Gold Price - Where is it heading?

[Joules MM1]

this is in the where is it heading thread as it's not directly executable, worthy of study, I thought

a commonality of price movements break down after a while.
when theyre active they 'suggest' activity to come
I promise not to start a sentence with "this shocking one weird trick...."

the point is to look at different way of how one instrument might be assisting another
...a different way, that's all.....this might shift your bias, at least to the extent you'll be less fixated on one idea
if it shifts you into uncomfortable, great!

i've done many of these studies, however, tempered with some basic experience that price is dynamic
and find that basic tendencies of an auction remain.....basic.....and so do I

in the first pic is the current generic print a 5 min view
some symmetry, a channel .....simple stuff,
you could use this to argue a case that without this action in $DX gold would be much lower
inferring that if the $DX is in a longerterm uptrend then gold is ready to get pummeled,
if so, at what point is that likely to occur? the answer may lay in the second chart.
...at least the second chart might lend an idea to distance price needs to travel before those
questions get answered...... also inferring they are not, necessarily, the correct questions...



in the daily view the first move down is a 100% black box
the second move down is 161.8% of that first move

in the red boxes are a simple 1:1 ratio (theyre equal)

then the blue length merely hints that if the tendency to repeat, repeats, there's an end point
based on the repetition A (circled) x B(circled) = C(circled)

remember....it's.just.a.study!

 

[DeepState]

I can't see how it [equities] (is) a crap inflation hedge...

Maybe this will help:



Equities are a crap hedge against unexpected and disorderly inflation.

 

[cynic]

Gold production is probably out performing, considering more is being mined than is used for any practicle purpose.

I really was hoping to receive a response from somebody armed with some facts to support their opinion. However, since you've so generously offered yours, I'd be interested to hear from anyone that can offer some factually grounded evidence to confirm (or alternatively refute) such opinion/s.

 

[Value Collector]

Maybe this will help:

View attachment 63633

Equities are a crap hedge against unexpected and disorderly inflation.

No doubt there would be disruptions to markets in such an unexpected inflationary environment, but provided you held longterm assets, the disruption would be temporary, once the inflation balanced or new currency was issued the assets would return to fair value in the new currency and continue earning.

the real underlying assets will have the same longterm inflation hedge as gold does, as long as the holding period used to measure covers both boom and bust cycle, but as I said, it's the income and internal asset growth that provides the out performance from other assets over gold.

 

[DeepState]

No doubt there would be disruptions to markets in such an unexpected inflationary environment, but provided you held longterm assets, the disruption would be temporary, once the inflation balanced or new currency was issued the assets would return to fair value in the new currency and continue earning.

the real underlying assets will have the same longterm inflation hedge as gold does, as long as the holding period used to measure covers both boom and bust cycle, but as I said, it's the income and internal asset growth that provides the out performance from other assets over gold.

Let's use that argument....and bring it to something a little more familiar.

In the very long run the value of land will rise. It may even generate income. It is a productive asset.

On the basis of your argument about long term...I guess you shouldn't bother insuring your property then, right? Because insurance generally has a negative return expectation and all that matters in life is the super long term and equilibrium arguments.

In the very long term, you can earn enough to rebuild your burned out and ransacked home. Restoring you to a long term equilibrium position. Thus, on this argument, there is no need for insurance to help tie you through the shorter term, right?

No?

Apparently, the long run is comprised of several short runs all lined up. If these short run periods contain critical periods where amazing insights derived from hindsight analysis are somewhat lacking at the time, and the drawdowns hurt in real time, most people insure at least some of that risk.

Apparently, gold has that property in certain conditions related to financial markets. Perhaps that's still unclear.

 

[Value Collector]

Let's use that argument....and bring it to something a little more familiar.

In the very long run the value of land will rise. It may even generate income. It is a productive asset.

On the basis of your argument about long term...I guess you shouldn't bother insuring your property then, right? Because insurance generally has a negative return expectation and all that matters in life is the super long term and equilibrium arguments.

In the very long term, you can earn enough to rebuild your burned out and ransacked home. Restoring you to a long term equilibrium position. Thus, on this argument, there is no need for insurance to help tie you through the shorter term, right?

No?

Apparently, the long run is comprised of several short runs all lined up. If these short run periods contain critical periods where amazing insights derived from hindsight analysis are somewhat lacking at the time, and the drawdowns hurt in real time, most people insure at least some of that risk.

Apparently, gold has that property in certain conditions related to financial markets. Perhaps that's still unclear.

If you want to talk insurance, you should probably insure your bullion, then not only are you not earning income, but you have a negative income situation, which makes the gold even worse.

I think there are a better ways to manage your capital to prevent erosion from inflation and also survive the highly unlikely situation of hyper inflation than holding gold.

 

[DeepState]

I think there are a better ways to manage your capital to prevent erosion from inflation and also survive the highly unlikely situation of hyper inflation than holding gold.

...such as....

 

[DeepState]

If you want to talk insurance, you should probably insure your bullion, then not only are you not earning income, but you have a negative income situation, which makes the gold even worse.

My bullion is kept warm at night by the good folk in the Perth Mint.

So the cost of your house and contents is now lifted by 1% per annum. Will you now choose to self-insure? Last I looked, House and Contents insurance wasn't listed under income producing asset.

 

[DeepState]

I really was hoping to receive a response from somebody armed with some facts to support their opinion. However, since you've so generously offered yours, I'd be interested to hear from anyone that can offer some factually grounded evidence to confirm (or alternatively refute) such opinion/s.

Currently, the stock of gold is increasing at a slightly faster rate than global population.
If I can guess at the purpose of this, you should also consider the productivity growth rate of the population as well.

 

[explod]

I really was hoping to receive a response from somebody armed with some facts to support their opinion. However, since you've so generously offered yours, I'd be interested to hear from anyone that can offer some factually grounded evidence to confirm (or alternatively refute) such opinion/s.

Can anybody here tell me whether the growth in the human population is outperforming or underperforming the growth in physical gold reserves?

That is not a question I can answer but is very worthy of some research (which I will do) and discussion.

South Africa and Australia's prduction has dropped a lot over the last 10 years. China's (they do not produce figures) is purported to have increased.

The world population has increased by more than 30% since the year 2000, so my guess is that population is moving ahead.

Will rreport back.

Good question

 

[sinner]

I can't see how it a crap inflation hedge, over time the market price of the stock indexes has out performed inflation, But again I think you have left out the income from your calcs.

uh. you cant see or you didnt bother to actually think about it? because the impact of inflationary pressure on every business that doesnt operate in a spot market is gonna be: eat poo very quickly and take at *least* a year to fully recover.

this is borne out in all of the data. ever.

the reasoning should be obvious and i even left you a hint.

Good assets will just continue to produce income in what ever the currenecy of the day is, hell if it comes down to it, we will even accept your gold as payment, every meal, rental payment or product you need to buy we will take some of your gold, we will end up with the farmland and your gold

gold will never be the currency of the day again thanks to the ECB. all of its former roles have been decommisioned and it has, now, but one: global reserve/wealth asset of unparalleled quality.

i get it VC, you are trying to cement your position as funniest poster on ASF. what i dont understand is why you would take payment in gold? gold is dumb. it doesnt even earn an income! you should take payment in fortescue shares, that makes sense. perhaps you could issue shares in your gold eating leviathan rental mealsonwheeels staples internet company and then your customers could pay you in shares of your company. makes even more sense!

Lol, just because I don't buy you party line doesn't make me a troll.

there are lots of people on ASF that dont "buy my party line" either. but i dont consider them trolls.

ps: eurodollars! hahahahaha ill be laughin at this for weeks.

 

[sinner]

perhaps consider changing your display name to EurodollarCollector hahaahahh

 

[Value Collector]

...such as....

My bullion is kept warm at night by the good folk in the Perth Mint.

So the cost of your house and contents is now lifted by 1% per annum. Will you now choose to self-insure? Last I looked, House and Contents insurance wasn't listed under income producing asset.

is there a risk that the Perth mint might not be able to give you your gold when you need it?

Real assets with natural inflation hedging will provide increasing returns as prices increase, it will be lumpy in cases of super high inflation, but it's not going to wipe you out. If you had $100k set aside to live off for the next year and it devalued 30% you wouldn't be wiped out, and interest rates would increase which would offset a chunk of it, you could put up you rents etc and you would get passed it.

Insurance is a cost of doing business when you have investment properties, it's funded by the rental income, not from your pocket, any cost you incur storing gold or insuring it must be paid by you, producing negative returns.

Also the lumpiness of return caused by inflation events would be offset by the extra returns and wealth you build up by compounded growth through productive assets.

 

[Uncle Festivus]

I'm actually starting to feel sorry for VC - I think he genuinely believes what he types?

"devalued 30%"???

"and interest rates would increase" what the ??? global rates have been zero bound for 8 YEARS! They are not going back up to normalise any decade soon?

"you could put up you rents"

So you've had an "event" that wiped 30% yet your solutions are exactly opposite to what would happen in the real world??

In any event VC yo have given life to this thread after it was going comatose, but I don' think we are getting through to you so bon voyage......

 

[Uncle Festivus]

I really was hoping to receive a response from somebody armed with some facts to support their opinion. However, since you've so generously offered yours, I'd be interested to hear from anyone that can offer some factually grounded evidence to confirm (or alternatively refute) such opinion/s.

The USGS keeps track of estimated annual global gold mine production. Exhibit 18 presents the USGS
gold mine production time series, which starts with the year 1900. Annual global mine production has
averaged about 2,500 tons per year for the last few years. In 1900, about 30,000 metric tons of gold had
already been mined. This means that over 80% of the current above ground supply of gold has been
mined since 1900 and that the above ground stock of gold has increased by about 1.5% per annum. If
global production of gold continues at a rate of 2,500 metric tons a year, and if the USGS is correct in its
estimate that there are only 51,000 metric tons of exploitable gold reserves, then gold production will
be exhausted in about 20 years.

Report from 2012

 

[Value Collector]

"and interest rates would increase" what the ??? global rates have been zero bound for 8 YEARS! They are not going back up to normalise any decade soon?

"you could put up you rents"

So you've had an "event" that wiped 30% yet your solutions are exactly opposite to what would happen in the real world??

In any event VC yo have given life to this thread after it was going comatose, but I don' think we are getting through to you so bon voyage......

Do you not think interest rates are linked to inflation?

One of the ways inflation is tamed is by increasing interest rates, so if inflation went through the roof, offcourse it would be followed by interest rates increasing.

Do you not think that inflation effects rents?

A devaluation of the currency, causes prices to rise on the real world items, including rents.

You guys seem to be worried that inflation will cause your money to lose value, but if the prices of houses or the rent you have to pay doesn't rise, has your money really lost value?

Which one is it? Are you worried about prices rising? If so that means the owners of the assets producing the good or service are collecting more revenue, offset the effect of inflation on them.

The devaluing of the currency only really has an effect on you if prices you have to pay for the things you need are rising, So you might be worried that in an inflation event the cash you were planning to spend loses value so you have trouble paying you rent, there fore you need gold because hopefully the gold goes up by the same amount, you can sell gold and pay your rent, but rent going up means the landlord has increased the rental income he gets, so you hedged you position holding gold, but the landlord owned a natural hedge.

Offcourse if you were holding the wealth you need to live off for the next 20years in cash, then the inflation will kill you, but holding real assets who's revenues increase along with inflation will protect you, offcourse gold would also provide limited protection, but that benefit is offset by not offering much growth beyond the inflation hedge.

 

[Value Collector]

Report from 2012

View attachment 63642

Take any prediction that gold reserves will be exhausted in 20years with a grain of salt, look back at reports from 1990 stating that we only had X number of years left of Oil, copper, Uranium etc.

25years on when Oil should have been depleted, we have more more reserves in the ground and are producing almost double per day, and people are worried about a glut, and that's a commodity who's daily production is literally burned every day.

There is more gold sitting in the ground waiting to be discovered than we have sitting in stock piles, probably many times more.

 

[sinner]

25years on when Oil should have been depleted, we have more more reserves in the ground and are producing almost double per day, and people are worried about a glut, and that's a commodity who's daily production is literally burned every day.

The fun never ends with EurodollarCollector.

What's the EROEI on all that new "oil" which the IAEA calls "unconvential liquids" or some other silly name? :bonk:

 

[Value Collector]

The fun never ends with EurodollarCollector.

What's the EROEI on all that new "oil" which the IAEA calls "unconvential liquids" or some other silly name? :bonk:

It doesn't matter, the point is we are bringing a lot more oil to market every day now than we were in 1990 and we have about the same years of reserves, if you believed the numbers in 1990, we shouldn't have any oil left by now, Since 1990 we have produced more oil than the stated reserves of 1990, simply because we keep finding more.

So if you are going to simply look at the current reported gold reserves number and divide it by the production rate and say, "Yep, in 20years we will have exhausted the gold reserves" you will be wrong, because that is saying that no more gold will be found, I don't think that will be the case.

Explorers will continue finding more gold deposits (as well as oil, copper, etc) and that "20 years till we run out" number will keep being pushed off into the future.

If you are holding gold hoping that reserves get depleted you are in for a long wait, and since most gold simply just gets stockpiled, the reserves aren't actually being depleted, they are just being shifted from underground mines into underground storage bunkers, its not burned like oil, and its not vital to our survival like oil is right now.

 

[sinner]

In the 1970s, Saudi oil was the global benchmark. Saudi oil was so easy to get at you could pretty much stick a straw in the sand. The stuff that would come out was called "light, sweet" because it required so little refinement compared to other oils.

In 2010 the Deepwater Horizon rig was drilling the Macondo prospect. The DH was a deep sea drilling rig, really designed for the most arduous conditions, the hardest to get at oil. To give you an idea of this, in 2009, DH drilled the deepest vertical oil well in history. So here we are, way out at sea, digging as far down as we possibly can go to get at this oil.

Now, you'd imagine, for such effort that we must be attempting to get at the next motherlode, Saudi style, right? Right? Well, for those playing at home, the Macondo had "estimated oil in place" of 50 million barrels.

Wow! That's a lot, right? Right? Well, for those playing at home, current global oil consumption is ~90 million barrels.

Way out at sea, digging as far down as we can possibly go, to get at oil which requires heavy refinement to be usable.

For 12 hours of global consumption.

Let that sink in for a second. Maybe this puts the Lula/Tupi field, Canadian tar sands, CSG, or other similar new "mega" discoveries in context of a global economy for which oil is the lifeblood.

Now, before Eurodollars over there starts stuffing misinterpretations down my throat, I'm not actually trying to scare anyone about resource depletion. I am simply trying to highlight how EROEI is important in that:

* EROEI is a physical construct independent of and actually driving the monetary construct. It simply doesn't matter how high (or low) the cost of marginal oil barrels are, EROEI is what really matters!
* The Saudis (or whoever has the best EROEI on lots of energy resources, maybe Russia?) will forever be the marginal price setter for a barrel of oil. They get to decide the value of a USD in terms of barrels of oil. Everyone else must play along.

What does this have to do with gold?

Well, as a wise man once reminded us:
"gold and oil can never flow in the same direction" - ANOTHER, Oct 5, 1997.

http://fofoa.blogspot.com.au/2008/08/king-and-his-gold.html (this is basically "It's the Flow Stupid" and "Flow Addendum" in childrens story format).