Where Is Gold Going In This Market

[flying]

being a polite man i claim that this is extremely flawed logic Flying! rude french people would call it 'shit de bull' because with that currency you can buy any time (24 hours / 6 days a week) any amount of gold if you have enough of that currenc

and now for the umteenth time: you cannot buy steaks and vegetables in a supermarket paying with gold, you cannot buy rolls or croissants in a bakery paying with gold, you cannot buy a car paying with gold, you cannot buy an airline ticket paying with gold, etc., etc., etcetera^99.

facit: if you can't pay for 99.99% of available goods and services with gold then gold is not money. period!

Well that IMHO is also flawed supermarket logic.........

Example....Come to America & go to buy those things using your currency euro/baht etc.

You will be out of luck at said markets that you say will not accept gold as they will not accept your currency of choice either.

You will need to go exchange...Your...currency for theirs...USD

I will need to go exchange my money...Gold....for their currency...USD

I do not see much of a difference....do you? We both need to exchange our currency/money of choice.

As for the money vs currency thinking yes it may be flawed to some but...It has been my thinking that money has to be worked for to be created & fiat/currency does not.

Both are accepted or exchanged for legal tender yes.

But real money historically true for the longest of times is backed & limited by what is a fact....Fiat is not limited by what is..but instead backed by what they claim will be... some day. The emperor truly has no clothes.

USD became the worlds reserve currency based on one thing Gold...The slogan The US Dollar good as gold is what made it what it is...or was I should say

The Dollars were not money nor even currency as it is today but IOU's promissory notes

I know that you know all of this....& I only type it to reiterate

Lastly, Yes it is true you may still exchange your fiat for gold & silver....Yes less than you could a year or two ago but you still can get physical metals.

This will not always be the case IMHO

Edited July 17, 2010 by flying

[Lost in LOS]

My prediction. I'll see you all back here in 50 years with proof I was correct.

hmmm... you think i will live long enough to celebrate my 116th birthday?

if you do your gold will be worth a fortune.........

[churchill]

Can Malaysia's Islamic gold dinar thwart capitalism?

Muslim advocates of the dinar believe it will stop the excesses of capitalism, but it is just another avenue for exploitation

"Imagine a world trading solely in gold and silver coins. Imagine the size of your wallet.

Yet this is the ideal world envisaged by some of Malaysia's activists championing the Islamic gold dinar and silver dirham as a new form of legal tender to replace paper money – a utopia that could see the light of day as early as the middle of next month.

This is when one such group, Muamalah Council, plans to implement the dinar system in Malaysia's northern state of Kelantan. If information on its website is to be believed, the council has the blessing of the state's Islamist government, Parti Islam SeMalaysia (Pas), to kickstart the dinar in three moves.

First, the state will pay a quarter of its public servants' salaries using the dinar. Second, all state companies will accept dinar payments. Lastly, some 600 commercial enterprises will also embrace this currency.

Inspired by selective religious sources and backed by historical precedents within the annals of Islamic history, the gold dinar system is touted by certain fiercely proud Muslims as the Islamic answer to thwart capitalism's woes."

more .. http://www.guardian.co.uk/commentisfree/belief/2010/jul/17/malaysia-gold-dinar-thwart-capitalism

[flying]

"Imagine a world trading solely in gold and silver coins. Imagine the size of your wallet.

I have said before I never thought it would go back & actually prefer free gold as it stands but.........

I always wonder when folks think like that about gold/silver/wallet size.

If by chance there was a gold/silver backed currency I would see no problem with certificates/IOU's/notes redeemable for metals like they did back when the USD operated that way.

But again just a thought & not a claim it will happen ...at least not in the US

[BigC]

simple no bulls""" $ up Gold down $ down Gold up.

in a nut shell when the world has no money gold goes up. right or wrong. people don't trust banks. is it that simple or am i wrong

[flying]

simple no bulls""" $ up Gold down $ down Gold up.

in a nut shell when the world has no money gold goes up. right or wrong. people don't trust banks. is it that simple or am i wrong

It is not always that simple....

[badge]

What I mean is that I have several financial contracts right now that are denominated in gold. While financial professionals do seem to keep pushing the "it's only a commodity" theory, real people seem to think it is wealth and money.

[...]

XAU is fundamentally no different. My belief that it will continue to strengthen is based on my analysis that people will increasingly demand gold for their transactions, and that this will effect a positive feedback loop where as the popularity grows, even more people will be accepting of its role in commerce.

[...]

Can you offer any examples? Especially those 'contracts' you have denominated in Gold.

Im pretty sure Ive never heard the words 'would you like to pay for that in Gold nuggets'.

3 private debt instruments. 2 where I am the creditor and 1 where I am the debtor. All interest free but denominated in gold, payable in bullion or cash equivalents. No nuggets, sorry. Better refine those first.

[...]

it is a universally desired yellow rock.

So 3 'private debts', and some reports of property in Vietnam.

Its hard to keep up with such fast spreading phenomenon.

2009 was the first year in which investment demand exceeded jewellery demand. Source: GFMS

Even more interestingly Scrap Gold supply was the largest in at least a decade in 2009, so prices have been taken higher by the recycle(trade) between scrap and investment.

Exactly the dynamics one expects in a typical bull market bubble.

[nakachalet]

LET'S EXAMINE THE CURRENT FACT, even though it might have appeared to be elusive to some:

let's take a look at the current gold price....

just how far has gold fallen from its grace.... month to month?

perhaps, the pix will further spur the gold discussion to a new high....

Edited July 17, 2010 by nakachalet

[Naam]

facit: if you can't pay for 99.99% of available goods and services with gold then gold is not money. period!

Well that IMHO is also flawed supermarket logic.........

Example....Come to America & go to buy those things using your currency euro/baht etc. You will be out of luck at said markets that you say will not accept gold as they will not accept your currency of choice either.

You will need to go exchange...Your...currency for theirs...USD

I will need to go exchange my money...Gold....for their currency...USD

I do not see much of a difference....do you? We both need to exchange our currency/money of choice.

incorrect assumption because when in America i don't need to exchange anything as my credit cards denominated in €UR or SGD are accepted everywhere.

[Naam]

"it is a universally desired yellow rock"

if it was universally desired the price would be sky high. presently gold has not even reached its inflation adjusted value it had 30 years ago. when i present these kind of facts to Mrs Naam, who has been hoarding gold jewelry since decades and gold bars since 2½ years, i get either blank stares or hostile looks plus perhaps the same lame argument which i hear since decades, namely "just wait... we shall see...".

disclaimer: i fully endorse that one holds a certain percentage of net worth in physical gold. the situation in 2008 convinced me without any doubt. but if the freeze of all financial transactions had occurred in october 2008, ETFs, contracts denominated in gold, gold mining shares and the like could not even have substituted a bumspray after a dump.

[gregb]

facit: if you can't pay for 99.99% of available goods and services with gold then gold is not money. period!

Well that IMHO is also flawed supermarket logic.........

Example....Come to America & go to buy those things using your currency euro/baht etc. You will be out of luck at said markets that you say will not accept gold as they will not accept your currency of choice either.

You will need to go exchange...Your...currency for theirs...USD

I will need to go exchange my money...Gold....for their currency...USD

I do not see much of a difference....do you? We both need to exchange our currency/money of choice.

incorrect assumption because when in America i don't need to exchange anything as my credit cards denominated in €UR or SGD are accepted everywhere.

Ahhh, but the gold paradigm is just getting started after being sidelined for many decades. This is yet another example of the validity of gold transactions that I referenced earlier. As this press release will show, your argument will soon be an anachronism:

http://www.prnewswire.com/news-releases/new-credit-card-coming-for-gold-bugs--golden-spike-might-be-just-what-ailing-economy-needs-85819387.html

Come on Naam. Even you will eventually have to admit that gold is not just a commodity, but is a real currency. Why hang on to what is ultimately a futile position?

Yes, fiat currency was all the rage in currency choices for the last 50 years. Gold is going to be the go to currency for the next 50.

[Abrak]

disclaimer: i fully endorse that one holds a certain percentage of net worth in physical gold. the situation in 2008 convinced me without any doubt. but if the freeze of all financial transactions had occurred in october 2008, ETFs, contracts denominated in gold, gold mining shares and the like could not even have substituted a bumspray after a dump.

Funnily enough it was 2008 that convinced me I shouldnt hold gold. Holding some gold as a hedge against not holding gold is fine. Where I dont like Flying's logic is that he has essentially admitted it is a sort of long term currency investment. If it falls to US$700, he will probably buy some more. It is difficult to claim at the same time it is cash, because cash is basically liquidity. If you have to sell gold at US$700 to buy some bread it aint good. If you hold a general 'long term' faith in gold you cant really hold it as a currency to buy goods, hospital fees, a car when you are essentially forced to sell at prices you find 'unacceptable' from a long term investment perspective. So my guess is that Flying holds cash for liquidity purposes and gold as a 'low risk' long term currency investment (but I would rather buy equities). Nothing wrong with that - I am sure Naam holds currencies to which he has no outstanding liabilities and has no need or inclination to sell them at unacceptable prices.

[gregb]

"it is a universally desired yellow rock"

if it was universally desired the price would be sky high. presently gold has not even reached its inflation adjusted value it had 30 years ago. when i present these kind of facts to Mrs Naam, who has been hoarding gold jewelry since decades and gold bars since 2½ years, i get either blank stares or hostile looks plus perhaps the same lame argument which i hear since decades, namely "just wait... we shall see...".

disclaimer: i fully endorse that one holds a certain percentage of net worth in physical gold. the situation in 2008 convinced me without any doubt. but if the freeze of all financial transactions had occurred in october 2008, ETFs, contracts denominated in gold, gold mining shares and the like could not even have substituted a bumspray after a dump.

Food is universally desired as well, but it is still less expensive on the whole than it was 30 years ago.

It is incorrect to say that something desired must be expensive. Right now, there is still sufficient supply to meet the universal desire, just as there is sufficient food to meet universal desire.

But the gold price is rising because demand for gold is outpacing supply of gold. That is economics 101. I maintain gold is universally desired, and appetites are increasing. That will continue to push gold higher for the forseeable future.

Gold hasn't even started its real upward climb yet. Just wait until the "gold as currency" paradigm really gets recognized by the masses. Then we might even see a bubble. We're a long way from that right now. We're very much still in solid fundamentals territory.

[Abrak]

Come on Naam. Even you will eventually have to admit that gold is not just a commodity, but is a real currency. Why hang on to what is ultimately a futile position?

Yes, fiat currency was all the rage in currency choices for the last 50 years. Gold is going to be the go to currency for the next 50.

To the extent you consider gold a real currency, it is a bit like saying I consider the Argentina thing ma gig a real currency. I have no desire to buy anything in Argentina nor do I have any liabilities there. Gold is not a currency apart from the poster who has contracts settled in gold. Even then he is simply punting on gold as an investment.

You cannot rewrite history. Gold is a complete disaster as a currency in a globalizing economy. A reserve currency based on gold is simply fraud - a short cut to making a global reserve based on your paper. Which, btw will eventually be a short cut to the destruction of your economy because by the time your paper is worthless it will be because you have no economy left.

As I have said before, I dont believe there is a single living trained economist who believes in the gold standard.

[gregb]

disclaimer: i fully endorse that one holds a certain percentage of net worth in physical gold. the situation in 2008 convinced me without any doubt. but if the freeze of all financial transactions had occurred in october 2008, ETFs, contracts denominated in gold, gold mining shares and the like could not even have substituted a bumspray after a dump.

Funnily enough it was 2008 that convinced me I shouldnt hold gold. Holding some gold as a hedge against not holding gold is fine. Where I dont like Flying's logic is that he has essentially admitted it is a sort of long term currency investment. If it falls to US$700, he will probably buy some more. It is difficult to claim at the same time it is cash, because cash is basically liquidity. If you have to sell gold at US$700 to buy some bread it aint good. If you hold a general 'long term' faith in gold you cant really hold it as a currency to buy goods, hospital fees, a car when you are essentially forced to sell at prices you find 'unacceptable' from a long term investment perspective. So my guess is that Flying holds cash for liquidity purposes and gold as a 'low risk' long term currency investment (but I would rather buy equities). Nothing wrong with that - I am sure Naam holds currencies to which he has no outstanding liabilities and has no need or inclination to sell them at unacceptable prices.

Argument is baffling to me, but everyone needs to make their own choices in how they save their wealth. If everyone did exactly the same there would not be a market.

Would you also agree that someone who keeps USD offshore and has to sell those to buy Baht in order to buy bread in Thailand "ain't good?" There is no difference really. Whether the currency is XAU or USD, if you need to convert to THB in order to eat, you sell.

Both XAU and USD are liquid investments. I don't see a difference between them other than personal bias.

[gregb]

Come on Naam. Even you will eventually have to admit that gold is not just a commodity, but is a real currency. Why hang on to what is ultimately a futile position?

Yes, fiat currency was all the rage in currency choices for the last 50 years. Gold is going to be the go to currency for the next 50.

You cannot rewrite history. Gold is a complete disaster as a currency in a globalizing economy.

Luckily for me then that peak oil and energy depletion are soon going to reverse the "globalizing economy" you refer to. Things are going to get significantly more local in the future. That is the element your analysis misses in my opinion, and the same applies to all those "trained economists" you speak of.

Edited July 17, 2010 by gregb

[Naam]

"Gold hasn't even started its real upward climb yet. Just wait until the "gold as currency" paradigm really gets recognized by the masses. Then we might even see a bubble. We're a long way from that right now. We're very much still in solid fundamentals territory."

as already mentioned "just wait until..." is what i hear since decades. i don't see anything solid in an asset that has not yielded a single penny but caused losses over a period of 30 years. goldbugs might blame me that i keep referring to the last three decades. but let's look at the facts. these are the decades which were important to me and these are the decades in which i made the money which enabled me to quit the rat race more than a decade ago. if i had invested exclusively in gold i'd live a rather mediocre life in my home country, would have worked a full decade longer and my assets would be a fraction of what they are today.

but whatever the future holds, gold will not appreciate multiple times over night. the value of gold is expressed in "fiat" money, id est i can -anytime i please- exchange whatever "fiat" i hold into gold or any other suitable commodity and as long i can beat gold's appreciation with "fiat" investments i see no valid reason to hold more gold than we do presently. it goes of course without saying that my stubborn and pigheaded Old Lady disagrees. whether i like it or not she will keep on buying gold or adding to our real estate holdings which do not really add any significant income. but it does not really matter as long as we can afford that kind of luxury which seems to make her happy. after all we are all into an elusive pursue of "happiness".

[Naam]

Come on Naam. Even you will eventually have to admit that gold is not just a commodity, but is a real currency. Why hang on to what is ultimately a futile position?

please define "ultimately" Greg. do you have any specific date in mind? will "ultimately" occur within or after my remaining statistical lifespan? let's discuss tangible facts instead of assumptions.

[Abrak]

Both XAU and USD are liquid investments. I don't see a difference between them other than personal bias.

Well I would in principal not wish to sell USD to buy bread. I believe as a matter of prudence you need to match your assets and liabilities to a large degree. Those who say live in Thailand but keep their savings in GBP are taking a significant investment gamble that isnt really suited to holding cash. If you hold THB you can still buy a loaf of bread if it goes down but I will admit that if you wish to buy a BMW in a year holding Euro might be sensible. The essential risk free nature of cash when matched by liabilities seems sensible. If you have say 3 years expenses matched by equivalent cash it also enables you to increase your risk reward ratio on non-cash assets.

I also believe in holding cash to take advantage of investment opportunities when they arise. Obviously you accept a low return for what you hope will be a significant opportunity. The major problem I have with gold is that it acts as a risk investment which it didnt used to. So when I bought it is 2008 at US$800, I found that markets collapsed but it fell too US$700 (unlike 1987). I then made the mistake of not selling at its lows to buy higher beta investments. Perhaps if I had seen the Comex positions I would not have been so foolish.

So stocks, oil, XAU and USD are all liquid assets, however it is certain that much of your liabilities will be priced in USD. Unless you can predict the future, the sensible thing is to match your liabilities. Cash is also generally a good hedge against the highly correlated price movements of risk assets (although I am sure Gambles can do better than that.) I will agree that many paper currencies are essentially investments to me rather than currencies although I do find them slightly easier to analyze.

[bangkokburning]

The New Bubble in the Barbarous Relic that Is Gold By Nouriel Roubini

Even Jim Rogers says he is no longer buying gold (and doesn't see it hitting US2000 for a decade).

Duh.

[churchill]

Gold Swaps

Who wanted to raise cash ? Why was it done via a commercial bank ? Why didn't they just sell their gold ?

Sometime ago I suggested that Greece should sell their gold if they needed cash - Perhaps they needed the cash but did not want the world to know about it and this was the only way ?

Does it mean that Greece ( or another ) needed to raise cash without alerting the markets and is unable to do it in any other way ?

see http://ftalphaville....281601/the-bis/

No, Greece is not that stupid. Niether is any central banks. Some say they are selling gold but its just not true.

Do you think a central bank would sell gold bullion just to put the returns on the same pile of fiat that they printed up for free the day before ?

Greece has been ruled out but maybe Portugal /

"More likely, analysts say, is that the gold was sourced from the official sector, with a central bank loaning gold to a commercial bank or banks that used it to raise currency.

"Just as the bullion banks were the go-betweens between the producer and the bullion market in the days when there was gold hedging being done, in the same way, the producer may have now been replaced by the central bank, and the investment bank may be the conduit," said Credit Agricole analyst Robin Bhar.

The timing of the swap, which is likely to have taken place in December or January, suggests it may have been done by European commercial banks needing to source liquidity during the sovereign debt crisis of early 2010.

Of those countries on the front line of the crisis -- Portugal, Greece and Spain -- only Portugal has enough gold to have covered the swap, with 382.5 tonnes in its reserves. Portugal's central bank declined to comment on the deal."

http://uk.reuters.com/article/idUKLNE66F03J20100716

[Abrak]

"Gold hasn't even started its real upward climb yet. Just wait until the "gold as currency" paradigm really gets recognized by the masses. Then we might even see a bubble. We're a long way from that right now. We're very much still in solid fundamentals territory."

Can you explain that concept to me. The 'solid fundamentals' bit. I know brokers employ analysts to write 70 page reports on these fundamentals. It has no yield or use. It is not a currency in any true sense of the word. It was a currency, it isnt anymore and it is never going to be again. Surely raw land or oil has better fundamentals (although raw land is not liquid). It seems to me to be a matter of 'belief' combined, most importantly, with a conviction that Governments are destructive. (although problem with that argument is that they hold a lot of the stuff.)

Gold is a very good hedge against not owning gold. It simply is not a currency. I think that say Flying holds it as a better alternative to holding 'excess' cash as a low risk investor (this would seem a sensible approach). Unlike Naam its poor performance is not what puts me off but its incredibly strong performance over the last 10 years which in my view coincided with an almost perfect storm of fundamentals. Still, not quite perfect, maybe USTs ten year bonds will yield 1%. And boy currencies dont behave like that. How could they?

P.S. I do think gold is essentially unethical as it is essentially fictitious capital. That is basically a joke. I have next to no ethics when it comes to investing.

[nakachalet]

I have next to no ethics when it comes to investing.

there are many among us who are quite shy about what you are saying....

it takes a great person to admit that....

with great admiration....

now.... that is funny.... it was abrak who said the quote, not naam...., what is happening here....? is my computer not agreement with what was quoted....?

Edited July 18, 2010 by nakachalet

[Abrak]

Luckily for me then that peak oil and energy depletion are soon going to reverse the "globalizing economy" you refer to. Things are going to get significantly more local in the future. That is the element your analysis misses in my opinion, and the same applies to all those "trained economists" you speak of.

I do agree with the argument. That some sort of commodity based currency could dramatically reduce global trade which actually might be beneficial. Still for it to work, it would need an independent Central Global Bank, no capital controls and taxes on trade surplus nations (so as to prevent them circumventing capital controls through non-productive fiscal policies.)

However, as I see it, globalization will reverse naturally. The process would happen far more quickly and naturally if the US paid China in tiddly winks.

[cloudhopper]

Both XAU and USD are liquid investments. I don't see a difference between them other than personal bias.

And physical gold and physical currency can be even more liquid than electromagnetic versions. As well as off any radar screens scanning for something to restrict, tax or confiscate.

[churchill]

Come on Naam. Even you will eventually have to admit that gold is not just a commodity, but is a real currency. Why hang on to what is ultimately a futile position?

Yes, fiat currency was all the rage in currency choices for the last 50 years. Gold is going to be the go to currency for the next 50.

To the extent you consider gold a real currency, it is a bit like saying I consider the Argentina thing ma gig a real currency. I have no desire to buy anything in Argentina nor do I have any liabilities there. Gold is not a currency apart from the poster who has contracts settled in gold. Even then he is simply punting on gold as an investment.

You cannot rewrite history. Gold is a complete disaster as a currency in a globalizing economy. A reserve currency based on gold is simply fraud - a short cut to making a global reserve based on your paper. Which, btw will eventually be a short cut to the destruction of your economy because by the time your paper is worthless it will be because you have no economy left.

As I have said before, I dont believe there is a single living trained economist who believes in the gold standard.

And perhaps it is not the economists but the people who will decide which currency they trust ?

Ron Paul Silver Ounces Accepted at Michigan Gas Station; Chiropractor Accepts Gold, Silver, Apple Pie; Back to the Stone Age; Chickens Invade Lansing

Gold, Silver, Copper, Freely Accepted as Money

http://globaleconomicanalysis.blogspot.com/

[Naam]

I have next to no ethics when it comes to investing.

there are many among us who are quite shy about what you are saying....

it takes a great person to admit that....

with great admiration....

now.... that is funny.... it was abrak who said the quote, not naam...., what is happening here....? is my computer not agreement with what was quoted....?

definitely not me as this is clearly not my diction. but basically i agree with whoever said this by adding perhaps a few exceptions such as manufacturers of landmines and cluster bombs.

[Naam]

"Gold hasn't even started its real upward climb yet. Just wait until the "gold as currency" paradigm really gets recognized by the masses. Then we might even see a bubble. We're a long way from that right now. We're very much still in solid fundamentals territory."

Can you explain that concept to me.

i can't because you quoted GregB

[Naam]

"Gold, Silver, Copper, Freely Accepted as Money"

yawnnnnnnn... i don't fill up my black beauty in Michigan paying with silver but pay 3,600 Baht for "Caltex Gold 95 octane" in Pattaya when the "low fuel" warning sounds ping... ping... ping.

[Naam]

Both XAU and USD are liquid investments. I don't see a difference between them other than personal bias.

And physical gold and physical currency can be even more liquid than electromagnetic versions. As well as off any radar screens scanning for something to restrict, tax or confiscate.

one can store and move only a certain amount of physical gold, USD or any cash currency. anything physical that cannot be hand carried and/or has to be declared when entering or leaving a country is not liquid but dangerously immobile.

Edited July 18, 2010 by Naam