Gold Price - Where is it heading?

[Nyden]

Since 1970 gold has gone up 33 times to 1 or US$35 to US$1,250 today. In 1970 you could buy the average good home for $35,000, to day $500,000 or 14 times to 1, looks like gold has been the winner by a long way and history has told this same story for over 2000 years. And I have family who have held gold for that period too and no way will they sell.

And of course later in the week as it did last week it will be rising again.

Again, that gain would require fantastic timing. If you bought houses, shares, or just about anything else after 78' up until 2002, no matter what the date, you would have made money. If you had bought gold, you'd have lost. (Certain sectors, and all of the other stuff, etc)

Sure, if you bought gold 40 years ago, and - so long as you didn't sell before 2002 - you'd have come out a winner. However, any sort of stop loss or rational would have gotten an investor out long before then, and into better assets.

Sinner, my point is that it's frowned upon - and is almost always temporary. No one likes the idea of the government having their finger in the corporate pie - just look at Telstra.

Sorry for coming into your rampfest thread Sinner. I now realise that only comments involving gold going to the moon are welcome here. ... Oh, and do not assume I am simply anti-gold. I have traded it, on a short-term basis. However, I have done this without even a lick of a concern for the fundamentals - and with success I simply believe that gold is a terrible performer over any long period.



Uncle festivus - it is not the same point. Your point involves buying the DOW at a peak, I am not talking about buying gold at an exact peak - but simply that if you had bought it - at any price after 1980, and held on until 2002 you would have held a losing position. A 20 year downward trend (with inflation taken into account) is simply unacceptable.

 

[sinner]

Sorry for coming into your rampfest thread Sinner. I now realise that only comments involving gold going to the moon are welcome here. ... Oh, and do not assume I am simply anti-gold. I have traded it, on a short-term basis. However, I have done this without even a lick of a concern for the fundamentals - and with success I simply believe that gold is a terrible performer over any long period.

This is the exact idiocy I am talking about ^^

To explod, I am a Central Bank loving, pro manipulation deflationista who will stop at nothing to see gold in the ground.

(simply because I pointed out his view has no basis in reality)

To you, I am rampfest goldbug who will stop at nothing to see "anti golds" in the ground.

(simply because I pointed out your view has no basis in reality)

If you had bothered to check this thread instead of towing your stupid line, you could have noticed I posted charts highlighting the inflation adjusted gold price more than a few times already in November.

 

[explod]

This is the exact idiocy I am talking about ^^

To explod, I am a Central Bank loving, pro manipulation deflationista who will stop at nothing to see gold in the ground.

(simply because I pointed out his view has no basis in reality)

To you, I am rampfest goldbug who will stop at nothing to see "anti golds" in the ground.

(simply because I pointed out your view has no basis in reality)

If you had bothered to check this thread instead of towing your stupid line, you could have noticed I posted charts highlighting the inflation adjusted gold price more than a few times already in November.

Tut tut tut, I in no way indicated or addressed myself to anything you have said Sinner. May last post was just the big picture and perhaps to some degree directed at Beej to show that over the very long term, property and gold is a great long term investment but at this stage gold in the long term is ahead.

I said not more and no less and sorry if I have interupted something else.

Cheers explod

 

[Nyden]

This is the exact idiocy I am talking about ^^

To explod, I am a Central Bank loving, pro manipulation deflationista who will stop at nothing to see gold in the ground.

(simply because I pointed out his view has no basis in reality)

To you, I am rampfest goldbug who will stop at nothing to see "anti golds" in the ground.

(simply because I pointed out your view has no basis in reality)

If you had bothered to check this thread instead of towing your stupid line, you could have noticed I posted charts highlighting the inflation adjusted gold price more than a few times already in November.

May I request that you explain how my view has no basis in reality? My view is that gold has been a very volatile and poor performer, and that perfect timing seems to be required in order to take advantage of its apparent purpose.

Please, do elaborate on how that view has no basis in reality.

 

[sinner]

May I request that you explain how my view has no basis in reality? My view is that gold has been a very volatile and poor performer, and that perfect timing seems to be required in order to take advantage of its apparent purpose.

Please, do elaborate on how that view has no basis in reality.

1. You say that gold does not "perform". Incorrect. As a currency, gold debases at a slower rate than any fiat currency (it debases at the rate of production - which is declining - minus the rate of consumption).
2. You say that gold is not productive. Incorrect. Gold has many industrial/scientific/medical applications. Gold is at least as productive as silicon and more productive than silver.
3. You say that gold is volatile. Based on which volatility measurement? In comparison to what? Other commodities? Equities? Treasury bills? Commodities are volatile by nature. Gold is probably the least volatile commodity I've traded. I've even included charts from a randomly selected commodity future below if you can find me a gold chart that looks even vaguely similar I will eat my hat.

London Wheat (trades same hours as gold): Looks nothing like a gold chart


4. You say that gold is a poor performer. As I mentioned in my previous posts today, gold is not an asset class like stocks or real estate and to treat it as such is stupid. If you don't understand this, or don't understand why, then what are you doing in this thread? This point also covers your "claim" that gold is a poor performer.
5. You say that perfect timing is required: guess what I have been buying gold or silver pretty much every payday since I was 15 and I'm pretty sure my payday isn't perfect timing yet I seem to be doing pretty well on my precious metals holdings. I trade gold all the time and have posted calls and charts in this thread, which had nothing to do with "perfect timing" "to take advantage of its apparent purpose".
6. You say Central Banks buy gold because they can't buy anything else. This is blatantly rediculous. Gold is in fact the SMALLEST market cap of all the currencies which central banks buy and sell.
7. You spout rubbish like this:

Sure, if you bought gold 40 years ago, and - so long as you didn't sell before 2002 - you'd have come out a winner. However, any sort of stop loss or rational would have gotten an investor out long before then, and into better assets.

Err yeah right, so Warren Buffett bought one fifth of the world entire silver supply in the late 80s early 90s and any "rational" should have seen him out long before now, and into better assets? Then why the hell is he still sitting on that pile of silver mate? You telling me Buffett is irrational or his "stop loss" on a giant pile of silver got hit?
8. You have been spouting the SAME junk for over 6 months now (I just went and checked to confirm). You were bagging the gold bugs because the "rise hadn't eventuated", and saying crap like "what happens when the recovery starts and gold loses its lustre", well guess what the recovery started and people piled into gold. I believe your call was gold to $300 instead of rocketing. Guess what, it rocketed.
9. You also claim that the current gold price is pure speculation when the last years worth of COT reports clearly show central bank interest in selling USD to buy gold. If CB purchasing of a currency is speculation, then what isn't?
10. You say good economic figures result in people flooding to the gold exits, but gold has been rising steadily on the back of a steadily rising NFP curve for almost 12 months now.

 

[Nyden]

1. You say that gold does not "perform". Incorrect. As a currency, gold debases at a slower rate than any fiat currency (it debases at the rate of production - which is declining - minus the rate of consumption).
2. You say that gold is not productive. Incorrect. Gold has many industrial/scientific/medical applications. Gold is at least as productive as silicon and more productive than silver.
3. You say that gold is volatile. Based on which volatility measurement? In comparison to what? Other commodities? Equities? Treasury bills? Commodities are volatile by nature. Gold is probably the least volatile commodity I've traded. I've even included charts from a randomly selected commodity future below if you can find me a gold chart that looks even vaguely similar I will eat my hat.

London Wheat (trades same hours as gold): Looks nothing like a gold chart
View attachment 34849

4. You say that gold is a poor performer. As I mentioned in my previous posts today, gold is not an asset class like stocks or real estate and to treat it as such is stupid. If you don't understand this, or don't understand why, then what are you doing in this thread? This point also covers your "claim" that gold is a poor performer.
5. You say that perfect timing is required: guess what I have been buying gold or silver pretty much every payday since I was 15 and I'm pretty sure my payday isn't perfect timing yet I seem to be doing pretty well on my precious metals holdings. I trade gold all the time and have posted calls and charts in this thread, which had nothing to do with "perfect timing" "to take advantage of its apparent purpose".
6. You say Central Banks buy gold because they can't buy anything else. This is blatantly rediculous. Gold is in fact the SMALLEST market cap of all the currencies which central banks buy and sell.
7. You spout rubbish like this:



Err yeah right, so Warren Buffett bought one fifth of the world entire silver supply in the late 80s early 90s and any "rational" should have seen him out long before now, and into better assets? Then why the hell is he still sitting on that pile of silver mate? You telling me Buffett is irrational or his "stop loss" on a giant pile of silver got hit?
8. You have been spouting the SAME junk for over 6 months now (I just went and checked to confirm). You were bagging the gold bugs because the "rise hadn't eventuated", and saying crap like "what happens when the recovery starts and gold loses its lustre", well guess what the recovery started and people piled into gold. I believe your call was gold to $300 instead of rocketing. Guess what, it rocketed.
9. You also claim that the current gold price is pure speculation when COT reports clearly show central bank interest in selling USD to buy gold. If CB purchasing of a currency is speculation, then what isn't?
10. You say good economic figures result in people flooding to the gold exits, but gold has been rising steadily on the back of a steadily rising NFP curve for almost 12 months now.

I didn't make a single call as to what price it would ever go to - I simply proposed a 'what if' scenario, and asked people to tell me what their contingency plan was. Well, turns out that I was both right, and wrong at the same time. Right about the world not ending, and a huge recovery - but wrong about gold. I will admit to that.

Guess what though? Being right about the markets recovering has paid off a whole lot more than buying gold would have.

It all depends on what economic data it is Sinner. Economic data that may lead to an interest rate rise will see gold fall, I am certain of that. I could be wrong though :

As far as I'm concerned, the rules of investing in one asset class apply to another. One must always be prepared to accept a loss, and to be prepared that one may be wrong. I am not Buffet. I do not have 100s of millions of dollars to play around with, nor to lose. If a position is losing, or not performing - I would sell it - despite the class.

 

[sinner]

As far as I'm concerned, the rules of investing in one asset class apply to another. One must always be prepared to accept a loss, and to be prepared that one may be wrong. I am not Buffet. I do not have 100s of millions of dollars to play around with, nor to lose. If a position is losing, or not performing - I would sell it - despite the class.

Really don't care what you would do, but it's not like you haven't told us at least four times today already.

Sell away, I will happily add to my pile from whatever you or any other gold denier want to sell (if they ever held even a grain of gold in the first place). I am following the same plan I've been following for almost a decade:

USD cheap? Buy USD.
USD expensive? Sell USD, use profits to buy cheap gold @ 10%.

Hasn't failed me yet.

 

[Nyden]

Really don't care what you would do, but it's not like you haven't told us at least four times today already.

Sell away, I will happily add to my pile from whatever you or any other gold denier want to sell (if they ever held even a grain of gold in the first place). I am following the same plan I've been following for almost a decade:

USD cheap? Buy USD.
USD expensive? Sell USD, use profits to buy cheap gold @ 10%.

Hasn't failed me yet.

Well, I'm pleased to see that it's working for you Sinner. I always hope success for others, even when I disagree with them. So, good luck

 

[Edwood]

apologies for interrupting the discussion of fundamentals for holding gold long term or otherwise, but appears we've taken out the previous low. Change of trend anyone?

 

[explod]

apologies for interrupting the discussion of fundamentals for holding gold long term or otherwise, but appears we've taken out the previous low. Change of trend anyone?

For very short term trading could not say. However it is very usual for it to push down early and late in the week (respectively) when traders are scant. Conspiracy theory or not, it just seems to happen that way. Tuesday's action will determine the trend but later tonight our time (on the Nymex) may tell if this is a serious correction. On the action of the past few months I doubt it though. Job numbers and other bits to pump green shoots used to push gold down for up to a week, but now only for a day or two.

 

[sinner]

apologies for interrupting the discussion of fundamentals for holding gold long term or otherwise, but appears we've taken out the previous low. Change of trend anyone?

Even if so, CBs will be looking to squeeze out shorts on the way down, so be cautious.

 

[Beej]

May last post was just the big picture and perhaps to some degree directed at Beej to show that over the very long term, property and gold is a great long term investment but at this stage gold in the long term is ahead.

Explod - I see your point and acknowledge it is valid given your example - certainly an investment in gold in 1970 and held to now was no terrible thing! However, as Nyden pointed out the timing of your entry into Gold would have to have been pretty well picked, and you would have had to held through a very long period of relatively poor returns to have realised your 33x capital value multiple. Also of course we are talking $US only here and not $AU, which also might give a different outcome?

Anyway, when comparing to property (from which you would have done pretty well buying anytime between 1970 and a couple of years ago even), and even to a diversified equities portfolio (again you could have entered almost anytime), you also need to account for the income that is earned from those assets. Ie in the case of property - rent received (or saved), and in the case of shares, dividends. Whereas you earn no income from your physical gold and in fact it costs you to store it. So factor in those income streams and I'd reckon that both property and equities would have beaten a physical gold play significantly over that 1970 to present period? Of course there are other reasons you may still have wanted a portion of your investments in physical gold through that period anyway - but that's a bit more like insurance I would say.

Cheers,

Beej

 

[Whiskers]

apologies for interrupting the discussion of fundamentals for holding gold long term or otherwise, but appears we've taken out the previous low. Change of trend anyone?

Even if so, CBs will be looking to squeeze out shorts on the way down, so be cautious.

I recently took some profits on shares just in case my estimation was not good... but still hold some on the premise that gold would probably peak around the 1200 mark before going sideways in USD for awhile.

I earlier advocated the AUD weakening against the USD to keep Aus shares up. I'm still pretty confidant the AUD has peaked, but anxiously waiting for it to make a significant and definate reversal trend to bolster our resource maket in particular.

I'd be surprised if it fell below support getting down near 1,000 USD... so as long as the AUD falls a bit, it's still getting better for Aus producers.

 

[sinner]

Best hypothetical article on gold I've read in a long time:

http://www.safehaven.com/article-15189.htm

From the Unqualified Reservations blog (aka Mencius Moldbug).

Covers the concept of distributed coordination (and its ease in a CB model vs retail), Florentine accounting, hypotheticals on gold, etc. Really great read.

I will include a small snippet on supply/demand

Suppose, for example, that you have 50 billion dollars, and you use this stash to buy the entire 2008 and 2009 peanut crops. You triple the price of peanut contracts. Congratulations! Your position is now valued at $150 billion. You've made a 200% profit. You've made money just by marking to market. You should be a spammer.

This is called "market manipulation," or more specifically "cornering the market," and it happens to be illegal. But even if it was not illegal, it would be unprofitable, because you cannot generally profit with this strategy - as you sell, you are driving the price back down. Your peanut contracts are valued at $150 billion - but can you get $150 billion for them? You can't buy lunch with peanut contracts.

This is called the burying-the-corpse problem, the corpse being the vast quantity of peanuts that you have bought but don't intend to eat. The accounting profit is indeed a mirage. Unless of course you can bury the corpse - ie, get some other fool to take all those peanuts off your hands, at anything like the inflated price you have created.

 

[explod]

. Of course there are other reasons you may still have wanted a portion of your investments in physical gold through that period anyway - but that's a bit more like insurance I would say.

Cheers,

Beej

Wondrful Beej, the sun has come up, physical is only 20% percent of my own portfolio. It is indeed a hedge and no matter how you look at it it has proven to outperform property. I have since 1970 made most of my money out of property as most of us have, starting with our family homes.

I find that the ballances are what works and it is pleasing to see you picking up on that. In may share portion over the last few months I am ahead over 100%, so what, its just a percentage of the overall, which comes down to 30%, but hey that is very good.

And overnight as I expected the gold price has found support around the 1140 and should now rise again from here.

cheers explod

 

[Beej]

Wondrful Beej, the sun has come up, physical is only 20% percent of my own portfolio. It is indeed a hedge and no matter how you look at it it has proven to outperform property. I have since 1970 made most of my money out of property as most of us have, starting with our family homes.

Just to be pedantic, as you are still stating that gold has "been proven" to out perform property - I checked up on 1970 house prices - the median house price then was $14.28k for Australia, against a current median of $487k. So in fact a house bought in 1970 is today worth 34x in nominal terms what you paid back then - exactly the same appreciation as gold over the same period. That's roughly 9.5%pa compounded.

Account for rent received (or not paid) and even discount that a bit to cover property maintenance (say 1%pa), and your return would be increased by another 3-4%pa - let's use 3%. That increases the compounded annual return for property to 12.5%pa, = a return of 100 times your initial invested capital over the 39 year period. I think that clearly beats gold hands down don't you??

PS: I'm not detracting from your assertion that it's useful to have an allocation of your wealth in gold regardless (in fact I think we have had that discussion before a few times), but we should be realistic about it's historic return relative to other assets.

Cheers,

Beej

 

[Ageo]

Whereas you earn no income from your physical gold and in fact it costs you to store it.

Just to clarify and most people dont understand this but if you look hard enough there are a few places that actually pay you interest on your gold.

Something to consider when holding physical long term

 

[Nyden]

Just to clarify and most people dont understand this but if you look hard enough there are a few places that actually pay you interest on your gold.

Something to consider when holding physical long term

But, wouldn't that render it almost useless as a hedge against disaster? In an every-man-for-himself situation, chances are - they would keep it. In a massive depression where gold is confiscated - the government would take it.

I guess you could always take the gold back when things start to look bad though. Unless somehow they're paying you interest whilst you get to hold onto it?

 

[Edwood]

apologies for interrupting the discussion of fundamentals for holding gold long term or otherwise, but appears we've taken out the previous low. Change of trend anyone?

lows taken out convincingly now. Hope Gummy Learner had some stops on his longs or hedges for his physical

 

[Edwood]

gone long for a trade, looking for high 30's. stop +3, will move it up as we go