GOLD

[bdon]

With WTI at $124, gold could trade at $1,825 today without being particularly expensive.

 

TBH I reckon it's just summer dolrums, not expecting much movement until early autumn. Traders in london and NY are enjoying this unseasonable heat - they go out for drinks at lunchtime and leave early. The "credit crunch" has been avoided (cough!) so they're not playing.

 

Reckon gold will bobble around the 850-900 all summer and not really see any movement until the US elections, change in UK government, BRIC/AME event (whatever it might be).

 

for us goldies it's going to be long and hot until september - still, at least we get to enjoy the weather.

[Steve Netwriter]

Nice one.

 

But what does gold actually insure you against? The collapse of fiat? The collapse of society?

 

it's insurance against inflation of course, but one that can backfire badly. If I had trusted it as insurance against inflation any time from 1980 to the late 90s, I think I'd have cancelled my policy long ago and found a new insurer.

 

Don't buy fire insurance when your house is flooded

 

How about turning this whole discussion around. Aren't you worried that your fiat money is going up in smoke ?

I mean, what guarantees are there that your 'money' will survive the financial weapons of mass destruction ?

Has any fiat currency lasted forever ? What will happen when yours collapses ?

 

I am a firm believer in the cycle. At times you'd want only a small amount of gold as insurance. Just in case.

But at other times, it's good to get the best insurance policy you can find. And this is definitely one of those times.

 

Stay safe out there, for somewhere there is a man with a printing press and a box of matches

 

PS To answer your question. Counter-party risk.

 

PPS Peaked at $885. And staying up at around $883. Nice move so far

 

[G0ldfinger]

...

My question is, do you fear that Scottish notes might some time be less reliable?

I read some time ago that Scottish notes (issued by banks like RBS, HBoS and Clydesdale) only need to be covered by BoE notes 4 out of 7 days a week, or so. After the credit crunch had hit, they wanted to increase the number of days.

 

In any case, Scottish money is not as good as the English one, which does NOT mean that the English is good. It's all just paper (backed by Northern Rock subprime), but the Scottish one is IMHO even worse. Just as a side note: RBS is one of the most highly leveraged bank turds in Europe. HBoS is through Halifax one of the biggest mortgage lenders in the UK. IMO, both are massive turds, and these are the guys issuing most of the Scottish money. Good luck!

[G0ldfinger]

If anyone is interested in a Nobel Laureate's opinion on currencies, inflation and gold, I would recommend Hayek's famous paper on competing currencies. It is very readable, and there are some interesting historic notes (US, Weimar hyperinflation etc.) at the end. I strongly support Hayek's thesis that it would be best to have freely competing currencies issued by private and non-private institutions in order to keep inflation in check.

 

http://www.anc.org.za/books/hayek.pdf

[G0ldfinger]

... the Liberty dollar was an idealistic scheme rather than a scam, or whatever. ...

Why is issuing 1 oz gold rounds a scam?

[Magpie]

How about turning this whole discussion around. Aren't you worried that your fiat money is going up in smoke ?

I mean, what guarantees are there that your 'money' will survive the financial weapons of mass destruction ?

Has any fiat currency lasted forever ? What will happen when yours collapses ?

 

I think you have to distinguish two questions. What happens when a currency is degraded? And what happens when it collapses.

 

For the former, gold, might be protection, although it seems a bit erratic in that respect to me. The only really good evidence we have is from the 1970s which ended up being a bit of a rollercoaster, with a lot of people getting burned.

 

For the latter, I'm sure some physical gold would be good, but I'd be inclined to also go for some tinned food, guns and bullets, petrol etc also. Not much good having gold coins if a mob of Mad Max lookalikes can come and take it off you by force. Fiat currencies do collapse in the end, but its generally more or less related to a collapse in civilisation.

 

I am a firm believer in the cycle. At times you'd want only a small amount of gold as insurance. Just in case.

But at other times, it's good to get the best insurance policy you can find. And this is definitely one of those times.

 

I do think this might be one of those times when gold comes into its own, and I still expect it to go further. I'm interested by the deflationist argument but at the end of the day I think like it or not we're going to see rising inflation and I suspect gold will go up a fair way from here. But I also expect that boom in gold to become hysterical at some opint and end up crashing and burning again. As GF says, the crucial thing there is when that happens. A big difference between a gold crash from $1500 and one from $15000.

 

 

[Magpie]

Why is issuing 1 oz gold rounds a scam?

 

I thought it was an obvious copper-bottomed scam. The guy running it was using the rhetoric of gold and free currencies and all that to run a profitmaking scam, more or less a pyramid scheme. He learned his trade in the 'Hawaiian Mint" or wherever. The genius of it is that once the scam collapses, he can blame the evil federal government and know that most of his customers will swallow that rather than accept they were being duped.

 

The US anti-government right-wingers seem to be easy marks for that kind of scam - they basically trust anyone who 'speaks their language'. That's why there were so many bible salesman type scams in the 30s and 40s. people who are deeply distrustful of government or strangers or commies or whatever, become stupidly trusting when presented with someone talking in terms they can relate to.

 

Edit: Bear in mind there were also Liberty Certificates, which supposedly were exchangeable for gold or silver, but that were highly unlikely to ever be honoured.

[G0ldfinger]

I thought it was an obvious copper-bottomed scam. ...

I don't see actual evidence that it was a scam/fraud. As long as people know how much gold they get for their Dollars, I don't see much of a problem. The whole alternative currency issue is a different, rather political issue. What is the US government afraid of anyway? Allow free markets in currencies. Heck, where has capitalism gone? This is monetary socialism/communism. It's just not good. Free those currencies!

[wren]

I read some time ago that Scottish notes (issued by banks like RBS, HBoS and Clydesdale) only need to be covered by BoE notes 4 out of 7 days a week, or so. After the credit crunch had hit, they wanted to increase the number of days.

 

In any case, Scottish money is not as good as the English one, which does NOT mean that the English is good. It's all just paper (backed by Northern Rock subprime), but the Scottish one is IMHO even worse. Just as a side note: RBS is one of the most highly leveraged bank turds in Europe. HBoS is through Halifax one of the biggest mortgage lenders in the UK. IMO, both are massive turds, and these are the guys issuing most of the Scottish money. Good luck!

Blimey. I had and have no understanding of Scottish paper over the English. Any links or further info would be most welcome.

 

Who's BHoS (Highland Bank of Scotland? )?

[wren]

For the latter, I'm sure some physical gold would be good, but I'd be inclined to also go for some tinned food, guns and bullets, petrol etc also. Not much good having gold coins if a mob of Mad Max lookalikes can come and take it off you by force. Fiat currencies do collapse in the end, but its generally more or less related to a collapse in civilisation.

It has interested me how often gold is regarded as generally irrelevant, and yet is then to be judged in a situation of societal breakdown.

 

Would you be better able to hold something else in the face of the Mad Max mobs? Would you feel safer with paper assets and the banksters in such a situation?

 

People like to suggest that they might exist in a barter-only society, and yet living something better than a mere scavenging for survival could not continue and would inevtably in almost all cases lead only to very premature death. (I believe a return to hunter-gatherer life for more than a tiny number of people would be impossible if only for the destruction of the local ecosystems).

 

If any system of trade were to exist, it would quickly become apparent that some solid, not too common material would serve as a medium of exchange. Whether it be squirrel skins or shiny bits of metal (and don't belittle squirrel skins too quickly: those who have tried find it quite tiresome to down one with a rifle in places where they are not in short supply - just imagine without any gun).

 

But don't buy precious metals: Precious metals are for nutters only, I mean survivalists... I mean not for survivalists.

 

Buy property, buy stocks, keep cash in the savings account, buy a microwave, a new iPod, a new Hummer if you're rich (even better on credit) , sniff coke of a weekend with your arsehole mates, get into Floridian property...

 

...just don't buy anything physical regarded as precious and as a store of value.

[Steve Netwriter]

I think you have to distinguish two questions. What happens when a currency is degraded? And what happens when it collapses.

 

For the former, gold, might be protection, although it seems a bit erratic in that respect to me. The only really good evidence we have is from the 1970s which ended up being a bit of a rollercoaster, with a lot of people getting burned.

 

For the latter, I'm sure some physical gold would be good, but I'd be inclined to also go for some tinned food, guns and bullets, petrol etc also. Not much good having gold coins if a mob of Mad Max lookalikes can come and take it off you by force. Fiat currencies do collapse in the end, but its generally more or less related to a collapse in civilisation.

 

 

 

I do think this might be one of those times when gold comes into its own, and I still expect it to go further. I'm interested by the deflationist argument but at the end of the day I think like it or not we're going to see rising inflation and I suspect gold will go up a fair way from here. But I also expect that boom in gold to become hysterical at some opint and end up crashing and burning again. As GF says, the crucial thing there is when that happens. A big difference between a gold crash from $1500 and one from $15000.

 

I think the history of gold goes just a little further back than that

 

I suggest you read this lengthy tome:

http://www.gata.org/files/RedburnPartnersG..._11-12-2007.pdf

 

And then Jim Sinclair's explanation of why he thinks gold will not drop like it did in the 1980s.

 

Keeping Gold At The Top - The Fulcrum Point At The Peak

http://www.jsmineset.com/ARhome.asp?VAfg=1...cate&UArts=

 

Even Mish the deflationist advocates gold !

http://globaleconomicanalysis.blogspot.com/

 

I agree with you about the gun & ammunition.

But don't forget water and food

 

[Steve Netwriter]

If anyone is interested in a Nobel Laureate's opinion on currencies, inflation and gold, I would recommend Hayek's famous paper on competing currencies. It is very readable, and there are some interesting historic notes (US, Weimar hyperinflation etc.) at the end. I strongly support Hayek's thesis that it would be best to have freely competing currencies issued by private and non-private institutions in order to keep inflation in check.

 

http://www.anc.org.za/books/hayek.pdf

 

Cheers GF. Now if you can just give me the time to read it

 

[G0ldfinger]

Blimey. I had and have no understanding of Scottish paper over the English. Any links or further info would be most welcome.

 

Who's BHoS (Highland Bank of Scotland? )?

 

Scotland's banknotes 'under threat in Treasury shake-up'

...

Published Date:

04 February 2008

By Michael Howie

Home Affairs Correspondent

THE future of Scottish bank-notes could be in doubt following proposed new measures to protect customers from failing financial institutions, it was claimed last night.

...

Under current laws, Clydesdale Bank, Royal Bank of Scotland and Bank of Scotland have to lodge funds with the Bank of England to cover the value of their notes, but only for three days of the week – the other four days they can be invested elsewhere, gaining millions of pounds in interest.

...

"The consultation proposes changes which will reduce the likelihood of individual banks facing difficulties, reduce the impact if, nevertheless, a bank gets into difficulties, and also provide effective compensation arrangements in which consumers have confidence – changes which as are important to Scottish banking customers as they are to those across the UK."

Only 3 out of 7 days. The other 4 days - where would they invest it? In 'high-yielding' Dollar-denominated paper possibly? US subprime anyone?

 

http://thescotsman.scotsman.com/latestnews...tes-.3739567.jp

 

HBoS stands for Halifax-Turd of Scotland, that was created through the merger of Halifax and the Turd of Scotland (BoS).

 

EDIT: Scottish Sterling: 3 out of 7 days backed by Northern Rock subprime, the rest of the week backed by US subprime. Now, tell me again, why is the value of Sterling sinking? -- OK, I can't prove my claims. But think about it, it totally makes sense. All this money was/is in AAA-securities, I am pretty sure. And by now we know what that means - no wonder the BoE/Fed/ECB buys/swaps this stuff now like crazy.

[Magpie]

It has interested me how often gold is regarded as generally irrelevant, and yet is then to be judged in a situation of societal breakdown.

 

Would you be better able to hold something else in the face of the Mad Max mobs? Would you feel safer with paper assets and the banksters in such a situation?

 

...just don't buy anything physical regarded as precious and as a store of value.

 

Good points. I suppose gold would be most use in an intermediate situation where fiat currency collapsed or all but collapsed but society managed to survive without lawlessness. In that case gold might become emergency currency, might even be the new standard.

 

It's all very notional though.

 

[G0ldfinger]

Good points. I suppose gold would be most use in an intermediate situation where fiat currency collapsed or all but collapsed but society managed to survive without lawlessness. In that case gold might become emergency currency, might even be the new standard.

 

It's all very notional though.

The reason is that gold is REAL money.

[Magpie]

I think the history of gold goes just a little further back than that

 

Yes, fair point - I should say the most recent example, and therefore the obvious comparison.

 

And then Jim Sinclair's explanation of why he thinks gold will not drop like it did in the 1980s.

 

Keeping Gold At The Top - The Fulcrum Point At The Peak

http://www.jsmineset.com/ARhome.asp?VAfg=1...cate&UArts=

 

Seems like balderdash to me. On a very basic level - in any bubble people will find reasons to explain why the price is justified, and also why it won't drop. "It's different this time", "A new permanent plateau" etc etc. The point is that a very sharp or sustained rise up in gold is likely to attract the bubble mentality and push it beyond whatever its 'natural' level is, and then at some opint the bubble is likely to collapse. That might not happen, but Jim's justifications do nothing to persuade me it couldn't happen.

 

Of course that's no reason not to buy now, as I doubt $1050 was the peak - just something to be aware of.

 

 

[Magpie]

The reason is that gold is REAL money.

 

Yeah yeah, tell me about it.

[G0ldfinger]

Gold will catch up.

 

[Bobsta]

Sorry if this seems like a dumb question... but could someone explain who/what "The Consolidator" is? Jim wrote about it/them yesterday...

 

I know more than any other writer on the consolidator subject.

 

The Consolidator has made every effort to dress up as the quiescent producer.

 

Now the Consolidator has joined the Asians and Middle East in competition to consolidate the junior production and exploration industry.

 

This is fact. Believe me I know.

 

The stockholders of the junior exploration and production companies do not, nor do they believe this is the real reason behind the depression in prices.

 

The Consolidator is out there shopping hard.

 

I'm slightly baffled.

[Chubbs]

I'm still going for one more down trend before the upswing...

 

Anyone for Friday afternoon plunging?

 

 

[Magpie]

Gold will catch up.

 

 

On Oil vs Gold, doesn't the fact that Oil is getting close to depletion mean that there is a better reason for its price to escalate than gold? The world economy depends on oil, if its gradually running out, of course the price will rise.

 

[Steve Netwriter]

Seems like balderdash to me.

 

:lol:

 

On a very basic level - in any bubble people will find reasons to explain why the price is justified, and also why it won't drop.

 

But, but, but........we're not in a bubble

 

[Steve Netwriter]

I'm still going for one more down trend before the upswing...

 

Anyone for Friday afternoon plunging?

 

I'm going to bet against you on this occasion. I think the falling US$ is going to put too much upward pressure on gold today.

 

[alexreeve]

On Oil vs Gold, doesn't the fact that Oil is getting close to depletion mean that there is a better reason for its price to escalate than gold? The world economy depends on oil, if its gradually running out, of course the price will rise.

I don't think that's a fact. While there are plausible arguments that cheaply extractable oil is at or past peak, there would appear to be plenty of less accessible reserves (oil shale, arctic, very deep or small pockets). This would still indicate a sharply rising price for oil.

 

The oil/gold ratio pricewise is fairly established throughout the oil driven economy era, is there a reason this correlation should break? I dont even understand why there is a tight correlation over 100 years, but I see no reason why it should production costs changes should necessarily alter the ratio dramatically now when they have not done so in the past. Like earth magnetic field, don't understand it, aware that it may change without warning, still feel it can be relied on.

 

 

[Magpie]

:lol:

 

The great thing about watching markets is you learn to spot balderdash a mile off. At least with housing people waited until there was a bubble till they started claiming the top was a permanent plateau. He's getting his balderdash in early, saying that when it does eventually reach a top, it won't fall.

 

But, but, but........we're not in a bubble

 

 

No, but a big surge in price would probably create one, unless there's some kind of ban on idiots buying gold that I haven't heard about. If the fair price is, say $2000, it's likely that the big run up to that would mean we overshot to $3000 or more before coming back down to earth.

 

But maybe it's different this time...