GOLD

[absolutezero]

Why?

Most people in the public sector (pretty much the only place to get a half decent pension unless CEO of a FTSE 100 company) don't earn anything like £50k.

[d2thdr]

Please tell , I've always wanted to start a thread about those who did well from the last gold boom.

Did they purchase property outright, more than one ? How much did they have invested. How did they know it would rise etc ?

 

 

Anecdotal evidence but evidence nonetheless. MY parents separated when I was about 3 years old. As a consequence she was left to effectively fend off for herself. Remember this was in India not in the west where it could have been a lot more prevalent and possibly the system was there to support women in these instances.

 

All she had was gold she got from her parents as a wedding gift which was quite a significant amount which I believe she still has. There were instances when her income was not adequate enough to cover the outgoings as 2 young children and not a very high salary but a stable income was the only way to support the family and live with dignity.

 

The gold helped her stay out of debt long term. Though she did not sell it, she got a loan with gold as a collateral. This was helpful to get over times when socialist policies of the Indian government did not make life easy for employees of the state. This gold was again useful when we had to achieve higher education both in India and west. Never was this gold ever sold. She always mentions never ever sell gold unless you have no other choice.

 

Another anecdote;

 

My great grandfather was a very good lawyer. Money was difficult to come when you chose to not work for the British Raj. However, he did save up and was able to send my grandfather to a very expensive law school in India. He apparently( as told to me by my uncle) sold some of their family gold to buy a lot of property in between 1916 and 1935- which is still in the family. I believe India must have suffered a lot as a consequence of the great depression of 1929. And Britain must have bled India dry of gold and money in general to cover their own debt black hole.

 

 

 

I'm not saying gold isn't a good investment.

What I do say is: Is gold a good investment now?

And: I don't think holding most of your wealth in gold is a good idea. 10%? 20%? Why not? But over 50% and I think you're barking.

 

It is all in the mind. If you start accepting gold as money and not as investment, you will not have all these doubts of asset allocation over gold. I am 80% in gold. Read FOFOA.

[absolutezero]

It is all in the mind. If you start accepting gold as money and not as investment, you will not have all these doubts of asset allocation over gold. I am 80% in gold. Read FOFOA.

It's all well and good saying that but if you buy gold at £700 it will buy you £700 worth of goods.

If it falls to £350 then it'll buy me only half as many goods.

 

Gold is a commodity like any other, except it's pretty to look at and does have a magical kind of allure. However it is subject to supply and demand. Putting most of your money into it is speculation and not wisdom.

[grumpy-old-man]

It's all well and good saying that but if you buy gold at £700 it will buy you £700 worth of goods.

If it falls to £350 then it'll buy me only half as many goods.

 

Gold is a commodity like any other, except it's pretty to look at and does have a magical kind of allure. However it is subject to supply and demand. Putting most of your money into it is speculation and not wisdom.

 

I disagree, for me personally it wasn't 'speculation'

 

this depends on your understanding of finance, history, geo-politics etc

I have learnt so much by listening to everyone, regardless of their stance. Only then can you properly formulate a protection & investment strategy.

You must remain open when deciding things of this magnitude imo.

 

I mean how many traders have not &/or did not see the major market turns....

 

imo metals are THE only real protection right now......

[headmelter]

It obviously all depends on your personal financial situation and how much savings/assets you have.

 

Say, you are a 40-year old state employee on 50K/year and you have been there long enough to get a 50% final salary pension. Assume 80 years life span. Since all payments are inflation-adjusted, we don't discount them and we assume a retirement age of 65. The future lifetime income is 25x50K + 15x25K = 1.625M. Say you own a house outright, 250K. Say you have another pension fund of 50K, and your truly free assets (your "savings") are 100K (which is nice given you own the house outright and you have a safe job). Total assets: 2.025M. Now you put 10% (10K) of your liquid assets in gold, the rest in cash, and you think you are diversified.

 

OK, let's see. You have 10K/2.025M = 0.494% in gold, most of the rest in a bond (80.247%), a little in the house (12.346%), and 4.444% in cash.

 

0.494% (i.e. next to nothing) in gold, and the rest in investments (bond, house, stocks, cash!!) that will most likely suck big time.

 

You are NOT exactly well diversified in that case.

 

EDIT: Had to correct my figures.

 

EDIT2: Even if you put all savings (100K) in gold (wuahahaha, ALL eggs in one basket) you are still below 5% gold allocation! Indeed, ALL eggs are still in your bond (lifetime income) basket. Good luck. People who are in such a position (as above, with 10K in gold) and think they hold a lot of gold, they could as well spit into the Pacific and be proud that they raised the water level.

 

EDIT3: One could argue that there has to be tax paid on the income and daily expenses etc. However, that doesn't change the little gold figure too much (even if it doubled it), and in the end all expenses go out of one pot of assets (the ingredients, admittedly, get differently taxed).

 

 

Although I have to agree with absolutezero that your salary figures are somewhat inflated, I am now acutely aware I don't have enough gold. . . .

[grumpy-old-man]

Far too much money sloshing around.

 

 

evening Goldfinger.

[d2thdr]

Not sure if we are really disagreeing here. In the western tradition, knowledge [a body of systemic thought] is considered justified true belief. It is the attempt to rationally demonstrate [justify] why we think our beliefs are true. What you term knowledge, I'd equate with [traditional] belief. I think the difference here is only semantic.

 

How can difference be semantic? Knowledge is dynamic. Belief can last for centuries without change if not challenged. What is considered knowledge today can be called belief later.

 

Yes, so knowledge and belief are a relation between the thinking subject and the objective world.

 

d2thedr's point would maybe be better expressed in terms of "facts". There are facts about gold that are not subjective, not in any way dependent on someone thinking about gold - facts about its durability, chemical make-up, mass etc.

 

However (IMO) value is always subjective - we ascribe value to an object based on our beliefs/knowledge of that object. We may ascribe value for good reason, for instance it is true that gold is durable, rare on this planet, and that it is generally valued by other people. But the value is not inherent to the object, only the facts that cause us to value the object.

 

Yes perhaps facts is a better substitute for knowledge in this instance.

 

 

[d2thdr]

It's all well and good saying that but if you buy gold at £700 it will buy you £700 worth of goods.

If it falls to £350 then it'll buy me only half as many goods.

 

Gold is a commodity like any other, except it's pretty to look at and does have a magical kind of allure. However it is subject to supply and demand. Putting most of your money into it is speculation and not wisdom.

 

If gold falls to 350£/oz from 700£/oz, and if it goes from 55,000 rs/oz to 75,000 rs/oz at the same time, the money i gain out of selling gold elsewhere other than UK would serve me very well. However, looking at the big picture the possibility of that happening are a bit low. The possibility of it going higher a significantly higher. As FOFOA says 'follow the footsteps of giants'.

[absolutezero]

If gold falls to 350£/oz from 700£/oz, and if it goes from 55,000 rs/oz to 75,000 rs/oz at the same time, the money i gain out of selling gold elsewhere other than UK would serve me very well. However, looking at the big picture the possibility of that happening are a bit low. The possibility of it going higher a significantly higher. As FOFOA says 'follow the footsteps of giants'.

This is the problem.

No bugger knows what's going to happen. Which is why I talk about diversity.

[Schaublin]

It's all well and good saying that but if you buy gold at £700 it will buy you £700 worth of goods.

If it falls to £350 then it'll buy me only half as many goods.

 

Gold is a commodity like any other, except it's pretty to look at and does have a magical kind of allure. However it is subject to supply and demand. Putting most of your money into it is speculation and not wisdom.

 

Gold is money. Three types of people understand this;

 

Central banks

 

Uber rich oligarchs

 

Ordinary people - mainly in Asia and The Middle East - but a growing (albeit small) number of people in the West.

 

You do not appear to understand that gold is money - I hope you can be open to persuasion, as it would be a shame if you lost wealth due to being duped by MSM and banking propaganda.

 

 

[absolutezero]

Gold is money. Three types of people understand this;

 

Central banks

 

Uber rich oligarchs

 

Ordinary people - mainly in Asia and The Middle East - but a growing (albeit small) number of people in the West.

 

You do not appear to understand that gold is money - I hope you can be open to persuasion, as it would be a shame if you lost wealth due to being duped by MSM and banking propaganda.

I am open to persuasion but don't make out it's some kind of enlightened club and anyone who doesn't believe isn't one of the illuminati.

 

I prefer to think of money as labour rather than bits of paper.

[d2thdr]

I am open to persuasion but don't make out it's some kind of enlightened club and anyone who doesn't believe isn't one of the illuminati.

 

I prefer to think of money as labour rather than bits of paper.

 

If money is labor, then gold is definitely money as compared to pieces of paper with some random number on it.

 

As sentient beings, we humans exist in a certain, specific frame of reference. For example, a small golden sun disc appears to circle our giant green planet each day. This is our frame of reference. But in another frame of reference, say, sitting in a space ship in outer space, the sun would appear stationary and the Earth would be seen spinning. And in yet another frame of reference, an astronomical time and scale frame, the Earth would be seen circling the sun while they both circle the galaxy together.

 

The point is that it is not difficult to picture other frames of reference in your mind once you learn how, but getting to that point of ease requires either centuries of thought or a little help.

 

Gold

 

One of the unique characteristics of gold that sets it apart from commodities is that its primary use - store of value - has no weight or mass requirements. In commodities, where industry is the primary user, weight is critical. If you are a builder who needs a ton of copper, then your need for this specific weight is more important than, and independent from, the price of copper. If copper rises in price, then darn-it, you must pay more. If copper falls in price, hurray, you just saved yourself some money.

 

But if your need is to store $100,000 worth of present value in gold, it doesn’t matter how much gold you get. All that matters is that whatever weight you get reliably and efficiently stores your value. One ounce could do just as good of a job as 100 ounces. In fact, one ounce would do a BETTER job than 100 ounces! The less gold it takes to store your value, the better it does its job. This particular “gold dynamic” sets it apart from all commodities.

 

One ounce would store your value more efficiently and stably than 100 ounces because A) your storage and security costs would be lower (efficiency), and if one ounce is worth $100,000 then that infers gold is being valued by many more people relative to when it was $1,000 per ounce. This wider distribution brings with it a more stable base of valuation and less relative volatility in price (stability).

 

Comparing this “gold dynamic” to any industrial or food commodity we can see a stark difference. What commodity could perform its job BETTER at a price 100x higher than today? Can you name one?

 

Gold as a Store of Value

 

Almost the entire human race today shares a common frame of reference when it comes to physical gold investing. That frame of reference is that when you invest in gold (you store value in gold) you are doing so in a specific weight of gold. “I bought ten ounces today,” you might say. Notice that you didn’t say, “I transferred $12,000 of value into gold today,” or, “I exchanged $12,000 for gold today.” It is true that you might have mentioned the price, but you ALWAYS mention the weight. Even if it’s just to yourself.

 

Of course there is nothing wrong with this perspective, this frame of reference, as long as you actually did take possession of the gold. But what if you didn’t take possession?

 

Notice the subtle difference in ETF investing, like GLD. If you bought some GLD today you might say, “I bought $12,000 in GLD shares today,” or, “I put $12,000 into GLD today.” Can you see the difference? Feel free to substitute anything besides actual physical in for GLD.

 

The next question is, Are there some gold investment vehicles in the world today that are less clearly either paper (GLD) or physical (e.g. Coins) in which the common frame of reference is denominated in weight? In other words, is there a way you could say, “I bought ten ounces today” and mean it, without ever touching the gold?

 

Of course! There are many. Are they all equal? Of course not. Is there an ounce of gold somewhere out there in the world set aside for everyone that thinks they own one? Unfortunately there is not.

 

So what we end up with today is a wide spectrum of “gold investment” options of relatively different qualitative values. On one end of the spectrum we have physical gold coins stuffed in the “gold toe” of your black socks in the back of your sock drawer. And on the other end we have investments like GLD from which you cannot take delivery, and in fact, you are quite unclear on the legal definition of its “physical backing” and who actually owns that “physical” gold.

 

And in between these two there are many other options where your investment is actually someone else’s liability to you. Sometimes it is a weight-denominated liability. Sometimes it is a dollar-denominated liability fixed at par to the published trading price of gold. Sometimes it is a weight-denominated liability with the contractual option to settle in currency at the published price of that weight of gold left to the depository’s discretion. And other times it is strictly weight-denominated because the depository knows full well that, in a pinch, the legal system can and does only enforce currency settlements.

 

http://fofoa.blogspot.com/2010/08/relativi...old-really.html

 

"...Then, in October of 1997 at the internet's only gold discussion forum of the day, a series of remarkable postings began appearing under the pseudonym "ANOTHER", offering plausible answers to those questions…

 

"Knowledge as is conveyed in his series of "THOUGHTS!" is rarely to be found outside the highest levels of international finance...”

 

Whoever Another or Friend of Another or FOFOA is, I think he knows what he is talking about.

[absolutezero]

If money is labor, then gold is definitely money as compared to pieces of paper with some random number on it.

 

 

 

http://fofoa.blogspot.com/2010/08/relativi...old-really.html

 

 

 

Whoever Another or Friend of Another or FOFOA is, I think he knows what he is talking about.

Gold's only worth something because people believe it is. It's all about confidence.

The big thing that gold has in its favour is that it cannot be inflated away at the press of a button.

[G0ldfinger]

Gold's only worth something because people believe it is. It's all about confidence.

The big thing that gold has in its favour is that it cannot be inflated away at the press of a button.

Gold has some excellent physical properties (besided its rareness). The "confidence" you are referring to certainly stems from these properties. And indeed, you have to put a lot of work in to get a little gold out. Just ask our prospectors on here (RH, chris_ct).

 

evening Goldfinger.

Hey-ho GOM! I hope everything is well.

[G0ldfinger]

Gold is a commodity like any other, except it's pretty to look at and does have a magical kind of allure. However it is subject to supply and demand. Putting most of your money into it is speculation and not wisdom.

Nnnngh. I got a gazillion dejavus. Come on, not again! Will this ever end?

 

Gold has always been money. Good money. Silver was more for day to day business, gold was for the big deals. Supply and demand applies to fiat currencies as well, I can assure you. Gold is NOT any other commodity. If you put all your eggs in the gold basket, YOU (and no one else) have to know what you are doing. Now, if you put 10% of your money in gold, make sure it is 10% (and not 0.5%, see example).

 

I prefer to think of money as labour rather than bits of paper.

How do you store this labour for when you'll be weak and old?

[G0ldfinger]

Although I have to agree with absolutezero that your salary figures are somewhat inflated, I am now acutely aware I don't have enough gold. . . .

50K is around the mid-level of a Senior Lecturer payscale, and quite a few of these achieve close to 40 years service which under USS means that they get 50% of their final scalary.

 

No wonder we've recently heard recently that USS now caps inflation adjustments at 2.5%/year.

[absolutezero]

How do you store this labour for when you'll be weak and old?

You don't.

You take it from those who are not weak and old.

[absolutezero]

50K is around the mid-level of a Senior Lecturer payscale, and quite a few of these achieve close to 40 years service which under USS means that they get 50% of their final scalary.

 

No wonder we've recently heard recently that USS now caps inflation adjustments at 2.5%/year.

Senior?!

Most people never get a promotion!

[nicejim]

It obviously all depends on your personal financial situation and how much savings/assets you have.

 

Say, you are a 40-year old state employee on 50K/year and you have been there long enough to get a 50% final salary pension. Assume 80 years life span. Since all payments are inflation-adjusted, we don't discount them and we assume a retirement age of 65. The future lifetime income is 25x50K + 15x25K = 1.625M. Say you own a house outright, 250K. Say you have another pension fund of 50K, and your truly free assets (your "savings") are 100K (which is nice given you own the house outright and you have a safe job). Total assets: 2.025M. Now you put 10% (10K) of your liquid assets in gold, the rest in cash, and you think you are diversified.

 

OK, let's see. You have 10K/2.025M = 0.494% in gold, most of the rest in a bond (80.247%), a little in the house (12.346%), and 4.444% in cash.

 

0.494% (i.e. next to nothing) in gold, and the rest in investments (bond, house, stocks, cash!!) that will most likely suck big time.

 

You are NOT exactly well diversified in that case.

<snip>

I'm not sure what your reason for holding gold is in this example but it looks like you intend to protect the value of your entire life and future in the event that all pension obligations are defaulted upon, you can no longer earn an income and you have to abandon your home, all during an even in which gold's purchasing power rose tenfold from today's level (so that 10% of assets in gold is enough to restore all wealth).

 

Personally, I'm prepared to run the risk of those not happening together and of my labour and home retaining some value. The house is owned outright so is worth a house before and after the event and does not need to be insured by gold. It may be hard for a while to earn an income but having £100k of purchasing power should be enough considering everyone will be in the same boat and happiness is often relative.

 

Cost of insurance for house, savings and income: £10k.

 

It's likely you'll be able to get income from investments after "the event" so I'll conservatively assume 5% returns. The £25k annual pension would require £500k of capital post-event.

 

Cost of insuring £25k annual pension: £50k

Cost of insuring £50k pension pot: £5k

 

So £65k should cover it. I'd move the £50k pension into GoldMoney or buy gold stocks with it, and keep a few dozen sovereigns nearby, with the actual number depending on my age as this determines whether I'm able to access the pension money. The rest would be used as insurance against "the event" not happening! Given that there is about 1oz of gold per human, the idea that it would take more than £65k (81.25oz today) to restore a middle class existence after a major collapse seems absurd.

[Steve Netwriter]

How is it wrong? Where is the disagreement?

 

I think Goldfinger's replies cover it pretty well.

 

My position is that the dollar can become significantly cheaper when buying with gold while at the same time the dollar can become more expensive against other currencies. It's all relative; the other currencies will become cheaper against the dollar, and very cheap against gold.

 

First, I applaud your wording: "cheaper when buying with gold".

I think the purchasing power of the US$ will decline drastically. Picking the currency that falls least seems like a bit of a futile exercise.

 

I suggest you re-evaluate the hyper-inflation theory. Our positions are after all theoretical.... fallible. I'm fully prepared to jump ship if my working hypothesis ceases to work, but it's worked for me just fine so far [a theory is a good one if it is fruitful].

 

Hyper-inflation is not a theory. It's the name given to a known and recorded process. ie there are examples of it.

Maybe a clear definition is required, and agreed upon.

 

Inflation

Can be defined as:

1. An increase in the amount of currency in the system - the correct definition.

2. An increase in prices - this is wrong.

3. A process in which the economy grows, wages rise, borrowing increases, and prices rise. - This has some merit, but is also wrong.

 

It is better to stick to descriptions of the component parts, because no word can accurately define any process which involves many factors. eg during an inflationary process wages might not rise. Is it still an inflationary process?

 

Hyper-inflation

1. Is NOT high inflation.

2. Is caused by a lowering faith in the currency, in which the currency is treated like a hot potato.

3. Is a very poor term to use.

 

For a more complete description: http://neuralnetwriter.cylo42.com/node/3337

 

[also, is it too much to ask to keep the conversation civil.... navel-gazing would have sufficed.

 

I picked what I thought was the most apt analogy. I will explain. I view philosophy like this:

 

1. There are inputs, and with philosophers those inputs are limited, as most philosophers are scientifically ignorant. It seems to me that philosophers tend to reduce the inputs to just their own thoughts, and those of other philosophers.

 

2. There is the philosophical process. Again limited to philosophical type thinkers.

 

3. The result, is often rubbish, best treated with care, and discarded carefully.

 

I hope you can see the merit of the analogy, and why "navel-gazing" is less appropriate.

 

You can if you wish see my views on philosophy, and my answers to all the common questions like "what is the meaning of life?", here:

http://neuralnetwriter.cylo42.com/node/3335

 

Don't you think the term "judgement day" was a bit dogmatic/ moralistic?

 

I meant it in two ways:

1. The market will judge your decisions.

2. In the way history judges people. For example, how does history judge Hitler? What you do and say, specially in public, is likely to be seen in context, at a later time. If for example you drive and don't put your seatbelt on, then crash, and hurt yourself, people will judge your actions. I suggest they will have less compassion.

 

I'd add that an awareness of philosophy encourages a healthy scepticism and tolerance towards other's views while discouraging dogmatic conclusions]

 

I'll give you that

[romans holiday]

Does anybody understand the increase of the gold price from 1209 to the current 1234$/ounch, in spite of the

decline in the Dow?

It's all about liquidity. Yen, gold and treasuries go up on safe haven demand, and assets such as Dow goes down on risk aversion. Two sides of the same coin.

 

This makes perfect sense when thinking of gold as a currency and not an asset. It also makes sense when you consider the Dow should continue down in a deflationary environment while gold benefits as a safe haven currency.

 

[romans holiday]

Maybe a clear definition is required, and agreed upon.

 

Inflation

Can be defined as:

1. An increase in the amount of currency in the system - the correct definition.

2. An increase in prices - this is wrong.

3. A process in which the economy grows, wages rise, borrowing increases, and prices rise. - This has some merit, but is also wrong.

 

It is better to stick to descriptions of the component parts, because no word can accurately define any process which involves many factors. eg during an inflationary process wages might not rise. Is it still an inflationary process?

 

Hyper-inflation

1. Is NOT high inflation.

2. Is caused by a lowering faith in the currency, in which the currency is treated like a hot potato.

3. Is a very poor term to use.

Not much argument from me with the above.

 

Perhaps you missed the "Weimar, could it really happen here" thread. It was discussed and agreed [along the lines of the above post] that hyper-inflation and inflation are very different beasts. What is interesting though in Weimar was the "tipping point" of where high inflation [where there is high demand for the currency] quickly morphed into hyper-inflation [destruction of the currency]. The point of the thread was that if hyper-inflation was to occur it would have to follow a very different route to Weimar.

 

http://www.greenenergyinvestors.com/index....t=0&start=0

 

Hyper-inflation is not a theory. It's the name given to a known and recorded process. ie there are examples of it.

Lots of things have been observed before, and that may either help or hinder current theory, and future predictions based on that theory. Past observances shouldn't be completely definitive of present theory because theory always develops and changes with new circumstances/ insights [if you think philosophy is nonsense, history of science is sufficient to estabilsh this... it also shows the greatest scientists were also philosophers who held the school of scepticism in the highest regard].

 

Speculation is at the heart of discussing macro-economics today which, by its very nature, involves theorists arguing whether the future outcome will be deflationary or hyper-inflationary. I mean, there is no direct observation of hyper-inflation today [the appearances seem to be the opposite]. If instead you want to argue that there are certain economic/ monetary laws at work that will lead to hyper-inflation [not based on observation but reason].... I don't see how this is any less theoretical. The scientific approach is inherently theoretical. My point on philosophy was simply that we should be aware of the nature of scientific theory..... that scientific method self-consciously recognizes it has no certainties, and it's working hypotheses are quite contingent until something better comes along. In short, theory can not be dogmatic. It should rather be pragmatic.

 

I'm interested in a theory that can account for both the observations of deflation in assets prices/ credit, and inflation in money supply.....a theory that can explain/ predict such diverse phenomenon as local asset prices declining against local currencies, the Dow going down while gold goes up, or again, where the reserve currencies can strengthen against non-reserve currencies... even as gold steadily slowly strengthens against reserve currencies.

 

I don't see either of the conventional theories of deflation or hyper-inflation being corroborated by these facts so far, which may make them dubious dated theories.

[Steve Netwriter]

Following on from the June thread: "The WORLDS No1 gold trading timer" Tom O'Brien sold ALL his gold at 1236 USD and went short saying we would be visiting 1056USD. This guy is apparently the WORLDS best and he seems to have gone a little stray on this one. Those who followed him may have made a bit money going short ASSUMING they have now closed their positions BUT will still hold NO gold! If they want their position back they will have to give up a good chunk of their profits if they want actual physical back.

 

That's why I keep pounding the table about averaging in. The WORLDS best can't seem to get the exact timing right!

 

8 more trading days left till the end of the month.... lets see where we are then.

 

The latest King World News interview with James Turk is a good listen. Are they referring to O'Brien by any chance?

 

http://www.kingworldnews.com/kingworldnews...James_Turk.html

 

It's looking increasingly unlikely that GoldUS$ will get down to 1100 in August:

 

 

I think people like Tom O'Brien are, how can I put this nicely,..... unwise

When I saw what he'd said, I laughed.

I guess his account will judge him LOL.

 

[Steve Netwriter]

Not much argument from me with the above.

 

Perhaps you missed the "Weimar, could it really happen here" thread.

 

I had no time to follow most threads.

[lyb]

It's all about liquidity. Yen, gold and treasuries go up on safe haven demand, and assets such as Dow goes down on risk aversion. Two sides of the same coin.

 

This makes perfect sense when thinking of gold as a currency and not an asset. It also makes sense when you consider the Dow should continue down in a deflationary environment while gold benefits as a safe haven currency.

 

 

During the deflationary scare of October 2008 and Dow collapse, PM followed the decline with gold decreasing from

900's to 680. The reason stated at the time was that hedge funds were forced to sell gold in order to fund liabilities

elsewhere. After Bubb's warning about impending Dow collapse, I expected gold and in particular silver to

be under selling pressure. During 2008, there was good correlation between silver and the Dow.

 

Yet, yesterday both PM in particular silver were exceptionally strong and reversed course to finish on the

upside. The 60c move of silver in particular requires some explanation.

 

1) Is silver finally perceived also as money?

2) Is the huge short position of large commercials being covered?

3) Are expectations of the strong autumn season driving investor interest?

 

Where is the truth? Perhaps, it is futile to understand short range fluctuations. I do understand the long term

inverse correlation between gold and the Dow, but what about silver's correlation with the Dow?

Surely, if a deep recession is expected, industrial demand should be expected to decline and silver should have followed all other commodities down.