Gold Price - Where is it heading?

BHP said:

Thanks SC, I checked it out but this too is unhedged.
See http://www.asx.com.au/investor/cfds/pdf/contract_specifications_commodity_cfds.pdf

6.1 Contract Specification for ASX GOLD CFD
Contract Currency USD

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If it's leveraged, you should be able to do alright out of it. Have a look at this post made by Wayne a little while ago-

https://www.aussiestockforums.com/forums/showpost.php?p=204614&postcount=1925

Explod,

Thanks, and I will (have) take your advice and stay out of the fray till I learn a bit more, especially now the markets are a bit turbulent.

Prof,

Thanks very much for the link, it answers my question. Makes a lot of sense however I have absolutely no idea about futures contracts so will read up on but will give it a miss. I will also try and work out if the same principle applies to CFD's.

explod said:

Gold price has begun to de-couple from the Share Market. Since May the Dow is at exactly the same level, in fact a couple of points down. For the same period gold is up 20%. On a day to day basis gold has moved a bit with the market but this effect is becoming less as more of the general investment community are taking notice of gold.

Cash and bonds are now being seen as risky so that haven now is also being viewed sceptically. Underlying inflation is now being appeciated, high, oil a big contributer now.

Silver as you suspect is rising on that chart at a greater rate than gold and is now near a new 27 year high. Once this resitance is broken I fully expect it to lead again and go back towards a ratio of 25 or 30 to 1.

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US gold Shares are still moving in line with the general market on most days however every now and then the fall may be not as great as it once would have been. Gold is becoming more of a safe haven.

POS :70:
Catch up move is on the cards the action of the last few day has been very suportive Stayed above the US$14.50

BHP

I don't know anything about hedging techniques, but a simple way of hedging would be to use borrowed $USD to buy physical gold. If gold price goes up in $USD you will be ahead. Interest is the cost of the hedge (but interest to some extent is a cost you bear in buying physical gold anyway because you have to use interest bearing funds to buy non-returning gold).

I'm sure one of the derivatives experts would be able to give a derivative based equivalent of the above (because I suspect the equivalent to the above is basically what you're looking for - though you'd probably want an interest rate hedge in there as well).

cuttlefish said:

BHP

I don't know anything about hedging techniques, but a simple way of hedging would be to use borrowed $USD to buy physical gold. If gold price goes up in $USD you will be ahead. Interest is the cost of the hedge (but interest to some extent is a cost you bear in buying physical gold anyway because you have to use interest bearing funds to buy non-returning gold).

I'm sure one of the derivatives experts would be able to give a derivative based equivalent of the above (because I suspect the equivalent to the above is basically what you're looking for - though you'd probably want an interest rate hedge in there as well).

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Gold are priced in US dollars.

If you live in Aussie dollars, then you should be buying GOLD in US dollars (after conversion), then borrow the equivalent US dollars for Aussie dollars to hedge against rise/fall of the currency pair movement.

Remember that the correlation between US dollars and Gold is still pro-dominately negative. If gold rises, US dollars fall. Thus, using Aussie dollars to buy gold without hedging will eat your profit by a lot because the US dollar based assets (gold or gold shares) will fall in value due weakening Us dollars.

This is of course, a viable strategy until gold start to break away from falling US dollars.

BHP said:

Prof,

Thanks very much for the link, it answers my question. Makes a lot of sense however I have absolutely no idea about futures contracts so will read up on but will give it a miss. I will also try and work out if the same principle applies to CFD's.

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No worries BHP

The Gold CFD mentioned previously is quoted in USD, so if you were to trade gold that way, it should have pretty well the same characteristics as the gold futures example that Wayne talked about earlier.

bean said:

US gold Shares are still moving in line with the general market on most days however every now and then the fall may be not as great as it once would have been. Gold is becoming more of a safe haven.

POS :70:
Catch up move is on the cards the action of the last few day has been very suportive Stayed above the US$14.50

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Beanster, do you think POS is the second phase of the PM bull run, and if so, why have you waited when POG has quite obviously run away? Or, have you been hiding your position? If you agree with above, what's the third phase of the PM run and when do you switch back to cash? What's your PM targets? Or, will we still see $540 POG? kennas

Afternoon Report
Gold spends 2nd day atop $800

The COMEX December gold futures contract closed up $2.30 Monday at $810.80, trading between $803.50 and $814.20.

November 5, p.m. excerpts:
(from Bloomberg) --
Gold closed above $800 an ounce for a second straight session, extending a rally to the highest since 1980, as energy costs rebounded, sparking demand for the metal as a hedge against inflation. Gold has rallied 27 percent this year, heading for the seventh straight annual gain, as crude oil climbed to a record and the dollar fell to the lowest ever against the euro. "Gold is following crude," said Frank McGhee, head metals trader at Integrated Brokerage Services LLC in Chicago. "On every break, this market is extremely well-bid. Domestic buying is for inflation. Internationally, you're seeing safe-haven buying." Gold reached a record in January 1980 after energy costs doubled in a year, triggering a surge in the inflation rate and demand for the precious metal. "The fundamental story for gold is going to be oil this week," said Ralph Preston, an analyst at Heritage West Financial Inc. in San Diego. "Everyone is anticipating $100 oil. It's going to fuel this rally."...more
(from Reuters) --
"We have to ask ourselves if the credit problems that we saw this summer had been remedied or not. If they haven't, we could see more bids into gold. If the credit markets are calming, then that will remove a bit (of demand) from gold," said James Steel, metal analyst at HSBC Plc in New York. Steel said that losses in the equity markets of late have often been associated with flight-to-quality buying in gold, and that reflected the precious metal's traditional values as a safe haven. U.S. stocks dropped on Monday as Citigroup Inc's warning of swelling loan losses fanned a sell-off in financial services companies and investors worried about the impact of the credit turmoil on the economy. Citigroup, the biggest U.S. bank by total assets, said it could suffer an $11 billion write-down related to subprime mortgage losses. Shares tumbled to 4-1/2 year lows...more
(from MarketWatch) --
Financial turbulence was back in the news Monday ... as renewed turmoil in the credit markets boosted the metal's safe-haven appeal after Citigroup said it will have to write off up to $11 billion more in losses. "Several items of concern are still fueling the flight to gold," said Jon Nadler, an analyst at Kitco Bullion Dealers, in a research note. "One of them [is] the $11 billion in Citigroup write-offs that have resulted in Mr. Prince losing his crown at the mega-bank. First Merrill, now Citi. The [fallen] head count is mounting." On Friday, gold futures rallied $14.80 to finish at $808.50 an ounce on Nymex. "The ailing dollar, near record oil prices and the developing and deepening housing and credit crisis are all supporting the surging gold price," said Mark O'Byrne, director at Gold and Silver Investments Ltd., in a research note. "In the past, the gold market influenced far less directly by external macro-economic factors, would not have made it through the $800 level," said Julian Phillips, an analyst at GoldForecaster.com. "However, in this new global monetary and macro-economically influenced gold market, gold appears to be holding over the $800 level. If it can hold up above that line, then the path very much higher will be far quicker than the last $100 climb," he said in emailed comments. "The investment qualities of gold as a 'contra' investment are shining brightly, taking it higher and higher."...more

I think people need to stop relying so much on the fundamentals of gold, technically its been behaving beautifully

kennas said:

Beanster, do you think POS is the second phase of the PM bull run, and if so, why have you waited when POG has quite obviously run away? Or, have you been hiding your position? If you agree with above, what's the third phase of the PM run and when do you switch back to cash? What's your PM targets? Or, will we still see $540 POG? kennas

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Yes POS always seems to move later than POG in bull runs.
I read that it seems to be when bull runsstart in gold. POG becomes dear so investers look for alternative which is silver. POS at that stage explodes being a smaller market doesn't need much money to cause it to move faster.

A good example of a small silver market (silver shares). Is Australia BHP produces heaps of silver but any rise in POS would have minimal effect on its shares price.
How many true silver miners or silver shares (silver is the main product) are there in Australia.
Not many in fact very few so if silver is joining the party.
Over the last few days I have moved to silver 70% gold 30%

POG say US$900 + (approx 10% from tonight price)
POS would/should be close to US$ 18 (approx 20% from tonights price)

POG rise could slow if US$ made a rally of some sort.

US$540 could happen if a financial storm hit world markets.

Holy S--t, the gold has spiked up in the last 12 hours to USD $820 now.

Silver has just reached $15.00 (at least on my screen) and is extremely close to a full break out from previous high of $15.23.

Go my gold and silver ETFs!

bean said:

How many true silver miners or silver shares (silver is the main product) are there in Australia.
Not many in fact very few

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I'm not an expert...but i think silver mostly occurs with other metals and in small amounts so its mostly mined as a side/by product.

so its almost imposable to be a pure silver miner.

bean said:

US$540 could happen if a financial storm hit world markets.

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This storm could easy go the other way and be
a positive for gold... assuming the storm is USD related.

Falling gold production and rising demand coupled with a wobbly USD
don't equal POG $540 USD.

Temjin said:

Holy S--t, the gold has spiked up in the last 12 hours to USD $820 now.

Silver has just reached $15.00 (at least on my screen) and is extremely close to a full break out from previous high of $15.23.

Go my gold and silver ETFs!

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Silver has reverted back to its behaviour of 2004 to 2006 when it led the gold price on a 30% uptick. The ease of breaking the 2006 high is very bullish indeed for both silver and gold.

O boy, this is now better times again for me. Lost a lot of money a few years ago on a bad property investment. I am now getting my money back.

Kauri said:

Having missed most of this run, only having joined in on the daily triangle, am now tightening up as she is now at what I consider to be the normal area for a W5...
Cheers
.........Kauri

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Kauri, how much further do you think a W5 can run.

I think Bean was calling a Wave B with this recent run, but I can't see how a B can run so much higher than the starting point. WP gave a number, but I can't find it back in the thread...

kennas said:

Kauri, how much further do you think a W5 can run.

I think Bean was calling a Wave B with this recent run, but I can't see how a B can run so much higher than the starting point. WP gave a number, but I can't find it back in the thread...

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Hi Kennas,
It's just a rough guidline mind you.. but the Miner software has it like this... remembering of course that all projections are based on my counts which may or may not be accurate..
Well, off for my 5.30am walk to get some fresh seeding grass for the budgies..
Cheers
..........Kauri

http://biz.yahoo.com/ap/071106/gold_miners_sector_snap.html?.v=1

Sector Snap: Gold Miners
Tuesday November 6, 1:41 pm ET
Gold Mining Stocks Gain on Higher Gold Price Amid the Dollar's Continued Weakness

NEW YORK (AP) -- Shares of gold miners climbed Tuesday, as the price of gold struck a 27-year high against the backdrop of the dollar's continued weakness.

An ounce of December gold added $14.20 to $825 on the New York Mercantile Exchange in midday trading, rising to its highest level since January 1980.

The price of gold has added about 26 percent since the beginning of the year, and gains accelerated within the last couple months as the Federal Reserve cut interest rates twice.

Lower interest rates undermine the dollar, which was already on a long-term downward spiral. Further supporting gold prices -- which typically trade inversely to the greenback -- the dollar fell against several major world currencies Tuesday, and touched a new record low against the 13-nation euro.

Meanwhile, oil prices touched an all-time high of $97 a barrel on geopolitical and other concerns. Rising oil prices are considered a signal of inflation, and gold is typically treated as a hedge against climbing prices.

In company-specific news, silver and gold miner Coeur d'Alene Mines Corp. gained 55 cents, or 14.3 percent, to $4.39, after a Bear Stearns analyst said the stock is underpriced given strong metals prices.

Other gold mining stocks posted more modest gains.

Barrick Gold Corp. shares rose 87 cents to $46.91 and Newmont Mining Corp. added $1.53, or 2.9 percent, to $53.86.

Goldcorp Inc. shares picked up $1.17, or 3.3 percent, to $36.91. Gold Fields Ltd. shares added 56 cents, or 3.2 percent, to $17.67.

AngloGold Ashanti Ltd. shares rose $2.09, or 4.9 percent, to $44.95 and Randgold Resources Ltd. shares picked up $1.01, or 2.8 percent, to $37.11.

Spine tingling stuff this .

And we're only 1/3 of the way to the inflation adjusted high of $2400!

How much of this is 'smart' & 'deep' money & how much is spec and 'me too' money? Does it really matter?

What can derail the dream run? A currency play on the $US & interest rates - despite the hollow rhetoric from the US Fed, it could be envisioned that an effective interest rate of zero (turning Japanese?) is on the cards, and the commensurate effects on the dollar and amplified effects on gold.

Middle eastern oil divesting $US into gold - to accelerate?

Geopolitical - Iran/US chest beating - always present.

Biggest threat is a technical correction aligned with a massive general market correction maybe. How long can the bellwethers of global money shuffling keep announcing billion dollar losses and the market remains at or near a (non inflation adjusted) record high? Is it all a smoke & mirrors show to instill confidence amongst the populace?

Holding the gold bull by the horns now

833.40 - Scary stuff!

Paul Van Eeden discusses the case for gold, and against pretty much everything else, even commodities & China, due to US M3 money supply explosion, & global money supply inflation generally.

http://www.kereport.com/audio/1103-02.mp3
http://www.kereport.com/audio/1103-03.mp3

With the surge in gold to aroung US$840 tonight it is worth having a look at the historic closing prices going back to 1980. Yes just $10 more dollars to an all time high closing price. The ensuing days and weeks ahead will be interesting indeed. The drop in the dollar this evening would indicate that all is very unwell with largest financial systems. Problem is there is too much money and not enough tangible backing.

Chart is coutesy "The Privateer" newsletter