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G0ldfinger's GOLD Thread: Longer Term Aspects

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We are just at the foot of the mountain with silver. What is your exit plan on silver? Ounces to houses again?

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EDIT: I want to point out again, that I intended the gold threads, when I started them, to be not mainly focussed on trading. Now the spin seems to be on trading, so I have to opt out, and start all over again.

 

Great ! You have another avid reader, only ever had accumulation for longer term wealth insurance needs. Hope my odd contribution's will be worthy their place, but if not just ignore me :)

 

You might like this one though and some very nice charts!

 

Seven Myths About Gold (Extract) by Ronald Stoeferle Erste Group Bank AG

 

Myth # 1: Gold is (too) expensive

Myth # 2: Gold is of no interest to euro investors

Myth # 3: Gold does not pay interest

Myth # 4: The gold price is volatile and speculative

Myth # 5: In periods of deflation, gold is a bad investment

Myth # 6: Gold does not have the relevance that it used to in today's modern society

Myth # 7: Gold is only a crisis investment

 

http://www.goldcore.com/research/seven_myths_about_gold

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We are just at the foot of the mountain with silver. What is your exit plan on silver? Ounces to houses again?

I would say watch gold and watch the ratio. They should peak out very close in time.

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If I was to have changed currency from GBP to dollars, and the GBP dropped and then I changed back to GBP, increasing my GBP by 50%, would I have to pay CGT? This is hyperthetical, as obviously I wouldnt touch either except if the loo paper ran out :)

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If I was to have changed currency from GBP to dollars, and the GBP dropped and then I changed back to GBP, increasing my GBP by 50%, would I have to pay CGT? This is hyperthetical, as obviously I wouldnt touch either except if the loo paper ran out :)

 

Yes. Foreign currency is a chargeable asset for UK CGT purposes.

That's why when I sell my Canadian shares say, I request to be paid in £ even though I can retain the proceeds in CDN. I am better off money-wise staying in CDN if I wish to reinvest the proceeds in another Canadian company but the CGT calculations would be horrendous.

Unfortunately, ISA money can't be held in a foreign currency, I believe - at least TDW won't let me.

 

Of course if your gains are within the annual exempt amount, you'll be OK.

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If I was to have changed currency from GBP to dollars, and the GBP dropped and then I changed back to GBP, increasing my GBP by 50%, would I have to pay CGT? This is hyperthetical, as obviously I wouldnt touch either except if the loo paper ran out :)

 

If in doubt the usual answer from the tax offiicals is yes you have to pay.

 

http://www.hmrc.gov.uk/manuals/cg4manual/cg78300.htm

 

This is why spread betting has taken off - profits are classed as gambling and therefore excempt from cgt.

 

http://en.wikipedia.org/wiki/Spread_betting#Tax_treatment

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OK.......Do you have to declare gains made from selling sovs?

 

Definitely nope unless you've got very old ones - can't remember the cut-off year, something like 1837 or thereabouts.

 

It's in the CGT legislation. Sovereigns are money; that's why there's no CGT on sale. Money's not a chargeable asset for CGT purposes.

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OK.......Do you have to declare gains made from selling sovs?

No, as they are legal tender BUT if your sale of legal tender becomes a significant proportion of your income for an accounting period then HMRC can determine that you are trading rather than investing and then all your profit is subject to tax.

 

This is why I keep banging on to people that they need to work out their exit strategy before they buy an investment. If you take the wrong exit you could get taxed!

 

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Readers should know this:

 

From Bedlam (one of our favourite investment companies (2 Oct 2009):

 

There is fraud in ETFs - what will that do to gold?

Interesting article, FP. I am afraid I am more in the James Turk camp though, that if ETFs (gold specifically) are dumped, then there might be an increase in price, not a decrease.

 

I think James's argument went along the lines that there are many more paper holders than physical.

If there is a flight from paper to physical then it will be very hard to lay one's hands on the real thing at that moment and there would be a major disconnect between physical/paper prices also.

 

The ultimate result could be an increase in demand for physical of roughly the same magnitude as the factor which paper had oversold the existing gold. Views?

 

 

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As for GF, only he can say what he believes, but I've gotten the impression that he believes: not trading in gold, gold will go to $2000-$5000 (inf adjusted), COMEX will default, gold somehow has intrinsic value, gold is money, and many other things. That to me is tantamount to "buy & hold & be happy". If I have misrepresented his views, I apologize and I hope he he will correct me.

....

Buy and hold UNITL something major changes.

 

And this thread here is about monitoring these changes and indicators that I want to use. For instance, I just posted the DJIA:gold chart above that is a very good indicator.

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I think (I hope) this is long-term enough to warrant a mention on here:

 

Gold Futures Commitment of Traders Analysis

http://www.zealllc.com/2009/goldcot3.htm

 

This first chart details the open interest in COMEX gold futures since 2001, the year this secular gold bull stealthily started steaming higher. Open interest is measured in contracts, and each contract represents 100 troy ounces of gold. Since CoT data is only available once per week, all this gold price data is weekly too. In order to understand gold futures open interest, this number’s historical context is utterly crucial.

 

The blue line is the weekly gold price, and the red line is the weekly gold futures open interest directly from the CoT. Digesting this chart will give you context to help evaluate the priesthood’s interpretations of developments in OI. For example, back in mid-2001 when there were only 100k contracts of gold trading, a 10k swing in one week was a big deal (10%). Today with 450k contracts, this same 10k swing is pretty trivial (2%).

 

Note that OI has trended higher on balance over this entire gold bull. This is the first key lesson of CoT analysis. As any bull matures, as any price marches ever higher, it attracts more traders and more capital. This is a core tenet of the financial markets in general. Nothing begets more interest in an asset like relentlessly rising prices. This dynamic forms the virtuous circle that drives all secular bulls higher.

.

.

.

This shatters a common OI myth from the CoT priesthood, that record-high gold OI is always bearish for gold. In its mild form, analysts claim record gold OI levels warn of an imminent pullback or correction. This is certainly true at times. But in its extreme form, I’ve heard analysts claim some particular OI record means this secular gold bull is coming to an end. That is just nonsense. Check out the OI records above compared with gold itself.

 

Sometimes, record-high OI does precede a correction. Early 2003 and early 2008 are great examples of this. But other times, despite record OI gold soars higher. In mid-2007, gold OI first approached 425k contracts. I remember well CoT analysts at that time claiming gold had to correct hard because OI looked frothy. Yet from those $675 levels, gold soon soared to $1000 in early 2008 (and gold OI went even higher).

 

Usually OI does rise when gold is strong, which makes sense. Rising prices attract in more futures traders looking to ride the rally. But this is certainly not always the case. One of gold’s strongest uplegs of this bull ran from late 2005 to mid-2006, from roughly $425 to $700. Yet during what was the best run in the entire bull to that point, gold OI stayed flat.

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.

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For the CoT priesthood, a 25% surge in commercial net shorts in one week, to a new record high no less, is the most bearish scenario imaginable. The noise about how the commercials were “going to cap gold” was deafening, and with gold already up at $994 it felt too high to many. Yet this week, just a month later, gold had surged to $1042 by Tuesday (the day the CoT is finalized).

.

Obviously a record commercial net-short position didn’t presage a sharp tumble in the gold price. And this ties in with why CoT analysis is often so misleading. Analysts will comment on this stuff, a 25% rise to a record in one week, but offer no historical context. If you study the chart above, you can find plenty of times when new record commercial net shorts did not precede a big correction in gold.

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Ed Steer talks to Al Korelin about the longevity of the gold market and the entering into the mania phase.

 

http://www.kereport.com/weekendshow/weeken...t1009-seg5.html

 

http://www.kereport.com/weekendshow/weeken...t1009-seg6.html

 

 

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Good read here:

 

http://www.marketoracle.co.uk/Article14123.html

 

Quote:

Counterfeit money distorts information. How? Because prices convey information. Prices should convey accurate information. When decision-makers have accurate information, they can find ways to lower the transaction costs of their decisions. They can search out better ways to cut expenses. They can become more efficient.

 

When prices convey inaccurate information, individuals find that they make more mistakes. They make decisions in terms of information that is misleading. This is why prices should be based on decentralized decisions in which individuals making the decisions are responsible for the outcome of their actions. This is the defense of free-market capitalism. But, when it comes to banks, the economists refuse to follow the logic of this principle of individual responsibility and performance. Defenders of central banking and fractional reserve banking are necessarily defenders of inaccurate information.

 

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Approximity has now a regularly updated chart of the Dow-gold ratio. :)

 

http://gold.approximity.com/since1885/DJIA...o_LOG_GUESS.png

DJIA-Gold-Ratio_LOG_GUESS.png

 

Hi GF. That is almost as good as Ian Gordons analysis (Dow for sov) but is there a date for that result. By the graph it looks like sometime 2010 but I would have expexted later, unless the move down starts soon and is devastating. Any time frame guesses?

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Hi GF. That is almost as good as Ian Gordons analysis (Dow for sov) but is there a date for that result. By the graph it looks like sometime 2010 but I would have expexted later, unless the move down starts soon and is devastating. Any time frame guesses?

The distance between the last 2 ticks on the x-axis is 12 years.

 

The target looks more like 2 to 7 years in the future.

 

 

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Hi folks,

 

Well this is all very fascinating and well worrying really.. I mean I hope very much that the predictive spirit of this forum is all wrong but the more I read around here and similar elsewhere, the more I suspect not.

 

This thread attracts me because I like to see someone openly concerned for the Krugerrand Grannies, who in terms of financial sophistication I can relate to more than most on here. Mind you they are still considerably sharper than I, as my only previous attempt to dauble in 'finance' was the aquisition of a unit trust fund 10 years back. - Like many of my peers who were sucked in on the 3..4..500% 10 year gain claims that were common place back then, I'm STILL waiting to just break even on my original investment!

 

We've now had 2 stock crashes inside 10 years and many plain thinking folk now realise that long term, fund managers aren't much better gamblers than they. I vowed never again to leave the safety of cash, however just lately .. reading around, I'm beginning to realise that sterling devaluation may have become a prefered goal of UK goverment.

 

So I like this Gold invest and hold strategy ..very much, the worry of course is the worry that most have ..that gold itself is now in a bubble, similiar to stocks in the nineties. Only a couple of weeks ago the Telegraph predicted just that and time to sell, now they have changed tune and are running predictions of upto 50% gains by next year! Confusing! - but I'm not greedy, I'm just looking for a relatively safe inflation hedge/alternative to cash?

 

So I guess, I'm looking for advice on how much to invest in Gold and/or Silver, and most importantly when! Many are advising to buy at the moment, but almost all simultaneously warn of the danger of an imminent "price correction". Argh!! is this for me? still not sure!

 

 

 

 

 

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Maybe. Let\'s plot an average of all fiat paper currencies PP with SS CPI adjustment and compare that to gold. That\'s the proof. I don\'t really want to believe anything this important without proof. Especially not gold-bug propaganda.

...

Here is a nice chart (but it's not Shadow Stats CPI):

 

http://gold.approximity.com/since1968/Infl...parison_USD.hml

Inflation-adj_currency_comparison_USD.png

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The distance between the last 2 ticks on the x-axis is 12 years.

 

The target looks more like 2 to 7 years in the future.

Other charts have implied a frame of around 2012. As you can see, the downturns are more swift than the upturns.

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...

So I guess, I'm looking for advice on how much to invest in Gold and/or Silver, and most importantly when! Many are advising to buy at the moment, but almost all simultaneously warn of the danger of an imminent "price correction". Argh!! is this for me? still not sure!

A "correction" is much less freaky of you hold coins in your hand. Start buying slowly and buy the real stuff. Then you possibly don't even care if there is a short-term downturn.

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