Gold Price - Where is it heading?

[cuttlefish]

A lot of nationalised industries in the free world. Capitalism communist style?

There is no paddle and the creek is long.

Gold isn't going to go up. Gold is just going to 'be' while the USD dissappears.

Interesting times indeed.

Insurance anyone? There's a better version on offer than AIG's.

 

[cuttlefish]

"A disorderly failure of AIG could add to already significant levels of financial market fragility and lead to substantially higher borrowing costs, reduced household wealth and materially weaker economic performance," the Fed said in a statement.

Got to love the carefully understated way they effectively say "If we don't do this everything's gonna be f***d".

 

[Temjin]

Just curious how many people here trade gold physical?

I have found the physical market to be in a real good position as the US Spot is at the lower price end over the last 12months and the AUD Spot is still easily sitting comfortably between the 900-1000 range (thanks to our weakening dollar).

Even when the US price tanks the AUD holds up nicely or takes a softer fall.

If you trade physical you would know what im talking about.

The problem is that physical gold are priced in USD, and it usually only rises when the USD Index is down. Fairly negative correlation. This also correspond to an increase value of our AUD verse USD, thus, dampening the increase in value of physical gold priced in AUD.

That's the ironic situation for us Australian gold investors.

What I do is to buy USD dominated ETCs (with physical backing!) and hedge it by borrowing USD with AUD to purchase them. This way, I am hedged against the movement of currencies. Of course, it means when gold prices do drop, I obviously suffer the "normal" investment lost.

 

[refined silver]

Who says cash is king?

http://www.marketwatch.com/news/story/story.aspx?guid={56A2CEE5-5A53-4A27-A4BA-585CFBE173A4}&siteid=rss

Reserve Primary has both institutional and retail accounts. "This appears to be the first case where a retail investor will lose money in a money market fund." said Peter Crane, president of market research firm Crane Data in Westborough, Mass., though he called the situation "an anomaly."

Here is a money market fund freezing redemptions! You put your money into a money mkt fund supposedly the most liquid and safest vehicle available, and now its frozen and losing money!

Its apparently only the second time ever a money market fund's value had dropped below $1 per unit.

What is happening now is too astounding for words! When even people like Greenspan are calling it a once on a century event, its fairly serious.

I am more concerned about the return of my money than the return on my money. --Mark Twain

From Jim Sinclair:
http://www.jsmineset.com/home.asp

Dear CIGAs,

1. The quoted amount of OTC derivatives on Lehman's books are not notional value, but some silly mark to no market. The real number is trillions. When either party to an OTC derivative fails the value of that derivative instantaneously become the size of what was previously called notional value. With one quadrillion, one thousand one hundred and forty four trillion (BIS) in notional value, there is NO means to stop this financial cataclysm.
2. The **** has hit the fan because trillions of dollars of OTC derivatives failed Monday.
3. The entity to fail is not the winner on those fraudulent pieces of paper but the loser. Otherwise it would not have failed.
4. Many other counter parties to those derivatives have fallen into potential bankruptcy.
5. The long spoken about "domino effect" is active and I now believe the Fed did not consider how a derivative becomes full value (formerly called notional value) when one side goes into bankruptcy. Yes, Pandora's Box opened Monday morning.

 

[refined silver]

While we are being positive, here's some more!

Commodity and precious metal ETFs drop over 50% because the backer was/is AIG!

http://www.investegate.co.uk/invarticle.aspx?id=58393

Do you know how much your paper gold and silver certificates, ETFs etc may be worth, if the company backing them defaults and its found they didn't have any in the pool, or it was leased out, contracted to someone else, covered by paper, etc?

 

[Ageo]

The problem is that physical gold are priced in USD,

Not sure what physical you mean but im actually talking about actual gold (not paper). And its not priced on USD but on AUD (yes we go off the US spot but then the currency conversion kicks in) I.E over the last few weeks if i were trading the US spot then i would worry as it has taken a beating but on the other hand with physical gold i am actually up.

 

[M34N]

A lot of nationalised industries in the free world. Capitalism communist style?

There is no paddle and the creek is long.

Gold isn't going to go up. Gold is just going to 'be' while the USD dissappears.

Interesting times indeed.

Insurance anyone? There's a better version on offer than AIG's.

Yeah it's funny, The Age ran a story on the latest casualty (AIG), so that makes the 3rd company in the past month to be 'controlled' by the US Government now. What happened to a free market?

This is probably why the market is bleeding so slow, every disaster is covered up and the bandages keep getting applied. I wonder how long before the next victim and another 'rescue package' is applied to the US economy.

What makes me wonder is, why all these failures in the past month? These problems have been known of since mid-2007 and only now we've had AIG, Lehmans, Fannie, Freddie, Merrill virtually bankrupt and having to be 'saved' all since the start of September... just in time before the US election maybe? Bizarre!

 

[bean]

Once spot pushes up past US$785 -790 resistance very soon then should be off to the races.
Gold stocks doing quite nicely.

 

[explod]

Yeah it's funny,

just in time before the US election maybe? Bizarre!

You got it, the ELECTIONS. Who controls, controls the money.

These companies are bailed out by the fed because they are such basket cases that no one else will finance them anymore.

Gold, very bad, it sends signal that currencies are a basket case. Gold after December no worries,

and yes Bean those stocks of mine up average 9% today, worth the wait, may not break the resistance tonight because AIG's been saved....Yeee Ha ha ho who whoa there boy

 

[michael_selway]

The problem is that physical gold are priced in USD, and it usually only rises when the USD Index is down. Fairly negative correlation. This also correspond to an increase value of our AUD verse USD, thus, dampening the increase in value of physical gold priced in AUD.

That's the ironic situation for us Australian gold investors.

What I do is to buy USD dominated ETCs (with physical backing!) and hedge it by borrowing USD with AUD to purchase them. This way, I am hedged against the movement of currencies. Of course, it means when gold prices do drop, I obviously suffer the "normal" investment lost.

Hehe yep good point, we need a currency/commoditiy that is independant of any currencies and has its own denomination that can be used the same aroudn the world etc?

thx

MS

 

[Whiskers]

What happened to a free market?

This is probably why the market is bleeding so slow, every disaster is covered up and the bandages keep getting applied. I wonder how long before the next victim and another 'rescue package' is applied to the US economy.

What makes me wonder is, why all these failures in the past month?

... just in time before the US election maybe? Bizarre!

No doubt part of it, but I think too many people are getting a bit too carried away with particular companies.

For me, as has been pointed out often, these problems have tentacle's all around the world. That is why I believe there is and will be more gov intervention worldwide to prevent any substantial losses to consumers and the general public... in the national interest... thus spreading the damage, if you like around the world and minimising the impact on consumers and the markets.

Not getting into the morality or otherwise of that, just see that as inevitable.

It's on that basis that I see the US leading a recovery of sorts and the rest of the world lagging behind.

Once spot pushes up past US$785 -790 resistance very soon then should be off to the races.
Gold stocks doing quite nicely.

While all this cash/credit crisis stuff is going on it's worth keeping in mind that gold production is slowing and a significant lag of production is looming.

For those reasons I still see the USD going higher because relative to Europe and Britan for example, I think the US will be getting over the worst while the rest are still sorting out their ramifications and also gold as people with a bit of spare cash start to position themselves more for the medium and longer term.

 

[bean]

Who says cash is king?

http://www.marketwatch.com/news/story/story.aspx?guid={56A2CEE5-5A53-4A27-A4BA-585CFBE173A4}&siteid=rss



Here is a money market fund freezing redemptions! You put your money into a money mkt fund supposedly the most liquid and safest vehicle available, and now its frozen and losing money!

Its apparently only the second time ever a money market fund's value had dropped below $1 per unit.

What is happening now is too astounding for words! When even people like Greenspan are calling it a once on a century event, its fairly serious.



From Jim Sinclair:
http://www.jsmineset.com/home.asp

Someone mention this scenario on a US forum I subscribe to.
Possibility of what may/could happen

You are probably aware that a large money market fund company with large holdings in Lehman bonds announced today that the fund that held these bonds will "break the buck"----ie, will have its NAV reduced to $0.97 per share. This results in a loss of 3% for the investors in the MM fund, rather large considering they were probably earning only about 1.5% in the fund itself.

I suspect that many MM fund investors will find this risk/reward ratio intolerable, and their likely move will be into US govt MM funds, ie invested solely in t-bills.

This will begin a quick death spiral. As investors move funds out of their regular MM funds (ie, funds holding debt that is not backed by the US govt), this will require the fund managers to sell assets held by the fund in order to provide cash for the redemptions. As other MM fund managers try to sell the same type of dent instruments, the value of this paper will decline markedly.

As these assets decline in value, other MM funds will be forced to break the buck as well, causing more and more investors to remove their assets from these funds, leading to a "run" on these funds. ---My sense is that all it will take is for a few more MM funds to announce that there is risk in non-US govt MM funds, and the game will be over in just a few days.

At the same time, short-term US govt debt will be in such high demand that interest rates will be bid down to zero, or perhaps go negative.

(This should be good for gold, but not for much of anyone else. It will be particularly bad for state governments, since they unfortunately can't print money to back their debt.) (It will also be very bad for businesses that rely on relatively low-cost short-term money-market financing.) (It will also probably end up driving up long-term borrowing rates for corporations, and likely for long-term US debt as well.) (I would also not want to be long the GM at this point either.)

I don't foresee any solution other than for the US govt to step in and provide FDIC-type insurance for MM funds as well. The end result is that, like it or not, eventually all of the so-called "toxic" assets will find their way on to the US balance sheet.

 

[Uncle Festivus]

FWIW, some sort of wedgy thingy hapning - primed for a big move - up???

 

[Trembling Hand]

FWIW, some sort of wedgy thingy hapning - primed for a big move - up???

Very interesting isn't it Uncle.

Seems all the hot money has gone home. (probably with a termination letter)

 

[Uncle Festivus]

Very interesting isn't it Uncle.

Seems all the hot money has gone home. (probably with a termination letter)

Huh? To me it looks like $785 is the resistance in a classic ascending triangle, with bullish continuance from accumulation?

 

[Trembling Hand]

Huh? To me it looks like $785 is the resistance in a classic ascending triangle, with bullish continuance from accumulation?

I'm just saying considering all the crazy action elsewhere you wouldn't expect gold to be suck in the range it set in the first 4 hours of trading early Monday.....

 

[Uncle Festivus]

I'm just saying considering all the crazy action elsewhere you wouldn't expect gold to be suck in the range it set in the first 4 hours of trading early Monday.....

Oh ok. The next 2 hrs are critical either way; it usually makes a big move around this timeframe.

 

[refined silver]

Now Morgan Stanley looking at a merger.

And 3 major UK banks doing the same.

Earlier this year it was banks going broke each week after 5pm Friday.

Then was was each day,

Now its coming every few hours!

Why is gold still range bound? Cos with gold you need to be aware of the fundamentals, the technicals and the interventionals. If the Fed can put $80b without blinking to save the system, how important also to spend a couple of billion keeping gold down, as thats the canary in the mine shouting the system is bankrupt. Unfortunately I don't think it can stay hidden much longer.

 

[Trembling Hand]

and the interventionals. If the Fed can put $80b without blinking to save the system, how important also to spend a couple of billion keeping gold down, as thats the canary in the mine shouting the system is bankrupt. Unfortunately I don't think it can stay hidden much longer.

Yes but still you would expect the volume to be up at least while they bashed down the heads as the poped up but its not there

 

[Trembling Hand]

But watch out here she goes