50sQuiff

Indeed. I showed some oft-cited figures that suggest even the most sophisticated ancient societies mined relatively little gold, and that even the early industrial era gold rushes yielded very little metal. Answer came there none.

Too right. You can't go wrong with gold and silver.

Every bullish call from the investment banks always seems to precede a spike higher than a major sell-off. I wonder if this will be any different. This, on the other hand, is very encouraging.

Better hurry up they'll miss the boat!

Watch what they do, not what they say. ECB balance sheet:

Those are some interesting examples and I bet there's some good history to be read about the Australian Gold Rush. I've only read bits about Roman and Egyptian mining as well as something of the Klondike Gold Rush. In each case the amounts involved seem to be relatively small by modern standards. The figure generally stated for the entire amount of gold mined in Spain by the Romans was 1400 tons, even using their somewhat sophisticated techniques in the most prolific mining region of its day. I've read Egyptian production stated at 1 ton per year for 3000 years. Supposedly in the Klondike gold rush 20,000 miners managed to produce 600 tons, again in that era's most prolific region. Although it makes sense that there is gold sat there off the books, I've still not seen any numbers about ancient production that suggest major tonnage, at least to the extent that DrBubb is suggesting. Something like that I've no doubt the Papal hoard could garner a few bob at Cash4Gold and that the assorted Rothschilds have quite a bit of the shiny stuff. But it seems pretty evident that the major overhang of financial assets in the world involves virtual, rather than physical wealth. On a more serious note, maybe the elites are trying to offload "Ram Man" figurines? http://www.bbc.co.uk/news/business-16207626

I'm still waiting to see some evidence presented for the historical abundance of gold and its ease of discovery and production.

It's worth noting at this juncture that premiums on Sovs and Krugs have risen dramatically and stayed high. So using ballpark figures, this 11% smash in USD gold has only been about 5-6% for holders of coins who measure their stash in GBP.

Fair play. As an (adopted) North Londoner I'm not familiar with this "leafy South" you speak of. Is it street slang or gang code of some kind? Now, if you'll excuse me, I have to get back to writing my screenplay...

I said NICE zone2 place. Last time I went to Canada Water was to go to the Decathlon outdoor store in the retail park over there. I had a good walk around to check out the state of the housing. What a grim, gray depressing non-place it was, replete with pokey little executive apartments that I forecast will be populated by DSS tenants in 10 years time. A true BTLers paradise and the exact type of London property that I think is vulnerable to a real fall. By citing Canada Water I think you've just illustrated the exact point I was trying to make. A nice 1-bed flat in Primose Hill will do just fine, but one of those shitbox serviced apartments in a horrible area isn't going to cut it in my view.

I think you're right, the fine old Regency buildings of London and other cities will still be here regardless of what happens. Even the idiot politicians couldn't destroy them all over the last 50 years. But the new build BTL flats over in the East of London might crumble and go to zero though. They look like they're crumbling now and they've barely been up 10 minutes. I bet they don't have 4m Parisian ceilings either

http://en.wikipedia.org/wiki/Haussmann's_renovation_of_Paris

You could be right I guess. But the mid 70s correction involved real interest rates (Fed Funds/3-month T-bill) going to 0, back when they had a real CPI.

Premiums on Krugerands at a "major dealer" are currently up 52% on the day.

Quite the smash today but gold is off 35% less in sterling terms last time I checked. Here's a few possible lines in the sand. Take your pick:

I've got no experience investing 200K, let alone buying a property, so I can't really comment on Testicle's circumstances. However I do rent a flat on a nice London street and probably fit into your friend's target demographic. I think your caution is very relevant. I bet the letting agent rip the landlord off every year on the contract renewal for a start. God knows what their cut was when we moved in. Nice old townhouses in nice areas need an incredible amount of maintenance too. The wiring is old so you get electrical problems, for one. The various flat owners collectively seem to continuously spend a fortune on renovating the interior and exterior of the building. I've had plumbers round on a number of occasions to fix boiler and washing machine issues. Wear and tear has required some form of interior renovation each year I've lived here. Communal areas are cleaned every weekend. The landlord even has to pay for the plants and boxes on our balcony that we replace every year. It must all add up! Funny how you never hear all this from the MSM property rampers. Combine this with some well-timed negotiations from myself in 2009 when things looked scary and I've no idea how the landlord would be making any money without ZIRP. Obviously the main benefit of a nice Zone 2 area is the chance of voids must be close to zero. With limited prospects for capital appreciation and a questionable real yield, I'm not sure I would accept the opportunity cost at this point. For Testicle's friend maybe prime London property makes a lot of sense long-term. But I would also note that £200k doesn't buy you prime London! So is he willing to mortgage up?

Kap, my gold is my house fund and on that basis I buy with a 5-year horizon. Do you think it's worth hedging with such a timescale in mind or would you prefer a disciplined accumulation approach (buying weakness)? I'm just interested in what your view of medium-term is and your perspective in general.

Property owned outright and property you've got a BTL mortgage on are different animals though. One will hold some value in the long term, the other could bankrupt you. You're making the assumption that everything will go smoothly with your three houses for the entire duration of the mortgage term. I think this is wishful thinking at best and to quote Chris Martenson, "the next 20 years will be nothing like the previous 20 years". Could the leverage involved see a problem with one property turn into a problem with your entire portfolio? And 'executive' apartments in city centres based on old economic paradigms may not hold their value in the way land and property values have been traditionally considered to do so.

Interesting things are happening. This is a shameless plug, but on goldbu.gs we're currently watching premiums spike in real-time at a major European coin dealer. This is very unusual. This decline in gold is not being completely passed on from the dealer in question. Either MF Global has damaged physical dealer hedging strategies and we will have higher spreads going forward, or there is pressure on physical.

Or, prolonged economic depression could see the flat go unoccupied for a period or the whole building could be devalued through social decay or lack of maintenence. If the BTL investor cannot keep the plates in the air for the full 25 year term, the forced sale and negative equity will bankrupt them. Just an alternave scenario

I think intraday we did just over 20% in this last correction so personally I don't think we're going to breach those lows again. I would not be surprised to see gold fall sharply down through this pennant formation to suck in more shorts, who will subsequently get smashed when more printing is announced.

And what of those gold 'bulls', who consider themselves that much more cool, cerebral and superior to mere paranoid gold simpletons? Especially those who deem it necessary to make pronouncements to that effect on internet forums? I'd say unbridled egotism and perhaps even narcissism is at play, but I'd just be speculating.

The divergence is inevitable. But many pundits (some of DrBubb's least favourite, I imagine) have been predicting this as imminent for years now. I'm not counting on it happening any time soon. The players involved have a remarkable capacity to keep all the paper plates spinning. You do sense from the action in gold since September that they're losing their firepower somewhat, though. DrBubb, it's occurred to me that one reason I struggle with your hedging premise is that you're very dollar-centric. The USD is on the other side of the deleveraging see-saw and you therefore have an obvious hedging strategy. But if sterling is your numeraire you're stuck in a very awkward position. Same goes for Europeans and Euros. Corrections in sterling/euro gold are not as deep, plus your currency and banking system could be toast in any given month, so you feel better holding the bullion. What's more, if you're a physical buyer the corrections tend to be shallower still. The cheapest dealers tend to price using the AM fix and it's therefore hard to buy at an intra-day low. Although in the recent correction there was a fantastic opportunity to buy at the previous day's AM fix after gold had rocketed higher, which I used to fill my boots.

Isn't $1000 scaremongering a bit? Anyway, I think $1500 is a pretty reasonable call. This would translate to roughly £1000, which is currently the 200DMA or thereabouts. However, I do think that sterling will be be next to come under pressure so as a UK investor with savings and earnings in sterling I am quite sanguine about a correction to $1500. If for some reason the central banks let us slip into another massive deleveraging cycle and we get a deflation scare, the UK and sterling is toast.

It's an absolute outrage if the BoE let any physical leave its vaults through this action.