Where Is Gold Going In This Market

[flying]

you are diverting Flying. i stated facts as far as total "fiat value" is concerned. it is rather easy, using simple maths, to compare the (known) quantity of all mined gold with a conservative estimate of all fiat values and arrive at a result which is neither dogmatic nor aimless.

No I 100% understood you the first time.

I was just saying it was a forgone conclusion.

[sokal]

Yes but that is part of the dogmatic arguments that can only circle aimlessly.

you are diverting Flying. i stated facts as far as total "fiat value" is concerned. it is rather easy, using simple maths, to compare the (known) quantity of all mined gold with a conservative estimate of all fiat values and arrive at a result which is neither dogmatic nor aimless.

for those who are mathematically or arithmetically handicapped:

estimated gold mined 170,000 tons = value ! 6 trillion US-Dollars

compare with fiat values and and bury all wet dreams of gold backing

p.s. young scholars of the Austrian School of Economics are kindly requested to switch on brains before posting in order to avoid irrelevant statements.

Jesus christ.....

Of course there is more assets around that have a higher net value then gold, that is part of the problem. When you create credit out of thin air, things get done and stuff gets built but all of that work and production is squeezed into a shorter amount of time. If central banks where restricted by gold then less credit would be created and things would get done in a longer, more realistic amount of time.

As Austrian economics states, when you have excessive credit expansion, it will be followed by a credit contraction, otherwise known as recessions or depressions.

[Naam]

you are diverting Flying. i stated facts as far as total "fiat value" is concerned. it is rather easy, using simple maths, to compare the (known) quantity of all mined gold with a conservative estimate of all fiat values and arrive at a result which is neither dogmatic nor aimless.

No I 100% understood you the first time. I was just saying it was a forgone conclusion.

facts are not foregone conclusions. facts are facts. facts prove that gold backing of "fiat" is not possible. therefore "gold backing" = wet dream = case closed

next!

[badge]

Copied from an email I received recently-

GOLD hit new all time highs this past week and if you are in the commodity markets you have to ask yourself if gold is leading the way for the rest of the commodities, or on a solo spike?

If this is a new broad commodity bull market, then we should see oil above $147 soon! (currently $70.) We should see CBOT Wheat above $13! (currently $4.60)

OR,

If this is a solo spike in gold we need to consider when the solo dance might end.

On Thursday, Gold got up to almost $1063. Will you stop yourself out at $999? Will you stop yourself out at $949? Will you stop yourself out at $899?

Where do you think gold is going? Above $2,000? If you have a 1 to 1 risk reward and if you think it is going up $1,000, does that mean you will risk your stop all the way down $1,000? Or, do you have a 2 to 1 risk reward and are looking for a $1,000 gain from here and will risk $500, thus a $560 stop?

I'M ASKING YOU! WHAT ARE YOUR TRADE PARAMETERS?

Remember in 1999 when EVERYONE was buying tech stocks. It seemed that EVERY TV COMMERCIAL was for some tech investment. Remember back in 2005 and 2006. It seemed EVERY TV add was for cheap mortgages!

I don't know the actual statistics, but I don't think I have ever seen so many TV commercials and other adds to get people to buy gold!

Really! THE GREATEST LINE IN AN INVESTMENT ADD I HAVE EVER SEEN IS THE LINE THAT SAYS "Gold has never gone to zero!"

(Remember the line that "there is only so much real estate? No one is making any more!" Well, "GOLD HAS NEVER BEEN ZERO" is even more condescending!)

So, let's recap.

If gold is leading a new commodity bull, maybe other markets , like wheat, are cheaper and better potential.

If gold is making a solo spike, we need to consider when we would say the solo spike is over, pick a stop.

[flying]

facts are not foregone conclusions. facts are facts. facts prove that gold backing of "fiat" is not possible. therefore "gold backing" = wet dream = case closed

next!

Interpret it how you want.

I have no dreams only reality to base my views on.

As I said in my original reply. It would be impossible to compare a finite substance with a infinite such as fiat anyway. But then again you seem to assume paper at face value as printed. If & that is not to say it would ever happen..It could be done...

There is in fact enough finite substance to back anything but...of course the substance would need to be revalued accordingly. I think I read a short while ago that would mean 10k USD/oz if it was gold that was to be the backing.

But again I am not of the opinion that would happen nor would it necessarily be a good thing. I have come to the conclusion free held gold is the best way for now.

The fact that the finite substance which has & always will be a store of wealth cannot compensate for a governments economic unbridled stupidity is the foregone conclusion I was speaking of.

Edited October 19, 2009 by flying

[flying]

If this is a solo spike in gold we need to consider when the solo dance might end.

Anyone who also holds Silver knows it is not a solo spike.

But I also see oil going up soon too. Also recently read that of the last 6 times oil reached 80 it was also a recession in 5 of the 6 times.

side note: badge I think it was you that posted the upcoming release of R Paul's book End The Fed....If so did you get it?

I did & think it is a great read. Lots of economic history very interesting read.

Edited October 19, 2009 by flying

[sokal]

Copied from an email I received recently-

GOLD hit new all time highs this past week and if you are in the commodity markets you have to ask yourself if gold is leading the way for the rest of the commodities, or on a solo spike?

If this is a new broad commodity bull market, then we should see oil above $147 soon! (currently $70.) We should see CBOT Wheat above $13! (currently $4.60)

OR,

If this is a solo spike in gold we need to consider when the solo dance might end.

On Thursday, Gold got up to almost $1063. Will you stop yourself out at $999? Will you stop yourself out at $949? Will you stop yourself out at $899?

Where do you think gold is going? Above $2,000? If you have a 1 to 1 risk reward and if you think it is going up $1,000, does that mean you will risk your stop all the way down $1,000? Or, do you have a 2 to 1 risk reward and are looking for a $1,000 gain from here and will risk $500, thus a $560 stop?

I'M ASKING YOU! WHAT ARE YOUR TRADE PARAMETERS?

Remember in 1999 when EVERYONE was buying tech stocks. It seemed that EVERY TV COMMERCIAL was for some tech investment. Remember back in 2005 and 2006. It seemed EVERY TV add was for cheap mortgages!

I don't know the actual statistics, but I don't think I have ever seen so many TV commercials and other adds to get people to buy gold!

Really! THE GREATEST LINE IN AN INVESTMENT ADD I HAVE EVER SEEN IS THE LINE THAT SAYS "Gold has never gone to zero!"

(Remember the line that "there is only so much real estate? No one is making any more!" Well, "GOLD HAS NEVER BEEN ZERO" is even more condescending!)

So, let's recap.

If gold is leading a new commodity bull, maybe other markets , like wheat, are cheaper and better potential.

If gold is making a solo spike, we need to consider when we would say the solo spike is over, pick a stop.

There is lots of BUY GOLD adds on Fox News and Glenn Beck but that is for smart people.

MOST ADDS TELL YOU TO SELL GOLD, EXCHANGE YOUR GOLD FOR CASH !!!

that means somebody wants your gold.

As for your questions. You need to do some reading on the FOFOA blog. FOFOA blog link

[sokal]

you are diverting Flying. i stated facts as far as total "fiat value" is concerned. it is rather easy, using simple maths, to compare the (known) quantity of all mined gold with a conservative estimate of all fiat values and arrive at a result which is neither dogmatic nor aimless.

No I 100% understood you the first time. I was just saying it was a forgone conclusion.

facts are not foregone conclusions. facts are facts. facts prove that gold backing of "fiat" is not possible. therefore "gold backing" = wet dream = case closed

next!

I am not arguing for a gold standard, what I am saying is that the reasons why gold is money is tied to the history of the gold standard.

I am believer in freegold.

[Abrak]

During the gold standard, all dollars where convertable into gold and gold had a fixed price. Gold is not volatile when it is being used as money so saying that it is too volatile now makes no sense.

NO the fact that it is too volatile NOW implies it is no longer money.

On a kind of more theoretical point. If the supply is money is fixed (gold basically) and you fix the nominal price of money (paper money) against it, you clearly cannot control inflation. In other words the volatility of the nominal price of everything else will rise or fall relative to the value of gold which is fixed. Actually what you are doing is replacing the volatility of the value of gold with the volatility of inflation as the price of gold is fixed.

So take a look what happened in the 1800s.

http://www.bankofengland.co.uk/education/i...eline/chart.htm

Now I fully understand that the whole point of a gold standard is to take away monetary policy from the hands of the policy makers but given we are sort of in the world of 'inflation rate targetting' (see hot air balloon policymaking on BOE site) then gold is not a great instrument.

[Jake1]

As for your questions. You need to do some reading on the FOFOA blog. FOFOA blog link

I concur. Read from the first post to the current..twice. It's a great source of info.

[badge]

side note: badge I think it was you that posted the upcoming release of R Paul's book End The Fed....If so did you get it?

I did & think it is a great read. Lots of economic history very interesting read.

It was, but I havent got or read it yet.

[Abrak]

Why not do what goldbugs usually do and show that the value of the dollar has depreciated against gold because they assume interest received on the currency is wasted/worthless/stolen/or pinched by their mia noi? Only joking

Well because ......

1) I am not a classic goldbug

2) The dollar looks bad enough all by itself.

Well my point is that any asset that generates a yield (if you dont count the yield) will depreciate against another asset that produces no yield say like a loaf of bread (assuming positive inflation).

You know if you had invested US$1 at 5% interest in 1900 it would be worth US$130 now. The positive real yield on the dollar has been about 0.9% over the last 100 years also so it hasnt really declined in value verses CPI. Of course it might have declined in value against other currencies but not many apart from Switzerland.

I mean your chart shows that US$1 is worth less than US$1 80 years also. But by simply putting your US$1 on deposit it would have accumulated to the extent that you had made a real gain.

Now those are rough figures but your chart simply shows that the dollar has devalued verses CPI. It is slightly meaningless to devalue it verses CPI without actually taking into account the investment return (i.e. interest).

Edited October 19, 2009 by Abrak

[badge]

Those who think printing money automatically leads to inflation arent in receipt of all the facts.

There are two main reasons that we will have deflation. 1st, is that all this printing isn't enough to even replace the money being lost as asset prices fall. 2nd, is the velocity of money, or rather the lack of it. When money is created it can only lead to price inflation if the money supply MZM actually expands(it's not) and the money changes hands.

However the money being produced is being used to rescue bank's balance sheets, to stop them failing completely. Most of the money isn't leading to new lending, in fact lending is falling. Most of the new money is being recycled into treasury bonds, which banks can use as collateral.

It also helps the US Gov. to raise the money it needs to bridge the HUGE and widening gap between tax receipts and spending.

It's all unsustainable and will lead to depression - the more they try to prevent it the worse it will be.

"Deflation, not inflation, will continue to pose a major risk to the British economy – however much stimulus is pumped into the economy by the Bank of England, in the form of low interest rates and quantitative easing, it is almost inconceivable that in the face of a budget bonfire the public will go out and spend heavily."

http://www.telegraph.co.uk/finance/comment...-at-Latvia.html

[flying]

CME To Allow Gold As Collateral For All Exchange Products

LONDON -(Dow Jones)- U.S.-based clearing house CME Group Inc. (CME) will allow physical gold to be used as collateral for margin requirements on all exchange products, a spokesman said Monday.

The new global policy is effective Oct. 19 in accordance with a member's notice issued late Friday, said spokesman Jeremy Hughes in London.

Clearing member firms will be allowed to post up to a maximum of $200 million worth of gold as collateral to cover performance bond, or margin, requirements, Hughes said.

The policy was a byproduct of CME's recent launch of clearing services for over-the-counter London gold spot and forward contracts, he said.

"Many of the [trading] houses hold quite a lot of physical gold and would welcome using it more efficiently," he said.

The gold will be held at J.P. Morgan Chase & Co.'s (JPM) bank in London.

-By Matthew Walls, Dow Jones Newswires; +44 (0)20 7842 9412; matthew.walls@ dowjones.com

(END) Dow Jones Newswires

10-19-090749ET

Copyright © 2009 Dow Jones & Company, Inc.

Edited October 19, 2009 by flying

[Naam]

There is lots of BUY GOLD adds on Fox News and Glenn Beck but that is for smart people.

that goes without saying as only smart people watch FAUX News

[Abrak]

One of the many things that puzzles me about gold - like I have no idea whether it is a currency, commodity, investment etc is this chart.

To me it shows a pretty good correlation with gold. In other words gold rises when real interest rates rise and declines when they decline. Obviously it isnt a perfect fit but not far off.

Well obviously most investments do badly under high real rates because your risk free discount rate rises compared to your nominal returns - either bonds or equities. Cash gives you the best return in real terms. Gold has zero yield so theoretically its value should go down unless you consider it cash - I guess.

The chart is not up to date. I mean is there a good reason why gold is tied to real interest rates?

[sokal]

During the gold standard, all dollars where convertable into gold and gold had a fixed price. Gold is not volatile when it is being used as money so saying that it is too volatile now makes no sense.

NO the fact that it is too volatile NOW implies it is no longer money.

On a kind of more theoretical point. If the supply is money is fixed (gold basically) and you fix the nominal price of money (paper money) against it, you clearly cannot control inflation. In other words the volatility of the nominal price of everything else will rise or fall relative to the value of gold which is fixed. Actually what you are doing is replacing the volatility of the value of gold with the volatility of inflation as the price of gold is fixed.

So take a look what happened in the 1800s.

http://www.bankofengland.co.uk/education/i...eline/chart.htm

Now I fully understand that the whole point of a gold standard is to take away monetary policy from the hands of the policy makers but given we are sort of in the world of 'inflation rate targetting' (see hot air balloon policymaking on BOE site) then gold is not a great instrument.

Are you aware that inflation targeting is basically theft and nothing more then Keynesian Bullshit ?

[sokal]

Those who think printing money automatically leads to inflation arent in receipt of all the facts.

There are two main reasons that we will have deflation. 1st, is that all this printing isn't enough to even replace the money being lost as asset prices fall. 2nd, is the velocity of money, or rather the lack of it. When money is created it can only lead to price inflation if the money supply MZM actually expands(it's not) and the money changes hands.

However the money being produced is being used to rescue bank's balance sheets, to stop them failing completely. Most of the money isn't leading to new lending, in fact lending is falling. Most of the new money is being recycled into treasury bonds, which banks can use as collateral.

It also helps the US Gov. to raise the money it needs to bridge the HUGE and widening gap between tax receipts and spending.

It's all unsustainable and will lead to depression - the more they try to prevent it the worse it will be.

"Deflation, not inflation, will continue to pose a major risk to the British economy – however much stimulus is pumped into the economy by the Bank of England, in the form of low interest rates and quantitative easing, it is almost inconceivable that in the face of a budget bonfire the public will go out and spend heavily."

http://www.telegraph.co.uk/finance/comment...-at-Latvia.html

Many countries around the world have double digit inflation with double digit falls in GDP. The only reason allot of North American economists have convinced many people that we will have deflation is because that is the only thing that people remember because of the 1930s. But the depression in 1930 happened during the gold standard, now it is different because we have no gold standard.

[sokal]

One of the many things that puzzles me about gold - like I have no idea whether it is a currency, commodity, investment etc is this chart.

To me it shows a pretty good correlation with gold. In other words gold rises when real interest rates rise and declines when they decline. Obviously it isnt a perfect fit but not far off.

Well obviously most investments do badly under high real rates because your risk free discount rate rises compared to your nominal returns - either bonds or equities. Cash gives you the best return in real terms. Gold has zero yield so theoretically its value should go down unless you consider it cash - I guess.

The chart is not up to date. I mean is there a good reason why gold is tied to real interest rates?

The future for gold is not a gold standard, it is free gold. Free gold will happen when the central banks stop trying to control the price of gold. Basically the Fed is trying to use fiat as a medium of exchange and a hold of value by controlling the the price of gold. Eventually they will give up trying to use fiat as a hold of value but only as a medium of exchange. Gold will then become the only currency that will be a store of value. Ideally most of the sheeple will continue to live in a paycheck to paycheck debt riddled inflationary circle while all the people looking for a store of value and the bankers will have gold as an uncontrolled free market mechanism to store their wealth.

[Abrak]

Are you aware that inflation targeting is basically theft and nothing more then Keynesian Bullshit ?

Targeting modest rates of inflation does not equal 'theft'. In fact assuming GDP growth is normalized and inflation is at your target 2% then interest rates should be 4% implying a 2% real return (Taylor rule) - hardly theft. It is suggested by the extremes on both sides Krugman and Bernanke but as you regard Keynes a 'bullshitter' I guess that doesnt matter. The problem as I see it if you set up a sort of 'zero' inflation rate environment (say with gold) you are constantly faced with the liquidity trap (but I guess that is a Keynesian concept too.)

Personally I think if we had all played laissez faire the total financial system would have collapsed.

[Abrak]

The future for gold is not a gold standard, it is free gold. Free gold will happen when the central banks stop trying to control the price of gold. Basically the Fed is trying to use fiat as a medium of exchange and a hold of value by controlling the the price of gold. Eventually they will give up trying to use fiat as a hold of value but only as a medium of exchange. Gold will then become the only currency that will be a store of value. Ideally most of the sheeple will continue to live in a paycheck to paycheck debt riddled inflationary circle while all the people looking for a store of value and the bankers will have gold as an uncontrolled free market mechanism to store their wealth.

Ultimately any economic policies with the result that a shiny bit of metal is the only store of value as the end result, wouldnt seem a great plan to me.

[flying]

Ultimately any economic policies with the result that a shiny bit of metal is the only store of value as the end result, wouldnt seem a great plan to me.

Of course there are choices when it comes to how you want to store/protect your wealth & you like everyone is free to choose.

The price & movement of PM's shows that more than a few choose that as theirs. But again you are free to choose yours too.

[Abrak]

Ultimately any economic policies with the result that a shiny bit of metal is the only store of value as the end result, wouldnt seem a great plan to me.

Of course there are choices when it comes to how you want to store/protect your wealth & you like everyone is free to choose.

The price & movement of PM's shows that more than a few choose that as theirs. But again you are free to choose yours too.

Absolutely....I do hold some silver in the sort of Sokal is right...future economic policy will be massive destructive hedge.

My point though is that if a totally non-productive fixed asset with no apparent use is the best store of value it will represent a massive failure of the capitalist system. I mean if creation of value is buying a lot of gold, sticking it under your bed, and going to play golf everyday (which I imagine it is in Zimbabwe) then it is simply an indictment on capitalism in that employment of capital must generate no significant real returns (despite the exploitation of all those masses).

[flying]

My point though is that if a totally non-productive fixed asset with no apparent use is the best store of value it will represent a massive failure of the capitalist system. ......

employment of capital must generate no significant real returns (despite the exploitation of all those masses).

I see your point & agree to some extent.

But the massive failure your speaking of is in fact occurring in many ways as we speak.

Employment of capital in a profit generating business venture/investment of course is available to those that seek it out.

Along with the risks like in anything including PM's

But then there are also those that do not have the desire to do so but instead are looking to just not be raped by the current problems. It is not like a bank account savings/CD's are any better these days.

Lastly I cannot totally agree that buying PM's has proved the equal of static.

Last year I went 50/50 ...cash/PM's

Today I am a much higher PM value ratio & not because I bought more.

Although the thought has sure crossed my mind more than once in hindsight I do not know why I kept that other 50% in $$

Not unlike the ECB financial statement that swelled from 15% to 56%

Although my gains do not rival theirs outright I actually did as well when considering theirs is a 10 year reflection & mine is 1

Edited October 20, 2009 by flying

[Naam]

...future economic policy will be massive destructive hedge.

i wish i could understand foreign languages

[Abrak]

But the massive failure your speaking of is in fact occurring in many ways as we speak.

Well I cant really disagree that such failure is a distinct possibility.

And Naam,

I didnt put it very well. But essentially I meant that 'if sitting on gold (a non-productive asset)

and playing golf everyday is the best store of wealth as Sokal sort of suggested - at no point did he suggest golf -

then he is implicitly implying that putting assets to productive use (would in general be less productive).

My point being that when the best store of wealth is gold (in general) then economic policies must be destructive if productive capital

(especially given the additional risk) is not a greater store of worth.

And maybe more simply if someone was to suggest that cash was the best store of wealth, then it must imply value destruction for

risk and productive assets.

Finally, obviously sitting on a pile of gold over the last 8 years would have been pretty good but I believe he is more refering to a

period like the 1970s.

Edited October 20, 2009 by Abrak

[flying]

[badge]

Those who think printing money automatically leads to inflation arent in receipt of all the facts.

There are two main reasons that we will have deflation. 1st, is that all this printing isn't enough to even replace the money being lost as asset prices fall. 2nd, is the velocity of money, or rather the lack of it. When money is created it can only lead to price inflation if the money supply MZM actually expands(it's not) and the money changes hands.

However the money being produced is being used to rescue bank's balance sheets, to stop them failing completely. Most of the money isn't leading to new lending, in fact lending is falling. Most of the new money is being recycled into treasury bonds, which banks can use as collateral.

It also helps the US Gov. to raise the money it needs to bridge the HUGE and widening gap between tax receipts and spending.

It's all unsustainable and will lead to depression - the more they try to prevent it the worse it will be.

"Deflation, not inflation, will continue to pose a major risk to the British economy – however much stimulus is pumped into the economy by the Bank of England, in the form of low interest rates and quantitative easing, it is almost inconceivable that in the face of a budget bonfire the public will go out and spend heavily."

http://www.telegraph.co.uk/finance/comment...-at-Latvia.html

Many countries around the world have double digit inflation with double digit falls in GDP. The only reason allot of North American economists have convinced many people that we will have deflation is because that is the only thing that people remember because of the 1930s. But the depression in 1930 happened during the gold standard, now it is different because we have no gold standard.

As usual, it appears that in the universe your in Sokal, your apparent response to my post was factful, relevant and made sense? As usual, sadly, not in the one Im in

[sokal]

Are you aware that inflation targeting is basically theft and nothing more then Keynesian Bullshit ?

Targeting modest rates of inflation does not equal 'theft'. In fact assuming GDP growth is normalized and inflation is at your target 2% then interest rates should be 4% implying a 2% real return (Taylor rule) - hardly theft. It is suggested by the extremes on both sides Krugman and Bernanke but as you regard Keynes a 'bullshitter' I guess that doesnt matter. The problem as I see it if you set up a sort of 'zero' inflation rate environment (say with gold) you are constantly faced with the liquidity trap (but I guess that is a Keynesian concept too.)

Personally I think if we had all played laissez faire the total financial system would have collapsed.

The and the economies in Britain and the US where powerhouses during the gold standard. There is no good reason for inflation targeting.

[flying]

Trend Change :Official Purchases from Central Banks now Supporting Gold Prices

And now for something completely different, it appears that the world's central banks may once again become net buyers of gold, after a twenty year campaign of selling gold from their vaults into the public markets, creating a steady downward pressure on the price of gold, that contributed to its long bear market.

This is not to imply that gold will replace the dollar. Rather, if the intended target is indeed the SDR, which comes up for rebalancing in 2010, banks may need to have gold on hand since it is thought to be favored as a component of the basket of currencies of which the new SDR will be created.

http://jessescrossroadscafe.blogspot.com/2...hases-from.html