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Sub-$500 gold ? :lol: Get a grip !

 

Who was that GEI poster calling $400 a few months back ? Produced all sorts of weird and wonderful charts to support his waffle.

To be fair, I believe BigT was expecting a low in the GBP gold price in the next few years. Not the next week weeks.

 

I don’t expect gold to drop that low over the next few years, but I do have a strategy* IF it happens. It’s best to think about these things in advance to avoid panic later.

 

* Strategy = Fraudulently take position of my parents house + MEW it + Back up the trucks + Wait for gold to go to The Moon + Sell gold and return house to parents.

 

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I'm confused. I thought you sold to buy a house, selling at what you thought was the best time, and avoiding any short-term changes against you.

Steve - I did indeed sell to lock in 200k cash, for a house. Then reflected on the tax hit we'd get bringing it to UK, so instead decided to use half of it to pay off Swiss mortgages on BTLs there. Other half is then free to go back into gold, at the 'right price'. [for UK house purchase, we'll just deploy more of our UK savings, and take a mortgage ...which will be covered by increased income from Swiss BTLs]

 

Sub 500 pounds?? If there is a reversal in the markets, which also looks likely, the pound will once again tank. Pounds look expensive at the moment. Yen and dollars look cheap... why not buy them with your pounds if you are waiting for a dip? :lol:

bigtbigt is holding out for sub £500 GBP gold.

To be fair, I believe BigT was expecting a low in the GBP gold price in the next few years. Not the next week weeks.

My 'right price' prediction back in March was 30% below the GBP prices then (i.e., sub 500). And I expected that to occur within 6 months to 2 years. We're now 5 months down the line, and have seen a 20% drop. However, the USD gold chart has shown more resilience than I expected, and so I am now slightly less certain of there being a sub-GBP500 opportunity. Hence my inclination to start nibbling now or soon.

 

EDIT: Most irritatingly: I placed a buy request this a.m. in Switzerland to get in before the BoE announcement, but they didn't execute before their lunch break. So given the last hours price changes (reactionary overselling of pound) I have decided to delay buying a while longer.

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Gold has been very stable the last few months, building a base. It is now quietly moving up to all time highs.

 

In the next couple of weeks we might well see it go through $1000 and stay there. I mean, who is going to sell? and there are plenty lined up to buy.

I remember hearing James Turk saying a few weeks back that that Silver would hit $15 before Gold challenged $1000. So here we go on the completion of the right shoulder for gold.

 

Got Gold :)

 

 

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Gold has been very stable the last few months, building a base. It is now quietly moving up to all time highs.

In the next couple of weeks we might well see it go through $1000 and stay there. I mean, who is going to sell? and there are plenty lined up to buy.

Next few months...

Who is going to buy: a few people who can see through the current and widely-reported price deflation and persistent stock market rally.

Who is going to sell: the many, many people who are believing we face deflation and who wish to cash out of gold to put their money in the rising stock markets

 

We must see through the majority's eyes, and not our own, if we wish to predict where gold is going.

 

So I still believe the price will idle along and/or slide slowly down some while yet. But I no longer think we're likely to get a rapid price fall.

 

 

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Next few months...

Who is going to buy: a few people who can see through the current and widely-reported price deflation and persistent stock market rally.

Who is going to sell: the many, many people who are believing we face deflation and who wish to cash out of gold to put their money in the rising stock markets

 

We must see through the majority's eyes, and not our own, if we wish to predict where gold is going.

 

So I still believe the price will idle along and/or slide slowly down some while yet. But I no longer think we're likely to get a rapid price fall.

The serious buyers of gold have moved on from the old mantra that deflation is bad for gold. And the volatility in gold has settled down because of it. Many investors are not buying gold as an inflation hedge but a currency now that other currencies are being "problematized" with reckless QE.

 

I do not understand why you think people who believe in deflation would buy stocks. When deflation bites next, it will kill the stock market.

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I do not understand why you think people who believe in deflation would buy stocks. When deflation bites next, it will kill the stock market.

Well - we have deflation, and we have a rising stock market!

 

I can theorise why this might be so, but it brings us nothing to do so. Basically, a lot of logical connections are missed by the masses.

 

For the vast majority, gold is the thing they buy when very scared (e.g., credit crunck panic, terrorist attack, war...) or when inflation is rampant (1970s). Those things are not apparent now, and those people will not be buying during deflation.

 

For a few informed individuals, the possible future inflationary impact of QE provides a reason to buy, and currently that is why the market is not collapsing - but that is not enough of a driver to make it shoot up. Too few people 'get it'.

 

...IMHO

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Well - we have deflation, and we have a rising stock market!

 

I can theorise why this might be so, but it brings us nothing to do so. Basically, a lot of logical connections are missed by the masses.

 

For the vast majority, gold is the thing they buy when very scared (e.g., credit crunck panic, terrorist attack, war...) or when inflation is rampant (1970s). Those things are not apparent now, and those people will not be buying during deflation.

 

For a few informed individuals, the possible future inflationary impact of QE provides a reason to buy, and currently that is why the market is not collapsing - but that is not enough of a driver to make it shoot up. Too few people 'get it'.

 

...IMHO

Gold does best in deflation

 

ash061709c.gif

 

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Well - we have deflation, and we have a rising stock market!

 

I can theorise why this might be so, but it brings us nothing to do so. Basically, a lot of logical connections are missed by the masses.

 

For the vast majority, gold is the thing they buy when very scared (e.g., credit crunck panic, terrorist attack, war...) or when inflation is rampant (1970s). Those things are not apparent now, and those people will not be buying during deflation.

 

For a few informed individuals, the possible future inflationary impact of QE provides a reason to buy, and currently that is why the market is not collapsing - but that is not enough of a driver to make it shoot up. Too few people 'get it'.

 

...IMHO

Well, many of the "ignorant masses" have been frightened to death and are largely out of the markets now, hunkered down trying to re-save for their retirement. I think the market is being driven now by investors and banks, not such an ignorant lot in the sense that they consider themselves financially savvy. Yet, I would suggest they are still susceptible to the mass behaviour and the madness of crowds.

 

imo, the explanation why market players are buying both commodities and stocks in the midst of a deflation [and here we agree that there is a deflation] is because they are concerned about the potential effects of QE. This portrays both mass behaviour and mass thought; as good monetarists they have been taught to believe that inflation follows increased money supply as surely night follows day. Hence QE and the credible threat of continued QE herds investors into the markets, it is simply an inflation trade on the future, but this is a future that might not eventuate. When/if investors realise this and see the reality of deflation instead they will all head for the doors at the same time.

 

Once again, with the buyers of gold, the ignorant masses will not be the prime mover of the price, the big and informed players have already started moving in.. savvier investors, large institutions and central banks. I reckon we will see steady buying continue as the long term future of major currencies continues to look bleak.

 

Though there is no doubt a lot of people do not "get it", there is also a lot who do get it and that is why I suspect we might not be seeing bargain prices in gold anytime soon.

 

Edit: I was thinking also of the graph P8R has posted above.

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Well, many of the "ignorant masses" have been frightened to death and are largely out of the markets now, hunkered down trying to re-save for their retirement. I think the market is being driven now by investors and banks, not such an ignorant lot in the sense that they consider themselves financially savvy. Yet, I would suggest they are still susceptible to the mass behaviour and the madness of crowds.

 

imo, the explanation why market players are buying both commodities and stocks in the midst of a deflation [and here we agree that there is a deflation] is because they are concerned about the potential effects of QE. This portrays both mass behaviour and mass thought; as good monetarists they have been taught to believe that inflation follows increased money supply as surely night follows day. Hence QE and the credible threat of continued QE herds investors into the markets, it is simply an inflation trade on the future, but this is a future that might not eventuate. When/if investors realise this and see the reality of deflation instead they will all head for the doors at the same time.

 

Once again, with the buyers of gold, the ignorant masses will not be the prime mover of the price, the big and informed players have already started moving in.. savvier investors, large institutions and central banks. I reckon we will see steady buying continue as the long term future of major currencies continues to look bleak.

 

Though there is no doubt a lot of people do not "get it", there is also a lot who do get it and that is why I suspect we might not be seeing bargain prices in gold anytime soon.

 

Edit: I was thinking also of the graph P8R has posted above.

So I think we largely agree, no?

 

The difference being our interpretaion of how many of what kind of investor are at play just now. But we do agree in the direction in which all this will ultimately develop (more and more 'getting it', eventually!)

 

But that table from P8R though prooves nothing - arbitrary selection of years, crude categorisation into deflation and inflation. One you use that kind of aproach to proove anything one wished to.

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So I think we largely agree, no?

 

The difference being our interpretaion of how many of what kind of investor are at play just now. But we do agree in the direction in which all this will ultimately develop (more and more 'getting it', eventually!)

 

But that table from P8R though prooves nothing - arbitrary selection of years, crude categorisation into deflation and inflation. One you use that kind of aproach to proove anything one wished to.

Yes, largely agree. We are both bullish and who can be sure what gold will do in the short term. Though that does not keep us from guessing. :lol:

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How do the central banks view gold?

 

Market Watch Link

 

European central banks agree to limit gold sales

 

LONDON (MarketWatch) -- The European Central Bank, the euro zone's 16 national central banks, the Swedish Riksbank and the Swiss National Bank on Friday released a joint statement announcing a new agreement to limit gold sales over the next five years. Under the plan, annual sales will not exceed 400 tons and total sales over the five-year period, which begins Sept. 27, will not exceed 2,000 tons. "Gold remains an important element of global monetary reserves," the banks said. The central banks also said the International Monetary Fund's intention to sell 403 tons of gold "can be accommodated" under the agreement.

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Gold does best in deflation

 

ash061709c.gif

 

When gold and silver are used as money inflation reduces the purchasing power of gold by definintion, which explains the table above.

 

How gold will hold value in another currency during a period of deflation is uncertain. It depends on the amount of leverage used to purchase gold.

 

As deflationists keep telling me I don't understand, a massive amount of credit has been issued and is evaporating. This credit allowed people to bid up the price of such things as houses, fitted kitchens, fancy cars and shoddy chinese consumer crap. As credit is withdrawn the price of these things will fall to their true market value. This is the 'disaster' of deflation that central banks hope to prevent by creating colossal amounts of money.

 

Some gold has also been bought on credit. But how much? If the price of gold has not been inflated by the same amount as the price of the other junk then the relative value of gold should increase as debt deflation occurs. This seems likely, but we will not find out. This is because central banks are creating phenomenal money to prevent 'the disaster' of deflation.

 

It is practically impossible for central banks to allocate the money they create so that the price of houses and consumer crap remains at its inflated, distorted high. Therefore general price rises in goods not bought on credit are inevitable. That means we can expect the price of such things as food and fuel to rise, while the price of houses and consumer crap continue to fall. As the amount of money created is huge and ongoing you can reasonably expect huge and ongoing price rises.

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When gold and silver are used as money inflation reduces the purchasing power of gold by definintion, which explains the table above.

 

How gold will hold value in another currency during a period of deflation is uncertain. It depends on the amount of leverage used to purchase gold.

 

As deflationists keep telling me I don't understand, a massive amount of credit has been issued and is evaporating. This credit allowed people to bid up the price of such things as houses, fitted kitchens, fancy cars and shoddy chinese consumer crap. As credit is withdrawn the price of these things will fall to their true market value. This is the 'disaster' of deflation that central banks hope to prevent by creating colossal amounts of money.

 

Some gold has also been bought on credit. But how much? If the price of gold has not been inflated by the same amount as the price of the other junk then the relative value of gold should increase as debt deflation occurs. This seems likely, but we will not find out. This is because central banks are creating phenomenal money to prevent 'the disaster' of deflation.

 

It is practically impossible for central banks to allocate the money they create so that the price of houses and consumer crap remains at its inflated, distorted high. Therefore general price rises in goods not bought on credit are inevitable. That means we can expect the price of such things as food and fuel to rise, while the price of houses and consumer crap continue to fall. As the amount of money created is huge and ongoing you can reasonably expect huge and ongoing price rises.

Thanks that is a very clear explanation, reaffirming what I thought.

 

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How gold will hold value in another currency during a period of deflation is uncertain. It depends on the amount of leverage used to purchase gold.

 

As deflationists keep telling me I don't understand, a massive amount of credit has been issued and is evaporating. This credit allowed people to bid up the price of such things as houses, fitted kitchens, fancy cars and shoddy chinese consumer crap. As credit is withdrawn the price of these things will fall to their true market value. This is the 'disaster' of deflation that central banks hope to prevent by creating colossal amounts of money.

 

Some gold has also been bought on credit. But how much? If the price of gold has not been inflated by the same amount as the price of the other junk then the relative value of gold should increase as debt deflation occurs. This seems likely, but we will not find out. This is because central banks are creating phenomenal money to prevent 'the disaster' of deflation.

I do not think you have much to fear in regards to the gold price in a deflation. The reason being is that gold is not on a par with other assets. It has not been bought as an "investment" in the super-abundant credit days. Though some have been buying gold as an inflation hedge, the prime reason gold is being bought today, with savvy investors cognizant of deflation, is that is now being considered a currency proper. With the big investors concerned about the debt burden on certain currencies [which btw can be a completely separate issue to inflation] it has increasingly become "monetized" in the minds of investors. It is now not a commodity/inflation hedge but a currency for them.

 

It is practically impossible for central banks to allocate the money they create so that the price of houses and consumer crap remains at its inflated, distorted high. Therefore general price rises in goods not bought on credit are inevitable. That means we can expect the price of such things as food and fuel to rise, while the price of houses and consumer crap continue to fall. As the amount of money created is huge and ongoing you can reasonably expect huge and ongoing price rises.

House prices should continue to come down against the currency. I doubt the price of consumables and durable goods will rise as there are deflationary counter-balancing forces at work. Exporting countires will reduce their prices in the attempt to maintain markets. Another way of looking at this is here will be demand destruction with a fall in consumption as spending drops off and savings picks up. Those that saved the currency, might end up doing well against property as it drops in nominal prices. Of course, there is the chance that the real value of the currency also drops, so if you were in a stronger currency such as gold you would do extremely well against property.

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How gold will hold value in another currency during a period of deflation is uncertain. It depends on the amount of leverage used to purchase gold.

 

As deflationists keep telling me I don't understand, a massive amount of credit has been issued and is evaporating. This credit allowed people to bid up the price of such things as houses, fitted kitchens, fancy cars and shoddy chinese consumer crap. As credit is withdrawn the price of these things will fall to their true market value. This is the 'disaster' of deflation that central banks hope to prevent by creating colossal amounts of money.

 

Some gold has also been bought on credit. But how much? If the price of gold has not been inflated by the same amount as the price of the other junk then the relative value of gold should increase as debt deflation occurs. This seems likely, but we will not find out. This is because central banks are creating phenomenal money to prevent 'the disaster' of deflation.

I do not think you have much to fear in regards to the gold price in a deflation. The reason being is that gold is not on a par with other assets. It has not been bought as an "investment" in the super-abundant credit days. Though some have been buying gold as an inflation hedge, the prime reason gold is being bought today, with savvy investors cognizant of deflation, is that it is now being considered a currency proper. With the big investors concerned about the debt burden on certain currencies [which btw can be a completely separate issue to inflation] it has increasingly become "monetized" in the minds of investors. It is now not a commodity/inflation hedge but a currency for them.

 

It is practically impossible for central banks to allocate the money they create so that the price of houses and consumer crap remains at its inflated, distorted high. Therefore general price rises in goods not bought on credit are inevitable. That means we can expect the price of such things as food and fuel to rise, while the price of houses and consumer crap continue to fall. As the amount of money created is huge and ongoing you can reasonably expect huge and ongoing price rises.

House prices should continue to come down against the currency. I doubt the price of consumables and durable goods will rise as there are deflationary counter-balancing forces at work. Exporting countires will reduce their prices in the attempt to maintain markets. Another way of looking at this is there will be demand destruction with a fall in consumption as unemployment rises, spending drops off, and savings picks up. Those that saved the currency, might end up doing well against property as it drops in nominal prices. Of course, there is the chance that the real value of the currency also drops, so if you were in a stronger currency such as gold you would do extremely well against property... perhaps twice as better than if you were in pounds.

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[Like most of us here :) . . . ]Bob Hoye is anticipating a correction in the markets. He's bearish on silver stocks and also suggests lightening up on the senior golds. Juniors? "Accumulate on weakness."

 

also

 

"Silver is about to plunge relative to gold."

 

Bob Hoye on Howe Street 7 Aug 2009

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I have been looking at the movement of the gold price this year against the seasonal change in the price of gold over the last five years and come up with this graph for you all to ponder over. As always do you own reasearch but it seems to suggest that the price of gold is under valued and could go up.

 

gold2009change.jpg

 

 

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I have been looking at the movement of the gold price this year against the seasonal change in the price of gold over the last five years and come up with this graph for you all to ponder over. As always do you own reasearch but it seems to suggest that the price of gold is under valued and could go up.

 

gold2009change.jpg

 

In what currency?

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