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G0ldfinger's GOLD Thread: Longer Term Aspects

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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.

Great response, said as only Errol can :)

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The COMEX banksters having a go and gold and silver again. :rolleyes:

They haven't managed to get the USDX back above 76, yet.

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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.

 

Thanks to everyone, feedback highly appreciated. Actually I had already more or less decided on the ETF route as it only costs £12 or so to buy at spot price and just (all to) as easy to sell again.

But of course you’re all quite right, I’d likely become fixated on hardcore technical and

fundamental analysis every waking moment and most likely opt to sell on highly emotional analysis.

- Looks like I’d best be on my way to the Coin shop then.

 

And thanks for percentages and buying strategy, makes sense and relatively stress free, not sure if I’ll spot a dip when I see one though!

 

 

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Thanks to everyone, feedback highly appreciated. Actually I had already more or less decided on the ETF route as it only costs £12 or so to buy at spot price and just (all to) as easy to sell again.

But of course you’re all quite right, I’d likely become fixated on hardcore technical and

fundamental analysis every waking moment and most likely opt to sell on highly emotional analysis.

- Looks like I’d best be on my way to the Coin shop then.

 

And thanks for percentages and buying strategy, makes sense and relatively stress free, not sure if I’ll spot a dip when I see one though!

 

Rob - please read this http://www.greenenergyinvestors.com/index....st&p=133770

 

and then read CGNAO thread at MSE.

 

I think it will help you.

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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.

 

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.

 

Well folk are talking about it, - Money Changers, Coin shops, Pawn brokers, Gold party Ad’s all highly visibly offering cash for Gold, they're all at it of a sudden.

 

I’m intending keeping an eye on this site though, and hopefully GF or some other kind soul will start a “Gold is finally done here” thread for the Krugerrand Grannies et al when the auspicious moment finally arrives.

 

 

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.

 

Aw-Aw – you’re in danger of spoiling it for me now, I’m not a big fan of miners, and certainly not GOLD miners.

 

http://www.guardian.co.uk/business/2009/oc...-american-mines

 

I see far too much of this sort of thing, far too often. Close them all down tomorrow, and just make do with recycling what we’ve already got, suits me fine.

 

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Thanks to everyone, feedback highly appreciated. Actually I had already more or less decided on the ETF route as it only costs £12 or so to buy at spot price and just (all to) as easy to sell again.

But of course you’re all quite right, I’d likely become fixated on hardcore technical and

fundamental analysis every waking moment and most likely opt to sell on highly emotional analysis.

- Looks like I’d best be on my way to the Coin shop then.

 

And thanks for percentages and buying strategy, makes sense and relatively stress free, not sure if I’ll spot a dip when I see one though!

If you do decide to go down the coin route I would highly recommend coininvestdirect.com they are in my experience the cheapest and offer great customer service. If you are a UK resident it makes sense to go with gold Britannias or sovereigns as they are exempt from capital gains tax.

 

Sadly silver britannias are priced WAY over spot so I personally opted for silver philharmonics/eagles/maples instead.

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Cheers FWIW and Doc Solar,

 

A lot of help around here for sure ..just had a peek at CoininvestDirect, Sovs going for near exactly 3x CGNAOS 2004 quote!

Phew!

 

 

 

 

 

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- Looks like I’d best be on my way to the Coin shop then.

I'd look for standard bullion coins and try to get the lowest cost per gramme of gold.

 

A couple of months ago I checked the cost per gramme of many gold coins at coininvestdirect.com (a good dealer that I and many others here have used).

 

Sovereigns were the cheapest of all. These and Britannias are free of CGT for UK residents (unless you are buying and selling large quantities according to id5 who knows the business).

 

I have bought a selection of gold and silver coins (I don't live in the UK anyway). My main holdings are at bullionvault.com and goldmoney.com. With these companies you own real physical metal which is audited on a regular basis. So I trust that the metal is real and in the vault and it is owned by the customer who bought it not by the company. So even if the company were to go bankrupt the customers' metal cannot be legally taken from them.

 

Good luck. If you average in I hope you get a correction to help you. If this bull market continues, which I think it will, a few pounds either way will not feel like much in couple of years.

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I'd look for standard bullion coins and try to get the lowest cost per gramme of gold.

 

A couple of months ago I checked the cost per gramme of many gold coins at coininvestdirect.com (a good dealer that I and many others here have used).

 

Sovereigns were the cheapest of all. These and Britannias are free of CGT for UK residents (unless you are buying and selling large quantities according to id5 who knows the business).

 

Some of the Austrian coins on CID are cheaper per gramme also, though not CGT free

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DOUBLE POST, for my own records.

Q1: What is the reason/aim/motive for central banks to manage the gold price to some extent.

The reason is that they hold large quantities of it. It's one of their main assets (if not THE main asset, because what are mortgage-backed securities worth in the end?). So, they either do something with it, or not. Fact is that they did something: they sold. The aims/motives don't matter if you're on the other side of the trade, e.g. as a gold miner: you have a depressed price, for various reasons after the 1980s blow-off, then on top you have central banks selling the stuff as well. It's annoying. The motives of the central banks (not the commercials who are involved)? There is one major source (otherwise central banks do their business quite secretively, they don't even publish proper figures):

 

http://www.federalreserve.gov/BOARDDOCS/TE...98/19980724.htm

Nor can private counterparties restrict supplies of gold, another commodity whose derivatives are often traded over-the-counter, where central banks stand ready to lease gold in increasing quantities should the price rise.

Why don't you drop Greenspan a line, maybe he wants to elude to it?

 

... Of course there is proof, science if based on proof. ...

Yes, but if you go down too deep in the rabbit hole, the proof gets lost. Let's take Greenspan's quote from above. If this is not proof, then what? If you will continue to torpedo it, claiming it is no proof, then what can I do? It's not a hard science. It's all soft and rubber in economics. In the real world, at some stage, you have to start to believe, be it in assumptions, or the validity of certain 'proofs'. Just take your own existence: you can't proof it! That's why Descartes had to say "cogito, ergo sum" - it's a common sense assumption based on some evidence, not a proof in the stricter sense.

 

Q2: My question is: why were there no net buyers if gold is such a great asset that it makes sense to buy it, esp. during inflation? Why were buyers buying stocks instead?

Gold is not always a 'buy' even on a longer term basis. In the early 1980s it was obvious that gold was a 'sell'. Just look at this (which should answer your question).

DJIA-Gold-Ratio_LOG_GUESS.png

 

Additionally: Q3: Why were central banks selling gold? Again, you *assume* that it was at least partly due to 'malicious' purposes. I don't assume that, because I don't know what to base that on (other than some really drivelish religious-gold-bug propaganda about how "gold is once-and future money and how central bankers are afraid of gold, etc"). It could have also been, because they needed the cash. Or something else. I don't know. Do you know this or do you assume?

Oh, again! Greenspan said, they wanted to keep the price low (see above). The commercials, who got the gold to make profit from it, had the same motive: sell the leased physical, invest the money in high interest assets, keep the price of gold low if possible, maybe buy back at even lower prices --> profit!! If profit is not a motive, then what? The central banks made profit too, from the interest paid on the leased gold.

 

My assumptions (not proof) are: central bankers are not on the average stupid. In fact they are on the average much smarter and wiser than the average, although they may sometimes appear as if they acted stupid in hindsight when one has perfect knowledge after the facts.

I see some evidence for pro-cyclical behaviour in central banks. I think that's silly.

 

This is the Taleb stance and stance of a hypothesis making: if you have no empirical data to suspect one way or another, then don't. Find the data, reason from that. And remember, I now refer to data about the motives/aims, not the data about the actual sales. Motives/aims are separate from actual actions.

Fair enough. Except for Greenspan's quote, we can only speculate what the real motives are. Using common sense helps. For instance, what would you think a gold price of $10,000 would signal to the world right now? Who therefore is not interested to see gold at $10,000?

 

... Again, in microeconomic theory - that's a reasonable explanation: price goes up (70s/80s gold spike), production goes up. When price comes down (it did), additional incoming production (new supply as shown above), while demand is shrinking (investors go to other assets like stocks, like they did).

 

Q4: Why is the above not a reasonable and believable explanation OVER the central bank gold-price dumping hypothesis? Just basic price/profit/production/demand cycle.

It's not wrong, I would say. You simply had on top of this massive central banks sales and leasing. That drove the people with a vested interest in gold nuts: the fundamentals were bad, and now even more pain, inflicted by some public institutions!

 

Let's ask this: when the Dow crashed in 2008, why were the central banks not shorting the cr@p out of it? They could have made so much profit!

Aha, so apparently damaging a market is only good with gold, not with stocks or property. Very strange! It almost looks like a conspiracy to me! ;)

 

So in this regard, I'm not convinced that the bubbles and cycles are BECAUSE of the central banks, but perhaps REGARDLESS of the central banks. Clearly the evidence can go both ways.

I agree, but the central banks make the bubble worse because they want to keep them going for longer. See also the chart above.

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Paul van Eeden is still a gold bear. He just sent this by e-mail:

 

Given that the gold price is trading at a 25% premium to its fair value and that we can imagine several scenarios whereby the US dollar could rally and the gold price could fall, it seems to me that betting on a higher gold price right now is merely a bet on the Greater Fool Theory. That is not to say that the gold price could not continue to rally - markets can remain irrational far longer than rational people ever imagine they would. Personally, though, I have no interest in buying an over-priced asset in the hope that it will become even more over priced - not even gold.

I somewhat mistrust his fair value calculation, but I will re-read it soon. In any case, Sinclair has one too, and he got it right in 1980.

 

EDIT: Not sure if the article is online. It's quite long, much on the Fed and China in it. Maybe I'll post more later.

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Again, DOUBLE POST for housekeeping purposes.

 

Haha, touche! So it is not in fact just to make money, but to control the price, in order to... (what exactly?) I have my take on this, but I'd like to hear yours.

Inflation expectations.

 

Now, that we have settled a possible motive, even if not necessarily (but possibly) malicious, then my continued brain-picking question to you would be: which mechanism does Fed use - gold lease, physical gold sales or paper derivatives for gold price manipulation? Which mechanism do you think/know the Fed uses and to what extent? I haven't read the GATA files so deeply, do you know if they have a statistical or some other guess about this?

There are numerous ways. You mention the important ones (chris_ct too). Again, difficult to prove, since almost no data is provided (just like TARP and all the other little/huge dirty secrets). Certainly GATA has more on it. Also:

 

http://en.wikipedia.org/wiki/Exchange_Stabilization_Fund

The U.S. Exchange Stabilization Fund [ESF] was established at the Treasury Department by a provision in the Gold Reserve Act of 31 January 1934. 31 U.S.C. § 5117. It was intended as a response to Britain's Exchange Equalisation Account[2]. The fund began operations in April 1934 [...]

 

A change in the law, in 1970, allows the Secretary of the Treasury, with the approval of the President, to use money in the ESF to "deal in gold, foreign exchange, and other instruments of credit and securities."[5]

 

Think about it: gold is the only real (i.e. tangible) asset central banks hold. Everything else they hold are paper promises, just like the ones they can issues themselves. Now, think of all these poor central banks who sold (almost) all of their gold. Like the BoE. All their paper is backed by, is just more paper. They would not be able to survive any critical situation without major gold purchases at possibly the least favourable prices. This is why many expect panic buying by central banks close to the peak in this cycle - just as it happened in 1980, only worse IMO.

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an interesting perspective from Stewart Thompson:

 

There's only one way to end the US dollar bear market. With a gold standard. The debt can never be repaid. The baby boomers just went into retirement mode. The "play today pay tomorrow" jig is up. Just as JP Morgan "saved" the Dow investors by buying the Dow for himself at a 90% discount after the 1929 wipeout, today's banksters have a similar plan to beat down the value of the US dollar and buy it in size after major weakness, just as they sold it in size at the top of the market. That's what a top is; one group of market players selling to another group. The Chinese Gman was one of those on the buy at the 2002 top. He'll bail at the bottom along with the rest of the dollar bag holders. After buying the dollars, the banksters will unveil a new gold standard. A panic IN to the dollar will occur, unleashing a massive bull market. At that point, US T-bonds will have collapsed and rates soared. The banksters will have dumped their gold on the public via central bank buying into the peak of the gold bull market. The bankers will buy US T-bonds featuring a gold-backed US dollar in a brand new bull market, while getting huge rates of real return, paid to them by the taxpayers of the world. Only gold, the US dollar, and bonds would rise as the new gold standard is put in place. All else could collapse as the United States' mini experiment with hyperinflation is ended with a new gold standard. Stock and commodity markets would crash to peanuts as the gold standard is, by definition, the ultimate "the buck stops here" statement of action, not talk. All commodities would disintegrate in price. All except GOLD.

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Double post

 

http://www.the-privateer.com/chart/gold-pf.html

 

Long-Term $US 5 x 3 Gold Chart - Since The 1982 Low

 

This chart is based on Comex spot future daily CLOSING Gold prices

 

Latest Update: Tuesday, October 13, 2009 - GOLD ABOVE $US 1065 - ALL TIME HIGH

 

The close above $US 1020 on September 16 (see below) is FOUR clear "Xs" above the $US 1000 double top on the chart set in March 2008 and February 2009. The entire bull market from its bottom is thereby re-validated.

 

The close above $US 1035 on October 6 is THREE clear "Xs" above the September 16 close. This signals the HIGH likelihood of an imminent surge in the $US Gold price.

 

This Chart is updated as the chart moves. The chart will not move as long as the spot future Gold price

closes between $US 1069.90 and $US 1050.10.

 

 

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Dollar falls again, but not through the floor and gold...not a lot.

 

Be careful when prices do not do what they 'should' given expected outcomes.

 

(Dow makes the 10 O'clock News. Excellent.)

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http://www.telegraph.co.uk/finance/persona...first-time.html

 

Harrods to sell gold bullion for first time

 

It is renowned for its glitzy clientele and upmarket Knightsbridge location, but shoppers at department store Harrods will from today be able to buy the ultimate luxury accessory – gold bars

 

From this morning, Harrods will start selling gold bullion and coins over the counter.

 

In a sign that the credit crisis has left his gilded customer-base largely untouched, Harrods owner Mohamed Fayed has teamed up with Produits Artistiques Métaux Précieux (PAMP), the Swiss refiner, to sell gold in the store.

 

Aimed at private investors, the gold will be sold at the Harrods Bank branch on the lower ground floor of the West London store.

 

Poor interest rates and falling property prices have left wealthy investors looking for alternative asset classes to put their money into. A weak dollar yesterday pushed the gold price to a record high of $1,072 an ounce.

 

Chris Hall, Head of Harrods Gold Bullion, said: "The financial environment has kindled a new demand for physical gold among private investors in Britain. For many people this is a new and unfamiliar asset class that demands absolute trust. Until now London has had no well-recognised name serving this market."

 

"Harrods saw the opportunity to help individuals buy physical gold in a prudent manner."

 

Mehdi Bakhordar, managing director of PAMP, said: "Harrods stock our full range and are now the only location in London where investors can purchase a 12.5kg gold bar 'off the shelf'."

 

Harrods, famed for its gold and green livery, has never sold bullion before.

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Reason to keep gold prices low

I'm not sure I agreed with the above on the reasons for keeping gold prices low, I think it's more basic.

 

My thought on the necessity to keep gold prices low is to maintain the facade that paper money has both stability and value. Paper money is relative but 1g of gold is 1g of gold and for some reason human nature has a way of fixing a value on it, maybe due to its exclusivity or collective value assessment, I don't really know, probably because someone can understand what 1g of gold is whereas if you ask them what a dollar acrtually is they wouldn't know. By keeping gold prices stable and low relative to the value of paper money, the vast majority of people are tricked into believing that paper money is also stable, controllable and understandable. If gold prices fluctuate and sky-rocket then I believe that the central bankers are worried that the subliminal link between gold value and paper value will be severed and people will realise that the management of the paper money is fundamentally flawed and therefore untrustworthy. I guess this is the main reason to keep gold low and stable - to maintain trust, that the paper is being managed correctly and this is demonstrated by the fact that the fundamental commodities accepted and understood by people world wide can be purchased at low price fluctuation. Gold is the prime commodity that measures this stability and 'trust' and therefore the central bankers will do all in their power to maintain stability.

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Dollar falls again, but not through the floor and gold...not a lot.

 

Be careful when prices do not do what they 'should' given expected outcomes.

 

(Dow makes the 10 O'clock News. Excellent.)

 

Yup, interesting moves yesterday. Silver failing at the $18 level, which you'd (I'd) think it should have cut though like a hot knife through butter. G/S ratio not making new lows either

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Yup, interesting moves yesterday. Silver failing at the $18 level, which you'd (I'd) think it should have cut though like a hot knife through butter. G/S ratio not making new lows either

One days action does not constitute failing at a level, we only just touched $18 yesterday early morning for a few hours. Everyone is so eager to jump on any gold/silver weakness at the moment.

 

 

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One days action does not constitute failing at a level, we only just touched $18 yesterday early morning for a few hours. Everyone is so eager to jump on any gold/silver weakness at the moment.

 

I see resistance at 17.92, 5th time silver has tested the level.

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