GOLD

[electroweak]

Question for those in gold at present. Have any of you borrowed paper from a bank to buy bullion? Serious question.

Ok, I'll bite. I have been overdrawn to the tune of 2k, because it was ~free for a year and I bought gold with it.

I am now out of the overdraft, but don't regret it at all. I'd rather keep cash in the mattress than leave it in a bank. Honestly.

EDIT: i could have paid it off immediately if the bank had asked, but I figured why not.. screw them.

[Pixel8r]

Question for those in gold at present. Have any of you borrowed paper from a bank to buy bullion? Serious question.

I remortgaged a property to free up equity for investment in metals and miners, it made complete sense as I could get 2% over base at the time. I have now downscaled to a smaller property and am again mortgage free.

 

 

[G0ldfinger]

There have been instances when I could have paid larger bills by selling gold, and I did not as easy credit was offered. It has served me very well to hold on to the gold. I am net short GBP, USD, and EUR. Together it is an amount of no concern to me, all fixed IR, and my income is as safe as it can get. I have the intention to continue paying the debt back by depreciating currency. Gold would have to fall a very long way to make these 'shorts' turn sour for me, and even then, the debt would be no issue in itself. I have never actively taken on debt with the intention to buy gold, and I also won't in the future. This also includes shorting currencies (or other assets) on margin, which I have never done and never will. Hence, I will get no margin calls on my currency 'shorts'. I just couldn't part with the shiny yellow stuff in these other instances, and good for me, I didn't.

 

EDIT: I just get some wicked kick out of being a little short these three currency turds. And, even better, with no margin.

[Perishabull]

Interesting, I was just curious as some seem so uber bullish on it. I have silver in a GM account but as 33% of my liquid wealth it's more of a hedge against a SHTF scenario rather than an all on red situation. There are exceptionally strong arguments for the PM case and I really want Jim Sinclair to be right in his call of $1650, he seems to be some kind of genius. What I struggle with is the argument that gold backed money is a limiting factor to growth in the economy...how exactly would a gold certificate ratio work?

[G0ldfinger]

... What I struggle with is the argument that gold backed money is a limiting factor to growth in the economy...how exactly would a gold certificate ratio work?

He predicts a link to a money supply measure like M3 or MZM (he (falsely?) calls it a liquidity measure), i.e. the gold price and e.g. MZM would simply move in proportion. E.g. US doubling MZM, gold getting double as expensive. This would not restrict the economy, just make holders of gold "wealthier" in paper terms.

[G0ldfinger]

In case any impressionable soul reads this, here is my advice:

 

(1) Don't take on debt to buy gold.

 

(2) If you have not much cash, but want exposure to PMs, buy silver/good PM miners/out of the money calls on the gold or silver price. In this case you have more risk, but if your bet is right, also much more potential.

 

(3) Don't do anything on margin.

 

(4) If you have 10,000 bucks, but you need a new kitchen, and the store offers you a 2% loan, then you should carefully consider your options. If you have a very safe and stable income (some tenure/public service position etc.), it could make sense to take the plunge and buy some bullion and finance (part of) the kitchen.

[harvipark]

Question for those in gold at present. Have any of you borrowed paper from a bank to buy bullion? Serious question.

 

I took out a loan for 20k in 2007 with the original intention of buying a new car. I didnt need a car at the time but i took it out as the rate was rock bottom and i knew i would eventually have to replace the car, probably within a couple of years. So i got the loan at a low rate and bought into Blackrock G&G and JPM Nat resources, with the intention of selling up when i needed the money.

 

I eventually got a new car but i took out a further loan to fund that. I have around 7k left to pay off on the original loan, so i am looking for a nice spike to pay off the remaining balance.

 

Was it worth it?

 

Yes. The Blackrock G&G tranche is up about 46%, and the JPM Nat Res is up 20%. My timing of the purchases wanst particularly good so i could have done better, but if we see a spike to 1650 then i will be quids in!

 

The bad news is that my credit report is totally shot as it shows that i have over 30k in car loans outstanding, so nobody will touch me with a bargepole if i need further loans....lol (in reality i can pay them both off if i needed to)

 

I was also stoozing credit cards, the proceeds of which went into gold/commodities. These have now been unwound apart from one card which will be paid off by the end of the month

 

Just my 2 penneth.....

[Perishabull]

Yes I should say I mentioned it since in theory if someone is ultra bullish on gold they may have considered such a thing. I certainly would stay well clear of loans etc as there are no foregone conclusions in life save, taxes, idiotic governments and death.

 

 

 

Right, so the price would be pegged to M3/MZM, any exchange of gold for Fiat would be based on a fixed ratio.

 

So that's what he means by gold going up and staying up.

 

At the moment then the conscious mind of the market, all collective participants, are coming to the gradual realisation that when fiat doesn't have a sufficiently constrained supply confidence in it's underlying value depletes. It depletes in an inverse correlation to a rising confidence in the value of the naturally constrained supply of gold, an asset that historically has functioned as money. Perhaps this helps explain the steady appreciation in price.

 

So it's a game of chicken in a sense then, those that control money have the option at any time of reinstating a real world link between the two, a link that is actually already there but only in quite an abstract way that takes time to filter through to mass consciousness and make it's mark in reality.

 

So if my thinking is right then the subconscious mind of the market understands:

 

1) At a fundamental level that one has no inherent true value as supply is only limited by thoughts in the minds of those who control money,

 

2) That something with a geologically constrained supply must be worth exponentially more than the potentially unlimited supply of fiat.

 

 

Meanwhile a reversion to the mean in terms of confidence is happening with both fiat and gold.

 

Fiat value = Confidence in limited supply of fiat/Confidence in limited supply of Gold

 

Gold value = Confidence in limited supply of Gold/Confidence in limited supply of fiat

 

 

Gold being fixed in supply against no fix for fiat results in a defacto David against Goliath, that could also explain why David is really being ignored at the moment, what threat can little David be to Goliath?

 

 

This argues then that fiat is inordinately overvalued and Gold inordinately undervalued, at the same time it argues that both have reverted wildly from their instrinsic fundamental mean value of 0 (illusion) and 1 (reality). Nixon being the ultimate nut in trying to kill off the reality of the situation in 1971.

 

Looking at it from the confidence angle, trust is slowly built over time whereas confidence is lost in quite the parabolic exponential curve. I now think I understand why Jim Sinclair sees it going parabolic, it's because the confidence in paper will be lost along the same parabola that all losses of confidence follow.

Apologies for the length but writing this has made thinks clearer for me.

 

The dangers then are that governments get in the way of the ultimate reversion to the mean by somehow trying to destroy what is happening via punitive taxation, making it illegal to trade or confiscation (the latter being highly unlikely I would have thought).

 

Punitive taxation and trading restrictions then are the unknowns for gold here then?

 

 

[romans holiday]

Looking at it from the confidence angle, trust is slowly built over time whereas confidence is lost in quite the parabolic exponential curve. I now think I understand why Jim Sinclair sees it going parabolic, it's because the confidence in paper will be lost along the same parabola that all losses of confidence follow.

Apologies for the length but writing this has made thinks clearer for me.

To reach Sinclairs target of 1650 [Jan next year], gold would have to go parabolic from here. He predicts such an early high price because he thinks hyper-inflation will play out.

 

But there are other ways this could all play out. Gold may just continue to strengthen relatively slowly against the dollar[and all currencies] at around 20-25% a year. The prime reason being instability in the international currency system. No hyper-inflation of currencies necessary here... just the re-discovery of gold as a currency.

[DoctorSolar]

To reach Sinclairs target of 1650 [Jan next year], gold would have to go parabolic from here. He predicts such an early high price because he thinks hyper-inflation will play out.

Jim set this target many many years ago. The fact that we are within touching distance of it so close to his date is credit to him.

[romans holiday]

Jim set this target many many years ago. The fact that we are within touching distance of it so close to his date is credit to him.

Actually, he set the date for that target only a couple of years back.... and I don't think we are quite within "touching distance" of it.

 

A lot have been calling for higher prices in gold. Sinclair has become so well-known in the gold community by putting a number and time frame to it:

 

http://www.goldprice.org/gold-news/2008/04...llars-gold.html

Jim Sinclair, noted gold expert, has really put his money where his mouth is on this topic. For years now Jim Sinclair has been calling for the gold price to reach at least $1650 during this gold bull market and has more recently commented that he thinks if anything his prediction is way too low.

Giving new meaning to the term commitment, Jim Sinclair has made a wager of $1,000,000 US dollars that the gold price will hit US$1650 before the 2nd week of January 2011.

This was no doubt based on his hyper-inflationary destruction of the dollar thesis. This is what now looks in doubt ... besides 1650 by january. Higher gold prices than the present are not much in doubt.

 

The reason gold is going higher is not because of hyper-inflation but currency instability. The Fed has been doing all it can to stoke up [hyper] inflation expectations with its programs of QE. Even if this expectation declines from here, I reckon continuing instability will be the main factor for higher gold prices.

[d2thdr]

What I struggle with is the argument that gold backed money is a limiting factor to growth in the economy...how exactly would a gold certificate ratio work?

 

Gold certificate ratio will not work.

 

 

The dangers then are that governments get in the way of the ultimate reversion to the mean by somehow trying to destroy what is happening via punitive taxation, making it illegal to trade or confiscation (the latter being highly unlikely I would have thought).

 

Punitive taxation and trading restrictions then are the unknowns for gold here then?

 

There would be freegold. The true unknown with maximum potential.

[Carlton]

Do it!

 

China should significantly boost gold in reserves –media

Reuters

 

BEIJING, Oct 27 – China should significantly boost the amount of gold <XAU=> held in state reserves, a newspaper run by China’s Ministry of Commerce said on Wednesday, citing a local researcher.

 

Meng Qingfa, a researcher with China Chamber of International Commerce, was quoted by the International Business Daily as saying that China should eventually boost its gold reserves to a level equal to that held by the United States.

 

U.S. reserves stood at 8,133 tonnes as of the end of June, significantly higher than China’s current level of 1,054 tonnes.

 

"Doubtlessly, if the yuan is set to become an international currency like the dollar or the euro, China has to get a huge gold reserve to support it, and a reserve of 1,054 tonnes is far from being enough," Meng said.

http://malaysia.news.yahoo.com/rtrs/201010...ld-21231dd.html

 

[DoctorSolar]

Actually, he set the date for that target only a couple of years back.... and I don't think we are quite within "touching distance" of it.

 

Can you tell me the year he set this date then?

 

What would you define as touching distance? 1600?

[romans holiday]

Can you tell me the year he set this date then?

 

What would you define as touching distance? 1600?

The date of the article is Wednesday, April 2, 2008... so that would make it early 2008 when he set his target date for the price right?

 

Yeah, if the price was around 1600 in January, that'd be fair enough. It's still possible but seems to me quite unlikely.

 

 

From the same article:

 

If Jim Sinclair is correct with his forecast that the gold price will reach $1650 by 2nd week of 2011, gold investors who buy gold today at $900 will be the ones who win, as they stand to make a profit in USD of at least 83% in the next 3 years.

[Mabon]

He predicts a link to a money supply measure like M3 or MZM (he (falsely?) calls it a liquidity measure), i.e. the gold price and e.g. MZM would simply move in proportion. E.g. US doubling MZM, gold getting double as expensive. This would not restrict the economy, just make holders of gold "wealthier" in paper terms.

 

In days of Yore, this is what the Gold Merchants who held Gold Deposits on behalf of the owners did.

 

The Gold Merchants noticed no-one actually came to claim their Gold, just happy that it was 'safe' in the custody of said Gold Merchants.

 

In time the Gold Merchants sniffed an opportunity.

 

"Why can't we issue certificates based upon the value of the Gold holdings in our business? After all it would make both us and the Gold Owners wealthier in paper terms".

 

They did.

 

And they single handedly invented The Fractional Reserve Gold Banking System....

 

What works on Paper, stays on Paper.

[G0ldfinger]

RH will like this. In a hyper-inflation the entire top of the inverted pyramid will try to get into this tiny & shiny pointed area down at the bottom. It will be very explosive. Pressure will be so high, that any manipulation attempts will be futile.

 

[G0ldfinger]

Bloomberg front page opinion:

Gold Will Outlive Dollar Once Slaughter Comes: John Hathaway

http://www.bloomberg.com/news/2010-10-29/g...n-hathaway.html

[G0ldfinger]

Even if we went down from here, it would only have been a near miss.

 

[Pixel8r]

Even if we went down from here, it would only have been a near miss.

 

Image

It would have just meant that I put the top line to high. I am actually thinking that it won't go down from here though and the pattern will break.

 

 

[G0ldfinger]

It would have just meant that I put the top line to high. I am actually thinking that it won't go down from here though and the pattern will break.

Yes, you said before that you were not quite sure about the position of the top line. I mean, at least so far the pattern is firm in place. It will be interesting to see whether it will break on a larger scale.

[romans holiday]

Even if we went down from here, it would only have been a near miss.

 

Sorry to keep harping on about this, but I reckon that linear chart is misleading. It implies that gold is just as volatile as before. Whereas, if you look at the log chart, the volatility in gold has died down quite a bit.

 

Gold, against the dollar, looks to be strengthening now at a much more even and measured pace. Considering this, I'm thinking anywhere between 1300 and 1350 might be the buying zone here.

 

 

[Pixel8r]

Yes, you said before that you were not quite sure about the position of the top line. I mean, at least so far the pattern is firm in place. It will be interesting to see whether it will break on a larger scale.

I was thinking that the accelerated manipulation over the last year is what is going to make it break this time. It is like they have been trying to keep a beach ball under the water, when they finally lose grip it shoots up. The JPM & HSBC cases are the first steps in this, I think there will be more to follow over the coming months.

 

 

[Pixel8r]

Sorry to keep harping on about this, but I reckon that linear chart is misleading. It implies that gold is just as volatile as before. Whereas, if you look at the log chart, the volatility in gold has died down quite a bit.

I think the decrease in volatility is down to an increase in manipulation, without it things would be more peaky.

 

 

[romans holiday]

I think the decrease in volatility is down to an increase in manipulation, without it things would be more peaky.

Either that, or gold's finding its feet as a currency.