Gold

[Naam]

Nope..not really about gold but about arbitrage between THB & THO

We all know by now after numerous postings in this forum about the ridiculous 15 percent spread on baht notes outside the Kingdom.....ridiculous as no other strong and stable currency in the world has such a huge spread...

i don't see a possibility to use that spread because the selling rate of Baht notes is ridiculously high above the mid rate as the buying rate is ridiculously low. and if you sell bullion against foreign currency the margin of presently 3-5% (depending what currency) is much too low to cover travelling expenses, gold price margin and forex buy/sell margin to yield a profit.

perhaps i do not understand your theory completely. care to elaborate?

[cclub75]

perhaps i do not understand your theory completely. care to elaborate?

Yep. Me too I've got problem to understand.

The idea :

-in Thaland, you buy 2 bath of gold = 2x11 170 THB (see price, here, for 99.9 % gold bullions)

(1 bath = 15,3 grams, half of a troy ounce[31.1 grams exactly])

At that time, if you convert in USD (on shore rate) the theoritical value of your ounce is 646USD (1 USD = 34.56 THB today)

-outside Thailand now: you sell your ounce, and you get like 660 USD (the fixing yesterday)

Is that your plan ? For such little margin ?

Edited August 30, 2007 by cclub75

[Carmine6]

perhaps i do not understand your theory completely. care to elaborate?

Yep. Me too I've got problem to understand.

The idea :

-in Thaland, you buy 2 bath of gold = 2x11 170 THB (see price, here, for 99.9 % gold bullions)

(1 bath = 15,3 grams, half of a troy ounce[31.1 grams exactly])

At that time, if you convert in USD (on shore rate) the theoritical value of your ounce is 646USD (1 USD = 34.56 THB today)

-outside Thailand now: you sell your ounce, and you get like 660 USD (the fixing yesterday)

Is that your plan ? For such little margin ?

Wait, isn't it more like (15.3/31.1)*2 = 98.392% of $660 or $649.39

Wire back to Thailand (for free), get back on the plane (for free), come back to Thailand and have $649.39 X 34.20B/$ = 22,209.14 baht. Divide by 2 to get 11,104.57 for each baht of gold.

[jonjon]

HI

Nope..not really about gold but about arbitrage between THB & THO

We all know by now after numerous postings in this forum about the ridiculous

15 percent spread

on baht notes outside the Kingdom.....ridiculous as no other strong and stable currency in the world has such a huge spread...

i don't see a possibility to use that spread because the selling rate of Baht notes is ridiculously high above the mid rate as the buying rate is ridiculously low. and if you sell bullion against foreign currency the margin of presently 3-5% (depending what currency) is much too low to cover travelling expenses, gold price margin and forex buy/sell margin to yield a profit.

perhaps i do not understand your theory completely. care to elaborate?

Hi Doc

Here´s the theory.

The rate difference between THO and THB has varied beween 4 and 15 percent over the past six months. No profit is to be made by arbitrage using Thai banknotes because nobody outside Thailand will pay anywhere near the true THB rate for Thai banknotes..

So Thai banknotes cannot be used to arbitrage on the two rates.

So instead of baht currency notes we use gold acquired through the use of these notes,to arbitrage between the rates.

Therefore as long as the Thai gold market is fixing their price based on the THO or onshore price and not the THB , the offshore rate, we should be able to arbitrage .

Gold bars and Krugerrand both of which you say are available in Yaoarat/Chinatown unlike baht notes, will not be discriminated and downgraded the way Thai banknotes are outside Thailand now. The full price less a tiny commission is what Singapore or London would pay for stamped 999 bars or Krugerrands

(Lets forget about gold in any form other than fine gold or Krugers )

So will it work Doc ?

[Carmine6]

HI

Nope..not really about gold but about arbitrage between THB & THO

We all know by now after numerous postings in this forum about the ridiculous

15 percent spread

on baht notes outside the Kingdom.....ridiculous as no other strong and stable currency in the world has such a huge spread...

i don't see a possibility to use that spread because the selling rate of Baht notes is ridiculously high above the mid rate as the buying rate is ridiculously low. and if you sell bullion against foreign currency the margin of presently 3-5% (depending what currency) is much too low to cover travelling expenses, gold price margin and forex buy/sell margin to yield a profit.

perhaps i do not understand your theory completely. care to elaborate?

Hi Doc

Here´s the theory.

The rate difference between THO and THB has varied beween 4 and 15 percent over the past six months. No profit is to be made by arbitrage using Thai banknotes because nobody outside Thailand will pay anywhere near the true THB rate for Thai banknotes..

So Thai banknotes cannot be used to arbitrage on the two rates.

So instead of baht currency notes we use gold acquired through the use of these notes,to arbitrage between the rates.

Therefore as long as the Thai gold market is fixing their price based on the THO or onshore price and not the THB , the offshore rate, we should be able to arbitrage .

Gold bars and Krugerrand both of which you say are available in Yaoarat/Chinatown unlike baht notes, will not be discriminated and downgraded the way Thai banknotes are outside Thailand now. The full price less a tiny commission is what Singapore or London would pay for stamped 999 bars or Krugerrands

(Lets forget about gold in any form other than fine gold or Krugers )

So will it work Doc ?

I think cclub75 did the math for you.

[Naam]

The rate difference between THO and THB has varied beween 4 and 15 percent over the past six months.

The full price less a tiny commission is what Singapore or London would pay for stamped 999 bars or Krugerrands

(Lets forget about gold in any form other than fine gold or Krugers )

So will it work Doc ?

no Jonjon it won't. the 12-15 percent rate differential is long gone and we are looking now at 3.50 to max 5.00%. moreover, the "tiny" commission is not that tiny but (depending on the volume between 2 up to 8%) and to use the lower marging you would have to buy/sell at least 1kg of 999 bullion.

doing the maths is rather easy. assuming the exchange rate difference is 5% your gross profit is 3%, i.e. 1kg of gold (32.15 troy ounces, assumed purchase price USD 665, onshore rate 33.24) will cost onshore THB 710,663 and will yield THB 21,000 from which sum travelling cost have to be paid.

on top of that you are running the risk that the gold price fluctuates and your gross profit is wiped out completely.

please forgive me that i destroyed a dream

[jonjon]

Thanks, Doc for the excellent review of my idea.

Its good to see you fully understand the plan and I agree wholeheartedly that with the 3-4 percent current differential it will not be profitable unless huge amounts are traded..

Please remember however that my plan was only formulated about one month ago when the differential was around 12 percent as evidenced by a posting on this forum at the time.

There is no reason why the gap in rates could not open up again to say ten percent.

Earlier in the year the gap narrowed and you Doc posted here at the time a chart showing the rates converging yet a short while later the gap opened up again wider than ever !!

Singapore being but a few hours flying time away once the rate widens again one could in theory do the whole deal in a working day and make a very nice profit.

In addition someone with an account in Singapore and funds to cover any loss could sell forward over the phone and deliver the next day

Nevertheless two questions remain unanswered

1. Are these bullion bars / Krugerand available in Yaoarat at a price commensurate with the onshore THO rate and traded with a small spread of just 1-2 percent ?.

2 Is the private export of bullion from Thailand permitted ?

To be prepared for the widening of the rate gap, one should really have the answer the two questions above now as time may be of the essence should one wish to taken advantage of the situation should it arise again..

.

The rate difference between THO and THB has varied beween 4 and 15 percent over the past six months.

The full price less a tiny commission is what Singapore or London would pay for stamped 999 bars or Krugerrands

(Lets forget about gold in any form other than fine gold or Krugers )

So will it work Doc ?

no Jonjon it won't. the 12-15 percent rate differential is long gone and we are looking now at 3.50 to max 5.00%. moreover, the "tiny" commission is not that tiny but (depending on the volume between 2 up to 8%) and to use the lower marging you would have to buy/sell at least 1kg of 999 bullion.

doing the maths is rather easy. assuming the exchange rate difference is 5% your gross profit is 3%, i.e. 1kg of gold (32.15 troy ounces, assumed purchase price USD 665, onshore rate 33.24) will cost onshore THB 710,663 and will yield THB 21,000 from which sum travelling cost have to be paid.

on top of that you are running the risk that the gold price fluctuates and your gross profit is wiped out completely.

please forgive me that i destroyed a dream

[Naam]

Nevertheless two questions remain unanswered

1. Are these bullion bars / Krugerand available in Yaoarat at a price commensurate with the onshore THO rate and traded with a small spread of just 1-2 percent ?.

2 Is the private export of bullion from Thailand permitted ?

i am not qualified to answer these questions and can only confirm that a few years ago gold bars of international standard (stamped Credit Suisse) were available in Bangkok as i bought some for a special purpose. at that time Krüger-Rand coins were available too.

unfortunately i don't live in Bangkok to clarify that specific question for you.

whether the export of bullion from Thailand is permitted i can only take a wild guess and say no.

[lannarebirth]

Haven't got an opinion on gold as an investment, but it looks as though it's about to break out in a big way. Probably going to mean something for currencies.

http://stockcharts.com/h-sc/ui?s=GLD&p...id=p48441000379

Edited September 7, 2007 by lannarebirth

[joeuk1]

Point taken, it would be a different story if I'd bought, say, in December 1998 and sold it now

So are all these people in Thailand (and elsewhere) buying gold and sticking it in their 'safe' misguided?

people who hold "some" gold as investment are definitely not misguided. it's also a matter of individual investor's taste what percentage of total net to hold in gold.

personally i like gold very much... around the neck, the wrists and the fingers of my wife.

In a balanced porfolio, gold (generally stock in gold producers) has a place of perhaps 5%. The trouble with gold bugs is that they a have been prepetually telling anyone who will listen that the world is coming to an end or a depression worse than the 1930's is just around the corner. Back in the spring of 2006 when gold hit $725/ounce all the gold bugs were touting that in less than a year we would see $1000/ounce gold and that $2000/ounce gold would not be far off, of course gold is currently trading at around $660-$670/ouunce, so not only would you have lost money in gold but while you were losing your money you wouldn't have been earing any interest or dividends. Gold bugs are usually right about once per decade, hel_l even a broken watch has the correct time twice per day

Looks like the bears may get there <deleted> handed to them again 660-70 no more

Trading 703-04

Happy days

JB

[LaoPo]

Haven't got an opinion on gold as an investment, but it looks as though it's about to break out in a big way. Probably going to mean something for currencies.

http://stockcharts.com/h-sc/ui?s=GLD&p...id=p48441000379

I agree.

Asia, Europe and now the US is quite heavy in the RED today.

Investors are nervous about where to put their moves/money in stocks.

The news in the US about negative, and unexpected, employment data is sending the indexes down, increasing the fear for recession:

U.S. Employment Declines for First Time Since 2003

http://www.bloomberg.com/apps/news?pid=206...&refer=news

"None of the analysts foresaw a decline (August: down 4.000 jobs) , as predictions ranged from 35,000 to 140,000 (UP)."

Good for gold (and silver!).

LaoPo

[AlexLah]

Well it seems gold has broken the 700 barrier.

From the moment I commented you should go for gold you could have made a nice profit in just a few weeks when you sold now.

I keep holding my gold as the price will rise within this year.

Gold will go up to 13000 Bath end of this year.

Alex

I told my friend (who has a lot of money in the bank) to purchase gold two weeks ago when the price was something like 10.700.

She could have made more then 40.00 Bath in just two weeks, but I guess that is just small money for her.

Edited September 8, 2007 by AlexLah

[pointofview]

I'm watching a report on channel 7 about gold theft & fraud and it started me thinking about gold...

My partner told me that when she was young her aunt used to buy 1 Baht of gold for about B800 but now it's worth B12-15,000(I've no idea!)

I asked her if she thought gold would ever decrease in value but she didn't think so...

I can't stand the stuff, I think it looks cheap, especially if I see a lot of it draped over someones neck or rattling around some wannabe-Hi-So's wrist, anyhow...

Is it worth investing in gold? buying the odd solid bracelet or even tiny bullion and keeping it somewhere VERY safe, like in my old shoes

Gold has had its day, it is currently dropping like a rock and with a worldwide recession as a very real possibility and deflation along with it, gold is the last place you want to be.

What planet you on? Gold is at an all time high. I bought gold kruggerands (1oz) a year ago for £220 and they sell all day long for £360 today.

Few facts:

1) The US dollar used to be backed by gold until 1971 2) when the US dolar collapses gold will rocket.

3) The Fed bank produce as many US dollars as they wish and then loan them to US banks with interest. 4) The Fed is a private company - law unto themself.

[Martin]

"... deflation along with it, gold is the last place you want to be...."

I completely disagree with that statement.

I doubt if we are going to see deflation, except in real terms for luxury goods. (A diamond-encrusted skull comes to mind.)

We are more likely to see trotting inflation in dollar terms for foods, and possibly for fuels, along with galloping inflation in real terms for those essentials.

But, even if deflation comes, gold is still the safest thing to have, after productive land.

In steady times, the fact that one's gold holding earns no interest makes gold unattractive to hold beyond maybe 20% of one's portfolio. (That is, as an 'insurance policy' against being caught out by unforeseen massive change.)

But in changing times, gold (in bars, not in jewelry) is the way to guard, as best one can, against losing what you want to keep saved.

Gold seems quite cheap at present, though it has risen from where it was three years ago. The signs are that the China and Russia governmental central banks are buying it as much as they can do without causing a great upward surge in its price. Presumably this is part of their strategy to position themselves for when the dollar is no longer the reserve currency.

If those signs are right, that puts a 'floor' under the price of gold, whereas house selling prices (even if there are buyers), stocks, and even bonds, never have a 'floor' beneath them.

Other people may go righter by shrewd gambling on the stock market; but with no downside risk and the chance of considerable upside gain, I don't think one can go wrong by putting one's savings into those heavy little bars of gold and keeping them there till they pass to the next generation (or till one feels like SKIing---spending the kids' inheritance!).

However, with gold, if you have it, DON'T flaunt it!!!

Edits: for mis-spellings.

Edited September 9, 2007 by Martin

[cclub75]

"... deflation along with it, gold is the last place you want to be...."

I completely disagree with that statement.

I doubt if we are going to see deflation, except in real terms for luxury goods. (A diamond-encrusted skull comes to mind.)

We are more likely to see trotting inflation in dollar terms for foods, and possibly for fuels, along with galloping inflation in real terms for those essentials.

I think your message shows the core of the core of the problem.

We are lost, because we have to aknowledge that... we have signals and datas, in the same time, of both ! Of both inflation AND deflation.

This makes the current situation new and really disturbing.

To make it quick : I agree with you : inflation on food, energy. But also powerfull deflation on a lot of manufactured goods (thanks to China) and also a lot of assets (real estate, bubbles everywhere, that are going to crash).

We can reformulate : the deflation would lead to a recession (or at last a zero growth), and inflation to higher prices.

Therefore : it could be.... "stagflation".

But I think that the state of "stagflation" will come later. Right now, we are at a previous stage, with both concepts inflation and deflation valids in the same time.

So ? And what to think about gold ? I think we should not forget the "currency problem" we have... Basically fiat moneys are now... toilet paper. Therefore, and even if a deflation could hurt the price of gold (like other many other assets), I think it will still have a value.

[Naam]

let's buy GOLD. perhaps we are luckier than those who bought Gold nearly THREE DECADES ago and never saw a single penny profit. Gold never loses it's value! it might fall from >800 dollars (1979) to 250 dollars (1998) per ounce but the "value" remains.

you don't believe me?

ask your wife, girlfriend, grandma or our esteemed and learned goldbug AlexLah

[pointofview]

It Is OK Dr. Naaam please tell all of us with what you got a bigger yield, na. Or is that your big litlle secret?

Alex, since nearly three decades i am an investor in a rather small and specific niche of the markets and that is emerging market bonds. until a couple of years ago i held only sovereign debtors, then i switched to corporates. believe me that the results beat investing in gold hands down although this year i am looking (more or less) at red figures only. but something similar happened to gold. an ounce was 669 dollars on 2nd of january and today's price is 657 dollars. so... where's the beef?

the problem with gold is that there is no cash coupon paid twice a year. to make a living you need the price to go up continously, sell a part for cash which the wife needs to buy food and drinks in Tesco and Carrefour and to pay for your other daily expenses (not to forget the mia noi).

An ounce of Gold would get you a good suit 200 years ago same applies today. Where as 200 years ago $1 would get you a good suiit and today $700. So even a simple startrek freak should beable to see that gold keeps its value where as the dollar loses and loses and will be worthless in time

PS when ever there is a crisis stocks and currencys take a dive - gold rockets (on earth)

Edited September 9, 2007 by pointofview

[Naam]

An ounce of Gold would get you a good suit 200 years ago same applies today. Where as 200 years ago $1 would get you a good suiit and today $700. So even a simple startrek freak should beable to see that gold keeps its value where as the dollar loses and loses and will be worthless in time

you can't pay for your living expenses holding Gold. the last fifty years are proof enough for my claim. whether the dollar loses and loses and perhaps becomes worthless is irrelevant because other currencies do exist... so i've been told. and if you are telling me that Gold has kept its value from 1979 to 1998 you should buy reading glasses and look at the graph again.

[Martin]

Actually, that spike to US$800+ in 1979 is misleading. It happened at the time of panic-buying on the invasion of Afghanistan, but very little was sold. As soon as profit-taking kicked in, the price became sensible again.

Quoting, from 'cclub': "Basically fiat moneys are now... toilet paper...."

We have to hope and pray that faith in fiat money is only shaken, and not stirred to the extent of the collapse of today's fiat monies.

I know there are historical precedents; but, if it happened this time, the urban peoples of the world could not sort out a bartering lifestyle without horrendous pain.

The Isaan villages could just manage to do it, and cope with the flood of economic refugees from Bangkok, Rayong, the resorts etc. Rice is still a day-to-day currency in the villages, alongside coins and paper.

But, for most of the world, collapse of faith in fiat monies would be horrendous.

We would live in horrible times.

[lannarebirth]

let's buy GOLD. perhaps we are luckier than those who bought Gold nearly THREE DECADES ago and never saw a single penny profit. Gold never loses it's value! it might fall from >800 dollars (1979) to 250 dollars (1998) per ounce but the "value" remains.

you don't believe me?

ask your wife, girlfriend, grandma or our esteemed and learned goldbug AlexLah

I bought my first house in 1979 for $34,500. I drove by it about 5 years ago before the real estate bubble got up to speed, and saw it was on the market for $219,000. Not bad returns.

[Martin]

"I bought my first house in 1979 for $34,500. I drove by it about 5 years ago before the real estate bubble got up to speed, and saw it was on the market for $219,000. Not bad returns."

Agreed, if somebody was buying a much cheaper property upon retirement.

But if they were moving on to something similar, it is a different story.

That was 5 years ago, so they probably got a buyer.

I remember how similar circumstances to the present around 1991 just froze up the UK house market for a few years.

In early 1991, we put my Mother's house on the market after she had a stroke, and we needed the capital for nursing home fees.

Sensibly priced then at 76k, it just sat, along with several more on the same street.

We brought the price down and there were those who would have liked to buy it, but still no joy as none of them could sell their own in order to buy from us.

The market began to move a bit in 1994, and we were glad to take 54k.

Last year, those were selling at around 154k. But now? and later??

[sonicdragon]

All I can say (again) is that gold (and other precious metals) deserve a place in a balance portfolio. That it has intrinsic value is beyond argument, which is not true of any fiat currency. As a very long-term owner of gold for investment in various forms, it gives me a certain sense of security, and even when I see it decline it doesn't matter to me at all because when gold is out of faviour other asset classes are usually doing extremely well. Such is the nature of diversification.

I fear the day when global widespread deflation takes hold. At least I own land (although I'd better sell up and buy something on higher ground since I also fear global warming / rising sea levels)

edit: typo

Edited September 9, 2007 by sonicdragon

[VegasVic]

Actually, that spike to US$800+ in 1979 is misleading. It happened at the time of panic-buying on the invasion of Afghanistan, but very little was sold. As soon as profit-taking kicked in, the price became sensible again.

Quoting, from 'cclub': "Basically fiat moneys are now... toilet paper...."

We have to hope and pray that faith in fiat money is only shaken, and not stirred to the extent of the collapse of today's fiat monies.

I know there are historical precedents; but, if it happened this time, the urban peoples of the world could not sort out a bartering lifestyle without horrendous pain.

The Isaan villages could just manage to do it, and cope with the flood of economic refugees from Bangkok, Rayong, the resorts etc. Rice is still a day-to-day currency in the villages, alongside coins and paper.

But, for most of the world, collapse of faith in fiat monies would be horrendous.

We would live in horrible times.

Martin, you should know by now that with the gold bugs the world is always coming to an end and gold is going to $1000/ounce, $2000/ounce, heck I have even seen predictions for $5000/ounce. One of the posters here a few posts back stated that gold just hit an all time high (just goes to show the blind ignorance and hyping that goes on with this commodity), apparently not realizing that gold traded in the upper $720's as recently as May of 2006, and of course the all time high was as you pointed out over $800/ounce back in the late 70's (lets see know adjusted for inflation that would be well in excess of $2500/ounce today). I will add two things here, they are that the $800/ounce gold back in the 70,s was indeed an abberation, but if memory serves correct it was due more to the Hunt brothers trying to corner the world silver market than the invasion of Afghanistan, the second thing is that the current blip in gold prices is just a technical situation that could wind up touching the highs of May 2006, before the eventual downturn begins. For anyone out there who is not well versed in the gold market and is thinking of buying in at these inflated levels, I will leave you with a classic quote about the gold market- "Gold takes the stairs up and the elevatoer down" Caveat Emptor!

[Martin]

"Gold takes the stairs up and the elevator down. Caveat Emptor!"

We are in complete agreement on the above, Vic.

I 'leave the upper storeys of the building' to others-----they are nowt but a casino---- and get on with other things in the basement.

My wife has given up getting up from watching television and coming to tell me what the 'Noo' says about the price of gold.

She used to come to me with a smile and tell me that it was up, and I would tell her that that didn't help us, as we weren't selling any.

Then she would come with a frown, and say it was down, and I would tell her that that might be a buying opportunity, but what bit of spare money we had this month wasn't available to buy gold, as I had my credit card to pay off first.

But if any rice fields adjoining ours came up for sale, I would immediately be looking at the price of gold and doing a sum to work out how many of the heavy little bars would have to be taken to the gold shop!!

(That would be SKIing, too. But meaning: "Safeguarding the Kids Inheritance".)

As the old farmers said: "Nowt grows on gold", and "Soil under thi boot is better than money in t' bank".

[Naam]

1. the all time high was as you pointed out over $800/ounce back in the late 70's (lets see know adjusted for inflation that would be well in excess of $2500/ounce today).

2. I will add two things here, they are that the $800/ounce gold back in the 70,s was indeed an abberation, but if memory serves correct it was due more to the Hunt brothers trying to corner the world silver market than the invasion of Afghanistan

1. that something like inflation exists is quite often forgotten.

2. correct. gold made already a big move in summer 1978, 1½ years before Afghanistan. since that time gold could never beat inflation.

my problem with gold is that it does not "work". i have worked hard to make some money and now i expect that hard earned money to work for me. not in six months or in a year or several years but NOW, every day and every hours that passes.

buying gold or any other assets with only the expectation that it will go up is against my principles. of course i like it when my assets rise in price but basically i am content clipping coupons once, twice and with some of the bonds i hold four times a year.

[sonicdragon]

1. the all time high was as you pointed out over $800/ounce back in the late 70's (lets see know adjusted for inflation that would be well in excess of $2500/ounce today).

2. I will add two things here, they are that the $800/ounce gold back in the 70,s was indeed an abberation, but if memory serves correct it was due more to the Hunt brothers trying to corner the world silver market than the invasion of Afghanistan

1. that something like inflation exists is quite often forgotten.

2. correct. gold made already a big move in summer 1978, 1½ years before Afghanistan. since that time gold could never beat inflation.

my problem with gold is that it does not "work". i have worked hard to make some money and now i expect that hard earned money to work for me. not in six months or in a year or several years but NOW, every day and every hours that passes.

buying gold or any other assets with only the expectation that it will go up is against my principles. of course i like it when my assets rise in price but basically i am content clipping coupons once, twice and with some of the bonds i hold four times a year.

1. And it is systematically understated.

2. It is not outside the realms of possibilities that gold makes the same kind of move that it did in the 70's. Obviously that's what the "gold bugs" want us to believe.

I am not a gold bug, but as I keep saying I do think that it deserves a place in a balanced portfolio.

I like to look at things with as objective a view as possible. I hardly ever consider an outcome as "impossible" in the way that many gold bears will put down the bulls arguments and vice-versa. That doesn't make sense. Unlikely things happen. So, ascribing some (low) probability to the sky falling (and also to the fed easing followed by a dramatic sustained rally in global equities and bonds along with low inflation) I balance my porfolio accordingly.

[VegasVic]

1. the all time high was as you pointed out over $800/ounce back in the late 70's (lets see know adjusted for inflation that would be well in excess of $2500/ounce today).

2. I will add two things here, they are that the $800/ounce gold back in the 70,s was indeed an abberation, but if memory serves correct it was due more to the Hunt brothers trying to corner the world silver market than the invasion of Afghanistan

1. that something like inflation exists is quite often forgotten.

2. correct. gold made already a big move in summer 1978, 1½ years before Afghanistan. since that time gold could never beat inflation.

my problem with gold is that it does not "work". i have worked hard to make some money and now i expect that hard earned money to work for me. not in six months or in a year or several years but NOW, every day and every hours that passes.

buying gold or any other assets with only the expectation that it will go up is against my principles. of course i like it when my assets rise in price but basically i am content clipping coupons once, twice and with some of the bonds i hold four times a year.

1. And it is systematically understated.

2. It is not outside the realms of possibilities that gold makes the same kind of move that it did in the 70's. Obviously that's what the "gold bugs" want us to believe.

I am not a gold bug, but as I keep saying I do think that it deserves a place in a balanced portfolio.

I like to look at things with as objective a view as possible. I hardly ever consider an outcome as "impossible" in the way that many gold bears will put down the bulls arguments and vice-versa. That doesn't make sense. Unlikely things happen. So, ascribing some (low) probability to the sky falling (and also to the fed easing followed by a dramatic sustained rally in global equities and bonds along with low inflation) I balance my porfolio accordingly.

OK Sonic, I will agree with you that a well balanced portfolio should have around 5% exposure to gold, but as far as your #2 goes, gold has already had its move form the upper $300's to around $700 currently and I don't expect the Hunt brothers to come back from the grave and try and corner the silver market again so its looking like the elevator could be heading down soon! Over the last 4 years many large hedge funds and currency traders have followed the lead of George Soros and shorted the U.S. dollar and gone long on gold, this arbitrage bet was very sweet for those who played it, but it has seen its best day and should the dollar go into even a mild strengthening trend then gold will drop so fast it will literally make your head spin. There are two things to consider when thinking about gold objectively as an investment: (1) Is the actual demand rising? The short answer is NO, especially when you look at industrial demand which now accounts for less than 12% of annual gold production and is actually falling and then when you look at dentistry and the innovations in composite materials, gold could soon become obsolete (except for the dentists working on Rap artists). (2) What is the supply of gold? Nearly endless. Take into consideration the fact that gold is not like many other commodities like say oil, when the last barrel of oil is pumped from the ground there will be no more oil on the planet available, but when the last ounce of gold is taken from the ground there will still be every ounce of gold ever mined in the history of the world available because gold is non corrosive and does not deteriorate in any way. Of course new gold mines are coming on line all the time and as the price has been rising over the last 4 years many companies reopened mines that were not profitable at say $375/ounce gold but are very profitable at say $650/ounce gold, so when the price is right there is and will continue to be a lot of supply out there. Now that the Chinese have a robust middle class and a booming economy they have been buying gold up like there is no tomorrow and that coupled with the dollar-gold arbitrage is why gold is where it is today, but if things were to slow down (or crash) in China and/or if the dollar strengthens then all I have got to say is that I for one don't want to be on that elevator ride down

[lannarebirth]

Markets like to make the most people wrong. It would not surprise me at all to see Gold and the $USD rise or fall together in the not too distant future.

[sonicdragon]

1. the all time high was as you pointed out over $800/ounce back in the late 70's (lets see know adjusted for inflation that would be well in excess of $2500/ounce today).

2. I will add two things here, they are that the $800/ounce gold back in the 70,s was indeed an abberation, but if memory serves correct it was due more to the Hunt brothers trying to corner the world silver market than the invasion of Afghanistan

1. that something like inflation exists is quite often forgotten.

2. correct. gold made already a big move in summer 1978, 1½ years before Afghanistan. since that time gold could never beat inflation.

my problem with gold is that it does not "work". i have worked hard to make some money and now i expect that hard earned money to work for me. not in six months or in a year or several years but NOW, every day and every hours that passes.

buying gold or any other assets with only the expectation that it will go up is against my principles. of course i like it when my assets rise in price but basically i am content clipping coupons once, twice and with some of the bonds i hold four times a year.

1. And it is systematically understated.

2. It is not outside the realms of possibilities that gold makes the same kind of move that it did in the 70's. Obviously that's what the "gold bugs" want us to believe.

I am not a gold bug, but as I keep saying I do think that it deserves a place in a balanced portfolio.

I like to look at things with as objective a view as possible. I hardly ever consider an outcome as "impossible" in the way that many gold bears will put down the bulls arguments and vice-versa. That doesn't make sense. Unlikely things happen. So, ascribing some (low) probability to the sky falling (and also to the fed easing followed by a dramatic sustained rally in global equities and bonds along with low inflation) I balance my porfolio accordingly.

OK Sonic, I will agree with you that a well balanced portfolio should have around 5% exposure to gold, but as far as your #2 goes, gold has already had its move form the upper $300's to around $700 currently and I don't expect the Hunt brothers to come back from the grave and try and corner the silver market again so its looking like the elevator could be heading down soon! Over the last 4 years many large hedge funds and currency traders have followed the lead of George Soros and shorted the U.S. dollar and gone long on gold, this arbitrage bet was very sweet for those who played it, but it has seen its best day and should the dollar go into even a mild strengthening trend then gold will drop so fast it will literally make your head spin. There are two things to consider when thinking about gold objectively as an investment: (1) Is the actual demand rising? The short answer is NO, especially when you look at industrial demand which now accounts for less than 12% of annual gold production and is actually falling and then when you look at dentistry and the innovations in composite materials, gold could soon become obsolete (except for the dentists working on Rap artists). (2) What is the supply of gold? Nearly endless. Take into consideration the fact that gold is not like many other commodities like say oil, when the last barrel of oil is pumped from the ground there will be no more oil on the planet available, but when the last ounce of gold is taken from the ground there will still be every ounce of gold ever mined in the history of the world available because gold is non corrosive and does not deteriorate in any way. Of course new gold mines are coming on line all the time and as the price has been rising over the last 4 years many companies reopened mines that were not profitable at say $375/ounce gold but are very profitable at say $650/ounce gold, so when the price is right there is and will continue to be a lot of supply out there. Now that the Chinese have a robust middle class and a booming economy they have been buying gold up like there is no tomorrow and that coupled with the dollar-gold arbitrage is why gold is where it is today, but if things were to slow down (or crash) in China and/or if the dollar strengthens then all I have got to say is that I for one don't want to be on that elevator ride down

I'm not investing in gold because I think the price is going up. I'm investing in it because it has intrinsic value, is reasonably liquid, is a hedge against disaster scenarios and provides diversification.

On another note, I don't care about the price of gold in US$ since I'm not based in the USA. If anything I care more about the relative values of gold some other commodities that I am involved with.

I also don't care whether the price has gone up a lot. It can always go up more, and trying to rationalise the "right price" is a waste of time and energy. And, as I said already, I am well aware that it can go down too, and I don't care about that either (reasons already given).

Your arguments seem to go against the idea of holding gold at all, so I wonder why you think a balanced portfolio should have 5% of gold in it, rather than none ? ? And why around 5% ? Why not 4% or 6% ? 2% or 12% ? And why stop with gold ? What about platinum and silver ?

[Naam]

Your arguments seem to go against the idea of holding gold at all, so I wonder why you think a balanced portfolio should have 5% of gold in it, rather than none ? ? And why around 5% ? Why not 4% or 6% ? 2% or 12% ? And why stop with gold ? What about platinum and silver ?

good questions! looking forward for answers and have a question for "Dragon". what percentage of your assets are your gold holdings?