Gold Price - Where is it heading?

[Mr Z]

A question for you gents please.

If you had say 19k in a short term deposit at 5.5% and you thought that you would do better in gold for 4 to max 12 months, what form of investment would you go with?

I.E. :

Perth Mint Certificate Program (PMCP)
Perth Mint Depository Program (PMDP)
or on the ASX - Perth Mint Gold Quoted Product (PMG) PMGOLD.

If none of above, any hints?

Kind Regards.

If you are restricted to a time limit I would not play with PM's, it can be volatile and you must be patient.

As far as Perth Mint goes I have dealt with them for close to two decades, they are fine, they have the metal, don't get sucked in by the US based CRAP that is written about them especially by con men like Hommel.

 

[Tysonboss1]

If you think that gold is in a bubble here you clearly have no idea what a bubble is. A bubble is not just a rising price

You know I have had people telling me we are in a gold bubble since we cracked $300 ! :

Well they say Property is in a bubble and since 2000 it has gone from 218 to 450. Gold has gone from 300 to 1800 now to me, that may mean it is on the high side.

Gold was in a bubble in the late 70's, and it took 30years to claw back to that level.

What do you make of this chart, Do you think now is the best time to buy into this asset, or could their be better assets that are currently on sale.

 

[Sdajii]

If you think that gold is in a bubble here you clearly have no idea what a bubble is. A bubble is not just a rising price

It's true that a bubble is not just a rising price. It's when everyone gets into an irrational frenzy and price of something far beyond its actual value. Does gold fit this? Perfectly. In any bubble there are people saying "Don't be silly, this is not a bubble!" and of course, attitudes like yours are essential for a bubble to exist.

Look at TysonBoss' chart. Keeping in mind that gold is still just gold, the same old element it ever was, and pretty much all we do with gold is store it in warehouses and sometimes wear it as trinkets (and sometimes actually use a tiny little amount in electronics etc, where its actual value is a tiny percentage of what you have to pay for it)... does that sound like a bubble? You can't eat it, you can't burn it, you can't build roads or buildings or cars out of it (without being stupid)... and you're telling me I'm silly for calling it a bubble? The more a bubble inflates the bigger the inevitable pop. It's so inflated now it's hard to imagine it inflating too much more. It can't go up by several more times now. Just wait until decent numbers of people try to sell it to buy things which actually are useful... it's going to be spectacular(ly ugly).

 

[RandR]

It's true that a bubble is not just a rising price. It's when everyone gets into an irrational frenzy and price of something far beyond its actual value. Does gold fit this? Perfectly. In any bubble there are people saying "Don't be silly, this is not a bubble!" and of course, attitudes like yours are essential for a bubble to exist.

Look at TysonBoss' chart. Keeping in mind that gold is still just gold, the same old element it ever was, and pretty much all we do with gold is store it in warehouses and sometimes wear it as trinkets (and sometimes actually use a tiny little amount in electronics etc, where its actual value is a tiny percentage of what you have to pay for it)... does that sound like a bubble? You can't eat it, you can't burn it, you can't build roads or buildings or cars out of it (without being stupid)... and you're telling me I'm silly for calling it a bubble? The more a bubble inflates the bigger the inevitable pop. It's so inflated now it's hard to imagine it inflating too much more. It can't go up by several more times now. Just wait until decent numbers of people try to sell it to buy things which actually are useful... it's going to be spectacular(ly ugly).

The thing that scares me about physical gold atm, is the simple truth that in order for all of the retail investors to realise there profits, they HAVE TO SELL. Once you see that trend falter, or start to sway a little backwards, the rush to the exit will be monumental, as everyone rushes to realise profits/avoid the exit rush.

Personally, at the moment I feel i'd rather make a coin on the inevitable bust then speculate on the gold price increasing ever more.

Im going through the process of looking at the best ASX gold producers to use long put options against.

 

[Tysonboss1]

The thing that scares me about physical gold atm, is the simple truth that in order for all of the retail investors to realise there profits, they HAVE TO SELL. Once you see that trend falter, or start to sway a little backwards, the rush to the exit will be monumental, as everyone rushes to realise profits/avoid the exit rush.

Personally, at the moment I feel i'd rather make a coin on the inevitable bust then speculate on the gold price increasing ever more.

Im going through the process of looking at the best ASX gold producers to use long put options against.

So very true, It's not like owning a business or a piece of real estate or even a piece of farm land where actual value is generated year in year out and income is thrown off which feeds you,

Gold must be sold to realise it's value, When ( not if ) it pops it will be a rush to the door like no one has seen.

At the moment round the world people exiting the real wealth of this world ie. real esate, farmland, mining assets and business and entering the "safe haven" of gold. Once the storm clouds pass, which they always do, people will want income producing assets again and leave gold in droves.

I own farmland, realestate, mining assets and businesses and yes, the quoted market value is a little less now, But there is no way I am swaping them for a shiny metal, especially at current prices.

 

[Uncle Festivus]

It's so inflated now it's hard to imagine it inflating too much more. It can't go up by several more times now. Just wait until decent numbers of people try to sell it to buy things which actually are useful... it's going to be spectacular(ly ugly).

So very true, It's not like owning a business or a piece of real estate or even a piece of farm land where actual value is generated year in year out and income is thrown off which feeds you,

Gold must be sold to realise it's value, When ( not if ) it pops it will be a rush to the door like no one has seen.

At the moment round the world people exiting the real wealth of this world ie. real esate, farmland, mining assets and business and entering the "safe haven" of gold. Once the storm clouds pass, which they always do, people will want income producing assets again and leave gold in droves.

I own farmland, realestate, mining assets and businesses and yes, the quoted market value is a little less now, But there is no way I am swaping them for a shiny metal, especially at current prices.

[Shakes head in amazement ]

What needs to be done is some basic research on why gold has any perceived 'value' at all, then maybe revisit the bubble hypothesis?

Yes, it's true that the price of gold is relatively high, that is, if you are measuring it's price point against other things that you deem to have 'value' ie your other 'assets'. What you haven't accounted for is that gold is now well & truly a currency, perhaps the only real currency left in the world. So if you need to start exchanging your paper money, which is being debased daily, for something that only needs to hold it's value - it doesn't need to pay an income - then you are still way ahead of the pack, who are still holding bits' of paper or plastic IOU's from central banks who just happen to keep printing/creating more of the stuff ie fiat is not as scarce as gold.

Which is the reason why gold is rising - on a relative basis it is not being created as fast as fiat?? Or, gold is not being debased (mined) as fast as fiat is created, or more to the point, as fast as the value of your existing money is being destroyed....

So you will have to factor in the continued debasement of the fiat money in your pocket until nobody is willing to exchange it for anything of 'value', at which point the system has failed.

The usual financial paradigms that you are used to will be blown away soon, if they havn't been already? Like this bit -

"Once the storm clouds pass, which they always do, people will want income producing assets again and leave gold in droves."

What if they don't? Who is going to make the storm clounds pass? Ben Bernake?? Bernanke just indicated that interest rates will be negative for the next 2 years because his QE's have failed, and they are fast approaching a double dip recession, only all their ammo has been spent!

The US has just passed the point where debt to GDP ratio indicates that they will struggle/fail to pay their debts without continuing to draw down their national savings ie plunder their retirement savings accounts. Not to mention some $200TRILLION in future liabilities! All compounded by polititians who only worry about the next election & unwilling to take the drastic measures needed to fix the problems, if they are fixable at all?

That's not to say that there won't be dramatic sell-offs, maybe soon if they (the market regulators) go marginless, but untill 'they' fix all the problems with global debt etc it a matter of 'buy the ** dips'!

You aint seen nothing yet............

As for Buffett - nothing more than a cheer leader for the Fed's loose money debasement policies, who will be left holding a portfolio of dramatically worthless shares in companies reliant on the credit addicted US consumer, who is bankrupt......

 

[RandR]

[Shakes head in amazement ]

What needs to be done is some basic research on why gold has any perceived 'value' at all, then maybe revisit the bubble hypothesis?

It has perceived value because we as humans 'like it'. For a long time in human history it was used as a currency.

But gold will only ever be an 'end of days' currency going forward imo ... in which case, you can store your gold ... i'll keep my rifle

Yes, it's true that the price of gold is relatively high, that is, if you are measuring it's price point against other things that you deem to have 'value' ie your other 'assets'. What you haven't accounted for is that gold is now well & truly a currency, perhaps the only real currency left in the world. So if you need to start exchanging your paper money, which is being debased daily, for something that only needs to hold it's value - it doesn't need to pay an income - then you are still way ahead of the pack, who are still holding bits' of paper or plastic IOU's from central banks who just happen to keep printing/creating more of the stuff ie fiat is not as scarce as gold.

No ... Id argure your not ahead of the pack, because all you have is UNREALISED profits ... which you need to take in those 'bits of paper'. The only way you will ever make money from gold is by selling it, failing to do so before the trend reverses will be catastrophic for a lot of people. Its taken a couple of years now to get to 1800. I think the retraction will take weeks, if not days.

Which is the reason why gold is rising - on a relative basis it is not being created as fast as fiat?? Or, gold is not being debased (mined) as fast as fiat is created, or more to the point, as fast as the value of your existing money is being destroyed....

So you will have to factor in the continued debasement of the fiat money in your pocket until nobody is willing to exchange it for anything of 'value', at which point the system has failed.

In Australia, on a percentage basis, we'd have to be pretty close to creating more gold here then the percentage increase in our Aussie money supply ? Especially once the federal budget is balanced. (disclaimer:I could be wrong on this, please correct me if so)

That's not to say that there won't be dramatic sell-offs, maybe soon if they (the market regulators) go marginless, but untill 'they' fix all the problems with global debt etc it a matter of 'buy the ** dips'!

I think your correct Uncle, in the current environment gold could well go higher. How much higher ? 20% ? 50 % 100 % 200% ? Who knows ? ... I dont know, so im not going to bank on it.

I think Id be better getting ready to leverage myself on the INEVITABLE bust. Put options on a high cost gold producer could do that. Why would I buy physical in the hope it might turn up 100%, when I could use options to leverage myself, on to something (a producer) that is leveraging itself of the price of gold. If gotten right the result could turn out (im emphasising the 'could')to be the biggest payday of my life, If wrong ... I lose some premium $$$.

 

[Mr Z]

Same old same old since $300... we have a LONG way to go! Just do the research and you may get your head around it. Gold is easily going to $5700 and will more than likely double that number in time. It will be volatile that is for sure but it will get there.

This reminds me over the "will never ever get to $1000" discussion I had around these parts years ago!

Buying puts on gold stock now is a certain loser, if they where over valued then yes I'd agree but they are at very very low valuations in relation to gold at this point.

Betting on a bust now is just mad if you know anything about gold, try waiting until we crack 2K and we are into the New Year. Sell rhino horns then... short gold stocks then... but turn buyer in the US summer.

 

[Mr Z]

It's true that a bubble is not just a rising price. It's when everyone gets into an irrational frenzy and price of something far beyond its actual value. Does gold fit this? Perfectly. In any bubble there are people saying "Don't be silly, this is not a bubble!" and of course, attitudes like yours are essential for a bubble to exist.

Nope... that is not the definition of a bubble. It may be a symptom but that is about it. You need to rethink that one! Bubbles have a certain dynamic that gets well out of control.

"Gold is far beyond its actual value"... and you know this how? You are just guessing because you don't really understand why gold has value at all. (Am I right?

Hmmmm... I have been saying gold is not a bubble since POG $300. So what has that proven! In any bull market there are those that have been right

You know it is funny how often the press call oil and gold bubbles yet they RARELY call true bubbles by that name, saving hindsight.

Look at what is happening in this world and it is very easy to understand why big smart money is heading to gold.

Bye now.

 

[aclassic]

Thanks very much explod and Mr Z.

Your caution re not holding the physical gold is noted.

I do wonder if the cost for transportation at the beginning and end, holding cost etc will make the exercise worthwhile as I am more driven by short-ish term gain rather than doubting NAB's security with my term deposit cash.

I remember missing the opportunity I saw when Commbank shares were $27 and I couldn't take advantage of it and it seems like this is one of those times as far as gold goes.

regards.

 

[Tysonboss1]

Your comparing today's gold price to missing out on Cba shares. But gold is at an all time high. So it's actually like missing out on buying cba for $60.00.

Look at the xao chart over the last 40 years and compare it to the gold chart.

You'll see 2007 was not a good time to buy Cba shares and 2011 is probably not a good time to buy gold.

 

[Mr Z]

Thanks very much explod and Mr Z.

Your caution re not holding the physical gold is noted.

I do wonder if the cost for transportation at the beginning and end, holding cost etc will make the exercise worthwhile as I am more driven by short-ish term gain rather than doubting NAB's security with my term deposit cash.

I remember missing the opportunity I saw when Commbank shares were $27 and I couldn't take advantage of it and it seems like this is one of those times as far as gold goes.

regards.

Given the undervaluation of gold stocks here you may well be better off in a good low cost producer. Provided you are willing to monitor the position.

Comparing gold to CBA @ $60 is presupposing this is the top for some years to come, that is very unlikely.

 

[awg]

[Shakes head in amazement ]

What needs to be done is some basic research on why gold has any perceived 'value' at all, then maybe revisit the bubble hypothesis?

Like this bit -

"Once the storm clouds pass, which they always do, people will want income producing assets again and leave gold in droves."

What if they don't? Who is going to make the storm clounds pass? Ben Bernake?? Bernanke just indicated that interest rates will be negative for the next 2 years because his QE's have failed, and they are fast approaching a double dip recession, only all their ammo has been spent!

The US has just passed the point where debt to GDP ratio indicates that they will struggle/fail to pay their debts without continuing to draw down their national savings ie plunder their retirement savings accounts. Not to mention some $200TRILLION in future liabilities! All compounded by polititians who only worry about the next election & unwilling to take the drastic measures needed to fix the problems, if they are fixable at all?

That's not to say that there won't be dramatic sell-offs, maybe soon if they (the market regulators) go marginless, but untill 'they' fix all the problems with global debt etc it a matter of 'buy the ** dips'!

You aint seen nothing yet............

As for Buffett - nothing more than a cheer leader for the Fed's loose money debasement policies, who will be left holding a portfolio of dramatically worthless shares in companies reliant on the credit addicted US consumer, who is bankrupt......

Hi Uncle Festivus.

I share your view that the storm clouds look ugly.

I have a question if you dont mind, as I respect your interest in this area.

Could you please offer your thoughts what prospect you see for gold price to be somehow/partially integrated into an international settlement currency, and how might that work in practice?

Now I know that this would be totally resisted by most every governmental authority, and would only be considered in the event of a major inter-currency collapse.

Anyone else feel free to contribute

I hold physical gold, (but majority in gold shares, with mixed results atm)

 

[Tysonboss1]

Comparing gold to CBA @ $60 is presupposing this is the top for some years to come, that is very unlikely.

All bull markets end badly,

Gold is no different, it is being driven higher by fear and greed combined, eventually fear will subside and the greedy with realize the gains are reversing and they will bail.

But please go ahead and explain why it is different this time.

People say gold is money, but today at the shops they were only accepting Australian dollars, funny that.

And guess what, feel free to load up on the shiny stuff. If it did end up being the currency, I have no need to hoard it now, I will just collect as payment from my businesses and real estate.

 

[Mr Z]

But please go ahead and explain why it is different this time.

LOL... It is not... it will end, in around five to ten years IF they address the fundamental issues driving gold.

Read up on financial repression and consider its impact. When the penny drops you will work out why your "income" needs insurance.

You are being more than a little premature in even considering this as a near top.

I love you guys... its always an all or nothing deal! Real Estate heads etc are as bad as the gold bugs

BTW... You are confusing money and currency... shops only taking AUD... LOL!!! Gold is money, gold is the only money that is no one else's liability, gold is money because human nature is what it is. There enduth the lesson

 

[Mr Z]

Could you please offer your thoughts what prospect you see for gold price to be somehow/partially integrated into an international settlement currency, and how might that work in practice?

Gold does not mesh well with our credit system, it introduces a deflationary bias that would make it an unsustainable choice. It may be used at some point to help stabilize a bad situation and introduce an element of confidence where it has been lost but it would have to be abandoned after a time. Personally I will be surprised if it becomes a commonly used currency (or backs one) again & if it does I cannot see it lasting all that long. The Swiss are reportedly discussing it but we'll see.

 

[Billyb]

All bull markets end badly,

Gold is no different, it is being driven higher by fear and greed combined, eventually fear will subside and the greedy with realize the gains are reversing and they will bail.

Yes, and this will occur as small pullbacks until the OVERALL FEAR subsides. Then, when things stabilise, obviously people will sell out of gold and go to riskier assets - that's when the so called gold bubble will pop.
But remember - Gold has shown consistently throughout history that it goes up in value when people are fearful. It's a hedge against fear. Go back and look at past gold prices, it always goes up when people are scared. I reckon people are going to be worried about the economy for at least a few more years - so the conclusion for me is that gold prices will go up during this period.

With regard to the gold/currency argument - I read somewhere an interesting point: for thousands of years gold has been our currency (or backing a currency), it's only in the last 40 or so years that we've started experimenting with this thing called paper money. And so far it's been a disaster of an experiment. So what's the likelyhood we'll go back to the gold standard sometime?

 

[aclassic]

Your comparing today's gold price to missing out on Cba shares. But gold is at an all time high. So it's actually like missing out on buying cba for $60.00.

Look at the xao chart over the last 40 years and compare it to the gold chart.

You'll see 2007 was not a good time to buy Cba shares and 2011 is probably not a good time to buy gold.

Thanks Tysonboss1,

In 2007 gfc, cba plummetted and I rightly thought it would only be a short term thing.

Would have doubled our money if x had have agreed.

I take and understand your point but I think that in these times we are in now the gold price has some way to go for the short term at the very least.

As a complete stranger to gold investment, I really only need to decide on the best form of gold related investment with the least security risk and least costs for a period of up to say 12 months.

I am just a little wary of miners and exploration companies as I have been acquainted with prospector/miners and an explorer - and I have been told and seen some of the tricks they use to lure investors regarding likelyhood of production, richness of prospects, enviornmental reports etc etc.

Mining company' and most other stocks confuse me (easily done) as their share value doesn't always rationally follow seemingly relevant stimuli or forces. Also, I don't know who will fall over as an indirect result of the current situation.
regards.

 

[awg]

All bull markets end badly,

Well we saw a bull market in cheap debt, and that is playing out.

How can US debt be dealt with, there is not many viable options?

If paper backed assets are debased via any mechanism, then imo its more likely to see gold rise, although corrections and even crashes are probable.

As to all bull markets ending badly, check out the bubble in human population growth chart.

 

[Tysonboss1]

As a complete stranger to gold investment, I really only need to decide on the best form of gold related investment with the least security risk and least costs for a period of up to say 12 months.

Sorry, I just have to pull you up their.

The word speculation should be used inplace of investment.

"An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return. Operations not meeting these requirements are speculative."[