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G0ldfinger's GOLD Thread: Longer Term Aspects

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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!

Hi Rob and welcome to GEI. Everything seems a risk at the moment. Even staying in cash Sterling is a big risk due to numerous factors of which you are no doubt aware e.g. QE, government debt etc etc.

 

Personally I think gold has a long long way to go to the upside. Of course it won't go up in a straight line so you will have to be mentally prepared for dips along the way. If you have no gold/silver yet I would not wait for a dip in price in GBP. Set aside 20% of your wealth now and use 50% of that to buy a chunk right now. Then use the other 50% to buy a set amount each and every month. That way you can take advantage of any dips we get along the way.

 

Silver is way more volatile than gold so if you want a bit more stability I would favour a heavier weighting to gold.

 

Hope this is helpful. Plenty gold/silver threads on here to provide you with more info to base your decision on.

 

Best of luck

 

 

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...

So if you are a gold-is-money-believer, then please ignore this post and all the scholarly analytical literature on gold standard. I'm sure it's all crap spouted by shoople historians who are in the pocket of the central banks.

 

From now on, I'll stick to discussing gold price moves and everybody who so desires can keep on believing in the gold-tooth fairy :)

...

A great example of an intelligent person making a silly mistake.

 

As someone else said: it's not that it has to be proven that gold is money. Anyone who claims anything else has to prove it (against over 6,000 years of human history). Such an endeavour therefore seems rather in vain to me.

 

Secondly, to say that gold as money doesn't work citing certain historical references is as if one would say that eating healthy doesn't improve health, while not mentioning that the considered group of people are heavy smokers. The point is, even during the "gold standard" times, banks were always running fractional reserve banking. Of course, this doesn't work and it has to collapse periodically. So, the "historical" reference to a gold standard quoted by Halcyon is possibly pretty useless.

 

EDIT: During war times politicians were also always happy to abandon the "gold standard" for a while. Politics and "gold standard" never really like each other. Printing limitless is what politicians really want. :)

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...

Personally I think gold has a long long way to go to the upside. Of course it won't go up in a straight line so you will have to be mentally prepared for dips along the way. If you have no gold/silver yet I would not wait for a dip in price in GBP. Set aside 20% of your wealth now and use 50% of that to buy a chunk right now. Then use the other 50% to buy a set amount each and every month. That way you can take advantage of any dips we get along the way.

...

I agree with DoctorSolar's recommendation.

 

You've chosen a difficult moment to enter gold as it looks like it's taking off but is quite likely to correct.

 

Like DS said spend 10% soon and then average in with 10% over a period of your liking.

 

Like GF said if you buy coins or bars you are less tempted to sell on the spur of the moment, which is a danger in this sort of volatile market which can give one the jitters quite easily.

 

Just my opinion, of course.

 

Welcome to GEI. :)

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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?

 

The best way to play bubbles is to ignore price, as you won't be able to climb the wall of fear. The time to take profits is when everyone is talking about gold or the increases in price go up too quickly.

 

Look for the extreme warning signs -

 

1. All four main precious metals making new highs [silver, platinum, palladium all made new highs in 1980]

 

2. Coin shops sprouting up [where's your nearest one?]

 

3. Are your friends talking about gold?

 

4. What is on the media at the moment? Are bullion collectors on youtube appear to be nerdy anoraks or clean cut spivs with Ferraris? I was watching Flog it a daytime TV antiques programme, and the main antique expert presenter admitted not knowing anything about Silver.

 

5. How many gold mining companies are forming? Count how many there were last year compared to now. If there's an IPO each month or week, that sounds alarm bells. Go to the Money shows. How many gold funds are there? Keep an eye on the amount of new gold ETFs and other investment vehicles.

 

6. If you are worried by gold crashing or gold never having a mania-like blowoff - you have put too much money into one asset class.

 

7. If a price doubles in 6 months with no major downtrend before it, you are likely to be in a bubble - best to take profits.

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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!

My view is that we are close to the begining of the move up to $1350 by the spring 2010. I bought in 2007 after watching gold move from $650 and jumped in at $850 as I was too "chicken" to get in sooner. Gold then continued to $1030 before consolidating for two years. So I believe we are close to the start of the next move upwards. Also, the pound may fall from here so there seems to be great upside compared to the downside risks.

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Looks like they are trying to engineer fake USD strength against JPY. I am expecting all other fiat will go down, the media will parrot dollar strength, the DOW will fly higher and gold will come under some pressure. When gold continues it's march up, then I think the smelly stuff will hit the fan.

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The trader vs. non-trader debate is raging over on Ax's thread on GIM.

 

There is one situation where I would trade before the 'great exit' out of PMs: if silver experienced a major short squeeze before gold, with the ratio going below 20:1 or possibly even to 10:1, then I would possibly exit silver entirely.

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The best way to play bubbles is to ignore price, as you won't be able to climb the wall of fear. The time to take profits is when everyone is talking about gold or the increases in price go up too quickly.

 

....

 

7. If a price doubles in 6 months with no major downtrend before it, you are likely to be in a bubble - best to take profits.

Push this one out a bit as the seasonality upswing on gold can last from late July through to mid March.

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Timely article: (It's not Techs Vs Funds - use them both with Risk Management)

 

http://www.marketoracle.co.uk/Article14138.html

 

Quote:

If you're not into technical analysis, you're not into it. I understand. Drawing squiggles on a chart seems like reading tea leaves to many. I get it. I personally believe that it increases your odds of success if you have the fundamentals right. In other words, technical analysis in isolation is not attractive to me, but laid over a solid foundation of fundamental analysis makes sense to me.

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The trader vs. non-trader debate is raging over on Ax's thread on GIM.

 

There is one situation where I would trade before the 'great exit' out of PMs: if silver experienced a major short squeeze before gold, with the ratio going below 20:1 or possibly even to 10:1, then I would possibly exit silver entirely.

What is this "great exit"? Do you think that gold will eventually be in a bubble? How does this fit in with the hyper-inflationary hypothesis where other currencies are destroyed? What would you exit to?

 

If you mean by "exit" an exit into productive property, this would not really be a "great exit" from gold as such, but a purchase of something with money. If you had further liquidity over and above the assets you wanted to secure, then where would that liquidity go?

 

I do not think gold will become a bubble, or there will be some mass exit at some point. It seems much more likely that it will become the soundest currency and remain a store of value for a very long time.

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Interesting reading:

 

Paranoid theories can't take the shine off gold

http://www.ft.com/cms/s/0/d2a6ad00-b534-11...?nclick_check=1

...

My take on the whole issue is this: central banks manage the gold price to some extent. There can be no doubt about that. It has been directly stated by several central bankers, but it is also more than logical since the only asset with intrinsic value they hold is gold (and they state to have quite a bit of it).

 

This managing, but also the desire to earn interest on their holdings (through leasing gold to their commercial banking friends, which mostly leads to physical selling, because otherwise how can the commercials earn the interest?), has helped to suppress the gold price during the late 80s and most of the 90s.

 

Is it a Cartel? -- Yes, you could say so, because you have to be one of the big bullion banks for this arbitrage game with central bank backing.

 

Is it all evil? -- I would say most of it is stupidity, similar to the dot.com/mortgage/T-bills/(... fill in whatever you like ...) bubble.

 

Will it blow up big time? -- Yes, of course, like all the other silly things & bubbles the central banks and their commercial cousins have caused.

 

What should be changed? -- The central banks should either properly fess up to the fact that they are gold managers, or they should let the market be truly free. In the first case, they should do proper reporting of their gold accounts, and they should indeed take care of a stable, growing (with inflation) gold price. In the second case, they should truly stop dealing in/with gold at all. Anything else is hypocracy of some kind.

 

EDIT: The above is in my opinion absolutely logical and obvious, and talking of conspiracies/nutbags/lunatics/... is just a way of distracting from the obvious, or to ridicule sincere concerns about what has been going on in the gold market for so long. The paper games played on the COMEX somewhat belong to this whole issue obviously. The greater concern there however is that fractional gold reserve banking is well and alive and could implode sometime soon (as all fractional reserve banking does on a regularly basis [and, yes, also this is an indsiputable fact]).

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What is this "great exit"? Do you think that gold will eventually be in a bubble? How does this fit in with the hyper-inflationary hypothesis where other currencies are destroyed? What would you exit to?

 

If you mean by "exit" an exit into productive property, this would not really be a "great exit" from gold as such, but a purchase of something with money. If you had further liquidity over and above the assets you wanted to secure, then where would that liquidity go?

 

I do not think gold will become a bubble, or there will be some mass exit at some point. It seems much more likely that it will become the soundest currency and remain a store of value for a very long time.

If we don't get catastrophic hyperinflation, then yes, I think gold could develop a bubble and the time to exit it (to a great part at least) might come. Indeed, I would look into stocks and property, or even government bonds (see 80s) at that point in time.

 

In a hyperinflation, an exit strategy is more risky because you have to be sure the hyper part is over. This is tricky, but even then it could make sense to use at least part of the gold to buy other assets at rock bottom prices.

 

Your last paragraph is Jim Sinclair's point of view. If we classify hyperinflation like BV's Paul Tustain (3 years with doubling prices), then, yes, we could see hyperinflation first and then a stabilizing gold price. But if gold stabilizes, then why not use it to buy something undervalued at the time (like UK houses or so)?

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If we don't get catastrophic hyperinflation, then yes, I think gold could develop a bubble and the time to exit it (to a great part at least) might come. Indeed, I would look into stocks and property, or even government bonds (see 80s) at that point in time.

 

In a hyperinflation, an exit strategy is more risky because you have to be sure the hyper part is over. This is tricky, but even then it could make sense to use at least part of the gold to buy other assets at rock bottom prices.

 

Your last paragraph is Jim Sinclair's point of view. If we classify hyperinflation like BV's Paul Tustain (3 years with doubling prices), then, yes, we could see hyperinflation first and then a stabilizing gold price. But if gold stabilizes, then why not use it to buy something undervalued at the time (like UK houses or so)?

Things need to be turned on their head here. High prices in gold will not reflect a bubble in gold, but rather a crisis in certain currencies as they become less stable. Capital flight will most likely be the main culprit here... and then the dollar could well be a beneficiary besides gold [quite a different view to Sinclair].

 

Given the continued collapse of asset prices and then peripheral currencies [a hyper-deflation] the whole monetary system will have to be revamped. In all likelihood it will have to be rebuilt on some kind of international gold exchange standard... I am backing SDRs backed by gold.

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Things need to be turned on their head here. High prices in gold will not reflect a bubble in gold, but rather a crisis in certain currencies as they become less stable. Capital flight will most likely be the main culprit here... and then the dollar could well be a beneficiary besides gold [quite a different view to Sinclair].

 

Given the continued collapse of asset prices and then peripheral currencies [a hyper-deflation] the whole monetary system will have to be revamped. In all likelihood it will have to be rebuilt on some kind of international gold exchange standard... I am backing SDRs backed by gold.

 

It's amazing that you and I have views on inflation/deflation that are 180 degrees apart. However, the path we both take leads us to believe in Gold as money.

 

This puts us in the same team against all fiat currencies - which is the real battle in this epic King of the Hill struggle.

 

The difference in our view comes from my belief that for fiat to get an advantage over gold, the fiat money will pay interest. As time goes on, they will need to pay more interest to keep gold surpressed. As can be seen in AUD, the recent rate rise is the first of many. The cracks are appearing in this "coalition of the willing" and will soon lead to conflict.

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And just like magic, another timely article:

http://www.moneyweek.com/news-and-charts/g...l-us-94111.aspx

 

Quote:

Events are coming towards us faster than we realise, and are hugely negative for the US dollar and the US economy. The potential is for a collapse of the dollar and for the cost of natural resources such as oil to be priced in a basket of currencies with only modest exposure to the weakening dollar, so causing the oil price and other commodities to soar in dollar terms.

 

Given what's at stake, it is hardly surprising that gold is launching into the stratosphere. The signals say that we are probably in the third and euphoric phase of the gold bull market. Acceleration is an end of something and so the third phase of the gold bull market will be coupled with huge acceleration. In the two months, December 1979 and January 1980, when gold topped out at $850/oz, the price of gold rose $400, it doubled in two months. January 1980 marked the end of the third and last phase of that gold primary bull market. This suggests $2,000/oz plus sooner than most people might think possible.

 

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A Gold Hunter's Experience, by Chalkley J. Hambleton. Read by Sue Anderson.

 

"Early in the summer of 1860, I had an attack of gold fever. In Chicago, the conditions for such a malady were all favorable. Since the panic of 1857 there had been three years of general depression, money was scarce, there was little activity in business, the outlook was discouraging, and I, like hundreds of others, felt blue."

 

 

This is a fascinating listen, from the camp being surrounded by wolves to the hordes of stampeding buffalo, from the scams used to sell claims such as washing out sands and pulling out juicy nuggets in front of new green prospectors and using false quicksilver, from the fighting of hypothermia in the winter to the use of gold grains as money, it's all here!

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A Gold Hunter's Experience, by Chalkley J. Hambleton. Read by Sue Anderson.

 

 

 

 

This is a fascinating listen, from the camp being surrounded by wolves to the hordes of stampeding buffalo, from the scams used to sell claims such as washing out sands and pulling out juicy nuggets in front of new green prospectors and using false quicksilver, from the fighting of hypothermia in the winter to the use of gold grains as money, it's all here!

Good find, thank for posting.

 

 

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My quote of the day.

 

"Other than being nice to have, the case for investing in gold looks to me like another example of the greater fool theory," writes Anthony Hilton in the Evening Standard.

 

"[Gold] makes sense just as long as there is someone out there willing to pay even more for the metal than you did."

 

 

So this only applies to gold. Yet another unique property :rolleyes:

 

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My quote of the day.

 

 

 

 

So this only applies to gold. Yet another unique property :rolleyes:

 

Don't take any notice of the Evening Standard.

 

They are peed off because they are now a free newspaper. That is free as in handed out for free not in free as in free enterprise or in freedom of speech. The banksters now pull the journos strings, so of course gold is useless and a barbarious relic of our past!

 

Next they'll do an article on how you can't eat gold...but your house is your pension.

 

 

 

 

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My quote of the day.

 

 

 

 

So this only applies to gold. Yet another unique property :rolleyes:

 

It's the same for any asset - stocks, houses etc etc. Not sure what point he's making. Anything is only worth what people will pay for it.

 

But I'd rather to stick to something with a 4000yr+ track record.

 

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