Gold Up In 2008 , Where To In 2009 ?

[flying]

I know we can exchange If with this phrase,,," Every Time" Bernanke types some more numbers in his spreadsheet he steals money from all countries that hold dollar reserves

incorrect statement. Bernanke typed a lot of numbers but the Dollar strengthened vs. most currencies.

You mean recently? If so is that only because the others fell *more*?

i refuse to anwswer that illogical question.

Ok I just meant that the only reason the USD has strengthened recently is for better or worse the rush to cash. This in turn IMHO makes the USD appear stronger than other currencies which are having their own troubles.

The again I have said on numerous occasions that I do not claim to be financially astute. But as I have also said before....if nothing else this crisis has gotten many like myself to take a look at these things from a different perspective. Albeit late to the table we are quite shocked at what we have found. Guess what though? Our reaction is mistrust....the one thing that gives that fiat currency value is leaving in great droves.

[Nouf]

There is a really easy way to see which way the US$ goes if the DX (dollar index) continues to move higher thats deflation, if the DX moves lower thats inflation , if its in a holding pattern say 73-87 then thats stagflation and the world goes no where

The forex markets can hold this pattern far longer than you think and i expect the wild moves to continue as the world is in a race to slash interest rates so if all nations slash to Zero you are back to square one

If the US collapes as everyone is talking above (i have no opinon) i just let the markets tell me, its pretty simple and you dont have to front run any move just let the DX tell you

I still fail to see any notion of hyper-inflation or inflation or such cause and yet to see any evidence of fiat currencies Yet!!! falling apart, unless the gold bugs see the US going the same route as Iceland then the US$ has a problem i dont see no evidence, the DX is going higher so far it needs to roll over and fall back below 72 (thast bearish for the $) or we stay in a trading range, now this range my carry on untill 70 is broken to the downside, but if it continues towards 90 or 100 then all commodities and curriences against the US dollar are likely to be going lower as the dollar goes higher or meander in a trading range

There will be far more worse consequences to worry about than money i can assure if an all out collapse on the US$ or fiat curriences, but can anyone show me any evidence of inflation???

alot of this collapse talk is just that "talk" scare mongering (when you simply have to watch the evidence to see which way the markets are going)

The technical term of Inflation is the creation of money supply (blah blah blah) but as an example if you create a trillion $`S and simply put in a safe and keep it there have you created inflation???

Answer is no

Why because the money is not spent Yet, so this is essentially what the World Governments are doing as i have mentioned unless the creation of this money gets into the system then and only then can you start talking about inflation let alone Hyper-inflation

Banks are not willing to lend to the consumer they are hoarding cash as they are afraid of loosing more investments form the bad pratices that got us here in the 1st palce and then have more write down on there books , the consumer is simpley tapped out and maxed out and is being forced in bankruptcy or paying of debt and that involves saving not spending.

So this is the same as printing as much money as you want to print but it not being spent so it never enters the system

Being Early is still wrong i dont care how you slice and dice that to being part of an investment strategy, so if you`re early by 5 years is thats a wise investment or simply an excuse becuse you called it wrong???

All the evidence points to deflation: House prices still falling, commodities still dropping (or trying to find a base) Stores sales figures likely to be worse Yr vs Yr.

Consumers dont have the abilty to spend themselves out of a recession or what ever you want to call it (i call it a contraction) trying to fight market forces by somehow expecting consumer to take on more credit is a nuts idea and laughable when the consumer is trying to pay down debt

The only way i see hyper-inflation and a serious decline of the US$ is basically if the US simply rights of the consumers debt ie all mortages, credit cards and gives out free money to the consumers and start the ball rolling again this in essence is what they did with the housing bubble (as consumers had the abilty to take money via HELOC`S but the debt is still there) but there is no where to turn to for re-inflation other than taking the debt from the consumer and starting from a clean slate

The world is not in a postion to de-couple form the US consumer unless the ROW breaks the cycle of trading without the US, exports around the world are getting destroyed as the world goes into recession, so unless the world simply tosses aside the US consumer we are heading for a hard time ahead or they come up with some other scheme to get spending going again

So at this present stage, i see no reasong to hold physical gold unless i see the evidence of inflation, even then its a hedge against the erosion of my currency, the bubbles last year in commodities were simply panic mania to get into a trade and they got rallied far higher than needed, as what happens in bubble mania`s the fundementals simply never made sence against price and has shown they come crashing down to more moderate levels

Certain other commodities like rice/corn/wheat/oil are needed unless you are deciding that the world can not survive without these type of foods or much needed commodoties (oil heating oil) but like all markets supply and demand and fair vlaue with right any bubble pops

Imo gold is bought on fear factor, much the same oil is bought and rallies in Hurricane season once any problems resolve themselves markets resume normality

For Gold to see $2000 or what ever that target is being put out in the media then you have some serious potenial unstabilty in the forth coming months/years for that to happen

But let the DX tell you where its going 1st before making any decision based on fear of because of some Guru on the TV like Peter Schiff (whos getting alot of attention but looks like his selling his book) although many have called the markets what they failed to see was the credit destruction and deflationary forces taking hold

As i said being early is still wrong, as by the time your thesis becomes right all your wealth might be destroyed by deflation 1st before any inflation or Hyper-inflation takes hold

If you believe the $2000 story and immediate Hyper-inflation is around the corner then buy gold, if you listen to the markets and follow the US$ then stay in cash and wait for the evidence:

That means a rebound and bottom in housing and employment figures getting better not worst as the case today, and deflationary evidence stops, and rising prices and a flush out of the system to restart again, this credit expansion took 15yrs to make and somehow it over in 18 months????

The above is factual based on evidence to what the markets are doing, front running a market is a way to wealth destruction. Just ask the Bond holders of the 10 & 30yr this week as we have lost over 8 points this week alone

If this deflationary spiral carries on as i expect then there is no where to hide IMO well not in the foreseeable future other than holding t-bills or cash in insured banks via strong currencies (yes they are all weak) but unless the world is doing away with fiat currecies then they will continue to still be used

Edited January 8, 2009 by Nouf

[flying]

There is a really easy way to see which way the US$ goes

---snipped to save space-------

Thanks Nouf I really like your posts. Alway informative & easy to understand.

Thanks

[VegasVic]

I know we can exchange If with this phrase,,," Every Time" Bernanke types some more numbers in his spreadsheet he steals money from all countries that hold dollar reserves

incorrect statement. Bernanke typed a lot of numbers but the Dollar strengthened vs. most currencies.

You mean recently? If so is that only because the others fell *more*?

i refuse to anwswer that illogical question.

Ok I just meant that the only reason the USD has strengthened recently is for better or worse the rush to cash. This in turn IMHO makes the USD appear stronger than other currencies which are having their own troubles.

The again I have said on numerous occasions that I do not claim to be financially astute. But as I have also said before....if nothing else this crisis has gotten many like myself to take a look at these things from a different perspective. Albeit late to the table we are quite shocked at what we have found. Guess what though? Our reaction is mistrust....the one thing that gives that fiat currency value is leaving in great droves.

Flying, I think that gold may have seen its high for 2009 already, even Marc Faber that perenial goldbug has been saying that he likes base metals far more than gold and sees gold going lower from here. Naam is correct, despite all the goldbugs urgings, gold is not money. Gold is merely a metalic commodity of varying value, if rhodium or some man made metal were to take the jewelry market by strorm and replace gold as the most popular metal for jewelry then gold would be lucky to fetch $100/ounce. The industrial demand for gold has been shrinking for the past two decades and currently represents less than 10% of annual production. I am in no way suggesting that gold will go to $100/ounce or that it will be replaced by some other metal as a favorite for jewlery, but given the severe recession in the worldwide jewelry market and the deflationary trend that is griping the worlds economies for the foreseeable future, I do think that gold has very possibly seen its high for the year already

[flying]

I think that gold may have seen its high for 2009 already, I do think that gold has very possibly seen its high for the year already

Oh boy..........You sure you want to make that prediction 7 days into the 1st of 12 months of 09?

In this environment?

Marc Faber that perennial goldbug has been saying that he likes base metals far more than gold

You know I agree with that & am weighted 60/1

Edited January 8, 2009 by flying

[Nouf]

Flying, I think that gold may have seen its high for 2009 already, even Marc Faber that perenial goldbug has been saying that he likes base metals far more than gold and sees gold going lower from here. Naam is correct, despite all the goldbugs urgings, gold is not money. Gold is merely a metalic commodity of varying value, if rhodium or some man made metal were to take the jewelry market by strorm and replace gold as the most popular metal for jewelry then gold would be lucky to fetch $100/ounce. The industrial demand for gold has been shrinking for the past two decades and currently represents less than 10% of annual production. I am in no way suggesting that gold will go to $100/ounce or that it will be replaced by some other metal as a favorite for jewlery, but given the severe recession in the worldwide jewelry market and the deflationary trend that is griping the worlds economies for the foreseeable future, I do think that gold has very possibly seen its high for the year already

Very possible well from a techincal point the high could be in for this move anyhow or maybe a slight ne higher as i can count a completed pattern or needing a sight marginal high Silver the same in Elliot terms is either done for this move or needing a push higher aboev the prior swing high, but under $830 and i would think downside is still forth coming

However the evidence suggets a problem and a weak bullish case as its failing to get back above its 200dma (871) and the RSI has broken its daily trendline which is bearish so even if it put in a spike high towards 890ish then i suspect the RSI will kiss back the trendline

so yes your call for a top maybe valid well for this rally anyhow

(i am short gold from the last prior high with stops just above the 200dma) and anything thats stalls below $900 or the Long term trendline or the 618 retrace ($910)is likely to halt any advance

In more simpler terms for any non technical readers what we have is a bear flag ie a rising wedge channel in a downtrend and the expected out come is a break of the lower trendline.channel line and a resumption of the downside

Of course nothing is 100% but from where i am looking based upoon the strength of the US$ i see gold prices either in a $50 range 900-840 possible or a break of $830 and a resumption of its down trend unless we back back above $935 (this weakens the bearish case) but with some key#`s above and resistance i think this move is on fumes or the downside has started

The $ has weakness recently yet gold failed to really show any strength

Chart enclosed

Edited January 8, 2009 by Nouf

[Nouf]

Nouf,

Very informative posts from you, thanks. But I have to disagree on your opinion that if you are early you are wrong. As the time to be acquiring ANY investment is when it is out of favor, would you agree? This way you have a position BEFORE the move starts, as we all know what happens to those who come late to the party. If one was to slowly but surely, accumulate a position, I think they are doing well as they are not taking a risk and jumping in all at once, but instead "scaling" into a potential investment, like one would do with a trade. Hard to do this with land, but with metals it is very easy and a safe way to get a position, so that you are exposed if/when a move happens.

Cheers

Hello,

I do agree on out of favour investments when forced liquidations are involded such as today,

Just because something is deemed to be cheap does it make it cheap??? imo No as value is peceived to be in the beholders eyes not you or I its the market that decides, so in your case you want to scale in on value stocks or investments right???

P/E ratios and anlaylst`s opions mean nothing unless the markets accepts that, i have a watch list of 20 plus stocks right now that i would say were cheap but upoon what basis??? the markets or mine????

scaling in is a good strategy and is on a sound principle provided you have done to correct work and research and your investments are un-impaired like for instance if Oil is under fair value etc, again what is fair value??? what is cheap????

I am looking to take a small postion perhaps in oil if and when i get a target possibly towards $28-30, but say if oil continues to slide, and stays below $20 for a very long time, and i hold on to it, because oil is very much needed in the world but the market decides that fair value is $20 is that really a value investment that i have to hold for years to get my price back simply staying in cash such as now is far greater return

of course finding the right stocks before an explosion is great providing you have the financial power and time to wait it out, but such like conditions the markets simply moves on buyers and sellers not value (why do you think we have bear markets rallies as short squeezes occurr)

the same appiles to stocks or basically anything, housing gold etc, what some one is prepared to pay i am not of the opinon in value investing at its what everyone is told that this is great value etc blah blah and all the BS that goes with it

It is of my opinon that value investing is a myth, its simply drummed into a heads when we enter the markets, value investing is simply trading on a bigger time frame (just ask the bulls from 2002-2007 about value investing when then they have lost the whole alledged bull run in 14 months)

however i do fully agree that buying low selling high is the correct investment/strategy/trade however you want you to call it

but picking markets tops and bottoms is a fools game again just ask the investors this year trying pick bottoms hence i will wait for evidence of a "potential" bottom before taking any positions 1st even then they are for a trade as i will be in and out as the market conditions change

To say you are picking stocks on value is fools game (my opinion) the market decides and trying to scale in as you put it is a great system but again i stress if you trying to bottom pick there is nothing wrong with that i do it myself as i like to buy on fear, and sell into the market when everyone is getting bullish and CNBC is plugging stocks (thats a time i am getting out) or waiting for a move lower

I am sentiment trader and contrarion

PROVIDING you KNOW where you are wrong ie the market is going to carry on lower regardless of your opinon just because you think some thing is cheap remember value is what the market decides not what you "think" it should be so i always have stops in place as even if i adopt the scale in approach then i will admit that i got it wrong i would rather be wrong and take a small loos that keep a postion just because a stock or commodity is deemed to be a bargain it can and usaully does go lowere

Unless you are a millionaire or have a serious time frame like Jim rogers then only then i would say some commodities are potential "investment" that are always needed like food stuffs like wheat/corn or oil/heating oil and some metals that are needed for industrial production etc as people will always need these commodities

But i refer you to my prior post based upoon the deflationary evidence timing in such circumstances is paramount infact there is not many investors that have witnessed a massive wealth destruction such as this just look how many suicides and hedge funds have blown up, and billionares have folded

even the greats of buffett and pickens and lost billions and these are the so called best, but they are perma-bulls

We can all make money in a bull market and pump stocks like Jim Cramer did in the tech bubble, and to say no one could see this credit destruction coming is a fallacy thats one point i agree with the likes of peter schiff and commend him for that, he stuck to his principles and he may just get his Hyper-inflation some time in the future

But again ask his clients about the value stocks he bought for them, his thesis on the world de-coupling is great and all but yet to remain to be seen, at least i have now cash ready for any such hyper-inflation, he never adopted his thesis to accomodate and let his clients portfolios waste away when what any investor/trader should be doing is setting stops and getting out not seeing your portfolio down by 30-50%

to me thats not value investing thats taking a gamble that market conditions will right themelves and stocks will once again be a trend higher

In fact i would argue that we have seen Hyper-inflation or inflation and its bust its bubble as the Stock market has wasted away i would be extremely surprised if we ever saw 1400 on the SNP 500 ever again in the next 20 yrs

just look at the 1930`s chart for a comparison, for all the hyper-inflationists out there you better hope Bernanke can revive the US economy

but again what is fair value for these commodities???? or course once thing we know oil is not going to 0

so in essence to this thread theirs specualtion and value investments the most part of markets are driven on specualtion you can see that last year

This is why value investing does not exist and is a term used by lazy investors/traders that can not actively manage their portfolios thinks just because they bought some so called value stocks then they come back in 5 years and become a millionare, wrong idea imo

The market is a game played by big players and you can either fight them or ride their coat tails Big money is the banks and hedge funds, and the media is used to premote stocks to the gullable based upoon value investing when they come out with all sorts of BS of why a stock should be going higher etc etc how the hel_l Jim cramer is still on tv land is beyond me

"what is value investing"??? something that has good fundementals sound managment etc

But what is value investing price (what markets condiotns dictate at the time)

Of course times like this i feel like a child in a candy shop as i look at stocks that have been decimated and i mean mining and oil stocks, but then i look at the bigger picture and find them stocks are not real value investing stocks as they could run alot lower or simply hold this pattern my guess is that we still have lower

so i would rather miss the 1st few points of a new run in stocks once the evidence present itself than to try and pick a fallling chainsaw

There is nothing wrong with your approach providing you know and admit you are wrong in your timing and are not keeping positions for the sake of having a bias this approach is drummed into us as value investing its only value investing when the markets agrees with your approach if the market has other ideas i would rather take my loss than be stuck with so called value investment stocks

This is my opinon you may or may not agree and respectively accept that but i have always been taught to know where your wrong on your opinon and never let loosing multiples become a wipe out case regardless of my opinon stocks can and will go lower before your thesis plays out as you cherry pick stocks or investments

THE MARKET DECIDES FAIR VALUE

The only situation i like as fair value or what i think is cheap is needed sources or energy or food stuffs or stocks part of this net work but even then i will still have stops in place

I will never avergae into a lossing postion unless its part of a scaling in procedure but i need to still know i am wrong somewhere so i dont get wiped

There is nothing worst that seeing stocks go lower than you bought but not having any funds at the bottom, but by then you are praying to use any rally to break even just ask all the 401ks and IRA holders as the look to theri retirement funds being decimated

Good luck with your investing

Edited January 8, 2009 by Nouf

[Naam]

All that is true, however,

1. if the global currencies all fall in value, people will look towards precious metals as a way to try to maintain their wealth. I.E. something to "store" value until a better time arises to transfer that value out of metals and into something else. The fact is we all are not on a desert island, so using water or fishing tackle is not likely to be the main currency form.

2. What would you suggest people use should there be a global collapse of currencies? They will turn to something, and gold and precious metals are likely to be it.

I really can't see people paying with metals, because if that happened, it would mean a TOTAL global collapse. But there are companies like goldmoney and egold that are making it possible to pay in "gold grams", so innovation is happening, albeit slowly.

1. that is -although logical- an assumption and your sentence contains the word "IF". moreover i rule out completely a global collapse of currencies because only a tiny amount of this planet's inhabitants possess or have the financial means to acquire precious metals. therefore the vision "paying with precious metals" is (in my personal view) fiction as there is no reason to expect a collapse, not even in the present situation of financial turmoil and nothing exists which warrants that assumption. inflation? yes, perhaps. high inflation that will hurt the majority of people? yes, perhaps. global collapse of all currencies? no, but it will remain the dream of the holy grail of the precious metal lovers.

by the way, "maintaining" wealth wouldn't solve the problem. you need proceeds to cover your living expenses. how much precious metals can a person require to last a lifetime?

2. i don't suggest anything. reason: see above.

disclaimer: my wife bought about 1½ years ago a huge acreage of prime farmland in a country other than Thailand. i only mildly opposed it because it adds to our diversification of assets although the purpose is based on some of her wild welfare ideas. so if worse comes to worst you might be able to buy your food from her. i plan to act as cashier weighing the metals and testing their purity and of course take my cut

[Khun Jean]

All that is true, however,

1. if the global currencies all fall in value, people will look towards precious metals as a way to try to maintain their wealth. I.E. something to "store" value until a better time arises to transfer that value out of metals and into something else. The fact is we all are not on a desert island, so using water or fishing tackle is not likely to be the main currency form.

2. What would you suggest people use should there be a global collapse of currencies? They will turn to something, and gold and precious metals are likely to be it.

I really can't see people paying with metals, because if that happened, it would mean a TOTAL global collapse. But there are companies like goldmoney and egold that are making it possible to pay in "gold grams", so innovation is happening, albeit slowly.

1. that is -although logical- an assumption and your sentence contains the word "IF". moreover i rule out completely a global collapse of currencies because only a tiny amount of this planet's inhabitants possess or have the financial means to acquire precious metals. therefore the vision "paying with precious metals" is (in my personal view) fiction as there is no reason to expect a collapse, not even in the present situation of financial turmoil and nothing exists which warrants that assumption. inflation? yes, perhaps. high inflation that will hurt the majority of people? yes, perhaps. global collapse of all currencies? no, but it will remain the dream of the holy grail of the precious metal lovers.

by the way, "maintaining" wealth wouldn't solve the problem. you need proceeds to cover your living expenses. how much precious metals can a person require to last a lifetime?

2. i don't suggest anything. reason: see above.

disclaimer: my wife bought about 1½ years ago a huge acreage of prime farmland in a country other than Thailand. i only mildly opposed it because it adds to our diversification of assets although the purpose is based on some of her wild welfare ideas. so if worse comes to worst you might be able to buy your food from her. i plan to act as cashier weighing the metals and testing their purity and of course take my cut

Would you accept paper money in that situation?

[LaoPo]

Well...some exciting news for the GOLD lovers: take your thermometer out of the closet and put it where it's needed

Paul Walker calls gold to $1,100

Brendan Ryan

Posted: Thu, 08 Jan 2009

[miningmx.com] -- GFMS CEO Paul Walker predicts gold could rise to about $1,100/ounce by the end of 2009 with an “outside chance” of the metal reaching $1,200/oz during the year.

The UK-based precious metals analyst has turned more bullish on gold’s prospects following the financial crisis that erupted from September onwards and the steps taken by US and other government authorities to deal with it.

Walker has been “on the money” with his predictions for both gold and platinum during 2008.

In December 2007 he stated his belief that gold would not reach $1,200/oz by the end of 2008 and, in April last year, he turned negative on prospects for the platinum price contrary to conventional platinum industry wisdom at the time.

Walker said: “Gold is looking a very attractive proposition for those people looking for a safe place to put their cash.

“You have to look at the huge fiscal stimulus packages already put in place by the United States authorities and with more being promised once president-elect Obama gets into office.

“These involve the creation of enormous amounts of debt by the government. There is no free lunch here. When it comes to repayment of the debts, government will have the choice of raising taxes or allowing inflation to run.

“It is much easier to take the pain of rising inflation than it is to take the pain of higher taxes.”

Inflation is traditionally good for gold but some economists, in particular “Dr Doom” - New York University economics professor Nouriel Roubini, who predicted the financial crisis a year advance - believe the economic outlook is one of severe deflation.

Deflation is bad for gold but Walker does not accept the deflationary economic outlook.

He said: “I just don’t see deflation being a real issue in this market. You may see inflation rates coming off from their 2008 peak levels in the short term, but the more important issue concerns the situation where you have highly negative real interest rates.

“I believe the current flight to the US dollar could reverse and the dollar could weaken significantly.”

Walker’s views on inflation are supported by former Gold Fields CEO Ian Cockerill, the executive with whom Walker took a bet against the gold price reaching US$1,200/oz during 2008.

Cockerill is now CEO of Anglo Coal but he still clearly follows the gold market closely.

He said: “The inflationary pressures that must result from all these financial bail-outs must lead to higher inflation rates, which must lead to a higher gold price. I am surprised that gold has not yet performed as a result.”

-mining mx

LaoPo

[Naam]

disclaimer: my wife bought about 1½ years ago a huge acreage of prime farmland in a country other than Thailand. i only mildly opposed it because it adds to our diversification of assets although the purpose is based on some of her wild welfare ideas. so if worse comes to worst you might be able to buy your food from her. i plan to act as cashier weighing the metals and testing their purity and of course take my cut

Would you accept paper money in that situation?

no way!

[flying]

following quote from Professor Walter E. Spahr, Chairman of the Department of Economics at NYU from 1927 to 1956:

What is the meaning of a gold standard and a redeemable currency?

It represents integrity. It insures the people’s control over the government’s use of the public purse. It is the best guarantee against the socialization of a nation. It enables a people to keep the government and banks in check. It prevents currency expansion from getting ever farther out of bounds until it becomes worthless. It tends to force standards of honesty on government and bank officials. It is the symbol of a free society and an honorable government. It is a necessary prerequisite to economic health.

It is the first economic bulwark of free men.

Professor Spahr understood that the essential role of gold in monetary systems is to prevent bankers and government from overstepping the bounds of sound governance and prudent banking, bounds, which if undone, will bring ruin to the nation and to its people.

[Pakboong]

I am growing a small gold position as a gamble that COMEX will default on deliveries in the coming years.

" The nature of futures contracts is that they expire at a given date. At that point the seller must deliver physical gold to the buyer. However as noted above, the trade in gold futures far, far outstrips that of the actual amount of gold in existence for the very reason that hardly anyone ever takes delivery of physical gold. Some 97% or so of futures contracts are either closed out for cash settlement before expiry or "rolled over" into the next month's contract. Thus paper gold trading can be perpetuated as a cash-only market.

But what if, this time, the buyers of paper gold demanded delivery? Judging by the current extraordinary demand for physical gold, it would be no surprise if many did. You could either sell the physical delivery into the physical market at a much higher price than the futures market is currently dictating or simply hold the gold because that's the asset you wanted in the first place.

The result would be a short gold squeeze, and the price of gold would go through the roof. Comex is the guarantor of settlement and would have to default. However dealers are dismissive of such a possibility, Douglas notes, given there are currently 8.5m ounces of gold being held in the Comex inventory and the average inventory amount over the past five years - without any default occurring - has been only 6m ounces.

But Douglas points out that Comex also holds gold for customers wishing to simply store it on the exchange. The reality is that gold available to dealers on delivery demand is only 2.846m ounces, not 8.5m. In December to date delivery notices have been sent for 1.26m ounces of gold, or 44% of that which is actually available for delivery. And as Douglas notes, "this assumes that the gold registered to dealers is totally unencumbered, which is not necessarily a good assumption in the fuzzy accounting world of Wall Street".

http://www.silverbearcafe.com/private/12.08/exposure.html

[Naam]

following quote from Professor Walter E. Spahr, Chairman of the Department of Economics at NYU from 1927 to 1956:

What is the meaning of a gold standard and a redeemable currency?

It represents integrity. It insures the people’s control over the government’s use of the public purse. It is the best guarantee against the socialization of a nation. It enables a people to keep the government and banks in check. It prevents currency expansion from getting ever farther out of bounds until it becomes worthless. It tends to force standards of honesty on government and bank officials. It is the symbol of a free society and an honorable government. It is a necessary prerequisite to economic health. It is the first economic bulwark of free men.

Professor Spahr understood that the essential role of gold in monetary systems is to prevent bankers and government from overstepping the bounds of sound governance and prudent banking, bounds, which if undone, will bring ruin to the nation and to its people.

Prof. Spahr died in 1966 and now his (in my view excellent) teachings and recommendations have been reduced to -impossible to achieve- science fiction.

[AlexLah]

I am growing a small gold position as a gamble that COMEX will default on deliveries in the coming years.

" The nature of futures contracts is that they expire at a given date. At that point the seller must deliver physical gold to the buyer. However as noted above, the trade in gold futures far, far outstrips that of the actual amount of gold in existence for the very reason that hardly anyone ever takes delivery of physical gold. Some 97% or so of futures contracts are either closed out for cash settlement before expiry or "rolled over" into the next month's contract. Thus paper gold trading can be perpetuated as a cash-only market.

But what if, this time, the buyers of paper gold demanded delivery? Judging by the current extraordinary demand for physical gold, it would be no surprise if many did. You could either sell the physical delivery into the physical market at a much higher price than the futures market is currently dictating or simply hold the gold because that's the asset you wanted in the first place.

The result would be a short gold squeeze, and the price of gold would go through the roof. Comex is the guarantor of settlement and would have to default. However dealers are dismissive of such a possibility, Douglas notes, given there are currently 8.5m ounces of gold being held in the Comex inventory and the average inventory amount over the past five years - without any default occurring - has been only 6m ounces.

But Douglas points out that Comex also holds gold for customers wishing to simply store it on the exchange. The reality is that gold available to dealers on delivery demand is only 2.846m ounces, not 8.5m. In December to date delivery notices have been sent for 1.26m ounces of gold, or 44% of that which is actually available for delivery. And as Douglas notes, "this assumes that the gold registered to dealers is totally unencumbered, which is not necessarily a good assumption in the fuzzy accounting world of Wall Street".

http://www.silverbearcafe.com/private/12.08/exposure.html

You obviously did not read the fineprint hidden in your Comex contract.

They are allowed if you demand delivery of your Gold to issue you another piece of paper called: Warehouse delivery bill ore something like that it is called.

Only if you have three or more of such they have to give you the real stuff.

Ha ha ha ah aha ha a a a a h ah a a aha ha ha aah a ha aha a h aa

We got you there didn't we?

Have a look in our safe, where is your Gold huh?

[Pakboong]

I am growing a small gold position as a gamble that COMEX will default on deliveries in the coming years.

" The nature of futures contracts is that they expire at a given date. At that point the seller must deliver physical gold to the buyer. However as noted above, the trade in gold futures far, far outstrips that of the actual amount of gold in existence for the very reason that hardly anyone ever takes delivery of physical gold. Some 97% or so of futures contracts are either closed out for cash settlement before expiry or "rolled over" into the next month's contract. Thus paper gold trading can be perpetuated as a cash-only market.

But what if, this time, the buyers of paper gold demanded delivery? Judging by the current extraordinary demand for physical gold, it would be no surprise if many did. You could either sell the physical delivery into the physical market at a much higher price than the futures market is currently dictating or simply hold the gold because that's the asset you wanted in the first place.

The result would be a short gold squeeze, and the price of gold would go through the roof. Comex is the guarantor of settlement and would have to default. However dealers are dismissive of such a possibility, Douglas notes, given there are currently 8.5m ounces of gold being held in the Comex inventory and the average inventory amount over the past five years - without any default occurring - has been only 6m ounces.

But Douglas points out that Comex also holds gold for customers wishing to simply store it on the exchange. The reality is that gold available to dealers on delivery demand is only 2.846m ounces, not 8.5m. In December to date delivery notices have been sent for 1.26m ounces of gold, or 44% of that which is actually available for delivery. And as Douglas notes, "this assumes that the gold registered to dealers is totally unencumbered, which is not necessarily a good assumption in the fuzzy accounting world of Wall Street".

http://www.silverbearcafe.com/private/12.08/exposure.html

You obviously did not read the fineprint hidden in your Comex contract.

They are allowed if you demand delivery of your Gold to issue you another piece of paper called: Warehouse delivery bill ore something like that it is called.

Only if you have three or more of such they have to give you the real stuff.

Ha ha ha ah aha ha a a a a h ah a a aha ha ha aah a ha aha a h aa

We got you there didn't we?

Have a look in our safe, where is your Gold huh?

Why would I hold paper gold if I am gambling the Comex will default on gold deliveries a some point in the near future?

[flying]

following quote from Professor Walter E. Spahr, Chairman of the Department of Economics at NYU from 1927 to 1956:

What is the meaning of a gold standard and a redeemable currency?

It represents integrity. It insures the people's control over the government's use of the public purse. It is the best guarantee against the socialization of a nation. It enables a people to keep the government and banks in check. It prevents currency expansion from getting ever farther out of bounds until it becomes worthless. It tends to force standards of honesty on government and bank officials. It is the symbol of a free society and an honorable government. It is a necessary prerequisite to economic health. It is the first economic bulwark of free men.

Professor Spahr understood that the essential role of gold in monetary systems is to prevent bankers and government from overstepping the bounds of sound governance and prudent banking, bounds, which if undone, will bring ruin to the nation and to its people.

Prof. Spahr died in 1966 and now his (in my view excellent) teachings and recommendations have been reduced to -impossible to achieve- science fiction.

and from Louis Carabini, in his new book, Inclined to Liberty (read a review of the book here: http://mises.org/story/3257 ):

"No government today issues money that is redeemable for anything of value. U.S. dollars were, at one time, IOUs redeemable for gold. But when more and more money was printed with no commensurate addition to the supply of gold, the government was compelled to prevent redemption to avoid a 'run' on its gold supply. In 1933, the U.S. government simply declared the ownership of gold by U.S. citizens illegal, in effect, reneging on its earlier promise of redemption. Then, in 1971, the government had to renege on the redemption in gold for the dollars held by foreign entities, as well. Since then, there has been nothing redeemable for a U.S. dollar; it is deemed money by edict, and must be accepted to satisfy any debt."

[Naam]

and from Louis Carabini, in his new book, Inclined to Liberty (read a review of the book here...)

"No government today issues money that is redeemable for anything of value.

no need to read a book to learn about a fact which is well known since decades if "redeemable" refers to a government. but with money one was and is still (despite ups and downs and a few exceptions) able to buy any available goods and services (provided on has the money).

[HardenedSoul]

Precious metals however don't need that as it has a real value.

nothing has real value or possesses any value except what others are willing to pay or barter for. a treasure chest filled with gold on a remote uninhabitated island is worthless for a stranded person. a hook and a line as well as the knowledge to fish and where to get potable water has infinite times more value. yeah right, fiat money is doomed. i heard this a zillion times. but until today my wife uses fiat money to pay for groceries, meat, fish and drinks.

i don't recall that she was ever asked in Carrefour, Foodland or Friendship to pay with Maple Leaves, Krügerrands or Gold Vrenelis and neither did Publix, Winn Dixie or Walmart ask

Rubbish ! As far as I know, the majority of us don't live on an uninhabited island. I doubt I could go into Carrefour and exchange my fishing skills for a dozen eggs and some smoked back bacon. You clearly believe that the tendency of governments to print money has few, if any, ramifications for the future of fiat money.

Precious metals implies value unlike a piece of paper. I'm bullish on gold and, as I've said elsewhere, it's done its job beautifully against the currency in which I bought it, namely sterling. +30% in 18 months ain't bad. The dollar is next and something tells me that you know it !

Frankly, I don't care how much success someone's had making money under the current financial framework. As the late Mr Merkle's family will tell you, past performance is no guide to the future . . . or the present.

[HardenedSoul]

Flying, I think that gold may have seen its high for 2009 already . . .

That is simply the most ridiculous statement I've heard in a fair old while

People seem to be lumping China, India et al in with the US as if, somehow, they are in as much schit as America. The idiotic commentary suggesting that China will only grow at 3 or 4% is from the same stable that espoused the notion that Federal Reserve would raise interest rates in the 4th quarter of 2008 Remember all the jaw-boning out of Bernanke ? Look at the idiots now ! The thrust of this disinformation is to depict the US and its hegemony as still being the best bet for investors with money parked in the "safe-haven" of government bonds.

Now the spin-doctors are trying to have us believe that because the US went into recession first, it will emerge first. Now there may be an element of truth to that but only when you compare it to Europe or the UK all of whom are pretty much in the same boat. China and India ain't in that boat.

China's gonna save its own skin - they ain't buying T-Bonds like they used ta. No, they're buying gold. They're allowing trading partners in Asia to settle trades in yuan instead of dollars.

Ignore the industrial uses for gold. If its price related only to its industrial applications, it'd be at $300. Gold is a currency and is trading as such. Ask Merrill Lynch where its richest clients are putting their money.

The Naams and VegasVics of this world clearly have an unshakeable belief in the ability of Western governments to tinker their way out of this but if you don't quite share their blind faith, get yerself some shining

[lannarebirth]

I could be wrong, but I'd say if Gold hasn't topped already in this latest swing move, it is within a week of doing so.

As for the dollar, it bottomed right on schedule at its recent 40 week cycle low. I'm not terribly impressed with its trading action since then but if it makes a higher high than a couple months ago, I'd say it will continue to climb, with corrections, for the next few years.

[lannarebirth]

I could be wrong, but I'd say if Gold hasn't topped already in this latest swing move, it is within a week of doing so.

As for the dollar, it bottomed right on schedule at its recent 40 week cycle low. I'm not terribly impressed with its trading action since then but if it makes a higher high than a couple months ago, I'd say it will continue to climb, with corrections, for the next few years.

Lanna, do you have a chart to show this 40 week cycle you are talking about? Never heard of it before. I think you are right about the dollar continuing to climb, but I feel it will be short lived. Nothing technical to back it up, just my "gut".

Vibe,

It is a Hurst Cycle, which are of 2.5, 5, 10, 20, 40, 80 and 240 weeks duration, with each nesting inside the next larger cycle. The $USD has just completed a right translated 40 week cycle (bullish, in that it crested past midpoint). What it needs to do now IMO, if it is to be considered in a LT upcycle is to have a right translated 80 week cycle, with new highs for the cycle (we just completed week 43).

Since the $USD downtend commenced 7+ years ago it has had previously one right translated 40 week cycle , but it could not establish a higher high in the 80 week time frame, which led to continued weakness.

The charts I use for $USD don't have a cycle nesting tool, so here's my crude chart I use for counting weeks:

Edited January 10, 2009 by lannarebirth

[flying]

I could be wrong, but I'd say if Gold hasn't topped already in this latest swing move, it is within a week of doing so.

As for the dollar, it bottomed right on schedule at its recent 40 week cycle low. I'm not terribly impressed with its trading action since then but if it makes a higher high than a couple months ago, I'd say it will continue to climb, with corrections, for the next few years.

It will be interesting to see this coming week then.

But continue to climb for the next few years?

In many way I hope so for everyones sake but charts not withstanding

I am really surprised to hear anyone think so.

But this financial world is a very strang land & one that I obviously do not understand.

[flying]

From Jesse's Cafe

09 January 2009

Merrill Lynch: The Wealthy Are Turning to Physical Gold for Safety

And so it begins...

Each person has to allow for their own circumstances, and provide for their daily needs as well as their longer term investment decisions.

Speculation and leverage are a trap in this market, because it is permeated by abusive practices and a deterioration of the conditions necessary to free markets.

It is truly amazing that the world continues to allow New York, Chicago and London to set the short term prices for their goods and labor.

The status quo will do all in its power to perpetuate itself, and hold the line on meaningful change and reforms for a variety of all too human motivations. This, we believe, is what has been causing this series of bubbles, booms and busts. Bernanke is fighting the last economic crisis.

As we can, provisions should be made for the troubles to come. We did not get where we are overnight, and we will not repair ourselves in a year either.

UK Telegraph

Merrill Lynch says rich turning to gold bars for safety

By Ambrose Evans-Pritchard

Last Updated: 10:32AM GMT 09 Jan 2009

Merrill Lynch has revealed that some of its richest clients are so alarmed by the state of the financial system and signs of political instability around the world that they are now insisting on the purchase of gold bars, shunning derivatives or "paper" proxies.

Gary Dugan, the chief investment officer for the US bank, said there has been a remarkable change in sentiment. "People are genuinely worried about what the world is going to look like in 2009. It is amazing how many clients want physical gold, not ETFs," he said, referring to exchange trade funds listed in London, New York, and other bourses.

"They are so worried they want a portable asset in their house. I never thought I would be getting calls from clients saying they want a box of krugerrands," he said.

Merrill predicted that gold would soon blast through its all time-high of $1,030 an ounce, and would hit $1,150 by June.

The metal should do well whatever happens. If deflation sets in and rocks the economic system it will serve as a safe-haven, but if massive monetary stimulus gains traction and sets off inflation once again it will also come into its own as a store of value. "It's win-win either way," said Mr Dugan.

He added that deflation may prove the greater risk in coming months. "It's very difficult to get the deflation psychology out of the human brain once prices start falling. People stop buying things because they think it will be cheaper if they wait."

Merrill expects global inflation to hover near zero, with rates of minus 1pc in the industrial economies. This means that yields on AAA sovereign bonds now at 3pc will offer a real return of 4pc a year, which is stellar in this grim climate. "Don't start selling your government bonds," Mr Dugan said, dismissing talk of a bond bubble as misguided. (Government bonds are a safe haven for now on the short tend of the curve, but to say there is no bubble on the long end is remarkable. The only vairable is how long before that bubble bursts. The real question is whether the risk is worth the return for you, and that will vary. It seems insane to hold the long end when you can take the shorter end. - Jesse)

He warned that the eurozone was likely to come under strain this year as slump deepens. "There is going to be friction as governments in the south start talking politically about coming out of the euro.

I don't see the tensions in Greece as a one-off. It is a sign of social strain in countries that have lost competitiveness." (Wait until it really gets rolling in the US, UK, Russia and China. Then there will be headlines - Jesse)

Daily Telegraph

Gold rush erupts over financial crisis

By Nick Gardner

January 10, 2009 12:01am

THE global financial crisis has sparked a new gold rush.

Worried investors seeking a safe home for their money are ploughing billions of dollars into the precious metal in a bid to preserve their wealth.

Demand has now reached such unprecedented levels that the Perth Mint, Australia's biggest wholesaler of gold coins and bars, has been forced to ration its sales.

Perth Mint's bullion sales rose 194 per cent in the December quarter compared with the corresponding period in 2007, while silver bullion sales were up 140 per cent.

The mint has suspended sales of all gold bars and all bullion coins - except its 1oz "Kangaroo" gold bullion coin.

On Monday, after a three-month suspension, it will expand its range of bullion coins for sale but the restrictions remain in place for minted gold bullion bars so the mint can sell some gold to as many customers as possible.

"We are working three shifts a day, six days a week, and still can't keep up with demand," Perth Mint CEO Ed Harbuz said. "I've never known anything like this in the precious metals market.

"We would be working Sundays too but we are having difficulty getting enough staff."

Non-minted gold in the form of cast bars produced by Perth Mint's local refinery can still be bought, although customers who want the bigger bars often have to wait several weeks.

One customer recently bought $500,000 worth of bullion and wanted it delivered so he could hold it personally.

"For very big orders we normally keep the gold in our depository for security reasons," Mr Harbuz said.

"Orders of $10 million or more are not unusual. Often the orders are much larger if we are dealing with pension funds or institutional investors."

[flying]

and from Louis Carabini, in his new book, Inclined to Liberty (read a review of the book here...)

"No government today issues money that is redeemable for anything of value.

no need to read a book to learn about a fact which is well known since decades if "redeemable" refers to a government. but with money one was and is still (despite ups and downs and a few exceptions) able to buy any available goods and services (provided on has the money).

Yes I just thought it was interesting.

Of course what he was really referring to was in the past paper money was nothing more than a IOU. You could take it to any bank & redeem it for gold or silver.

That option no longer exists so what he is saying is in fact true.

You can no longer redeem it.

You can barter with it & others for goods & services as you said

But of course you are right too as I bought gold with FRN's didn't I

So as long as everyone continues to have faith in this paper things will continue along. But........

Redeemable......

1 a: to buy back : repurchase b: to get or win back

2: to free from what distresses or harms: as a: to free from captivity by payment of ransom b: to extricate from or help to overcome something detrimental c: to release from blame or debt : clear d: to free from the consequences of sin

3: to change for the better : reform

4: repair , restore

5 a: to free from a lien by payment of an amount secured thereby b (1): to remove the obligation of by payment <the United States Treasury redeems savings bonds on demand> (2): to exchange for something of value <redeem trading stamps> c: to make good : fulfill

6 a: to atone for : expiate <redeem an error> b (1): to offset the bad effect of (2): to make worthwhile : retrieve

Edited January 10, 2009 by flying

[Naam]

Merrill expects global inflation to hover near zero, with rates of minus 1pc in the industrial economies. This means that yields on AAA sovereign bonds now at 3pc will offer a real return of 4pc a year, which is stellar in this grim climate.

in future i will quote Merrill whenever my wife complains that prices for whatever product she buys have gone up and point out that global inflation is minus 1%. most probably i will suggest that she buys steaks in Argentina, vegetables in a rural area near Nakhon Nowhere, rice in Bangla Desh, dog meat in Viet Nam, lamb chops and kiwis in New Zealand, wine in Chile, whisky and cigarettes in the duty free shop of Dubai airport and fuels up the cars in Iran or Venezuela.

thank you for the good news Merrill!

[Naam]

[China's gonna save its own skin - they ain't buying T-Bonds like they used ta. No, they're buying gold. They're allowing trading partners in Asia to settle trades in yuan instead of dollars...

...and Rumpelstilzchen (original spelling) announced his upcoming wedding with Little Red Riding Hood in Las Vegas which will be covered live by Oprah Winfrey

[Naam]

[China's gonna save its own skin - they ain't buying T-Bonds like they used ta. No, they're buying gold. They're allowing trading partners in Asia to settle trades in yuan instead of dollars...

...and Rumpelstilzchen (original spelling) announced his upcoming wedding with Little Red Riding Hood in Las Vegas which will be covered live by Oprah Winfrey

China has bought in the first 10 months of 2008 more UST than in any year before and that applies to USD too. in fact the volume of both is not going up linear but nearly exponentially as the figures prove:

http://www.treas.gov/tic/mfh.txt

China's gold reserves are miniscule compared to the total reserves:

http://www.imf.org/external/np/sta/ir/hkg/eng/curhkg.htm#I

next fairy tale please

[flying]

China has bought in the first 10 months of 2008 more UST than in any year before and that applies to USD too. in fact the volume of both is not going up linear but nearly exponentially as the figures prove:

First one to a funeral gets the most donuts yet again

You know your my favorite paper bug right? Well you & Vegas Vic

China Losing Taste for Debt From U.S.

Published: January 7, 2009

http://www.nytimes.com/2009/01/08/business.../08yuan.html?em

Edited January 10, 2009 by flying

[Khun Jean]

Government bonds are also not what they used to be:

German bond sale's fate signal trouble ahead