Jump to content
drbubb

Gold comments - for the first half of 2008

Recommended Posts

There is a LOT of poverty in India... and I would expect many households to sell as we go higher & higher.

 

But rest assured, many families will NOT be selling, and most will be net buyers.

Share this post


Link to post
Share on other sites

The "Real" Gold Price

http://www.kitco.com/ind/Turk/turk_jan252008.html

 

There are a couple of important conclusions from the above chart. First, gold at its present price of $900 today is still very cheap. In other words, it is a long way from the purchasing power an ounce of gold achieved in January 1980.Second, both measures on the above chart show that the dollar is losing purchasing power every month. So if gold in the future were to reach a $6,255 price, the inflation between now and then would require gold to reach an even higher price to equal the purchasing power it had in January 1980.

Share this post


Link to post
Share on other sites

Hi there,

 

A question for folk who know more than me. How big is the world's stock of gold in value - i.e. if you could buy all the gold in the world at $925 an ounce? And how does that compare in percentage terms to e.g. the value of GM or Toyota stock, Microsoft, the FTSE100, the FTSE250, the Dow Jones Index, UK property stock etc?

 

The reason I'm asking is that I'm reasonably convinced that if the Fed cut again tomorrow we may see one bubble swelling as another continues to deflate. But the extent to which it (Gold/metals) swells is in some part dependent upon the size of the asset class - i.e. the deflation of the 'Petunia Seed Bubble' probably isn't going to drive the next housing boom, but the reverse might well be true (wonderful things petunias....).

 

CS

Share this post


Link to post
Share on other sites
A question for folk who know more than me. How big is the world's stock of gold in value - i.e. if you could buy all the gold in the world at $925 an ounce? And how does that compare in percentage terms to e.g. the value of GM or Toyota stock, Microsoft, the FTSE100, the FTSE250, the Dow Jones Index, UK property stock etc?

 

...Here's an answer- a little dated, but still useful, I hope...

 

Reserves in Tonnes as of August 2002

Country Gold Reserves Country Gold Reserves

Country... tonnes ... Country.. tonnes

U.S........ 8,149 ... Philippines. 253

Germany.... 3,446 ... BIS......... 201

IMF........ 3,217 ... Sweden...... 185

France..... 3,025 ... South Africa 178

Italy...... 2,452 ... Algeria..... 174

Switzerland 2,038 ... Libya....... 144

Netherlands.. 876 ... Saudi Arabia 143

ECB.......... 767 ... Singapore... 127

Japan........ 765 ... Greece...... 120

Portugal..... 607 ... Turkey...... 116

Spain........ 523 ... Romania..... 105

China........ 501 ... Poland...... 103

Taiwan....... 422 ... Indonesia.... 97

Russia....... 387 ... Australia.... 80

India........ 358 ... Kuwait....... 79

Venezuela.... 356 ... Thailand..... 78

Austria...... 318 ... Egypt........ 76

U.K.......... 314 ... Denmark...... 67

Lebanon...... 287 ... Pakistan..... 65

Belgium...... 258 ... Kazakhstan... 54

Source: International Monetary Fund

Reported: BMO,Nesbitt Burns: August 19, 2002

With current mine production forecast at 2,600 tonnes in 2002, official bank holdings represent greater than 10 years of production. However, with a deficit in primary supply of over 300 tonnes and net investment of nearly 200 tonnes, controlled sales within the framework of the CBGA can be absorbed by the market

 

Of the 140,000 metric tons produced since the yellow metal was first crafted into jewelry or melted into ingots, about 120,000 tons are still in existence. And the annual production of 2,600 tonnes represents 2.2% of this.

Share this post


Link to post
Share on other sites

One good read is this:

 

http://www.gata.org/files/RedburnPartnersG..._11-12-2007.pdf

 

Look at page 50 for gold quantity info and comments on it.

 

I have recently read an article addressing exactly your question. Unfortunately at the moment I can't find it.

I know it concluded that if just ~3% of US investment money went into gold, the price would go.................UP.

 

I'll try and find it for you later.

Steve

Share this post


Link to post
Share on other sites

Geez, that took a search. Found it:

 

This is where that chart comes from:

 

There's Just Not Enough Gold; Modeling A Dollar Flight To Gold

http://www.kitco.com/ind/Dillon/jan172008.html

 

The author does not consider any of the above modeled-gold prices to be forecasts. He does consider them to be very illustrative of how sensitive the price of gold is to even minor shifts of investment from the dollar into the gold.

 

There have recently been a spate of forecasts of upcoming gold price rises based on adjusting for inflation the 1980 peak price of gold. The author submits that these forecasts could be way too low if a serious flight from the dollar to gold takes place.

 

As a postscript, there remains one important thing to say about how a dollar flight to gold differs from the Internet stock bubble and the Housing bubble. The supply of gold is inelastic. Even though the price of gold has more than tripled in the last few years (from $250 / oz to around $900 / oz), gold mine output has stagnated.

 

The supply of worthless Internet startups was, as we found out, anything but inelastic. After the mania got going, Wall Street produced out of thing air a limitless supply of worthless Internet startups. Soon the bubble popped and the price of those worthless startups price reverted to their actual value, zero.

 

Similarly, homebuilders have found that the supply of new houses, while initially inelastic, was quickly made elastic by the flood of houses brought to market. Home prices are now returning to their actual value.

 

In the first really classic bubble, the Dutch discovered that the supply of tulip bulbs, while initially inelastic, after a couple of growing seasons was completely elastic. The bubble burst and the rest is history.

 

Because the supply of gold is inelastic, the rise of the price of gold does not constitute a bubble, at least not the same as the Tech bubble, Housing bubble and Tulip Mania. It is not susceptible to the same kind of wall of supply induced collapse.

 

The dollar is completely different from gold. Its supply, like the other fiat-currencies, is like worthless Internet startups: perfectly elastic. Just as venture capitalists could produce a limitless supply of Internet startups, central banks can produce a limitless supply of fiat currency. It is this very difference in elasticity between the dollar and gold that could trigger a flight (or panic) from the dollar to gold.

 

I think that's a perfect answer to your question :D

Share this post


Link to post
Share on other sites

There was a bit of a sell-off in gold yesterday ahead of the FOMC rate decision today. Anyone here been tempted to take profits just in case Bernanke only cuts 25 basis points ?

 

I get the feeling that today just might be the day that the Fed says it isn't gonna be pushed around by the markets any more with a message along the lines of "Right, that's your lot" or "this far and no further" . . .

Share this post


Link to post
Share on other sites

For what it's worth, I disagree.

I think this is no longer about the markets. I think this is about survival of the financial institutions. All of them.

Share this post


Link to post
Share on other sites
There is a LOT of poverty in India... and I would expect many households to sell as we go higher & higher.

 

But rest assured, many families will NOT be selling, and most will be net buyers.

 

Thanks for the reassurance. I think the recent highs are not 'confirming' this apparent demand side theory... so , corrections aside, lets look onwards and upwards !

Share this post


Link to post
Share on other sites

This is pure gold:

 

Quoting BBC.co.uk:

 

"The [Fed] central bank lowered rates to 3% from 3.5% after a two-day meeting."

 

"There's signs that our economy is slowing. There's some uncertainty in the economy," the president said during a visit to a helicopter factory"

 

Very funny. :lol::lol::lol:

Share this post


Link to post
Share on other sites
This is pure gold:

 

Quoting BBC.co.uk:

 

"The [Fed] central bank lowered rates to 3% from 3.5% after a two-day meeting."

 

"There's signs that our economy is slowing. There's some uncertainty in the economy," the president said during a visit to a helicopter factory"

 

Very funny. :lol::lol::lol:

 

cryinglaugh.gif

Share this post


Link to post
Share on other sites

Immediate trouble, or opportunity ?

aa1au3.gif

 

If gold breaksout from here, it could go alot higher

Share this post


Link to post
Share on other sites

Silver and Platinum peforming better than Gold today, could be a good sign. Gold is probably being supressed by the authorities imop. I think once it breaks out it will explode. I am long Gold and Siver.

Share this post


Link to post
Share on other sites
Immediate trouble, or opportunity ?

aa1au3.gif

 

If gold breaksout from here, it could go alot higher

 

You thinking there might be a bit of a pullback ?

Share this post


Link to post
Share on other sites
You thinking there might be a bit of a pullback ?

 

A pullback IS happening, but it looks shallow to me.

Is this a preparation for a big leap forward ?

Share this post


Link to post
Share on other sites

I tend to agree Dr.B , and for the moment I am sticking with my longs. Gold had a great opportunity to really go down today but it recovered from what ended up being a fairly shallow dip. Silver wanted to really move but was halted by Gold's anaemia. Platinum did have a healthy move up ( $35) or so.

Share this post


Link to post
Share on other sites

Royal Gold (RGLD) looks way too cheap relative to the price of Gold

 

003ad8.png

 

Some in-the-money calls for March 2008 or later may reward nicely

Share this post


Link to post
Share on other sites

No idea where it is going right now, but up is the only way relative to fiat currencies in the medium term. The same applies to silver.

The question is when to buy more. I have CHF's and Yen waiting for a dip to get in.

 

The physical side is undeniable. Holding a paper note in my hand, knowing that it is a promise for a government to pay me something..... nothing specific... an amount based on international consensus of what each paper wad is worth is terrifying; especially at the point where we face the largest financial crisis of modern history.

Share this post


Link to post
Share on other sites
Meant to sell half my gold today, had to put the children to bed, and come back and discover it down $15.... Bother.

 

Next time: sell 25%, then put them to bed, befiore selling the other 25%

Share this post


Link to post
Share on other sites

This is where gold is going. 100% correct guaranteed.

 

Well sort of anyway :lol:

 

JimSinclair_formula_chart.jpg

 

Seriously, it gives you an idea of where Jim thinks it might go. Something to mull over if nothing else.

Steve

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now

×