Gold Price - Where is it heading?

[explod]

Why is the bottom in?

The low towards US$1530 has been tested three times since October last year and that level is now strong support technically speaking. We are close to a breakout of the pennant typical of gold over the last 10 years.

Fundamentally there is fear on the markets behaviour and the only thing apart from some minor other sectors are the rise of gold stocks after a severe washout south. Investors in gold stocks know the signs and when to go long.

A drop from here is most unlikely in my view, and I am often wrong. If things continue to turn more ugly with Spain there will be more stress on the European Union and also the US who are now also throwing in money to try and hold them all together. And remember the US money itself is merely debt paper. So may be ugly but not for gold in my view.

US$2000 by August, entirely reasonable.

 

[Mr Z]

 

[Mr Z]

Bernanke Steps on Gold Bugs

 

[explod]

http://www.gata.org/node/11456

Big securement's of physical gold during the takedown, and unreported

515 tons in four hours.

 

[Starcraftmazter]

http://www.gata.org/node/11456

Big securement's of physical gold during the takedown, and unreported

515 tons in four hours.

Riveting stuff, I wonder if the cartel's shorts got squeezed or if they are unable to deliver the physical. Would be hilarious.

 

[explod]

Riveting stuff, I wonder if the cartel's shorts got squeezed or if they are unable to deliver the physical. Would be hilarious.

And when the physical for delivery runs out completely.

Total default and war I suppose.

 

[Mr Z]

Guys, this would be LBMA OTC stuff, if the gold was sold for physical delivery it would be there, it settles T+2 so there is no room to mess around. OTC both parties expect to complete the deal, only where the client is holding metal unallocated with an LBMA member can the famed 100:1 leverage be employed, otherwise it is a physical market. It's just not likely that we see a default unless someone wades into the Comex, which is not a market designed for physical delivery (it is meant to be a paper market for hedging activity) and demands a large delivery. Should that be the case they will simply use the rules to force cash settlement. You are never likely to see a Comex default despite the goldbug hype.

What you will see if there is ANY pressure on delivery is rising price, which is what we want... eh?

Gold will not run out... the price will adjust... that is a market!

 

[Mr Z]

BTW it was a very constructive closing number this week, if we can get past whatever the Spanish Euronut announcements are on the 10th, assuming they happen, then we are looking good. However expect that to be USD positive and expect the short sellers to have another go at gold next week. It is not all bad... I suspect that will take us to the final bottom in short order, time is running down. For now evidence is building that the ~1525 area is the low, supported by recent action BUT we still have upside work to do to prove that and we have failed at the first hurdle every time so far.

 

[explod]

Gold will not run out... the price will adjust... that is a market!

(Talking physical gold now), why not ?

 

[Mr Z]

To run out of gold is to suggest that there is no price at which it can be obtained. Clearly there will always be a price for gold, the market will always clear the only thing to be determined is at what price. Price will always seek balance supply and demand therefore we will not run out. That price may be 5k oz, it maybe 1k or 50k but it will be obtainable if you meet the market.

If there was not a price at which you could obtain gold then gold will have effectively ceased to function as money, that is to say it would not be traded and would have no determinable value (by whatever measure you choose to value it). If you believe this to be the case then why hold gold? You will never trade it for anything and it will never be of value to you. But that is not the case is it? I will always be able to name a price at which you (or someone else maybe ) will part with your gold. Therefore we will never run out... unless we some how use or lose all of it, or aliens steal it!

Markets clear.... they balance supply and demand at a price. The question should be why would you think that will not apply to gold? I for one simply want to see the price rise in an orderly fashion to a price that I can take advantage of. Defaults, broken markets that soar in price then collapse before you can take advantage of them, because that is what would happen in a default, are a goldbug fantasy just like some permanently high plateau price for gold. It can't work that way and never will! Price will float to balance supply and demand. With orderly markets that you can actually trade on being very desirable come the time YOU want or need to sell... goldbugs are nuts with this stuff... if they ever get what they want you will need big gun more than you will need gold.

 

[Smurf1976]

If there was not a price at which you could obtain gold then gold will have effectively ceased to function as money, that is to say it would not be traded and would have no determinable value (by whatever measure you choose to value it). If you believe this to be the case then why hold gold?

It depends on how you define "price".

It is likely that you will always be able to exchange gold for, say, a loaf of bread or a barrel of oil. At least you will as long as someone is baking bread and extracting oil.

But if you define "price" in terms of fiat currency, then it is plausible that at some point gold will not be available at any price. In a hyperinflation scenario, which is essentially what gold bugs fear, it would be a brave person who exchanged gold for a currency that was very rapidly losing value. In that scenario, it is quite likely that you would not be able to buy gold with fiat currency.

 

[Mr Z]

Then you will need a gun, not gold...

Regardless you can't claim to have run out of gold simply because your currency is worthless, gold will have a price and will be available, you will simply have to pay the price to obtain it, whatever it is... peanuts or kryptonite, there will be something to trade and we will not "run out".

 

[Mr Z]

It depends on how you define "price".

Price is what you pay... Cadillacs, wives, wine, banana's, labor etc AUD is a medium of exchange that sits between what you pay and what you get. If you don't use AUD and you barter instead you are still "paying"

 

[Uncle Festivus]

As per Smurf, the worst thing for me as a physical gold holder would be for the currency that I 'value' my gold in to become 'junk' - it would then become a liability as you wold then be exposed to security risks as it became known that you trade in gold? Much prefer to go to a secure place and swap gold for cash - real cash & not a deposit into a bank account, as I think physical cash will become just as 'valuable' as gold in day to day goods & services trading/living if there is a banking crisis/run.

So yes, to wish? for the 'evil' fiat to finally meet it's proper and deserving death and for gold to take it's rightful place as some sort of new world currency is a bit short sighted - we will still need some sort of non physical means of value exchange, but perhaps one that will not just be backed by the promises of politicians or manipulated by the evil, non-wealth creating money shufflers like the too big to fail entities.

For me it (gold) is a 'wealth medium exchange' mechanism for the transition period ahead.

As for the GP itself, I started to muck around with a chart and came to the conclusion that nobody really knows what's going to happen from here - it's certainly at a defining crossroad for everything in the world right now. What I have bet on though is that 'they' won't be able to save the world and we are headed for some tough & interesting times ahead.......

 

[numbercruncher]

I see Gold as money that never ever changes in value - it is Fiat currencies that have the wild swings.

Id much rather do all my dealings in Gold and Silver but things dont work like that (yet)

 

[Starcraftmazter]

I see Gold as money that never ever changes in value - it is Fiat currencies that have the wild swings.

That is precisely how I see it too

And of course since overtime fiat loses value, overtime gold will always be priced higher against fiat.

 

[zac]

I see Gold as money that never ever changes in value - it is Fiat currencies that have the wild swings.

I read an interesting quote about gold that sums up the value of gold rather well I thought.

500 Years ago an ounce of gold was enough to buy you a nice suit.
10 Years ago an ounce of gold was enough to buy you a nice suit.
Today an ounce of gold is enough to buy you a nice suit.

 

[Mr Z]

I see Gold as money that never ever changes in value - it is Fiat currencies that have the wild swings.

Id much rather do all my dealings in Gold and Silver but things dont work like that (yet)

But gold does and always will change in value... it buys varying amounts of things over time, even if you ignore FIAT.

 

[Mr Z]

I read an interesting quote about gold that sums up the value of gold rather well I thought.

500 Years ago an ounce of gold was enough to buy you a nice suit.
10 Years ago an ounce of gold was enough to buy you a nice suit.
Today an ounce of gold is enough to buy you a nice suit.

Yeah but its not quite true is it? A $1600 dollar suit today is a little better than a $250 suit back around 2000 isn't it? I love these old chestnuts that goldbugs use, they never really stand close scrutiny! Save to say gold has done better than any other form of money over the last few centuries... now that is true.

 

[Mr Z]

As per Smurf, the worst thing for me as a physical gold holder would be for the currency that I 'value' my gold in to become 'junk' - it would then become a liability as you wold then be exposed to security risks as it became known that you trade in gold? Much prefer to go to a secure place and swap gold for cash - real cash & not a deposit into a bank account, as I think physical cash will become just as 'valuable' as gold in day to day goods & services trading/living if there is a banking crisis/run.

So yes, to wish? for the 'evil' fiat to finally meet it's proper and deserving death and for gold to take it's rightful place as some sort of new world currency is a bit short sighted - we will still need some sort of non physical means of value exchange, but perhaps one that will not just be backed by the promises of politicians or manipulated by the evil, non-wealth creating money shufflers like the too big to fail entities.

For me it (gold) is a 'wealth medium exchange' mechanism for the transition period ahead.

As for the GP itself, I started to muck around with a chart and came to the conclusion that nobody really knows what's going to happen from here - it's certainly at a defining crossroad for everything in the world right now. What I have bet on though is that 'they' won't be able to save the world and we are headed for some tough & interesting times ahead.......

View attachment 47389

Gold has its place and time, that has been 'now' for the last decade and will continue to be for quite a few more years IMO. However gold would be too deflationary to use permanently as a formal currency given the way our credit system, banking system and political systems function, they are simply not compatible for anymore that a short period of time (a stabilization period perhaps!). Once the distress has passed FIAT will again make more sense than gold but for now it is gold all the way.