Gold Price - Where is it heading?

[Uncle Festivus]

I had a thought; people keep using the term 'safe haven', and with the intent of avoiding volatility.

But, is gold really that safe a haven? It's just rallied so hard in a matter of months (& years!) if it were a stock I'd say it was overbought! In the short term, is there not a risk of rather significant losses here? Not to mention all the complications from different currencies! (Especially when entering at these levels)

What bothers me, is that the rise isn't driven by a massive increase in need, but rather a want ... just seems dangerous.

In 05' gold was at 500/600-something, wasn't it? 3 years later we're sitting on nearly 1000 ... that's a fairly significant rise, for something that's supposedly stable.

Overbought? Short term trading possibly yes. Depends what you compare it too. Not overbought relative to the money supply M3. Not overbought relative to it's inflation adjusted value. Relative to any number of 'things' it is still 'cheap'?

I posted the chart below on the oil thread, but also serves as a comparison between relative commodity price appreciation over the last few years. If you compare it with the energy bull, golds advance is still rather orderly, but more to the point is still only just starting to enter the parabolic stage?

The danger with thinking that a secular bull trend has run too hard is that gold is in blue sky now. It has momentum & growing widespread, diverse support from non investment types ie the general public is aware.

There will be pullbacks, some severe. We may be in for another 'consolidation' phase if the Fed decides to digest the 75 bp cut though, to be offset by a deepening of the US recession or the contagion spreading further eg China (the saviour of the world ), or, deflation rear's it's ugly head.

 

[tigerboi]

can someone tell me the exact measurements used for gold,is an ounce at

30 grams which is metric or is it 28 grams the old oz?????thx anyone..tb

 

[Kauri]

can someone tell me the exact measurements used for gold,is an ounce at

30 grams which is metric or is it 28 grams the old oz?????thx anyone..tb

troy ounces...
Troy Ounce (20 pennyweights)480grains...31.1034768grams

 

[tigerboi]

can someone tell me the exact measurements used for gold,is an ounce at

30 grams which is metric or is it 28 grams the old oz?????thx anyone..tb

troy weight at 31.10 grams per oz...found this site for all into gold gives you

the price in 23 currencies....gold price.org,also www.24carat.co.uk

also had for awhile...www.goldnerds...they give you info on all aussie gold

companies......so troy ounce is 32.15 oz to the kg....tb

 

[barrett]

I had a thought; people keep using the term 'safe haven', and with the intent of avoiding volatility.

But, is gold really that safe a haven? It's just rallied so hard in a matter of months (& years!) if it were a stock I'd say it was overbought! In the short term, is there not a risk of rather significant losses here? Not to mention all the complications from different currencies! (Especially when entering at these levels)

What bothers me, is that the rise isn't driven by a massive increase in need, but rather a want ... just seems dangerous.

In 05' gold was at 500/600-something, wasn't it? 3 years later we're sitting on nearly 1000 ... that's a fairly significant rise, for something that's supposedly stable.

Gold was actually my very first investment, I bought myself a little physical bar many years ago : & I am now considering to add the stock GOLD to what will be my conservative portfolio, consisting of an index fund, high interest savings account, & gold.

Nyden, nice work on your early gold buy. Here's my take on gold.

Currency investors prefer currencies with higher real interest rates (yields), and the expected future direction of yields directs the carry trade, which directs the exchange rates of the currencies..

Current yields on some major global currencies:

__short term interest rate___consumer price inflation rate___yield
Renminbi______4.14%_____________6.9%______________ -2.76%
US dollar______2.3%______________7.5%______________ -5.2%
Gold__________ 0%________________-__________________ 0%
Yen__________0.5%______________0.8%_______________ -0.3%

The price of gold has been going up in recent years because its exchange rates against other currencies are benefiting from the carry trade. You often hear journalists saying 'gold pays no interest'.. what they don't seem to realise is that at 0% interest, right now gold is about the highest yielding currency around! That's the fundamental reason why the gold price is going up at the moment.. as they say in fixed income investing, yield is king.

Because the markets are forward looking, today's changes in currency exchange rates reflect expectations of future changes in their relative yields. Some questions affecting the future yields of the fiat currencies:

Are the major central banks coming under pressure to raise or lower interest rates (considering the ongoing credit crisis)?

Is consumer price inflation in the major economies increasing or decreasing?

Is the combination of these likely to drive the yields of the fiat currencies up or down?

The way I see it, massive pressure on central banks to reduce interest rates, combined with structural deficits in all the main commodities stoking inflation, will combine to drive the yields on fiat currencies down, increasing gold's yield advantage.

The US-led global credit boom, under-investment in commodity production, peak oil, Asia's industrialisation and competititive currency devaluation are background reasons for why fiat currency yields are low today, with excessive credit creation over the past 35 years being the main culprit. Thanks to that, it now takes $7 of debt to fund every additional dollar of US GDP - so interest rates there have to be kept low to avoid a depression.

So I see the fundamentals as being a bit stronger than the 'safe haven from the credit crisis' media argument. In fact I suspect that argument is just a safe haven for journalists who don't understand currencies and will be some of the last to buy gold.

Re the question you raised about gold price corrections, they do tend to be big and unpredictable, IMO a few good principles for a conservative portfolio are don't buy all at one time.. average in.. buy more in May-August when prices tend to dip.. don't trade in and out.


Chinese inflation: November 2007 figure
Japanese inflation: Dec 07 figure, central bank official interest rate
US dollar: shadowstats inflation.. all others are bogus (government) figures

 

[josjes]

Nyden, nice work on your early gold buy. Here's my take on gold.

Currency investors prefer currencies with higher real interest rates (yields), and the expected future direction of yields directs the carry trade, which directs the exchange rates of the currencies..

Current yields on some major global currencies:

__short term interest rate___consumer price inflation rate___yield
Renminbi______4.14%_____________6.9%______________ -2.76%
US dollar______2.3%______________7.5%______________ -5.2%
Gold__________ 0%________________-__________________ 0%
Yen__________0.5%______________0.8%_______________ -0.3%

The price of gold has been going up in recent years because its exchange rates against other currencies are benefiting from the carry trade. You often hear journalists saying 'gold pays no interest'.. what they don't seem to realise is that at 0% interest, right now gold is about the highest yielding currency around! That's the fundamental reason why the gold price is going up at the moment.. as they say in fixed income investing, yield is king.

Because the markets are forward looking, today's changes in currency exchange rates reflect expectations of future changes in their relative yields. Some questions affecting the future yields of the fiat currencies:

Are the major central banks coming under pressure to raise or lower interest rates (considering the ongoing credit crisis)?

Is consumer price inflation in the major economies increasing or decreasing?

Is the combination of these likely to drive the yields of the fiat currencies up or down?

The way I see it, massive pressure on central banks to reduce interest rates, combined with structural deficits in all the main commodities stoking inflation, will combine to drive the yields on fiat currencies down, increasing gold's yield advantage.

The US-led global credit boom, under-investment in commodity production, peak oil, Asia's industrialisation and competititive currency devaluation are background reasons for why fiat currency yields are low today, with excessive credit creation over the past 35 years being the main culprit. Thanks to that, it now takes $7 of debt to fund every additional dollar of US GDP - so interest rates there have to be kept low to avoid a depression.

So I see the fundamentals as being a bit stronger than the 'safe haven from the credit crisis' media argument. In fact I suspect that argument is just a safe haven for journalists who don't understand currencies and will be some of the last to buy gold.

Re the question you raised about gold price corrections, they do tend to be big and unpredictable, IMO a few good principles for a conservative portfolio are don't buy all at one time.. average in.. buy more in May-August when prices tend to dip.. don't trade in and out.


Chinese inflation: November 2007 figure
Japanese inflation: Dec 07 figure, central bank official interest rate
US dollar: shadowstats inflation.. all others are bogus (government) figures

Excellent commentary Barrett. We are in the same wavelength. The "real yield" argument is definitely THE most important reason why gold is in bull territory. As long as the FED keeps cutting the rate, and inflation remains rampant, Gold is King.
Bottom Line is :
In a "fight" sentiment versus fundamentals & liquidity, sentiment will lose eventually and give way to the primary trend up. Bullish sentiment is frequent during strong bull markets and confirming the uptrend.
As a rule you would never buy everything in one step, 2-3 steps are the minimum to cost average and diversify on the time axis. The best strategy after the initial position is to buy the dips, e.g after corrections of 2 months
(much more you hardly get in a bull market).

 

[ithatheekret]

As a rule you would never buy everything in one step, 2-3 steps are the minimum to cost average and diversify on the time axis.

Someone has mastered the price axis versus the time axis and evaluated a trading plan to steer by .

Modifying the generator ( fractal ) helps . Invariances are the only proof .


Much applause for so much said in a short sentence , because the poster has also grasped dynamics ......... much applause . But it does not only apply to POG it has a far broader range than that . It can be spread much further than cost averaging , depending on the basis of the evaluation model . But to pick out diversification on the time axis , is what we aspire to constantly .

Whilst some may just see it as a trading plan , it goes beyond that , it is a wealth creation plan that can be compounded on .

 

[michael_selway]

Nyden, nice work on your early gold buy. Here's my take on gold.

Currency investors prefer currencies with higher real interest rates (yields), and the expected future direction of yields directs the carry trade, which directs the exchange rates of the currencies..

Current yields on some major global currencies:

__short term interest rate___consumer price inflation rate___yield
Renminbi______4.14%_____________6.9%______________ -2.76%
US dollar______2.3%______________7.5%______________ -5.2%
Gold__________ 0%________________-__________________ 0%
Yen__________0.5%______________0.8%_______________ -0.3%

The price of gold has been going up in recent years because its exchange rates against other currencies are benefiting from the carry trade. You often hear journalists saying 'gold pays no interest'.. what they don't seem to realise is that at 0% interest, right now gold is about the highest yielding currency around! That's the fundamental reason why the gold price is going up at the moment.. as they say in fixed income investing, yield is king.

Because the markets are forward looking, today's changes in currency exchange rates reflect expectations of future changes in their relative yields. Some questions affecting the future yields of the fiat currencies:

Are the major central banks coming under pressure to raise or lower interest rates (considering the ongoing credit crisis)?

Is consumer price inflation in the major economies increasing or decreasing?

Is the combination of these likely to drive the yields of the fiat currencies up or down?

The way I see it, massive pressure on central banks to reduce interest rates, combined with structural deficits in all the main commodities stoking inflation, will combine to drive the yields on fiat currencies down, increasing gold's yield advantage.

The US-led global credit boom, under-investment in commodity production, peak oil, Asia's industrialisation and competititive currency devaluation are background reasons for why fiat currency yields are low today, with excessive credit creation over the past 35 years being the main culprit. Thanks to that, it now takes $7 of debt to fund every additional dollar of US GDP - so interest rates there have to be kept low to avoid a depression.

So I see the fundamentals as being a bit stronger than the 'safe haven from the credit crisis' media argument. In fact I suspect that argument is just a safe haven for journalists who don't understand currencies and will be some of the last to buy gold.

Re the question you raised about gold price corrections, they do tend to be big and unpredictable, IMO a few good principles for a conservative portfolio are don't buy all at one time.. average in.. buy more in May-August when prices tend to dip.. don't trade in and out.


Chinese inflation: November 2007 figure
Japanese inflation: Dec 07 figure, central bank official interest rate
US dollar: shadowstats inflation.. all others are bogus (government) figures

Hi what about Australia?

thx

MS

 

[Whiskers]

There goes a new record high.

Just keeps adding to the staggering heights. $928.80 as I post.

 

[Sean K]

There goes a new record high.

Just keeps adding to the staggering heights. $928.80 as I post.

Cracking another woody again.

Concern I have is the old theorum the faster they rise, the harder they fall...for the sake of my long term LGL and NCM, time for consolidation above $900 please. Or, maybe it already has....

 

[ithatheekret]

You think POGs looking good check out platinum whoooohooooo .

1700 big ones

 

[Whiskers]

Cracking another woody again.

Concern I have is the old theorum the faster they rise, the harder they fall...for the sake of my long term LGL and NCM, time for consolidation above $900 please. Or, maybe it already has....

I tend to agree kennas, but I haven't given it a lot of thought the last few weeks, just accepted that it will stay strong for awhile cos the US is determined to stave off a recession no matter the risk of inflation tomorrow.

US markets relatively steady, slightly green and setting up for a good day here for gold stocks.

 

[Whiskers]

You think POGs looking good check out platinum whoooohooooo .

1700 big ones

Yeah, tends not to get a lot of mention, but I've been watching. Some little specs have platinum shows as a side-kick to gold and base metals. Probably a bit of reassessing priorities going on now.

 

[ithatheekret]

US markets relatively steady, slightly green and setting up for a good day here for gold stocks.

Might get a shock and see banks roar tomorrow too , the US financials sickly as they are , have started to glow on the US boards . Smells like consolidation plays , whilst everyone else argues about decoupling ..........

 

[ithatheekret]

............ even coppers comeabout , up by a bluey .

 

[bean]

Delivery for february gold on Comex starts today - Do they have the gold to delivery for those who want it or are higher prices in the offering.

Either way there are going to be big losers in the shorts on Comex

A week to remember $1000 is a possibitliy

 

[Sean K]

A week to remember $1000 is a possibitliy

Not $540 beanster? :

Never letting you live that one down my little legume.

I suppose we'll be back at $540, one day.

 

[CamKawa]

Does anyone know of a good free web site that offers the ability to chart the POG, AUD and USD on the one chart? I wouldn’t mind seeing how it looks for the last 6 months. Thanks.

 

[Kauri]

A tad early yet but... a touch of diversion may be developing... be a good spot for a four if it does..
Cheers
...........Kauri

 

[Miner]

Does anyone know of a good free web site that offers the ability to chart the POG, AUD and USD on the one chart? I wouldn’t mind seeing how it looks for the last 6 months. Thanks.

Please peruse postings in this thread specially the charts from Kauri.
You can also try kitco.com for gold, silver etc charts and historical values too.
Alternatively just type gold chart in google - you would be bombarded with various other sites too

Good luck