Gold Price - Where is it heading?

[noirua]

As Guru Dr Mark Faber said last Wednesday, "many people have little else showing a profit left to sell, so gold has to go". He failed to say 'don't sell gold', though he will be holding on to his.

Greece now owes AU$550 billion and the final bail out of banks on allowing Greece to go bust is more than AU$3 trillion; mostly to cover German, French, Italian and a few UK banks that would be bust otherwise.

 

[Mr Z]

Gold is falling because it is a risk asset. People are taking their profits on gold, gold ETFs, gold futures to go into cash.

If you believe in the long term fundamentals of gold then perhaps this is a buying opportunity for you, just like shares or any other asset you can make a case for under valuation at the moment.

Also the people who bought gold as an inflation hedge are selling because the perceived inflationary risk is lower, deflation is considered to be more likely in the near to medium term.

1. In this environment it is not a risk asset, even the brain dead press worked that out this time around.

2. Yes it is a buying opportunity.

3. Gold is not an inflation hedge, that is a common misnomer that is easily dispelled by looking at historical data.

 

[Mr Z]

As Guru Dr Mark Faber said last Wednesday, "many people have little else showing a profit left to sell, so gold has to go". He failed to say 'don't sell gold', though he will be holding on to his.

Precisely... Mark is on the money, this has more to do with the finical state of some of the market participants than anything else.

PS. Normally by the time that gold gets caught up in this sort of carry unwind it is all over bar the shouting. Time to BUY the beaten up!

 

[TabJockey]

1. In this environment it is not a risk asset, even the brain dead press worked that out this time around.

Gold is a risk asset to many market participants. They bought an instrument that had a risk of falling an value, in the hope that it will rise in value and can be sold at a profit. Sure gold is not a risk asset to doomsdayers stacking it away in a bunker under their house, but when you have a market as hyped as gold, you get allot of speculators in there for a quick buck. Big and small.

 

[explod]

1. In this environment it is not a risk asset, even the brain dead press worked that out this time around.

Yep thats it.

 

[Mr Z]

Gold is a risk asset to many market participants. They bought an instrument that had a risk of falling an value, in the hope that it will rise in value and can be sold at a profit. Sure gold is not a risk asset to doomsdayers stacking it away in a bunker under their house, but when you have a market as hyped as gold, you get allot of speculators in there for a quick buck. Big and small.

Everything is a risk asset by that definition!

Gold hyped? You have to be kidding me, LOL it has yet to scale the heights of domestic RE ---> wake me up when we get a gold reality TV show, hyped LOL Just because it is getting some coverage now. More like welcome to phase two of the bull market... the broad awaking is occurring... lots more talk but little action but at least an awareness.

We are running on solid, VERY SOLID, fundamentals here. That will not change until the shaky debt is purged from this system and a reasonable chance of REAL growth returns to the major economies.

If you class gold as a risk asset here you simply don't understand what gold is and what is happening to the worlds financial system.

 

[sinner]

Agreed, but how do we quantify the relationship between gold and fiat, sans speculative input?

Is fiat worth 20% of what it was 10 years ago?

If so, I'm putting my prices up!

Secular trends can be measured outside of pricing input. i.e. if it is a real long term trend then you should see it whether it is priced in USD, barrels of oil, dozens of eggs or Russian Rubles, inflation adjusted, cyclically adjusted, etc.

For example, take a look at the bull market in the SP500 from 1987-start 2001. Priced in gold, CPI adjusted, Case Shiller adjusted, priced in USD, barrels of oil, whatever. That was a secular bull trend.

Now, head on over to the goldprice.org spot price calculatey thingy

http://www.goldprice.org/spot-gold.html

Click all data, and price gold in any currency you want. JPY is the last currency standing in terms of "gold hasn't priced a new all time high yet". If you can be bothered, run some ratio charts of gold priced in barrels of oil, or tonnes of copper or 30 year bonds. I think its fair to say that gold prices have already undergone a phase transition in many global currencies.

 

[Uncle Festivus]

If you class gold as a risk asset here you simply don't understand what gold is and what is happening to the worlds financial system.

Exactly. That's largely the problem both here and in the general population. Only I would like to think that even some basic research would enlighten some posters in this thread to finally 'get with the program' about gold and contribute with some informed opinion, rather than 'it's gone up a lot so it's gonna come down a lot again.........sometime.....I guess'???

Many a fine gold naysayer have graced this thread over the years only to disappear under the weight of inevitability - of the fall of the fiat system and the rise of gold as a store of value. They too were always predicting the imminent crash of gold, but thanks to greed & politicians it has gone from strength to strength.........that's not to say this correction won't be severe, and I hope it is.......

Gold is a risk asset to many market participants. They bought an instrument that had a risk of falling an value, in the hope that it will rise in value and can be sold at a profit. Sure gold is not a risk asset to doomsdayers stacking it away in a bunker under their house, but when you have a market as hyped as gold, you get allot of speculators in there for a quick buck. Big and small.

Not to me - it's relatively less risky than anything else at the moment. I bought it and buy it to maintain 'value'. This is not a 'normal' bull market - it's an exercise in relativities - your store of value is most likely in a fiat form, which relies on the confidence of the market to maintain it's value, even though it's value is continually being eroded by the creation of excess fiat units, among other things.

It's relative to anything else whose 'value' is determined by the quantity and availability of dollars, as well as the confidence of the market to uphold that 'value' - enter exhibit A, the US housing crash. Right now there is very little confidence in the ability of counter parties to even pay back the principle let alone interest, so the 'credit constipation' requires those who do have lot's of cash to park it some where relatively safe e.g. the USD. And what little confidence there is is based on 'past perceptions' ie that the office holders of where the buck stops ie the central bankers, will be able to, again, steer the ship through and out of the crisis. Based on the numbers (that I and others have posted here & on other threads) & simple maths this simply won't happen - it's the end game, eventually!

You can either 'get it' and be prepared or follow the herd and get vaporised.....??

 

[explod]

Apart from good land the only safe place is gold or silver in the hand.

The 600 trillion, paper IOU, dirivatives market will collapse and the physical bullion market will then be free of constraints and go bananas.

Mr Z, you are doing a great job on the "sunshine and lollie pops" there brother.

Faculty head and attempt at leader Plod.

 

[skyQuake]

Apart from good land the only safe place is gold or silver in the hand.

Cash is always good.
imo if things are getting out of hand, it will be too late to buy gold, but it will not be too late to get out of cash.

Large market participants or funds will not park their money in gold for the sole reason it acts speculative. All that spare cash.. Buy stocks? Nope. Buy euros? Ewwwww. Buy gold/silver? Too speculative. Better stay in treasuries.

It will be a fair while before this type of thinking changes.

 

[Mr Z]

Apart from good land the only safe place is gold or silver in the hand.

The 600 trillion, paper IOU, dirivatives market will collapse and the physical bullion market will then be free of constraints and go bananas.

Mr Z, you are doing a great job on the "sunshine and lollie pops" there brother.

Faculty head and attempt at leader Plod.

If you are right then buy guns and lots of ammo because you will need it. Plus you better hope you are a tough guy otherwise you will hold nothing. This is what rabid goldbugs don't seem to get in their wish for gold and silver to reign supreme.... they don't seem to picture what society will look like if it all fails. Frankly it is a repugnant idea and the wishes of many bugs I find equally repulsive.

IMO it is not going to happen... all things tangible and related will do quite well and they are selling many good resource companies cheap right now.

By all means get gold and silver BUT it doesn't end there, Asia is not closing down tomorrow, we are not finding massive amounts of most things and the demand is growing as Asia both grows in population and heads for a more middle class life style. The debt is a western issue and we will muddle through it one crisis after the next while Asia jogs past us getting fitter each day.

Be careful what you wish for X, I for one certainly do not want to live in the world where only gold and silver have kept value and I will bet that you couldn't with what you have.

I detest goldbugs, I am a gold investor.... lets keep this real, Mad Max ain't your local highway patrolman yet!

BTW... I hope you don't mean land that's price is based on an over extended debt market.

 

[Mr Z]

Large market participants or funds will not park their money in gold for the sole reason it acts speculative.

But they are increasingly doing just that...! The funds are moving more and more in golds direction as this thing rolls on. 20% compound in USD for 10 years with the fundamentals still strong is hard to argue with! Even CalPERS is going for gold! and I predict they will increase the %'s over the years to come.

 

[sinner]

Cash is always good.
imo if things are getting out of hand, it will be too late to buy gold, but it will not be too late to get out of cash.

Large market participants or funds will not park their money in gold for the sole reason it acts speculative. All that spare cash.. Buy stocks? Nope. Buy euros? Ewwwww. Buy gold/silver? Too speculative. Better stay in treasuries.

It will be a fair while before this type of thinking changes.

This is absolutely not the reason that bonds of various sovereigns are bought. Large market participants are not ones to say "ewww" and I think your claim that they are not participating in (or the direct cause of) this gold bull is pretty silly.

What is cash? Cash is now nothing but a transactional notion. If you give the cash to the bank, for them to "hold it as reserves" they still have to go and buy some debt (bonds) from another (or the central) bank, in effect loaning your so called "cash" out to another entity who has to deploy it in a productive transaction or also go and buy debt with it. From a counter-party risk perspective there is no such thing as cash as you've portrayed it. Aside from the physical stock of coins and notes, there simply isn't a big pile of "cash" somewhere which all those credits and debits net out to someone holding a bunch of the pile. They actually just vanish! So paying off or defaulting on debt has become the same as retiring a portion of the money supply.

To wit, my super has been in "Cash" since August 2008. Yet I am not foolish enough to think these dollars are any measure of "safe". If I could buy gold with the money I would.

 

[Mr Z]

Short term treasuries are a bank account for the funds, it is the only place they can get certainly on "return of capital". Short term cash is parked there... it is not considered an investment position, just a short term defensive measure. Gold is an investment position... nobody moving into short term treasuries believes anything other than it will cost them some $ in exchange for certainty, but hey better that than trusting this creaky old banking system eh?

 

[Uncle Festivus]

Be careful what you wish for X, I for one certainly do not want to live in the world where only gold and silver have kept value and I will bet that you couldn't with what you have.

I detest goldbugs, I am a gold investor.... lets keep this real, Mad Max ain't your local highway patrolman yet!

BTW... I hope you don't mean land that's price is based on an over extended debt market.

I'm not sure it's even a case of 'wishing' either? Is it a matter of degrees of bugness'? You don't think it will get truly bad - I think the probability of 1st worlders being forced to lower our standard of living is pretty high, thanks to the ineptitude & greed of all types of bankers.

We have seen what happens when some countries are forced to start living not only within their means but go even further because the proper decisions were not made before that harder decisions have to be made now.

If you are inferring that gold 'bugs' actually want this to happen just to be proven correct then I am not a gold bug. It's just that if you see what's happened and envisage what needs to happen then things are dire indeed, to the point where 'unexpected' things start happening like riots in the US.

Now to assume that the Asian states can somehow get it right, at the same time using the same financial philosophies as the countries in trouble ie mis-allocation of money, and to do that while the rest of the world implodes, is a long call to make. China is not the beacon of fiscal responsibility the mainstream media make it to be - the consequences (for us) of it taking a stumble are obvious. Their data leaves a lot to be desired. I recall Japan was the golden haired child some 30 years ago and see where it is now?

It's all a matter of the contagion working it's way through the system on an slow negative feed back loop - and taking advantage of it?

 

[Mr Z]

Gold and silver being the only thing of value infers a world where we are doing it very very tough. It is beyond anything in our experience of the first world, it is in the territory that law is breaking down, government is in disarray and locally, might has right. Hang around the bug sites for long enough and you should see that they are inhabited by anarchical racist survivalists than want to see government and civil society fail so that they can build a brave new bugdom. They "prep" by storing food, guns and ammo and they talk strategy in dealing with the "sheeple". Basically they seem to see nothing worth keeping in their current society, they seem to have no skin in this game, no "buy in" on the idea of making our systems better. They just wanna pull the rug and gloat that they where right. What they think happens beyond the life of their food store or the limit of the 5000 rounds of ammo they have I don't know! They are "hardmen" in there own minds, no one bigger will turn up and push them around when the SHFT!

I once thought that I bought gold therefore I must be a goldbug ---> then I met some real goldbugs and was repulsed by the totality of what this set beleive and willfully wish for.

Yeah this may get tough, but not gold and silver only tough, that is just plain nuts IMO.

 

[disarray]

If you are right then buy guns and lots of ammo because you will need it. Plus you better hope you are a tough guy otherwise you will hold nothing. This is what rabid goldbugs don't seem to get in their wish for gold and silver to reign supreme.... they don't seem to picture what society will look like if it all fails. Frankly it is a repugnant idea and the wishes of many bugs I find equally repulsive

funny you should mention that ....

 

[sinner]

funny you should mention that ....

Personally, I like Ferfal and I don't think he really fits into what Mr. Z is talking about at all. Maybe some nuts co-opted him as such, but it's pretty clear that isn't his game.

 

[Mr Z]

funny you should mention that ....

I have not read him!

<MINI RANT>I prefer to be optimistic about our ability to make the best of this messy paper chase. I don't want to crawl under a rock and throw life as I know it out the window. There is lots to like about it and it is worth defending for me and my family --> disaffected and disenfranchised gold bugs be damned! </MINI RANT>

 

[Mr Z]

Anywhooooo... back to gold. Ready for a bottom this week? Wanna hang some odds on that idea?