Gold prices

[Lestat]

People say that gold is the last ditch investment, when you think EVERYTHING is going in the shitter, you buy gold.

Well gold is skyrocketing. I believe it is due to armagedon an type mentality of investors. Domestic outlooks don't look good in the long term and there isn't anything overseas that can make up the difference.

Here are some theories.

- worries about a yield curve inversion
http://news.google.com/news?q=yield curve inversion


- worries about a national housing market crunch
http://angrybear.blogspot.com/2005/12/house-prices.html (which shows
boom seems to have ended, not that crunch is coming)


- worries about an unsustainable US budget deficit
http://www.chron.com/disp/story.mpl/front/3498189.html


- mixed worries about the trade deficit (don't seem as dire now as a
couple months back, though it has continued to broaden)
http://news.google.com/news?q=united+states+"trade+deficit"


- GM may be going down the tubes (but it's seemed that way for ages),
which is sort of a symbol/placeholder for worries about health care
costs and eminently-retiring BB gen.


OTOH, GDP is kicking tail (although I remember hearing somewhere that
real median wage has been declining, but can't find the
article/numbers), gas seems to have come down, so you can put on any
color of tinted glasses you want and see what you like. But like you
said, seems like a lot of people are putting on their armageddon
glasses.


I'm allergic to gold as an investment because there seem to be some very
strange ideas about it and I really try not to buy into things when
they're at their peak historic price, but I figure if things are going
to go poorly in the U.S., I should expand my international exposure. I
did that about a year ago and it hasn't worked too well. I'm still
bearish on the U.S. in the short term though so I'll stick with the plan
for a while.

 

[Lestat]

There are hardly any simple explanations when it comes to economics. But generally gold prices are correlated very well with inflation.


When the Fed had interests rate at historic lows, real interest rate ( interest rate - inflation) turned negative. When this happens it means money is losing its value, so the gold prices increased. At around 4% interest rate, real interest rate turned positive for a while. But from Sep/Oct CPI inflation data (around 5% inflation), even with high interest rate, the real interest rate again turned negative. This partially explains the run-up in gold.

 

[gotmilk]

Depressed gold prices are signs of a good economy B. In fact, cheaper gold prices makes borrowing much easier. Banks obtain cheap bullion and resell it creating cheap cash to lend.

A depressed gold price gives the impression of a strong dollar as the international reserve currency and distracts from inflation in the USA.

It also needs a low greenback because the euro needs to be torpedoed if the dollar-reserve system is to have any chance at survival. The Euro is a stabilized currency.

The United States needs its currency to fall in order to attract foreign manufacturing to the US to make up for the jobs lost to China - a new trend that most people are not even aware of. We need cheap money to lure foreign companies to the United States. Cheap money creates expansion and growth.

Larger banks like JP Morgan shorted against bullion reserves back in 2002. They figured gold was a losing commodity because people prefer cash, stocks, bonds...not gold. The problem was, shorting only works when others are not going long.

The Chinese went long. They bought every fucking thing they could buy and now are demanding delivery.

With stocks, you get a margin call and you simply buy stock to cover..or keep adding cash to cover your margin call.

With gold, you need bullion and there is only 33,000 tonnes worldwide in the central banks. The shorts were squeezed over the last year.

 

[PolfaJelfa]

Depressed gold prices are signs of a good economy



Very well put.
I would buy bullion when the economy is great....and sell at times of disasters, etc. 9/11 type events that hopefully will be rare to none. Thats when the market typically plunders, there is uneasiness and financial caos and everyone wants to scure their investments buy buying something that has real value. And not simply on paper which is truly worthless.

 

[bdog527]

GLD is an inflation play. The gov't. is printing and spending money like crazy just look at the M3. I've been heavily invested in the Vanguard Precious Metals Fund for several years and the GLD most recently with great returns. Although it may be time to cash out, as long as our fiscal policy continues I will maintain at least a minor position long.

 

[PolfaJelfa]

What do you think about 1000$ for gold in 2010
I have seen some predictions as high.....?

 

[bdog527]

Hell gold could go to 1000 by the end of the year for all I know. I'm not a gold bug by any means, just following a trend. I took some profits today and will probably watch with a close eye on the rest. Gold and other metals have had a huge run and there are a lot of guys out there who are much more intelligent than I who say it still has a ways to go. They cite things like foreign demand, excess money supply, too much money chasing too few investments. I wouldn't chase it at this price level but what the hell do I know.

 

[PolfaJelfa]

By the current trends it looks to go that high especially after a large scale event.

 

[Mr.X]

I would buy bullion when the economy is great....and sell at times of disasters, etc. 9/11 type events that hopefully will be rare to none. .

That makes absolutely no sense bro, you have it backwards. You buy during the start of hard times/end of good times and wait until the next dip in the economic cycle to sell. Usually inflationary and economic cycles push the price of gold up or down. During good times, where there are no economic or inflation worries, gold prices tend to drop and vise versa. I bought gold at $290 during 'good times', now my oz. is worth $530 +/- in the asian market.

I can see gold going to $1000+ if oil prices go up and economic instability in the USA continues.

 

[PolfaJelfa]

That is exactly what i said bro....
I think you must have read my post wrong...

I also have gold in my portfolio.....bought for 273$/oz when gold was at an all time low. What i meant is if you wanted to cash in on it....into another fund....its value will be realy high when there is financial unstability....like i said "bad times".
This is what i meant. You would never want to buy gold to make an investment at bad times as that is when the price is high. People are willign to loose money in order to have security.

 

[Mr.X]

That is exactly what i said bro....
I think you must have read my post wrong...

I also have gold in my portfolio.....bought for 273$/oz when gold was at an all time low. What i meant is if you wanted to cash in on it....into another fund....its value will be realy high when there is financial unstability....like i said "bad times".
This is what i meant. You would never want to buy gold to make an investment at bad times as that is when the price is high. People are willign to loose money in order to have security.

ok, you should have explained it above, sounded like you're suggesting a dip-investment in gold.

 

[PolfaJelfa]

P/J "I would buy bullion when the economy is great....and sell at times of disasters, etc. "

X..You buy during the start of hard times/end of good times and wait until the next dip in the economic cycle to sell. Usually inflationary and economic cycles push the price of gold up or down. During good times, where there are no economic or inflation worries, gold prices tend to drop and vise versa. I bought gold at $290 during 'good times', now my oz. is worth $530 +/- in the asian market.

I can see gold going to $1000+ if oil prices go up and economic instability in the USA continues


Now u see?

 

[Mr.X]

P/J "I would buy bullion when the economy is great....and sell at times of disasters, etc. "

Now u see?

I thought you were implying an investment buy, not a buy to short and sell.

 

[sawastea]

Ticker: Gg

 

[PolfaJelfa]

 

[PolfaJelfa]

Sawastea..whats with no goggles? Thats your trademark.