GOLD

[njpurser]

Good find!

 

He seems to be very balanced and objective, and overall he predicts a major bull for gold

 

I'd like to react to a few of his more important points;

 

"The main source of new money in the economy is not the Fed but the commercial banks....The Fed began swapping poor performing assets on the banks' balance sheets for the high quality treasuries on the Fed's balance sheet in an effort to improve the financial situation of the banking sector and restore liquidity"

...M3 growth represents the sum of gains (new money) minus losses (asset depreciation). Fed actions to salvage bad bank debts are dramatically reducing the losses, thereby increasing M3.

...despite all the theorising, money supply growth is still at 15% in the US, and even higher elsewhere.

...The inflation issue is a global phenomenon, and this is not being taken into account by this writer.

 

"Today, the biggest fear that the Fed has is the fear of deflation. The monetary policymakers...[will]...use everything in its arsenal to prevent deflation."

...This is the most important thing to note: and it means there will be no deflation. It will not be allowed to happen, regardless of consequences to money supply and inflation

 

"Going forward, gold will likely resume its up-trend due to...a vicious wave of competitive devaluation...[which]...will cause not only price shocks (oil, food, etc.) but also spiraling monetary inflation. [This] outcome, in our opinion, is inevitable but no one knows when it will come and what path it will take."

...I agree, but think this will come about by gradual base rate easing and not via some sudden 'wave of devaluation', as growth slows (even though inflation will not have fallen to target)

 

"gold will touch its 65-week moving average in the low $800s. Unfortunately, this outcome is now quite likely, meaning that the duration of the correction could be extended by an unknown length of time, from a couple of months to as long as a year."

...this reflects back on the point made by Wrongmove: the perception of reality rather than reality itself has changed. And this was suggested to imply quite some delay until the perception changed to one which is more gold bullish. My view would be that perception changes can be very sudden (as happened just last week) and they come out of the blue. Also, the more remote the perception is from the truth, then its more likely to correct sooner rather than later

 

"During the seventies' bull market gold lost about half of its value in a period of two years, just before embarking on an unprecedented run that took the price to $850/oz."

...we must be careful with this. The 43% fall happened because oil had been painfully high and constant for several years, people started to 'get use to it' - meaning their fear was waning. Then oil started to fall, giving great reassurance and making people sell gold. Only then did OPEC try to squeeze the oil market, so pushing the price of oil up to unimaginably higher prices in a short time frame - which caused massive fear and gold's massive reactionary peak.

...so its all about fear and oil. It was then, and it will be again - but you can't expect the price moves to necessarily match between the 70's and now percentage for percentage.

Great post.

 

I fight perception with facts myself.

 

1 There is no way a guy on £20k can afford a house for £180k-this is not affordable and will have to correct.

2 No facts have come to light this week that suggest this crisis is over, or is fundamentally improving in a meaningful way.

 

The fear will return.

 

Nick

 

[bitbigt]

Great post.

I fight perception with facts myself.

1 There is no way a guy on £20k can afford a house for £180k-this is not affordable and will have to correct.

2 No facts have come to light this week that suggest this crisis is over, or is fundamentally improving in a meaningful way.

The fear will return.

Nick

'Dr' nick ???

 

One other core fact to keep in mind:

 

>15 years of global M3 growth at >15% !! ...and all that money is still sloshing around out there.

Now keep in mind that M3 increases do not necessarily cause an immediate increases in inflation: in the last 15 years Asia has taken all that new money from us (in return for cheap goods and services) and used it to increase their standard of living and build their country ...often referred to as 'exporting inflation to them'. You can think of China, India etc like a big train, which needed a lot of pushing (money) to get it moving. But now its rolling along and the engine is firing up there is no stopping it, and this will cause a delayed and massive inflation backlash for the West, which must be big enough to reflect the 15 years of global M3 growth at >15% [i.e., they'll now hand back that inflation we originally exported to them ...plus more!].

 

The UK government basically admits this when they say "this inflation we're suffering is coming from the rest of the world"

 

...oh, but in the next breath "if we all accept low wage increases then we can bring inflation back under control" ...duh!!!

[njpurser]

'Dr' nick ???

 

One other core fact to keep in mind:

 

>15 years of global M3 growth at >15% !! ...and all that money is still sloshing around out there.

Now keep in mind that M3 increases do not necessarily cause an immediate increases in inflation: in the last 15 years Asia has taken all that new money from us (in return for cheap goods and services) and used it to increase their standard of living and build their country ...often referred to as 'exporting inflation to them'. You can think of China, India etc like a big train, which needed a lot of pushing (money) to get it moving. But now its rolling along and the engine is firing up there is no stopping it, and this will cause a delayed and massive inflation backlash for the West, which must be big enough to reflect the 15 years of global M3 growth at >15% [i.e., they'll now hand back that inflation we originally exported to them ...plus more!].

 

The UK government basically admits this when they say "this inflation we're suffering is coming from the rest of the world"

 

...oh, but in the next breath "if we all accept low wage increases then we can bring inflation back under control" ...duh!!!

Yes, M3 curve is now exponential.

 

This is going to get very interesting.....

 

Nick

 

[G0ldfinger]

Incase anyone missed it. The Silver Sammy index is screaming

 

http://goldismoney.info/forums/showthread.php?t=290831

WOW! An SSS! The bottom is in (99% guaranteed ). Thanks for letting me know!

 

I really do think the best policy towards baiters is to just ignore them, rather than encourage their drivel by responding.

Sorta fun. Here we go:

 

Of course that is your shout. I'm not going to argue with you. But the last few days price action should give you a hint.

 

How can an asset this volitile preserve anything? Some people have lost 10% (nominal) in just a few days? Hardly a "safe haven" at the moment.

I suggest you put everything into Dollar then. On the other hand, you could start viewing gold as the real thing, and despise the USD and lots of other fiat for being too volatile.

 

Since the central banks are basically 'against' gold, they (and others) implicitly cause this volatility. To drive people into their paper crap.

 

wrongmove, no one is expecting you to hold gold. Sell it all, so that you don't have to worry anymore.

[Compounded]

Consumer spending has collapsed in the UK, we are in freefall.

 

Gold looks the only sensible bet .

 

Nick

 

The Pound is now below $1.90, so the gold drop is not so bad in for sterling holders like myself.

 

I thought 25% corrections in the gold price are normal and nothing to worry about at all.

 

[cazlane]

Is this your personal 'back up the truck' number?

 

I think after this plunge, somewhen later this year or next year, we will see the mother of all rebounds. Maybe when one of the big ones, like UBS or RBS, goes belly-up.

 

Maybe this is the time for me to start getting into mining shares? Although, I wanted to wait on the City/Wall Street crash first. Hmm, decisions... Otherwise, I will continue accumulating physical silver, some gold, and maybe Palladium.

 

 

Not me personally, I just wouldn't be at all surprised if we reach that level in the near term. Im more likely to buy into more silver if we see a big enough dip-OH was champing at the bit to get more this week but Im gonna wait it out a while longer to see how low it will go. Palladium and platinum are looking like good buys again though I wouldnt be surprised to see more downside in platinum in the coming days. Last time I bought platinum it was not much above $1200 an oz and I traded out half at around the $2200 mark-I can easily see a retrace all the way back down to $1265 or thereabouts taking place so Im holding off for now.

[UpTheKhyber]

Of course that is your shout. I'm not going to argue with you. But the last few days price action should give you a hint.

 

How can an asset this volitile preserve anything? Some people have lost 10% (nominal) in just a few days? Hardly a "safe haven" at the moment.

Tut tut. You may as well use the same argument against investing in housing, shares, commodities, or the multitude of other assets which peoples' life savings, and especially pensions, are invested in. They are all done with the same aim: to try and preserve wealth and possibly even grab a larger slice of the pie. Investing in volatile asset classes is the only way you can attempt to preserve wealth in the long term, in a world where broad money just keeps on expanding.

 

The question in my mind regarding gold in my mind, is whether I am likely to get a higher return over the next 2-5 years than in other asset classes. Right now I'm still holding my bet on gold performing well over the medium term. I'm also of the view that a certain holding in precious metals is a sensible insurance policy.

 

Having said that I'm not going to bet the farm on gold or silver. Anyone who does because they view them as a short-term one-way bet is braver/crazier than I am.

[Gatesy]

Anyone feel that the progress shown in silver this morning is bullish for a bottom, or just irrelevant?

 

[notanewmember]

ssh keep quiet about that silver!

 

 

[notanewmember]

Whoosh. Now you've done it, silver new intra day high.

 

 

Picture of a rocket please

[Gatesy]

Strange divergence on silver here since NY pre trading at 1.30 between spot futures prices (via etrade) and spot prices on IG index. What gives?..

 

$14.57 on etrade versus v $14.82.

 

edit: $14.57 on etrade

[Justin Thyme]

Commiserations to those who lost on leveraged positions and those who bought at $900+ !! Interesting reading comments from contributors who may have taken some of the opinions aired here as the basis upon which to enter markets as volatile as those built around gold and silver.

 

This drop has surprised most of us - even, I think, Dr Bubb ! I was going to investigate the possibility of buying some calls but decided against it cos I was too darned lazy to get more info on how to buy, how much to pay but NOW . . .

 

The fundies remain firmly, irrefutably in place and doubters - including myself, from time-to-time - must always bear that in mind . . . Do NOT sell

[notanewmember]

You're playing against the pros here. I m just a mere mortal with no contacts on Wallstreet, Jp Morgan, COMEX, Washington or Zurich.

 

Me play calls/puts? I ll need some help and inside information.

[notanewmember]

Duplicate

[wrongmove]

I suggest you put everything into Dollar then. On the other hand, you could start viewing gold as the real thing, and despise the USD and lots of other fiat for being too volatile.

 

Since the central banks are basically 'against' gold, they (and others) implicitly cause this volatility. To drive people into their paper crap.

 

wrongmove, no one is expecting you to hold gold. Sell it all, so that you don't have to worry anymore.

 

If I am suggesting anything, it is a balanced, diversified approach. I'm not suggesting "putting everything" into anything. And as a UK citizen wishing to move to Eurozone, dollars are not even on my radar.

 

Thanks for the advice GF, but I'll do my own research thanks. Disclosure - I am not, nor have I ever have been, either long or short gold. I'm certainly not worrying about anything gold related.

[Gatesy]

Strange divergence on silver here since NY pre trading at 1.30 between spot futures prices (via etrade) and spot prices on IG index. What gives?..

 

$14.57 on etrade versus v $14.82.

 

edit: $14.57 on etrade

 

 

Gap now gone. Weird. There was a c.$0.25 gap for about half an hour. I think the error was on etrade as well.

[wrongmove]

Tut tut. You may as well use the same argument against investing in housing, shares, commodities, or the multitude of other assets which peoples' life savings, and especially pensions, are invested in. They are all done with the same aim: to try and preserve wealth and possibly even grab a larger slice of the pie. Investing in volatile asset classes is the only way you can attempt to preserve wealth in the long term, in a world where broad money just keeps on expanding.

 

The question in my mind regarding gold in my mind, is whether I am likely to get a higher return over the next 2-5 years than in other asset classes. Right now I'm still holding my bet on gold performing well over the medium term. I'm also of the view that a certain holding in precious metals is a sensible insurance policy.

 

Having said that I'm not going to bet the farm on gold or silver. Anyone who does because they view them as a short-term one-way bet is braver/crazier than I am.

 

My main conclusion (for myself, based on my own research) is that gold is certainly not a farm bet. I am not convinced by the "gold is money" theory (as discussed elsewhere) and without that, gold has a certain amount of physiacl demand for jewelry, which should keep prices ablove the cost of production, but beyond that it is all just speculation.

 

Speculation is fine and good, but they are some here who seem to have muddled the two strategies for gold into one. i.e. they are playing the market like a speculator, yet they think they are just trying to preserve their wealth. To me, this is a dangerous muddling.

 

I am just trying to seperate "gold as insurance" and "gold as speculative instrument". But it seems to me that with gold so far above the cost of production, gold is now more speculative than wealth preserving.

 

Who has ever really made a big stack with gold? That tiny handful that managed to buy 40 years ago (before the last extermely short lived bubble), and hold and hold and hold and then mange to press the sell button in that week or so it peaked.

 

 

 

[G0ldfinger]

Gap now gone. Weird. There was a c.$0.25 gap for about half an hour. I think the error was on etrade as well.

Error, or their way of making money?

[rgleeson]

About 12 months ago, I remember reading a number of articles that predicted a sell off in gold alongside other commodities as we progressed further into to the down turn and demand plummeted. That might be happening here. But they also predicted that the monetary properties of gold would re assert, detach from commodities, and the price would take off once again.

 

I still find this argument attractive, though I’m becoming less inclined to believe that we’ll see a gold bubble and blow-off. I just don’t see where the general public investment buyers are going to come from. The general deleveraging, paying down of debt, and lack of savings, leaves little scope for investment mania pumped into Gold.

 

Another possibility is that, though I went all in on Gold 12 months ago, I might be the ‘public’, rather than the ‘smart investor’. In which case there is sharp learning curve ahead for me

 

We need more contrarian debate on this thread. Group self re-enforcement is a seductive but dangerous thing. Perhaps we can entice ?..! to come over from HPC and lecture us on deflation...

[cazlane]

Silver bottoming? I dunno HOWEVER am still very tempted to take a spot on a few kilos today-decisions decisions

 

[G0ldfinger]

Silver bottoming? I dunno HOWEVER am still very tempted to take a spot on a few kilos today-decisions decisions

I might buy some junk silver soon. Not sure whether I will go American or British. British are less recognizable and only 40%, I think. So, maybe I go for American 90% coins.

 

The good thing is that while your gold coins will (inconveniently) buy the whole supermarket when the SHTF, a silver coins will be good for one shelf only. It's just handy to have some.

[Gatesy]

Error, or their way of making money?

 

And it's back again. $14.65 v $14.79 now. I've never seen this before. I can't see how etrade could be manipulating this as the prices should reflect what's available in the market, certainly on the actual futures contracts themselves.

[marmite]

I might buy some junk silver soon. Not sure whether I will go American or British. British are less recognizable and only 40%, I think.

 

All UK silver coins issued before 1920 are sterling (.925) Silver, and all coins issued between 1920 and 1946 contain 50% silver (.500)

 

 

[G0ldfinger]

And it's back again. $14.65 v $14.79 now. I've never seen this before. I can't see how etrade could be manipulating this as the prices should reflect what's available in the market, certainly on the actual futures contracts themselves.

Are you buying an actual silver future there, or are you just betting/are they just shorting something to you? If the contract expires, how do you usually take physical delivery?

 

Is it real, or just paper?

 

All UK silver coins issued before 1920 are sterling (.925) Silver, and all coins issued between 1920 and 1946 contain 50% silver (.500)

Cheers. American for me, I think. Higher marketability. And 90% until 1964.

[electroweak]

HERE COMES NACHO GOLDO........

edit.. hadn't noticed the irony of the guy wearing golden shorts.