Gold Up In 2008 , Where To In 2009 ?

[Khun Jean]

Anyone who invested money in the last 20 years made a bundle, it was a big and long bull period. The ones that still had there money invested in stocks 3-4 months ago are the ones who lost between 40-100%.

Even now (today) is see bank stocks rising 25% and more, only to go down the next by 15% wiping out any gains. Again people on the media are calling a 'bottom'.

The one thing that explains most that is happening is the 'exponential' function off almost all what we use. It is money, oil, food, etc...

For a lot of these it is 1 minute before 12. Population growth is the biggest cause. and especially in the western world, as all those 'new' people will use a lot of oil and food. A child born in Africa or India, China does not burden the planet as much.

The problem with anything 'exponential' is that you don't see it coming unless you use a calculator and the calculator does not have enough zeros. 2 minutes before 12, everything looks perfectly normal. But a modest 3% growth will make everything impossible in a few years. If you read 'politicians' saying 'our coal reserves are enough for a thousand years', start calculating and with again a modest growth of 3% it is depleted in 30-40 years. In some areas we are having a doubling period of 7-10 years! Meaning in the next 7-10 years we need twice as much as in all the history before. Obviously that is impossible.

Now many thing are 'exploding' up, the last few corrections in the market were manipulated to not go all the way, building more pressure for the next correction. Same as is happening now. If we don't let the market correct itself we're building more pressure for the next correction. Letting this correction unmanipulated might cause it to do damage but a repairable one. If the manipulation stops this correction the next one will be devastating. Problem is only to recognize which one we are in now. The repairable one, in which i believe, or the devastating one, for which i prepare just in case i gambled wrong.

Gold being 910 dollar now suggests more people are going for a safety net, just in case.

[Khun Jean]

I am curious what people using TA would make of the following graphs.

All of them are measured in gold instead of dollars.

http://pricedingold.com/crude-oil/

http://pricedingold.com/us-dollar/

http://pricedingold.com/us-gdp/

http://pricedingold.com/dow-jones-industrials/

[Nouf]

I am curious what people using TA would make of the following graphs.

All of them are measured in gold instead of dollars.

http://pricedingold.com/crude-oil/

http://pricedingold.com/us-dollar/

http://pricedingold.com/us-gdp/

http://pricedingold.com/dow-jones-industrials/

Those charts are an adaptation of Robert Prechters work, he was the 1st as far as i can remember to show many things priced in the ounces of gold

what you had is a Bull stock market run to the 1999 top, as every assett moves higher, but becasue of the credit expansion (Greenspan dropping rates, and causing the housing boom) the actual nominal Stockmarket went higher but becasue of this loss of purchasing power of the US$ from 1999 the Real Stock market prices in "real money" gold was already on its way down from 1999 and continued lower as the nominal stock market went higher

This what others can not understand, all they see is the Nominal Stockmarket, prices in dollars, but at the time the US$ has been on a slide from that period ever since Greenspan reduced rates, so what we are now seeing is the Nominal Stockmarket aligning with the "real" stockmarket priced in onces of gold.

so when these both align and dividends come into an extreme for P/E ratios, then we will eventually see a bottom as we get a final wash out, probaly around 400-500 on the S&P 500

Further to the above comments, and a earlier statement i made in this thread

Buy and hold is not an option anymore, as found out via many who bought into the US$ collapse theis, and has proved otherwise wrong, so far the US$ to the utter disappointment of many is still the king of fiat money (of course things change) but price action dont lie ( i will adapt as and when as per my previous comments)

many did not understand the worldwide debt thats still in the system thats still needed to be paid down and priced in US$ and the fact the Fed can not print fast enough, and they are not actually printing, they are just replacing lost debt, Worldwide there is still a massive amount of $ denominated debt to still be paid down

I explained earlier in this thread on the importance of stops and accepting when your wrong

I still say "being early is still wrong" and below is a perfect example of such a case.

being right in the trend but wrong in your postion is still wrong if it wipes you out

Peter schiff has called some great calls, but as i noted and have many, his thesis on the US$ collapse was a non runner, the opposite of what happened

again, he may be right in say 5 years how about 20 years? (but what he failed to do is adapt to the markets) instead of sticking to a hard and fast idea that the US is going to collapse, we should of had was stops on those profits of hos clients posrtfolios and either stayed in cash and limited losses fr bargain hunting later

To use an excuse of high dividends is poor as they can get slashed and forward earnings get marked down

He never saw this when price action told you, so is a poor excuse, try telling that to the holders that have been decimated in their portfolios

well if you read this commentry from Mike shedlock, he gives the exact same reasons why you need stops.

http://globaleconomicanalysis.blogspot.com/

Euro-pacific capital clients have been decimated in the stock market plunge(they were invested outside of the US) using the "decoupling" thesis" and the Hyper-inflation arguments

its is true at some sign point Inflation may arise in the future, but for now you have to trade in the market conditons and not try to pre-empt a possiblity, as Euro-pacific clients have now found out, if you read this guys portfolio, you will see he his 60% down and i know many are down this amount as well

So as i have stayed in cash i have the abilty to cheery pick still, these clients have been wiped out at the loss of destuction to their wealth, and this is what happens in deflation, they simply never adapted to market conditions

Being right in your thesis means "nothing" if you dont get the goods/profit from the outcome, now they pray their thesis comes right, i on the other hand can wait untill i see the evidence then i can join the party, but for know i stay in cash, and wait it out

you may or may not agree with the impeding US$ dollar collapse but price action does not lie

having a thesis is one thing but getting your timing right is another

Gold is at a crucial point and once again needs a break out here, back above $900 forcefully and push on through $930, any pull back really needs to stay above $870, or we may see weakness, but its very clear people are running to gold as a safe haven,

we are back the trading range once more, same as the DX

Edited January 27, 2009 by Nouf

[flying]

the fact the Fed can not print fast enough, and they are not actually printing, they are just replacing lost debt,

Some would disagree

I saw this at

http://www.zealllc.com/2009/biginf.htm

M0, the narrowest measure, is usually called the monetary base. It is simply currency (coins and paper dollars) in circulation and in bank vaults plus reserves commercial banks have on deposit with the Fed. These reserves are critical because they are the base from which all other forms of money such as checking accounts are created. The monetary base directly controls the ultimate size of fractional-reserve banking.

Until late 2008, I hadn’t looked at M0 for years. Why? Even the Fed isn’t foolish enough to change it too much. For decades it has traveled in a tight range between about 2% and 10% annual growth, with a pre-panic average since 1960 of 6.0%. M0 growth less real economic growth is one of the most basic measures of inflation. If M0 grows at 6% and the underlying economy at 3%, then there is relatively 3% more money available to spend on goods and services. This is inflation.

I was reading a book last month that discussed the monetary base’s direct impact on inflation. So I decided to take a look at M0 again. I could not believe what the data showed, I almost fell out of my chair it was so mind-blowing. Per the Fed’s own data, we have just witnessed the most inflationary event in modern history. This crazy monetary base chart will make even the most rabid deflationist very uneasy.

M0 has gone parabolic! Year-over-year in December 2008, it was up 98.9%! This is so shocking it defies belief. In late September as the stock panic started, it had grown by 9.9% over the past year. By October, this rate ballooned to an all-time high of 36.7%. In November, it rocketed again to 73.0%. And in December, it surged up to the staggering 98.9% you can see above. Ben Bernanke’s Fed has doubled the monetary base in a single year! Holy cow.

Between January 1960 and August 2008, the 48-year pre-panic average M0 growth rate was 6.0% and the range was pretty tight as you can see above. 10% growth rates were rare and often preceded sharp gains in commodities prices (mid-1970s, late 1970s). The Y2k scare led to the highest monetary-base growth rate ever to that point, 15.8% as the Fed prepared for an expected run on currency. Yet that is now dwarfed by the unprecedented parabolic explosion in M0 seen during late 2008’s stock panic.

[Nouf]

the fact the Fed can not print fast enough, and they are not actually printing, they are just replacing lost debt,

Some would disagree

I saw this at

http://www.zealllc.com/2009/biginf.htm

Hi,

Yes i have read that article and if you look at the link above you will see Mike Shedlock, actually mentions and replys to that article as well

I think Adam Hamilton is wrong, for the reasons mentioned prior

There is still simply too much debt in the system, its one thing to print money its another thing to get that money in the system

look around you, the consumer is not spending they are hoarding to pay down debt, and the banks are not lending, un-employment is increasing, house values are still dropping, commodities are still going down(presently looking at some of the softs,grains, appear to be corrective bounces in a downtrend)

The article from Adam hamilton is the same argument of all hyper-inflationists use, the expansion of money, but the expansion of money is nothing, if its not being spent, the banks are not lending, every month, more write downs after another etc

There is still too much US$ denominated debt to be paid down, other than foregiving that debt, ie we simple write down the debt which have to happen anyhow, only then will you see a possible loss of power

What many still fail to see is that all countries and central banks are doing this, people seemed to be occupied on the US$, (why do you think gold has reached new highs against many other cuurencies) yet the UK is doing it, the swiss are doing it, Germany are doing it, the french, virtually everyone is printing money, so it cancels each other out(as there is no currency that i know yet that is either going to print money(bonds) or has already started

There is alot of countries in severe trouble, China, Japan, Korea, Germany, portugal, ireland, spain etc

this is why you are seeing the FX market traders going from currency tocurrency, as the more bad news come out traders are dumping and moving from one to another, so as long as the world still accepts fiat currencies then i see no collapse of the US$ at some stage risk will eventually get priced in to every currency as we continue to get out of this mess

the UK and the Swiss Bank, US$ liabilities are in worst state than the US, if anything they are 1st to crack Imo, alot of the world has very severe problems, and i fail to see where growth will come from

The leverage on the European Banks was horrfic, if anything you see a European nation go to the wall before you see the US go down, my guess would be Ireland or Spain 1st

Most of the UK Banking system liabilites are foreign loans in Euro/US$, they simply dont have the option of defaulting on that debt

the chances of the US going down and defaulting are 0.01% IMO (but hey i could be wrong)

the ramifications of a major country like the UK and the Swiss failing will be a major crises,world wide, i just dont see it, in fact i would go as far to say that the ECB and FED will back any major country because the fall out will be worldwide if any of these countries were to fail, (the UK would swap GBP, into Euro`s or US$ this i suspect would happen with the UK if needed)

There is a shortage of US$`s, because of the outstanding debt that is still to be written down, and that leads to problems ahead.

So simply creating more money does not create Hyper-inflation, its needs to become part of the system, and thats not happening

Further more all the FED has done is swapped treasuries for that debt, and taken it on its balance sheet, granted some of it is poor debt and will be wrote down, but some of those swaps will have some value in the future, when the economy gets back on its feet,(thats what the FED is banking on) so to say that the FED has printed money is incorrect, as they have swapped that for commerical paper

now if the FED starts buying long term treasuries as Bernanke has suggested, then thats a different problem, as he messing with market forces, as market prices in risk, by higher rates,

Whats Bernanke says and does is two different things, you can say one thing but never actually do it, if the US goes down that route of buying its own debt thats a whole different can of worms he is opening with a potential for capital flight and you dont want to go down that road, I am sure Bernanke knows this (the UK was apparantly 3 hours away from this exact situation last year)

The same appilies to the UK, start buying your own debt is a No No

This is why they are trying all these games, as they credited this bubble and will simply not let it runs its course,

Imo as news comes out worldwide, we are moving from one speculation of a meltdown of a country to another, presently its the UK, next it will be a European country etc, then it will be the Chinese or a Asian country as Currency speculators are having a field day

Imo

Edited January 27, 2009 by Nouf

[boggzzy]

Gold is inverse to the strength of the USD and the USD is inverse to the strength of the stockmarket. If the stockmarket tanks in Q1, Q2 due to

falling earnings and lets say the S & P 500 goes to around 560 the panic will lead to a lot of USD being drawn back to the US which will lead to a very strong USD, and thereby weakness in Gold. This flush out in the stockmarket could mark the bottom and the following bull market would mean a drop in the dollar and renewed strength in gold (the scenario for Q3-Q4).

i am no expert but the price of gold is not linked to anything it is pure supply and demand. there is limited amounts of it with falling production throught the world when ecconomies are down people turn to the yellow stuff. advancing economies of the biggest users of Gold (india/china) leads to shortages of supply. the Experts Had predicted $1500 an ounce that may change with the world in decline

[Naam]

one of my loser banks has a negative view on gold. perhaps the time has come for me to buy?

Gold to re-couple partially with EURUSD

At a glance

Gold remains expensive, in our view.

An uptick in risk perception, triggered by expectations of further writedowns

in the banking sector, pushed gold prices up.

With the exception of higher risk aversion, most indicators speak in

favor of a lower gold price in the short run.

We favor buying gold at around USD 700 and not at the present levels.

Momentum: We think gold should stay in a consolidation phase from the

highs at around USD 1,000. It should also find it hard to trade sustainably

above USD 900. However, uncertainty in financial markets (soaring VIX

Index) has resurfaced. The outlook for another round of write-downs in the

banking sector and more central bank liquidity increased risk perception.

This could delay gold prices from reaching our short-term target at USD

700.

Fundamentals: The near- and long-term price outlook for gold is quite

contrarian. A stronger US dollar in the short run, the lack of inflationary

pressure and asset prices that have already melted down give little reason

for gold to appreciate sustainably. In relative terms, versus equities or other

assets, gold has reached record highs. With no supply disruption expected

on the mining side and seasonally weak demand in the months ahead, we

favor buying gold at lower levels.

However, from a long-term stance, the US dollar should weaken again.

Also, the risk for higher inflation is substantial if central banks do not

withdraw all the excess liquidity provided. Hence, we expect gold to recover

from USD 700 and target levels around USD 900.

Edited January 28, 2009 by Naam

[flying]

one of my loser banks has a negative view on gold. perhaps the time has come for me to buy?

Boy Jim Cramer did a show that I didn't see but read about. He was slamming gold & gold mining too.....So.......I would say yes the time has definitely come to buy if Jim Cramer says no

Edited January 28, 2009 by flying

[sibeymai]

Gold is only as valuable as there is cash to buy it. Since the world is headed for deflation anyone who thinks gold is a haven for maintaining its value should consider buying a bridge in New York.

In deflation cash is the most valuable asset. When the economy picks up again gold will be dumped so holders will be a second time loser.

Now is the time time to buy hard assets like property and resources.

[flying]

Gold is only as valuable as there is cash to buy it. Since the world is headed for deflation anyone who thinks gold is a haven for maintaining its value should consider buying a bridge in New York.

In deflation cash is the most valuable asset. When the economy picks up again gold will be dumped so holders will be a second time loser.

Now is the time time to buy hard assets like property and resources.

Your saying if there is no cash/fiat currency Gold has no value?

That is very odd to me.

Your thinking we are headed to deflation? Or disinflation?

You would buy hard assets like land now when your own view is prices will plunge in deflation?

[Khun Jean]

Which deflation? You mean discounted prices?

[flying]

Which deflation? You mean discounted prices?

Yes I do not see deflation at all

I was just saying to sibeymai's

claim of deflation

[Naam]

Which deflation? You mean discounted prices?

Yes I do not see deflation at all I was just saying to sibeymai's claim of deflation

deflation is presently limited to immobile property. with a global recession at the horizon there might be deflation in future. but i wouldn't hold my breath, especially not in Thailand where it's the done thing to increase prices if nobody buys at a lower price

[Naam]

Reminds me of a quote that I had done up for a stainless steel kitchen. The dimensions were had to understand, and they wanted to charge 16K for shipping and install. I asked them to redo the quote, minus the 16K and it turned out to be MORE than the first quote!! Makes one wonder sometimes.

same, same here! when i built i got a quote for the granite tops in the kitchen. the linear meters were listed at 14m but i asked to quote for the actual 11.5m. quote was revised and HIGHER

[sibeymai]

Gold is only as valuable as there is cash to buy it. Since the world is headed for deflation anyone who thinks gold is a haven for maintaining its value should consider buying a bridge in New York.

In deflation cash is the most valuable asset. When the economy picks up again gold will be dumped so holders will be a second time loser.

Now is the time time to buy hard assets like property and resources.

Your saying if there is no cash/fiat currency Gold has no value?

That is very odd to me.

Your thinking we are headed to deflation? Or disinflation?

You would buy hard assets like land now when your own view is prices will plunge in deflation?

Think of it this way...

As a means of exchange, when money becomes scarcer prices decrease as there is generally an excess of supply (goods) which need to be bought with the same or less money. Supply adjusts to decreasing demand (money) but there is a lag time. Even though supply is usually also decreasing the lag time tends to maintain a level of over supply which has the effect of keeping downward pressure on prices over an extended time span.

Selling X amount of goods requires Y amount of money. When Y decreases faster than X the price of X decreases. When there is not enough X (money) to buy Y (goods) the price of Y declines further.

Technically, in pure money terms, if there is no money to buy gold then gold has no value. However, by the time that money (cash) has become so scarce another means of exchange usually emerges such as barter. The value of gold in a barter economy is likely to be different than its value when money was the primary means of exchange. Since gold is not usually in a form easily traded it's value declines due to the difficulties of using it as the means of exchange...how easily could you buy food with gold and get change ?

I still believe cash is the best to hold right now simply because the prices of assets like gold, land and resources have declined and I expect will continue to do so until there is some economic growth, probably a few years away yet. Wouldn't rush into buying anything just yet but expect that property and resources would be some of the first indicators that the economy has turned the corner. You can still loose on these in the short term if the timing is wrong though.

[flying]

Technically, in pure money terms, if there is no money to buy gold then gold has no value. However, by the time that money (cash) has become so scarce another means of exchange usually emerges such as barter. The value of gold in a barter economy is likely to be different than its value when money was the primary means of exchange. Since gold is not usually in a form easily traded it's value declines due to the difficulties of using it as the means of exchange...how easily could you buy food with gold and get change ?

I still believe cash is the best to hold right now simply because the prices of assets like gold, land and resources have declined and I expect will continue to do so until there is some economic growth, probably a few years away yet. Wouldn't rush into buying anything just yet but expect that property and resources would be some of the first indicators that the economy has turned the corner. You can still loose on these in the short term if the timing is wrong though.

I see what your saying but I see we think in different terms.

For you money is gold & is also currency

You are supposing that all currency would disappear at the same time,

Then there is no currency to buy gold.

First off I have always said I do not see any mad max type scenarios & bought gold as a safe haven in turbulent times that lacked a better ( for me ) parking spot for currency.

But on to what you said...........

If there is no currency to buy gold then gold has no value?

I would remind you that gold existed long before currency & people bought gold

with the same thing then that they would use in your scenario.

That being labor, goods, services.

Gold in barter would be exactly the same as currency. Initially I would imagine in the type of scenario your describing yes goods would be the preferred trading .....AT FIRST

That of course would be due to simple facts...You cannot eat gold & you cannot shoot it for protection.

But after things settled a bit Gold & Silver would again be used as it always has.

When folks want to trade they may not need the goods the trader has to offer so a medium of exchange is again needed. I strongly disagree with your argument gold is not easily exchanged via the example you gave. All the detractors use that one & of course your not buying a bag of food for a 1oz coin. Gold & silver comes in many shapes & sizes.

If you read about an actual collapse you see he does in fact recommend smaller gold pieces like rings etc.

http://www.powerswitch.org.uk/portal/index...79&Itemid=2

But lets put the whole Mad Max scene aside for now & get back to what I think is the crux of it.......

You said

I still believe cash is the best to hold right now simply because the prices of assets like gold, land and resources have declined and I expect will continue to do so until there is some economic growth

I disagree & have held gold since the 730 range per ounce so mine has not declined. Land & resources....Yes declined I agree.

Will this pattern continue till there is some economic growth? I think probably so too but we differ on the Gold. I think it is rising & I still believe in spite of the USD's

behavior it will rise more. I may be right & I may be wrong

Edited January 29, 2009 by flying

[sibeymai]

Flying, since you bought gold some time ago i agree you haven't lost value, yet. I'm saying that I wouldn't buy anything, gold included, right now. I do think gold will increase in the short term and that's fine for speculators. But in terms of somewhere to park your money for a longer term I think gold (and most if not all other assets) will go lower than today over the next few years for the reasons I've already stated. Probably won't recover until some of the smart guys figure the economy's fundamentals are getting out of balance again (asset bubble, credit expansion) then they will start gradually increasing their gold holdings which will start gold on an upward trend, much like happened in the last few years. But the world's economy must have returned to health long before then for the asset bubble and credit espansion to build up. There's been several of the "smart guys" predicting 5 years ago what has now happened. They suggested getting cashed up back then, wait for prices to tumble then pick up the bargains. Seems logical to me.

[LivinLOS]

I still believe cash is the best to hold right now simply because the prices of assets like gold, land and resources have declined and I expect will continue to do so until there is some economic growth, probably a few years away yet.

Really ??

You looked at it in GBP, EUR, AUD, etc lately ??

[lannarebirth]

I still believe cash is the best to hold right now simply because the prices of assets like gold, land and resources have declined and I expect will continue to do so until there is some economic growth, probably a few years away yet.

Really ??

You looked at it in GBP, EUR, AUD, etc lately ??

Cash means $USD. Everything else is a seculative trade versus the $USD.

[flying]

"The history of fiat money is little more than a register of monetary follies and inflations. Our present age merely affords another entry in this dismal register."

Hans F. Sennholz

"We need only take our heads out of the sand to see clearly that interventionism not only has failed to provide the promised something-for-nothing, but has led to all sorts of undesirable consequences. Indeed, many are just beginning to realize that we are moving towards disaster even though we have been on a wrong heading for decades."

Leonard Read

"Deficit spending is simply a scheme for the 'hidden' confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights."

Alan Greenspan

[Naam]

Lo and behold! And the LORD commanded his followers to slay all Canaanites and Philistines, take their women folks as slaves, the ugly ones to work the occupied land, the beautiful ones to lust after, destroy all fiat money and melt down the golden calf, its remnants to be exclusively used as payment for goods, services, Chang and bar fines.

[flying]

Lo and behold!

Sorry didn't mean to sound religious

I saw those quotes & thought they were good.

Here is a Religious one

Hey Gold & Silver are having a good day! Although it is early here.

"Gold is worshipped in all climates, without a single temple, and by all classes, without a single hypocrite."

Caleb C. Colton

Edited January 30, 2009 by flying

[VegasVic]

Flying, since you bought gold some time ago i agree you haven't lost value, yet. I'm saying that I wouldn't buy anything, gold included, right now. I do think gold will increase in the short term and that's fine for speculators. But in terms of somewhere to park your money for a longer term I think gold (and most if not all other assets) will go lower than today over the next few years for the reasons I've already stated. Probably won't recover until some of the smart guys figure the economy's fundamentals are getting out of balance again (asset bubble, credit expansion) then they will start gradually increasing their gold holdings which will start gold on an upward trend, much like happened in the last few years. But the world's economy must have returned to health long before then for the asset bubble and credit espansion to build up. There's been several of the "smart guys" predicting 5 years ago what has now happened. They suggested getting cashed up back then, wait for prices to tumble then pick up the bargains. Seems logical to me.

Sibeymai, I think you have a good take on the situation in the gold markets. As a trader I covered my short and got back in a few of the miners late last week when gold made an about face from its recent test of $810. There are a myriad of reasons for the bounce back, but it mostly seems to be a European phenomena this time around. Europeans are seeing the Euro and Pound dropping vs. the Dollar and prospects for further erosion of both of those currencies so they are parking their money into gold for the short term! As you astutely pointed out it really doesn't matter where gold goes to near term, because when those currencies bottom and stabilize and the good bank bad bank programs get instituted and stabilize the wordlwide banking system, then the money that is temporarily parked in gold comes out. As a trader I enjoy these swings up or down, but as things stabilize and most people pull their money out of gold then the POG will fall. The big mistake that flying and the other goldbugs here make is that they buy into the false premise that hyperinflation is bound to happen sometime soon and gold will shoot to some astronomical level when this occurs so they think that gold is a great long term investment. Of course given the current economic situation worldwide with deflation as a very real possibility in many countries, and the prospects that this could be with us for many years and not many months, hyperinflation is just not in the cards. These goldbugs just cannot grasp the fundementals of the velocity of money, they see money being printed as the U.S. and European nations bailout their banking system, but they just can't seem to grasp how undercapitalized these financial institutions really are! You can print money from now until the cows come home, but if it never circulates there will be no inflation!!! Times like these where panic reigns supreme are a gift for traders like myself, because people will park their money in gold for a while as the panic heightens, then when things appear to stabilize a bit more and the markets start to rise they sell out of gold and chase the market

[flying]

The big mistake that flying and the other goldbugs here make is that they buy into the false premise that hyperinflation is bound to happen sometime soon and gold will shoot to some astronomical level when this occurs so they think that gold is a great long term investment.

Vic I am hurt........... I am starting to think you never read any of my posts at all.

If you did you would see I have said many times I see no mad max scenarios nor do I see hyperinflation or depression. Can it occur at some future time like 2010-2012? Who knows.

But as I have said many many times I bought 20% of my liquidity as a possible safe haven in these times.

But the more I read posts like yours & hear Jim Cramer rant etc I tend to think I may go 50%

On a side note tons of $$ hitting the markets & after hours too.

So perhaps you will enjoy more swings & gold may take a plunge for a little while.

Knowing this or seeing it do I sell? NO...Why? Because like I said unlike you I am not trading.

There is physical gold & there is paper gold (haha) There is no sure thing I would be able to buy it (here)when I want it.

Am very glad to hear your doing so well though & keep up the good work

[Nouf]

Flying, since you bought gold some time ago i agree you haven't lost value, yet. I'm saying that I wouldn't buy anything, gold included, right now. I do think gold will increase in the short term and that's fine for speculators. But in terms of somewhere to park your money for a longer term I think gold (and most if not all other assets) will go lower than today over the next few years for the reasons I've already stated. Probably won't recover until some of the smart guys figure the economy's fundamentals are getting out of balance again (asset bubble, credit expansion) then they will start gradually increasing their gold holdings which will start gold on an upward trend, much like happened in the last few years. But the world's economy must have returned to health long before then for the asset bubble and credit espansion to build up. There's been several of the "smart guys" predicting 5 years ago what has now happened. They suggested getting cashed up back then, wait for prices to tumble then pick up the bargains. Seems logical to me.

Sibeymai, I think you have a good take on the situation in the gold markets. As a trader I covered my short and got back in a few of the miners late last week when gold made an about face from its recent test of $810. There are a myriad of reasons for the bounce back, but it mostly seems to be a European phenomena this time around. Europeans are seeing the Euro and Pound dropping vs. the Dollar and prospects for further erosion of both of those currencies so they are parking their money into gold for the short term! As you astutely pointed out it really doesn't matter where gold goes to near term, because when those currencies bottom and stabilize and the good bank bad bank programs get instituted and stabilize the wordlwide banking system, then the money that is temporarily parked in gold comes out. As a trader I enjoy these swings up or down, but as things stabilize and most people pull their money out of gold then the POG will fall. The big mistake that flying and the other goldbugs here make is that they buy into the false premise that hyperinflation is bound to happen sometime soon and gold will shoot to some astronomical level when this occurs so they think that gold is a great long term investment. Of course given the current economic situation worldwide with deflation as a very real possibility in many countries, and the prospects that this could be with us for many years and not many months, hyperinflation is just not in the cards. These goldbugs just cannot grasp the fundementals of the velocity of money, they see money being printed as the U.S. and European nations bailout their banking system, but they just can't seem to grasp how undercapitalized these financial institutions really are! You can print money from now until the cows come home, but if it never circulates there will be no inflation!!! Times like these where panic reigns supreme are a gift for traders like myself, because people will park their money in gold for a while as the panic heightens, then when things appear to stabilize a bit more and the markets start to rise they sell out of gold and chase the market

That`s not a bad entry if your short up here, it does look toppy, i had a price target zone of $922-$936, also $929 is a measured target

where Y = 0.618 of W.

it still does look corrective so i am watching and waiting but would most likely turn neutral on gold if we exceeded $936, however the RSI is coming into very overbought conditions so a top should be here soon if not in already for at least a correction

There is also a measured move which Y = W at 1011.1

However the spread between the large speculators(who are long) and the commercials(who are short) is at its largest that has been seen for a while so its very likely a top is near

so i would rather get neutral or stay flat than be chasing a move higher in gold, the evidence suggests a move lower is near, now we see if the boyz let the "bag holders" drop as they usually do, the mood on the street is very bullish as is the sentiment

funny how i wrote last week in one of the threads about the GBP, about the price of sterling as we approached $135 and that turning points usually occurr whn the news is at its worst hhhmmmmmm as fear was evident in the markets, when sentiment was ripe for a turn as the world got UBER bearish on cable, looks like the "last to party" got squeezed good and proper last week

The evidence suggests the $ still looks Bullish,and higher prices are likely higher, i find it very strange how Gold is moving up with the $, i suspect its a temporary dis-location

the other clue is the $HUI, it too looks toppy as we had a lower high against the gold putting in a new high the divergence against gold stocks is noticeable

charts enclosed

Hence the sentiment on Gold is very Bullish at the moment, i may decide to join you on that trade just waiting for a little more evidence that a tradeable top is in

If all goes to plan, we maybe seeing that $650 price after all of course(still speculative) we would need to see the break of $800 1st

Edited January 31, 2009 by Nouf

[gregb]

The big mistake that flying and the other goldbugs here make is that they buy into the false premise that hyperinflation is bound to happen sometime soon and gold will shoot to some astronomical level when this occurs so they think that gold is a great long term investment.

I will just chime in here so that someone reading this thread does not come away with an improper perspective. The reasons hyperinflation will occur have nothing to do with economics as economists study it. Velocity of money or not.

The reason is fundamental and geological. The economy is based on oil. Oil is a rapidly depleting resource. There are no viable substitutes for oil. Belief that anything can replace it is an illusion. When oil goes, so does our entire way of life. The global economy as it is practiced today will crash completely, and as that happens, confidence will be lost across the entire spectrum of countries and industries. Fiat currencies which rely on economic growth and fractional reserve banking will be recognized an unstable, and only now, after all of this, does the velocity of money come into play. During the final days of a currency, when all confidence has been lost due to geological factors outside of anyone's control, will people try and get rid of their paper money for anything tangible.

That is hyperinflation waiting to happen. And that is the physical and geological reality we are facing in the near future. You already saw round 1 last year. Round 2 of oil spikes is coming soon to a gas pump near you, and this time will probably include rationing. This will happen as soon as any type of recovery looks imminent and the scarcity premium is reestablished on oil. After that, they'll be another pass at economic consolidation like we're seeing now, and then round 3 is probably resource wars and the end of normal economic function.

The only question is the definition of "near", and the exact mechanism by which hyperinflation will manifest itself. Studying economics or market theories is not going to put more oil in the ground, nor make any of the current alternatives a viable replacement for it. That is the reason for betting on gold. Don't waste your time studying economics to understand why gold will be the preferred currency in the future, study geology and physics. You'll get alot further. Unless and until I see a viable replacement for oil, I will continue to buy gold, secure in the knowledge that one day I will know it was the best decision I ever made.

When you own a business that depends on a critical resource, and that critical resource is going to become unavailable, your business is going to fail no matter how much you wish it wouldn't, and your stock value will crash. In this case, the global economy is the business, and it requires oil to run. When that resource become scarce and unavailable, stock in the global economy (fiat currency) will become worthless. There isn't a politically acceptable way out of this. This is the future of the world, the same as it has been for countless other failed civilizations. My advice: bet on gold. The loss of confidence is coming sooner than any of us would like to believe.

This isn't doom and gloom, it's just proper perspective.

[12DrinkMore]

http://www.bahtsold.com/forum/viewtopic.php?t=3716

COMMODITIES

Selling spree drains cash at gold shops

Bangkok Post Jan 29, 2009

A selling spree in the wake of soaring gold prices has led to a liquidity squeeze for some gold operators.

"Contingency funds will be needed if the gold prices continue to rise and people continue to sell," said Jitti Tangsithpakdi, chairman of the Gold Traders Association.

He acknowledged that the association had asked for assistance from the Bank of Thailand to arrange funding lines, a request rejected on legal grounds.

Gold investors flocked to gold shops on Yaowarat Road in Bangkok's Chinatown yesterday, after the shops unexpectedly closed for two days during the Chinese New Year.

Trade yesterday was estimated to be as high as 10 billion baht, compared with six to seven billion on Saturday and 200 to 300 million on average during normal market conditions.

Mr Jitti said gold bars accounted for more than 95% of the trade yesterday, compared with only 10% in the past.

Gold was quoted at nearly 14,450 baht for one baht-weight (15.16 grammes) yesterday, compared with 14,600 on Saturday and 13,650 eight days ago.

Mr Jitti admitted the selling spree had led certain gold shops, especially in Yaowarat, to settle in cheques rather than cash to conserve liquidity. "[shops] are unlikely to have enough cash flow if [the selling spree] continues for more than two or three more days," he said.

He said shops were likely to suspend trading again if prices continue rising and they no longer have cash on hand.

"The gold trading business requires massive cash, and it is not as easy as one would expect for us to secure more loans from banks," he said.

Kritcharat Hirunyasiri, a deputy secretary of the Gold Traders Association, said that normally it would take a month for shop operators to get approval from banks for additional credit lines.

He said liquidity was expected to ease after large gold shops that operate wholesale and exports resumed trading today.

Normally, retail gold outlets supply gold to large-scale wholesalers and exporters. Trading suspensions of the two channels during the New Year festival cut the circuit of trading for small-scale outlets, leading to tight liquidity.

Bank of Thailand governor Tarisa Watanagase said a proposal by gold shops to place gold as collateral in exchange for a liquidity injection by the central bank was not possible under the law.

"Direct lending to the private sector is prohibited under the Bank of Thailand Act," she said. Local banks said gold shops had not made any unusual loan requests.

Vivat Kittiphongkosol, an executive vice-president of Siam Commercial Bank, said the gold market was typically driven by cash due to the high liquidity of gold.

"Operators have a strong capital base and mostly rely on cash for their businesses, even when trades are in the hundreds of millions of baht," Dr Vivat said.

Virasak Sutanthavibul, a Bangkok Bank executive vice-president, said credit and overdraft activity for business clients in the gold trade were normal.

Yanyong Phuangrach, director-general of the Internal Trade Department, said that to curb speculation and benefit consumers, the government planned to outline guidelines for retail gold traders in a few weeks covering gold weights, appropriate goldsmiths' fees, standardised booking tickets and trading days.

That raises a few interesting details.

10,000,000,000 Baht traded in gold down Chinatown in one day? More than a few rich Thais around... That works out around 10,000 kilograms of gold was traded. Must have been a few overladen Benz cars running around.

And an interesting perspective on the Thai market. We have rising prices and people want to sell, but the dealers have no cash and offer cheques! Why don't they reduce the local price? If people still want to sell, then they can go abroad, or maybe not? And who wants to take a cheque instead of cash?

[gregb]

http://www.bahtsold.com/forum/viewtopic.php?t=3716

That raises a few interesting details.

10,000,000,000 Baht traded in gold down Chinatown in one day? More than a few rich Thais around... That works out around 10,000 kilograms of gold was traded. Must have been a few overladen Benz cars running around.

And an interesting perspective on the Thai market. We have rising prices and people want to sell, but the dealers have no cash and offer cheques! Why don't they reduce the local price? If people still want to sell, then they can go abroad, or maybe not? And who wants to take a cheque instead of cash?

The local news had a story of one guy who wanted to trade 1000 baht of gold bars. It took him 6 hours of waiting to do it, so there's 16 kg by just 1 person. At that rate you'd only need about 600 people to make that kind of volume.

He said he'd buy it all back again when the price came down.

The Gold Trader's Association does set the 96.5% price slightly above or below the international market when they can to try and help control volatility, but never enough to make arbitrage profitable in my experience. 96.5% is very much a domestic standard, and there aren't too many places outside of Thailand you can go to get a reasonable price for it, so they have some flexibility here, but not too much.

I've never seen them place the 999 price significantly different from international spot though. In fact, most of the time it is almost exactly at the London AM or PM fix. That would be just too easy for international traders I guess. I do watch that closely. I have friends in the US who have offered to split the profits with me if I can catch a reasonable arbitrage opportunity on PAMP certified 1kg gold bars. So far, no luck.

[Bizz]

Make your own asumsutions

10) Newmont Mining Corp (NEM), $26.30: This is one of the most solid Gold companies in the mining industry and one of the safest ways to capitalize on Gold mania.

High on 1/16/09 of $45.45 +73%

9) iShares Silver Trust (SLV), $9.62: An ETF designed to track the price of Silver, which could potentially increase in value even faster than Gold.

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8) Eldorado Gold Corp (EGO), $4.17: Goal of producing 500,000 ounces of Gold annually by 2010.

High on 1/16/09 of $8.49 +104%

7) Yamana Gold Inc (AUY), $4.66: Grown revenues from $46 million in 2005, to $169.2 million in 2006, to $747.1 million in 2007 and $1.1 billion during the most recent twelve months.

High on 1/16/09 of $8.38 +80%

6) Hecla Mining Co (HL), $2.39: The oldest U.S.-based precious metals mining company and the lowest-cost primary silver producer in North America.

High on 1/6/09 of $2.95 +23%

5) Silver Wheaton Corp (SLW), $3.70: The largest publicly traded pure silver play. Expects to have silver sales of between 13 million and 15 million ounces in 2008, increasing to 19 million ounces in 2009 and 25 million ounces in 2010.

High on 1/16/09 of $7.48 +102%

4) Ivanhoe Mines Ltd (IVN), $2.68: Has a strategic partnership with Rio Tinto to develop Oyu Tolgoi, considered to be the world's largest copper-gold development project.

High on 1/6/09 of $3.96 +48%

3) Entree Gold Inc (EGI), $0.82: $62 million in cash and no debt, enterprise value of only $15 million, Ivanhoe Mines and Rio Tinto are major shareholders, holding approximately 15% and 16% of issued and outstanding shares respectively.

High on 1/7/09 of $1.30 +58%

2) Gold Double Long ETN (DGP), $12.70: This is the easiest way to capitalize on the upcoming Gold mania. As Gold prices soar, DGP is designed to make double the gains of the commodity.

High on 1/16/09 of $19.80 +56%

1) DRDGOLD Ltd (DROOY), $3.56: One of the world's oldest Gold miners, been in business since 1895 and in 1979-1981 made a run from $15 to over $500. Trading near book and for a fraction of sales.

High on 1/16/09 of $7.12 +100%

[12DrinkMore]

The local news had a story of one guy who wanted to trade 1000 baht of gold bars. It took him 6 hours of waiting to do it, so there's 16 kg by just 1 person. At that rate you'd only need about 600 people to make that kind of volume.

But hang on, you have just said it, if one person trying to sell 16 kg of gold took SIX hours, where on earth were the other 600 people standing????

Was there a long queue for 150 days? Obviously not, as the lot was sold in one day. And why did only the one guy make the headlines. Methinks that all is not above board in these reports.