Gold Price - Where is it heading?

[cynic]

Like I said, for those that care, the truth is out there to be understood. I even included a whole bunch of links which explain this topic far better than I ever could (for those actually interested in understanding, won't provide much value to idiots).

But most people are sure they know and understand everything. So why bother researching? Just make useless forum posts about something you apparently don't even care about. That'll show 'em!

Perhaps you feel like concepts which can't be spoonfed to you in the form of a simplistic forum post wouldn't possibly represent reality.

They do.

I haven't delved into the intricacies of the gold market as deeply as your good self, nor have I read all the articles for which you've helpfully provided links.

Would you be willing to provide a brief summation on the perspective/s you've gleaned from digesting those articles?

I'm interested to see if any of them touch on one of my fanciful theories about the driver/s behind gold's price behavior in recent years.

 

[DeepState]

But is a productive asset not better insurance? Unless you think a monetary mishap is going to destroy the physical productive economy and if that does happen then what does your gold buy? Liquidity insurance maybe?

1. Liquidity insurance
2. Hedge for risk of material and disorderly inflation
3. Durable store of wealth

I think gold is a better put option for truly extreme events than a financial put option. From time to time, it has been more liquid than just about anything else available to hand. When you need to consume continuously, it is important that you can get/pay-for these goods (or services) without interruption. Gold plays a role in insuring against such distress. It has done so in distressed situations where there is significant doubt about the acceptability of existing fiat currency in circulation. The situation in Greece will highlight that sometimes you can't even get hold of the currency even if the currency itself is not acutely questioned. It would be your first best alternative in the event that fiat is not available. I'm going to pass on explaining why Grexit risk did not spike gold.

Even if you don’t personally expect to be in that situation, the fact that others may be still gives some weight to gold as a hedge because you may be exposed to these economies via other investments.

I think of gold as a currency in waiting. In doing so, I am simply taking a leaf out of the reserve managers’ actual practices. If you need a hedge against regular and orderly inflation, an indexed linked bond works much better than gold. Gold serves as an effective hedge against the risk of unexpected and significant disorderly inflation. In these situations, historically, gold sometimes supplants fiat…before fiat returns again subsequently for various reasons. One of the key strengths of gold as a currency (low flow to stock) is also one of its greater weaknesses. Fiat (can change flow to stock pretty quickly) has the opposite strengths and weaknesses. The world seems to vacillate between the two. Hence, it seems to be a durable store of wealth, in a way which fiat does not seem to be.

Ownership in a well priced productive asset is expected to do better than gold over the long term and is thus a better form of insurance against insufficient wealth in most scenarios. It is not so in every scenario. Gold covers the tail of some truly horrendous scenarios. I cannot say that it will always function this way in an extreme scenario, but I don’t have better ideas at the moment.

I am not expecting the collapse of the existing monetary system, but I do not dismiss the potential. Gold holdings would assist if things turned really bad and there are still things to buy…like a boat trip out. Events in Argentina, for example, will highlight that gold would have made a good alternative to their currencies which are experiencing a decent degree of distress of the type I have referred to – even if the whole system does not completely collapse.

I have around 1-1.5% in physical gold claims. It’s not going to protect the portfolio from a collapse of the monetary system. It should preserve some of it if that event developed. Meanwhile it hedges/insures some of my other financial assets. That is a good enough reason for me to have some.

 

[waterbottle]

I haven't delved into the intricacies of the gold market as deeply as your good self, nor have I read all the articles for which you've helpfully provided links.

Would you be willing to provide a brief summation on the perspective/s you've gleaned from digesting those articles?

I'm interested to see if any of them touch on one of my fanciful theories about the driver/s behind gold's price behavior in recent years.

x2 I would find this helpful

 

[Wysiwyg]

But most people are sure they know and understand everything. So why bother researching? Just make useless forum posts about something you apparently don't even care about. That'll show 'em!

I trade the gold price and not hold the actual although I did go detecting out Warwick way when the price was near 1k/oz. with no result. I like the look of the stuff and feel special to hold the physical but can wait 'till price is below US800.

 

[sinner]

I haven't delved into the intricacies of the gold market as deeply as your good self, nor have I read all the articles for which you've helpfully provided links.

Would you be willing to provide a brief summation on the perspective/s you've gleaned from digesting those articles?

I'm interested to see if any of them touch on one of my fanciful theories about the driver/s behind gold's price behavior in recent years.

I already did in post #11195...

I have around 1-1.5% in physical gold claims.

Obviously I can't give financial advice, but if it was me, I'd take delivery of at least half. Otherwise basically all you own is an obligation to settle in cash at the last known good price...

 

[cynic]

I already did in post #11195...

Thanks for that. Please accept my apologies for having overlooked your earlier post.

During these tumultuous times, I can certainly appreciate that there are reasons that people choose to store some of their wealth in something that is as portable, tangible (and virtually indestructible) as physical gold.

I've been somewhat mystified by the stagnant price behavior of gold during these past few years, and in the absence of any compellingly plausible alternatives, am now leaning towards a couple of theories from the realm of conspiracy.

However, I haven't delved into the facts as deeply as others on this forum, and as such, I am hesitant to express those theories too openly.

Chart analysis aside, I'd be interested to hear the perspectives of others on the possible underlying causes of gold's deflation in value relative to fiat currency.

 

[sinner]

How timely:

What is the country with the largest foreign reserves in the world doing with these assets?

China has just released details into its gold reserve holdings. This from today's FT:

"China ended years of speculation about its official gold holdings by revealing an almost 60 per cent jump in its reserves since 2009."

"The purchases show how China is seeking to diversify its reserves away from the US dollar, at a time when the price of gold is falling.

" 'Gold has a special risk *return characteristic, and at specific times is not a bad investment,' the People’s Bank of China said."

Funny the way FT put vaseline over the camera...

Ok so we all know ZH sucks and goldbugs blah blah blah whatever but as you can see from comparing the journalism, it doesn't hurt to get multiple perspectives:
http://www.zerohedge.com/news/2015-...dings-57-one-month-first-official-update-2009

From the PBOC
Gold as a special asset, with multiple attributes financial and commodities, together with other assets to help regulate and optimize the overall risk-return characteristics of international reserves portfolio. From the perspective of long-term and strategic perspective, if necessary, dynamically adjusted international reserves portfolio allocation, safety, liquidity and increasing the value of international reserve assets.

Thanks ZH! Meanwhile, how is this for an amazing tidbit:

In a rare comment on gold, Yi Gang, the central bank’s deputy governor, said in March 2013 that the country could only invest as much as 2 percent of its foreign-exchange holdings in gold because the market was too small. The press office of the People’s Bank of China in Beijing didn’t respond to a fax seeking comment sent on April 14.

Wowee. Wish someone had pointed that out to me in 2013!

So, back then the Chinese FX reserves were sitting at approximately $3.5tn. Let's round it off to 3.5 for the sake of a quick thought experiment.

(1,000,000,000,000×3.5)×0.02 = 70,000,000,000

 

[notting]

The market was expecting the Chinese reserves to be a little more than what was announced. The announcements are lies so you shouldn't take any notice of them any way.

They dumped on the market along with the conservative announcement, to ramp it down and break technical lows. They probably shorted all kinds of gold related instruments last week.

"There was some heavy selling on the Shanghai Gold Exchange this morning," says ANZ precious metals analyst Victor Thianpiriya.

"Half an hour after the market opened we saw 5 tonnes of gold sold through the Shangahi gold exchange, which is way above normal levels.

"I don't believe this was a result of fundamentals. Silver prices usually move in tandem with the gold price. That wasn't the case this morning.

I guess they will be doing alot of buying over the coming period at down ramped levels, then they will start printing money and lowering the Yaun.

 

[sinner]

The market was expecting the Chinese reserves to be a little more than what was announced. The announcements are lies so you shouldn't take any notice of them any way.

I don't want to argue about it with you, but my 2c is that the announcement is not a lie, for the following reasons:

* The announcement was not random, it happened in preparation for IMF stuff, along with updated announcements for other key macro metrics.
* The Chinese have been saying forever, openly, that their gold as a % of foreign reserves was puny compared to the average country and to the US. They have stated they want to be #1 in gold reserves, first step: get more than average (they are wayyyy below average), then get more than the US.
* The reporting is completely voluntary in the sense of "what gold (or other assets) do you want to declare voluntarily as reserves for the defense of your currency". It's not China saying "this is all of our gold" under inspection from an auditor, merely them saying "this is how much gold we are willing to voluntarily declare as CB reserves". So there is no reason to lie about a voluntary report, if there is gold they are hiding they would simply not report it.

 

[AverageJoe]

Anyone still thinks gold is a buy after the flash crash Shanghai open?

 

[skyQuake]

Anyone still thinks gold is a buy after the flash crash Shanghai open?

Yep.

 

[cynic]

Yep.

Is that a yep to all time frames?

 

[notting]

Anyone still thinks gold is a buy after the flash crash Shanghai open?

Now is the time to be getting very, very interested in it.
Watching for stability and signs it was a blow off low on China's utterly obvious down-ramp with the conservative announcement and dumping.
China will be buying and when nobody thinks inflation is on the cards anytime soon that's when the ugly duckling will rear it's head and that's alot harder to control than what the Central Banks have managed to control so far.

 

[skyQuake]

Is that a yep to all time frames?

I felt tempted to write yep and leave it as that

But its prob only a short term bounce. Feels like a HK/China fund blew up today...

 

[sinner]

China will be buying and when nobody thinks inflation is on the cards anytime soon that's when the ugly duckling will rear it's head and that's alot harder to control than what the Central Banks have managed to control so far.

You can see for yourself from the "wowee" quote above that the market is not big enough for China to bid without being crushed by those bids, to the tune of $70bn.

The volume in futs was about ~$2-3bn...now I know most people think this is "the market" but the real volume in gold is in LBMA OTC and FOREX OTC markets, so who knows how crazy today was.

China is "buying" all the time, all their gold mines have various amounts of nationalised output, they track every ounce that goes in/out of mainland private holdings through SGE and so on.

Anyone still thinks gold is a buy after the flash crash Shanghai open?

Well, I bought my monthly allocation about 5 days ago, anticipate my next buy signal to be in about 25 days...

 

[notting]

The volume in futs was about ~$2-3bn...now I know most people think this is "the market" but the real volume in gold is in LBMA OTC and FOREX OTC markets, so who knows how crazy today was?

All I need to see is this to know that.

 

[AverageJoe]

I felt tempted to write yep and leave it as that

But its prob only a short term bounce. Feels like a HK/China fund blew up today...

Short term bounce off the lows today on the way back up through the long term support?

I have 1131.46 as new resistance to be looking for short with a reversal setup should it ever test that level this week.

 

[Uncle Festivus]

Slow hand clap.

Or, a topping for risky things bought with IOU nothings?

 

[AverageJoe]

If you want to take the moral high ground when trading I suggest Salvation Army?

 

[Uncle Festivus]

I think markets are in the irrational phase right now. US equities at or near record highs even though revenue is missing. Nasdaq co's going through the roof even though the fundamentals don't support the valuations - deja vu last bubble bursting in 2000?

A close reading of Google’s report reveals that the price of their main product – paid clicks – is dropping like a stone but that doesn’t matter either. What matters is that Google is working on all kinds of cool things in secret and that their new CFO was able to restrain expense growth to a paltry 13%. Yes, Google sells for 33 times trailing earnings and is growing at about 15% but still it made perfect sense for the company to gain $67 billion in market cap in one day based on that stellar performance. As for Netflix, with its 300 forward P/E, the only metric I could find in the report that was also triple digits was their cash flow. Unfortunately, it is negative and grew more so by a factor of 3.

Something big, and bad, is about to happen to the things that fiat bulls hold dear & close?

For me, it's not a time to add to gold as it's still $1490 in AU terms, but yet gold equities got the usual full sell off in response to the US price dip. Gold equities are still way above the last cycle lows, having beaten the rest of the market since the start of the year.

As for the gold price slam, at his stage all roads lead to yet another fat finger from the usual culprits trying to smash CONfidence in gold while trying to elevate CONfidence in fiat, and most importantly, $USD's, while central banks try to extricate themselves from $USD holdings in an orderly manner.