The Panic Starts ? Invest In Gold !

[LivinLOS]

If you don't trust gold, do you trust the logic of taking a pine tree, worth $4,000-$5,000, cutting it up, turning it into pulp, putting some ink on it and then calling it one billion dollars?

I am sure if I followed this logic I would simply buy something like wheat (which is inherently useful) rather than gold or useless bits of paper.

Incidentally I would be happy to invest in crappy bits of currency paper if they would stop printing so much of it. If you increase the dollar money supply by 20% per annum it is hardly surprising that its value falls 20% relative to gold whose supply is relatively fixed.

One of the basics of inflation that seems to be missed in the noise..

If money supply stayed static I too would be happy(er) to hold cash.. However inflation (and also now a weak currency in this globalised world) are a way for governments to keep thier commitments in nominal terms while actually reducing the burned of them in real terms. While Paulson manages to keep a straight face while talking about a strong dollar policy they are deflating thier way out of deficit debt. While inflating the currency away at double digits and massaging stats to say inflation is really 3% they are mitigating the baby boomer retirement timebomb and every other commitment.

The problem with wheat etc (I was told to buy grains and coffee and didnt.. Was good advice) is they either deteriorate / rot etc or the futures / options expire and need to be continually traded to remain valid.. One of Golds bullet points is it doesnt degrade, its timeless.

[Abrak]

If you don't trust gold, do you trust the logic of taking a pine tree, worth $4,000-$5,000, cutting it up, turning it into pulp, putting some ink on it and then calling it one billion dollars?

I am sure if I followed this logic I would simply buy something like wheat (which is inherently useful) rather than gold or useless bits of paper.

Incidentally I would be happy to invest in crappy bits of currency paper if they would stop printing so much of it. If you increase the dollar money supply by 20% per annum it is hardly surprising that its value falls 20% relative to gold whose supply is relatively fixed.

One of the basics of inflation that seems to be missed in the noise..

If money supply stayed static I too would be happy(er) to hold cash.. However inflation (and also now a weak currency in this globalised world) are a way for governments to keep thier commitments in nominal terms while actually reducing the burned of them in real terms. While Paulson manages to keep a straight face while talking about a strong dollar policy they are deflating thier way out of deficit debt. While inflating the currency away at double digits and massaging stats to say inflation is really 3% they are mitigating the baby boomer retirement timebomb and every other commitment.

The problem with wheat etc (I was told to buy grains and coffee and didnt.. Was good advice) is they either deteriorate / rot etc or the futures / options expire and need to be continually traded to remain valid.. One of Golds bullet points is it doesnt degrade, its timeless.

Your point about inflation and the weak dollar is well taken. I think it is a statement of the obvious but it seems many others simply dont get it.

My point about gold as a commodity is slightly different. Its importance in the past rested partly on its portability and traderbility. Gold was simply the best and most convenient store of wealth. This is no longer obvious in todays more sophisticated markets. Gold is little more than another commodity and less useful than most. Why not own oil, lead or copper? A lot of gold's cache is historic - that is why I dont see it return to its previous inflation adjusted highs.

[Naam]

Smart investors buy gold at the bottom and sell some of the profits at the top while maintaining a growing portion of gold to preserve wealth.

It really is about timing your play and always has been...

you don't say! i wish i had known that before will write it down now... "buy...at...bottom...sell...some...at...the...top.." ohmygosh! i could be a rich man by now if only i had...

[Naam]

If you don't trust gold, do you trust the logic of taking a pine tree, worth $4,000-$5,000, cutting it up, turning it into pulp, putting some ink on it and then calling it one billion dollars?

why not as long as you can buy with that pine tree a thousand gold shops including all of their inventory?

[Naam]

I bought into the gold rush in the early 80's and paid in the low $800 for it then. Would not have done much worse off burying my money in a can. Still have it, well some of it and I'm waiting for the big run up. If it goes up to $3,000 or so it will not have been a bad investment. Thanks but I will go with something that works for me a bit.

Amazing.. I thought it was only over 750 for a 5 day window ?? You must have timed it almost to the day !!

4 trading days, six calendar days. january 16 till january 21, 1980.

[sonicdragon]

I am sure if I followed this logic I would simply buy something like wheat (which is inherently useful) rather than gold or useless bits of paper.

...which is part of the reason why I have been advocating investments in agricultural commodities as well as precious metals for as long as I have been a member here.

Incidentally I would be happy to invest in crappy bits of currency paper if they would stop printing so much of it. If you increase the dollar money supply by 20% per annum it is hardly surprising that its value falls 20% relative to gold whose supply is relatively fixed.

Indeed. Although it's not really that simple is it ? If it were, then the price of gold (measured in whatever paper currency you choose) would not have "fallen" in value as much as it did during the 80's and 90's during which time inflation existed and money supply increased. The counter-point to this of course is that a speculative bubble in gold and other commodities occured in the 1970s, and it is a matter of much debate and disagreement what the "true" value of gold is, and how it can be measured.

[BEENTHEREDONETHAT]

I suppose I should have mentioned it was in the form of krugerands, Canadian Maple leafs and the Chinese Panda. Which are a premium over gold bars. That way my wife got to wear some of it.

[LivinLOS]

If you don't trust gold, do you trust the logic of taking a pine tree, worth $4,000-$5,000, cutting it up, turning it into pulp, putting some ink on it and then calling it one billion dollars?

why not as long as you can buy with that pine tree a thousand gold shops including all of their inventory?

But in a crisis of confidence will people decide that the 'promise to pay the bearer' either may not be held or even my be a promise made by someone without the ability to pay the bearer. At what point will people be less interested in promises for real goods and services.

I know my comments must make me sound like a rabid goldbug.. I dont think i am, certainly I will be a seller at some point.. However given market conditions right now I am happier to hold that than fiat promisary notes. I also think there is a growing awareness to much of what I am saying and that should in turn feed into more desire for safe haven assets.

[BEENTHEREDONETHAT]

Some people have a knack for picking tops and bottoms. The problem is getting them in the right order.

[LivinLOS]

I suppose I should have mentioned it was in the form of krugerands, Canadian Maple leafs and the Chinese Panda. Which are a premium over gold bars. That way my wife got to wear some of it.

Even so they wouldnt be that much over spot..

I just find it amazing that whenever theres a gold thread theres usually someone who chimes in about how they bought in at >800 back when etc.. The amount of people that must have bought within that 4 days is incredible if those posts are all correct.

[LivinLOS]

Some people have a knack for picking tops and bottoms. The problem is getting them in the right order.

Confusious he say.. Man who pick bottoms, end up with smelly finger...

[churchill]

Inflation wrecks currencies in the same way that termites destroy wooden houses. The world's two most successful currencies, the US dollar and the British pound, both of which are still used by other nations to hoard wealth, have each lost more than 95 per cent of their value in the past 100 years.

Since 1971, when Richard Nixon broke the dollar's formal link to gold, America has pumped out trillions of new dollars. Money from thin air. China alone is sitting on more than $1,000 billion of reserves, as American consumers pile up debts to buy "essentials" from factories in Shenzhen and Guangdong.

By contrast, there is a finite supply of gold. This keeps it honest.

[PCA]

I bought into the gold rush in the early 80's and paid in the low $800 for it then. Would not have done much worse off burying my money in a can. Still have it, well some of it and I'm waiting for the big run up. If it goes up to $3,000 or so it will not have been a bad investment. Thanks but I will go with something that works for me a bit.

so you got your lesson honoring your nickname. Unfortunately people dont learn from other people experience and so are the frightened hands now lured to get trapped like you did when buying into a blow off top.

[BEENTHEREDONETHAT]

LivinLOS

It depends what you call a large premium. This is from googleing krugerand gold premium.

A ‘coin premium’ is the additional cost of a bullion coin above and beyond the market value of the precious metal commodity it contains. For example, with gold at a spot price of $787.50 as mentioned above, an investor can expect to pay a premium of $43.30 over the gold price to buy the one-ounce American Gold Eagle. On the other hand, at the same spot price, an investor will pay only a $39.40 premium (approximately 0.5% less than the Eagle) for a one-ounce Gold Maple Leaf, and only a $31.50 premium (or 1.42% less) for the one-ounce Gold Krugerrand.

In general, this additional cost over the spot price for any bullion coin stems from a number of factors, including the manufacturing, distribution, and administration costs incurred by the mint or refiner in making the coin, plus a "mark-up" representing the cost of sale and the profit for the wholesaler selling the coin to a retail dealer. The retail dealer, in turn, will also "mark-up" its wholesale price of the coin to cover its own sales costs and realise a small profit when selling the coin into the investor market.

[Abrak]

I bought into the gold rush in the early 80's and paid in the low $800 for it then. Would not have done much worse off burying my money in a can. Still have it, well some of it and I'm waiting for the big run up. If it goes up to $3,000 or so it will not have been a bad investment. Thanks but I will go with something that works for me a bit.

so you got your lesson honoring your nickname. Unfortunately people dont learn from other people experience and so are the frightened hands now lured to get trapped like you did when buying into a blow off top.

I think you raise a very valid point.

I am bullish on gold but I cant get away from the fact that it has had a very strong run up.

The 200 day moving average is at US$720 and a correction below US$800 has to be expected.

It would be good to see new highs later in the year but nothing is guaranteed.

[lannarebirth]

You can construct a price chart for anything that is fungible over a period of time. To maintain valuations the thing in question must build support for prior price levels The recent trading history of Gold is that it runs up, consolidates, and runs up again. What it hasn't done is check that the price levels it previously brokeout from are secure. It has retested no breakouts since 550ish. It WILL retest it's breakout at 670ish at some point but whether it's sooner or later I couldn't say. In order for prices to remain bullish Gold needs to establish support. If it doesn't I would expect some kind of blowoff phase and a return to a prolonged bear market.

[LivinLOS]

An part of a relevant piece.. A little off topic but between this / the condo thread or the other doom / gloom threads it has a place somewhere..

From http://www.kitco.com/ind/Katz/jan182008.html

The answer to this is that what are conventionally called recessions are in fact credit contractions. In the early days, as people were groping their way to the idea of a free market, an important mistake was made. Bankers were given the special privilege to create money out of nothing. (That is, commercial banks were given this privilege. The original savings banks paid interest to depositors and did not create money.)

When the banker creates money (in the process of making a loan), he makes a profit. He lowers interest rates to make more loans. His loan customers profit. The quantity of loans (credit) in the society expands. This is a money and credit expansion. Of course, the vast majority of the people in the society have to pay higher prices.

This money/credit expansion is called economic growth by most of today’s economists. This is the first lie. It is growth only for the banker, his loan customers and a few associated special interests. About 95% of the people are getting poorer so that 5% can get richer.

Since the privilege to create money is not a free-market institution, it does not follow the above rule of stability. In the old days, bank runs would force the banks to start a cycle of credit contraction, and this was called a depression. During these “depressions” wealth was flowing from the banks and their associated vested interests back to the people.

The central bank was created to assist the commercial banks in their expansion of money and credit. However, since the central bank is a political institution, it has to contract credit when the public protest against “inflation” gets too strong. This is the main source of instability in the system at the present time.

One of the dramatic things about the credit expansion of the early years of the century was that it focused on real estate. Housing speculators bought houses with NINJA loans (No Income, No Job, no Assets), and this buying drove housing prices so high that the average American can no longer afford the average house. (Between 1997 and 2007, according to the Case Shiller index, the median home price in the U.S. multiplied by 2.8 in nominal terms and almost doubled in real terms. In 1997, the average working man had to work for 4.5 years to buy the average house. In 2007, he had to work 7.3 years to buy the average house. The intent of the housing speculators was to flip (sell for a quick profit) their houses and thus rake in a quick hundred thousand dollars with minimal effort.

Home ownership was so important to Americans that it has traditionally been called the American dream. America was the one country where the majority of the people could afford to own their own homes. This is no longer true.

Today the newspapers are full of the sub-prime crisis. The crisis (in their eyes) consists of the fact that the banks might lose their money. But this is not a crisis. The banks deserve to lose. They made bad loans. The housing speculators had bad judgement. They deserve to lose. The crisis is the fact that houses have gone up so high in price that the average American cannot afford the average home. To solve the crisis, it is necessary that housing prices come down.

A start was made on solving this problem this past year when housing prices started to decline. Suddenly, the $500,000 house on which the bank had made the NINJA loan was only worth $400,000. The housing speculator solved his problem by defaulting on his mortgage. The bank was stuck with a $500,000 loan and a $400,000 house.

So what is being done? Ben Bernanke, the Federal Reserve and the banker economists are trying to lower interest rates back to their lows of 2003 (the peak of the problem). Their intent is that housing prices go back up so that the banks and the housing speculators are bailed out. To accomplish his goal, Bernanke is printing large amounts of money. This will cause average prices to rise and make the average American even poorer. It is the intent of Bernanke and the supporters of the existing system to make the average American pay for the losses incurred by the banks.

One day the fed will be seen for what it is.. A tool of a secret banking cabal that is there to protect the bankers and produce wealth for the minority at the expense of the majority.

[lannarebirth]

An part of a relevant piece.. A little off topic but One day the fed will be seen for what it is.. A tool of a secret banking cabal that is there to protect the bankers and produce wealth for the minority at the expense of the majority.

Here's my advice. Try to get on the side of the manipulators until your fellow idealogues blow out their accounts. Then switch side.

Edited January 19, 2008 by lannarebirth

[kdvsn]

I have a question related to gold investing which I hope someone can help me out.

I own GLD and CEF but I also own Newmont Mining (NEM). I wonder why NEM - an unhedged miner - performs so badly relatively to the price of gold.

Newmont has all the signs of being a bloated, poorly run company. I gave up on them a couple of years ago and shifting into the FSAGX (a mutual fund) and the GDX (an ETF fund that tracks the AMEX Gold Miners Index) so that I wouldn't be at risk when any individual mining stock misses thier earnings target or has crminal charges filed against them by the Indonesians (both of which were going with NEM while I held it)

[kdvsn]

I bought into the gold rush in the early 80's and paid in the low $800 for it then. Would not have done much worse off burying my money in a can. Still have it, well some of it and I'm waiting for the big run up. If it goes up to $3,000 or so it will not have been a bad investment. Thanks but I will go with something that works for me a bit.

Amazing.. I thought it was only over 750 for a 5 day window ?? You must have timed it almost to the day !!

4 trading days, six calendar days. january 16 till january 21, 1980.

Aside from being a notoriious doomsayer, the "nutter" Sinclair's claim to fame is that he liquidated his gold position during that small window that marked the peak of the 1980 blow-off. Other gold bugs considered him to be a traitor at the time and the more fanatatical present day gold bugs look at him as a sage, apparently assuming that if we was able to call the peak once that he'll be able to do it again.

[Naam]

Some people have a knack for picking tops and bottoms. The problem is getting them in the right order.

Confusious he say.. Man who pick bottoms, end up with smelly finger...

:D

[sonicdragon]

One day the fed will be seen for what it is.. A tool of a secret banking cabal that is there to protect the bankers and produce wealth for the minority at the expense of the majority.

That day has been and gone. The problem is that not enough people know and/or care about it. It's all part of the capitalist system. The rich get richer and the poor get poorer. All over the world. But if you refer to a day when it is widely seen for what it is and something is done to change it, then I fully agree - the only problem is that that day will not come in our lifetime, nor probably the lifetime of our children. You can get some kind of guage for this, by observing the performance of Ron Paul (who as you will know is a big believer in this issue) in the US Presidential primaries:

http://edition.cnn.com/ELECTION/2008/prima...ts/scorecard/#R

I hope I am wrong on this, but I doubt it.

[sonicdragon]

The problem with wheat etc (I was told to buy grains and coffee and didnt.. Was good advice) is they either deteriorate / rot etc or the futures / options expire and need to be continually traded to remain valid.. One of Golds bullet points is it doesnt degrade, its timeless.

There are fewer factors affecting the demand and supply of gold than agriculturals, I'll give you that. And the attributes that make gold an appealing investment (a store of value) mostly do not apply to agriculturals. But that just underlines the fact that they are not really comparable at all. You may as well compare bonds with equities. But specifically with respect to your points: First, that they are perishable is a reason why agriculturals increase in value as a commodity, in the case of freak weather (for example). This is an advantage, not a disadvantage. No one in their right mind, except specialist investors/funds, buys the physical product for investment. Second, as for futures and options, exactly the same applies to gold (in fact all) futures and options. Holding futures contracts, and rolling them when near expiry, is a very simple thing for funds that invest in them and is not a hindrance at all.

[LivinLOS]

An part of a relevant piece.. A little off topic but One day the fed will be seen for what it is.. A tool of a secret banking cabal that is there to protect the bankers and produce wealth for the minority at the expense of the majority.

Here's my advice. Try to get on the side of the manipulators until your fellow idealogues blow out their accounts. Then switch side.

Thats what I hope to have tried to do..

As I will never be in thier league in fiscal terms I just try to spot trends and ride the cycles.. I guess I will always be outside the tent pissing in rather than inside pissing out..

[LivinLOS]

One day the fed will be seen for what it is.. A tool of a secret banking cabal that is there to protect the bankers and produce wealth for the minority at the expense of the majority.

That day has been and gone. The problem is that not enough people know and/or care about it. It's all part of the capitalist system. The rich get richer and the poor get poorer. All over the world. But if you refer to a day when it is widely seen for what it is and something is done to change it, then I fully agree - the only problem is that that day will not come in our lifetime, nor probably the lifetime of our children. You can get some kind of guage for this, by observing the performance of Ron Paul (who as you will know is a big believer in this issue) in the US Presidential primaries:

http://edition.cnn.com/ELECTION/2008/prima...ts/scorecard/#R

I hope I am wrong on this, but I doubt it.

I am sure it surprises no one to know I am a Ron Paul fan..

Not only the fact hes the only fiscally responsible person in the race but the whole ideology of small government and letting people do what they wish as long as it does not infringe upon others. The whole constitutionalist thing which is so often touted isnt a seller to me as I am not familiar enough with it and dont know how valid such a dated document is in the modern world..

[sonicdragon]

One day the fed will be seen for what it is.. A tool of a secret banking cabal that is there to protect the bankers and produce wealth for the minority at the expense of the majority.

That day has been and gone. The problem is that not enough people know and/or care about it. It's all part of the capitalist system. The rich get richer and the poor get poorer. All over the world. But if you refer to a day when it is widely seen for what it is and something is done to change it, then I fully agree - the only problem is that that day will not come in our lifetime, nor probably the lifetime of our children. You can get some kind of guage for this, by observing the performance of Ron Paul (who as you will know is a big believer in this issue) in the US Presidential primaries:

http://edition.cnn.com/ELECTION/2008/prima...ts/scorecard/#R

I hope I am wrong on this, but I doubt it.

I am sure it surprises no one to know I am a Ron Paul fan..

Not only the fact hes the only fiscally responsible person in the race but the whole ideology of small government and letting people do what they wish as long as it does not infringe upon others. The whole constitutionalist thing which is so often touted isnt a seller to me as I am not familiar enough with it and dont know how valid such a dated document is in the modern world..

Right. I'm also a fan. But keeping to the point that you brought up, notice how he has been largely ignored by the media to an extent that does not reflect his apparent (albeit small) grassroots support. Not only that, but he has been systematically portrayed as a kind of political leper. A great example was one televised debate I happened to see around 3 months ago, in which he seemed to perform extremely well (my judgement) - while getting disproportionately less camera time than the other participants. CNBC then ran an online poll in which he came out the winner but they removed the results from it's website the following day suggesting that his supporters had hacked their poll ! ! That should give you an idea of why the day you hope for will be a long time in coming.

[lannarebirth]

One day the fed will be seen for what it is.. A tool of a secret banking cabal that is there to protect the bankers and produce wealth for the minority at the expense of the majority.

That day has been and gone. The problem is that not enough people know and/or care about it. It's all part of the capitalist system. The rich get richer and the poor get poorer. All over the world. But if you refer to a day when it is widely seen for what it is and something is done to change it, then I fully agree - the only problem is that that day will not come in our lifetime, nor probably the lifetime of our children. You can get some kind of guage for this, by observing the performance of Ron Paul (who as you will know is a big believer in this issue) in the US Presidential primaries:

http://edition.cnn.com/ELECTION/2008/prima...ts/scorecard/#R

I hope I am wrong on this, but I doubt it.

I am sure it surprises no one to know I am a Ron Paul fan..

Not only the fact hes the only fiscally responsible person in the race but the whole ideology of small government and letting people do what they wish as long as it does not infringe upon others. The whole constitutionalist thing which is so often touted isnt a seller to me as I am not familiar enough with it and dont know how valid such a dated document is in the modern world..

Right. I'm also a fan. But keeping to the point that you brought up, notice how he has been largely ignored by the media to an extent that does not reflect his apparent (albeit small) grassroots support. Not only that, but he has been systematically portrayed as a kind of political leper. A great example was one televised debate I happened to see around 3 months ago, in which he seemed to perform extremely well (my judgement) - while getting disproportionately less camera time than the other participants. CNBC then ran an online poll in which he came out the winner but they removed the results from it's website the following day suggesting that his supporters had hacked their poll ! ! That should give you an idea of why the day you hope for will be a long time in coming.

I used to like to watch Ron Paul dig into Greenspan at the semiannual appearances before Congress. I like him too, but people don't liker to hear straight talk. In a mature democracy all they want is their handouts.

[Crushdepth]

There now must be EMERGENCY ACTION because the Chairman of the Fed has BOMBED OUT PUBLICLY and a PANIC is about to occur. Expect EMERGENCY ACTION in days, not weeks.

Yawn...the Thaivisa bears have been predicting the collapse of the Thai economy (and now the end of the world US) for years. It's boring guys, but cheer up statistically speaking one day you'll get it right. This particular panic has largely run its course in my view, so you'd be better off buying some quality stocks than gold.

BTW: It wasn't the fed that bombed out, it was hopelessly greedy US banks and investment houses that had their snout a bit too deep in the trough. Most of them have escaped with burnt fingers and a black eye or two, but otherwise largely intact and hopefully a bit wiser. Thanks in part to massive injections of foreign capital...

[lannarebirth]

The Panic Starts when the insurers of all the misrated "dodgy debt" begin to fold. That's when you'll want to have cash.

[LivinLOS]

One day the fed will be seen for what it is.. A tool of a secret banking cabal that is there to protect the bankers and produce wealth for the minority at the expense of the majority.

That day has been and gone. The problem is that not enough people know and/or care about it. It's all part of the capitalist system. The rich get richer and the poor get poorer. All over the world. But if you refer to a day when it is widely seen for what it is and something is done to change it, then I fully agree - the only problem is that that day will not come in our lifetime, nor probably the lifetime of our children. You can get some kind of guage for this, by observing the performance of Ron Paul (who as you will know is a big believer in this issue) in the US Presidential primaries:

http://edition.cnn.com/ELECTION/2008/prima...ts/scorecard/#R

I hope I am wrong on this, but I doubt it.

I am sure it surprises no one to know I am a Ron Paul fan..

Not only the fact hes the only fiscally responsible person in the race but the whole ideology of small government and letting people do what they wish as long as it does not infringe upon others. The whole constitutionalist thing which is so often touted isnt a seller to me as I am not familiar enough with it and dont know how valid such a dated document is in the modern world..

Right. I'm also a fan. But keeping to the point that you brought up, notice how he has been largely ignored by the media to an extent that does not reflect his apparent (albeit small) grassroots support. Not only that, but he has been systematically portrayed as a kind of political leper. A great example was one televised debate I happened to see around 3 months ago, in which he seemed to perform extremely well (my judgement) - while getting disproportionately less camera time than the other participants. CNBC then ran an online poll in which he came out the winner but they removed the results from it's website the following day suggesting that his supporters had hacked their poll ! ! That should give you an idea of why the day you hope for will be a long time in coming.

Of course.. But as an anti establishment candidate what can he expect..

Also I think this next election could be a poison pill anyway.. Maybe in 4 more years fiscal responsibility will be a topic that rings true in many ears.