I have learnt so much about investing from reading this thread ...particularly around the height of the gold bubble circa August 2011..pages in the 420s on my computer. Behavioural psychologist etc could have a field day studying perception biases on this thread as one after another random nugget (pun intended) of information is extracted from the cosmos to rationalise a stance on the gold price.
Gold Price - Where is it heading?
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DeepState
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So let's have a field day with the shrink and get on the couch. 
If you eschew financial engineering and/or the use of diversification to protect wealth then please stop reading....here.
This represents a trade/exposure management transaction which I expect to be implementing in the period ahead. These are my considerations.
Gold is a store of wealth whether held in central bank vaults, ETFs, as direct investments and even significantly in the form of jewelry which is not notionally classed in that fashion. Only a fraction is used for industrial purposes. Extracts from the World Gold Council in relation to jewelry use in the biggest buying nations of China and India are provided below.
It is a pseudo currency because it serves as a store of wealth. Two charts below also display how AUDEUR performs with GOLD(EUR) and similarly for the US equivalent:
The fact that these lines move somewhat similarly outlines the characteristics of gold as a type of currency. There are many arguments about why gold serves as a monetary asset. I just observe it to be the case in practice. Central banks are accumulating. They do not do so with other precious metals, diamonds.... to them, it is a reserve asset, mixed in with USD t-bonds etc.
I have a fair chunk of assets, proportionately, held offshore and the Australian equity market is also heavily exposed to the currency. I don't mind having offshore exposure for a lot of reasons, not least of which is that it helps hedge my expenditure stream. When the AUD depreciates, costs go up as per Q4 2013.
Gold is presently trading close to the bottom of the all in total cost curve and demand is not shrinking. Whilst it might get worse as secondary supply can take its place, there is a limit to this unless the world stops buying gold for some reason.
The world is suffering lowflation. This is priced. There is a wing risk of inflation surprise. I already have ILB to protect against domestic inflation. Further, the BoJ print now exceeds the Fed and ECB will likely start printing in Oct. It does not seem like a stupid idea to own gold outright if your only choice was a basket of currencies. It is useful to imagine what you would do to increase your wealth in world terms when all you had to invest in are deposits in different currencies and gold. Personally, I would have some gold if in that position....wait a minute, I am in the position. I would not hold this belief if gold prices were trading well to the right of the all in cash cost curve before interest payments, QE wasn't all over the place and debt overhang so large.
However, my offshore exposure is dominated by USD and Euro. USD exposure is gained via US investments (bonds and equities) and also via emerging markets as some countries pay bond coupons in USD.
As the ECB prints via TLTRO, some of this will flow into offshore FDI and portfolio investment, weakening the EUR. This is what happens in QE and it is an intended effect. Check out Japan - they are the world beaters. I have less conviction on the outlook for the USD. It will likely rise.
I don't know. Taking a conviction stance with zero information is nuts, in my view. I am not a punter. So, I want to change the mix of my offshore currency exposure from USD and EUR into Gold for a portion....about 10% of offshore currency exposure, or something akin to a JPY exposure.
Other things. I don't want to change my exposures otherwise. I want to be able to own the gold, or a claim to it which is readily converted to the metal itself. PMGOLD-ASX does the trick, but I could just buy the metal. As I don't think I actually need the metal in my hands (arranging storage and security etc.) in Australia I'm happy with the rights. At 1% round trip including brokerage, that's alright and in-line with bullion. I can turn up at the door with my certificate and a form and collect my gold in the same way.
So, I want to shift some exposure from USD and EUR into Gold. I don't want to change my exposure to cash. How is this achieved?
1, Buy PMGOLD
2, Sell EUR for AUD and Sell USD for AUD in appropriate proportions.
I now have the same effective exposure to cash, and have shifted some of my exposure to USD and EUR into gold. I own the metal/rights. The gold is now a capital asset which will be on a hold-to-death basis. Whereas the cash was on income and the ATO is clipping tickets. I have FX contracts whose expected value is conservatively zero less the tom-next margin plus admin, say, 0.65% per annum. In reality there is an expected pick-up due to positive carry that would eliminate that, but let's call that a cherry on top. I have a more comfortable exposure to a currency basket which includes a measure of protection against geopol and inflation surprise and whose relevance as a store of value by investors, central banks and notional consumers of jewelry looks pretty solid. Good enough for a central bank, good enough for me. If all gold does is perform in line with cash in AUD over the longer term, then this will lead to an after tax outcome equivalent to a very nice TD (including realisation of gold profit, obviously better if not), but also comes with an option on top of that protects against certain extreme events whilst limiting country risk in the offshore exposures.
...all for a fraction of the overall portfolio value. But this stuff counts to me and it all adds up. One percent per annum over 40yrs et al. Limit blow up risk etc.
What could go wrong?
AUD elevates vs world currencies on a secular basis in manner which does not elevate gold with it;
Gold behavior changes to a consumption item and demand drops a lot as a result;
Confiscation of gold in an emergency of some sort...don't laugh..it happens;
Change of tax treatment on any aspect;
Operational risk with trading, rolls, margin management, technology outage; and
New substantive low cost mine development.
I'm ok with that.
Thanks Doc.
If you eschew financial engineering and/or the use of diversification to protect wealth then please stop reading....here. This represents a trade/exposure management transaction which I expect to be implementing in the period ahead. These are my considerations.
Gold is a store of wealth whether held in central bank vaults, ETFs, as direct investments and even significantly in the form of jewelry which is not notionally classed in that fashion. Only a fraction is used for industrial purposes. Extracts from the World Gold Council in relation to jewelry use in the biggest buying nations of China and India are provided below.
It is a pseudo currency because it serves as a store of wealth. Two charts below also display how AUDEUR performs with GOLD(EUR) and similarly for the US equivalent:
The fact that these lines move somewhat similarly outlines the characteristics of gold as a type of currency. There are many arguments about why gold serves as a monetary asset. I just observe it to be the case in practice. Central banks are accumulating. They do not do so with other precious metals, diamonds.... to them, it is a reserve asset, mixed in with USD t-bonds etc.
I have a fair chunk of assets, proportionately, held offshore and the Australian equity market is also heavily exposed to the currency. I don't mind having offshore exposure for a lot of reasons, not least of which is that it helps hedge my expenditure stream. When the AUD depreciates, costs go up as per Q4 2013.
Gold is presently trading close to the bottom of the all in total cost curve and demand is not shrinking. Whilst it might get worse as secondary supply can take its place, there is a limit to this unless the world stops buying gold for some reason.
The world is suffering lowflation. This is priced. There is a wing risk of inflation surprise. I already have ILB to protect against domestic inflation. Further, the BoJ print now exceeds the Fed and ECB will likely start printing in Oct. It does not seem like a stupid idea to own gold outright if your only choice was a basket of currencies. It is useful to imagine what you would do to increase your wealth in world terms when all you had to invest in are deposits in different currencies and gold. Personally, I would have some gold if in that position....wait a minute, I am in the position. I would not hold this belief if gold prices were trading well to the right of the all in cash cost curve before interest payments, QE wasn't all over the place and debt overhang so large.
However, my offshore exposure is dominated by USD and Euro. USD exposure is gained via US investments (bonds and equities) and also via emerging markets as some countries pay bond coupons in USD.
As the ECB prints via TLTRO, some of this will flow into offshore FDI and portfolio investment, weakening the EUR. This is what happens in QE and it is an intended effect. Check out Japan - they are the world beaters. I have less conviction on the outlook for the USD. It will likely rise.
I don't know. Taking a conviction stance with zero information is nuts, in my view. I am not a punter. So, I want to change the mix of my offshore currency exposure from USD and EUR into Gold for a portion....about 10% of offshore currency exposure, or something akin to a JPY exposure.
Other things. I don't want to change my exposures otherwise. I want to be able to own the gold, or a claim to it which is readily converted to the metal itself. PMGOLD-ASX does the trick, but I could just buy the metal. As I don't think I actually need the metal in my hands (arranging storage and security etc.) in Australia I'm happy with the rights. At 1% round trip including brokerage, that's alright and in-line with bullion. I can turn up at the door with my certificate and a form and collect my gold in the same way.
So, I want to shift some exposure from USD and EUR into Gold. I don't want to change my exposure to cash. How is this achieved?
1, Buy PMGOLD
2, Sell EUR for AUD and Sell USD for AUD in appropriate proportions.
I now have the same effective exposure to cash, and have shifted some of my exposure to USD and EUR into gold. I own the metal/rights. The gold is now a capital asset which will be on a hold-to-death basis. Whereas the cash was on income and the ATO is clipping tickets. I have FX contracts whose expected value is conservatively zero less the tom-next margin plus admin, say, 0.65% per annum. In reality there is an expected pick-up due to positive carry that would eliminate that, but let's call that a cherry on top. I have a more comfortable exposure to a currency basket which includes a measure of protection against geopol and inflation surprise and whose relevance as a store of value by investors, central banks and notional consumers of jewelry looks pretty solid. Good enough for a central bank, good enough for me. If all gold does is perform in line with cash in AUD over the longer term, then this will lead to an after tax outcome equivalent to a very nice TD (including realisation of gold profit, obviously better if not), but also comes with an option on top of that protects against certain extreme events whilst limiting country risk in the offshore exposures.
...all for a fraction of the overall portfolio value. But this stuff counts to me and it all adds up. One percent per annum over 40yrs et al. Limit blow up risk etc.
What could go wrong?
AUD elevates vs world currencies on a secular basis in manner which does not elevate gold with it;
Gold behavior changes to a consumption item and demand drops a lot as a result;
Confiscation of gold in an emergency of some sort...don't laugh..it happens;
Change of tax treatment on any aspect;
Operational risk with trading, rolls, margin management, technology outage; and
New substantive low cost mine development.
I'm ok with that.
Thanks Doc.
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well appreciated:
finding the AUD hugely overpriced, I moved a lot into the USD, but always been uneasy with the fact that all eggs are in one bucket that way, i also have gold both physical and paper (GOLD.asx) and I agree Gold is currently cheap.
Moving more from USD to Gold while in both case bringing no real interest , but as well no tax would remove some of the risk I have in any FED specific decision or at least lessen it;
As always an interesting point of view I will act on.
Thanks for an entry a bit different from the gold bugs usual arguments (which by the way i do not discard completely)
finding the AUD hugely overpriced, I moved a lot into the USD, but always been uneasy with the fact that all eggs are in one bucket that way, i also have gold both physical and paper (GOLD.asx) and I agree Gold is currently cheap.
Moving more from USD to Gold while in both case bringing no real interest , but as well no tax
would remove some of the risk I have in any FED specific decision or at least lessen it;As always an interesting point of view I will act on.
Thanks for an entry a bit different from the gold bugs usual arguments (which by the way i do not discard completely)
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Which asset class(s)? Which time frame? I don't think you have proven your assertion that gold is an mediocre store of value.
Even allowing for golds 'gold is finished' correction, it still 'smashes' pretty much every other asset class over my chosen time frame......which has now been going strong for the last 15 years .....
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I noticed the use of PMGOLD (Perth Mint) vs GOLD (ETF);
Do you consider PMGOLD safer? I have some doubt as to the real link between GOLD and the underlying assets so would PMGOLD be safer?
Disclaimer: I own GOLD, have owned PMGOLD in the recent past and also physical gold
Do you consider PMGOLD safer? I have some doubt as to the real link between GOLD and the underlying assets so would PMGOLD be safer?
Disclaimer: I own GOLD, have owned PMGOLD in the recent past and also physical gold
DeepState
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For retail investors in ETFs, you can really only sell the security and do not get access to the underlying. ie. you do not get hold of the physical on redemption. Fees are higher than for PMG (0.15%) as well. For these reasons, I suspect, GOLD-AU trades at a discount to physical. If I am buying gold, I want to be able to have it in my hands. Doing so provides yet another embedded option on top of those already stipulated. PMGOLD is also a much much larger capitalization and would offer deeper liquidity. If/when I trade in, I will not cross the spread and the 1% buy-sell will be much narrower as I am happy to 'market make' narrow to the bid for as long as it takes to get filled.
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thanks
DeepState
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Houston, we have cleared the tower...
Tranche # 1 of undisclosed, now completed. Order VWAP 1385 in accordance with trade strategy. Inside day VWAP. Cheaper to transact than bullion.
Executed desired volume for the day. I don't think I would have been able to fill with a further cent back based on the transaction history. A nice start. Let's hope it ends well in several decades' time.
Tranche # 1 of undisclosed, now completed. Order VWAP 1385 in accordance with trade strategy. Inside day VWAP. Cheaper to transact than bullion.
Executed desired volume for the day. I don't think I would have been able to fill with a further cent back based on the transaction history. A nice start. Let's hope it ends well in several decades' time.
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Your post reinforced the uneasy feeling I was overexposed USD and gold as a proxy still validates what I see as an overvalued AUD, and could protect me from inflationary danger.
not good as I was probably competing with you.
I actually moved 14k from GOLD to PMGOLD and 20k from USD(ASX code) to PMGOLD, reducing my overexposure to pure USD;
Definitively not in my "day trading" list:time indeed will tell if this was the good move.
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I would never touch GLD but I do trust PMGOLD.
Just at the moment 60% of my gold holding is physical and 40% is PMGOLD. PMGOLD allows quick reaction to accumulate whenever the price looks right. When convenient the physical can be collected from the Perth Mint.
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I appreciate: I fully completed the switch from GOLD to PMGOLD on Friday.
This site is such a wealth of knowledge and allow you to take the stepo back and look again at your situation: I have had GOLD for years and never thought to compare with PMGOLD.
This site is such a wealth of knowledge and allow you to take the stepo back and look again at your situation: I have had GOLD for years and never thought to compare with PMGOLD.
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Has anyone tried to get delivery of PMGOLD? Their redemption clauses have a lot of 'if's' and 'maybe's' or am I missing something?
DeepState
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Not yet. However, my reading of the PDF suggests the request are in line with 'Know your client' and 'anti money-laundering' requirements. The form to do so is very straight forward and the request for ID is readily achievable as per opening a bank account. Delivery is within 20days loco Perth and is on a best endeavours basis.
But, I've not tested it as yet.
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G'day all,
I first started calling a warning for a fall in gold June 2012. (I checked the date on the quarterly chart I put up here at the time). I remember I got well and truly zapped by the goldbugs here at the time for saying such a thing! Ahh well, there you go!
Now for the good news (potentially). Looking at the long term daily gold chart going back to when it first started to rise in 2001 there is a long term trend line which has offered good support. Now this trendline from back in '01 is being tested again. Will it hold? Will it fail? It is well worth watching closely at the moment. Gut feeling? I reckon it may hold. Why? I think the DOW and All Ords are showing potential chart weakness which may well give gold a good shove along.
Let's see!
I first started calling a warning for a fall in gold June 2012. (I checked the date on the quarterly chart I put up here at the time). I remember I got well and truly zapped by the goldbugs here at the time for saying such a thing! Ahh well, there you go!
Now for the good news (potentially). Looking at the long term daily gold chart going back to when it first started to rise in 2001 there is a long term trend line which has offered good support. Now this trendline from back in '01 is being tested again. Will it hold? Will it fail? It is well worth watching closely at the moment. Gut feeling? I reckon it may hold. Why? I think the DOW and All Ords are showing potential chart weakness which may well give gold a good shove along.
Let's see!
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I woouldn't be rushing in buying gold right now, unless for short term with a tight stop.
Gold is falling Impulsively from a Top in the last years and looks like it is forming a Fourth Wave Triangle where the last subdivision of Wave E is missing. After one more pop up Gold will crash to or below 1000 mark completing a 5 Wave secuence at Primary degree, where a really good oportunity for longs will be. It should then rally to the levels where we are today or, even more higher.
But for now be very cautious with metals longs, a sideways correction could be very close to an end.
Gold is falling Impulsively from a Top in the last years and looks like it is forming a Fourth Wave Triangle where the last subdivision of Wave E is missing. After one more pop up Gold will crash to or below 1000 mark completing a 5 Wave secuence at Primary degree, where a really good oportunity for longs will be. It should then rally to the levels where we are today or, even more higher.
But for now be very cautious with metals longs, a sideways correction could be very close to an end.
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I agree with both of the above could be up trend now but with sizable risk past september october of a fall;
What i do takle into account is the AUD factor, I believe a fall in the AUD is expected and would cushion any fall in POG in USD term;
so I am more long than bear and i bought.
Time will tell but I will be extra cautious in a month time indeed
What i do takle into account is the AUD factor, I believe a fall in the AUD is expected and would cushion any fall in POG in USD term;
so I am more long than bear and i bought.
Time will tell but I will be extra cautious in a month time indeed
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G'day qldfrog, I reckon you will see a rise in the Aussie dollar if the gold price rises. The AUD rises and falls with the POG. Have a look at a chart.
Caution is a good thing qldfrog!
Mighty convenient time frame there
Does that include the dividends and rents from the US Housing and Shares?
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Hum Ann,
not that sure:
in the last 3 years at least POG peaks when the AUD falls:
Sorry the image is just crude cut and paste, but short term wise, I expect POG to give me some buffer when AUD falls;
a proxy for a currency edging of my cash
But I am not a gold bug, I know I get no interest, inflation is eating me alive and this is just an alternative to cash in the bank, taken at a time I see as potentially a low in POG
I used PMGOLD and USD as these are the two tools I use for my edging but indexes should be similar
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