wrongmove

Why not just sink a percentage of your savings into PMs? (I don't think PM stands for Peace of Mind at the moment). If an insurance policy actually costs your entire net worth, it is not a very good one........ What's left to insure?

Is that on top of the 10% spread? That's an instant crash in value the second you purchase! I guess the motivation for holding physical is more as an extreme insurance policy than as a way to make money.

So that would indicate a clear divergence. I'm guessing that usually they (dealers) would buy at around spot (for coins, maybe a bit under for bars) and sell at around spot+10%? Cheers SN. Very interesting.

It will be interesting to see how this physical/paper divergence pans out. I can thing of a few boring, practical reasons why physical would be hard to get hold of now, but only time will tell. e.g. these dealers must have paid a lot more for these coins than they can now sell them for. If they think this is just a dip, they would logically be buying themselves now, and holding tight to what they have. Or just maintaining very low stocks in a falling market. Can coin dealers hedge in any way to avoid the above? I cannot see an obvious mechanism for this, but one may exist.

If you do sell to a dealer at the moment, are they also paying over the spot price, or are they just charging extra? i.e. has the physical price diverged, or have the spreads just increased?

edit - wrong thread!

The most common explanation I have seen for the recent upturn in stocks is that traders are in a "flight for safety". The first step may be selling developing country stocks and exotic investments (gold is classed as exotic by many) and buying US stock (among other thiongs). I guess the next move would be to liquidate those, if global slowdown pans out.

I doubt it, but I don't know. My post was just to summarise how I see trading behaviour now. I am not qualified or experienced enough to get into the prediction game. Just trying to sound a small note of caution amongst the clamour of "gold can only go up".

Well, gold surged over the last few years on correct expectations that inflation (CPI/RPI) would rise. Gold now seems to be falling back because the expectations going forward from here have changed. For example, oil. It has driven up inflation, but now it has dropped (~20%!). For oil to keep driving up (YoY) inflation, it is not enough that it just stays high. It has to continue rising. But it has dropped. Another few months of this, and oil will be dragging inflation down. With a flurry of bad numbers from Asia and Europe (now technically in recession), the market does not see it flying up from here to well beyond $140, which would be required to continue to drive inflation. And with things like property tanking in most countries at the moment, debt driven money supply is not seen as likely from here. The fact that these expectations are driving shares up (presumably reduced fear of rate rises) will be short lived, as deflation is hardly likely to be good for shares, either. Didn't gold tank last time, just as boom turned to recession? The very same month, I believe, in the USA. And with demand seemingly dropping, all comodities have suffered badly (I know gold is not a commodity to many here, but it sure seems to trade like one). Plus, hot money is being pulled out. The hedge funds (which seem a far, far more likely explanation to me than the "PPT") are pulling out, or even shorting. They just follow trends. They have no political agenda. They will happily chase prices up or down, as long as they are the correct side of the trade, and massed punters are the wrong side. So it seems to me that if you think the market is wrong, and we are actually on the verge of a renewed credit boom, then pile in. But why not wait for a more obvious bottom first? Gold has shed 20%, so it needs to gain 25%, just to get to where it started. And it was cheap at the peak, apparently, was it not? I had always thought that the very first rule of TA was don't try to catch a falling knife. If you miss the bottom by 10%, so what?

Thanks. And I respect your willingness to do that. Especially when the "chips are down" somewhat.

For example, here is another possible interpretation, real basic stuff Double Top/Bottom "When price peaks after a rise, and the decline that follows leads to another rise in prices to form a second peak at or about the level of the first peak, a double peak is said to have formed. A neckline can be drawn across the base of the two peaks. A neckline is simply a trendline and penetration through a neckline after a decline from the second peak is a good indication that the price of the tradable will continue to fall. Traders often allow for a 5% penetration through a neckline to avoid whipsaws. Volume is generally greater in generating the first top than in making the second. ...... Waiting for confirmation is important for trading double tops. Twin peak formations usually show a decline of between 10% and 20% between the peaks. Volume is usually higher on the left peak than on the right peak. The confirmation point is the base of the peaks. A breakout through the baseline is more convincing if accompanied by higher volume and predicts a continuation of the trend in that direction....." That chart seems to have all the warning signs. But clearly your experience tells you to see past these.

I am listening DrBubb, but it seems to me that there are always many possible interpretations of any particular chart. Some will turn out with hindsight to be correct, others won't. You always give a clear description of your reasoning, but would be the first to admit that you sometimes call it wrong. All I am trying to ask is how I should decide between all these possible interpretations. Should I just look at the chart and wait for a "eureka" moment, or should I work through them, assessing each interpretation on its merits?

I read your post. But how do I know that I should ignore the nasty looking one I posted in favour of the interpretation above? With all respect, it looked just as nasty at $850, yet the set up then was presumably good, else you wouldn't have bough $0.5M.

I'm no chartist, but on a pure TA level, is this chart screaming "buy"??

Sweet. In a few years I should be in a similar situation, but at the bottom right hand corner of the penisula.

Certainly not me! One point though. Markets look to the future, while indices measure the past. It's all about expectations, not "here and now" and certainly not "several months old data".

If you are never likely to need the 150k, then you also don't need it to make you a profit. So have some fun! If big, risky bets are your type of fun, then why not? Me - I'd rather see a bit more of the world, or maybe buy an exotic getaway, or a seaworthy boat, but each to their own.

Of course! Except that I agree with you! Another thread perhaps?

Yes - this non-expert would like to thank the more expert posters. I feel quite educated now! These sort of discussions also reveals to me that there is a much wider range of views here than is always apparent in the posts. It sometimes seems that most here are "all in" and cheering for war and disaster so they can buy a whole supermarket with one gold coin . But this is clearly not the case at all. As for trying to accurately model the global economy - that isn't happening anytime soon, IMHO. That is what is so fascinating to me - I deal with complex, but largely deterministic systems in my job, but the global economy is so complex that it just looks chaotic when you try to model it accurately. i.e a random number generator is likely to be as accurate as a very detailed model. So one has to try to work out which bits are important, which bits can be (relatively) safely ignored, and you can't avoid falling back on instinct and, to some extent, guesswork, at which some are much better than others. This discussion has certainly caused me to somewhat lower my expectations of a deflation, or at least of a deflation that is not preceeded by a inflation. It is also clear how having a chunk in gold (say 5-20%, depending on circumstance, mainly how liquid you are) may protect you from the worst without ruining you if things turn out less bad than expected. Maybe I should be buying this dip....... Back properly on topic - I see gold is looking a little perkier this morning............ (Not that that is really good news, in the overall picture)

That's not quite what I meant. I was implying credit demand reducing (as is clearly happening in UK mortgage market, for example). i.e. manA decides to contnue renting. Rather a lot of going on at the moment. "BankA writes off MBS" What about maturing loans that were taken out some time ago - i.e if their value approaches that of new loans issued? This is what happened in the last recession, early 90s - debt stopped growing, but did not shrink, and then took off again. Gold did squat. How would it protect me this time?

I had changed a few settings on the graph, that may have done it. I was wondering if they had upset the good doctor or something!

Not at all to me! And quite convincing. Rereading the article I posted, it is interesting, but definitely seems to be written with an agenda. Clearly though, deflation is not an impossibility. I should repeat, I am not a deflation fundamentalist, i am just trying to work outs its probability, and hence the correct hedging strategy. M3 increases twice in your excellent example - when someone takes out a mortgage, and then when the bank swaps this mortgage for cash (and the CB sells on the debt). M3 never drops in the example. I assume that drops occur when debt is repaid, which does not occur in your example (old loans that matured during the period covered, for example). So for deflation of M3, presumably we need i) "manA no longer wants mortgage" and ii) "CBs no longer willing to accept MBS". Are these the things we should be looking for? I think i) is happening, but ii) does not look likely. Interesting.

Clarification - the 8% contraction is in bank credit, M2 is down slightly, but nowhere near 8%. So not so staggering as I first thought.

Yes - how did you do that?

As I said, I can't really comment on that theory, but one possible explanation is things like SLS. The banks are currently able to borrow against MBS, which won't last forever. However, their net lending is reported to have gone negative last month. They seem to be using this money to shore up the balance book in the face of the write-offs/write-downs, rather than lending it out.