Where Is Gold Going In This Market

[VegasVic]

But if I were wondering about the fundamentals I would say gold is & always was a safe haven for many during times of economic upheaval. I have a feeling most still feel that way....for now.

I know from your posts that you see many green shoots or have read about them & I think you said something along the lines of it would be unwise not to believe them. That again could be true but is not what I am*seeing*. I am only seeing a reaction to our sorry government throwing tons of their worthless zeros onto the balance sheet & yes it has in fact had an effect.

But since this effect is only caused by what I see as worthless zeros I do not see it as honest sustainable improvements/growth. The curtain will more than likely fall on this.

Actually my slightly negative view about gold doesnt have have anything to do with my assumptions about growth. A statistical bounce in the economy was inevitable. To the extent it might look like a bit more it has just been given a few zeros.

I am less negative about inflation though (I dont see either hyper or deflation.) Although the market takes the same view it hasnt really been reflected in the gold price.

The gold price should go up when inflation expectations rise...

As well as rise when real interest rates fall ...

This can be seen in price movements in that the bottom of gold reflects the greatest difference between inflation and real yields, most of the upside was seen in the very sharp narrowing of this differential up to 2005 and the peak was when the inflation expectations were near their highs and the real yield at its lows relatively. That is a perfect storm for gold.

Since then real yields have risen and inflation expectations fallen, without much fall out for the gold price. As I see it inflation expectations will probably fall further and the real yield may well rise.

Abrak, Your prior two posts have hit the nail on the head! The "real" money supply in the U.S. is not growing at an alarming rate at all, despite every goldbugs claims that the breau of engraving is workning 24/7 and hyperinflation is just around the corner Inflation and growth will both remain at anemic levels for the next few years, but even if inflation should begin to rear its ugly head, Mr. Bernanke at the FED and Mr. Volker in the White House are both inflation hawks and wil not be afraid to raise rates to keep inflation in check. There is an old adage that by the time you see an economic story on the frontcover of Time or Newsweek it is time to bail, this is very true for gold and a few other commodity markets at present. When 20 out of 22 fund managers are touting gold as another poster pointed out, and every third commercial on bloomberg financial and CNBC is trying to sell you gold, then you know the gold market has been played out and is extremely overbought. Currently the velocity of money is at a standstill and inflation is about as tame as I have ever seen it in my adult life, so I will go on the record here and predict a fall in the POG to mid $800 levels or lower by the end of September

[flying]

so I will go on the record here and predict a fall in the POG to mid $800 levels or lower by the end of September

Yes but all these other predictions were made when gold was $730 & it never really looked back... Kind of funny too that China went forward as well as others with purchases

Yes, there should be strong support in the $640-$670 level, once that level falls then a good "buy spot" for gold would be in the upper $300's (wait for about $365-$370 if possible).

'VegasVic' date='2008-10-18 11:52:42' post='2282546'

Just look back 6 years and you will see mid $300's or look back 7 years and you will see sub $300. Thats why I told you to not buy gold immediately when it drops below $400/ounce, rather wait until it hits $365 or so because if it drops lower then it will be easier to average down!

'VegasVic' date='2008-10-21 06:12:20' post='2287459'

The answer to the topic of this thread is DOWN!!! Gold is at around $770/ounce and headed south

'VegasVic' date='2008-11-13 21:54:07' post='2331239'

The Chinese have got far more imortant things to spend their money on right now (besides gold) within their own borders. As far as the Saudis buying gold over the past few weeks, it sure hasn't affected the POG much, gold dipped below $700/ounce today before the shorcovering rally happened in the states.

We are in a worldwide recession and their will be a strong deflationary trend for quite some time, so investing in gold now will only bring you heartbreak and losses for the foreseeable future. Gold will break down below $650/ounce before years end, so if you really feel the need to own some of the shiny stuff I would wait a while

'VegasVic' date='2008-11-16 07:34:52' post='2335741'

You have a great wit Naam I'll bet there are some very nervous goldbugs out there today after the G-20 came forward yesterday after their meeting and spoke with such unanimity of purpose! After all the whole goldbug thesis is that countries will not trust each other and the fiat money system will break down and gold will reign supreme. It appears that gold will likely head down below $600/ounce long before it ever reigns supreme

Edited August 2, 2009 by flying

[PCA]

Well, VV says Gold down and I cannot think of any stronger fundamental buy signal

Amazing that timing and welcome back

[Abrak]

Yes but all these other predictions were made when gold was $730 & it never really looked back... Kind of funny too that China went forward as well as others with purchases

The very sharp fall in gold to 730 at the end of last year can be best explained by temporary collapse by the very sharp fall in expected inclation rates in the last 3 months of 2008.

I also see central banks as being a better contra indicator for the gold. They were net buyers at golds peak as well as net sellers at its bottom (remember the BOE). And have been consistently selling all the way up. The Chinese massive holdings of USTs doesnt make them too smart either imho.

[churchill]

Why the dollar is toast

Article By: Sandy McGregor (Allan Gray)Mon, 03 Aug 2009 10:14Doubts are starting to emerge as to whether the United States is a financial safe-haven and whether the dollar will continue to have the most important attribute of a reserve currency — that it be a stable store of value. The recent strength of the gold price suggests we may be witnessing the early stages of a flight from the dollar. Sandy McGregor explains…

We have commented previously that gold has the characteristics of both a commodity and a currency. Since the sub-prime crisis broke in July 2007, the role of gold as a store of value has become increasingly prominent, with its dollar price rising from US$660 to US$980 at a time when almost all other commodity prices have declined significantly. This is not simply a matter of a weak dollar. In euros, gold is up 42 percent and in yen, 17 percent. If gold is regarded as a currency, it has been the best performer of its class since the start of the financial crisis.

What is driving people to invest in a financial instrument that economist John Maynard Keynes famously described as a barbarous relic? Underlying the shift of investor sentiment towards gold is concern about governments generally abandoning fiscal and monetary discipline in an attempt to stabilise global economic conditions, and, in particular, worries about the dollar as the world’s reserve currency.

The rise and fall of reserve currencies

In modern times there have been two reserve currencies. The first was the pound sterling, which played the central role in global finance over the century between the end of the Napoleonic wars and the outbreak of the First World War in 1914. Two world wars destroyed Britain’s financial hegemony and, after a period of considerable confusion, in 1945 the dollar emerged as the lynchpin of the world’s financial system, a position it has held ever since.

While prior to 1914 Britain did not abuse its privileged position at the centre of the world’s financial system, generally running balanced budgets and current account surpluses, the same cannot be said of the United States. Since 1981 the US has run huge current account deficits. Initially, this did not matter because it had substantial foreign assets to offset foreign obligations. However, over time the US has become the world’s largest net debtor. The dollar’s special role has allowed Americans to live beyond their means for almost three decades. The rest of the world has been willing to finance this spendthrift behaviour because it has prized, perhaps irrationally, US assets above all others. In addition, many countries have supported the dollar in order to grow their own economies.

Japan, the Asian Tigers (Indonesia, South Korea, Malaysia, Thailand and the Philippines) and, more recently, China have all used export-led growth to create their present prosperity. They have boosted exports by maintaining artificially competitive exchange rates, generating large current account surpluses and, as a consequence, have accumulated substantial dollar foreign exchange reserves. The great boom in emerging markets over the past decade has been based on this simple formula of undervalued currencies. As is the nature of such things, matters got out of control and went to excess, the most dramatic manifestation of which has been China’s accumulation of foreign reserves valued at US$2-trillion.

Confidence in the dollar is eroding

Foreign central banks continue to prop up the dollar because they have no alternative. They would like to diversify their reserves into other currencies but cannot do so without causing a major realignment in exchange rates, with unfavourable consequences for world trade. In contrast, private investors have the freedom to act and are doing so. The market as a whole has become increasingly neurotic about US government finances. Doubts are starting to emerge as to whether the US is in fact a financial safe-haven, and whether the dollar will continue to have the most important attribute of a reserve currency — that it be a stable store of value.

At the heart of the problem is the US fiscal deficit, which will be between US$1.5-trillion and US$2-trillion this year. The Federal Reserve is planning to fund a substantial part of the deficit by printing money. The Federal Budget Office projects that federal debt will increase from 41 percent of GDP at the end of 2008 to 82 percent in 10 years' time — provided certain policy changes are made. Without these changes the debt will exceed 100 percent of GDP. Such projections are at the best of times very unreliable, but clearly the US faces a severe fiscal crisis.

Continued on page two: Why is the Fed is printing money and can the spiralling US deficit be brought under control? Is inflation, and a weakening dollar, the only way out?

http://personalfinance.iafrica.com/moreinvest/1840920.htm

Edited August 3, 2009 by churchill

[teletiger]

After taking a recent 2 year hiatus from the internet, I was surprised on my return to find the intelligence level of poster replies to internet postings seemed to have taken a quantum leap. Are more "insiders" posting under the nick "anonymous"? This site aside.

CNBC are currently on a crusade to "out" the AKA writers of Zero Hedge. Is the message under threat? Too late.

Here's an "insider"? reply to an article about last weeks "successful" treasury auction.

"Not only did the dollar drop, but gold and silver spiked in relation to the drop, and to top it off there was a spike in the futures market on the US 10yr bond; no doubt other correlations can be found, these are just a few. One, of course, has to look at the time of the event and then attempt to uncover an antecedent or consequential event that might hope to offer explanation of this abnormal event (the dollar index dropping).

Ah, the GDP report was released, and although the press release claimed that there was only a 1% contraction and this is true based on BEA’s categories and compiling of those categories and then the milling of them through their statistical factory.

But look closer at the GDP release—and let us assume the BEA’s numbers at face value. Everything is declining—especially consumption and inventory stocks—; everything, that is, but government spending and debt (which was down last quarter when we had a massive contraction, the spending part that is). Further, if one correlates this with the quarterly reports of publically traded companies (yes, there was earnings, but these earnings were no revenue driven—a point green shoot gardeners and defunct Nobel prize economists conveniently over look)), one comes to the conclusion that the only way we will see growth or a continuation of slowing contraction is through more government spending.

However, the issue becomes more complicated when we consider HOW the US government gets its revenue, and this is done by either by taxation, securities auctions, “printing” money, and/or inflation.

Taxes could increase, but this would stifle consumption and business earnings, thus the US consumption driven economy falters.

Securities, as has become well documented, are primarily (and almost only) supported by foreign countries and primary dealers (PD). The problem here is that China is not only not happy with US monetary policy at the moment, but they were distinctly absent from two securities auctions this week (not to mention that the 5yr bond posted only a 1.92 bid/cover (~1.18 of that being PDs). This option for the US is becoming increasingly limited, especially in the light that most of the PDs are the institutions the Feds and the government bailed out (which can only really mean that they are using tax payer money to buy US debt, since most of them will suffer the fate of becoming zombie banks). A temporary solution here, and a likely one, is that more institutions will be allowed to become primary dealers, but a point will be reached that even they wont be able to make convincing bids, even though they are required to.

The government can simply print the money, which they are doing, and let the Fed distribute it through the zombie banks who are PDs and then in turn buy government securities and then the government will in turn redistribute it through its various functions, and back to some of their creditors, like the Chinese; and even better still some of this will also be redistributed back to the zombie banks as they will need much more bailouts as revenue falls or fails to appear (hard to “earn” your way out when you have no earnings) and more toxic assets comes in. Of course all of this is inflationary, either through the government directly stimulating the economy, paying employees that consume, paying their utility bills and such, that is, just existing, and/or simply through the velocity of money having to rapidly change hands—and the faster the system falls, the more they need to expand the money supply and rev up the velocity of the money to prop it up.

And then the government could simply “choose” to cause massive inflation in order to inflate their way out of debt, that is, the government hands you a relative high valued dollar, but as it exchanges more hands it loses value due to the effect of inflation which cause prices to rise which in turn causes more devaluation, and this in turn causes government workers to strike because their wages do not keep up with inflation, so the government “prints” up more money to pay them more, and so the circle goes until they “print” themselves, and us, into oblivion.

Needless to say, this does not pose a good fundamental outlook to those who are holders of US dollars as all the above scenarios are dead ends, and so the great dumping began (selling dollars), and that is why there was a dramatic drop in the dollar. There are many other reasons as well, that are interconnected to the above issues in general, and the US dollar in particular."

http://www.zerohedge.com/article/successful-week-treasury

Regards.

[flying]

Well, VV says Gold down and I cannot think of any stronger fundamental buy signal

Amazing that timing and welcome back

It is Amazing isn't it? Like a reverse cooler....

Ever see that movie the cooler? The guy works for Vegas...

Anytime someone wins too much he goes & stands next to them & kaput

Vic you know I am just kidding as usual

The very sharp fall in gold to 730 at the end of last year can be best explained by temporary collapse

Yes it is just a old joke with my Pal Vic

That is when I was buying & asking him advice. He kept telling me to wait for the 6 hundred range & that 3-4 hundred would be right on its heels so not to buy too much. It is just a running kid. I like Vic & while I ignored his advice on Gold I took his advice back then on Silver which he liked due to industrial usage & loaded up heavy. That was a very good call.

[Abrak]

Churchill's post didnt include the second page on which it was stated...

US monetary policy now clearly has an inflationary bias with the Fed printing money to buy government bonds.

My theory is that this analysis of things is totally wrong because...

1) The Fed has not been printing money to acquire USTs. To the extent it has acquired them it has sold other assets. Its balance sheet has not expanded.

http://blogs.wsj.com/economics/2009/07/16/...t-71609-update/

2) I do not believe the Fed has an inflationary bias. Quite the opposite - the Fed is very optimistic about growth both next year and the year after (+3% and then +4%). My concern is that they see the economy recovering in a real way (when recovery is likely to be a short term bounce). So I think it is just as likely they might even tighten policy (on the basis of a rapid recovery which isnt) than they will allow inflation to cure a problem that they dont even think they have.

3) I do admit that my assumption of what the Fed thinks is about as useless as anyone elses as the Fed is always trying to manage expectations. But a lot of the bullishness for gold is based on the concept that the Fed will monetize debt and is already doing it. Just look at that balance sheet again - the Fed has not even bought back sales of USTs in 2007 let alone been a 'buyer' of government debt and the purchases have not been achieved by expanding the balance sheet. Bernanke has said he will not monetize on several occasions in the last couple of months probably on the basis that he now doesnt see the need.

Anyway the assumption that the Fed will monetize seems a very poor one based on a policy of reversing UST sales of 2 years ago and not expanding the balance sheet. The negligible growth in M2 over the past 6 months is also hard to reconcile with currency debasement.

Edited August 3, 2009 by Abrak

[BEENTHEREDONETHAT]

You can't just bite your gold to tell if it is real. This http://www.panamalaw.org/counterfeit_gold_...s_and_bars.html tells you what it takes to tell the good from the bad or how to make it if you like.

[lannarebirth]

Yes but all these other predictions were made when gold was $730 & it never really looked back... Kind of funny too that China went forward as well as others with purchases

The very sharp fall in gold to 730 at the end of last year can be best explained by temporary collapse by the very sharp fall in expected inclation rates in the last 3 months of 2008.

I also see central banks as being a better contra indicator for the gold. They were net buyers at golds peak as well as net sellers at its bottom (remember the BOE). And have been consistently selling all the way up. The Chinese massive holdings of USTs doesnt make them too smart either imho.

I think it might better be explained by deleveraging and the tightening of futures margin requirements. Froth.

[Abrak]

I think it might better be explained by deleveraging and the tightening of futures margin requirements. Froth.

I certainly agree that there was an element of this. Outstanding futures dropped by some two thirds clearly indicating that there were many buyers who were being forced to liquidate their position either due to margin requirements or redemptions.

[flying]

While not a tech or cyclist myself I like to read. Some I follow have been very accurate to the day for turns.

This month claims a bottom for Aug 22nd setting a higher low then to have its strongest run. Who knows what a higher low will turn out to be. But could provide another opportunity. This is Physical not Stocks....Like I said I only read & mention it as a point of interest. DYODD

[sokal]

But if I were wondering about the fundamentals I would say gold is & always was a safe haven for many during times of economic upheaval. I have a feeling most still feel that way....for now.

I know from your posts that you see many green shoots or have read about them & I think you said something along the lines of it would be unwise not to believe them. That again could be true but is not what I am*seeing*. I am only seeing a reaction to our sorry government throwing tons of their worthless zeros onto the balance sheet & yes it has in fact had an effect.

But since this effect is only caused by what I see as worthless zeros I do not see it as honest sustainable improvements/growth. The curtain will more than likely fall on this.

Actually my slightly negative view about gold doesnt have have anything to do with my assumptions about growth. A statistical bounce in the economy was inevitable. To the extent it might look like a bit more it has just been given a few zeros.

I am less negative about inflation though (I dont see either hyper or deflation.) Although the market takes the same view it hasnt really been reflected in the gold price.

The gold price should go up when inflation expectations rise...

As well as rise when real interest rates fall ...

This can be seen in price movements in that the bottom of gold reflects the greatest difference between inflation and real yields, most of the upside was seen in the very sharp narrowing of this differential up to 2005 and the peak was when the inflation expectations were near their highs and the real yield at its lows relatively. That is a perfect storm for gold.

Since then real yields have risen and inflation expectations fallen, without much fall out for the gold price. As I see it inflation expectations will probably fall further and the real yield may well rise.

Abrak, Your prior two posts have hit the nail on the head! The "real" money supply in the U.S. is not growing at an alarming rate at all, despite every goldbugs claims that the breau of engraving is workning 24/7 and hyperinflation is just around the corner Inflation and growth will both remain at anemic levels for the next few years, but even if inflation should begin to rear its ugly head, Mr. Bernanke at the FED and Mr. Volker in the White House are both inflation hawks and wil not be afraid to raise rates to keep inflation in check. There is an old adage that by the time you see an economic story on the frontcover of Time or Newsweek it is time to bail, this is very true for gold and a few other commodity markets at present. When 20 out of 22 fund managers are touting gold as another poster pointed out, and every third commercial on bloomberg financial and CNBC is trying to sell you gold, then you know the gold market has been played out and is extremely overbought. Currently the velocity of money is at a standstill and inflation is about as tame as I have ever seen it in my adult life, so I will go on the record here and predict a fall in the POG to mid $800 levels or lower by the end of September

So your an Obama greenback bug. Whats your bull pitch ?

Most people don't understand that the dumbest predictions are made when the bubbles are at the top, not when they are forming. Right now everyone is doubting gold(bubble forming) When everyone owns gold when its $2000 an ounce and somebody says its going to $3000, that's the dumb prediction. Just like when everyone was in oil last July when it made record highs($147). Some fools said it was going to $200 and look what happened, the price fell through the floor.

There is nothing even close to a gold bubble. I have not been talking gold stocks with taxi drivers, maybe you have. I was getting tech stocks in 2000 and I was also getting real estate tips in 2006.

[BEENTHEREDONETHAT]

Counterfeiting gold seems to be a relatively easy job and very difficult to detect. Since gold is not a legal currency I'm not even sure what the legal status of counterfeiting gold would be.

So does it bother you that you may be getting ripped off and would not have a clue that you are? Or do you trust your dealer to be selling the real thing? How does he know it is the real thing?

Here is a little excerpt from post 655 this thread.

How to Counterfeit a Gold Bar (for information purposes only) – This was easily found on the Internet. You begin with a tungsten slug about 1/8-inch smaller in each dimension than the gold bar you want to counterfeit create. Next you would cast a 1/16-inch layer of real pure gold all around it. This would not be so expensive to do. The resulting “gold” bar would project a good feel to the touch, it would have a decent enough ring like a gold bar, it would test right chemically because the coating of pure gold would take care of this sort of chemical test, it would weight test correctly. Gold has a density of 19.3  g·cm−3 and tungsten has a density of 19.25  g·cm−3 so there is a detectable difference. One would need to add into the tungsten something denser like iridium or osmium. 98.5% tungsten mixed with 1.5% osmium, iridium, or osmiridium would have the exact density of gold. One would need to damage the bar by drilling inside it to detect it. If you were drilling to be sure you would need to drill in several spots to be certain. It could be detected using electrical resistance testing but you would have to have a heck of a lot of current and good equipment to detect the subtle differences. See how hard it is to detect. Remember the movies about the college kids learning to count cards and beat Vegas? Imagine a similar movie with mining and geology graduate students manufacturing gold bars and coins in their garage. The Chinese are selling counterfeits all over eBay today.

[sokal]

Counterfeiting gold seems to be a relatively easy job and very difficult to detect. Since gold is not a legal currency I'm not even sure what the legal status of counterfeiting gold would be.

So does it bother you that you may be getting ripped off and would not have a clue that you are? Or do you trust your dealer to be selling the real thing? How does he know it is the real thing?

Here is a little excerpt from post 655 this thread.

How to Counterfeit a Gold Bar (for information purposes only) – This was easily found on the Internet. You begin with a tungsten slug about 1/8-inch smaller in each dimension than the gold bar you want to counterfeit create. Next you would cast a 1/16-inch layer of real pure gold all around it. This would not be so expensive to do. The resulting "gold" bar would project a good feel to the touch, it would have a decent enough ring like a gold bar, it would test right chemically because the coating of pure gold would take care of this sort of chemical test, it would weight test correctly. Gold has a density of 19.3  g·cm−3 and tungsten has a density of 19.25  g·cm−3 so there is a detectable difference. One would need to add into the tungsten something denser like iridium or osmium. 98.5% tungsten mixed with 1.5% osmium, iridium, or osmiridium would have the exact density of gold. One would need to damage the bar by drilling inside it to detect it. If you were drilling to be sure you would need to drill in several spots to be certain. It could be detected using electrical resistance testing but you would have to have a heck of a lot of current and good equipment to detect the subtle differences. See how hard it is to detect. Remember the movies about the college kids learning to count cards and beat Vegas? Imagine a similar movie with mining and geology graduate students manufacturing gold bars and coins in their garage. The Chinese are selling counterfeits all over eBay today.

Do you actually think that there is a big counterfeit gold problem out there ? I assumed you where talking about naked short selling in the COMEX by the US treasury.

My gold was purchased at the Bank of Nova Scotia in Toronto. Its not fake man. I still can't believe what you wrote.

Do you actually think that there is a big counterfeit gold problem out there ? I will keep some gold around, you just keep that toilet paper that Ben Bernanke wrote a dollar sign on.

Edited August 7, 2009 by sokal

[flying]

So does it bother you that you may be getting ripped off and would not have a clue that you are? Or do you trust your dealer to be selling the real thing? How does he know it is the real thing?

It does not bother me at all as I know from who I purchase. I but from reputable firms such as Apmex & Tulving as well as my local dealer who I have known for many years before I ever started purchasing PM's he is very well versed & a long time coin/bullion dealer.

As for fakes if I were buying from a suspicious source.....well of course I would pass but for the sake of your argument there are several easy tests that you could google if interested. Again for the sake of your argument perhaps clueless investors should stick to keeping their money in a sock As I am sure they are equally clueless about anything else they could easily be deceived into investing in.

Edited August 7, 2009 by flying

[Jake1]

Small coins and bars are impossible to counterfeit if the size, weight, and color match.

If you're buying 100oz bars pay the few dollars it's going to cost you to have it assayed.

Much easier to counterfeit paper or to add digits onto a screen

[BEENTHEREDONETHAT]

For those of you who think counterfeiting isn't being done.

http://www.coinworldonline.com/counterfeit...unterfeit_1.asp

Liu Ciyun (who prefers to be known by his eBay handle, “Jinghuashei”) is a typical young upwardly-mobile Chinese suburbanite. Married, with a 2-year-old son, Jinghuashei has worked hard the past few years to build a business.

Like most legitimate businessmen, Jinghuashei operates within the laws of his country, and has earned official certification for his small production facility, which employs up to 30 people. The products he sells are properly licensed, where appropriate, and absolutely, 100 percent legal to produce and sell in China.

The only fault that most Americans might find with Jinghuashei’s business model is that he is in the business of producing counterfeit coins.

Jinghuashei’s company is called the Big Tree Coin Factory. It is located in the Fujian (also known as Fukien) province in the southeast portion of the People’s Republic of China. This area is well known to be a hotbed of counterfeiting activity and Jinghuashei acknowledges being aware of approximately 100 competitors who are manufacturing fake coins.

Jinghuashei says that his coin factory is probably the largest of its type in China. It produces in excess of 100,000 fake coins per month for Chinese coin types alone.

He says he is currently only selling about 1,000 counterfeit U.S. coins per month, mostly on eBay. His primary motivation for servicing this comparatively small volume business is that he is making contacts with people he hopes will come to China to buy counterfeit coins on a wholesale basis.

Jinghuashei also claims a sales volume of several thousand counterfeit coins per month in world coin types.

Legal business

Jinghuashei is forthcoming about his business practices. He is certain that he is operating legally in China, which requires that the coins he makes are dated 1949 or earlier. As long as he sticks to this one important regulation and maintains his business certification (license), he says he has nothing to fear from the authorities in China.

But what about the United States of America?

Isn’t he worried that the Secret Service or some other U.S. government agency will come after him for making counterfeit U.S. coins? After all, the coins struck by the U.S. Mint, regardless of date, are all still legal tender, and thus subject to U.S. coin counterfeiting laws. It is illegal for him to sell these coins in the United States, even via eBay.

Jinghuashei responds by claiming that he is operating within the confines of the Hobby Protection Act, a U.S. law that requires all nongenuine numismatic items produced after 1973 to be permanently and conspicuously counterstamped with the word COPY. When informed that his eBay auctions are not in compliance with this law, because he is using a punch that says REPLICA, he seems unconcerned.

Despite numerous online chats and e-mail exchanges with him in which the U.S. law has been discussed, Jinghuashei still hasn’t changed his punch to be in compliance.

Although he has never said it outright, it is apparent he feels invulnerable to U.S. law enforcement because they are unlikely to go all the way to China to prosecute him for the relatively small sums of money his eBay sales generate.

The word “replica” was used in conversations with and questions of Jinghuashei since that is the term he prefers and he appears to be more open to talking than if the terms “counterfeit” or “fake” are used.

Production costs

Jinghuashei acknowledges that the minting equipment currently used in his Big Tree Coin Factory is old and the images he provided show a cramped and dirty environment. But that helps to keep Big Tree’s coin manufacturing costs very low. He says he has access to more modern presses when he needs them.

Jinghuashei says it costs him only 8 cents each to produce each fake Chinese coin using iron-based planchets. Counterfeit U.S. coins cost more – an average of 50 cents each – because the copper and nickel planchet alloys cost him more to make. Jinghuashei says these figures include his entire expense, including materials, labor and marketing.

On eBay, Jinghuashei’s single-coin auctions are usually listed with a starting price of 5 or 10 cents, and they usually close around those prices when he gets a buyer.

Asked how he makes a profit if it costs 50 cents each to make his coins, he explains that he makes most of his profit from the shipping expense he collects from buyers.

This is a common practice with China-based sellers on eBay. They sell the item very cheaply, but then charge as much as $70 or more for shipping. Doing this serves two useful functions. First, their Final Value Fee expense is minimal, since eBay bases this fee on the auction’s closing price. Secondly, if an item is returned to the seller for some reason, the buyer can only recover that minimal bid amount since shipping and handling is typically nonrefundable.

Most of the Big Tree Coin Factory’s current profits are coming from the large number of fake Chinese coins it produces. Many of these coins are replicas of ancient Chinese coins. There is a strong demand for them at flea markets and in tourist zones. Jinghuashei does an active wholesale business in fake Chinese coins, most of which are sold within China itself.

Some of the photos Jinghuashei provided of his storefront operation, the Big Tree Temple Coin Shop, depict fake Chinese artifacts, but he says that some of the goods for sale in the shop are produced by other counterfeiters.

Also evident in photos he provided are what appear to be slabs similar to ANACS slabs, and containing fake U.S. coins. When queried about the slabs in this photo, he became very wary.

“They’re not mine,” he said.

After examining the image, an ANACS spokesman noted the gasket used in the holder is black and does not properly fit the coin. He said ANACS has never used a black gasket in its holders. While the holder appears to mimic some ANACS holders, it does not appear to be an exact copy. All of the slabs in the image carry the same information on the grading tab and all of the coins are counterfeit 1877-CC Trade dollars. The number used is for a coin of a different denomination graded by ANACS in 2005.

Asked whether he has the capability of making “replica” Professional Coin Grading Service slabs, Jinghuashei repeatedly responds that he is not intentionally deceiving anybody with his coins. He insists that he sells them openly and clearly as “replicas,” but if other people do dishonest things with them, that is not his fault.

The subject of fake PCGS slabs generates an interesting response from Jinghuashei. He vehemently denies having anything to do with fake PCGS slabs, claiming that they are “big trouble.”

But during a recent conversation where fake PCGS slabs were the topic of discussion, a photo alert popped up in the instant messenger chat program. The photo shows a 1916 Chinese silver coin in a PCGS slab. Asked if the slab is genuine, he said, “Yes, and the coin is, too. I collect silver Chinese coins myself.”

Jinghuashei has been branching out in recent weeks, listing on eBay entire collections of fake U.S. Trade dollars, Morgan dollars, Barber half dollars and other larger diameter “silver” coins.

These collections are already housed in what appear to be Dansco albums. Asked if the albums are also fake, Jinghuashei responds: “Of course!”

Like most Chinese businessmen in the counterfeiting industry, Jinghuashei takes great pride in producing a fine, high-quality product that is difficult to distinguish from the real thing.

Twisted Avatar

[Abrak]

Most people don't understand that the dumbest predictions are made when the bubbles are at the top, not when they are forming. Right now everyone is doubting gold(bubble forming) When everyone owns gold when its $2000 an ounce and somebody says its going to $3000, that's the dumb prediction. Just like when everyone was in oil last July when it made record highs($147). Some fools said it was going to $200 and look what happened, the price fell through the floor.

There is nothing even close to a gold bubble. I have not been talking gold stocks with taxi drivers, maybe you have. I was getting tech stocks in 2000 and I was also getting real estate tips in 2006.

I totally agree that there is no sign of mania that you would associate with the top of a bubble.

There are signs that gold is forming a bubble - brokers who have never even considered gold are now writing 30 page reports etc. Obviously when the hooker in Patpong starts recommending it then you can get out in a pretty sure bet.

I simply have a theory that golds underlying fundamentals are very stable (despite of a lot of historic volatility). You cant compared it with oil where a 10% increase in demand relative to supply (inelastic) would lead to a 3x prices increase. It should be compared to currencies or property where total supply is very high verses annual demand.

As such neither fundamentals nor peoples price perception should move a very high degree. Take the dollar for instance, it trades between 1 and 2 against sterling. Even in the massive bull run in property in the US it did not appreciate 3x in real terms.

Even if you assume volatility then US$250 an ounce (inflation adjusted US$305) would mark a low and US$750 (inflation adjusted US$1675) a high.

Fundamentally valuation should be less volatile than in the past. As importantly most people invest in gold because it is an inherently stable form of value.

It has gone up in real terms 3x since its lows. If it is a currency or even if it was property that would be a sure sign of overvaluation. You can compare it with oil and say it will go up another 5x but then it is simply a commodity and a punt. Think of it another way if oil was held as a store of value and total supply in storage was 50 x annual demand, how could the price go up 12x.

Anyway I sort of admit it is in a bull run and there a definitely no signs of a mania that guarantees a top. I just think long term you are the wrong side of the value curve and short term the fundamentals are weakening against a bull position. My maid doesnt even know how to make coffee so it is risky to wait for her to advise me to buy gold.

[wileycoyote]

I can see it rising signicantly during "A Winter of Discontent"

[churchill]

European Central Banks Renew Gold Sales

By REUTERS

Published: August 7, 2009

Filed at 5:25 a.m. ET

FRANKFURT (Reuters) - European central banks have agreed to extend a cap on gold sales for another five years, but reduced the maximum of total gold that could be sold under the agreement, the European Central Bank said on Friday.

Gold prices rose, topping $962 per ounce after the announcement, from $960.20 per ounce immediately before. Gold was trading at $961.20 by 0845 GMT (9:45 a.m. British time), Reuters data showed.

The ECB said the overall cap on sales in the next five-year period would be reduced to 2,000 tonnes from the current 2,500 tonnes. Annual sales would not exceed 400 tonnes, it added.

No new signatories would join the new deal from September, but the International Monetary Fund's intention to sell gold could be included within the agreement.

"The signatories recognise the intention of the IMF to sell 403 tonnes of gold and noted that such sales can be accommodated within the above ceiling," the ECB said in a statement.

Analysts said the new agreement did not include any big surprises.

"It is not a surprise at all that there is a new Central Bank Gold Agreement ... if only to allow the accommodation of the IMF sales," said Stephen Briggs RBS Global Banking and Markets commodity strategist. "It is reassuring that the IMF sales will be within the agreement."

European central banks first agreed to cap gold sales in 1999, an agreement which has been a key factor driving a rally in the price of the precious metal over the last eight years.

"Gold remains an important element of global monetary reserves," the ECB said.

The new agreement starts on September 27, immediately after the current agreement expires.

Under the terms of the existing five-year central bank gold agreement, which expires on September 26, signatories can sell a maximum of 500 tonnes of gold per year -- although sales have fallen well short of the quota in recent years.

As the current annual limit of 500 tonnes was not likely to be reached, lowering it to 400 tonnes was a good compromise, RBS's Briggs said.

The International Monetary Fund said on July 29 it planned to sell 403 tonnes of gold within the next central bank pact, raising the question of whether the overall sales cap would be raised, or the limits for other signatories reduced.

The IMF is not currently a signatory of the pact, but selling its gold within the CBGA would avoid disruptions to the gold market.

The ECB holds 501 tonnes of gold, according to the World Gold Council, worth about $15.5 billion (9.2 billion pounds) at current prices, according to Reuters calculations.

The signatories to the existing deal are the ECB and the central banks of Italy, Spain, Portugal, Greece, Luxembourg, France, Belgium, Ireland, the Netherlands, Germany, Austria, Finland, Switzerland, Sweden, Slovenia, Cyprus, Malta and Slovakia. For details, please see the World Gold Council's Web site: http://www.reserveasset.gold.org/

http://www.nytimes.com/reuters/2009/08/07/...-gold.html?_r=1

[Jake1]

Obviously when the hooker in Patpong starts recommending it then you can get out in a pretty sure bet.

The Hooker in Patpong knows Gold is a wealth reserve. Do you see stock brokers on every street corner in Thailand or Gold Shops? I'd say it's time to get out of Gold when the Hooker would rather hold 2 shares of Google instead of a 2 Baht Gold chain

[Abrak]

Obviously when the hooker in Patpong starts recommending it then you can get out in a pretty sure bet.

The Hooker in Patpong knows Gold is a wealth reserve. Do you see stock brokers on every street corner in Thailand or Gold Shops? I'd say it's time to get out of Gold when the Hooker would rather hold 2 shares of Google instead of a 2 Baht Gold chain

Ok fair point, the hooker has always held long term belief in gold through thick and thin, so her advice on google is a much better contra-indicator.

If a hooker started lecturing me on google - I would assume she is just a bad shag.

[Naam]

Obviously when the hooker in Patpong starts recommending it then you can get out in a pretty sure bet.

The Hooker in Patpong knows Gold is a wealth reserve. Do you see stock brokers on every street corner in Thailand or Gold Shops? I'd say it's time to get out of Gold when the Hooker would rather hold 2 shares of Google instead of a 2 Baht Gold chain

Ok fair point, the hooker has always held long term belief in gold through thick and thin, so her advice on google is a much better contra-indicator. If a hooker started lecturing me on google - I would assume she is just a bad shag.

so what? she might be able to perform an excellent blowjob.

[Abrak]

so what? she might be able to perform an excellent blowjob.

Quite possibly.

But it is a better assumption that she is giving blowjobs because she doesnt know what she is talking about re Google. Although I would admit that the blowjob itself would curtail the nonsense.

[flying]

"Gold remains an important element of global monetary reserves," the ECB said.

I'd say it's time to get out of Gold when the Hooker would rather hold 2 shares of Google instead of a 2 Baht Gold chain

[Abrak]

I just saw a couple of interesting long term charts on gold. Apologies if you have seen them before.

And this....

[flying]

I just saw a couple of interesting long term charts on gold. Apologies if you have seen them before.

.

My eyes are not good enough to make out the1st chart even when enlarged but,,,

In the 2nd chart they are saying that the value of all gold mined is more than the value of any fiat currencies?

I see they are valuing the gold at US$806.62...I think?

So what does this say to the argument that always pops up about there not being enough gold to convert to a gold backed system?

Their own notes at the end of their report is more telling....

Notes

1 As an interesting aside, one may note that the present U.S. debt of US$10.5 trillion easily exceeds the value of ALL circulating currencies in the world PLUS the value of all gold ever mined! A naive person may wonder just exactly how the American government ever intends to pay this debt off...

2 It was illegal for Americans to own gold for investment purposes since President Roosevelt signed Executive Order 6102 on April 5, 1933. It wasn't until Dec 31, 1974 when Americans could own once again own gold coins, bars and certificates.

3 In nominal terms, gold did not surpass this level until Jan 8, 2008 - nearly some 28 years later.

http://news.goldseek.com/GoldSeek/1233083811.php

Edited August 7, 2009 by flying

[sokal]

For those of you who think counterfeiting isn't being done.

Talking about fake gold on a discussion about the fundamental implications gold plays on monetary policy is ridicules. Sure there might be some idiots flipping some fake gold on craigslist but nobody cares.

[badge]

Nothing particularly noteworthy going on here yet.