Gold Price - Where is it heading?

Uncle Festivus · 15 October 2009

Here is Paul Van Eedens take on it all, and I tend to agree. For as long as the gold price is merely a reactionary to the US dollar then there is going to be savage retracements in the POG. I'm still waiting for this next leg down (or USD rally?), and I think it's past due ie this surge is overbought?

Golds time will come when it is no longer possible to push demand the worlds consumers through inflating the money supply and currency debasement - a currency race to the bottom by attempting to make their exporters competitive. Tis a pity it's at our expense ie dollar parity very soon? If the USD sucks, then why is our currency worth less than it?

Sean K · 16 October 2009

This is predominately on Inflation but mentions the effect on gold and silver. Long but worth it.

explod · 16 October 2009

Good clip Kennas, but has all been said, as you know on this and Imminnent thread.

You can take a donkey to water but cannot make it drink.

Those who know and believe, but those who do not will not. Took me a long time to learn that, ASF has finally done that.

Glad to be holding silver

Wysiwyg · 16 October 2009

explod said:
Glad to be holding silver

Were you buying silver when Buffet was buying at 4 $ an ounce? Highlighted, quoted, underlined and doing handstands.

Famous Billionaires have bought silver in recent years. In 1997, Warren Buffet bought 130 million ounces of real silver, due to the favorable "supply and demand fundamentals", and although he bought as much as they would let him legally buy, his purchase was with about 2% of the value of his portfolio.

And this lil beauty from a dreamer passing on his silver to the next 5 generations of kin.

Thus, silver will be valued at about 1/5th of $1000, or $200, assuming that gold is fairly valued at $1000. But, if gold should really be valued at about $5,000 per ounce, then silver will be about $1000/oz."

lukeaye · 16 October 2009

explod said:
Good clip Kennas, but has all been said, as you know on this and Imminnent thread.

You can take a donkey to water but cannot make it drink.

Those who know and believe, but those who do not will not. Took me a long time to learn that, ASF has finally done that.

Glad to be holding silver

It is alarming, i too beleive it has all been said, but nobody wants to accept it. I mean what does the US collapse mean for the rest of the world?

i def think holding pyhsical gold or silver is a very smart thing to do.

I remember reading about a particular incident in the first world war. I cant remember the country exactly, or the currency. Anyway, they had such huge probelms with the country and the currecny was devaluing at an astronimcal rate due to the hyper inflation from the war. The government ended up changing the currency, to prevent people from leaving the country, the only people that had any wealth were those who had the forsight to change it all to gold, which is worth something anywhere.

lukeaye · 16 October 2009

o i see the video covered my story haha.

well there you go

Ageo · 16 October 2009

Good video Kennas, i have alot more people asking me for payment in gold for general services which is funny.

Personally i would take commodities over fiat any day.

Sean K · 16 October 2009

I am actually hoping we don't quickly get to the stage this vidoe is predicting, unless there are some significant changes made. I have many family and friends who will be going through their retirement in very poor condition.

Come on decision makers! Find a way out!!!

explod · 16 October 2009

Wysiwyg said:
Were you buying silver when Buffet was buying at 4 $ an ounce? Highlighted, quoted, underlined and doing handstands.

Dont know about Buffet, knew that he did. I purchased my prime holding of silver bars in 2004(about $8 oz Aus), has not appreciated a great deal yet, but confident that it will serve my family well in the long term

jancha · 16 October 2009

explod said:
Dont know about Buffet, knew that he did. I purchased my prime holding of silver bars in 2004(about $8 oz Aus), has not appreciated a great deal yet, but confident that it will serve my family well in the long term

Hi Explod

I have noticed that with the increase of gold prices, some of the mining companies of gold seem to be heading north quite quickly so if price of gold has increased and gold companies benefiting why then has ASX Code GOLD dipped to $111. Maybe a silly question but shouldn't it head north also?

Uncle Festivus · 16 October 2009

jancha said:
Hi Explod

I have noticed that with the increase of gold prices, some of the mining companies of gold seem to be heading north quite quickly so if price of gold has increased and gold companies benefiting why then has ASX Code GOLD dipped to $111. Maybe a silly question but shouldn't it head north also?

Exchange rate. Aussie gold could be headed lower. Unless Aussie co's sell in USD's then as long as the AUD keeps going to parity and beyond then the US price has to appreciate a lot faster just for the AU price to stay steady.

I'm not sure Aussie gold equity buyers understand this simple concept ie they seem to respond more to the US price than to the AU price for some reason.

In fact some Aussie miners SP's were lower when the AU price was $1500 - work that one out. But as long as someone wants to buy them off me who's complaining?

There's going to be a better time to buy physical I think, just have to be patient? It's certainly not the time to sell?

Ageo · 16 October 2009

Gold is a store of wealth which means you only sell what you need to in order to keep going. The rest just hold and over time it will outperform fiat which is the main purpose of it.

I put gold away for my daughter not money because i know in 20yrs gold will have much more purchasing power than paper.

Silver is a very good long term investment (20-30+yrs) as its still cheap to acquire large amounts. Basically you could acquire 100kgs for around $50,000 and if it does hit $1000p/o in the future sometime that would equate to around $3.2million.

But who knows by then, perhaps everything will be priced in euros or commodities will just have its own price where 1 ounce of gold will buy you xxxxx or something along those lines.

Always be prepared for the unexpected.

explod · 16 October 2009

I think that some of our gold producers sell into US dollars. Certainly Newmont and others that have diversification with mines in other countries.

On that score of course if as a simple example:-

A company produces gold at say $US700 per ounce, has been selling at $900, price goes to $1000 then a 50% increase on profits. So regardless of exchange rates, in my view if gold is suddenly to rise beyond US$1500 then the numbers from profit go up enourmously.

1970 to 1980 some gold producers went up 100 times. Having the right ones in the right currency will be the trick though, if US$ turns to no more than the cost of the paper its written on then that is going to be a problem. No doubt we will be in the game when this thing goes up, but due to danger of currency collapse I like having my physical as well.

Uncle Festivus · 16 October 2009

explod said:
I think that some of our gold producers sell into US dollars. Certainly Newmont and others that have diversification with mines in other countries.

On that score of course if as a simple example:-

A company produces gold at say $US700 per ounce, has been selling at $900, price goes to $1000 then a 50% increase on profits. So regardless of exchange rates, in my view if gold is suddenly to rise beyond US$1500 then the numbers from profit go up enourmously.

1970 to 1980 some gold producers went up 100 times. Having the right ones in the right currency will be the trick though, if US$ turns to no more than the cost of the paper its written on then that is going to be a problem. No doubt we will be in the game when this thing goes up, but due to danger of currency collapse I like having my physical as well.

Yes, I get a div from NEM, but it still gets converted to AU, as would any return to AUS gold co's eventually to pay their bills etc.

The AU price has dropped $20 today via the combination of US price and FX rate. The AU price has flatlined for the past 6 months?

I just think that any plans to contend with a USD demise will be more than countered by a corresponding rise in the FX rate, unless and until something happens to the AU economy to make it relatively worse to that of the USA?

If the assumptions are in fact correct and we become largely dependant on China, then gold might not be a good USD counter trade for Australians - I've certainly made more in other sectors while pretty ordinary returns from gold lately?

jancha · 16 October 2009

explod said:
I think that some of our gold producers sell into US dollars. Certainly Newmont and others that have diversification with mines in other countries.

On that score of course if as a simple example:-

A company produces gold at say $US700 per ounce, has been selling at $900, price goes to $1000 then a 50% increase on profits. So regardless of exchange rates, in my view if gold is suddenly to rise beyond US$1500 then the numbers from profit go up enourmously.

1970 to 1980 some gold producers went up 100 times. Having the right ones in the right currency will be the trick though, if US$ turns to no more than the cost of the paper its written on then that is going to be a problem. No doubt we will be in the game when this thing goes up, but due to danger of currency collapse I like having my physical as well.

Very interesting. So when looking at a gold company that exchanges with US currency you would think twice under the present circumstances? PRU for example ( I think ) deals in African Aus & USA currencies. Would that be a better option as opposed to just trading with the one currency when looking to invest in a gold mining company?

explod · 16 October 2009

Uncle Festivus said:
If the assumptions are in fact correct and we become largely dependant on China, then gold might not be a good USD counter trade for Australians - I've certainly made more in other sectors while pretty ordinary returns from gold lately?

Interesting, those into it, run on similar lines, I have not had a gold stock for two months(last was OGC ( to which I will return), all in energy at the moment.

Thanks for your valuable inputs Uncle

cuttlefish · 16 October 2009

Overall currencies are going to devalue due to excessive expansion of money supply. Australia is no exception - just not as excessive as others - so the AUD is just climbing a ladder but the ladder is on an escalator that is going down and that escalator is the USD. The more people selling USD to get off the descending escalator the faster the escalator will fall and the more rapidly the gold price will rise against all currencies that are on the descending escalator, and the effect of the AUD climbing a ladder on the escalator will be irrelevant. (DISCLOSURE: I've had a couple of beers this pleasant Fri evening.

).

GumbyLearner · 16 October 2009

cuttlefish said:
Overall currencies are going to devalue due to excessive expansion of money supply. Australia is no exception - just not as excessive as others - so the AUD is just climbing a ladder but the ladder is on an escalator that is going down and that escalator is the USD. The more people selling USD to get off the descending escalator the faster the escalator will fall and the more rapidly the gold price will rise against all currencies that are on the descending escalator, and the effect of the AUD climbing a ladder on the escalator will be irrelevant. (DISCLOSURE: I've had a couple of beers this pleasant Fri evening. ).

An alternative view is to look at it from an M/A perspective. Aussie/Canadian based miners will have to pay less for competitors who deal primarily in US dollars. Just a thought.

hobo-jo · 17 October 2009

jancha said:
Interesting point explod & nice ratio. What silver mining companies would you recommend looking at?

Check out CCU, still in the process of defining their resource (will probably see increases in resource/grade), good management (MD 20 years experience ex-WMC), low market cap, 50m+ oz Silver resource, lead credits expected to provide very cheap cash cost to mine, production potential by 2011...have posted some updates in the CCU thread here, but seems not much interest yet in silver and gold miners from general investors. That will change in my opinion

https://www.aussiestockforums.com/forums/showthread.php?t=3912

Disclosure: I own CCU shares

forestlevy · 18 October 2009

lukeaye said:
It is alarming, i too beleive it has all been said, but nobody wants to accept it. I mean what does the US collapse mean for the rest of the world?

i def think holding pyhsical gold or silver is a very smart thing to do.

I remember reading about a particular incident in the first world war. I cant remember the country exactly, or the currency. Anyway, they had such huge probelms with the country and the currecny was devaluing at an astronimcal rate due to the hyper inflation from the war. The government ended up changing the currency, to prevent people from leaving the country, the only people that had any wealth were those who had the forsight to change it all to gold, which is worth something anywhere.

U mean Germany,Poland and Austria.
However, governments now, especially developed countries', won't let a hyper inflation happen. See if they can handle this by aborting current crazy liquidity policy.

Gold Price - Where is it heading?

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