Gold Price - Where is it heading?

[Mr Z]

I have been told that may now be a 5k limit... its been a while since I have bought less than 10K so that may well be the case.

Phone a bullion dealer and ask!

 

[Ageo]

Anything over 5k in "cash" purchases is now becoming mandatory practice to obtain ID checks etc...

This of course is just the beginning as down the track it will be "all" purchases will require ID.

Another part in government control and the abolishment of cash.

 

[tothemax6]

If gold is correlated to inflation, which country's inflation? The US? A mixture?
To show whether there is a correlation all we need is a graph of the inflation rates (eg from the US) vs Gold price over time. Anyone got that data?

Many would have already seen this graph which suggests gold is not correlated with inflation
http://inflationdata.com/inflation/images/charts/Gold/Gold_inflation_chart.htm

Why does the red line drop drop so significantly after 1980 (note the blue line stays relatively stable during that drop). Clearly gold didn't protect you from inflation during that period.

The 1980 event was Paul Volcker (Fed) ramping up interest rates to 20% to arrest inflation. When one says 'Gold is correlated to inflation', one does not necessarily mean correlation with no relative time shift. Gold front-runs inflationary signals. Wiemar german investors would not have simply watched their government monetize their debts, and waited until inflation took hold - they buy real assets immediately.
Some monetary base vs gold price charts might be interesting.

 

[explod]

Seriously, can nobody answer my question about holding gold? I would imagine at least someone here would have experience with this.

Can you clarify, do you mean storage?

 

[Starcraftmazter]

Can you clarify, do you mean storage?

The storage is unimportant; whether I buy (physical) gold to take home, or store it in some sort of a depository, the question is, are one's gold holdings on record anywhere.

My main interest is whether our government holds the capacity to confiscate all gold similarly to the US government during the great depression.


So in relation to the 5k limit, does that mean that you can go around various dealers buying lots of 5k gold, without having to give any ID? Can you enact multiple transactions of under 5k in value with the same dealer to circumvent this as well?

 

[Mr Z]

The 1980 event was Paul Volcker (Fed) ramping up interest rates to 20% to arrest inflation. When one says 'Gold is correlated to inflation', one does not necessarily mean correlation with no relative time shift. Gold front-runs inflationary signals. Wiemar german investors would not have simply watched their government monetize their debts, and waited until inflation took hold - they buy real assets immediately.
Some monetary base vs gold price charts might be interesting.

Correlated with a time shift? ... That means what? Nothing really, our system always has inflation!!!! If you choose to get real about what triggers gold bull markets just look at real interest rates for the gold correlation and forget about inflation. We had a twenty year gold bear market WITH inflation from Volkers high to the gold low. Inflation has NOTHING directly to do with golds value and gold will not enter a bull market until the safe opportunuty to gain a return on capital in other assets turns negative in real terms (return less inflation). An economy can live with inflation without triggering a gold bull market so long as it is otherwise healthy and offering real returns. Excessive inflation will eventual send returns negative and trigger inflation defensive plays then eventually a gold bull market BUT the link is not direct hence there is no useful correlation between gold and inflation with no static "time shift" difference between the two events. Real returns are the key to timing these events, best represented by real interest rates if you are looking for a correlation.

To be a little more succinct to understand when gold bulls come about we are looking for the point at which inflation damages the economy to the point it is contracting in real terms.

This is a little like looking for the point one becomes dangerously drunk... it all depends on how much alcohol is consumed over what period of time. Although the link undeniably exists there are so many variables that determining the point at which dangerous is reached is not possible unless you are measuring blood alcohol content. Real rates gives you that reading and gives you the correlation to gold, talking inflation in general will just confuse you because it is a constantly present variable in our current system.

 

[Mr Z]

So in relation to the 5k limit, does that mean that you can go around various dealers buying lots of 5k gold, without having to give any ID? Can you enact multiple transactions of under 5k in value with the same dealer to circumvent this as well?

Yes... or a couple can buy 10K... which is why I think I remember that number, it is always me and the misses

 

[Mr Z]

The storage is unimportant...

If you think about it storage requires identification and records are kept so the purchase is not anonymous. Once you have handed over that info it is mute point as to whether it is reported because the info is available should the authorities require it.

The thing with physical gold is they are looking for large transfers of wealth that MAY be payments for nefarious activity. You'd have to match some sort of pattern to trigger a response from the government, in fact the rule is likely to be more directed at discouraging that avenue of potential payment than actually getting Joe Blow gold buyers name. Then how hard is a fake ID to get? As normal it only really succeeds in keeping honest people honest! Capital gains and all that... but then how do they know you sold it?

 

[Ageo]

So in relation to the 5k limit, does that mean that you can go around various dealers buying lots of 5k gold, without having to give any ID? Can you enact multiple transactions of under 5k in value with the same dealer to circumvent this as well?

Yes thats what many people do to avoid the 5k rule (if paying cash) but if its a bank transfer or credit card from a business then there is no need for them to report it.

 

[explod]

There is a thread called "Buying Gold" which may be more usefull to some, many questions have been answered there and more on topic than here.

 

[tothemax6]

My main interest is whether our government holds the capacity to confiscate all gold similarly to the US government during the great depression.

It is a government, so yes. I would argue that even Gillard isn't as much of a national saboteur/thug as FDR, but its always possible. However, even if the gov nationalized everyone's gold, A - its easy to hide gold, B - if they were actually breaking into homes to find gold, the gold would be the least of your worries, C - foreign currency coins which happen to be made of gold are normally exempt (such as Krugerrands in the case of the depression).

 

[Mr Z]

The direct correlation between me wanting to eat food and me eating food is poor. If you shift the chart of me 'wanting food' forward about 20minutes, the correlation is good.

You simply cannot add a fixed time shift and find any correlation between the gold price and inflation it is not that simple.... there is no correlation, time shift or other in that sense. It is entirely to do with the ability to earn a safe return over and above inflation. Which, when you think about it is entirely logical... if there is no threat and safe returns can be had why on earth would you own gold? This is why for MOST of the time real estate is a better inflation hedge than gold, it is a real asset that in the wider time frame moves inline with inflation + you can leverage it cheaply. Gold gets legs when things like RE stop working... case in point the USA.

Regarding real rates, one must also consider that the inflation rate is a function of the interest rate.

The real rate is basically the nominal rate with the inflation rate backed out of it, it is not a function of the inflation rate it is the current rate stripped of inflation distortion.

 

[Mr Z]

As for the Australian government confiscating gold, the law already exists to allow for this and all that is required is the governments will to exercise it. Silver is another story but in Australia you can be asked to hand in your gold... to my knowledge it has never been done but???!

 

[Starcraftmazter]

As for the Australian government confiscating gold, the law already exists to allow for this and all that is required is the governments will to exercise it. Silver is another story but in Australia you can be asked to hand in your gold... to my knowledge it has never been done but???!

Seriously? Do you know which Act it is in or when it was enacted or any other info? This is somewhat worrisome

I guess I will be buying in 5k lots from various dealers in cash. Then the question is, how the hell do you secure gold against theft, and of course you can not insure it because then it will be on record (not to mention costing it's weight in gold to do so .


Thanks to everyone for the responses, and I will find that thread on buying gold.

 

[Mr Z]

Seriously? Do you know which Act it is in or when it was enacted or any other info? This is somewhat worrisome

I first learned of it from Bron Suchecki of the Perth Mint. It is Part IV of the Banking Act 1959.

You can read about it on his blog.

 

[Bron Suchecki]

Re confiscation, the Govt can't actually do it as it stands now, they have to have the dormant Part 4 of the Banking Act reactivated, but that probably won't take long to do.

On the ID issue, note that only cash purchases above $10,000 or suspicous transactions (which would include obvious multiple sub $5000 purchases and other avoidances) are reported.

Yes dealers record and file ID for transactions over $5000, but there is no reporting. They don't keep those records forever, usually after 7 years businesses can destroy records.

So if a future Govt wanted to track down gold owners they could go to bullion dealers and ask for records. If those are kept in paper files then it will be impractical but I suppose most would have electronic name and address details.

Personally, I'd be more worried about crooks breaking into a dealers shop not for their gold, but to hack their computer records of who they sold to.

Note also if you purchase under $5000 but paid with bank transfer or cheque then the Govt can access that information via the banking system, so for total privacy you need purchases under $5000 in cash. Buying small amounts more frequently is probably not a bad idea anyway, as it is a form of dollar cost averaging.

 

[Ageo]

Re confiscation, the Govt can't actually do it as it stands now, they have to have the dormant Part 4 of the Banking Act reactivated, but that probably won't take long to do.

On the ID issue, note that only cash purchases above $10,000 or suspicous transactions (which would include obvious multiple sub $5000 purchases and other avoidances) are reported.

Yes dealers record and file ID for transactions over $5000, but there is no reporting. They don't keep those records forever, usually after 7 years businesses can destroy records.

So if a future Govt wanted to track down gold owners they could go to bullion dealers and ask for records. If those are kept in paper files then it will be impractical but I suppose most would have electronic name and address details.

Personally, I'd be more worried about crooks breaking into a dealers shop not for their gold, but to hack their computer records of who they sold to.

Note also if you purchase under $5000 but paid with bank transfer or cheque then the Govt can access that information via the banking system, so for total privacy you need purchases under $5000 in cash. Buying small amounts more frequently is probably not a bad idea anyway, as it is a form of dollar cost averaging.

Bron in the not too distant future any cash transaction on bullion will fall under cash reporting requirements.... Its only a matter of time before they kill the industry and hopefully by then the average citizen wakes up and over throws all these stupid departments which are nothing but money grabbers and intel gatherers.

 

[sinner]

I am personally not worried about confiscation of personal gold. What gold anyway, I sold mine to pay off large losses gambling on red at the casino.

I think before too long, "western governments will encourage people to hold physical gold...citizens will be asked to use gold as savings...for holding (the currency as a store of value) will be frowned upon" (sic)(ANOTHER - http://www.usagold.com/goldtrail/archives/another4.html)

See

"China urges its citizens to purchase gold and silver" - http://digitaljournal.com/article/279166

It's my understanding you can buy gold (not silver) bullion in the UK tax exempt, and in Europe I hear you can buy gold bullion at the spot rate by simply walking into almost any bank.

 

[Mr Z]

It has been funny...

...watching Forbes swing from a fairly anti gold stance in the early 2000's to running more and more gold supportive articles. Not that I am one that believes we should return to gold as currency BUT just the fact that sound money principles are being discussed in the press is very encouraging.

Will Western Civilization Rediscover The Moral Foundations Of Sound Money?

The people are starting to look for an alternate money!

Battered by Economic Crisis, Greeks Turn to Barter Networks

 

[Mr Z]

Of course...

... the Greek government will have to clamp down on it at some point because it could threaten tax revenue.... not that the Greeks tend to pay taxes anyway