wrongmove

So why is it dropping now? And what will reverse that trend? I can see physical demand from jewelers, for example, putting in a floor, but why should it then shoot up and recoup all the recent losses and then some? One logical explanation for the falls in gold (and falls in pretty well everything else) is a somewhat "disorderly deleveraging", i.e. a rush to cash from leveraged positions. What is wrong with this explanation, and, if "gold is different", why is behaving the same as everything else, in bad times as well as good?

I guess. Bearing in mind it only breached $800 a few hours ago, and started the day at over $810, it seems a bit of a tiny "victory". If $800 wasn't a big round number, I don't thing anyone would see the day's action as particularly positive.

Gold is down about $20 in the last 24 hrs. In what way is this positive?

You are a sucker for punishment posting that here! Most are down (edit: over the last couple of months), but if there's one thing that cheers you up when you are down, it is finding someone who is more down Here's the advice: this is a buying op, and if you gear, you deserve all you get.

This got me thinking. Then I came across this: Irrational emotions? Depends which analyst you ask I won't cut and paste it as it's a bit OT to this thread, but it raises a few interesting points IMHO. Might be worth a thread?

http://www.kitco.com/ "Kitco currently has numerous physical gold, silver, and platinum coin and bar items in stock, available for immediate delivery. Please call for more information."

I'm certainly not cross! By no justification, I meant that the growth over the next three months would be driven by physical demand, particularly the Indian wedding season. But this would not continue for a year. In fact demand from this source will actually likely fall back again after the 3 month period. And, this growth is not guarenteed - of course one would expect more gain from a risky investment. For me, due to transaction costs and the short period, the additional gain is not enough for the additional risk (all based on this "bullish" article).

I'll do my best enrieb. It can just come across as patronising if I spell everything out, and I do not intend to patronise.

"Kitco currently has numerous physical gold, silver, and platinum coin and bar items in stock, available for immediate delivery. Please call for more information."

No I am not retracting that statement. I would also say that Uk houses are not selling now. Of course some are, but I think most people would know what I meant. I expanded my statement for those that are very literal minded in a subsequent post. Gold was not selling in sufficent quantity to support the price. I have added a few links to back this up.

No. Annualising the growth has no justification. To "invest" in gold, I first need to free up capital. This often involves costs. Then I have to pay dealers spread and fees. Then I lose interest, and have to pay for storage. I also have to take currency risk - isn't the dollar going to hell, according to most here? Then I have to sell, incurring more costs. So for me, the risk premium is insufficient. But each to their own, of course.

Or are you saying that fundamental and speculative demand are the same thing???!!!! So UK house prices had good fundamentals at £200k, because there were speculators buying?

"We hold our one and three monthforecasts for gold at $850 and $900/oz respectively." Well, I'm a gold bull then! I can see $900 in 3 months. But I wouldn't call that very spectacular.

Here's another about the global demand Physical gold demand falls to lowest level in 5 years (May 2008) "Data compiled independently for the World Gold Council by GFMS Ltd. shows tonnage demand for gold at 701 tonnes in the first quarter, down 16% on the same period last year - the lowest quarterly figure in last five years. According to the report, Gold Demand Trends, this fall was caused primarily by the sharp rise and unusually high volatility in the gold price, which briefly touched record levels above $1,000/oz in mid-March. Jewellery demand declined 21% year-on-year to 445.4 tonnes, the lowest quarterly level since the early 1990s. Net retail investment demand dropped by 35% to 72.7 tonnes in Q1. However, demand for gold ETFs was up 100% on Q1 2007 at 73 tonnes for the quarter - representing $2.2 billion in dollar terms." Even now, jewelry is much bigger consumer than speculators.

Kitco is littered with such links. Here is one about India, for example Indian Gold Demand "It’s hard to over-egg the importance of Indian jewelry demand in the physical gold market. Between 2000 and 2007, gold jewelry sold in India accounted for one ounce-in-nine sold worldwide. One ounce in every five wound up as an Indian import (its domestic mines produce less than six tons per year), ready to be hung off young brides as 24-carat dowries or worked into bracelets and necklaces for the international market. The single-largest gold bullion consumer, India’s own final demand outweighed the next largest market — China — by almost 57%. But Chinese gold buyers have now caught up in 2008. Or so says the latest data from the World Gold Council. The switch isn’t only due to surging Chinese demand (up by 15% year-on-year between Jan. and April). It comes because Indian gold sales have collapsed — down 65% in the first six months of 2008 from ‘07 according to the Bombay Bullion Association — as consumers balk at record high prices:........................" They are buying again now at around $800. These are numbers that I can put into a spreadsheet and attempt some Fundamental Analysis. FA is quantitative. Unbacked claims of CB buying (although usually the excuse here is that CBs are selling too much, not buyng) can not be used in FA. The rise from $800 to $1000+ was down to ETFs and hedge funds going long, then it crashed as hedge funds over reached, and ETF demand shrunk. It stopped falling at $800 as what I call fundamental demand kicked in again.

No such as what? Speculative demand? Physical demand? Fundamental demand?

Is this a serious discussion board? Let me be patronisingly more clear: Much less physical gold was sold for jewelry at $1000 than was selling at $800. I can provide links if necessary, but this is not obscure or secret knowledge. Just check out Kitco's news links.

Is it possible to post a link to some reliable figures for this?

More speculation. Not fundamentals in the usual use of the word. I am not denying that speculators may get lucky, just trying to seperate speculative and fundamental demand.

What is your estimate for the weight of physical that speculators take delivery of, compared to say the Indian jewelry market? I think you seriously, seriously over-estimate the prevelance of gold buggery. There are jewelry shops everywhere, yet posters often have to ask "where can I buy physical?" it is so obscure.

I would be extremely disappointed if that was not the case. Of course some was, but only to gold bugs and very desperate jewelers. There is article after article on Kitco, for example, describing what happened to Indian and physical demand in general in the Spring. It crashed. Totally false analogy. Speculators are not buying physical gold (except for a very few). All wine drinkers are buying physical. The demand for physical from gold bugs is tiny and seems to be largely satisfied by frikkin' eBay, FFS. eBay shifts very little physical indeed, on the scale of things.

The "jewelry brigade" are the only people who generate demand for physical. It was the speculative paper game that took gold up to above $1000 and back down again. Physical wasn't selling at those prices. The rest is speculation to me. No-one knows what the future holds, though a few vested interests like to pretend they do ($1200 by Christmas anyone?). Like all speculation, it may be right, or it may be wrong, but to describe it as "fundamentals" is to devalue that word and its meaning in the investment wprld. (All very much IMHO, of course)

I thought I had! The demand for jewelry.

All sounds very plausible to me. The only gold fundamental I understand is jewelry demand (both as adornment and a long term wealth store). But this really dried up over $900. At around $800, it is back, and their will be some "pent-up" demand to satisify which may drive the price up to $900 dollars through the "gold season". They even put the bug fall down to longs hitting their stops, not the bogeyman. But from a punters point of view, this will only take the price back to what it was a month ago, and somewhat less than it has been. It seems that for prices much beyond $900, large speculative demand is needed, and the fundamentals are shot. So while it may go much higher than this, it will be a bubble like any other. Money to be made with good timing, but same as everything else.

From the link posted by Steve: "Either This Is the Greatest Silver- and Gold-Buying Opportunity of All Time, or the End of a Bull Market By Franklin Sanders Goldprice.org Friday, August 15, 2008 http://goldprice.org/silver-and-gold-prices/ Twenty-eight years of brokering silver and gold have not prepared me for what I met this morning. One of my wholesalers said he was not selling anything, only buying, until further notice. Another refused to give any prices until he adjusted his spreads. Another was spreading one-ounce gold coins, normally at $7-$8, at $25. Another said he was making no sales for immediate delivery or deferred payment, only sales for 30 days' delivery paid at once. ......" The first bit seems to backup my post earlier about why physical seems to have diverged: So another interpretation is that the dealers are simply not letting you buy this dip (if that is what it is). Heads they win, tails you lose. But they are dealers, not charities, of course. The next few days or weeks should reveal what is really going on.