Gold Price - Where is it heading?

[Garpal Gumnut]

I've done a fairly brutal reassessment of my smsf this weekend.

apart from some kgrams of physical gold I've hidden about the place, I'm bearish . I reckon its going to tank, $300 US or thereabouts after the US elections.

Its always good to have gold in case the whole world goes to s**t, but stocks or futures are gone atm imo.

gg

 

[refined silver]

5,000 years of human history says you are wrong.

Wrong about what? Everyone knows all fiats end the same way. I'm not arguing any different. I'm betting gold takes a big hit from deflationary pressures over the next 12 months, maybe more. There have been plenty of periods throughout history where fiat has out-performed gold.

1. You said "Gold is not money". I said 5000 years of human history proves you wrong, where gold has always been and still is accepted as money.

2. You then contradict yourself by saying you agree that all fiats go to zero eventually, showing that fiat is not true money.

3. You also said China will sell its gold to get dollars. If you think its going to sell its 1-2% gold reserves to add to its $1.7t USD, good luck to you.

4. If you expect gold to take a big hit, get short now.

 

[Garpal Gumnut]

1. You said "Gold is not money". I said 5000 years of human history proves you wrong, where gold has always been and still is accepted as money.

2. You then contradict yourself by saying you agree that all fiats go to zero eventually, showing that fiat is not true money.

3. You also said China will sell its gold to get dollars. If you think its going to sell its 1-2% gold reserves to add to its $1.7t USD, good luck to you.

4. If you expect gold to take a big hit, get short now.

It is always wise to buy physical gold and bury it in your backyard.

Stocks and futures are in for a flaying.

gg

 

[refined silver]

It is always wise to buy physical gold and bury it in your backyard.
gg

True. But watch out for those google earth satelites watching where you put it!

 

[Indie]

I've done a fairly brutal reassessment of my smsf this weekend.

apart from some kgrams of physical gold I've hidden about the place, I'm bearish . I reckon its going to tank, $300 US or thereabouts after the US elections.

Its always good to have gold in case the whole world goes to s**t, but stocks or futures are gone atm imo.

gg

1. You said "Gold is not money". I said 5000 years of human history proves you wrong, where gold has always been and still is accepted as money.

2. You then contradict yourself by saying you agree that all fiats go to zero eventually, showing that fiat is not true money.

3. You also said China will sell its gold to get dollars. If you think its going to sell its 1-2% gold reserves to add to its $1.7t USD, good luck to you.

4. If you expect gold to take a big hit, get short now.

Well if you want to completely ignore the context of my views then go ahead and suit yourself. If you can be bothered going back through the thread it's clear that you are misrepresenting me.

This is my position regardless of your misrepresentations:

I have bet on USD strength and put my money where my mouth is, so far I have outperformed gold. I'm counting on this to continue for the next 12 months. I see $600/oz coming soon. So, yeah, I'm shorting gold. Are you buying at $780/oz? Where is your money? If you expect gold to rise in the coming months get in. Top up if you already have some, you seem to be inferring it's a bargain right now.

When the deflationary cycle looks to be bottoming out I will consider gold and CHF. This is there in the thread, open your eyes hero. It's there.

Fiat is money until fiat collapses. So yes fiat is money, you can buy real stuff with it. US Fiat is outperforming gold this year. Fiat is proving to be a better store of wealth right now. I'm betting on this continuing for the next 12 months, at least. Yes, I am putting money on this. Are going the other way? Please let us all know.

As far as China goes, they will not be spending their $1,7tr reserves on more gold during the deflationary cycle. They won't be pushing the price up. The Chinese public, to whom I was referring, won't be buying more gold either, they will be selling whatever they have to put food on the table. Where did I previously refer to the Chinese governments gold reserves and specifically China selling them? Maybe you've just assumed a bunch of things, not read through the thread properly, and now you're trying to marginalize my views.

 

[refined silver]

A Nobel prize winning economist who is already an advisor to the Chinese govt, (and so has presumably already suggested this to them) said that China should buy all the IMF gold should they sell it as is sometimes talked about.

http://news.goldseek.com/GATA/1224401684.php

 

[refined silver]

Well if you want to completely ignore the context of my views then go ahead and suit yourself. If you can be bothered going back through the thread it's clear that you are misrepresenting me.

I suggest you're the one who has suddenly appeared on thread and hasn't read it properly. If you had read, you would know I am fully long and unmargined.

There was no misquote. You said Gold is not money. That is wrong, fullstop.

As to China, you said

When China crashes we'll see if they want dollars or Gold. I'm thinking they will trade their gold for dollars.

You didn't specify govt or people, but I assumed govt, and they are definately not trading gold for dollars. As for people, the Chinese have only been able to buy gold freely in the last year or two, so they don't yet have great supplies to sell. Since they have seen a falling USD for the last few years,(last 3 months excepted) and Asians have known and trusted gold for thousands of years, I can't really see your scenario happening.

As for waiting 12 months to see which is better Au or USD in the next year, thats a fair test. However, I think there'll be too much water under the bridge for anyone to remember or bother with it.

 

[IFocus]

Well if you want to completely ignore the context of my views then go ahead and suit yourself. If you can be bothered going back through the thread it's clear that you are misrepresenting me.

This is my position regardless of your misrepresentations:

I have bet on USD strength and put my money where my mouth is, so far I have outperformed gold. I'm counting on this to continue for the next 12 months. I see $600/oz coming soon. So, yeah, I'm shorting gold. Are you buying at $780/oz? Where is your money? If you expect gold to rise in the coming months get in. Top up if you already have some, you seem to be inferring it's a bargain right now.

When the deflationary cycle looks to be bottoming out I will consider gold and CHF. This is there in the thread, open your eyes hero. It's there.

Fiat is money until fiat collapses. So yes fiat is money, you can buy real stuff with it. US Fiat is outperforming gold this year. Fiat is proving to be a better store of wealth right now. I'm betting on this continuing for the next 12 months, at least. Yes, I am putting money on this. Are going the other way? Please let us all know.

As far as China goes, they will not be spending their $1,7tr reserves on more gold during the deflationary cycle. They won't be pushing the price up. The Chinese public, to whom I was referring, won't be buying more gold either, they will be selling whatever they have to put food on the table. Where did I previously refer to the Chinese governments gold reserves and specifically China selling them? Maybe you've just assumed a bunch of things, not read through the thread properly, and now you're trying to marginalize my views.

Indie thanks for your contribution your comments make a great deal of sense to me, appreciate you looking at time frames.

RF the limited knowledge I have on the cycle of metal money and fiat money tells me there are many swings and roundabouts along the way before it completes the full cycle.

 

[refined silver]

A good summary of the paper mkt/physical mkt disconnect.

The Bullion Market Versus The Paper Gold Market - An Explanation. Author: Jim Sinclair

Dear Friends,

1. It is axiomatic that the most leveraged gold market most often (95 percent of the time) sets the price of any cash market. First derivatives (listed futures) commands price.
2. This remains true as long as the COMEX warehouse of gold is NOT meaningfully depleted by long gold contracts by taking delivery from the exchange warehouse.
3. As long as an exchange maintains a warehouse that historically overwhelms historical demand for delivery the first derivative, The COMEX listed gold future, will be the primary cause of price.
4. Taking delivery from the COMEX warehouse is not an easy process as the system is designed not to violate your contract but to be a world-class pain in the ass.
5. The COMEX requires re-assays, assuming you wish to re-deliver. This then places another raving pain in the ass in your way.
6. The COMEX market is effectively an international 24-hour market as there is no location where you cannot buy or sell a COMEX clone.
7. Cash bullion gold as opposed to the semi cash markets that non-USA banks trade is the only totally private means of buying and selling gold.
8. As currency problems increase, first the knowledgeable public such as you clean out the coin market.
9. This is the first time that the international coin markets have been cleaned out everywhere. This did not happen globally in the 70s.
10. Large gold bars are still available in major markets but the backup inventory is getting low.
11. As long as the COMEX warehouse remains adequate and large bars still are available, the paper market, the leveraged COMEX market, will rule the price.
12. Only with a decline in COMEX warehouse inventories and a run down in large bar supplies of the cash market will the cash bullion market command the price of the COMEX futures market.
13. It was not the buying by the Hunts that caused silver to move above $30 into the $50 area, but rather the universal belief that they would take delivery, which would deplete or exceeded the COMEX warehouse supply.
14. The War between paper gold and bullion gold is a war to determine which will take command of the price of gold, nothing more, nothing less. There will be no two markets trading at different prices. All this battle is about is IF the bullion gold market is going to take the lead in making the singular price away from the traditional axiom that the most leveraged market makes the price. I believe the bullion, in these most unique conditions, will command the one gold price making it hard to impossible to manipulate the gold price via the paper gold market, as is the practice every day.

 

[Uncle Festivus]

I have bet on USD strength and put my money where my mouth is, so far I have outperformed gold. I'm counting on this to continue for the next 12 months. I see $600/oz coming soon. So, yeah, I'm shorting gold. Are you buying at $780/oz? Where is your money? If you expect gold to rise in the coming months get in. Top up if you already have some, you seem to be inferring it's a bargain right now.

How did you arrive at $600?

Relatively speaking, gold should be already under at least $700 if the inverse correlation to the USDX holds, but it's not even matched the last low @$735, yet the USDX is struggling to get past 83, perhaps looking like a H&S top? That's not to say there won't be several tens of billions of repatriation money & co-ordinated support of the USD to suppres the gold price lower, but they will need to keep putting up tens of billions each & every day for the USDX 'strength' to continue?

So the question should be are you still buying $USD at these levels? Also, is it actually the USDX or the AUS/USD?

 

[Uncle Festivus]

I'm betting gold takes a big hit from deflationary pressures over the next 12 months, maybe more. There have been plenty of periods throughout history where fiat has out-performed gold.

Combating deflation is highly inflationary, bad for the USD?

And how will the US Fed combat deflation? From Bernankes own mouth in 2002 - how prophetic?

This bit is a classic now -

Of course, the U.S. government is not going to print money and distribute it willy-nilly

Woops - too late for that eh? S*it scared of "zero bound"?

Like gold, U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation.

Of course, the U.S. government is not going to print money and distribute it willy-nilly (although as we will see later, there are practical policies that approximate this behavior).8 Normally, money is injected into the economy through asset purchases by the Federal Reserve. To stimulate aggregate spending when short-term interest rates have reached zero, the Fed must expand the scale of its asset purchases or, possibly, expand the menu of assets that it buys. Alternatively, the Fed could find other ways of injecting money into the system--for example, by making low-interest-rate loans to banks or cooperating with the fiscal authorities. Each method of adding money to the economy has advantages and drawbacks, both technical and economic. One important concern in practice is that calibrating the economic effects of nonstandard means of injecting money may be difficult, given our relative lack of experience with such policies. Thus, as I have stressed already, prevention of deflation remains preferable to having to cure it. If we do fall into deflation, however, we can take comfort that the logic of the printing press example must assert itself, and sufficient injections of money will ultimately always reverse a deflation.

Bottom line - they don't have a clue; they are hoping & praying on untested theories from academics to save the world?

http://www.federalreserve.gov/BOARDDOCS/SPEECHES/2002/20021121/default.htm

 

[Uncle Festivus]

....and last one for the week......from Marc Faber.....

How would gold perform in a deflationary global recession? Initially gold could come under some pressure as well but once the realization sinks in how messy deflation would be for over-indebted countries and households, its price would likely soar.

Therefore, under both scenarios - stagflation or deflationary recession - gold, gold equities and other precious metals should continue to perform better than financial assets.

http://www.ameinfo.com/134334.html

 

[barrett]

The spread between Eurodollar and T-bill rates (TED) ( thanks Nick) has today fallen to its lowest levels since September 15th. Although the spread remains at elevated levels, it has fallen nearly by half from its September 24 peak. Probably a better guide to how the credit crisis is being corrected versus tracking the stock market, thus also a good guide on safe-haven gold... if you subscribe to the safe haven status of gold that is...

Cheers
................Kauri

Good point about the TED spread.. potential for turnarounds in the VXO and VIX may be confirming that.

Why do people buy gold? Safe haven.... from..
1) savings banks going under, and
2) inflation/currency devaluation eating away savings.

The Fed seems determined to stop 1) from happening....leaving 2) as the only reason I can see to own gold at the moment (any other views?)...
Many of those who'd recently bought gold for fear of 1) sold up as the Fed's intentions became clearer.. eg.. the past week.

But.. I am pretty sure that most participants in this gold bull aren't buying for a 'bartering for canned goods' scenario, they're buying as a safe haven against inflation and currency devaluation. From that perspective, a restoration or partial restoration of credit flows could well be seen as bullish for gold, especially if it happened around the same time as an interest rate cut... if if haha

 

[Kauri]

Federal Reserve Chairman Ben Bernanke said today that congressional consideration of a second fiscal stimulus package would be appropriate given the "extraordinarily uncertain" US economic outlook.
"With the economy likely to be weak for several quarters, and with some risk of a protracted slowdown, consideration of a fiscal package by the Congress at this juncture seems appropriate," Bernanke said today in testimony before the House Budget Committee.
He recommended that the Congress consider measures to help improve access to credit by consumers, homebuyers, businesses and other borrowers, which "might be particularly effective at promoting economic growth and job creation." This is because the tightened conditions which led to the slowdown thus far could contribute to delaying economic recovery.
Bernanke said "any fiscal package should be structured so that its peak
effects on aggregate spending and economic activity are felt when they are most needed, namely, during the period in which economic activity would otherwise be expected to be weak." He also recommended the package seek to maximize the beneficial effects on spending and that the allocated funds be used responsibly. "Any program should be designed, to the extent possible, to limit longer-term effects on the federal government's structural budget deficit," Bernanke said.

 

[Indie]

Uncle Festivus, post: 351685"]....and last one for the week......from Marc Faber.....[/COLOR]

Did Marc Faber say gold possibly at $600?

http://wallastoninvestments.com/marc-fabers-latest-rant-and-where-to-make-money

He's suggesting now is a buying opportunity, however, Marc admits he gets it wrong now and then.

I'm a subscribe to Marc's monthly market commentary. I bought into USD (AUD/USD) on Marc's suggestion. However, unlike Marc I got the timing mostly right - I bought at .83 sold 60% at .71 and have now put half of that into yen. He pulled out at the first sign of Greenback weakness at a net loss.

As Marc himself says, picking timeframes and prices - you invariably get one or the other wrong. So as a trader you need to stay reasonably flexible. But I'm not a gold buyer when I see strong deflationary pressures. At $600 I can re-evaluate, but who knows, maybe I'll then see more downside. But for now I'm betting we go down substantially and I don't see any significant upward movement for at least 12 months.

 

[hitmanlam]

Golds getting smashed right now. High 760's on my screen. Looks like its heading down to 750. Reasons cause the USD just keeps on getting stronger.

 

[Whiskers]

Golds getting smashed right now. High 760's on my screen. Looks like its heading down to 750. Reasons cause the USD just keeps on getting stronger.

I had .84 ish as a target for wave 3 of the USDX. The futs have just taken that... and I'm unsure yet whether that's it for the USDX or whether it'll come back a bit for a 4 and go on for 5 waves up.

Either way it's likely to come back a bit in the not to distant future and that should cause the POG to rise again... a wave 3 up by my count to probably nudge 1,000 with talk of a major recession/depression probably averted and gold still in relative low supply.

 

[Ageo]

And while the paper gold futures has fallen, the actual physical price has gone up (1142 Aus right now)

hmm interesting

 

[kransky]

And while the paper gold futures has fallen, the actual physical price has gone up (1142 Aus right now)

hmm interesting

where do you get the physical price from? I thought it was just the paper price then translated to our currency...

770/0.677 = 1137

physical price rises when the AUSdollar / USdollar falls..

 

[Ageo]

where do you get the physical price from? I thought it was just the paper price then translated to our currency...

770/0.677 = 1137

physical price rises when the AUSdollar / USdollar falls..

Yes Kransky that is true although with gold futures are you subjected to margin requirements? i.e you dont get the benefit of the price rise until you close your position, and if the U.S spot drop further (because contracts are in U.S dollars arnt they?) the margin requirement will increase even further? (we are talking longer term trading).... i have only had minimal experience with trading gold on paper