Gold

[Martin]

It has been interesting to watch the price of gold (in bahts) over the past year.

Holding its own, and now edging up slightly, it has done much better than the US$ and the pound.

Nobody will let on that they are doing it, of course, but it suggests to me that some big players among the petroleum exporters are 'buying the dips' in gold (and in the baht) to somewhat reduce the increase in their holdings that are denominated in US$.

What could send the price of gold high would be a panic by Westerners (or others) who see their pensions savings threatened if they hold on to stocks or cash.

Whether that would be damped down by 'profit taking' is anybody's guess.

The Western central banks would want such damping down to happen, but it is doubtful whether they now any longer hold enough gold to be able to make it happen.

Certainly Russia wouldn't do it. They still have that grudge about the way that Reagan and Thatcher knackered the USSR by getting the Saudis to pump, pump and pump again till the price of oil was so low that Russia's oil exports wouldn't pay for its wheat imports.

And I can't see any reason that would cause the OPEC countries to do it.

In the end, what matters is the purchasing power of one's savings, and gold looks safest to maintain that.

[cloudhopper]

GOLD - Don't watch the price, which will fluctuate chaotically and, regardless of what anyone thinks, unpredictably. Buy a little bit as you can all the time and put it away never to be sold for a profit, only exchanged as a last resort. Treat it as an insurance premium, not an investment.

[JimmyGreaves]

Do the banks have store boxes to take care of purchased gold and what guarantees to they give? I would not really like to store it at home

[sonicdragon]

Do the banks have store boxes to take care of purchased gold and what guarantees to they give? I would not really like to store it at home

Bank of Ayudya/Krungsri main branches do, but perhaps a better choice would be a bullion fund ?

[cloudhopper]

Dollar cost averaging into a fund would be a great way to invest, but if the sh!t really hits the fan I don't want to be on the taxman's radar screen...

[Martin]

I notice that gold has gone up over the past couple of days (selling at 12,150 bahts/baht now), and so has oil.

This movement in the price of gold (up or down) at the same time as a similar one in the price of gold (up or down) seems to have been happening for over a year.

Is there a theory that explains it?

[lannarebirth]

I notice that gold has gone up over the past couple of days (selling at 12,150 bahts/baht now), and so has oil.

This movement in the price of gold (up or down) at the same time as a similar one in the price of gold (up or down) seems to have been happening for over a year.

Is there a theory that explains it?

There is a relationship between gold and oil prices, as identified by Tom McCllelan of "The McCllelan Report and McCllelan Oscillator" fame. Here's a link describing the relationship:

http://www.321energy.com/editorials/mcclel...an032706-C.html

[churchill]

Gold up for the last 2 days - See article below - May be going much higher ! if we don't see a pull back in prices soon .

COT Changes. In the Tuesday 10/9 commitments of traders report (COT) the COMEX large commercials (LCs) collective combined net short positions (LCNS) increased 14,990 contracts or 7% from 212,031 to a new record 227,021 contracts net short Tuesday to Tuesday while gold metal turned in a net advance of $6.19 or 0.8% from $731.98 to $738.17 on the cash market.

COMEX commercial traders have never been so strongly net short gold, but they didn’t exactly back up the truck with an overly large one-week spike higher in new net short positions.

Since Tuesday gold tacked on another $11.58 for a Friday close of $749.75 on the cash market, which is $6.75 higher than the Friday before the last Got Gold Report two weeks ago.

Over the past week total COMEX gold open interest increased 19,071 to 458,936 total open contracts. Another record total open interest on a COT reporting Tuesday.

Long term October 2008 and beyond COMEX forwards added 6,463 contracts to 66,902 lots open, about 14.6% of open contracts which is still somewhat below average. So far we have not seen a telltale large spike higher in long forwards in other words.

As measured on COT report cutoff Tuesdays, in the seven reporting weeks since August 21, when gold was trading in the $650s and the COMEX commercials reported a collective net short position of 91,994 contracts, gold metal has advanced $80.39 or 12.2%. Over the same period the LCs have been willing to add a staggering 135,027 contracts to their net short positioning, an increase of 147%.

So as gold was still trading in the high $730s the LCs were betting in all-time record proportions that gold was about to pull back. Indeed there were at least two attempts at pullbacks over the past two weeks down into the $720s, but neither down impulse managed to gain any traction.

Repeating from the last Got Gold Report two weeks ago: “… the last time they (the LCs) set a record net short position, in October of 2005 with gold then trading in the $470s (not a misprint), there was a teensy pullback shortly after that down to the $450s (first week of November 2005) and the COMEX commercials managed to get the heck out of about 60,000 of those net short contracts just before gold took out the psychological $500 barrier on its 5-month, 59% romp higher to $730 in May of 2006. … So the last time the COMEX commercials were this confident of lower gold prices, they were very short term right, but they were long term very, very wrong.”

Is history trying to repeat? Were the meager dips down into the $720s all the pullback we are going to get to work with, or is there another, stronger dip yet to come? No one can say in advance, of course, but we can note one important difference between the two events so far. In the October/November 2005 LC record-net-short-small-pull-back event the LCs dumped a big portion (about 60,000 contracts worth) of their then collective net short positioning during the pullback. As of Tuesday, 10/9, the LCs not only have not dumped any of their net short positioning, they’re still adding to it. That suggests that at least they think a more intense pullback is coming.

Does that mean that we will see a much harsher pullback for sure? No, virtually anything is possible short term. The LCs could be dead wrong too, gold could even go parabolic from here, but it certainly does mean that the LCs need a pullback and will be gunning for one on any opportunity. Friday’s near high close of just under the $750 level also means that the largest of the largest gold futures trader’s net positions are currently underwater in a big way. And make no mistake about it, their net short position really is big, the biggest ever. How big?

Well, as of Tuesday 10/9 COMEX commercials had a net short interest in 100-ounce gold futures contracts covering an amazing 22,702,100 ounces of gold metal. That’s right, they were net short (betting against) over 706 tonnes, worth notionally about $16.7 billion U.S. dollars, almost as much as is held today in all global gold ETFs. As of Friday, virtually all of those net short positions were upside down so, to put it in street language, there are about 16.7 billion reasons why we might suspect that the LCs will be gunning for a more meaningful gold sell-down.

The trouble is for those bullion banks and very large commercial interests betting on the gold downside, further advances in gold can be explosive when they are breaking out to new highs, literally above all short positions and when momentum-chasing funds and so-called “hot-money” is flowing in. Interesting to contemplate, isn’t it?

Nevertheless, because of the now all-time record high LCNS, this indicator has to stay on the bearish side of the gold market indicator ledger short term. This indicator by itself suggests that the odds of a more meaningful gold pullback have increased over the past two reporting weeks.

Gold versus the commercial net short positions as of the Tuesday COT cutoff:

[Naam]

Gold... May be going much higher ! if we don't see a pull back in prices soon .

good call! duly noted

[sonicdragon]

I notice that gold has gone up over the past couple of days (selling at 12,150 bahts/baht now), and so has oil.

This movement in the price of gold (up or down) at the same time as a similar one in the price of gold (up or down) seems to have been happening for over a year.

Is there a theory that explains it?

There is a relationship between gold and oil prices, as identified by Tom McCllelan of "The McCllelan Report and McCllelan Oscillator" fame. Here's a link describing the relationship:

http://www.321energy.com/editorials/mcclel...an032706-C.html

Indeed, this is a well known phenomenon.

Oil isn't known as "black gold" for nothing

The reasons for it are quite straightforward. You need to think about it in terms of factors which they have in common, that increase the correlation, and factors that tend to make them move independently (and thus decrease correlation). Both are commodities that require extraction from the ground at a cost. Both are precious/scare. Both incur costs of storage. Both are "consumed" (oil as fuel, and gold as jewelry). These similarities should cause a significant correlation between their prices. The differences explain why the correlation is not better - in particular oil is more sensitive to business cycles, and gold tends to be be more sensitive to crises. Those the basic reasons anyway. More could easily be added

[lannarebirth]

Gold... May be going much higher ! if we don't see a pull back in prices soon .

good call! duly noted

I see a potential market newsletter writer in the making.

[sonicdragon]

I notice that gold has gone up over the past couple of days (selling at 12,150 bahts/baht now), and so has oil.

This movement in the price of gold (up or down) at the same time as a similar one in the price of gold (up or down) seems to have been happening for over a year.

Is there a theory that explains it?

There is a relationship between gold and oil prices, as identified by Tom McCllelan of "The McCllelan Report and McCllelan Oscillator" fame. Here's a link describing the relationship:

http://www.321energy.com/editorials/mcclel...an032706-C.html

Indeed, this is a well known phenomenon.

Oil isn't known as "black gold" for nothing

The reasons for it are quite straightforward. You need to think about it in terms of factors which they have in common, that increase the correlation, and factors that tend to make them move independently (and thus decrease correlation). Both are commodities that require extraction from the ground at a cost. Both are precious/scare. Both incur costs of storage. Both are "consumed" (oil as fuel, and gold as jewelry). These similarities should cause a significant correlation between their prices. The differences explain why the correlation is not better - in particular oil is more sensitive to business cycles, and gold tends to be be more sensitive to crises. Those the basic reasons anyway. More could easily be added

One thing that I should have added, is that when looking at price series data such as these one also has to take into account that the unit of measurement (ie the US dollar or whatever currency you want to use) is not constant, and thus the changes in the value of the currency are also being observed. This of course also increases correlation.

[Naam]

Gold... May be going much higher ! if we don't see a pull back in prices soon .

good call! duly noted

I see a potential market newsletter writer in the making.

shall we subscribe?

[Martin]

I see that gold has passed 12,700 bahts per baht (sell) today.

If my memory serves me right, that is a touch above its peak in May 2006, but to compare exactly what that is worth it would be necessary to know by how much has the monetary baht depreciated in the past 17 months.

Thank you to those above who shed light for me on the apparent degree of correlation between oil price and gold price.

[gregybn]

Hmmm...

I have arrived a bit late to this thread...

But I'll but in my 2 satangs worth.

I see some quite good advice over the 7 pages and 160+ posts... and some quite delusional thinking.

MY position... (and I put my money where my mouth is...)

I LOVE gold and silver... I have made a lot of money over the last few years... and expect to make a lot more.

I hold physical gold (9999 fine... none of that Thai 22k)

I hold physical silver (999 fine)

I hold gold mining stocks

I hold silver mining stocks

I hold GLD

I hold XGD

Plus some various and sundry related Au/Ag investments.

I will say - and continue to say... the A'murkan$ is doomed - just like every other fiat currency in history.

BTW... it's already in the cards to let the USD cease to exist - in favor of the soon-to be "Amero"

(Think it won't happen... look around, research - and think again)

I also see that quite a few responders have very little awareness of the pervasive, insidious effects of inflation.

I will have obvious supporters and detractors in my position...

Whatever... I really don't give a rat's ass...

I have made - and continue to make - significant profits in my investment decisions.

I also recognize that volatility is a given... but I'm in this "game" for the long term.

BTW... Chicken Little is a friend of mine... ;-)

Folks should also look at long term gold/silver ratios... historically 15:1... now trading at 50+:1

Silver is CHEEP, CHEEP, CHEEP

Folks should also remember the Dow:Gold ratio... and how it has dropped to about 2.5:1 - a few times along the way.

At over 18:1 right now... just think what the price of gold will be when the Dow drops - as it will.

Folks should remember that the previous high of gold in the 70's.

Accounting for inflation - gold should be around $2000 - right now!...

But it ain't... which means it's still cheep.

Do your own due diligence folks... but ignore gold (and silver) at your peril.

[Martin]

There is much in what is said by 'gregybn' that resonates with me, though I am not a 'trader', if that is the right term.

I just want to maintain the 'purchasing' power of the family's savings.

To me, that is best done for future generations by holding on to our productive land and adding to it, if some that is adjacent to what we already have becomes available.

So I look for what 'store of value' is best, whilst waiting to liquidate some of it in order to buy more farming land. Like 'gregybn', I have no faith in fiat money, so it comes down to gold or silver.

Last year, I felt that the price of silver was very low compared to the price of gold.

(And the price of oil is ridiculously low---but I don't know how to put long-term savings into oil).

I was attracted to silver as it is a traditional way of holding savings in a portable way and as there is a large requirement for it in industrial processes. So, if industrialisation holds up better than I expect, the silver price should hold up, too.

However, when I enquired in Udon, I couldn't find any little silver bars to buy, as I can with gold.

If anybody knows how I can acquire some physical silver, please tell. (I do go down to Bangkok from time to time.)

[Naam]

hmmm...

I LOVE gold and silver... I have made a lot of money over the last few years... and expect to make a lot more.

hmmm... so you have made a lot of money... measured in what currency?

[gregybn]

hmmm... so you have made a lot of money... measured in what currency?

Whatever currency I choose, at any moment in time...

With the full realization that they are all fiat.

Admittedly I have a fair bit in CDN$... quite strong now... as you undoubtedly are seeing.

And I recently figured I have a meager 3% of my net worth in the dismal USD$

Swissy's are always nice too...

Euro's are OK... for the time being.

Yuan may be something to consider...depending on how the global geo-polytickle-e'cumnomic circus plays out???

But I say again... ALL currencies are basically worthless... having only "value" assigned by (private) central banks and "faith" in governments .

ALL "currencies" have been, are being, and will be, inflated out of existence.

GOLD and SILVER have been, and will continue to be... the only real ways to store "value" and "purchasing power"

Deny if you wish...

But remember that river in Egypt.

[Naam]

hmmm... so you have made a lot of money... measured in what currency?

Whatever currency I choose, at any moment in time...

and you think you beat with precious metals the yield one could achieve with 'fiat money' during the last 5-6 years? please be kind enough and provide the annualized average yield you achieved. it seems quite interesting.

[gregybn]

No time for too many details right now... I'm outta Thailand in 2 daze... lots of things to do.

My physical gold and silver have shown gains of about 80%... annualized to around 25% +/- over the last few years

A few of my "winners" in the junior gold/silver plays have shown returns of 200-300%

And yes... I've had a few "dogs" too... but then it's always nice to have a few capital losses to offset capital gains.

But, much of my investing is sheltered in RRSP's - hence, NO TAXES

But I do hold other investments as well...

My (conservative) Canadian Income Trusts have been averaging about 12-13% p.a.over the last 5-6 years... and all dividends are reinvested.

But... as the old saying goes... "There's gold in them thar hills"

And btw Naam... just how big a bite does inflation take out of your "fiat money"...

The stat's I read say inflation has been rising from 8-9% in recent years... and is closer to 12-13% now.

If anyone believes what the "government" tells you about inflation numbers... well... a person has to be pretty credulous and uninformed

Chok Dee Krap...

Happy investing...

But remember to keep what you make, and not give it to "anyone" else.

Edited October 29, 2007 by gregybn

[Naam]

And btw Naam... just how big a bite does inflation take out of your "fiat money"...

The stat's I read say inflation has been rising from 8-9% in recent years... and is closer to 12-13% now.

i strongly doubt that my expenses in Thailand went up more than 5% p.a. in the three years i am living here. a lot depends on the personal expense structure. that of course does not apply when taking the appreciation of THB against all major currencies into consideration.

in my specific case inflation is irrelevant for two simple reasons. i don't pay income tax and i spend only a rather small percentage of my income. both these factors allow me to negate inflation for the remainder of my and my wife's statistical life expectancy.

by the way, inflation was also irrelevant for the "goldbugs" and precious metal lovers who fell for the lure of "intrinsic" values and said good bye to "fiat money" investments about 28 years ago. those who did not survive on welfare had sold their precious metals in the 80s and 90s to cover their living expenses and then starved to death.

[churchill]

Intersting times ahead As a gold bull see

http://www.resourceinvestor.com/pebble.asp?relid=37198

There will of course be a pull back at some stage but it could still go a lot higher 1st

[gregybn]

a lot depends on the personal expense structure.

absolutely... both you and I seem to do well in that regard

i don't pay income tax

Nor I.. haven't paid tax to any gov't for about 17 years - I keep what I make - a most important principle.

i spend only a rather small percentage of my income.

Absolutely... my wife and I choose to live a life of "voluntary simplicity"... have been, and will continue to...

A fact and a lifestyle that escapes a large majority of the folks out there in the western "civilized" world these daze.

both these factors allow me to negate inflation...

Good on ya (and me)... others should wish to be so lucky

...precious metal lovers who fell for the lure of "intrinsic" values and said good bye to "fiat money" investments about 28 years ago. those who did not survive on welfare had sold their precious metals in the 80s and 90s to cover their living expenses and then starved to death

Only SO TRUE...

It's just a reminder of "timing" - to buy low and sell high... a truism that many of those poor sods a generation ago failed to realize.

And mark my words.. there are many in the present generation who will make exactly the same mistakes.

History is a great teacher... but many too many folks are piss-poor students.

I think we think a lot alike Naam... and we are "survivors" where others are victims.

I'd like to have an evening with you (with appropriate libations) and discuss the vagaries and vicissitudes of life at greater length... but, as I said... I'm outta here.

Done my time in Thailand...

Next stop, Ecuador.

Hasta la vista... and Chok Dee Krap.