GOLD

[G0ldfinger]

http://news.silverseek.com/SilverInvestor/1211435880.php

The derivatives markets are alive and well in both silver and gold, and there is roughly one hundred ounces “claimed” on paper for every physical ounce of silver.

This will blow up spectacularly some time soon.

[Magpie]

No offence meant. It's just that when I look at this thread it is to see what people have posted about gold. News items, their views on the current state of the gold market.

There's nothing wrong with discussions about things, but it's just that on this thread I find it fills too many posts. Your post, the replies, your replies.......and finally I get to what I'm looking for.

 

IMO, and just mine, it would be better on a separate thread.

 

You might be right. It's just that I read this thread out of personal interest, and then this is where I find comments that I find questionable. So it feels more natural to respond to them here.

 

Who mentioned the gold standard ?!

I thought there was a simple statement about the amount of gold mined in total versus population.

 

In fact I don't remember reading ANY article from any 'goldbug' suggesting a return to the gold standard. That doesn't mean there aren't any, just that I haven't read any.

 

Right now the argument tends to be about whether gold is 'real money' and only obstructed from that by coercive government measures (as for instance in GF's posts above).

 

In past decades the debate was more often about the merits of a return to gold as money, and I think this particular historical fact smacks of coming from someone trying to justify gold as a monetary system that could cope with population growth. As I said before somewhere, when you see an obviously dubious fact it often makes sense to think of why someone would have wanted to make that statement in the first place.

[Magpie]

Mainly the immediate dismissal of people who are on the goldbug 'side'.

There is sceptism and bias.

Maybe use of some expressions just annoy me and remind me of deniers of the usefulness of gold.

 

I'm OK with debate of the facts. Debate of the economics. Personally I find some expressions about people who I think are honourable irking.

 

I get a bit sneering sometimes and sorry that can be annoying. I think your last line there is very telling though. If you regard someone as honourable you tend to accept their statements as being sincere and probably truthful. The point I'm trying to make is that this can lead to taking on board dubious facts and theories, simply because they come from someone you trust. That's why I started poking at the 'gold has always expanded with population' theory.

 

Others will disagree, but the whole Liberty Dollar thing seemed to me an obvious moneymaking scam. Maybe I'm wrong, but what was interesting to me about it was the fact that a lot of gold believers accepted the whole thing at face value simply because Mr Nothaus 'spoke their language'. Now I'm not trying to imply that all goldbugs are con artists. Most of them are indeed decent and honourable, and concerned about real issues. But I think they sometimes pass on a bundle of received ideas, some of which seem flawed or false to me. To question those ideas doesn't mean that I am questioning the integrity of anyone who repeats them, only suggesting that they apply a critical eye even to opinions from people they trust as well as to opinions from those they don't trust.

 

[HPCsoYESTERDAY]

I don't post here often so excuse my general ignorance but.....

 

For me to believe that there will be a significant increase in pog (say 50 to 100% GBP) over the next 18 months, I have to look at my own krugs and say 'will these coins be worth anywhere between 750 to 1000 pounds in 18 months'.

 

When I take this approach (i.e. my own situation) I struggle to see how it could happen without wage inflation.

 

During the gold price rises of 07, the 'man on the street' was only mildly aware of energy and food price inflation; Now in mid-08 these concerns are commonplace and widely reported. So, in my muddled thinking, the pog will rise from here on in if there is a growing demand for gold as an 'asset preserver' but with so many other commodities demanding excess cash, will we see great rises in pog without wage inflation?

 

Do many posters here believe that we will see wage inflation take off? and how will the pog feature in an deflationary environment caused by a severe recession and lack of excess cash?

 

apologies to all for the lack of clarity in the questions (at this time of the morning!)

[Magpie]

Do many posters here believe that we will see wage inflation take off? and how will the pog feature in an deflationary environment caused by a severe recession and lack of excess cash?

 

My gut feeling on this - there might technically be a deflation as a lot of apparent wealth and money will continue to be destroyed. This will affect some commodity and asset prices quite badly. But the public will perceive the problem as being inflation as food, energy and goods prices rise. I don't think wage inflation will rocket, but I think there will be a lot of pressure on wage demands and some sectors will achieve more wage inflation, while others fall behind in real terms.

 

In that environment I can certainly see the idea of gold as insurance or wealth protection gaining more adherents, and I'd suggest that the profile of individual gold buyers (most of whom have some wealth or savings to protect) means that wage inflation isn't the most direct driver of their buying decision. It's more about whether or not they transfer money from savings and investments to gold.

 

 

[frizzers]

From a poster on the ADVFN gold thread:

 

I have just been reading the archives of commentary at Kitco and I'm astounded at the museing of Jon Nadler Kitco's chief analyst. He never misses a chance to take a pop at gold and silver, in particular silver, and his writing have always a subtle but persistant doubtful tone. You could be forgiven for thinking that he works for the FED as he talks of an imminent recovery in the US with a near term riseing dollar and riseing interest rates.

 

This kind of distorted rehtoric in the face of over whelming evidence to the contrary is what we have come to expect from the FED, who afterall has only confidence to rely on. BUT from the chief PM analyst at Kitco, an organisation setup to sell and hold precious metals for investors!?

 

Something is very wrong here, I can accept that its important for Kitco to present a balanced view, but Nadler's comments are not balanced and have been consistantly incorrect, in the fact that things have got much worse for the economy and more postive for PMs. I wonder if you can't be positive for PMs now, with negative real interest rates , when can you be.

 

Something very wrong with Kitco and Nadler, it smells very fishy to me.

[G0ldfinger]

...

Do many posters here believe that we will see wage inflation take off? and how will the pog feature in an deflationary environment caused by a severe recession and lack of excess cash?

...

The idea that recession means deflation couldn't be wronger as Adrian Ash and others have repeatedly pointed out in their articles.

 

M3 is growing explosively, it does not matter that there is a meltdown in housing: we are witnessing extremely strong inflation.

 

People who will get squeezed in this mess and whose wages possibly won't hold up will have (and have had) other problems than buying gold. These are not (large) gold buyers anyway and this process is therefore totally irrelevant. It is the wealthier who protect their already existing assets who will drive the price.

 

In summary: The cash (to buy much more gold) is already out there, and getting more and more by the minute. We will have a recession/depression and strong inflation -- isn't that fun? Thanks and congrats to the Fed and the BoE!

[G0ldfinger]

From a poster on the ADVFN gold thread:

 

...

Something very wrong with Kitco and Nadler, it smells very fishy to me.

Nadler is simply a bad analyst and getting it wrong all the time. Whether he does this purposefully or whether there is some other agenda behind it -- who knows?

 

I still think that Bill Murphy's email (to Nadler, calling him names) was a mistake and very immature.

[enrieb]

I don't post here often so excuse my general ignorance but.....

 

For me to believe that there will be a significant increase in pog (say 50 to 100% GBP) over the next 18 months, I have to look at my own krugs and say 'will these coins be worth anywhere between 750 to 1000 pounds in 18 months'.

 

When I take this approach (i.e. my own situation) I struggle to see how it could happen without wage inflation.

 

During the gold price rises of 07, the 'man on the street' was only mildly aware of energy and food price inflation; Now in mid-08 these concerns are commonplace and widely reported. So, in my muddled thinking, the pog will rise from here on in if there is a growing demand for gold as an 'asset preserver' but with so many other commodities demanding excess cash, will we see great rises in pog without wage inflation?

 

Do many posters here believe that we will see wage inflation take off? and how will the pog feature in an deflationary environment caused by a severe recession and lack of excess cash?

 

apologies to all for the lack of clarity in the questions (at this time of the morning!)

 

Wage inflation will not take off all by itself, as the effects of inflation take hold and people suffer then it will precipitate industrial action, wages will only rise after workers and unions organize and hold strikes. The sector with the most power is Transport/lorry drivers they have ability to shut the country down and they also have the support of the car driving public. We have created a society that is even more dependent on an oil based infrastructure since the original fuel protests. I speak anecdotally to people who are beginning to suffer from the prolonged higher cost of fuel its only a matter of time before the public start to show unrest.

 

There are quite a few other areas where we can see industrial action starting over pay, in the main its public sector workers but eventually it will spread. The UK economy has only just started to turn downwards I don't think that the public are about to accept a lower standard of living without a fight. The 70s period of economic turmoil, high oil prices, high inflation and stagflation were rife with industrial action.

 

http://news.bbc.co.uk/1/hi/uk/7411437.stm Police's warning shot in pay row

 

http://news.bbc.co.uk/1/hi/england/lancashire/7404120.stm Second strike over wages review

 

http://news.bbc.co.uk/1/hi/uk/7365331.stm School's out as teachers march

 

http://news.bbc.co.uk/1/hi/uk/7341980.stm Coastguard staff strike over pay

 

http://news.bbc.co.uk/1/hi/uk_politics/7175503.stm Ministers seek prison strike ban

 

http://news.bbc.co.uk/1/hi/uk/7129299.stm Civil servants on 48-hour strike

 

http://news.bbc.co.uk/1/hi/uk_politics/6987810.stm Unions back 'co-ordinated' action

[Magpie]

People who will get squeezed in this mess and whose wages possibly won't hold up will have (and have had) other problems than buying gold. These are not (large) gold buyers anyway and this process is therefore totally irrelevant. It is the wealthier who protect their already existing assets who will drive the price.

 

In summary: The cash (to buy much more gold) is already out there.

 

Agreed - the money is already there if people decide to put it into gold. Some money and credit getting destroyed now won't affect the money that is likely to go into gold.

 

The idea that recession means deflation couldn't be wronger as Adrian Ash and others have repeatedly pointed out in their articles.

 

M3 is growing explosively, it does not matter that there is a meltdown in housing: we are witnessing extremely strong inflation.

 

I think there is something technically correct in the deflation argument, in that a lot of money will be destroyed, money supply may even fall temporarily on some measures. But I think the result on prices will be a mixture - deflation in certain areas (housing being an obvious example) and inflation in others (cost of living, wages to a lesser degree).

 

 

 

[Steve Netwriter]

You might be right. It's just that I read this thread out of personal interest, and then this is where I find comments that I find questionable. So it feels more natural to respond to them here.

 

 

 

Right now the argument tends to be about whether gold is 'real money' and only obstructed from that by coercive government measures (as for instance in GF's posts above).

 

In past decades the debate was more often about the merits of a return to gold as money, and I think this particular historical fact smacks of coming from someone trying to justify gold as a monetary system that could cope with population growth. As I said before somewhere, when you see an obviously dubious fact it often makes sense to think of why someone would have wanted to make that statement in the first place.

 

Sorry Magpie, I owe you an apology.

I realised a few minutes ago that I had confused you with someone else on another forum

Someone who had said they had a dislike for gold/goldbugs.

 

You are tempting me to start a thread on the 'end-game' if you like, for gold. It has to be done some time. I had hoped to do it in a few years.

I just need to find the time.

After all, sometime, and we can discuss when that might be (tomorrow or 10 years from now), gold will no longer be needed in any large quantity for personal insurance, and it won't be a very good investment. Unless even that is wrong.

So the serious question is, what are the signals that will for-warn us of that time.

 

Anyway, feel free to ignore my gripes. I can just scroll through what I'm not interested in at the time.

I may just quote the odd phrase that irks though

 

If you haven't please do listen to Ben Steil though. Very interesting.

 

[Steve Netwriter]

Maybe, over time, the US will find a solution for this problem, e.g. little hybrid cars that can be plugged in and use solar energy as well. However, the change will take decades, and so long the 'bad location' will keep falling in value.

 

I think the problem with small cars is the lack of safety when there are big cars still on the road.

That may not be so bad in some countries, but here in NZ, to feel safe with the quality of drivers here (some of the worst in the world), and the number of huge 4x4s about, you really need to be in something big.

 

[Magpie]

Sorry Magpie, I owe you an apology.

I realised a few minutes ago that I had confused you with someone else on another forum

Someone who had said they had a dislike for gold/goldbugs.

 

Nah, I wouldn't hang around here if I disliked you lot. I'm just fond of an argument, and I don't have much patience for bad logic. No offence either way.

 

You are tempting me to start a thread on the 'end-game' if you like, for gold. It has to be done some time. I had hoped to do it in a few years.

I just need to find the time.

After all, sometime, and we can discuss when that might be (tomorrow or 10 years from now), gold will no longer be needed in any large quantity for personal insurance, and it won't be a very good investment. Unless even that is wrong.

So the serious question is, what are the signals that will for-warn us of that time.

 

I think that question is worth asking now, no matter how far away we think it might be. Even if we don't get to the point where it's not needed for insurance, we might get to a point where a spike gets out of control and then runs into a crash - worth thinking about that now with a clear head, as the spike might cloud judgment, just as the housing boom clouded so many people's judgment.

 

If you haven't please do listen to Ben Steil though. Very interesting.

 

OK I'll try, but not at work, no speakers. Maybe at home later.

 

 

[Magpie]

I think the problem with small cars is the lack of safety when there are big cars still on the road.

That may not be so bad in some countries, but here in NZ, to feel safe with the quality of drivers here (some of the worst in the world), and the number of huge 4x4s about, you really need to be in something big.

 

My mum won't drive a little car since she crashed her 2CV into a big Rangerover. The other car was hardly dented, hers was a write-off.

 

[Steve Netwriter]

Oh boy, this looks good.

 

Ben Steil giving a talk. You can read it and listen to it.

 

Is the Dollar Doomed?

http://www.resourceinvestor.com/pebble.asp?relid=42915

 

Audio downloadable if you have Download Helper

 

I've now listened to this, and read the transcript at the same time.

 

If you haven't I really suggest you do. I think it really very good.

 

Particularly the bit about what countries with US$s do with them. They can't ditch their dollars because they'd knock the value, so instead they use them to buy assets, like commodities.

 

[Steve Netwriter]

My mum won't drive a little car since she crashed her 2CV into a big Rangerover. The other car was hardly dented, hers was a write-off.

 

Exactly

 

The thing is, in most places big 4x4s aren't really necessary. Unfortunately, with the countryside here (braided rivers etc etc) they are really quite handy here.

But I still hate them. Specially when they tailgate !

 

But, I would love to have cycle lanes, and separate lanes for little cars.

 

OK, I'll try and compose a list.

 

[ologhai]

That might be very approximately true historically, but it's a big logical leap from "the amount of gold per capita has remained more or less unchanged (at about half an ounce per person) since Roman times" to the much stronger "the amount of gold available grows at about the same rate as the population" - the latter implies it's a consistent growth (clearly untrue as there have been various surges such as gold rushes etc) and that there is something inevitable about it.

 

I suspect it's a notion that has been wheeled out in the course of some 'gold is money' debate, thus. Gold-sceptic points out that the gold standard can be problematic as it prevents expansion of the money supply with population. So goldbug comes up with "the amount of gold available grows at about the same rate as the population" to vindicate continued faith in gold's perfection as money.

 

Dodgy history, dodgy theory...

 

You may be reading too much into what I said (and why I said it).

 

There's no confusion is my mind (as far as I can tell). I wasn't suggesting that there was any causal relationship between the growth in population and the growth in the amount of gold 'above ground'. I only quoted someone saying that there'd been some kind of (coincidental) parity between the two.

 

The only real point I suppose is that if inflation (the reduction in value) in something (e.g. gold) is fundamentally caused by the amount of that something which people have available, then the fact that the amount of gold that (at least notionally) people each have available hasn't changed much for at least a couple of thousand years, then one would imagine that gold's value probably hasn't changed much over that period either.

 

This is the cause not the effect, and, of course, is a startling contrast to fiat currencies (particularly over the last few decades).

 

Gold doesn't 'magically' grow at roughly the same rate as population -- it just happens that this is what has apparently occurred for a long time.

[G0ldfinger]

I've now listened to this, and read the transcript at the same time.

 

If you haven't I really suggest you do. I think it really very good.

...

I agree 100%. Everyone should read this or listen to it.

 

http://www.resourceinvestor.com/pebble.asp?relid=42915

[Magpie]

You may be reading too much into what I said (and why I said it).

 

There's no confusion is my mind (as far as I can tell). I wasn't suggesting that there was any causal relationship between the growth in population and the growth in the amount of gold 'above ground'.

 

No ,to be fair, I was attacking the source rather than the use you made of it. But I think it's a dubious fact, gold supply has gone in surges and plateaus and gold has changed value plenty even if it has ended up in more or less the same area.

 

The only real point I suppose is that if inflation (the reduction in value) in something (e.g. gold) is fundamentally caused by the amount of that something which people have available, then the fact that the amount of gold that (at least notionally) people each have available hasn't changed much for at least a couple of thousand years, then one would imagine that gold's value probably hasn't changed much over that period either.

 

Yes, and I think some goldbugs have worked back from the desired conclusion, that gold's value is unchanging, to the supposed fact, that gold has increased at the rate that would make that true. Even if it is true, which I doubt, it's a highly conditional fact, liable to change in future.

 

 

[Magpie]

If you haven't please do listen to Ben Steil though. Very interesting.

 

I just read the transcript. Extremely interesting, especially in the analysis of how the US dollars role as international currency may change. Thanks for the link.

 

 

 

[Magpie]

Gold doesn't 'magically' grow at roughly the same rate as population -- it just happens that this is what has apparently occurred for a long time.

 

As it happens, there's an interesting quote in the Ben Steil transcript on this subject, which emphasizes that fluctuations in the gold supply were indeed a problem when it was the international currency:

 

"The basket idea has a lot of attractions in the abstract, because I have to emphasize gold is not, in any sense, a nirvana currency. We certainly did see periods in the 19th century, for example, where the supply of gold went way up, and therefore prices went up, and then it came down, and prices went way down. Over the longer term, it certainly led to a price stability we've not seen under fiat currency, but a basket of commodities would have all the benefits of diversification that all of us as investors like."

 

I like him because he is realistic about the problems of alternative systems, including gold, but still very good at identifying the risks and problems of the current one.

[cazlane]

Hellooo campers Glad to see you're still alive and well GF and Magpie Have been meaning to pootle over here & GHPC now and again to see how we're all doing (especially in terms of gold investment naturally lol), but somehow I keep gettin sidetracked back into that other most noble of forums ~cough~. Sorry it's the minx in me-I just can't help it

Oh and of course can't leave without saying 'SELL SELL SELLL YOUR GOLD'

[Whosthedaddy?]

California's new gold rush?

 

It would seem that there is increasing public interest in the metal since it hit $1000 per oz

 

the article suggests that much of the states gold remains undiscovered.

 

http://news.bbc.co.uk/1/hi/world/americas/7378281.stm

 

 

[wren]

You are tempting me to start a thread on the 'end-game' if you like, for gold. It has to be done some time. I had hoped to do it in a few years.

I just need to find the time.

After all, sometime, and we can discuss when that might be (tomorrow or 10 years from now), gold will no longer be needed in any large quantity for personal insurance, and it won't be a very good investment. Unless even that is wrong.

So the serious question is, what are the signals that will for-warn us of that time.

Thinking along similar lines I'd like to make a suggestion.

 

We have a new gold thread every month. I think it might be interesting to include a poll at the beginning of the thread, so that we have a gold (and maybe silver) poll each month.

 

Of course, most of us are bullish at present on gold, but surely that will change over time, and a monthly poll could give us a feel for sentiment trends among us.

 

I'm not sure what the best wording of the poll would be. Maybe something like this:

 

Do you think the price of gold is?

1) very overpriced

2) overpriced

3) a little overpriced

4) about sensible

5) a little underpriced

6) underpriced

7) very underpriced

 

And if, as I believe, multiple polls are possible, the same for silver.

 

DrBubb and others what do you think? It could save people from asking for people's sentiment repeatedly within the thread, which is something I would be tempted to do at a later stage.

[drbubb]

Do you think the price of gold is?

1) very overpriced

2) overpriced

3) a little overpriced

4) about sensible

5) a little underpriced

6) underpriced

7) very underpriced

 

The Poll is a good idea. We can start next month. REmind me, if I forget

 

Here's a chart / suggesting "not over priced"