Where Is Gold Going In This Market

[flying]

I'm not sure about the T/A, but normal thinking always goes out the window... eventually. My personal opinion is, 650ish is too well staked out, meaning it doesn't make it there, or if it does it slices right through. BWDIK?

Thanks I bet you know more than you think

I would be happy if it did slice right through 650.

Then I wouldnt waste any resources there.

Do you have any thoughts on Silver?

[lannarebirth]

I'm not sure about the T/A, but normal thinking always goes out the window... eventually. My personal opinion is, 650ish is too well staked out, meaning it doesn't make it there, or if it does it slices right through. BWDIK?

Thanks I bet you know more than you think

I would be happy if it did slice right through 650.

Then I wouldnt waste any resources there.

Do you have any thoughts on Silver?

Absolutely none.

[flying]

Absolutely none.

Me neither but I bought some anyway

In spite of the downtrend I bought some on a lark because it was locally available for 9.45 / oz +2

I figured it cant hurt too bad & I always wanted some PM in hand. Leave it for the kids

[flying]

I dont think it can hurt either. Nothing wrong with diversifying a bit. I am bullish on silver and palladium for the long term, more so on palladium as it is very scarce and the main countries that supply it are not the most stable, politically. However, I am out of luck when it comes to buying more 1oz coins of silver and palladium, as all the dealers in North America are out of stock. Very strange this surge in demand of the physical, while such a hard sell off of paper.

Cool Vibe !

I am thinking long term too. I was not into PM before but now that I have started I must admit it is a bit addicting isn't it? I know what you mean about lack of stock. Everywhere is out.

I just lucked out as a dealer here had 6000oz of rounds on order & although most were spoken for I still got a nice start.

Good Luck

[lannarebirth]

Two observations:

1) this gold bar restriction is very remeniscent of the panic we observed in LPG lines, just as oil was topping out. Interestingly, Gold is not making new highs (not in $'s anyway).

2) a friend of mine in the states tried to buy some gold coins at 685 last week, as Gold was trading lower. The dealer was aking $USD710, with the rational being "I'm not going to take a loss on these coins". It would seem at least "some" dealers are holding inventory they are underwater on, and that could be a contributory factor to the "scarcity" that people say is present in the market.

[BEENTHEREDONETHAT]

Two observations:

1) this gold bar restriction is very remeniscent of the panic we observed in LPG lines, just as oil was topping out. Interestingly, Gold is not making new highs (not in $'s anyway).

2) a friend of mine in the states tried to buy some gold coins at 685 last week, as Gold was trading lower. The dealer was aking $USD710, with the rational being "I'm not going to take a loss on these coins". It would seem at least "some" dealers are holding inventory they are underwater on, and that could be a contributory factor to the "scarcity" that people say is present in the market.

They use to charge a premium for coins over gold bars. The amount of premium depended on which coin you chose. The lowest premium was for the Krugerand, then the Maple leaf and the highest premium for for the Chinese Panda. Sorry don't recall how much the premium was but about 10% rings a bell. This was in the 80's so probably dosen't mean much now.

[Naam]

Two observations:

1) this gold bar restriction is very remeniscent of the panic we observed in LPG lines, just as oil was topping out. Interestingly, Gold is not making new highs (not in $'s anyway).

2) a friend of mine in the states tried to buy some gold coins at 685 last week, as Gold was trading lower. The dealer was aking $USD710, with the rational being "I'm not going to take a loss on these coins". It would seem at least "some" dealers are holding inventory they are underwater on, and that could be a contributory factor to the "scarcity" that people say is present in the market.

They use to charge a premium for coins over gold bars. The amount of premium depended on which coin you chose. The lowest premium was for the Krugerand, then the Maple leaf and the highest premium for for the Chinese Panda. Sorry don't recall how much the premium was but about 10% rings a bell. This was in the 80's so probably dosen't mean much now.

the difference in premiums still exists and is based on mainly two factors:

1. the purity of gold in the coins differs although each coin has exactly one ounze of 999 fine gold.

2. the availability of coins. "Krüger-Rands" are more easily available than for example the swiss "Gold Vreneli" or the canadian "Maple Leaf".

remark: coins have the advantage of having rather small denominations. but the general ignorant gold bug (GOLD WILL BE 10,000! IT'S ONLY A MATTER OF TIME!) overlooked the fact that even 5 and 10 gram bars (less than 1/6 and 1/3 of an ounce) were available in the (european) market with a much smaller mark-up than coins. by now these are sold out too of course.

[lannarebirth]

Two observations:

1) this gold bar restriction is very remeniscent of the panic we observed in LPG lines, just as oil was topping out. Interestingly, Gold is not making new highs (not in $'s anyway).

2) a friend of mine in the states tried to buy some gold coins at 685 last week, as Gold was trading lower. The dealer was aking $USD710, with the rational being "I'm not going to take a loss on these coins". It would seem at least "some" dealers are holding inventory they are underwater on, and that could be a contributory factor to the "scarcity" that people say is present in the market.

They use to charge a premium for coins over gold bars. The amount of premium depended on which coin you chose. The lowest premium was for the Krugerand, then the Maple leaf and the highest premium for for the Chinese Panda. Sorry don't recall how much the premium was but about 10% rings a bell. This was in the 80's so probably dosen't mean much now.

I'm going from memory on the prices, but my point was, the dealer would not sell at all, unless he could be made whole, which was a point above the usual premium paid. I think a lot of dealers have had to restock at prices higher than they would wish and therefore have to carry asset price risk. Ordinarily, asian dealers seem to be content making most of their money on the transactional vig, and may not be so schooled in locking in prices through the futures pits.

[Naam]

I'm going from memory on the prices, but my point was, the dealer would not sell at all, unless he could be made whole, which was a point above the usual premium paid. I think a lot of dealers have had to restock at prices higher than they would wish and therefore have to carry asset price risk. Ordinarily, asian dealers seem to be content making most of their money on the transactional vig, and may not be so schooled in locking in prices through the futures pits.

??? ??? meaning what in a language i understand?

[lannarebirth]

I'm going from memory on the prices, but my point was, the dealer would not sell at all, unless he could be made whole, which was a point above the usual premium paid. I think a lot of dealers have had to restock at prices higher than they would wish and therefore have to carry asset price risk. Ordinarily, asian dealers seem to be content making most of their money on the transactional vig, and may not be so schooled in locking in prices through the futures pits.

??? ??? meaning what in a language i understand?

To be made whole is to recover losses (lower price than payed in this case). Vig is a loansharking term, but it applies to gold dealers and pawn shops as well, it's the price chrged for services, aside from the price of asset. I think Asians tend to load up at low prices to sell on at higher prices. I think they are less comfortable in a fast high volatility market, where they could be underwater (holding a losing position) rapidly. In the more "sophisticated" markets dealers buy protection through the use of futures contrats. I'm not so sure if that's how they do it here. They may, but I don't know.

[VegasVic]

I'm going from memory on the prices, but my point was, the dealer would not sell at all, unless he could be made whole, which was a point above the usual premium paid. I think a lot of dealers have had to restock at prices higher than they would wish and therefore have to carry asset price risk. Ordinarily, asian dealers seem to be content making most of their money on the transactional vig, and may not be so schooled in locking in prices through the futures pits.

??? ??? meaning what in a language i understand?

To be made whole is to recover losses (lower price than payed in this case). Vig is a loansharking term, but it applies to gold dealers and pawn shops as well, it's the price chrged for services, aside from the price of asset. I think Asians tend to load up at low prices to sell on at higher prices. I think they are less comfortable in a fast high volatility market, where they could be underwater (holding a losing position) rapidly. In the more "sophisticated" markets dealers buy protection through the use of futures contrats. I'm not so sure if that's how they do it here. They may, but I don't know.

Vigorish is oftened used in Vegas as the % of the house take, most commonly in the sports books a standard 10% on the gross ammount of any wager (i.e. lay down $110 to make $100 the vig is 10% on any particular bet but the house makes a guaranteed 5% if they have laid everything off evenly so in the houses eyes the vig 5%). I believe its a yiddish term originally and Lanna is right that it is also used as a term by loan sharks to expres the % interest on a loan, although the term juice is much more common in the states for such activities. Back to gold, I am not sure if gold is nearing a bottom but the Dollar is up huge today vs. the Euro and Pound and yet gold is flat and the miners are actually up a little? I agree that there is not always an inverse relationship with gold and the Dollar like there is with Oil, but usually its pretty close. Gold is a bit of an anomally because it has very little industrial application any more (less than 11%) unlike silver and Platinum which have a growing industrial demand. The primary reason that I recently took my position in the gold stocks was for hedging purposes because I have a strong feeling that there could be some sort of geopolitical event or terrorist attack over the coming months that could spike gold.

[AlexLah]

Can somebody please explain.

What is the purpose of leasing Gold, and why the rise in cost of leasing Gold.

While the price of real Gold is declining even though many people report that Gold bars are not easy to find..

Is the Spot price of Gold related to the Paper Comex Gold?

What will happen if people that have/own Comex Gold want to see real Gold?

Very confused.

Alex

[flying]

I'm going from memory on the prices, but my point was, the dealer would not sell at all, unless he could be made whole, which was a point above the usual premium paid. I think a lot of dealers have had to restock at prices higher than they would wish and therefore have to carry asset price risk. Ordinarily, asian dealers seem to be content making most of their money on the transactional vig, and may not be so schooled in locking in prices through the futures pits.

??? ??? meaning what in a language i understand?

To be made whole is to recover losses (lower price than payed in this case). Vig is a loansharking term, but it applies to gold dealers and pawn shops as well, it's the price chrged for services, aside from the price of asset. I think Asians tend to load up at low prices to sell on at higher prices. I think they are less comfortable in a fast high volatility market, where they could be underwater (holding a losing position) rapidly. In the more "sophisticated" markets dealers buy protection through the use of futures contrats. I'm not so sure if that's how they do it here. They may, but I don't know.

Could be but I have never seen gold sold without the spread or vig as you say.

I also see the same Namm mentions but maybe in reverse?

For instance I see swiss Pamps 100gr is sopt + 3.75%

Yet coins like Kruggerands & Perth lunar mouses are spot + 9%

Odd because as you say purity is actually better on the bar. The Kruggerand has a bit of copper? I guess for hardness to make the coin last without damage?

Also like you say the fractual smaller coins would have been great but everytime I see any the premium is actually higher than both I mentioned.

Could be the survivalist want the smaller coins thinking to buy goods when TSHTF?

Edited October 27, 2008 by flying

[HardenedSoul]

Platinum/Gold/Silver is on its way down. It's had its run.

Ahhhhh well that's it then. The dollar's going to recover because of the rock solid fundamentals underpinning its economy, its tightly managed budget deficit which won't be impacted upon at ALL by the trillions in bailouts, liquidity injections, stimulus packages and yet-to-be disclosed payoffs to speculators in the credit default swap market and because it's housing market has rebounded thanks to the return of "NINJA" mortgages. The credit card, auto and student loan sectors have reigned in any defaults and GM & Ford are, once again, selling V8 trucks to Americans who drive 100 mile roundtrips to work and back.

The European economies have sorted their massive exposure to the emerging Eastern European property bubbles and everything's hunky dory.

We trust our banks and when they tell us the price of gold is $700 or whatever. We believe them because, honestly, who do these people talking about gold being sold on eBay for $1000 think they're kidding ? The central banks absolutely DO NOT manipulate the price of gold on the COMEX and anyone who holds out for physical delivery of their gold in December WILL get it because the COMEX warehouses are full of the stuff and, let's face it, the world's governments will have all this sorted by Christmas . . . . won't they ?

Seriously though, I love the gold-knockers because they're the types that'll head into US Treasuries just when the Gulf nations are looking to de-peg their currencies from the dollar. The Russians, who are in as much trouble as the rest of them, need readies big time. What can they sell now oil's trading at $60 ? Hmm . . . oh, I know !! What about all those mickey mouse US Treasury bonds that are paying peanuts while the country runs inflation at 5% which is only gonna get worse ? These are the types that'll follow Warren Buffett into equities only to be hammered as the markets take another leg down. These are the types that held cash in Icesave savings accounts. Good Luck, guys

[lannarebirth]

You know, $60 is a pretty good price to be getting for 42 gals of crude oil.

[flying]

http://finance.yahoo.com/tech-ticker/artic...t-Its-Mojo-Back

Ashraf Laidi, chief FX strategist at CMC Markets, says several factors explain gold's recent swoon:

[VegasVic]

Platinum/Gold/Silver is on its way down. It's had its run.

Ahhhhh well that's it then. The dollar's going to recover because of the rock solid fundamentals underpinning its economy, its tightly managed budget deficit which won't be impacted upon at ALL by the trillions in bailouts, liquidity injections, stimulus packages and yet-to-be disclosed payoffs to speculators in the credit default swap market and because it's housing market has rebounded thanks to the return of "NINJA" mortgages. The credit card, auto and student loan sectors have reigned in any defaults and GM & Ford are, once again, selling V8 trucks to Americans who drive 100 mile roundtrips to work and back.

The European economies have sorted their massive exposure to the emerging Eastern European property bubbles and everything's hunky dory.

We trust our banks and when they tell us the price of gold is $700 or whatever. We believe them because, honestly, who do these people talking about gold being sold on eBay for $1000 think they're kidding ? The central banks absolutely DO NOT manipulate the price of gold on the COMEX and anyone who holds out for physical delivery of their gold in December WILL get it because the COMEX warehouses are full of the stuff and, let's face it, the world's governments will have all this sorted by Christmas . . . . won't they ?

Seriously though, I love the gold-knockers because they're the types that'll head into US Treasuries just when the Gulf nations are looking to de-peg their currencies from the dollar. The Russians, who are in as much trouble as the rest of them, need readies big time. What can they sell now oil's trading at $60 ? Hmm . . . oh, I know !! What about all those mickey mouse US Treasury bonds that are paying peanuts while the country runs inflation at 5% which is only gonna get worse ? These are the types that'll follow Warren Buffett into equities only to be hammered as the markets take another leg down. These are the types that held cash in Icesave savings accounts. Good Luck, guys

If you think that inflation is currently running at 5% in the states then I know that you have no idea what you are talking about. At best the U.S. is currently in a period of disinflation with the possibility of outright deflation waiting in the wings, oh yea BTW those mickey mouse T notes that you refer to, they are getting more and more valuable each and every day because when you do decide to sell them you actually get paid in one of the only currencies that is appreciating in todays world., THE U.S. DOLLAR

[HardenedSoul]

If you think that inflation is currently running at 5% in the states then I know that you have no idea what you are talking about. At best the U.S. is currently in a period of disinflation with the possibility of outright deflation waiting in the wings, oh yea BTW those mickey mouse T notes that you refer to, they are getting more and more valuable each and every day because when you do decide to sell them you actually get paid in one of the only currencies that is appreciating in todays world., THE U.S. DOLLAR

Disinflation ??!!

So the rising cost of food, imports and, eventually, oil have no part to play ? The deflation you allude to is public enemy number one to the Fed and the US Treasury and they've decided to use some seriously inflationary measures to combat it. They've DOUBLED the federal deficit in a MONTH - how on earth do you think they're going to pay that down ? Raise taxes on an economy that's plunging into recession ? Or will they do what they always do; inflate the currency ??

As far as the "valuable" T-Notes are concerned, my friend it is YOU that is clueless. The US is toast and is held to ransom by the huge holders of US debt, Russia, China and Japan. The dollar is only appreciating because of the repatriation of USD by the hobbled banks, mutual funds and hedge funds to pay off all their liabilities in the shadow banking system and to meet the billions of dollars in client redemptions.

If you think the US is gonna get out of this with a V-shaped recession, you really need to get into remedial economics 101. The US is to all intents and purposes, BANKRUPT and no amount of monetary expansion is going to save them. Sorry !

[OriginalPoster]

If you think that inflation is currently running at 5% in the states then I know that you have no idea what you are talking about. At best the U.S. is currently in a period of disinflation with the possibility of outright deflation waiting in the wings, oh yea BTW those mickey mouse T notes that you refer to, they are getting more and more valuable each and every day because when you do decide to sell them you actually get paid in one of the only currencies that is appreciating in todays world., THE U.S. DOLLAR

Disinflation ??!!

So the rising cost of food, imports and, eventually, oil have no part to play ? The deflation you allude to is public enemy number one to the Fed and the US Treasury and they've decided to use some seriously inflationary measures to combat it. They've DOUBLED the federal deficit in a MONTH - how on earth do you think they're going to pay that down ? Raise taxes on an economy that's plunging into recession ? Or will they do what they always do; inflate the currency ??

As far as the "valuable" T-Notes are concerned, my friend it is YOU that is clueless. The US is toast and is held to ransom by the huge holders of US debt, Russia, China and Japan. The dollar is only appreciating because of the repatriation of USD by the hobbled banks, mutual funds and hedge funds to pay off all their liabilities in the shadow banking system and to meet the billions of dollars in client redemptions.

If you think the US is gonna get out of this with a V-shaped recession, you really need to get into remedial economics 101. The US is to all intents and purposes, BANKRUPT and no amount of monetary expansion is going to save them. Sorry !

Yesterday there was a TIPS (Treasury Inflation Protected Securities) bonds auction; bonds with 4.5 year maturity went sold at a price that would imply an annual yield 3.27% plus an amount equal to the CPI inflation rate. 5 Year Treasuries that aren't linked to the CPI are presently yielding about 2.75%. On the surface of it, it would appear as though the bond market is pricing in deflation.

BTW, below par TIPS looks a "buy" to me as they are guaranteed to not go below par ($1000 per bond) even in the event of deflation if they are held to maturity, and if it turns out that we do encountered massive inflation ahead they will pay 3.27% per year above whatever inflation rate the government admits to. Barring a outright default by the US government or a devaluation of the dollar that greatly exceeds the domestic inflation rate, they seem like the closest thing to a free lunch that you can get right now.

Edited October 28, 2008 by OriginalPoster

[lannarebirth]

If you think that inflation is currently running at 5% in the states then I know that you have no idea what you are talking about. At best the U.S. is currently in a period of disinflation with the possibility of outright deflation waiting in the wings, oh yea BTW those mickey mouse T notes that you refer to, they are getting more and more valuable each and every day because when you do decide to sell them you actually get paid in one of the only currencies that is appreciating in todays world., THE U.S. DOLLAR

Disinflation ??!!

So the rising cost of food, imports and, eventually, oil have no part to play ? The deflation you allude to is public enemy number one to the Fed and the US Treasury and they've decided to use some seriously inflationary measures to combat it. They've DOUBLED the federal deficit in a MONTH - how on earth do you think they're going to pay that down ? Raise taxes on an economy that's plunging into recession ? Or will they do what they always do; inflate the currency ??

As far as the "valuable" T-Notes are concerned, my friend it is YOU that is clueless. The US is toast and is held to ransom by the huge holders of US debt, Russia, China and Japan. The dollar is only appreciating because of the repatriation of USD by the hobbled banks, mutual funds and hedge funds to pay off all their liabilities in the shadow banking system and to meet the billions of dollars in client redemptions.

If you think the US is gonna get out of this with a V-shaped recession, you really need to get into remedial economics 101. The US is to all intents and purposes, BANKRUPT and no amount of monetary expansion is going to save them. Sorry !

Yesterday there was a TIPS (Treasury Inflation Protected Securities) bonds auction; bonds with 4.5 year maturity went sold at a price that would imply an annual yield 3.27% plus an amount equal to the CPI inflation rate. 5 Year Treasuries that aren't linked to the CPI are presently yielding about 2.75%. On the surface of it, it would appear as though the bond market is pricing in deflation.

BTW, below par TIPS looks a "buy" to me as they are guaranteed to not go below par ($1000 per bond) even in the event of deflation if they are held to maturity, and if it turns out that we do encountered massive inflation ahead they will pay 3.27% per year above whatever inflation rate the government admits to. Barring a outright default by the US government or a devaluation of the dollar that greatly exceeds the domestic inflation rate, they seem like the closest thing to a free lunch that you can get right now.

It is clear, that markets everywhere are pricing in a deflationary scenario. I cannot think of a single asset class that has not "bubbled". If not for the extraordinary actions of governments and central banks at this time, this would be a "no brainer" regarding which way this breaks (inflation/deflation). Given these actions, and those to come I'm sure, I have no idea what might happen next. As Naam correctly points out, ride the wave and be prepared for when the wave ends.

[HardenedSoul]

Yesterday there was a TIPS (Treasury Inflation Protected Securities) bonds auction; bonds with 4.5 year maturity went sold at a price that would imply an annual yield 3.27% plus an amount equal to the CPI inflation rate. 5 Year Treasuries that aren't linked to the CPI are presently yielding about 2.75%. On the surface of it, it would appear as though the bond market is pricing in deflation.

BTW, below par TIPS looks a "buy" to me as they are guaranteed to not go below par ($1000 per bond) even in the event of deflation if they are held to maturity, and if it turns out that we do encountered massive inflation ahead they will pay 3.27% per year above whatever inflation rate the government admits to. Barring a outright default by the US government or a devaluation of the dollar that greatly exceeds the domestic inflation rate, they seem like the closest thing to a free lunch that you can get right now.

Well I suppose that the US government is nothing like the UK's cos their official inflation figures accurately reflect those experienced by Joe Sixpack and Sally Housecoat in the street, right ?

I'm surprised at how bullish you guys are on the US. I mean, you appear to be in denial. Asset deflation in the US is a temporary phenomenon and has nothing whatsoever to do with the pricing in of lower GDP. Stocks in great companies with SERIOUS amounts of cash are being sold off like they're going out of fashion which leads me to believe that there is a LOT of forced-selling going on. These forced-sellers aren't doing it for fun - they're doing it cos they need cash. The flight into treasuries has occurred because of the manipulation in the gold market which has traditionally been a safe-haven and a store of wealth in times of financial uncertainty but this cannot last long. The dollar is backed by the promises of a technically BANKRUPT government. Even now, there's public talk of a return to Bretton-Woods with the attendant requirement for the reserve currency to be pegged to the price of . . . wait for it . . . gold !

The Fed's tried to put out the financial fires by pouring petrol on the flames. What are they trying to achieve ? How can they seriously expect to solve a problem caused by credit and monetary expansion by encouraging more of the same ?

Defaults by both banks and corporates are set to mount and thanks to the shadow banking system, the US Treasury has effectively put the taxpayer on the hook for the losses the banks and insurers stand to suffer. The US consumer is tapped out on credit and is unlikely to tolerate higher taxes to boot. The government will inflate the currency and the price of gold, oil and other commodities will rise.

Look, we could sit here all year debating inflation/deflation but sometimes it's best to stand back and look at the wider picture. America is in REAL trouble, no amount of money printing will save it and the recession has only just begun.

[OriginalPoster]

Yesterday there was a TIPS (Treasury Inflation Protected Securities) bonds auction; bonds with 4.5 year maturity went sold at a price that would imply an annual yield 3.27% plus an amount equal to the CPI inflation rate. 5 Year Treasuries that aren't linked to the CPI are presently yielding about 2.75%. On the surface of it, it would appear as though the bond market is pricing in deflation.

BTW, below par TIPS looks a "buy" to me as they are guaranteed to not go below par ($1000 per bond) even in the event of deflation if they are held to maturity, and if it turns out that we do encountered massive inflation ahead they will pay 3.27% per year above whatever inflation rate the government admits to. Barring a outright default by the US government or a devaluation of the dollar that greatly exceeds the domestic inflation rate, they seem like the closest thing to a free lunch that you can get right now.

Well I suppose that the US government is nothing like the UK's cos their official inflation figures accurately reflect those experienced by Joe Sixpack and Sally Housecoat in the street, right ?

No, I don't think that CPI is an accurate reflection and I made no such claim. What I think that 3.27% plus whatever rate of inflation that the government admits to is a good rate of return compared to its level of risk.

What's your specific advice on where to put money right now, to try to catch a falling knife in currencies or gold?

Edited October 28, 2008 by OriginalPoster

[HardenedSoul]

No, I don't think that CPI is an accurate reflection, what I think that 3.27% plus whatever rate of inflation that the govenment admits to is a good rate of return compared to it's level of risk even if the government understates inflation.

What's you specific advice on where to put money right now, to try to catch a falling knife in currencies or gold?

3.27% above whatever the US government admits to is fine if true inflation is running only a percentage point above their official rate but it's not and this is why OPEC are jumping up and down so much. They hold Treasuries yielding next to nothing yet the OFFICIAL rate of US inflation means the purchasing power of the dollars they get at maturity is reduced; more so if they factor in the TRUE rate of inflation. Hence the cut in production and the prospect of another to come in short order.

The US government is no different to the banking fraternity who swore blind that the subprime crisis was "contained" just after those two hedge funds owned by Bear Stearns went down. They're swearing blind now that these bailouts will solve everything just after swearing blind that allowing Lehman Brothers to fail posed no systemic risk.

Personally, I'm buying stocks in oil exploration and services companies. The crude oil declines have impacted upon those tremendously but, looking at the fundamentals, regardless of whether the world is going into a slowdown, oil is not going to get any easier to find or extract. Americans will still drive miles to work and back because so many of them live in the suburbs and travel into towns to work/shop. The Chinese and the Indians aren't going to seriously curb the subsidies they pay out and once the world realises that oil pricing takes far too much notice of demand factors and not enough of supply, oil will become very expensive indeed.

I'm not buying any more gold but those without holdings really do need to get wise. Sure, I can't see me having to pay my rent in gold dubloons but I can see a time when gold is used to back currency again; the Gulf nations are truly fed up with the greenback. Frankly, I could sell my physical gold, RIGHT NOW, at well over $1000 a troy ounce on Ebay. People are buying because confidence in the banking system will only deteriorate further.

[colibra]

Hey guys what do you think oil will do once this goes on the market

New source of energy that lasts 12.5 to 20 years no recharge just continuous energy.

http://pesn.com/2008/10/22/9501495_Litroenergy_Power_Cells/

Edited October 28, 2008 by colibra

[OriginalPoster]

No, I don't think that CPI is an accurate reflection, what I think that 3.27% plus whatever rate of inflation that the govenment admits to is a good rate of return compared to it's level of risk even if the government understates inflation.

What's you specific advice on where to put money right now, to try to catch a falling knife in currencies or gold?

3.27% above whatever the US government admits to is fine if true inflation is running only a percentage point above their official rate but it's not and this is why OPEC are jumping up and down so much. They hold Treasuries yielding next to nothing yet the OFFICIAL rate of US inflation means the purchasing power of the dollars they get at maturity is reduced; more so if they factor in the TRUE rate of inflation. Hence the cut in production and the prospect of another to come in short order.

The US government is no different to the banking fraternity who swore blind that the subprime crisis was "contained" just after those two hedge funds owned by Bear Stearns went down. They're swearing blind now that these bailouts will solve everything just after swearing blind that allowing Lehman Brothers to fail posed no systemic risk.

Personally, I'm buying stocks in oil exploration and services companies. The crude oil declines have impacted upon those tremendously but, looking at the fundamentals, regardless of whether the world is going into a slowdown, oil is not going to get any easier to find or extract. Americans will still drive miles to work and back because so many of them live in the suburbs and travel into towns to work/shop. The Chinese and the Indians aren't going to seriously curb the subsidies they pay out and once the world realises that oil pricing takes far too much notice of demand factors and not enough of supply, oil will become very expensive indeed.

I'm not buying any more gold but those without holdings really do need to get wise. Sure, I can't see me having to pay my rent in gold dubloons but I can see a time when gold is used to back currency again; the Gulf nations are truly fed up with the greenback. Frankly, I could sell my physical gold, RIGHT NOW, at well over $1000 a troy ounce on Ebay. People are buying because confidence in the banking system will only deteriorate further.

Whether it's a bogus metric or not, I can't think of many investments that have consistently yielded more than 3% + CPI over the long haul.

I'm a little jaded about gold and currencies right now because I lost a lot amount of money this year on Gold and on non-US$ fixed income investments even though I had only about 20% of my portfolio in those asset classes. That those Au and non-USD investments were correct in terms of economic theory and correct morally does nothing to ease the sting. Basically the macroeconomic scenario that gold bugs have been predicting for 40 years has finally come true and what's the beneficary thus far? Not gold, but the US Dollar. There's no justice in that, but I'd least I still have enough worthless greenbacks to pay the bills.

Edited October 28, 2008 by OriginalPoster

[OriginalPoster]

Hey guys what do you think oil will do once this goes on the market

New source of energy that lasts 12.5 to 20 years no recharge just continuous energy.

http://pesn.com/2008/10/22/9501495_Litroenergy_Power_Cells/

Do you believe in it enough to invest in it?

[OriginalPoster]

No, I don't think that CPI is an accurate reflection, what I think that 3.27% plus whatever rate of inflation that the govenment admits to is a good rate of return compared to it's level of risk even if the government understates inflation.

What's you specific advice on where to put money right now, to try to catch a falling knife in currencies or gold?

3.27% above whatever the US government admits to is fine if true inflation is running only a percentage point above their official rate but it's not and this is why OPEC are jumping up and down so much. They hold Treasuries yielding next to nothing yet the OFFICIAL rate of US inflation means the purchasing power of the dollars they get at maturity is reduced; more so if they factor in the TRUE rate of inflation. Hence the cut in production and the prospect of another to come in short order.

I think that you'll find that the overwhelming number of Treasuries held from foreign governments are regular Treasuries that are not linked to inflation rather than TIPS. In that case, the purchaser of the Treasury Bonds knows exactly what yield they would be getting when they purchased the bonds and it would be irrelevant what the US declares the official rate of inflation to be. Part of the reason for the preference for normal bonds that is that TIPS have not usually had nearly as high of a "real" interest rate as 3+% and have not always looked attractive compared to conventional bonds, let alone compared to other asset classes. In fact it was not many months ago that the 5-year TIPS had a NEGATIVE real interest rate, meaning that they would pay the Official Inflation Rate MINUS some percentage. Overall, since TIPS were born in the late 1990's there've only been a few windows of time when they appeared to offer unusually high real yields compared to non-Index treasuries, and often those windows have been fleeting.

Edited October 28, 2008 by OriginalPoster

[HardenedSoul]

Whether it's a bogus metric or not, I can't think of many investments that have consistently yielded more than 3% + CPI over the long haul.

I'm a little jaded about gold and currencies right now because I lost a lot amount of money this year on Gold and on non-US$ fixed income investments even though I had only about 20% of my portfolio in those asset classes. That those Au and non-USD investments were correct in terms of economic theory and correct morally does nothing to ease the sting. Basically the macroeconomic scenario that gold bugs have been predicting for 40 years has finally come true and what's the beneficary thus far? Not gold, but the US Dollar. There's no justice in that, but I'd least I still have enough worthless greenbacks to pay the bills.

Yeah I know lots of people bought into gold a little late and got stung on the correction and one could reasonably ask why the price ever got to $1030+ an oz if the market was being manipulated by the central banks to make it look unattractive. I was very sceptical when I heard goldbugs banging on about the so-called "PPT" (Plunge Protection Team) but now the price of gold on the COMEX and the price of gold on the street are totally different, I see their point.

When you say you lost money on gold, is that because you sold it or because you traded it on margin ? If the latter, then it was a hugely speculative play on a notoriously volatile market. The macroeconomics appear to be benefitting the dollar but, for the reasons given earlier, it simply cannot last. The dollar is rallying on the back of hoarding. Once this hoarding phase collapses, the dollar will - without doubt - be punished by sellers.

[OriginalPoster]

Whether it's a bogus metric or not, I can't think of many investments that have consistently yielded more than 3% + CPI over the long haul.

I'm a little jaded about gold and currencies right now because I lost a lot amount of money this year on Gold and on non-US$ fixed income investments even though I had only about 20% of my portfolio in those asset classes. That those Au and non-USD investments were correct in terms of economic theory and correct morally does nothing to ease the sting. Basically the macroeconomic scenario that gold bugs have been predicting for 40 years has finally come true and what's the beneficary thus far? Not gold, but the US Dollar. There's no justice in that, but I'd least I still have enough worthless greenbacks to pay the bills.

When you say you lost money on gold, is that because you sold it or because you traded it on margin ? If the latter, then it was a hugely speculative play on a notoriously volatile market. The macroeconomics appear to be benefitting the dollar but, for the reasons given earlier, it simply cannot last. The dollar is rallying on the back of hoarding. Once this hoarding phase collapses, the dollar will - without doubt - be punished by sellers.

Didn't sell, so in some sense one might say those are paper loses. Wasn't on margin. Actually the bullion is still somewhat above my basis price, some of it was bought at $400 an ounce, none of it bought this year. It's the gold mining shares that have gotten competely killed, they're back down to a level that I bet hadn't occurred since gold was in the 300's.

Edited October 28, 2008 by OriginalPoster

[HardenedSoul]

Didn't sell, so in some sense one might say those are paper loses. Wasn't on margin. Actually the bullion is still somewhat above my basis price, some of it was bought at $400 an ounce, none of it bought this year. It's the gold mining shares that have gotten competely killed, they're back down to a level that I bet hadn't occurred since gold was in the 300's.

Ouch ! Yeah the rout in mining stocks has been painful to say the least. I bought a handful myself and have lost a few quid but I'm not selling them. It costs a lot of money to get gold out of the ground and many miners aren't hedging their output anymore which is a sure sign they expect prices to rise. I'm hanging on to the goodies especially those in Jinshan Gold Mines. They've got China Gold backing them and seeing as China's eclipsed South Africa as the largest gold producer, I think that, as a long term hold, they're a good bet. Price plunged recently but they ain't going outta business so what the hel_l.

I remain bullish on gold and commodities in general simply because contrary to popular consensus, the laws of economics can NOT be altered. These huge nationalizations and bailouts only serve to postpone and exacerbate the inevitable.