Gold Price - Where is it heading?

[Value Collector]

Was looking at the 10 year chart over the weekend and noticed the obvious, POG now back to where it should be, back to the long term 10 year trend..if we consider the irrational exuberance of 2011/12 to be just that then its full steam ahead with everything going according to plan.

Based on the above i would think that the miners look to be extraordinary opportunities at current prices.
~

An interesting assessment So_C, But what makes you think the fair value should be near 1200. I mean that's a tripling in price in 7 years. Tripling in 7 years is a massive move for an asset that doesn't grow, I mean an ounce is still just an ounce 7years later.

I would think that the growth in the value of gold has to be linked to inflation and population growth in some way. I am not sure these two factors alone could justify a continuation of such rapid growth.

I think there is probably room for more downward movement.

 

[So_Cynical]

An interesting assessment So_C, But what makes you think the fair value should be near 1200. I mean that's a tripling in price in 7 years. Tripling in 7 years is a massive move for an asset that doesn't grow, I mean an ounce is still just an ounce 7 years later.

I didnt say anything about value, simply pointed out that the 10 year trend was still intact and that the price had now returned to trend...i will leave value calculations to the people who think it matters...world average production price is around $1150 USD and as i suggested several months ago this has so far proven to be support.

 

[Value Collector]

I didnt say anything about value, simply pointed out that the 10 year trend was still intact and that the price had now returned to trend...i will leave value calculations to the people who think it matters...world average production price is around $1150 USD and as i suggested several months ago this has so far proven to be support.

And before that people claimed $1600 as support.

Gold is a weird one to me, Because it doesn't get consumed, it doesn't get used up, it just gets stockpiled. I can't see the cost of production providing support, because if it falls out of favour there is no need for people to keep stock piling it, Those high cost mines would just be shut down.

 

[Value Collector]

It is not hard to work out as the price of gold has gone up an average of 30% per year since 2001. And as the monetisation of debt looks to continue so will the price of gold go up on its current trend.

We have had a fair bit of it this year so I am calling US$2,200 2011

2012 about $2,900
2013 " " 3,900

roughly of course, but as the general investment community is now taking a little bit of notice it my go up exponentially further.

And we are nowhere near the mania of the dot. com for example, when the taxi driver insists on buying, only then will it hit the top and be time to sell.

This has been a good thread to flick through,

This prediction has got to be one of the most amusing I have found, I hope nobody to this guys advice.

According to him we will all be rich, just keep buying shiny metals, 30%pa, easy as that.

 

[pixel]

As with all "useless" commodities - art, stamps, autographs, cricket memorabilia - an ounce of gold ihas no intrinsic value per se; it's worth exactly what the keenest buyer is prepared to pay and the most disenchanted seller is willing to accept. That can change daily and locally, although with the global marketplace, I can find an eager buyer or desperate seller at any place where there is Internet and eBay.

 

[McLovin]

As with all "useless" commodities - art, stamps, autographs, cricket memorabilia - an ounce of gold ihas no intrinsic value per se; it's worth exactly what the keenest buyer is prepared to pay and the most disenchanted seller is willing to accept. That can change daily and locally, although with the global marketplace, I can find an eager buyer or desperate seller at any place where there is Internet and eBay.

But Tony Greig said it was limited to 5,000 and worth every cent of the $699 + p&h.

 

[CanOz]

This was worth posting again in this thread, thanks Pixel....

10 Reasons the Gold Bugs Lost Their Shirts

 

[Tyler Durden]

Funny thing.

I don't really follow the POG, but at around this time last year, I recall there were heaps of front page news articles about how the POG was dropping. I went to buy a small amount and found a huge queue lined up outside. It took more than an hour to get to the front of the line.

Then, last week I went back to the same place to buy some gold. No queue, only one customer ahead of me inside. I figured, based on this, that the POG had gone back up, but when I looked at the chart, it was actually much cheaper now than it was a year ago! Only now there weren't any news articles on it.

Funny.

 

[lusk]

It's important to know where the entry is, but it's more important to know where the exit is?

For those in Sydney the SMH ran a story here.


View attachment 56315


That Q at ABC Bullion takes about an hour to get through. I was after 10oz bars but they only had 1oz left. Totally overwhelming for all involved, totally unprofessional organisation by the vendors.

An ABC Radio journo (an attractive lady ) was hanging around for interviews.

When there is a genuine bull bust there's just no way of dumping physical, so keep nimble..........

Others - http://bullionmoney.com.au/

As for the gold dump over the last 2 weeks, all it has succeded in doing was to sterilise even more paper money into non productive, non velocity, inertness which will need even more QE to counter?

A little inflation in Japan though - http://www.bloomberg.com/news/2013-...boost-burger-price-first-time-since-2008.html

Yep must be over for gold, the sheep are lining up and its in the news.

Yeah l remember that too

 

[explod]

This was worth posting again in this thread, thanks Pixel....

10 Reasons the Gold Bugs Lost Their Shirts

Yes, and in 2008 the US gold price went from near $1,000 to $750, down 25%.

But in 2010 to late 2011 it went from $1,100 to above $1,800, up about 70%; and,

the last two years as per the article down about 35%. So in reality it is all over the place, as are currencies.

However in thinking currencies I believe gold to be the safest. A good way to look at gold is in the very long term, (not thinking of a trading perspective here but asset preservation). In 1971 gold was US$35 an ounce, today $1,240 up 35 times. I purchased a basic home back then for $10,000, today that home (in a country town) is worth about $230,000. In gold we would realise $350,000. Against our own currency a lot more.

 

[Value Collector]

Yes, and in 2008 the US gold price went from near $1,000 to $750, down 25%.

But in 2010 to late 2011 it went from $1,100 to above $1,800, up about 70%; and,

the last two years as per the article down about 35%. So in reality it is all over the place, as are currencies.

However in thinking currencies I believe gold to be the safest. A good way to look at gold is in the very long term, (not thinking of a trading perspective here but asset preservation). In 1971 gold was US$35 an ounce, today $1,240 up 35 times. I purchased a basic home back then for $10,000, today that home (in a country town) is worth about $230,000. In gold we would realise $350,000. Against our own currency a lot more.

So, does this mean your still clinging to your prediction that gold will be hitting $3900 some time soon?

 

[Value Collector]

In 1971 gold was US$35 an ounce, today $1,240 up 35 times. I purchased a basic home back then for $10,000, today that home (in a country town) is worth about $230,000. In gold we would realise $350,000. Against our own currency a lot more.

Your failing to factor in the income though, the rent generated . If you just retained that net rent after maintaince etc in a bank account you would have a bank account worth $350,000, plus a house.

If you compounded the rent income into another property, you would have even more.

Gold is a terrible long term investment.

The biggest long term argument against gold has to be the compounding effect of other assets that generate income, which can be used to buy more assets.

an ounce in 1971 is still just an ounce in 2014, where as a portfolio of assets that throw off income grow over time or they can feed you without you having to sell the actual asset.

 

[pixel]

Yes, and in 2008 the US gold price went from near $1,000 to $750, down 25%.

But in 2010 to late 2011 it went from $1,100 to above $1,800, up about 70%; and,

the last two years as per the article down about 35%. So in reality it is all over the place, as are currencies.

However in thinking currencies I believe gold to be the safest. A good way to look at gold is in the very long term, (not thinking of a trading perspective here but asset preservation). In 1971 gold was US$35 an ounce, today $1,240 up 35 times. I purchased a basic home back then for $10,000, today that home (in a country town) is worth about $230,000. In gold we would realise $350,000. Against our own currency a lot more.

1971 was 43 years ago.
In another 43 years, I'll have received a birthday card from the Queen or King or President - assuming they'll still honour centenarians. But most likely, I won't know a Gold Eagle from a $1 Kangaroo. So, waiting is of no use to me.

 

[Trembling Hand]

Gold is a terrible long term investment.

Yeah only if you have eyes that you use though,

 

[McLovin]

However in thinking currencies I believe gold to be the safest. A good way to look at gold is in the very long term, (not thinking of a trading perspective here but asset preservation). In 1971 gold was US$35 an ounce, today $1,240 up 35 times. I purchased a basic home back then for $10,000, today that home (in a country town) is worth about $230,000. In gold we would realise $350,000. Against our own currency a lot more.

And if you'd bought in 1980 (before I was even born) you'd still be underwater. The takeaway seems to be don't buy when gold is on a streak, because just like every other asset class, today's above average returns are really just borrowed against tomorrow's returns.

 

[So_Cynical]

And before that people claimed $1600 as support.

Gold is a weird one to me, Because it doesn't get consumed, it doesn't get used up, it just gets stockpiled. I can't see the cost of production providing support, because if it falls out of favour there is no need for people to keep stock piling it, Those high cost mines would just be shut down.

To understand gold you have to think of it as a currency not a commodity...as a currency it is outperforming all others with the exception perhaps of BC.

Gold is a terrible long term investment.

The biggest long term argument against gold has to be the compounding effect of other assets that generate income, which can be used to buy more assets.

Currency's are not generally considered to be an asset or an investment, gold just like any other currency can be traded for profit...big difference with gold of course is that it costs $1150 USD to produce an ounce while is costs a fraction of a cent to produce $1150 USD.

 

[sinner]

I have returned just to defend gold from the marauders here who are spouting what is some obvious nonsense.

No asset or asset class returns an income for nothing. Income is generated and (sometimes) returned on a risk basis. This applies to rental income, interest rates, market cap expansion, *everything*. Only the ignorant would believe an asset is guaranteed a return.

An ounce of gold is a unit with the following properties:

* Exists in the physical plane
* It cannot be diluted and has extreme chemical stability/nonreactive properties.
* It holds no economic function (i.e. hoarding it does not disrupt the economy) - this also happens to make it the perfect diversification asset for investments with high correlation to economic function but that is another story.
* It has no counter-party risk

This is the absolute exemplar in a "risk free" asset.

So let's compare apples to apples here and leave the oranges out of it.

When we are trying to determine how gold has performed, it must be against the same criteria (since otherwise we should be examining how gold performed if we had loaned it out, and that would depend entirely on who it was loaned to -- guess what, the performance of gold loaned out is not dissimilar to the performance of other currencies loaned out).

Essentially there is only one other asset which can match gold in this comparison and that is hard cash in a box under your bed. History has shown that on timelines of over 50-100 years (pension funds, endowments, Central Banks, etc care even if you do not) even cash does not hold up due to dilution and counter-party risk (for example see post WW2 50% devaluation of silver currency in Aus or Nixon closing gold window in US).

I figured all of this would be eminently obvious to the people who have shown up to take such glee in the decline of the price of gold. I wonder why they don't also troll the subforums for stocks which don't pay dividends or for that matter, any equity or asset class which has not compounded at above the average rate?

Anyway. Since this is ASF, we compare the performance of an ounce of gold to an AUD held in a box under the bed. We do not compare against the USD unless there were actually USDs under our bed at some point. Now, just how has an ounce of gold done compared to an AUD held in a box under the bed? Let's take a look...



Now this is an interesting enough chart, especially if you consider things like starting value and rate of change over different time periods, but what I always like to do is flip it over as that is when the waterfall nature of cash underperformance becomes apparent:



I feel at this point if you do not "catch my drift" then you never will, and I question what you are doing wasting your time trolling the gold forum if you aren't interested in such a crappy asset.

However, as a small bonus chart, why don't we see how we would have fared if we had put money into the 500 of the largest (and therefore, best, right?) global companies and sold gold.



Now, you might argue that a total return chart would look less horrifying, and I agree, but I can assure you that it's only slightly less horrifying. I didn't post this last chart in any attempt to "prove" gold is better than stocks after just explaining for over a page the difference between them, but rather to show how gold is highlighting a problem which the global economy has suffered since before the tech bubble (hint: valuation ratios like MC/GDP or CAPE show a very similar pattern).

Morons.

 

[Trembling Hand]

Morons.

Sinner since no one here has true excess capital your argument is rubbish. Any punter with a bit (ie 5 mil or less) of $ to allot would still be better making money 'work'. Putting it in gold to "store" value is about as sensible business decision as closing up shop because you don't want to purchase any more stock that you can then on sell.

Some of the gold bugs talk like they are the Rothschilds. Just LOL. My bet is 99% are wage jockeys deluding yourselves into protecting your extra few hundred left over after you pay your landlord rent.

Forget risk/counter party blah blah. Go out and use your money to grab a bit of the worlds opportunity. Trust me it will still be here for some time......

 

[sinner]

Sinner since no one here has true excess capital your argument is rubbish. Any punter with a bit (ie 5 mil or less) of $ to allot would still be better making money 'work'. Putting it in gold to "store" value is about as sensible business decision as closing up shop because you don't want to purchase any more stock that you can then on sell.

Some of the gold bugs talk like they are the Rothschilds. Just LOL. My bet is 99% are wage jockeys deluding yourselves into protecting your extra few hundred left over after you pay your landlord rent.

I find it so amusing on this thread that always people alternatively call me gold bug or fiat bug (depending on whos delusions I'm addressing on a particular day).

We have been over this before TH and you know my views, primarily that there are savers and investors, not everyone wishes to be an investor and is happy to save the productive surplus of their human capital (whether they are a wage jockey in Aus or a rickshaw driver in India). Saving in fiat forces you into the position of an investor, whether you want that or not.

We aren't all as well off as you mate, but I'm on six figures and still living like I was when I was earning $30,000 so more than 60% of my net income is "free cash flow" each month. Hardly a couple of hundred dollars. Yes, I pay rent and will continue to do so until the payoff equation changes in my benefit.

Forget risk/counter party blah blah. Go out and use your money to grab a bit of the worlds opportunity. Trust me it will still be here for some time......

I thought we weren't allowed to give out financial advice on this forum? Maybe the rules have changed.

Anyway, I did not come back to try and convince everyone to sell all their assets and buy gold, simply defend it as an asset class against smart people with narrow minds and too much time on their hands. In the interests of disclosure, I hold exposure to multiple asset classes of which physical gold is one.

The numbers speak for themselves, most people in the West think they can grab opportunity and are out there bidding it up, they don't care about gold. I think historically it's been pretty well established that the success rate of bidding up "worlds opportunity" is correlated more to how many others are also bidding rather than the mere presence of it, but whatever.

Signing out.

 

[Value Collector]

Currency's are not generally considered to be an asset or an investment, gold just like any other currency can be traded for profit...big difference with gold of course is that it costs $1150 USD to produce an ounce while is costs a fraction of a cent to produce $1150 USD.

Well my comment was in response to explode, who said it is a great long term investment, so you will have to take it with him.

I have no doubt you can make money trading gold if luck and the markets are on your side, just as you can with just about anything.

I don't consider gold a currency, you would be stretching the concept to make it fit, It certainly wouldn't be a practical one. It does fit the definition of asset though and it is most certainly a commodity.