GOLD

[romans holiday]

 

 

 

[Pixel8r]

[Kilham]

 

Looks like we're not getting our bargain price gold then.

[Pixel8r]

Looks like we're not getting our bargain price gold then.

Go back a year and many were holding out for the price going back below $1000.

 

 

[fitkid]

Looks like we're not getting our bargain price gold then.

 

Yes you are its a bargain right now.

But some look but dont see and some listen but dont hear.

Dont be one of them PROTECT your financial health.

BUY PHYSICAL GOLD NOW.

KEEP IT IN YOUR OWN POSSESSION.

 

TOO SIMPLE FOR SOME IT CLEARLY SEEMS.

[Errol]

In a note last week from Goldman Sachs, one of its gold traders observed that while the recent London Bullion Market Association gold conference in Berlin enjoyed record attendance, and folks were a bit more bullish than last year, it would appear no one owns very much. To wit:

 

"(W)hen participants were surveyed as to how much gold was owned as part of their own personal wealth, in excess of 90% had less than 5% (the increments were 5%, so this number could have been even lower)."

 

http://articles.moneycentral.msn.com/Inves...not-enough.aspx

[Erewhon888]

This article can be found at:

http://www.ft.com/cms/s/0/0945597e-e1c6-11..._i_email=y.html"FT" and "Financial Times" are trademarks of The Financial Times.

Copyright The Financial Times Ltd 2010

China is key to next rally in gold prices

By David Hale

Published: October 27 2010 15:04 | Last updated: October 27 2010 15:04

The recent gold price rally is the first stage of a multi-year bull market that will drive the gold price to at least $2,000 an ounce by 2015. A mixture of economic factors and innovations in how institutions can purchase the metal have moved prices. But the biggest driver of gold prices is yet to come.

 

First, a recap of the factors that have taken gold prices to current levels.

 

The economic causes centre on monetary policy and the risk of inflation. Some industrial countries are striving to devalue their currencies and will use monetary policy to support the goal. Japan recently spent $24bn on unsterilised intervention trying to weaken the yen. The policy succeeded, albeit briefly. In 2003-04, Japan spent more than $350bn on intervention and could easily do so again. This policy would increase dollar liquidity while nurturing more monetary growth in Japan itself.

 

The Federal Reserve has been dropping ever-bigger hints that it will embark on further quantitative easing. A significant policy move will trigger immediate selling of the dollar, and could set the stage for competitive devaluations elsewhere.

 

The gold price has also benefited from the introduction of exchange traded funds five years ago. These funds allow investors to purchase gold bullion as effortlessly as a share of stock. In the second quarter of 2010, investors bought more than 274 tonnes of gold through ETFs. Their holdings now exceed 2,000 tonnes, and are the sixth largest in the world after the official stocks at the International Monetary Fund and the central banks of the US, Germany, France and Italy. At current growth rates, these ETFs could rank third by the end of 2012.

 

After a long period of selling gold, central banks are re-emerging as buyers. China revealed last year that it had purchased 450 tonnes. India bought 200 tonnes last October. Russia has bought 71 tonnes of gold this year while there have been small purchases by Mauritius, Thailand, Bangladesh and Sri Lanka. South Korea announced last week that it might use some of its $290bn of foreign exchange reserves to buy gold. During the previous two decades, central banks sold nearly 4,500 tonnes.

 

But potentially the most important new factor in the gold market is China. China now has more than $2,400bn of foreign exchange reserves, but only 1.7 per cent of this is invested in gold. The IMF is projecting that China will run a current account surplus of $2,600bn during the next five years. If it does, its forex reserves could rise to the $5,000bn-$6,000bn range. Even if it keeps the gold share of its reserves constant, it will have to buy a further 1,000-1,500 tonnes. Yet the odds are high that China will want to expand the gold share of its reserves in order to lessen its vulnerability to dollar devaluations and strengthen the renminbi’s status as a global currency.

 

As with the US 100 years ago, China will probably regard large gold holdings as a way to project financial power. In 1913, before the dollar had emerged as a global currency, the US had 2,293 tonnes of gold compared with 248 tonnes for Britain, 439 tonnes for Germany, 1,030 tonnes for France and 1,233 tonnes for Russia. The Americans’ large gold reserves made the dollar a natural replacement for sterling when the first world war crippled Britain’s financial position. The US is now running a fiscal policy that has parallels with Britain during wartime, which could undermine the dollar’s global role at some point.

 

Some Chinese officials have publicly called for the central bank to purchase 10,000 tonnes of gold. The central bank has declined to comment on these proposals, but they will become increasingly attractive if the US pursues a policy of dollar devaluation while the renminbi emerges as a global currency.

 

It is also possible that the massive expansion of China’s foreign exchange reserves could spawn faster monetary growth and increase China’s inflation rate. If it does, there could be a sharp rise in Chinese private demand for gold.

 

China has deregulated its gold market since 2008 and private demand is increasing rapidly. It totalled 143 tonnes during the past 12 months compared with 73 tonnes in 2009 and 17 tonnes in 2008. It could easily rise to several hundred tonnes if investors perceive that China’s monetary growth is going to produce higher inflation.

 

The US government has been critical of China’s policy of pegging the renminbi to the dollar, but it would abandon this criticism if China pursued a policy of unsterilised currency intervention and allowed inflation to accelerate. The renminbi would then appreciate in real terms, and make Chinese goods less competitive.

 

There is no way to predict the timing of China’s future gold purchases, but there can be little doubt they will create a demand for gold that will dwarf all other factors during the next quarter-century and guarantee large price gains irrespective of what happens to Federal Reserve policy.

 

The writer is chairman of David Hale Global Economics

[G0ldfinger]

This "correction" sucks. The price is correcting upwards, rather than downwards.

[DoctorSolar]

This "correction" sucks. The price is correcting upwards, rather than downwards.

Yep even the world's number one timer is finding this one tricky.

Bears out what I many others have been saying for ages

You gotta average in and don't get cute trying to time the market

Unless you already have a sizable core position

 

 

[Errol]

A Gold Bull and His Prediction: $10,000 an Ounce

There are gold bulls. And then there is Shayne McGuire. The 44-year-old pension-fund manager from Texas, who spoke recently at a gold conference in Berlin, caused a stir among the roomful of gold aficionados. His provocation: A book that predicts the price of the precious metal could soar to $10,000 an ounce, more than seven times its current price.

 

 

http://online.wsj.com/article/SB1000142405...2233501196.html

 

 

[wee Jinky]

There are gold bulls. And then there is Errol

 

luv your optimism btw

I'm a bit of a heffer compared to you

[romans holiday]

Go back a year and many were holding out for the price going back below $1000.

Back a year, there was a real chance that the price would retrace to 1000. And it's still possible for gold to go back below 1000. However, this looks a lot less likely now given gold has become increasingly monetized in the minds of investors with the passage of time. I believe this has also served to reduce the volatility seen in gold as the log chart shows well.

 

That gold could retrace $100 or so around this level wouldn't surprise me, or most gold bulls. Then again, it wouldn't surprise me if it didn't. With short term uncertainty, it's all about probabilities. That gold is going higher over the long term goes without saying, and has its basis in fundamentals/ logic, not the vagaries and mood swings of the present day market. I don't need to see short term strength in order to bolster the long term view.

 

 

[Pixel8r]

Back a year, there was a real chance that the price would retrace to 1000. And it's still possible for gold to go back below 1000. However, this looks a lot less likely now given gold has become more monetized in the minds of investors with the passage of time. I believe this has also served to reduce the volatility seen in gold as the log chart shows well.

 

That gold could retrace $100 or so around this level wouldn't surprise me, or most gold bulls. Then again, it wouldn't surprise me if it didn't. With short term uncertainty, it's all about probabilities. That gold is going higher over the long term goes without saying, and has its basis in fundamentals/ logic, not the vagaries and mood swings of the present day market. I don't need to see short term strength in order to bolster the long term view.

As I said at the time (6th Oct '09) the is no chance gold will go back below $1000. We took over a year and half to break through it, a massive inverse head and shoulders was built. When the break out from it happened it was the last we will see of sub $1000 gold.

 

There is always to much talk of pullbacks on here, it stops people buying when they should have IMO.

 

 

[Pixel8r]

For me, here are two other plausible scenarios for Gold

 

Looking back at the Oct '09 thread was interesting a year on.

 

Do you realise that you have been far to bearish on gold yet DrBubb? The fundamentals and TA seemed very obvious to me at the time.

 

 

[romans holiday]

There is always to much talk of pullbacks on here, it stops people buying when they should have IMO.

Well, everyone's an adult here... I assume. And should avail themselves of all the relevant facts/ risks/ perspectives when buying gold.

 

Hypothetically speaking, say someone, relatively uninformed, rushed into gold having had the living daylights scared out of them by the hyper-inflation narrative, and then gold corrected 100 or 200 dollars. Having expected gold to only explode one way to the upside, and then seeing it seemingly crash, there is every likelihood they might panic and sell right at the wrong time. Best for new buyers to have a more rounded view of how gold performs in bull markets imo.

 

I've advocated all along that if someone was without a position in gold, it would make sense to start building one.... no matter the present price.

 

 

The linear chart you post gives a much stronger impression than the log chart that a large pull-back is due. An impression I'm sure you don't want to give.

[Pixel8r]

Well, everyone's an adult here... I assume. And should avail themselves of all the relevant facts/ risks/ perspectives when buying gold.

 

Hypothetically speaking, say someone, relatively uninformed, rushed into gold having had the living daylights scared out of them by the hyper-inflation narrative, and then gold corrected 100 or 200 dollars. Having expected gold to only explode one way to the upside, and then seeing it seemingly crash, there is every likelihood they might panic and sell right at the wrong time. Best for new buyers to have a more rounded view of how gold performs in bull markets imo.

 

I've advocated all along that if someone was without a position in gold, it would make sense to start building one.... no matter the present price.

I agree completely, but really gold has been on a very steady uptick for 10 years now. Even if it did correct a whole $200 you would only have "lost" 15% in the fiat value.

 

I just think there is to much talk about corrections and trading for me. More emphasis should be placed on the fundamentals of protecting your buying power and less on trading and trying to make an extra 5%, which when it comes down to it just isn't worth bothering with.

 

Best to just accumulate and not look at the daily noise to much, focus on the bigger picture which is that fiat currencies are being printed into oblivion. Negative interest rates (interest rates - real inflation) have always been good for gold and rates are getting more negative by the month at the moment. With the launch of QE2 rates are set to keep very low, as the FED will be the buyer. There is loads of talk about how QE2 has already been priced into gold, I just don't see it. Physical gold & silver are very small markets and trillions of extra money is being created via QE. As Jim Sinclair says their only choice is QE to infinity, protect yourself before it is too late.

 

 

[Pixel8r]

[G0ldfinger]

Gf does this work for GBP also,(ie uk external debt divided by gold reserve) and if so do you have any idea of the implied price?

I guess you could apply that model to the UK as well. Whether or not plays a role that the US has the reserve currency - I guess it does in Sinclair's rationale, so maybe he would not apply that model to the UK.

 

http://www.statistics.gov.uk/cci/nugget.asp?id=277

At the end of March 2010 general government debt was £1000.4 billion, equivalent to 71.3 per cent of GDP.

The question though is how much of it is external debt. I don't have this exact information. However, this BBC source here implies it could be something £200Bn external debt (potentially more now).

 

Apparently, the UK has 310.3 metric tonnes of gold reserves.

 

This makes the target UK gold price approximately £20,045.11/oz.

[malvern hills]

I guess you could apply that model to the UK as well. Whether or not plays a role that the US has the reserve currency - I guess it does in Sinclair's rationale, so maybe he would not apply that model to the UK.

 

http://www.statistics.gov.uk/cci/nugget.asp?id=277

 

The question though is how much of it is external debt. I don't have this exact information. However, this BBC source here implies it could be something £200Bn external debt (potentially more now).

 

Apparently, the UK has 310.3 metric tonnes of gold reserves.

 

This makes the target UK gold price approximately £20,045.11/oz.

Thanks GF.

[Jake]

DOUBLE POST

 

Gosh, snuffle, snort, grunt. Does this mean I'll be able to pick up an average house for-licks chops-12 and a half ounces? (thats presuming no nominal falls either).

 

 

Perhaps I'll sod the average house and have a flat in Mayfair afterall. And Roppongi Hills. And some farmland. And a wood. And a...

 

Cripes then there's silver too...the mind boggles Perhaps I'll just retire to Singapore and get 24/7, 365day air conditioning....

[G0ldfinger]

Gosh, snuffle, snort, grunt. Does this mean I'll be able to pick up an average house for-licks chops-12 and a half ounces? (thats presuming no nominal falls either).

You might even see nominal house price inflation picking up again if such a price came to pass.

[Jake]

You might even see nominal house price inflation picking up again if such a price came to pass.

Weeeel I might stretch to 15 or 20 for the average house, but it would have to be in a good area blah blah blah...lets face it the av house/box is no place to call a home.

 

There I was thinking I could use 12 and a half kruggers I bought for 200 squid for some old house...I knew there would be a catch...

[Eiji]

According to The Market Oracle's Nadeem Walayat, USD index is projected to fall to around 70 by mid 2011 and GBP is set to rise to around as high as £/$1.80 / £/$1.90 in that same period.

 

I guess that would be a massive buy opportunity for STERLING GOLD buyers.

[romans holiday]

QE2 to be announced tonight. If it fails to wow investors, the dollar which looks to have built a base, may rally. Even so, I doubt that will have that much of an impact on the gold price. Looking at the last correction in gold, on the last dollar rally, gold only corrected $100 or so and then went on to strengthen with the dollar.... showing that gold and the dollar are not always inversely correlated.

 

RBA raised their rate to 4.75%. Following China's lead?

 

 

 

Link to previous thread:

 

http://www.greenenergyinvestors.com/index....st&p=190436

[malvern hills]

QE2 to be announced tonight. If it fails to wow investors, the dollar which looks to have built a base, may rally. Even so, I doubt that will have that much of an impact on the gold price. Looking at the last correction in gold, on the last dollar rally, gold only corrected $100 or so and then went on to strengthen with the dollar.... showing that gold and the dollar are not always inversely correlated.

 

RBA raised their rate to 4.75%. Following China's lead?

 

 

 

Link to previous thread:

 

http://www.greenenergyinvestors.com/index....st&p=190436

Rh ,I thought FOMC (according to Forex factory) meeting is on 3 NOV ,and QE2 to be announced then?