of my key examples of this was RBS, if you had bought RBS shares 11 years ago, just before RBS blew up you would have been getting 50% per year back on your original investment. And my favourite, you can buy shares on margin

The "hyper deflation" you talk of is absolutely real, it doesn't even need a "for the sake of argument" Its called depreciation, and it happens as much because of technological advancements as from wear and tear (neither of which affect gold much). It seems very easy here to go off topic, but I really cannot see how these markets are examples of eroding value. If anything my GBPs EURs and USDs are more valuable than they were two years ago.

examples?

"that the capital is simply not there to cover liabilities" That's not resolved by "recapitalizing on gold" (if the gold was there, there would be capital to cover liabilities) That's resolved by sending in the bailiffs. Big Bailiffs with tanks and bombs if necessary, higher taxes either way.

Insurance is the process of removing uncertainty, you may not be able to remove the risk, but you can remove the uncertainty. -> Given the dominance of uncertainty, investors will not be sure how to value assets... and currencies for that matter... this is the prime reason capital will continue to flow, in the aggregate, into gold and out of other currencies and assets. I 'almost' agree with. But I would put it as: Given the dominance of uncertainty, investors will not be sure how to value assets ... and currencies for that matter... this is the prime reason capital will continue to flow into goods and products that remove that uncertainty. maybe, maybe not. That is entirely irrelevant when compared to the difference between peoples expectations of their behaviour. Its expectations that define what people plan for. People were not planning for helicopter Ben in the Greenspan era, inflation was all but forgotten by the masses and deemed under control by TPTB. It was this caricature that kicked off the hyperinflation debate. Which, among many other things triggered a seismic shift into gold buying. The US crash started in 2005. So there is two very good reasons to look at it from these dates. What could possibly be affecting the price of gold that started and continues from 2000 that can compare to these two issues?

In that case, there are many, many better forms of insurance than holding gold receipts, why will the money prefer gold and not these?

absolutely not. Ben Bernake was the one spun as the money printer (helicopter ben) Greenspan and Greenspeak was well understood and largely approved of by everyone outside of the tin hat brigade. I meant with regards to the corrections, e.g. the kind of alterations that need to be made to a graph for a long term trend analysis.

Well, if you start a trend analysis from 2000, a log chart is a really bad idea, log charts are only really useful when comparing different assets over a fairly short time period. If you use a log chart over a long period the kind of corrections you need to make become insane, and you will always adopt a "bubble" mentality since that log chart will hide what has happened recently and place to much emphasis on what happened early on. If you can give me a reason why it should start from 2000 (e.g. What Ben Bernake was up to in 2000 ) I can throw some of the corrections that need to be made your way.

But its much more than that. Whos uncertainty? Your governments? The IMF? The third world? China? TPTB? trade? savings and loans? reserve requirements? thermonuclear war? border hostilities? The dollar? All currencies? The list is endless, all of which play significant roles in its movement, but all of which are so inter-related, that its [currently] impossible to see what the effect of one will have on the other. e.g. say people decide to save a higher percentage of their income. That should increase the price of gold. But if that saving results in lower national income, the actual amount saved could decrease, reducing the price of gold. Exactly the same applies to oil, sometimes there are massive forces, which drive it one way or the other, and you can get some sort of hold they are about to happen (e.g. last November), but even these are usually buried in gigs and gigs of misinformation.

My problem with gold (and oil) is the component parts of its fundamentals are so very very complicated, its not like say, Northumbrian water shares, where you can spot insider trading a couple of months in advance of a taker over bid, or NRK/LEH shares, where you can pull up their balance sheet and get a good idea of the impact of the credit crunch on their bottom line. Its all flaky ifs, maybes and 1st/2nd/3rd order derivatives of the entire global economy.

If he'd selected october 08 it would look even further away, He's actually being quite generous, a big blow out is always (in my experience) preceded by a high level of chaotic price movement, I think he's probably being a bit too generous even continuing the trend, Its probably going to end up something like oil, drop some high double digit percentage through its lower support, rebound back to it (oil support, via Russia, was and still is $70 last time I checked) and sit there for a couple of years.

I am.

Down and Down she goes Where she stops nobody knows.

How long have you lived in the IMF?

Which way round does the clock tick again? Spooky.

And you believe UK govt figures? Good stuff, slight memory leak issue at the moment with some of the more advanced stuff which is my job for today, but most of the critical bugs are now fixed, hopefully fully delivered on the pharma requirements now, so its back to the grindstone on things I had planned for the start of the year.

When western governments hold such a large portion of their forex reserves as gold (both in the ground, and in the vaults), I suspect you may struggle to convince them to talk its price down.....

Have you seen China/Russia/India/Pakistan state TV recently? They're like full colour HD re-runs of 1938. 1938 Rome: http://www.youtube.com/watch?v=4hiBLceU12I 2009 China:

A serious case of "really should've read the small print on those mortgage agreements" It doesn't even have to be housing, every overdraft/loan agreement ever to cross my desk has had a "demand full and final settlement within x days" clause in it. housing speculators bend over and prepare to take your medicine. More worrying is this suggests RBS is getting margin calls its not in a position to meet.

And fits nicely with a road to economic recovery starting halfway through this year. although The bottom is likely to be closer to 80k than 130k

EDIT:nothing to see here, move along.