GOLD

[Magpie]

I am very worried about deflation too. Unfortunately, I have not so much time to spend on it, since I am busy working more so that I can keep up with the price increase by 35% from British Gas and the increased food prices, lunch has gotten 15-20% more expensive too recently. But yes, other than that, extremely worried about deflation.

 

Very droll. But the problem is that it is perfectly possible for us to have inflation in living costs at the same time as deflation in the value of commodities - in fact the latter deflation feeds into inflation. Corporations and financials are faced with a reduction in their wealth base, so they try to claw back what they can from increasing their margins. Their actions feed back into further cost inflation for other companies and so on. Meanwhile the wealth destruction and deflaion continues at a larger scale.

 

Biflation is maybe a better word for it. Don't let rising prices fool you into thinking inflation is the only word for it. I thought everyone here went with the view that rising prices are a symptom, not inflation in themselves. In this case they may be a misleading symptom - they are reflecting the past surge in money supply, not the current freeze and collapse of wealth.

[romans holiday]

My intuition [not analysis sorry] is that whether or not inflation or deflation wins out is really a distraction. I imagine that the old orthodoxies of inflation being good for gold and the opposite, and all the a posteriori rationalizations that go with it, will not be applicable to what is coming in so far as it will be completely novel and accordingly beyond our powers of analysis. This kind of event, which is outside of our experience, is what Nassim Taleb has articulated as a black swan event. Such an event can unfold slowly.

 

In my mind, gold will be good not because it will be an inflationary hedge, but because it will be money in an economic crisis. Even if there is deflation, I imagine both that dollars/pounds will have been severely weakened in terms of purchasing power and also gold will have "decoupled" from commodities, in the public mind, to reassert itself as money. I believe, any coming crisis will make monetary metals extremely valuable.

 

Edit: Agree with Magpie that we obviously have both deflationary and inflationary forces at work because we have to consider both the supply of money and credit as the Austrians remind us.

[G0ldfinger]

Very droll. But the problem is that it is perfectly possible for us to have inflation in living costs at the same time as deflation in the value of commodities - in fact the latter deflation feeds into inflation. Corporations and financials are faced with a reduction in their wealth base, so they try to claw back what they can from increasing their margins. ...

Sure, and it also works the other way around. Have you realized how over the last year gas prices went down because the price of oil went up? Errh, uh, oh, wait ... mmmh, no, I think I really have to think about this again!

 

[cazlane]

Very droll. But the problem is that it is perfectly possible for us to have inflation in living costs at the same time as deflation in the value of commodities - in fact the latter deflation feeds into inflation. Corporations and financials are faced with a reduction in their wealth base, so they try to claw back what they can from increasing their margins. Their actions feed back into further cost inflation for other companies and so on. Meanwhile the wealth destruction and deflaion continues at a larger scale.

 

Biflation is maybe a better word for it. Don't let rising prices fool you into thinking inflation is the only word for it. I thought everyone here went with the view that rising prices are a symptom, not inflation in themselves. In this case they may be a misleading symptom - they are reflecting the past surge in money supply, not the current freeze and collapse of wealth.

 

Precisely Magpie-IIRC biflation is also a bit too short termest in my view. Ironically (and as I said before quite counter-intuitive) it's the very fact we have inflation in commodities now that we will have a sharper and quicker deflation than we would otherwise have had. Why? Simply because the few with net wealth as opposed to net debt will see their holdings eroded even more quickly ergo less to spend into the economy longer term ergo even greater risk of a sharp and painful deflation. If you are still in any doubt by all means throw the kitchen sink at gold now, it's your funeral

[lowrentyieldmakessense(honest!)]

OK, this looks like $750 and below today (just touched $775). The bullion banks ('Cartel') smell the blood now. Could become ugly.

 

If anything, it's a time to buy, that's for sure.

 

The question is, WHEN exactly? :lol:

think from memory FP said Gold was going to $750 a few months ago - good call

 

 

 

 

[Perishabull]

Hi there folks, well, like the rest of you I think we have all been surprised by the recent price action in the gold and silver markets. I have 11% exposure to these metals having increased my silver holdings at $17.1 just a few days ago! Oddly I'm not massively concerned, worst case scenario is that a medium term holding becomes a long term holding. It does strike me as odd the sudden turnaround in sentiment however, this to my eye seems to be some rather clever PR work and timely intervention in the markets by Uncle Sam and it's worked very well it has to be said. It almost seems like some cosmic joke, gold and silver take a beating during the Olympics...definately planned.

 

In the medium term I don't see oil sub $100, this in my view will support continued worldwide inflation at unsustainable levels. Once everyone realises this then the gold and silver bulls (and commodities) should march on for the last leg of the secular bull market, how long this takes is anyones guess but my feeling is up to 9 months.

 

I was going to say I feel sorry for those that went all in however that only really applies if this is the end of a bubble.

 

 

[avid tea drinker]

This is going to be interesting to watch.

 

If this really is the end of the bull, this thread could be a study in cognitive dissonance as denial as people downgrade their previous lowest expectations and keep predicting an upswing.

 

However as a relatively dispassionate observer, my observation would be this. What we are seeing is a reminder of how shockingly turbulent gold can be (maybe because of interventions, but more likely because of the size of the market and the degree to which sentiment swings it). I've seen a graph here where an upswing in gold through the autumn is extremely common. And I believe there is going to be plenty more scary financial and international news this autumn. So an upswing still feels more likely to me than not.

 

My worry would be the degree to which deflationary forces are starting to drag money available for all investment down. Gold may turn out to be some kind of insurance simply because its value doesn't collapse to quite the same degree as other popular options such as shares and property. People are going to lose a lot of money from bad property investments and companies are going to collapse*. Gold might just bumble along in this region, not doing quite what you'd hoped but still protecting your wealth better than some alternatives.

 

Good luck to those of you holding anyhow. Must be a slightly unnerving period, but hopefully you like rollercoasters, and the next uphill stretch might be close.

 

* FWIW - I don't have huge amounts of money and most of mine is in my property - right now that isn't working out so great either as I haven't been able to remortgage and that is making life a little tough, so I hope I won't be showing any schadenfraude if gold has its own problems.

 

INCORRECT

 

What we are seeing is how shockingly unstable currencies can be. That is why ALL commodities are 'shockingly unstable' at the moment

 

[drbubb]

Well this looks like another Ugly Friday for gold.

Another promising Support level has gone, teken out be dollar strength/ gold weakness.

 

I certainly feel and look as though I have lost my "touch" for the time being.

==

 

The markets are teaching a serious lesson in risk-management to commodity traders

[Magpie]

INCORRECT

 

What we are seeing is how shockingly unstable currencies can be. That is why ALL commodities are 'shockingly unstable' at the moment

 

See, I'd put that down as an absurd piece of denial.

 

Fiat has not just surged 20% against gold. Gold has fallen 20% against fiat. Just as gold more than doubled against fiat before that. Gold is a turbulent market, and to deny that just seems fatuous to me.

 

[THEBIGMAN]

The markets are teaching a serious lesson in risk-management to commodity traders

Good call. I just can't figure out why PMs have tanked so much in light of latest western inflation figures, money supply figures etc. A cosmic joke indeed. Just wish I had a few extra quid to splash on silver right now...

 

C'est la vie, wait 'n' see I guess.

[Magpie]

Sure, and it also works the other way around. Have you realized how over the last year gas prices went down because the price of oil went up? Errh, uh, oh, wait ... mmmh, no, I think I really have to think about this again!

 

 

You're really not prepared to listen on this are you.

 

If a corporation selling gas had a large holding of oil, and the oil price fell, then their wealth would be eroded. They might well raise gas prices as a result - to protect their margins and wealth. Prices falling can cause price rises, just as prices rising can.

 

You have to try to understand the difference between the effects of wealth erosion and inflation. Otherwise you're not equipped to understand the possible outcomes of this situation. Everyone is getting poorer as wealth is destroyed. As a result some of those who are able to will raise their prices. This will manifest itself as price inflation. That is very different to an inflation being driven by huge money and credit expansion.

 

It's a chaotic situation, virtually unprecedented, and it could tip into major inflation, but I wouldn't assume it's the only possible outcome.

 

[Justin Thyme]

If this really is the end of the bull, this thread could be a study in cognitive dissonance as denial as people downgrade their previous lowest expectations and keep predicting an upswing.

 

Hmm . . . It is true that the general consensus among goldbugs is that ANY pullback in price is an opportunity to buy in and I'm sure that those who took that advice at or around the $975 or $875 marks will be feeling somewhat disillusioned by now. Personally, I don't give a monkey's how many laughing smileys someone places after their post, this was never going to be a straight, toe-to-toe fight. I never bought more gold because the risk vs reward in the short-term made it no more than a punt and I binned margin trading after $950 went down. Now, however, with silver pulling back like it has, there is some tangible potential even if I'm not a true believer in the $50 an ounce figure I've seen bandied about.

 

The CBs are fighting to save their very civilization and will, naturally, use every dirty trick and lowblow to achieve their aim. Having said that, I don't necessarily think the PPT forced this.

 

 

 

[Johan van der Smut]

think from memory FP said Gold was going to $750 a few months ago - good call

 

FP has made good calls all along. I only wish I'd listened to him more closely.

 

On HPC today he's predicating it might fall to $730 but will be $1,200-1,500 by spring 2010.

 

Which is helping me not to panic too much, I guess.

[romans holiday]

This is going to be interesting to watch.

 

If this really is the end of the bull, this thread could be a study in cognitive dissonance as denial as people downgrade their previous lowest expectations and keep predicting an upswing.

 

Yes, but keep in mind please that many a gold bug always knew, well before this downturn, this was going to be one wild ride with a lot of volatility. These guys have always looked at fundamentals and the long term. Time will tell whether they are right... not todays news.

[avid tea drinker]

See, I'd put that down as an absurd piece of denial.

 

Fiat has not just surged 20% against gold. Gold has fallen 20% against fiat. Just as gold more than doubled against fiat before that. Gold is a turbulent market, and to deny that just seems fatuous to me.

Let's examine the facts, then see who is really in denial.

 

Bloomberg headline: Silver, Oil, Wheat, Copper plunge as Dollar's rebound Saps commodity boom.

 

ie everything else is turbulent against the dollar, or the dollar itself is turbulent. Am I just being stupid, or what?

[cazlane]

FP has made good calls all along. I only wish I'd listened to him more closely.

On HPC today he's predicating it might fall to $730 but will be $1,200-1,500 by spring 2010.

 

Which is helping me not to panic too much, I guess.

 

What you mean like his DJIA at 15000 and the US out of recession by June-yeah the guy is a genius....

 

...

 

 

 

 

....

 

 

>>>>

 

 

 

 

>>>>>>

 

 

 

 

 

>>>>>>>>>>>>>>>

 

 

 

 

 

 

 

 

 

 

 

>>>>>>>>>>>>>>

 

 

 

 

NOT!!!

[Magpie]

Yes, but keep in mind please that many a gold bug always knew, well before this downturn, this was going to be one wild ride with a lot of volatility. These guys have always looked at fundamentals and the long term. Time will tell whether they are right... not todays news.

 

Sensible answer. It's a rollercoaster and one that you hope will work out in the end.

[Magpie]

Let's examine the facts, then see who is really in denial.

 

Bloomberg headline: Silver, Oil, Wheat, Copper plunge as Dollar's rebound Saps commodity boom.

 

ie everything else is turbulent against the dollar, or the dollar itself is turbulent. Am I just being stupid, or what?

 

So the dollar has risen by 25% against all other goods and commodities since the turn of the year? No wonder prices have fallen so far. And the dollar plunged by several hundred per cent in 1980 before surging back 65%? I don't think so.

 

Of course there is short term variation in currency values and that's one of the factors in gold's fall vs the dollar. and of course currency loses value long term. But gold is turbulent in its own right, way above and beyond the effects of currency variation. To pretend otherwise is just silly.

[rgleeson]

 

Awwww, I was waiting to buy physical for less than it takes to dig it out the ground, but it seems it aint going to happen, at least not through the U.S mint.

 

U.S. mint suspends gold coin sales

 

http://www.gata.org/node/6489

[rgleeson]

What were those average gold mining/production costs again?

[G0ldfinger]

...

It's a chaotic situation, virtually unprecedented, and it could tip into major inflation, but I wouldn't assume it's the only possible outcome.

It looks like the 70s all over again, only much worse. No one wants deflation, especially not Bernanke. I have just posted about the collapsing tax income by the UK and the US. What do you think they will do? Decrease their national debt? Pay it back at a higher rate? Or, maybe, but just maybe, exactly the opposite?

 

My bets are placed.

 

Regarding some people's upset about the price swings, I wonder how they will do when gold plunges from $2,000 back to below $1,500, before it moves on to take out $3,000. My guess is, they won't be in this market anymore. And this is exactly what Jim Puplava tells everyone: if you can't stomach it, and if you're not enough convinced by the fundamentals, then put your money into a savings account. The fundamentals couldn't be any clearer than they are now.

[HPCsoYESTERDAY]

A lot of folk are saying that a gold bottom of 750-770 now looks likely, but just suppose we did see the bottom (avoid the pun!) earlier today, that would make silver a screaming buy.

 

I await to see what happens at 16:30............

[G0ldfinger]

Awwww, I was waiting to buy physical for less than it takes to dig it out the ground, but it seems it aint going to happen, at least not through the U.S mint.

 

U.S. mint suspends gold coin sales

...

I am sure the price will fall further. Clearly no demand here.

[THEBIGMAN]

I find that sulking helps. Whaddaya gonna do? Sell PM holdings? And buy what exactly? Cash is gash. Stocks have the pox. Bonds are, uh, erm... one minute, for blondes. Mortar 'n' bricks are for <censored>. Fudge it all, might as well hold for the inevitable bounce. And then hold some more. And until then, I'm gonna keep sulk sulking and write a very stiff letter to the Mogambo Guru. 100% Guaranteed.

[Joe90]

Silver is very nearly at BOGOF prices. I have been waiting patiently and am taking a sizeable position here.

 

Best, Joe.