Where Is Gold Going In This Market

[badge]

Are you really Harmonica with a new handle?

prophosize

Seems familiar

perhaps he uses Google spell check too.

[badge]

UBS Metals Daily - 17th June 2009

After hitting a high of $990/oz in early June, gold has fallen

over the past two weeks. Market based inflation expectations,

defined here as the five-year, five year forward TIPS spread,

peaked in late May about 2.45% and have declined to around

2.10% since then: as the accompanying chart shows, there

appears to be more than a casual relationship between these

two data series, especially since the start of the year. To the

extent that inflation expectations have increased due to the

talk of "green shoots of economic recovery", any deterioration

in growth expectations may see gold follow inflation

expectations lower. But as we saw in the first quarter of this

year, gold gets bought when investors get scared – so talk of

a double-dip recession (or whatever letter of the alphabet or

character you wish to use to describe this scenario) might

bring back the safe haven buying that defined the gold market

earlier this year. [...]

Or put another way, Gold is correcting due to its correlation with risk appetite

Far from being the safe haven investment its touted as, sometimes it goes up in times of panic as its safe haven cheerleaders suggest, sometimes it goes down in times of panic as markets become risk adverse.

You have to feel sorry for Gold bugs

[Abrak]

UBS Metals Daily - 17th June 2009

After hitting a high of $990/oz in early June, gold has fallen

over the past two weeks. Market based inflation expectations,

defined here as the five-year, five year forward TIPS spread,

peaked in late May about 2.45% and have declined to around

2.10% since then: as the accompanying chart shows, there

appears to be more than a casual relationship between these

two data series, especially since the start of the year. To the

extent that inflation expectations have increased due to the

talk of "green shoots of economic recovery", any deterioration

in growth expectations may see gold follow inflation

expectations lower.

But as we saw in the first quarter of this year, gold gets bought

when investors get scared – so talk of

a double-dip recession (or whatever letter of the alphabet or

character you wish to use to describe this scenario) might

bring back the safe haven buying that defined the gold market

earlier this year. [...]

To me the first paragraph above is a direct contradiction of the second (they used to be all one paragraph.) Presumably the worse possible scenario for gold is a return to decent growth with stable inflation but any reasonable gold investor is going to make up losses there with gains elsewhere (in the extremely unlikely event this occurs). Gold is basically a play on risk and inflation. To the extent it fell during a period of rising risk costs at the end of last year it was a bit artificial caused by hedge fund liquidations (look at futures contracts) and also remember deflation.

My problem is this. To me a financial crisis is risk, hyper inflation is risk and a double dip recession really isnt. And to the extent it is, it may be offset by falling inflationary expectations. So to the extent the economy falls back into recession I am still not convinced that gold will do well.

So to me the only reason to hold gold is that there will be hyper inflation, namely low growth and high inflation, as in the 1970s. This is the perfect scenario for gold in that it represents both risk and inflation. It isnt regarded as likely now but it is a risk of FED policy as Bernanke himself admits - it also happens to be an acceptable cost to the underlying problem - if not, the easiest answer.

BTW I dont like the price of any asset class anywhere at the moment.

[badge]

http://seekingalpha.com/article/143148-com...o-physical-gold

[flying]

Here is something funny............

You know I pretty much never watch TV.

100 channels & nothing really on. But my wife lets it run at times & I hear it as background noise.

Anyway all my life I have heard them try to sell you everything under the sun on that tube.

But lately I have noticed there is one commercial where they are actually paying for prime time TV space to *buy* something from *you* !!!

Yes it is true we want to turn your unwanted gold into CASH !!!!!!!!

Edited June 18, 2009 by flying

[churchill]

Russia Makes the First Call for the Monetization of Gold

Russia is proposing the inclusion of the ruble, yuan and gold as a part of a revised basket of currencies to form the valuation of the IMF’s special drawing rights seen as the coming new alternative global reserve currency, reported AP.

continued at http://seekingalpha.com/article/143662-rus...ization-of-gold

[flying]

Remember that contractor that got arrested in 03 & a few weeks ago again?

Paying his sub contractors in gold coins?

Makes you wonder why they made such a big thing about it.

Watch how they disable the cameras & everything during their 2003 raid.

Then on this recent arrest a few weeks back. They later wanted all the names & IP addresses of folks that commented on the story online.

Sheesh They really feel threatened by the use of gold as money don't they?

Although they had no problem in letting him pay his taxes in silver dollars

http://www.lvrj.com/opinion/47141327.html

http://www.wnd.com/index.php?fa=PAGE.view&pageId=101348

[Abrak]

Russia Makes the First Call for the Monetization of Gold

Russia is proposing the inclusion of the ruble, yuan and gold as a part of a revised basket of currencies to form the valuation of the IMF’s special drawing rights seen as the coming new alternative global reserve currency, reported AP.

continued at http://seekingalpha.com/article/143662-rus...ization-of-gold

Somehow I think that this report lacks credibility not so far as it includes gold in the concept of a global reserve currency - that concept I can accept. The idea that the Yuan should be included when it is pegged to the dollar and subject to forex controls seems pretty absurd to me. How are Cental Banks supposed to get hold of Yuan anyways? Only through a totally artificial bias towards the special drawing rights of the IMF or indirectly through their dollar holdings and an assumption of the peg.

[flying]

http://www.mineweb.com/mineweb/view/minewe...1&sn=Detail

Obama Administration pushes IMF gold sales through House by tieing it to security bill

[churchill]

A good summary of the current situation - I am holding back before re-investing as I think the balance is for lower markets and a higher $ at this time .

http://www.gold-eagle.com/editorials_08/grummes062209.html

[flying]

A good summary of the current situation - I am holding back before re-investing as I think the balance is for lower markets and a higher $ at this time .

What type of investing?

Do you mainly deal in mining stocks or physical?

[churchill]

Mining Stocks through Blackrock Gold and General - though it is very difficult to trade as instructions given today are not acted on for 2 days - Prices change every day at 12 noon UK time but the office I deal with need at least 24 hours notice to process any instruction .

[flying]

Mining Stocks through Blackrock Gold and General - though it is very difficult to trade as instructions given today are not acted on for 2 days - Prices change every day at 12 noon UK time but the office I deal with need at least 24 hours notice to process any instruction .

Ouch that must be very scary at times.

Especially these days.

Good luck to you

[churchill]

I tend not to trade very much but leave myself invested , when I do , yes can be a nervous few days , and can get the timing wrong but try to catch the trend and not worry too much if I get the low or high .

[timinchina]

Russia Makes the First Call for the Monetization of Gold

Russia is proposing the inclusion of the ruble, yuan and gold as a part of a revised basket of currencies to form the valuation of the IMF's special drawing rights seen as the coming new alternative global reserve currency, reported AP.

continued at http://seekingalpha.com/article/143662-rus...ization-of-gold

Russia also proposed crude oil being bought and sold in Euros a while back,instead of the petrodollar,guess which currency crude is now bought and sold in...errrmmm,the US Dollar of course!

[flying]

Russia also proposed crude oil being bought and sold in Euros a while back,instead of the petrodollar,guess which currency crude is now bought and sold in...errrmmm,the US Dollar of course!

Yes but didn't Saddam switch & was making a increase of income ?

With the approval of the UN........

Then we went in & hunted his butt down & hung it. Timing eh

Funny right after that all kinds of things happened & continue till today.

http://archives.cnn.com/2000/WORLD/meast/1...q.un.euro.reut/

http://www.time.com/time/magazine/article/...,998512,00.html

http://www.energybulletin.net/node/7707

http://www.globalresearch.ca/articles/CLA410A.html

Edited June 25, 2009 by flying

[timinchina]

Russia also proposed crude oil being bought and sold in Euros a while back,instead of the petrodollar,guess which currency crude is now bought and sold in...errrmmm,the US Dollar of course!

Yes but didn't Saddam switch & was making a increase of income ?

With the approval of the UN........

Then we went in & hunted his butt down & hung it. Timing eh

http://archives.cnn.com/2000/WORLD/meast/1...q.un.euro.reut/

http://www.time.com/time/magazine/article/...,998512,00.html

http://www.energybulletin.net/node/7707

http://www.globalresearch.ca/articles/CLA410A.html

There's a lesson to be learned there somewhere...not quite sure what it is though!

[flying]

There's a lesson to be learned there somewhere...not quite sure what it is though!

Yes but unfortunately we did not learn from it.

On the other hand....we will not find the rest so easy.

We were able to bully & continue to do so there.

But where we are headed we will not find as easy.

At the end of the day you have to wonder though............

What would have been easier? Pay the new converted price of the black gold or

pay what we have paid since 2001 ahhhhh

http://www.costofwar.com/

[badge]

Ah, the infamous, late, and still ellusive Inflation showing up in day-to-day life...

http://www.guardian.co.uk/uk/feedarticle/8579650

..Oh no, Im mistaken.

[flying]

...........

Edited June 27, 2009 by flying

[churchill]

Ah, the infamous, late, and still ellusive Inflation showing up in day-to-day life...

http://www.guardian.co.uk/uk/feedarticle/8579650

..Oh no, Im mistaken.

"But mortgage payments were the only area of household running costs that fell during the 12 months, with gas and electricity charges rising by 13% to average £1,409 a year.

Routine maintenance costs also increased, rising by 7% to £350 a year, while both water bills and the cost of repairing properties were 5% higher in April than a year earlier.

Despite their fall, mortgage interest payments are still the single biggest cost of owning a home, accounting for 27% of the total, although this is down from 43% in April 2008.

Electricity and gas bills are the second biggest cost at 19%, up from 14%, followed by council tax and domestic rates at 17%."

So if it were not for the reduction in interest rate payments the costs would have risen about 15% !

[Abrak]

Ah, the infamous, late, and still ellusive Inflation showing up in day-to-day life...

http://www.guardian.co.uk/uk/feedarticle/8579650

..Oh no, Im mistaken.

"But mortgage payments were the only area of household running costs that fell during the 12 months, with gas and electricity charges rising by 13% to average £1,409 a year.

Routine maintenance costs also increased, rising by 7% to £350 a year, while both water bills and the cost of repairing properties were 5% higher in April than a year earlier.

Despite their fall, mortgage interest payments are still the single biggest cost of owning a home, accounting for 27% of the total, although this is down from 43% in April 2008.

Electricity and gas bills are the second biggest cost at 19%, up from 14%, followed by council tax and domestic rates at 17%."

So if it were not for the reduction in interest rate payments the costs would have risen about 15% !

Yes good point Churchill especially as interest rate repayments are not included in the CPI.

Now we should also bear in mind the structure of interest rates.

Look at US mortgage rates for instance....

So while UK mortgage rates have apparently fallen 40% or so over the last 12 months US 30 year mortgages have fallen just 50 basis points or less than 10%.

To be honest I find it hard to believe that UK mortgage rates average 3.28% when US mortgage rates are 5.75% but lets see if we can think of a few reasons why.

1. Normally UK rates are higher than US reflecting its reserve currency status. Not this time.

2. Maybe high US rates reflect their fiscal imbalance relative to UK. Well they both look pretty screwed there.

3. Maybe the article doesnt reflect the recent rise in rates. Quite possible.

4. Maybe it reflects the different way the banks were restructured - could be - both have ZIRP but UK could sustain a lower margin.

5. Maybe it simply reflects a different view of monetary policies - maybe.

If the UK has managed to keep long term rates down well below the US while still running a substantial fiscal deficit (in other words having a much, much flatter yield curve) it has obviously convinced the world that its fundamentals are substantially better (afterall you can get a better yield on 10 year treasuries). They may well be but I remember 3 months ago when sterling was US$1.37 and nobody would touch it with a barge pole.

[churchill]

I think you will find that average interest rates for mortgages are generally lower, at present , in the UK as people fix on a short term basis rather than long term as they do in the US? So when interest rates eventually do go up the average interest rate in the UK will be higher than the US .

[badge]

Ah, the infamous, late, and still ellusive Inflation showing up in day-to-day life...

http://www.guardian.co.uk/uk/feedarticle/8579650

..Oh no, Im mistaken.

[...]

So if it were not for the reduction in interest rate payments the costs would have risen about 15% !

And if it were not for the sellers, Gold would be alot higher.

[badge]

Gold; the final bubble.

If Gold can surmount $1100 it'll be a fantastic buy, it could double.

Until it does so theres a very real chance it goes to $600 in my opinion.

Either way, with 140 times the paper Gold as the physical, one day we'll see the same blow up in the Gold market as we are witnessing in credit markets, albeit it not as large, and effecting the few rather than the many.

[flying]

And if it were not for the sellers, Gold would be a lot higher.

The more I watch the more I wonder if this will not be a very big revelation some day. We will see but even sellers have a limit to their supply

[lannarebirth]

And if it were not for the sellers, Gold would be a lot higher.

The more I watch the more I wonder if this will not be a very big revelation some day. We will see but even sellers have a limit to their supply

Still, the question you have to ask yourself is, what is the real demand for gold and what is the speculative demand? Speculators are already in, so now real demand has to take it higher. Are you comfortable with that?

[teletiger]

I thought speculators were waiting for the pull-back. Have they missed it? The latest geo-political events have found out a few "bottlers". Not too many though.

Gold could be the stone in a catapult. The further it's pulled back.....the further it flies. 'Or is it a lump in a trebouchet.....a ranging shot. One thing everyone agrees on though, is that $1000 ($1200?) is just a rice paper target. But when?

Regards.

[flying]

Still, the question you have to ask yourself is, what is the real demand for gold and what is the speculative demand? Speculators are already in, so now real demand has to take it higher. Are you comfortable with that?

Today Honduras President was ousted Mr Obama is mad.... guns on the street....

Iran has a new turn out & has more folks on the street than before....

We gear for Afghanistan.....

Cap & Trade goes to senate & will probably pass as Americans are busy watching Michael Jackson life videos

Am I comfortable with demand having to take gold higher?

Oh yeah... you bet I am

Folks are all calling for the pull back now in PM's.

IMHO 6/22 was the turn & time to back up one last time if you wanted anymore.

Of course I have the same 50/50 chance of being wrong as the next guy.

By the time we reach August Mr Obama will have his hands so full he will need a auto bum washer installed. California may be at the front of his woe's. We will see.

Folks see green shoots I see the slightest beginning of the worse yet to come.

Stock market looks fine & will probably continue up maybe even make the 9600 who knows...But on what? Talk about lack of demand Hope...wishful thinking....yes...But show me the money

We will see where it goes soon enough. The truth of the matter is there is no good reasons on that side. But plenty of reasons to tank. Both the $ & the market..... There you will have your demand for what was & always will be money.

Yes I am comfortable....I sleep better now than I did back at the beginning of the year. But I still am 70% USD & need to make some decisions. There are some Canadian Energy companies I am interested in so it is not like I am totally opposed to considering other ideas. But considering is as far as I have gone with those.

Edited June 28, 2009 by flying

[Naam]

Still, the question you have to ask yourself is, what is the real demand for gold and what is the speculative demand? Speculators are already in, so now real demand has to take it higher. Are you comfortable with that?

Today Honduras President was ousted Mr Obama is mad.... guns on the street....

Iran has a new turn out & has more folks on the street than before....

We gear for Afghanistan.....

Cap & Trade goes to senate & will probably pass as Americans are busy watching Michael Jackson life videos

Am I comfortable with demand having to take gold higher?

Oh yeah... you bet I am

there is no doubt that the ousting of Manuel Zelaya will have gold trading in Hong Kong above 2,800 dollars within the next couple of hours!

OOPS! edited to add that i meant of course >$2,800 for THREE ounces

Edited June 29, 2009 by Naam