Gold Price - Where is it heading?

[explod]

Gee Explod, you're starting to sound like Chicken.

Where is that bird these days anyway?

GP

And while we are remebering, where's Bean, his prophecy is now down to 5 to 1 and some say shortening by the day. Forget now; Kennas you had it pinned down was it US$550?

 

[Kauri]

Bloomberg is a mate of GWB and will ramp everything they can for the upcoming Presidential election. A good policy is to do the oposit to what is expressed on Bloomberg and you will do ok.

The US dollar is doomed because it is not backed by assets but gold is an asset. And they cannot stop gold now because too many people are now worried about the financials and have gold as the safe haven on their radar.

Can't agree more, I remember being pulled up a whiles back for expressing my use of contrarian indicators, glad to see you are on board.
I see Gold as nothing more than a commodity to be bought and sold, much as wheat or cattle or whatever, I think you will find the funds who have fueled the rises across the commodity board see it the same way, it's the sheeple, particularly those who fell in love with the mystic hype spun around gold and bought in fearlessly at prices over $1000 recently, (some on margin no doubt), who........
I noted a lot of concern when the XAO fell past 10% originally, it is some majic number apparently that signifies a possible major turning point... yet when Gold does it, in quick time, it seems to be bullish???
Have attached my EW chart,(last posted when the white coily was forming)... interestingly the retrace has halted at 50% of the 5th wave.. will that be it for the retrace will all systems go from here, will it bounce and continue down to correct the major 4th wave, or......
Cheers
...........Kauri

 

[MRC & Co]

Because certain members of the fed are proactive when it comes to inflation? Because if it absolutely spins out of control they'll have no choice (imo) but to raise rates, admit to a recession, & let the punters / undying faith finally die.

Their economy is dead for the moment, simple as that. Making things more expensive isn't going to fix it, no matter how much cheap money they offer to the masses ... who are already in debt. It is my belief that they'll figure this out :

I agree.

However, raising IRs now would be political suicide, election time and all that.

I am not saying it shouldnt happen, I am saying it wont happen! Big difference.

Kauri, another contrarian here!

Explod, I dont like to lump gold in with commodities either. But gold equities sure seem to run with them at the moment, both are afterall, lumped into the XMJ yeh?

 

[MRC & Co]

In the eventual-long-term (not in our generation) I do see gold completely collapsing. People argue that once there's none left to mine, prices will rocket ... I disagree. Prices could plummet! If there's no longer any work-value placed on gold (the effort in getting it), & no more can be made / found ... and as population grows / it's only held by a few, who the hell would buy the archaic relic? Perhaps collectors? I know I sure wouldn't :

Here's something philosophical to ponder over; USD is backed by nothing? What is gold backed by? ...

If the US financial system collapses, where does that leave the USD? How much supply of USD can come online at anytime? How much gold can come online at anytime?

Gold completely collapsing? Huh? Prices could plummet? If you have a shift in global values and beliefs, not likely. There will not be "no more can be made/found" for a LONG LONG time! It will just cost more to extract! It will become ludicrously expensive if it ever becomes THAT rare. A real collectors item. And by that time, once it comes to fruition maybe hundreds of years down the track, people like you (or me) not in the market for its purchase will not matter. Because it will only trade in the hands of the absolute global elite.

Anyways, way off topic. This wont happen in our lifetimes, so not relavent to this thread.

 

[spectrumchaser]

You guys are overlooking the huge growth in demand for gold
by the growing economies of India and China.

Bling ladies Bling

http://en.ce.cn/Business/pick/200612/05/t20061205_9674651.shtml


Gold consumption continues to surge in China
Last Updated(Beijing Time):2006-12-05 11:28

The consumption of gold across China will top 350 tons this year, a record high, according to Cheng Fumin, chairman of China Gold Association.

Addressing an ongoing forum on gold and precious metals held in Shanghai, Fu said rising gold prices since the beginning of the year had restrained sales of gold jewellery, which accounts for the bulk of gold consumption, but gold bullion -- seen as a way of preserving value -- has been selling like hot cakes.

The country produced 161 tons of gold in the first three quarters of the year, a rise of 13 tons on the same 2006 period, and raked in 3.9 billion yuan (about 487 million U.S. dollars) in pre-tax profits, up 52 percent on comparable figures from last year.

Fu predicted the country's gold output would exceed 240 tons this year, with gold sector profits topping 5.5 billion yuan, a record high.

China now ranks third in the world in terms of gold consumption, after India and the United States.

Gold consumption exceeded 300 tons in China last year, 80% of which went to the jewellery-making sector.




http://goldnews.bullionvault.com/india_gold_jewelry_gems_diamonds_industry_120620073
The jewelry industry in India contributes over 15% of the country's total exports and provides employment to 1.3 million people directly and indirectly.
Gold jewelry forms around 80% of the Indian jewelry market, with the balance comprising fabricated studded jewelry (including diamonds) as well as gemstone studded jewelry.
India consumes nearly 800 tonnes of Gold Bullion, accounting for about 20% of world gold consumption. Nearly 600 tonnes of it goes into making jewelry. The Indian jewelry market, estimated to be worth $13.5 billion in fiscal 2006-07, accounts for 8.3% of world jewelry sales by value according to a study by KPMG.

 

[cuttlefish]

Out of curiosity, at what price would some gold devout-believers be convinced of a trend change? Hypothetically (not saying it would happen!), would some true believers follow

I see support at $830, though I expect this short term decline to stay within the $870-$920 range - if its out in the wilderness for a while it could drift further but I'd be hoping $830 was the bottom of this. So I guess a strong move below $800 would be significant.

I'm not a technician though and prefer to base my investment on fundamentals so that would still be the main driver - the key fundamental to me is the current decline of the US and in particulary US inflating itself out of the current credit crisis which imo is still just being postponed - reality is not being faced and they are just stringing things along month to month. As I'm at the moment primarily investing in gold stocks I'm also looking at other factors not just gold price in determining whether the investment value is there - I see value in some of the stocks I'm investing in even if the gold price doesn't recover from the $850 -> $950 levels for a long time.

 

[cuttlefish]

Making things more expensive isn't going to fix it, no matter how much cheap money they offer to the masses ... who are already in debt. It is my belief that they'll figure this out :

Inflation doesn't necessarily make everything more expensive in real terms, though of course it makes some things more expensive and sometimes goods will lead and at other times wages will lead. What inflation does is devalues cash (or inflation is the result of a devaluation of cash). Extra money in the system reduces the purchasing power of each dollar in the system. It is important to understand the shift in philosophy/outlook required when investing during an inflationary environment. Investing in things that go up isn't enough - they have to go up in real terms.

Wage inflation can help the masses because their rising salaries can be used to reduce their previously insurmountable debt. By devaluing cash the value of the debt is effectively reduced in real terms as well. Of course typically interest rates will be high in a high inflationary environment which counters this effect to a fair extent but overall it can still in real terms reduce the size of existing debt. That is why a moderate but not execessive level of inflation seems like a possible path for the US out of the current debt crisis. That path WILL be at the expense of the USD in international terms though and there is a risk of the inflation becoming unmanageable and becoming hyper inflation.

 

[Temjin]

One need to remember that the Federal Reserve DO NOT CARE about the inflation regardless of what they say in the press. If you dig more deeply, you should be aware that "communication publicly" is one of their many strategies to control the economy.

With so much public and private debt (and the fact that THEY CAN NEVER REPAY THEM), lower interest rates and increasing inflation is one sure way to reduce their debt. Why would the Fed care about inflation anyway?? IT's not in their interest to save the foreign governments who have such a massive reserve. Remember Benchopper & Co. are students and believers of deflation CAUSE depression. They will do absolutely ANYTHING to prevent it, inflating by lower short term interest rate is their first line of strategy.

More to it later..

 

[So_Cynical]

POG falls a hundred or so dollars and this thread turns to mush

Who said the gold bubble is deflating...hell its only just started, how can a
bubble burst when its only half full.....the perfect storm for POG is still
building, ALL the "real world" indicators are still POG positive.

Gold will trend sideways for 3 to 6 weeks then away we go again...are we all looking at the same chart.????

 

[cuttlefish]

Gold is backed by greed.

I agree with explod here. In any society there are symbols of power. It takes very little in the way of money to achieve the basic needs for human comfort and sustenance, so once societies members attain this they then chase something else - symbols of their place in society that identify them as having a status - in modern society thats nice cars, expensive clothes, big houses, a big bank balance, power, control.

Almost since the birth of modern man gold has been a strong psychological symbol of status, wealth and power and it has been coveted for milleniums. Gold is universally recognised as a symbol of wealth and power in all modern religions and cultures.

Our language and culture is scattered with references to gold - gold medals, pot of gold at the end of the rainbow, golden age, gold standard, gold credit cards, gold anniversary, gold wedding rings, golden guitar awards, gold cup, Nestle gold, gold record, guilt edged etc. etc..

All of the most powerful civilisations and regimes over thousands of years have had gold as part of their symbolism for a very long time. (From the gold laiden tombs of the Egyptians to the golden domed mosque at Temple Mount in Jerusalem, to the Galleons of gold of the spanish plundered from the ancient civilisation of the Incas, to the gold treasures of the Ming dynasty in China, to the crown jewels of Britain, to USA's Fort Knox).

Gold also can't be manufactured, doesn't react with many other chemicals and is extremely rare - there really isn't much gold by volume in the world.


Gold is backed by gold - it is axiomatic.

 

[cuttlefish]

If inflation in the US keeps soaring, what will happen to the USD? Based on PPP?

USD cannot keep rising, no? Or arbitrage will exist?

Exactly - the only way that I can see that the USD can not fall when there is strong inflation in the US is if there is even stronger inflation outside the US or the market is not a true efficient market.

 

[Nyden]

I agree with explod here. In any society there are symbols of power. It takes very little in the way of money to achieve the basic needs for human comfort and sustenance, so once societies members attain this they then chase something else - symbols of their place in society that identify them as having a status - in modern society thats nice cars, expensive clothes, big houses, a big bank balance, power, control.

Almost since the birth of modern man gold has been a strong psychological symbol of status, wealth and power and it has been coveted for milleniums. Gold is universally recognised as a symbol of wealth and power in all modern religions and cultures.

Our language and culture is scattered with references to gold - gold medals, pot of gold at the end of the rainbow, golden age, gold standard, gold credit cards, gold anniversary, gold wedding rings, golden guitar awards, gold cup, Nestle gold, gold record, guilt edged etc. etc..

All of the most powerful civilisations and regimes over thousands of years have had gold as part of their symbolism for a very long time. (From the gold laiden tombs of the Egyptians to the golden domed mosque at Temple Mount in Jerusalem, to the Galleons of gold of the spanish plundered from the ancient civilisation of the Incas, to the gold treasures of the Ming dynasty in China, to the crown jewels of Britain, to USA's Fort Knox).

Gold also can't be manufactured, doesn't react with many other chemicals and is extremely rare - there really isn't much gold by volume in the world.


Gold is backed by gold - it is axiomatic.

Yes, but I quite honestly find that disgusting. That man feels the need to hold something another man doesn't have; to be better than others, & to flaunt their wealth to the have-nots.

Greed, lust for power, need for status symbols ... nothing but egotistical rubbish. I would hypothesise that if society were itself an entity, it would be narcissistic

I guess gold becoming worthless will be a fantastic thing; as it'll be a true indication of society as a whole developing greater moral fibre, deeper conscience, & a respect / care for fellow man.

I've been talking more philosophically here though (last few posts!), as to what may happen in hundreds of years ... & not in the current period of time; but - surely this counts towards really long term fundamental analysis? Or rather, sentiment analysis!

... Perhaps that's why I feel an aversion to investing so heavily in gold; too much of an investors conscience? :



Now; I need to add something more on topic!
Do Goldman Sachs still hold their short position on gold at $800?

 

[cuttlefish]

Yes, but I quite honestly find that disgusting. That man feels the need to hold something another man doesn't have; to be better than others, & to flaunt their wealth to the have-nots.

Greed, lust for power, need for status symbols ... nothing but egotistical rubbish. I would hypothesise that if society were itself an entity, it would be narcissistic

There are differing motivations but at the end of the day ego is a big part of the human psyche and is unlikely to disappear and creates desires beyond the simple need for physical comfort and sustenance.

Pure narcissistic ego isn't the only driver. Desire for power and control can be driven by many underlying emotional motivators. Some will claim they want power to do good and have the influence that enables them to make the world a better place, which is often true but this is still not an egoless transaction.

Humans have all sorts of drivers - related to innate and subconscious fears and survival instincts that drive them towards a need to have a position of status and power in society.

Just look at how society treats those with status vs those that don't have it. Celebrities (e.g. the classic example of OJ Simpson) can get away with murder while there are numerous innocents on death row. In Australia football players can get away with questionable behaviour of an extreme nature and have it swept under the carpet.

Status and power enhance mans ability to survive and to protect himself and his family. I obviously can't explain the complexities of human interaction and ego within a paragraph or two on a forum.

But if you have no ego, and no desire whatsoever for status or power you are an extremely unique individual in this world. There are many that would claim not to have this but they are likely mistaken.

 

[pb112]

This extract from a newsletter explains in part why POG had such a big sell off.


Mining Speculator Hotline

Hotline

"This is Greg McCoach with a Mining Speculator Hotline for Friday, March 21, 2008.

Events this past week have prompted me to send out this communication regarding the sudden collapse of the precious metals prices.

Here is what is happening.

The demise of Bear Sterns, which was reported to the public Sunday evening and Monday, has in turn caused their assets to be sold off in masse this week.

On their book of liquid assets was a rather large, long gold position. It is being sold off in order to raise cash to offset their massive losses. The spot prices have been hammered because of this activity. It will be short-term in nature. If you're looking to buy physical precious metals to diversify your portfolio at this point, you are being given an unexpected gift to do so. It won't last long.

Another item in Bear Sterns closet was a massive short-position in the ten year treasury. This off course is being unwound this week, which is making the dollar looking a bit stronger than it really is. Don't be confused by this nonsense. The dollar will soon resume its downward trend.

The fact that Bear Sterns was shorting the dollar to such a degree shows that they were not playing along with the game of the establishment Federal Reserve banking crowd. They have been severely punished by the powers that be.

What brought Bear Sterns to their knees was their own riverboat gambling mentality that not only jeopardized them, but the financial system as a whole. This kind of story is just the beginning of what will be a long list of companies that meet a similar fate. Will the Fed and the citizens of the United States be able to bail out all the financial sewage that is about to be uncovered?"

 

[MRC & Co]

Exactly - the only way that I can see that the USD can not fall when there is strong inflation in the US is if there is even stronger inflation outside the US or the market is not a true efficient market.

Thats right, but with Fed actions, its unlikely. Thats what I call a money supply saturation! They dont call him helicopter Ben for nothing.

The market is also inefficient, things such as trade barriers, transport costs and differences in taxes cause the differentials in PPP. However, only to a certain extent. PPP does, evidently, have its rightful place in theory and reality.

Nyden: "Do Goldman Sachs still hold their short position on gold at $800?"

Not sure, however I dont think they would have been holding their gold futures all the way into the run-up! Imagine the contracts they would be trading, would have been one HELL of a margin call (well more like 30 margin calls along the way)! Surely they would have stops set. Perhaps they are shorting again now, more than likely.

 

[refined silver]

You would really hold on to hold to $500? Surely you'd be selling / re buying ... sure, gold is perhaps great for a trader, but not so much for a medium term investor imo.

Frankly, by the charts - depending on the year you begin from ... Gold has been a piss-poor performer! In 78'-80 it was 750 ... and it's only just hit that price range again! 30 years ... that is disgraceful. If you had bought in at 300 back in 79, & held with a long term, bottom-draw plan ... your money would not have made any gains if you sold up in 03. Wouldn't have even matched inflation.

The simplest way to make money is get the long term trends right. That doesn't mean buy and hold forever, but until the longterm trend changes. Eg to be a billionaire now from $10,000 start in 1970 needs 3-4 trades only. Buy gold 1970 sell 1980, buy Japanese stocks 1980 sell 1989, buy US tech stocks/1990 sell Jan 2000, buy gold 2001/2002 start selling well north of $2000 sometime round 2010/11, (although I think the bull could go a few years longer than that.

So no you don't need to trade, just get the main trend right and stay on til near the end, which is not now.

Yes I'd hold to $500 and I'd still be in front of where I bought, and if it did go there which is very improbable, it would be dip in the main trend which would violently return, certainly not a time to sell.

Furthermore, gold is a metal. A precious, useless, shiny commodity;

Here's something philosophical to ponder over; USD is backed by nothing? What is gold backed by?

No, gold is money. It has been for 5000 years and will continue even though the mainstream financial hates that, and actively promotes the gold is a commodity view, because gold is the direct competitor to their paper money, of which every single currency has ultimately end up worthless, because there is too much temptation to just print more when the govt needs it.

Why is gold money? It has all the charcteristics necessary for money which virtually nothing else does. If you don't know what they are look them up.

 

[wayneL]

Why is gold money? It has all the charcteristics necessary for money which virtually nothing else does. If you don't know what they are look them up.

As far as I know, my local supermarket won't take gold in exchange for a sack of potatoes and a loaf of bread.

 

[>Apocalypto<]

As far as I know, my local supermarket won't take gold in exchange for a sack of potatoes and a loaf of bread.

That depends on who u talk to at the supermarket wayne!

 

[Gurgler]

Why is gold money? It has all the characteristics necessary for money which virtually nothing else does. If you don't know what they are look them up.

The five characteristics I know are:

1. Divisible - can be divided to pay exact value
2. Portable - can be carried around
3. Durable - can last longer
4. Easily recognised - standardised
5. Generally acceptable – guaranteed in the market

Wayne has acknowledged that the last one is a bit of a problem - unless you have easy access to bullion dealers!

But I'd argue that on a day-to-day basis, divisibility is also, not to mention portability - again unless you own an armoured truck equipped with melting/carving facility.

 

[refined silver]

The five characteristics I know are:

1. Divisible - can be divided to pay exact value
2. Portable - can be carried around
3. Durable - can last longer
4. Easily recognised - standardised
5. Generally acceptable – guaranteed in the market

Wayne has acknowledged that the last one is a bit of a problem - unless you have easy access to bullion dealers!

But I'd argue that on a day-to-day basis, divisibility is also, not to mention portability - again unless you own an armoured truck equipped with melting/carving facility.

You better add "rare" to the list otherwise sand would also fit the bill.

I'm not arguing for a return to gold as money in general circulation, then you'd need silver for divisibility and probably other coins too -copper zinc etc but with much higher values than they have now. There is a way to put gold back in the system slightly different from how its been before, which I believe will happen.

Without the rarity factor, govts just inflate away especially when confronted with a crisis, and that returns paper money to its intrinsic value - 0.