Gold Price - Where is it heading?

[craft]

Thanks craft, wise worse from Aswath in the comments section of that article, recognising the reality of the situation:


My main issue with that article is twofold:
1. A lot of what he says applies equally to an ounce of gold as to money under the mattress. Which implies logically a definition of "saving", not "investing", after all the "real interest rate" is what you get for investing the money, not saving it in a shoebox. So why exactly is gold being held to the standard of investment, when it is (has and always will be) a "store of value" i.e. savings. Should it not be held up in comparison to other savings devices, such as holding a giant warehouse full of USD for 30Y?
2. All of the "valuation hypothesis" he chooses seem kind of fallacious to me since they are entirely US focused, yet obviously the number of USD that an ounce of gold can buy has been influenced more by global than local factors. Consider for example the USD was a promissory note to deliver a defined unit of gold to the holder, prior to the closing of the gold window. Holding USD in lieu of the physical did not protect from that event, yet he did not examine owning golds role as a hedge against such events (i.e. specifically hyperinflation and/or currency default).

I thought your points were covered in the 'Gold as Insurance' section and the bottom line – well that’s how I read it and that was the most interesting part.

As an aside – If Gold deserves a position in the portfolio as insurance then I see it as insurance against counterparty promise failure – therefore only physical does that job.

Not my preferred insurance but I see the reasoning.

 

[sinner]

Warren Buffetts 20% CAGR for ~30-40Y has given him a net worth ~50 billion USD. Lets say he decides to spend 20 billion in figuring out how to live for another 100Y and continue his awesome investment performance. How long does it take at 20% CAGR before he has all the money in the world? My calculations are roughly that at a 30 billion starting balance, at 20% CAGR, old WB will have 248453 trillion dollars (that's 12 more zeros on the end) after 100Y. Surely at some point, you have to recognise there is an upper limit to investing, an upper limit to which markets can even take that sort of size - how large would the US deficit have to be to accomodate old WB?

Lucky for gold, since it's a real physical good, its infinitely divisible against imaginary constructs like "the unit of account".

 

[Mr Z]

I watched it again, I stand corrected he mentioned options.

Just for the hell of it, as we stand today.

June Calls OI = 233020 potential of 33B @ $1450
June Futures OI = 251249 potential of 36B @ $1450

Total for June ~69B.... not so far from the quoted number, given we are down on OI from the period he is likely talking about.

Registered Inventory 2,210,735.929 @ $1450 = 3.2B - Over the quoted number but not massively.

Now as TH mentioned you can't just take option OI, they are often apart of complex strategies and typically 80+% of them finish out of the money and are worthless. Similarly many futures positions are a part of a strategy like a spread trade. The total number of positions doesn't give you much of a clue as to what the physical demand could be at the end of the month. The only figure we have is that typically something slightly less than 1% of positions are taken to delivery and most of that is just movement within Comex warehouses not off take. One of the points that Kyle was making is that 1% is not a very big number, as he said if that where to change to 4%, for any reason, metal would be getting hard to come by. Likely? Well not if the Comex history is anything to go by but something like a default on the LBMA would probably put a good deal of pressure on the Comex as people sort alternates. Will it happen... well who knows, but if you are running a conservative private fund that is holding gold for the long run would you want to explain to them that due to unforeseen circumstances you now only have a cash contract? I would not, I would be doing what he did and I would also be careful about who was storing the metal once acquired.

 

[nulla nulla]

I guess if the university is storing their bullion at their own secure location, they remove the risk of a second party storage facility "leasing" out their bullion without their knowledge and/or consent. Further, if the University has their wealth in hard bullion they insure against any devaluing of the paper dollar through the printing presses.

 

[Uncle Festivus]

The University of Texas Investment Management Co., the third-largest U.S. academic endowment, sold $375 million in gold bars from holdings of about $1.4 billion and reinvested the proceeds in gold futures and equities.
http://www.bloomberg.com/news/2013-...nd-sold-375-million-in-gold-bar-holdings.html

 

[nulla nulla]

US$1,467.00 slowly climbing since the fall.

 

[nulla nulla]

Kyle Bass on why he had Uni of Texas take physical delivery of $1 billion in gold.

http://www.youtube.com/watch?v=lgNVNTvlpFY

The youtube clip date is unclear but I note Mr Z's posts that it was in 2011 (correct me if I'm wrong). They took delivery of US$1 billion in physical gold, but his comments in respect of the subsequent audit, suggest it is still being held by a party other than the University of Texas, mixed in with the gold of other parties.

The University of Texas Investment Management Co., the third-largest U.S. academic endowment, sold $375 million in gold bars from holdings of about $1.4 billion and reinvested the proceeds in gold futures and equities.
http://www.bloomberg.com/news/2013-...nd-sold-375-million-in-gold-bar-holdings.html

It looks like their investment was up over US$100 million and that they have now sold off some of the physical and re-invested it in futures and equities. The timing of the sell off and re-investment in futures (if they re-invested in gold futures) would be interesting.

 

[Mr Z]

Chillout Dudes!!!!

 

[CanOz]

Before the bulk of trading gets underway I'm focusing on the 1465 to 1480 as price is accepted as value here.

Make no mistake about this, we have a short term uptrend, with no signs of aging yet. 1500 is a 50% extension off the lows...might see some bracketing there...

The best scalps are trading with stop runners on this market prior to pit open.

CanOz

 

[Joules MM1]

Before the bulk of trading gets underway I'm focusing on the 1465 to 1480 as price is accepted as value here.

Make no mistake about this, we have a short term uptrend, with no signs of aging yet. 1500 is a 50% extension off the lows...might see some bracketing there...

The best scalps are trading with stop runners on this market prior to pit open.

CanOz

nice flip this morning...and no one could blame etf selling....

 

[CanOz]

nice flip this morning...and no one could blame etf selling....

Absolutly beautiful move back into that gap...this big move happened with liquidity!

 

[explod]

Absolutly beautiful move back into that gap...this big move happened with liquidity!

On satynight hops try to stay away,

But my big tip of a crash is obviously wrong?

It has proved to me that JPM are watching what I say at all times as all my calls (all of them) go the other way.

Now as a holder, I say being wrong in this case again is good, but they will ruminate and stew over this post so just watch it crash mundy.

 

[chumley]

On satynight hops try to stay away,

But my big tip of a crash is obviously wrong?

It has proved to me that JPM are watching what I say at all times as all my calls (all of them) go the other way.

Now as a holder, I say being wrong in this case again is good, but they will ruminate and stew over this post so just watch it crash mundy.

Really dont understand what your basing your "tips" on.
Is it the huge + 80 rillion dollar debt the US has?
Or the fact that no one wants to hold US $'s
In the current circumstance I can see no alternative for gold but to go up, as it has for 1,000 of years.

 

[chumley]

nice flip this morning...and no one could blame etf selling....

Why is it a "short term" uptrend
Its been going up for the last decade.
We really need to be looking at the $1,560 range right now.
Sure some sell stops will be pressed, as in Fridays trade, but no one is asleep at the wheel here.
Unlike three weeks ago when it crashed, that was just so stupid.
And to hear all the idiots come out of the little door in the Cookoo Clock bleating "end of bull run for gold"
Really stupid.
Why?
Because its not the end of any "bull run" for gold.
I don't know if anyone noticed by what it is is the end of the Bull run for the US $ over the last 40 years.

 

[CanOz]

Why is it a "short term" uptrend
Its been going up for the last decade.
We really need to be looking at the $1,560 range right now.
Sure some sell stops will be pressed, as in Fridays trade, but no one is asleep at the wheel here.
Unlike three weeks ago when it crashed, that was just so stupid.
And to hear all the idiots come out of the little door in the Cookoo Clock bleating "end of bull run for gold"
Really stupid.
Why?
Because its not the end of any "bull run" for gold.
I don't know if anyone noticed by what it is is the end of the Bull run for the US $ over the last 40 years.

If you had experience or some screen time with the Gold contract you might think about your posts a little differently.

CanOz

 

[explod]

If you had experience or some screen time with the Gold contract you might think about your posts a little differently.

CanOz

There are two golds, paper which you trade CanOz and physical which some of us on here collect; and I might add and keep as a safe method of long term saving.

The shortage of physical is now cronic, and the paper trading bears no relationship to a real gold market anymore. Again in silver more than 12 month production (in volume) was traded Friday, nearly a weekly event now, but that is what it now takes to keep the price under control.

I will see if I can sus out another thread just about physical or mount a case for us gold collectors to seperate our discussions from you traders. To newcomers this whole circus makes little sense. The idea of this site (ASF) is to inform and help each other to learn.

The spot price is no longer the price of real gold so on our ASF heading most of us are off topic.

 

[Lone Wolf]

The spot price is no longer the price of real gold so on our ASF heading most of us are off topic.

I'm a bit out of the loop when it comes to the gold situation so excuse me if this is a stupid question...

Perth mint is selling 1oz gold bars for $1465. 10oz bars for $14376. The spot price is currently $1430. All in AUD.

So when you say the spot price is no longer the price of real gold. What do you mean?

Are you saying that the advertised bars from perth mint aren't in stock? And therefore if you want physical today you'll need to pay above perth mint rates to acquire it from someone else?

Is this just for small amounts though? Or for all quantities of gold? If the shortage is only on small quantities, then is that really a gold shortage, or just a temporary shortage in a specific form of gold? What form of gold do you consider "real gold" ie. coins, 1oz bars, 400oz bars?

 

[FlyingFox]

I'm a bit out of the loop when it comes to the gold situation so excuse me if this is a stupid question...

Perth mint is selling 1oz gold bars for $1465. 10oz bars for $14376. The spot price is currently $1430. All in AUD.

So when you say the spot price is no longer the price of real gold. What do you mean?

Are you saying that the advertised bars from perth mint aren't in stock? And therefore if you want physical today you'll need to pay above perth mint rates to acquire it from someone else?

Is this just for small amounts though? Or for all quantities of gold? If the shortage is only on small quantities, then is that really a gold shortage, or just a temporary shortage in a specific form of gold? What form of gold do you consider "real gold" ie. coins, 1oz bars, 400oz bars?

+1. I might be wrong here but you can still get Perth mint bars quite readily.

I don't think we should be expecting spot price for coins, eagles. The price for larger bars is not that much above spot (usually 2-3 %).

 

[explod]

So when you say the spot price is no longer the price of real gold. What do you mean?

Are you saying that the advertised bars from perth mint aren't in stock? And therefore if you want physical today you'll need to pay above perth mint rates to acquire it from someone else?

Is this just for small amounts though? Or for all quantities of gold? If the shortage is only on small quantities, then is that really a gold shortage, or just a temporary shortage in a specific form of gold? What form of gold do you consider "real gold" ie. coins, 1oz bars, 400oz bars?

All amounts. Try to buy some for immediate delivery into your own hand Monday.

The entire financial system, Governments, Banks and advice industry are terrified of a rising gold price. There are no trailing fees, or other interest for them, and its price rise has always been the signifier of the dilution of paper money. (which with respective Q/es they are printing madly atm). Perth Mint play with that game, and sure with established customers who after long waiting periods some are still getting it at the prices quoted.

Check out the following sites a few times;

http://harveyorgan.blogspot.com.au/

http://www.gata.org/

Coin dealers are a good place to hang around too, talk to the other people there buying for metal content, plenty of them as they are very busy at the moment, and you will soon get the idea.

 

[FlyingFox]

All amounts. Try to buy some for immediate delivery into your own hand Monday.

The entire financial system, Governments, Banks and advice industry are terrified of a rising gold price. There are no trailing fees, or other interest for them, and its price rise has always been the signifier of the dilution of paper money. (which with respective Q/es they are printing madly atm). Perth Mint play with that game, and sure with established customers who after long waiting periods some are still getting it at the prices quoted.

Check out the following sites a few times;

http://harveyorgan.blogspot.com.au/

http://www.gata.org/

Coin dealers are a good place to hang around too, talk to the other people there buying for metal content, plenty of them as they are very busy at the moment, and you will soon get the idea.

Hi explod,

Were you able to get in touch with the perth mint? Do they not have any physical for immediate delivery?

Cheers