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... So far we have yet to see a "Real gain" in gold prices ...

Yes. Since 2002, gold has essentially only kept up with US External Debt inflation. So, in that sense, there have been no real gains in gold whatsoever. But they will come at some stage.

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Just for you GF - you might like this...

 

The China reserve rate change is driving global markets lower.

 

And the timing was a big "slap in the face" to Mr. Bernanke.

He gave a defensive speech in Europe, and is truly under seige. I wonder if he will last teh year?

My "dream scenario" is that BB resigns and Obama appoints Volcker as temporary Fed chairman,

until they can find a new chairman acceptable to Ron Paul.

 

I just heard a comment about BB on Bloomberg.

One of their interviews spoke about Bernanke "taking the dunce cap from Alan Greenspan." Wow !

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Gold mentioned at about 8:45 on Radio 4 this morning, the royal mint has seen sales of gold coins increase 400% on last year and silver coins are up 20% on last year. The R4 guy was at pains to point out gold is in a bubble, volatile commodity, you could lose a lot of money on gold, strange investment pays no dividend etc. If only Pravda had similarly cautioned about property in such a way.

 

 

Royal mint is expensive place to buy gold. However, if gold rises more and falls a bit, you could see a lot of people selling it off.

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I think Sinclair is talking his own $1,650 book here. This is no way like late 1979. It's not even like 1974 yet (see charts below).

 

http://kingworldnews.com/kingworldnews/KWN..._Violently.html

Getting back to gold, this is late 1979. It’s got all of the characteristics of late 1979. If people will go back and look at the long chart they’ll see that there was one violent flip right before it took off and never looked back. And it’s getting very close to that point now. I think what you have seen is a major shake of the tree right before gold takes off.”

nosedive1974.png

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Don't see much drama in gold these days. It was due a correction to the trend line....a 20% appreciation against the dollar. Ho hum....

 

 

perspective.gif

 

 

RH, you seem rather wedded to your idea of a a nice 20 percent increase in the price of gold year on year together with appreciating value of the fiat. Leaving aside the fact that fiat is losing its purchasing power - except in property bubbles, from what I have seen in life, unstable systems of any kind rarely behave in a linear consistent way for long. At some point a self-reinforcing mechanism takes hold and the model quickly explodes/collapses/falls over.

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RH, you seem rather wedded to your idea of a a nice 20 percent increase in the price of gold year on year together with appreciating value of the fiat. Leaving aside the fact that fiat is losing its purchasing power - except in property bubbles, from what I have seen in life, unstable systems of any kind rarely behave in a linear consistent way for long. At some point a self-reinforcing mechanism takes hold and the model quickly explodes/collapses/falls over.

Well, I wouldn't say I'm wedded to the idea. It's just a theory after all [capable of being falsified], but seems to me a pretty good one.... the past few years have corroborated it very well.

 

Instability can work both ways [the underlying reason gold is rising imo]: on the risk trade, capital flies in to emerging currencies strengthening them; on the risk off trade, capital flies back into advanced/ central currencies strengthening them in turn [mainly Yen and US dollar].... all the while gold continues to steadily rise in the aggregate with the squeeze on liquid capital. It's this instability rather than a currency collapse that I think is more central..... but then you could say all fiat currencies are "collapsing"/ imploding at around 20%-30% against gold [could this be considering an unconventional hyper-inflation?.... I've called it hyper-deflation]. If this process was left unarrested, at some point things may well go critical... with a hyper-inflationary explosion of certain currencies at the end. But then I think the re-institution of a gold standard will re-stabilze the system. Governments may have no choice.

 

The monetary value of assets looks likely to continue declining against currencies, while effectively collapsing against gold.

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Well, I wouldn't say I'm wedded to the idea. It's just a theory after all [capable of being falsified], but seems to me a pretty good one.... the past few years have corroborated it very well.

 

Instability can work both ways [the underlying reason gold is rising imo]: on the risk trade, capital flies in to emerging currencies strengthening them; on the risk off trade, capital flies back into advanced/ central currencies strengthening them in turn [mainly Yen and US dollar].... all the while gold continues to steadily rise in the aggregate with the squeeze on liquid capital. It's this instability rather than a currency collapse that I think is more central..... but then you could say all fiat currencies are "collapsing"/ imploding at around 20%-30% against gold [could this be considering an unconventional hyper-inflation?.... I've called it hyper-deflation]. If this process was left unarrested, at some point things may well go critical... with a hyper-inflationary explosion of certain currencies at the end. But then I think the re-institution of a gold standard will re-stabilze the system. Governments may have no choice.

 

The monetary value of assets looks likely to continue declining against currencies, while effectively collapsing against gold.

The "LOG" chart below shows that the rate of increase is escalating, along with volatility, as we get further into this gold bear. Rework your fixed 20% percentage increases using these lines.

 

20101120-1cyinygegjitjebg8rcss4e377.jpg

 

 

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The "LOG" chart below shows that the rate of increase is escalating, along with volatility, as we get further into this gold bear. Rework your fixed 20% percentage increases using these lines.

Always room for various interpretations of charts. Personally, I prefer to iron out the extremes, such as the spikes and the massive deleveraging dip, and find the long term average rate of appreciation.

 

Looking at the Aussie dollar price of gold is interesting in regards to volatility. The gold price has been massively volatile in Aussie, but has settled down a bit. Looks due for another spike up... perhaps on the renewal of the "risk off" trade.

 

 

aussielong.gif

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Trader Dan Norcini:

 

http://jsmineset.com/2010/11/19/hourly-act...trader-dan-377/

I believe that one of the things that they are doing is attempting to trip the hedge fund algorithms into a sell mode in the commodity sector so that they can secure what they need for feedstuff and metals for that matter, at a reduced price. After all, if we all here understand how the mindless hedge fund algorithms function, is it not reasonable to suspect that so do the Chinese, whom after all, are excellent traders and who never chase prices higher. I repeat – the Chinese NEVER buy when the hedge funds are buying. They buy when the hedge funds are selling. Whom do you think the hedge fund algorithms often end up selling to?

 

My guess is that during periods of sharp market sell offs across the various commodity markets, a change of ownership is occurring with grains, beans, silver and gold, moving into strong hands who are buying for the longer term and will continue to buy on any bouts of price weakness. The long term trend in the grains and the metals are all pointed upward, and that is why periods when prices are falling are going to continue to attract quality buying. That is where the floor of support under both gold and silver is going to come from.

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Soros Gold Bubble Expanding as ETFs Hold Nine Years of U.S. Mine Supplies

 

http://www.bloomberg.com/news/2010-11-22/s...u-s-output.html

Gold’s 23 percent surge this year to a record is proving no deterrent to George Soros, John Paulson and Paul Touradji, whose investments signal more gains for the longest winning streak in at least nine decades.

 

Securities and Exchange Commission filings this month by Soros Fund Management LLC, Paulson & Co. and Touradji Capital Management LP listed investments in gold as their biggest holdings. Exchange-traded products own 2,088 metric tons, equal to nine years of U.S. mine supply, data compiled by Bloomberg show. Precious metals will produce the best commodity returns in the next year, Goldman Sachs Group Inc. said in a Nov. 9 report.

 

The purchases show how investors are snapping up hard assets as governments and central banks led by the Federal Reserve pump more than $2 trillion into the world financial system. Gold in exchange-traded products, as much as half of which may be held by individual investors according to BlackRock Inc., is equal to more bullion than the official reserves of every country except the U.S., Germany, Italy and France.

 

“People who are selling gold here are making a big mistake,” said Michael Pento, a senior economist at Euro Pacific Capital Inc. in New York who correctly predicted gold’s highs the past two years. “The gold bull market will end when real interest rates become positive and we’re very far away from that. The Fed believes it’s going to have to print more money to keep real interest rates from rising and rescue the economy.”

 

Interest Rates

 

Gold gained 87 percent since September 2007 when the Fed began cutting benchmark interest rates and global credit markets started to falter. The Standard & Poor’s 500 Index of shares is down 21 percent since then, even after last year jumping 23 percent, the most since 2003. The Fed has kept its benchmark interest rate near zero since December 2008 and plans to pump another $600 billion into the economy through June by purchasing government bonds, a program known as quantitative easing.

 

The central bank bought $1.7 trillion of securities in a first phase that ended in March. The U.S. Dollar Index, tracking the currency against six counterparts, slumped 8.5 percent in the third quarter, the most in eight years.

 

“QE2 just furthers strengthens the already strong market for hard assets like gold,” said Michael Cuggino, who helps manage $9 billion at Permanent Portfolio Funds in San Francisco, and has about 20 percent of his assets in gold. “Real short- term interest rates after inflation are still negative and until that changes, commodities are going to continue to make higher highs.”

 

Record Price

 

Gold, which doesn’t pay a dividend, reached a record $1,424.60 an ounce in London on Nov. 9. Prices are heading for a 10th consecutive annual gain, the best performance since at least 1920. The S&P 500 Index returned about 9.5 percent with dividends reinvested, according to data compiled by Bloomberg, and Treasuries returned 7.3 percent, a Bank of America Merrill Lynch index shows.

 

Other precious metals have done better this year. Silver futures rose 61 percent and would have to gain another 85 percent to reach the record $50.35 an ounce reached in New York in 1980. Palladium advanced 72 percent in London and would need to add another 60 percent to match the all-time high of $1,125 an ounce reached in 2001.

 

Investors bought shares of ETPs representing 1,081 tons of silver worth $945 million since the end of September, according to data from four providers compiled by Bloomberg. Gold in ETPs such as the SPDR Gold Trust, the biggest, fell 9.5 tons. Investors may have considered silver cheap relative to gold and bet that it would benefit from the economic recovery, said Daniel Briesemann, an analyst at Commerzbank AG in Frankfurt.

 

‘Biggest Drawback’

 

Industrial applications account for 9 percent of gold consumption, while for silver it’s about 50 percent of demand, according to GFMS Ltd., a London-based research firm.

 

Speculators in Comex gold futures cut their net-long position, or bets on higher prices, by 11 percent to 218,479 contracts in the week ended Nov. 16, data from the Commodity Futures Trading Commission show. That’s still about 40 percent more than the average over the last five years.

 

“The biggest drawback for gold right now is that it’s just so darn popular,” said Barry James, who manages $2.2 billion as chief executive officer of James Investment Research Inc. in Xenia, Ohio. “Gold has become a fad and there’s a little mania involved in this rally.”

 

Soros, who made $1 billion breaking the Bank of England’s defense of the pound in 1992, described gold at the World Economic Forum’s January meeting in Davos, Switzerland, as “the ultimate asset bubble.” Buying at the start of a bubble is “rational,” he said.

 

‘Pretty Ideal’

 

“It’s all a question of where are you in that bubble,” Soros, 80, said in a speech at a meeting organized by the Canadian International Council in Toronto on Nov. 15. “The current conditions of actual deflationary pressures and fear of inflation is pretty ideal for gold to rise.”

 

“The big negative is that too many people know this and a lot of hedge funds are very heavily exposed,” Soros said. “Gold has shown tendencies to go parabolic and usually bubbles tend to end in that parabolic rise before the collapse.”

 

Gold rose more than eightfold from 1976 to 1980, reaching a then-record $850, before plunging 67 percent to as low as $284.25 over the next five years. That peak adjusted for inflation is equal to $2,266 today, based on a calculator on the Federal Reserve Bank of Minneapolis’ website.

 

Paulson & Co., which manages $33 billion of assets, is the largest investor in the SPDR Gold Trust and Johannesburg-based AngloGold Ashanti Ltd., Africa’s biggest producer, an SEC filing Nov. 15 and data compiled by Bloomberg show. The New York-based fund is run by John Paulson, 54, who bet against U.S. mortgage markets amid the subprime crisis. The company’s funds generated profits of more than $3 billion in 2007.

 

................

 

290 Tons

 

Investors in options on Comex gold futures are anticipating the rally will continue. The second-most widely held option gives holders the right to buy gold at $2,000 by November 2011.

 

Investors in gold-backed ETPs bought shares representing 290 tons this year, worth $12.6 billion, data from 10 providers show. Investment overtook jewelry as the biggest source of demand last year for the first time in three decades and will retain the top spot this year, according to GFMS, which has a team of 18 precious metals analysts.

 

Euro Pacific’s Pento says gold will go as high as $1,800 by the end of next year. Pento correctly predicted in September 2009 that gold would reach $1,200 before the end of the year and in July this year forecast $1,400.

 

Allison Nathan, Jeffrey Currie and other analysts at Goldman Sachs in London, New York and Hong Kong, are forecasting $1,650 in 12 months. Precious metals will return 30 percent over the period, more than energy, industrial metals and agriculture, they said in a report Nov. 9.

 

‘Gold Standard’

 

“I flagged gold, not as a potential return to the gold standard, but as an indicator of lack of confidence in the growth policies,” World Bank President Robert Zoellick said in an interview Nov. 10.

 

One-month implied volatility on the euro against the dollar climbed to 14.49 earlier this month, the most since June.

 

“Gold is the preferred currency right now,” said Ronald Stoeferle, an analyst at Erste Group Bank AG in Vienna who expects gold to reach $1,600 by June. “The Fed can print and produce money, but it cannot produce confidence and trust in the U.S. dollar.”

Gold an expanding bubble?

 

Soros is a complex character and you never know what the intention of his pronouncements exactly are. And surely they have some intention - to shape perceptions as his writings would suggest. Or should we take him at face value? Or does he think privately one thing and say publicly another? Surely, Soros understands gold as the international currency.....? I'm inclined to be generous towards Soros here and take him at face value [what interest would an old man have in being duplicitous?]... maybe he really does think gold will develop into a bubble.... but then he wouldn't be the intellectual I think he is.....

 

For the record, I don't think gold can become a bubble. Only assets are susceptible to bubbles, and gold is now a currency.

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Yes, I think so too.

But it got overpriced, so I switched to Gold Wheaton (GLW.t)

... a "gold skeptic's" response to many comments here ...

 

(1)

"Dr Bubb, When will you throw in the towel on your Gold bearishness?"

 

I have been asked this question several times by posters on various threads, and I thought I might answer it one more time:

 

+ I am not Bearish (or Short!) on Gold, merely a skeptic recommending some caution towards forecasts like Jim Sinclair's that gold will hit $1650 in Jan. 2011 (that's only two months away.)

 

+ I remain long Gold in 6-figures (thru GLD bull spreads), a large position on Gold Wheaton (GLW.t), and various smaller junior mining and exploration shares

 

+ I did sell all my "paper gold" Taels, with the latest two transactions since the thread ("Is the gold bull market just starting?") was set up, and those sales were: half at near $1310 and half at near $1340, for an average near $1325,

 

+ Previously, I sold some other Gold holdings, and switched into PHYS (Sprott's Physical Gold etf), and then out of PHYS when it ran up to a 10% premium to Gold. My PHYS holdings mostly went into Gold Wheaton (GLW.to). The following chart shows how that worked out:

 

Gold Wheaton (GLW.to) to PHYS ratio ... update

xxxlx.png

 

+ I have continued to lighten up on my Junior miner holdings- including selling almost 40% of my GLW as the price rose a similar amount, raising cash (which is now mostly in HK$ and C$, since I think these two are safer than holding US$, even though I think a nice bounce in the US$ is underway. these too should tend to move up with it, but are likely to be less vulnerable, if the US$ gets adjusted downwards sometime in the future.)

 

+ I do hold several ounces of Gold coins, and some physical Gold taels. This would allow me to buy food for some weeks or months, or to pay for emergency expenses like travel.

 

I hope that helps to answer some of the questions and comments that keep reoccurring on various threads. I do think a more serious correction in Gold lies ahead, and I would not rule out seeing Gold below $1100, but if it rallies instead, I will welcome it.

 

(2)

I haven't stopped looking for Gold-related opportunities, but I have a growing "war-chest" for a possible future price dip

 

BTW, I did recently put about 2% of my Cash into Call options on this "undervalued" Gold stock.

 

Exeter Resources / XRC.t ... update

xxxm.gif

 

If the stock hits Canaccord's target ($11+), it would vastly outperform gold, with much less risk.

My 2%, will trade as if I had invested 20% of my cash or more in Gold - I like "intelligent leverage" like this,

and it illustrates the "gold re-entry strategy" that I am developing, and may implement slowly in the weeks

and months to come.

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“People who are selling gold here are making a big mistake,” said Michael Pento, a senior economist at Euro Pacific Capital Inc. in New York who correctly predicted gold’s highs the past two years. “The gold bull market will end when real interest rates become positive and we’re very far away from that. The Fed believes it’s going to have to print more money to keep real interest rates from rising and rescue the economy.”

At least this guy knows why he is holding gold.

 

Seems some on here think real interest rates are magically going positive sometime soon.

 

Or they think its 1974 again which of course it isn't.

 

The Fed stands ready to increase its quantative easing and it will.

 

Bernanke will keep real rates negative.

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Seems some on here think real interest rates are magically going positive sometime soon.

Even if so, the effect on gold could/would be delayed, and the rise would have to be so substantial that the Western world would pretty much collapse instantly.

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Even if so, the effect on gold could/would be delayed, and the rise would have to be so substantial that the Western world would pretty much collapse instantly.

I don't think interest rates will be moving up much [if at all] in the US anytime soon.... could well stay low for quite some time similiar to Japan.

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and the rise would have to be so substantial that the Western world would pretty much collapse instantly.

Exactly, which is why it isn't going to happen until the USD is fairly valued against gold and the Federal reserve is once again "solvent".

 

Then they can have a Volcker moment.

 

I think Obama having Volcker in his team is a classic, as its spooked the gold holders who don't understand history.

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http://ftalphaville.ft.com/blog/2010/11/22...dard-is-flawed/

Bernanke hints dollar standard is flawed

...

... Never before has a senior US policymaker admitted that the Dollar Standard is flawed. ...

...

What’s more, since the flaw has now been declared, Duncan believes the world should expect the Fed or the US to do something about it relatively soon.

...

... If the flaw cannot be corrected through international coordination, then unilateral actions by the United States should be anticipated. ...

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Breakout!?

 

Top callers and Pied Paper Pipers, what now? :P

 

goldhu.png

 

Jim Sinclair

The action of gold is quite interesting. It is threatening to the shorts.

 

Forget the reasons given by experts. If gold was trading regularly as per three weeks ago it should have sold off $20 to $40 this morning.

 

This has to attract the attention of the shorts.

 

A follow through of this new relationship into the Comex morning US session tomorrow will be telling.

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