GOLD

[wrongmove]

Gold is not currently used as legal tender in many countries (if at all), and nor is it likely to be any time soon (i won't digress into that discussion). However that does not mean that gold does not have a monetary role; it still plays a key role in the asset backing of credit money, particularly fiat issued by central banks. Its ease of storage, liquidity, and lack of counterparty risk make it attractive in this role. What made it unattractive until recently was the lack of income yielded by gold compared with US government bonds. With these bonds now giving a negative yield, gold looks a whole lot more attractive, especially for asian central banks with a huge over-exposure to US Treasury Bills. It's no coincidence that the strength of the US dollar and the price of gold are inversely related. As long as the medium-long term outlook for the US dollar looks weak, gold is for me a hold/buy. The demand for gold (including in the form of jewellery) as a store of wealth by individuals, especially in poorer parts of the world should also not be underestimated. To deny the monetary role of gold is as daft as denying the sheltering role of housing.

 

 

Average total cost of gold mine production in Q4 2007 (@~US$520/oz) was ~65% the average spot price of gold in Q4 2007 (@~$US800). With costs increasing 17/25% year over 2006/7, and oil today at @~$US115/barrel vs ~$US85 in Q4 2007, if we get into Q4 2008 with price of gold @ $US800/oz then average gross margins will be down to ~20-25%, which is on or slightly below long-term industry average for the mining sector as a whole. Doesn't look to me much like an asset which is at the peak of a price bubble, unless you believe that energy and material costs will drop significantly in the coming years. I view this as unlikely with current demographic trends.

 

 

Depends what you mean by speculation in some ways, but gold seems a perfectly reasonable, middling risk/reward investment choice to me. That gold and bonds are favoured by central banks as assets gives some idea of how you should generally view it as an investment class. In a financial climate currently stuffed with counterparty risk and negative real returns on bonds, I would argue that a 10-20% holding in gold is sensible. If people are getting into physical gold as high risk/reward then they've chosen the wrong asset class imo. Anyone thinking they've found a low-risk/high-reward investment choice is just kidding themselves; there's no such thing.

 

 

Doesn't strike me as a fair description. The bull run in the 70's ran for 10 years, with a major multi-year correction half-way through. Yes, timing the exact top would be an impossible task, but then the same applies to any asset bubble. Doesn't mean you shouldn't invest in the first place though; as always you just need to be realistic about when to enter/exit the market.

 

 

I wouldn't (and haven't) bet the farm either. However, I do think your conclusions regarding gold as an investment are rather too pessimistic, just as I think some other people are rather too optimistic.

 

BTW, here's some more research for you, which is I think fairly balanced... http://www.gfms.co.uk/Market%20Commentary/...resentation.pdf.

 

Thanks for that UTK. You are probably right that I am too pessimistic. Especially when posting - I'm certainly not trying to play devil's advocate - I post what I think, but on a board like this, being non-pro gold can come across as being very bearish, which I am not either (I am not short gold, and certainly not planning to be, just not long either). In the "real world" I am considered a massively economic bearish by my peers, it is only here my views are considered bullish!

 

I am suspicious of gold as money, I could see it being a useful part of a barter system, but just a part. This makes me very skeptical of the rockets and forecasts of 10K gold etc.

 

I'm basically a 5-10%er, whereas you are a 10-20%er, not that far apart. I probably assign a slightly risk of deflation than you, and this would adjust the holding. Fiat is actually some form of 'protection' in deflation. (At the moment, i have other things to worry about, so I have no speculative money available and not much to protect.)

 

Thanks again for the reply. I'll check out the link when I get time.

[drbubb]

Re title of thread: what is CDNX, by the way?

 

The Canadian venture index: an index of small companies traded on Canada's Venture exchange

 

I use it as a proxy for Junior miners

 

[G0ldfinger]

http://blogs.telegraph.co.uk/ambrose_evans..._just_beginning

Ambrose Evans-Pritchard

...

Stage two of the gold bull market is just beginning

....

What we are about to see is a race to the bottom by the world\'s major currencies as each tries to devalue against others in a beggar-thy-neighbour policy to shore up exports, or indeed simply because they have to cut rates frantically to stave off the consequences of debt-deleveraging and the risk of an outright Slump.

 

When that happens - if it is not already happening - it will become clear that the both pillars of the global monetary system are unstable, infested with the dry rot of excess debt.

The Fed has already invoked Article 13 (3) - the \"unusual and exigent circumstances\" clause last used in the Great Depression - to rescue Bear Stearns. The US Treasury has since had to shore up Fannie and Freddie, the world\'s two biggest financial institutions.

 

Europe\'s turn will come next. We will discover that Europe cannot conduct such rescues. There is no lender of last resort in the system. The ECB is prohibited by the Maastricht Treaty from carrying out direct bail-outs. There is no EU treasury. So the answer will be drift and paralysis.

 

When EU Single Market Commissioner Charlie McCreevy was asked at a dinner what Brussels would have done if the eurozone faced a crisis like Bear Stearns, he rolled his eyes and thanked the Heavens that so such crisis had yet happened.

 

It will.

 

Gold bugs, you ain\'t seen nothing yet. Gold at $800 looks like a bargain in the new world currency disorder.

[G0ldfinger]

The Canadian venture index: an index of small companies traded on Canada's Venture exchange

 

I use it as a proxy for Junior miners

Cheers!

[drbubb]

For those who want to find these charts easily...

I am copying this post to the end of the Links page, and you can go there by clicking on "GEI-Links"

under the Banner, which is at the top of this & every page on GEI

 

I have a secret source. These are realtime, and meant to be private.

But I will share a link with you, which is similar, and has a 15 minute delay.

 

GLD: 10d-Intraday : 3yrs-Daily // Gold : 1yr-Daily : 5yr- Weekly

 

yesterday's chart:

 

BTW, that's a big buy: 2.7 million GLD shares = 270,000 ounces at $800/oz, that's : $21.6 million

 

Buying like that can turn the market around. Let's see if there are more BUY orders like that.

 

[Rikk03]

Ambrose Evans-Pritchard latest Telegraph article entitled.....

 

"Stage two of the gold bull market is just beginning"

 

http://blogs.telegraph.co.uk/ambrose_evans..._just_beginning

 

The article ends .......

 

What we are about to see is a race to the bottom by the world's major currencies as each tries to devalue against others in a beggar-thy-neighbour policy to shore up exports, or indeed simply because they have to cut rates frantically to stave off the consequences of debt-deleveraging and the risk of an outright Slump.

 

When that happens - if it is not already happening - it will become clear that the both pillars of the global monetary system are unstable, infested with the dry rot of excess debt.

 

The Fed has already invoked Article 13 (3) - the "unusual and exigent circumstances" clause last used in the Great Depression - to rescue Bear Stearns. The US Treasury has since had to shore up Fannie and Freddie, the world's two biggest financial institutions.

 

Europe's turn will come next. We will discover that Europe cannot conduct such rescues. There is no lender of last resort in the system. The ECB is prohibited by the Maastricht Treaty from carrying out direct bail-outs. There is no EU treasury. So the answer will be drift and paralysis.

 

When EU Single Market Commissioner Charlie McCreevy was asked at a dinner what Brussels would have done if the eurozone faced a crisis like Bear Stearns, he rolled his eyes and thanked the Heavens that so such crisis had yet happened.

 

It will.

 

Gold bugs, you ain't seen nothing yet. Gold at $800 looks like a bargain in the new world currency disorder.

 

Just what we need ...... good articles to turn the sentiment to positive on gold.

 

[Errol]

Ambrose Evans-Pritchard latest Telegraph article entitled.....

 

He sounds like a Sinclair fan.

 

Both are spot on, however. Hold physical gold. Do not trade on margin (or at all, frankly). We will see $1650++ by 2011.

[marmite]

Gold getting expensive when bought in £

 

Yesterday 1oz coins could be had for £450

 

Today 1oz coins are £466

 

As £ falls off a cliff

 

GBP/USD 1.8804

[Steve Netwriter]

Thanks Steve.

I think the thing that has been bugging me is, do you calculate your gold holdings by weight or monetary value ???

 

I can't say I've given this much thought. I think it has to be by value. But I think maybe you are trying to be too precise. Suppose I change 10% to "between 10% and 30%". ?

 

And to make your life even easier, that percentage range would move up and down according to the economic climate.

So in "really safe times" you'd have say 5% to 10%, and at times like this you'd have "10% to 30%" say.

 

I don't think you should worry too much about having too much gold

 

As I expect you can tell by now, I have no way of narrowing the answer

 

[Steve Netwriter]

Gold getting expensive when bought in £

 

Yesterday 1oz coins could be had for £450

 

Today 1oz coins are £466

 

As £ falls off a cliff

 

GBP/USD 1.8804

 

Still 88,500 Yen !

 

[marmite]

Gold getting expensive when bought in £

 

Yesterday 1oz coins could be had for £450

 

Today 1oz coins are £466

 

As £ falls off a cliff

 

GBP/USD 1.8804

 

Maybe I should be looking at this with different eyes

 

Do I want to be holding gold or £

 

I wonder where GBP/USD could be in 1 years time when Gold could be at $1200 ???

 

£450 - 460ish per oz might seem incredibly cheap.

 

 

 

[Steve Netwriter]

IMO currencies not to hold at all are:

 

US$, GBP, Euro, NZ$, AUS$ (I may have missed some) - basically those in debt !

 

Currencies to hold:

 

gold, silver, Yen, Swiss Francs (I may have missed some) - either real money or not in debt

 

 

I think it's tricky to know which out of the GBP and US$ will fall most

 

[romans holiday]

IMO currencies not to hold at all are:

 

US$, GBP, Euro, NZ$, AUS$ (I may have missed some) - basically those in debt !

 

Currencies to hold:

 

gold, silver, Yen, Swiss Francs (I may have missed some) - either real money or not in debt

 

 

I think it's tricky to know which out of the GBP and US$ will fall most

 

Kiwi dollars are getting much cheaper these days. I am considering buying some [shock, gasp... horror, I hear]as I am 100% in metals these days. I am not too worried about inflationary erosion as I want to spend these dollars one day on assets which are now deflating in price. Also, deflation is always lurking in the wings. By the way, our friend Ambrose Evans-Pritchard is a deflationist.

 

Edit to add: Certainly will not be buying dollars with my metal but with Korean won that I am earning.

[radge]

4 Reasons to Buy Gold Now

 

GEI and Goldfinger (in a roundabout way!) get a mention over at Money Week.

[Steve Netwriter]

US central bank in $25bn auction

http://news.bbc.co.uk/2/hi/business/7557476.stm

 

The US Federal Reserve has auctioned $25bn (£13.1bn) in loans to banks in its latest bid to boost credit markets.

 

The results of Monday's auction were revealed on Tuesday and showed the auction was oversubscribed with 64 bidders seeking $54.8bn from the bank.

 

This latest auction involved lending firms money for 84 days - rather than the 25 days of previous auctions.

 

[Steve Netwriter]

Kiwi dollars are getting much cheaper these days. I am considering buying some [shock, gasp... horror, I hear]

 

:blink:

 

I'm not sure how to put this.

 

 

 

 

Are you insane

 

Yeah, that gets my point over

 

How about buying some Yen or Swiss Francs instead ?

 

I don't see the point in buying a currency on the way down !

 

I'm waiting for the NZ$JPY rate to pass 70.

 

[Steve Netwriter]

4 Reasons to Buy Gold Now

 

GEI and Goldfinger (in a roundabout way!) get a mention over at Money Week.

 

For gold and silver investors this has been one of those weeks when you just wanted to bury your head in the sand, weep, then re-emerge in six months time. Many of the most unemotional traders I know have been wailing like bereaved heroines from a Greek tragedy, while others have been seen approaching strangers in the street and asking them for a hug.

 

 

That's as far as I've got so far. Am I going to get a mention as someone who loves these drops ?

 

[romans holiday]

:blink:

 

I'm not sure how to put this.

 

 

 

 

Are you insane

 

Yeah, that gets my point over

 

How about buying some Yen or Swiss Francs instead ?

 

I don't see the point in buying a currency on the way down !

 

I'm waiting for the NZ$JPY rate to pass 70.

 

Well, I am not planning to rush out and buy kiwi dollars tomorrow [like I do when I buy gold] ... in a month or so will buy some. I see some are calling for the kiwi to drop to around .65.

 

Feel I should have at least a few of them.... being a good patriotic kiwi

[Steve Netwriter]

This sell-off will have hit precious metals investors in two different ways. Those who hold only physical will have raised a weary eyebrow and observed, "Oh, another August sell-off" before returning to their beach read, possibly Ian Fleming's Goldfinger.

 

Hmmm, for me it's "The World According to Clarkson"

 

[Steve Netwriter]

Well, I am not planning to rush out and buy kiwi dollars tomorrow [like I do when I buy gold] ... in a month or so will buy some. I see some are calling for the kiwi to drop to around .65.

 

Feel I should have at least a few of them.... being a good patriotic kiwi

 

OK, wait a few months and buy 3x "gold coins"

 

I can be your patriot by proxy if you like

 

[romans holiday]

double post

[romans holiday]

"For gold and silver investors this has been one of those weeks when you just wanted to bury your head in the sand, weep, then re-emerge in six months time. Many of the most unemotional traders I know have been wailing like bereaved heroines from a Greek tragedy, while others have been seen approaching strangers in the street and asking them for a hug."

 

As they would say in New Zealand; "Harden up!!"

[romans holiday]

OK, wait a few months and buy 3x "gold coins"

 

I can be your patriot by proxy if you like

When you put it like that...... makes me want to buy the real ones!

[Steve Netwriter]

Come on then guys, you've got to listen to this.

 

Warren Pollock

Deflation - a Looming Disaster *AUDIO*

http://www.howestreet.com/audio/warrenpollock12082008.mp3

 

Warren explains what Keynes' dubbed a 'liquidity trap'. Make no mistake, says Warren - deflation can be worse than inflation.

 

-------------

 

I don't know what you guys think, but I kinda switched off when he said "you can see deflation by things like the price of gold going down"

 

To me when an 'expert' quotes a normal correction as evidence for a theory, they blow their credibility.

 

[romans holiday]

OK, wait a few months and buy 3x "gold coins"

 

I can be your patriot by proxy if you like

When you put it like that...... makes me want to buy the real ones!