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I honestly think this is a very short term correction and the next uptick is imminent/3 weeks away. This in my mind is not a replay of last year when you look at the fundamentals. Personally I think if there is a stock market bounce it will only last a few weeks at best, you have to remind yourself what's on the horizon:

 

1) Continuous onslaught of CDO/CDS exposure

2) Further worldwide bank nationalisation

3) Soaring unemployment and commercial/retail bankruptcies

4) International currency devaluations

5) Soaring food inflation

6) Collapse of hedge and pension funds

7) The IMF is out of money

8) QE and the systemic inflationary kickback

9) Civil unrest

10) Sovereign default

11) Eastern EU sovereign default wipes out Western Europe financial markets

 

I could go on.... Simply there is nothing positive to say about anything at the moment. In short they will have to let gold go at some point, so the interim volatility doesn't bother me. Excluding hyperinflation (HI), I think a safe estimate would be $2,700/t oz, but it could be anywhere up to $6,000 and if HI hits, the sky's the limit. I am also expecting parity with the dollar in the next 5-6 months.

 

Thanks!

 

I'm still going to keep watching prices, and judging the market - even though I now have only a little skin in the game.

 

Regarding bear trap...

- are we deep in the valley of that trap, or just part way along the downward slope? [i think the latter]

- how long until we start on the next upleg? [i think it could be many months away, if stocks have a significant bear market rally]

- how high up will the final 'mania' leg be ALLOWED to go by the PPT [i think they have more control that any of us would like to admit]

 

Gold should already be at USD 1500-2000 if everything worked out fairly and logically, but it doesn't :(

 

[PS. I'm already missing my gold investment, and starting to wonder if I shouldn't buy a smaller house and buy some of my recent profits back in at the base of the bull trap!!!]

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I honestly think this is a very short term correction and the next uptick is imminent/3 weeks away. This in my mind is not a replay of last year when you look at the fundamentals. Personally I think if there is a stock market bounce it will only last a few weeks at best, you have to remind yourself what's on the horizon:

 

1) Continuous onslaught of CDO/CDS exposure

2) Further worldwide bank nationalisation

3) Soaring unemployment and commercial/retail bankruptcies

4) International currency devaluations

5) Soaring food inflation

6) Collapse of hedge and pension funds

7) The IMF is out of money

8) QE and the systemic inflationary kickback

9) Civil unrest

10) Sovereign default

11) Eastern EU sovereign default wipes out Western Europe financial markets

 

I could go on.... Simply there is nothing positive to say about anything at the moment. In short they will have to let gold go at some point, so the interim volatility doesn't bother me. Excluding hyperinflation (HI), I think a safe estimate would be $2,700/t oz, but it could be anywhere up to $6,000 and if HI hits, the sky's the limit. I am also expecting parity with the dollar in the next 5-6 months.

 

...or is much of that already in the price - explaining why gold has rise to 900-1000 even in a disinflationary environment? If so, people may now be starting to look beyond those problems, and seeing a light at the end of the tunnel. Only when the more extreme items in your list come to pass (e.g., painfully high inflation 2-4 years from now, civil unrest) will fear rise and confidence in fiat plummet the way it should.

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...or is much of that already in the price - explaining why gold has rise to 900-1000 even in a disinflationary environment? If so, people may now be strating to look beyond the problems, and seeing a light at the end of the tunnel.

 

Looking at the action in markets today - I'm not so sure. That 'positive' feeling seems to be missing. Hmmm...

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http://www.usagold.com/amk/abcs-gold-coin-shortage.html

 

Gold coin shortage likely to become chronic

 

Is the U.S. Mint's production problem long-term or short-term?

 

What will be the effect on gold coin prices?

 

In 1999, at the height of the Y2K crisis and under the strain of record gold demand, the U.S. Mint produced 2,055,000 1-ounce gold American eagles.

 

In 2008, with the world embroiled in an unprecedented economic crisis and once again under the strain of record gold demand, the U.S. Mint produced only 710,000 1-ounce American eagles and 189,500 1-ounce American gold buffaloes -- just under half its 1999 production.

 

The Mint's ability to keep up with demand in the ramp-up to Y2K played a key role in suppressing premiums on bullion gold coins. The Mint's inability to keep up with demand in 2008 drove premiums to the double digits at one point and helped add 2 percent to the baseline cost of gold coin acquisitions in 2009.

 

When the American eagle shortages first cropped up in August 2008, the Mint blamed the problem on its vendors, saying they were "not able to supply enough 1-ounce gold bullion blanks to meet the unprecedented demand we are experiencing." The Mint promptly thereafter suspended all sales of the popular 1-ounce coins.

 

To understand the full implications of the Mint's production problems, two important pieces of information need to be taken into consideration.

 

First, all the 1-ounce gold blanks purchased by the Mint now come from one refiner in the western United States.

 

Second, with global refiners already running at capacity, Mint officials' attempts to line up additional blank manufacturers are likely to be rebuffed.

 

The prognosis under the circumstance is not a good one: The problem appears chronic and unlikely to resolve itself any time soon.

 

Unlike the Y2K event, which resolved itself as soon as New Year's Day 2000 came and went, the current strong demand is the result of a secular gold bull market deepened by the worldwide economic crisis. As such this is a whole new ball game for the gold market. Typically, in past bull markets the principal market driver was supply and demand for the metal itself. In the current bull market, it looks like there will be an additional driver to the price paid by those acquiring gold -- the premiums added to the price because of the combination of burgeoning demand and the diminishing supply of gold coins.

 

The role played by gold premiums -- the add-on paid over the melt value of a gold coin -- is little understood and frequently overlooked by gold investors. Usually, premiums remain relatively constant and cover the costs of minting and marketing the coins. When coin supply and demand get out of kilter, rising premiums are the mechanism that restores balance.

 

The bad news is that rising premiums can add significantly to acquisition costs for gold consumers. The good news is that rising premiums can add to the profits for those who already own gold coins and for those who were farsighted enough to buy early in the process.

 

A historical precedent can be found in the gold market of the late 1960s. At that time gold was pegged at $35. As the dollar crisis of the late 1960s and early 1970s unfolded, investors globally began moving into gold coins like the U.S. $20 gold piece, the British sovereign, the German 20 mark, Swiss 20 franc, et al. Though the gold price itself was fixed, premiums on gold coins were not. The demand drove premiums on these coins to unimaginable levels -- in some case four to five times melt value.

 

We got a whiff of that sort of thing when contemporary gold coins briefly reached premiums of 12 to 15 percent at the height of the gold rush in 2008. (Pre-1933 gold coins went to premiums in excess of 20 percent.) Once the market settled down, though, a base premium 2 percentage points above normal remained.

 

If the mints are indeed boxed in by the blanks problem, and it appears they are, there will be no easy way to keep those base premiums in check over the long run. It appears that the bullion gold coin shortage has become a chronic problem and something gold owners and accumulators will need to keep an eye on in the months to come.

 

Michael J. Kosares

03/08/09

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Buffett's response to a question that came from an investment club of seventh and eighth graders who invest $1 million in fake money every year. This is the Grizzell Middle School Investment Club in Dublin, Ohio, and the question is, where do you think gold will be in five years and should that be a part of value investing?

 

BUFFETT: I have no views as to where it will be, but the one thing I can tell you is it won't do anything between now and then except look at you. Whereas, you know, Coca-Cola will be making money, and I think Wells Fargo will be making a lot of money and there will be a lot--and it's a lot--it's a lot better to have a goose that keeps laying eggs than a goose that just sits there and eats insurance and storage and a few things like that. The idea of digging something up out of the ground, you know, in South Africa or someplace and then transporting it to the United States and putting into the ground, you know, in the Federal Reserve of New York, does not strike me as a terrific asset.

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Buffett's response to a question that came from an investment club of seventh and eighth graders who invest $1 million in fake money every year. This is the Grizzell Middle School Investment Club in Dublin, Ohio, and the question is, where do you think gold will be in five years and should that be a part of value investing?

 

BUFFETT: I have no views as to where it will be, but the one thing I can tell you is it won't do anything between now and then except look at you. Whereas, you know, Coca-Cola will be making money, and I think Wells Fargo will be making a lot of money and there will be a lot--and it's a lot--it's a lot better to have a goose that keeps laying eggs than a goose that just sits there and eats insurance and storage and a few things like that. The idea of digging something up out of the ground, you know, in South Africa or someplace and then transporting it to the United States and putting into the ground, you know, in the Federal Reserve of New York, does not strike me as a terrific asset.

should have just asked him where the dollar will be

 

gold is money - sometimes its good to hold excess money - when financial assets are overvalued

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BUFFETT: ...The idea of digging something up out of the ground, you know, in South Africa or someplace and then transporting it to the United States and putting into the ground, you know, in the Federal Reserve of New York, does not strike me as a terrific asset.

He quite clearly does not understand the concept of a monetary commodity, i.e. real money. This would distress me quite a bit if I were invested with him (which I am not).

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should have just asked him where the dollar will be

 

gold is money - sometimes its good to hold excess money - when financial assets are overvalued

 

 

The majority of people do not accept your view that gold is money. Try buying a loaf of bread in Tesco with your gold. Gold has no intrinsic value, unlike oil or corn or sugar. Gold depends on people's acceptance of it as a store of value. Just like fiat.

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Very few people accept that gold is money. Try buying a loaf of bread in Tesco with your gold. Gold has no intrinsic value, unlike oil or corn or sugar. Gold depends on people's acceptance of it as a store of value. Just like fiat.

That's only because of the combination that these people are stupid and the government wants them to stay stupid.

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The majority of people do not accept your view that gold is money.

My experience says different. My father runs a shop and will happily barter with customers. On one occasion this involved payment in gold! Rare certainly but it does happen and my father was delighted!

 

More recently an email came round at work from someone within the company saying they would like to buy any scrap or unwanted gold jewelery. I then over heard a group of colleagues saying and i quote:

 

"got any gold?! that's like asking can i have your unwanted money!"

 

They certainly understood that gold is money. The public seem more clued up on the nature of gold than i thought.

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The majority of people do not accept your view that gold is money. Try buying a loaf of bread in Tesco with your gold. Gold has no intrinsic value, unlike oil or corn or sugar. Gold depends on people's acceptance of it as a store of value. Just like fiat.

well if the govts carry on their current path - tesco because of its dependance on global trade wont survive

 

i'm with some old politicians regarding what is money - and people when left to their own devices have decided that gold and silver are the best medium of exchange

 

 

link

The new Congress and President Washington obviously understood those mandates when they passed into law in 1792 the Coinage Act, one of the first acts of the newly formed federal government. It established the Silver Dollar, weighing 371-1/4 grains of fine silver, as the monetary unit of account of the United States. This Act also defined the value of gold in terms of silver, namely, 15 grains of silver were deemed to equal one grain of gold. By setting this rate of exchange between gold and silver, the new Congress and President Washington were fulfilling their Constitutional duty as required in Article I, Section 8, which states: “To coin Money, regulate the Value thereof…”

 

 

 

This clause – “regulate the Value thereof” – is often misunderstood today, but its intent was clear to the framers. It meant only one thing. Congress was required to fix the rate of exchange between gold and silver, and by so doing, determine whether the country would be on a gold or silver standard. A silver standard was established by the 1792 Act and remained the monetary standard until the Gold Standard Act was passed and signed into law in 1900.

 

 

 

To “regulate the Value thereof” did not mean that Congress and the president could change the value of the dollar or debase it with inflation. The dollar is supposed to be an unchanging unit of measure like a ‘foot’, a ‘pound’ or a ‘gallon’. The federal government has no Constitutional authority to change the ‘size’ of the dollar, just like it has not been granted the power to change any other measure.

 

 

 

As evidence for this conclusion, note that clause 5 of Article I, Section 10 reads in its entirety: “To coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures.” The framers understood that money is no different from other units of measure, and accordingly, they placed these items within the same clause by granting to Congress the power to establish these standards. And so it was, until 1933 with the confiscation of gold by Franklin Roosevelt, which began the process – which continues to this day – of debasing the dollar and moving it further from the requirements of the Constitution.

 

 

 

Hopefully the efforts in Indiana and New Hampshire and in time, other states will bring about the required change needed to put the US back on the right path, one state at a time. It is what the framers intended. It is the lawful alternative. It is the path to constitutionally mandated sound money

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According to the Bank of International Settlements, the world's total of derivatives investments, including the poorly understood credit default swap (CDS) market reached some $700 trillion at its height, or more than 20 times the world's total annual production! The American portion was about $419 trillion, or some 40 times America's annual production.

 

The essential problem is that these inherently risky securities were used as collateral for loans. The fall in their value resulted in massive deleveraging. Of course, not all derivatives are yet flawed, or toxic. So, it can be assumed that, in the absence of a total financial collapse, only a limited number will default.

 

However, if a conservative assumption were made that only some two percent of derivatives fail, it would still amount to some $14 trillion. The American share would be about $8 trillion, or almost one year of GDP once that figure declines to a sustainable level. The estimated total capitalization of all U.S. banks is some $1.6 trillion. But, this amounts to only 20 percent of the potential American liability.

 

So far, American citizens have been forced to provide financial institutions with nearly $2 trillion in additional bailouts. This brings the total of current U.S. banking capital to some $3.6 trillion, still less than half of the potential problem, leaving a massive $4.4 trillion shortfall. In light of this, even noted bearish economist Nouriel Roubini's estimate of a $3.6 trillion shortfall appears to be too optimistic.

 

Of course, not all American banks are in trouble. There are a number of local and regional banks whose managements did not participate in gambling away America's financial future. Nevertheless, investors should ask themselves some hard questions. What if the government is forced to face the fact that the U.S. banking system, as a whole, is already fundamentally insolvent? What if the Administration is therefore forced, despite its expressed disinclination, to nationalize the problem banks?

 

Most importantly, while the good banks are being separated from the bad in the FDIC's ‘coral', will all American banks be forced to close? Worse still, after the forthcoming G-20 meetings, will all international banks be closed on a temporary basis, on a long bank holiday, as happened in the Great Crash? If so, what would happen to consumer confidence and the price of gold?

 

Citigroup says that it is profitable. At the same time, most banks are in dire straits. Until Citigroup is able to put its capital where its mouth is, investors in U.S. financials should remain cautious.

 

gold seek

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It's possible the prospect has been priced in, but not the reality. How would you put a value to it and if you can't put a value to it how can you look beyond it? I see no light at the end of the tunnel, all I see are large chunks of the roof caving in. There have been various police reports of rioting this summer, it may happen quicker than you think, this certainly isn't a linear event.

 

...or is much of that already in the price - explaining why gold has rise to 900-1000 even in a disinflationary environment? If so, people may now be starting to look beyond those problems, and seeing a light at the end of the tunnel. Only when the more extreme items in your list come to pass (e.g., painfully high inflation 2-4 years from now, civil unrest) will fear rise and confidence in fiat plummet the way it should.
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The majority of people do not accept your view that gold is money. Try buying a loaf of bread in Tesco with your gold. Gold has no intrinsic value, unlike oil or corn or sugar. Gold depends on people's acceptance of it as a store of value. Just like fiat.

Buffet is an equities man. He did extremely well in a period of growth. The tide has changed and we are now in a period of wealth destruction. It has been estimated that 45% of the world's wealth has already been destroyed. Buffet's own account is down 50% this year. You do not need to be a rocket science to see that gold as a currency is one of the best places to preserve your capital.

 

http://www.iht.com/articles/reuters/2009/0...-BLACKSTONE.php

 

 

All money is "anthropocentric" where it depends on psychology and people's acceptance. Ask yourself; "Has gold been accepted, is gold being accepted and will gold be be accepted as a store of value by the market?"

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The majority of people do not accept your view that gold is money.

 

a consensus doesn't make a fact.

 

the fact that the majority of the population is economically ignorant has allowed many GEI members to load up on sub £300 /t.oz gold.

 

Try buying a loaf of bread in Tesco with your gold.

 

http://www.guardian.co.uk/world/video/2009...starvation-food

 

Gold has no intrinsic value

 

what's that supposed to mean?

 

unlike oil or corn or sugar.

 

it would be impractical to store your life savings in oil, corn and sugar, unless you're really poor.

 

Gold depends on people's acceptance of it as a store of value. Just like fiat.

 

fiat is not accepted; it is imposed.

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The majority of people do not accept your view that gold is money. Try buying a loaf of bread in Tesco with your gold. Gold has no intrinsic value, unlike oil or corn or sugar. Gold depends on people's acceptance of it as a store of value. Just like fiat.

 

When I first got interested in gold, a friend asked me why gold has any value at all. At the time, I didn't have a good answer, although I recognised the plausibility that the value associated with gold may rise.

 

These days, I may be able to offer some kind of reply...

 

I'm not sure anything has intrinsic value. I don't even really know what intrinsic value means.

 

However... Aluminium is a material whose properties make it useful for making planes out of. Gold is a material whose properties make it useful as a form of currency.

 

Fiat currency shares some of the properties of gold which make fiat currencies useful as money. But one significant difference between fiat and gold is that, with gold, governments and/or central banks can't simply turn on the printing presses[1] to make more gold.

 

In short, it's harder for those in charge to devalue gold.

 

This is presumably why (assuming it's not just urban myth) Zimbabwean vendors will accept gold -- because they know the Zimbabwean government probably can't make it worthless.

 

[1] Or keep interest rates low to make credit cheap, or... any other mechanism that produces easy money from nowhere.

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The majority of people do not accept your view that gold is money. Try buying a loaf of bread in Tesco with your gold. Gold has no intrinsic value, unlike oil or corn or sugar. Gold depends on people's acceptance of it as a store of value. Just like fiat.

 

Try buying a loaf of bread in Tesco with any currency but the GBP.

This is a bad test of whether something can be used as money.

 

One should not confuse currency with money.

 

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The majority of people do not accept your view that gold is money. Try buying a loaf of bread in Tesco with your gold. Gold has no intrinsic value, unlike oil or corn or sugar. Gold depends on people's acceptance of it as a store of value. Just like fiat.

 

Ask people what, ”I promise to pay the bearer on demand the sum of TEN Pounds” means.

 

I found that the majority of people believe they can exchange their fiat for gold at the Bank of England.

 

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Quite funny really because we all like to have company, but at the same time we try to benefit from contrarian-ness.

Resolve that one :D

 

Resolving it would spoil the fun. Without the conflicts the point of coming to the physical plane is lost ........... though I admit that an excess of herd-like (non)-think is not good for the soul ............ but I then I used to pick up holiday brochures to see what to avoid; was that an early contrarian indicator or an example of useless resistance?

 

In the meantime to stay ontopic, that was nice Euro/gold dip yesterday :)

 

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We've all seen charts of the last century's gold price in USD, corrected for inflation

 

But has anyone got (or could anyone approximate) the same chart for GBP?

BigT, I was thinking re your gold sale: did you consider buying an in the money put option in GBP (if such a thing exists?)

 

The only reason I ask is to possibly educate myself. It seems like the perfect case for an option but not the obligation to sell at a price.

You'd have limited the GBP loss whilst still being able to benefit from any upside.

 

Probably wouldn't have cost you too much if it was in the money?

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I was looking for a comparison of costs over the last 100 and 1000 years of prices in gold for things like , farming land , a meal , a house , a haircut etc - It would be interesting to see if gold value has stayed stable and how it compares to today's gold price - Any links ?

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I was looking for a comparison of costs over the last 100 and 1000 years of prices in gold for things like , farming land , a meal , a house , a haircut etc - It would be interesting to see if gold value has stayed stable and how it compares to today's gold price - Any links ?

 

gf has posted links to property and oil vs gold:

 

http://gold.approximity.com/gold_charts.html

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