Price Of Gold

[samran]

Martin - the success of europe, america, Hong Kong (former brit colony) and even Singapore is based on capitalism. So until that rule is broken I think its wise to follow the trend.

<{POST_SNAPBACK}>

that and a strong rule of law.

[galt67]

The metals are ending a 'seasonal' bullish pattern this week which started at the end of July--consider close stops!

[PCA]

The metals are ending a 'seasonal' bullish pattern this week which started at the end of July--consider close stops!

<{POST_SNAPBACK}>

Gold was breaking out from an important point on the monthly chart. It is demanded from people like you and thats what is feeding the trend. The trend is there and Speculators are well aware of that, thats all.

Gold was never a save investment fundamentally since the US were not able to hedge their cash reserves against it by printing new money all the time and inflation accordingly (20 years ago).

There is no point for gold to be priced at 600 or 1000 or 100. There is a trend and a chance to follow it until its over.

Nevertheless currently the seasonality is driving the lately move and it is behaving abnormal at the moment.

Gold as an investment is stupid, so is oil or the US-Dollar.

Thats my 2 cents.

Edited September 25, 2005 by PCA

[chownah]

The metals are ending a 'seasonal' bullish pattern this week which started at the end of July--consider close stops!

<{POST_SNAPBACK}>

Gold was breaking out from an important point on the monthly chart. It is demanded from people like you and thats what is feeding the trend. The trend is there and Speculators are well aware of that, thats all.

Gold was never a save investment fundamentally since the US were not able to hedge their cash reserves against it by printing new money all the time and inflation accordingly (20 years ago).

There is no point for gold to be priced at 600 or 1000 or 100. There is a trend and a chance to follow it until its over.

Nevertheless currently the seasonality is driving the lately move and it is behaving abnormal at the moment.

Gold as an investment is stupid, so is oil or the US-Dollar.

Thats my 2 cents.

<{POST_SNAPBACK}>

I guess if you've only got 2 cents to invest it doesn't really matter much where you put it!

[Martin]

In reply to britmaveric above:

I have no great disagreement with the the idea that China would be wise to 'follow that trend'. I expect they will. I think you have probably moved in the right direction by coming away from your view that they must 'buy into full capitalism'.

I expect China to be very wary that it doesn't follow in Russia's footsteps.

The 'chinese mentality' leadership of Singapore make no secret of the fact that they study what happened to those who went before, but make sure that, whilst they 'follow the trend', they avoid (as much as possible) the pitfalls revealed by those in whose footsteps they travel.

Singapore kept the Civil Service integrity and probity that had been demonstrated by the British (and have maintained it and even honed it since, which is more than I can say for the British), but they didn't buy into the class warfare of the British.

Singapore would never end up with the civil war that we could conveniently call Scargill v. Thatcher.

Obviously, Singapore has had far less problems than those that China faces. The Singapore leadership didn't have the great proportion of self-sufficient peasantry to complicate their industrialisation that China has. So I expect China's progress to be a lot more messy than Singapore's has been, and only partial parallels will be revealed as history unfolds.

I will 'flag' this to come back (hopefully, D.V.) to my attention on 26 September 2015, and review it then.

[Mali_in_CM]

Back on topic.

I'm a goldbug who figured oyt a long time ago that threre's about as little point in debating gols as there is in debating religion, labor unions or other topics about which people have passionately held, but not always sensible, opinions.

You either believe that gold is money or you don't.

If you were 'fully invested' in the US bubble and own a few houses which have tripled, you probably think of gold as an anachronism, a drag on 'wealth' and of evryone who espouses gold as a nut-case.

As far as where we're heading, probably $500 by April 2006 and $600 a year later.

Doug Casey, who knows more about gold than most ever will was asked in the 1990s if he thought gold would go through the roof again [as in 1980]. His reply: no, last time it went through the roof; next time it's going to the moon.

Richard Maybury, at EWR http://www.chaostan.com

predicts $5000, IIRR, when the various wars get going in earnest.

I agree with an earlier post that silver has a greater potential than gold, in % gain.

[Martin]

"As far as where we're heading, probably $500 by April 2006 and $600 a year later."

Well, 'Mali', it your forecast of $600 in April 2007 proved to be a bit low!

(But if you were thinking in terms of 'purchasing power of October 2005 US dollars', then maybe not so far astray.)

"Where will be in April 2008 in 'price' of gold and purchasing power of US dollar?", asks he, reeling from the price he had to pay for a packet of butter , in bahts, in the Tops Supermarket in Khon Kaen yesterday.

[LivinLOS]

April 08.. well my year end prediction was around 1300.. Lets say ballpark 1300 - 1400 for april but march is seasonally a pullback / soft month so its a ballpark for around there pricing / dates.

[Naam]

April 08.. well my year end prediction was around 1300.. Lets say ballpark 1300 - 1400 for april but march is seasonally a pullback / soft month so its a ballpark for around there pricing / dates.

which year?

[LivinLOS]

April 08.. well my year end prediction was around 1300.. Lets say ballpark 1300 - 1400 for april but march is seasonally a pullback / soft month so its a ballpark for around there pricing / dates.

which year?

Opps sorry.. 09...

[VegasVic]

April 08.. well my year end prediction was around 1300.. Lets say ballpark 1300 - 1400 for april but march is seasonally a pullback / soft month so its a ballpark for around there pricing / dates.

which year?

Opps sorry.. 09...

WOW, the BS sure is getting deep on these thai visa gold threads Not just the wild projections (especially since gold just had its blowoff top and has started its downturn) but injecting Jim Rogers in the discussion as an objective voice Jimmy has been a bear since the 1970's and a gold tout as well, he has missed out on most of the great equity runs over the last 30 years and has been wrong on gold 90% of the time. If you were to go back over the years and do just the opposite of good ole Jimmy was expousing, you would be a millionaire many times over.

[LivinLOS]

On the subject of wild predictions.. As March is almost over.. when can I pick up those 1.4x USD / EUR's then Vicky ??

[Naam]

On the subject of wild predictions.. As March is almost over.. when can I pick up those 1.4x USD / EUR's then Vicky ??

any time! bring any amount of €UR and i will give you 1.4x USD

[Martin]

Price of gold in Thai baht doesn't seem to be quite as volatile as it is reported to be in US$.

I am wondering if the (rising) price of rice-for-export is linked into this in some way.

[sonicdragon]

I've said it before, but since I've nothing better to do today I'll say it again. Gold is a commodity. Simple as that. Due to it's peculiar characteristcis it is also a good store of value, hence it's use as currency, and as the backing of currencies in previous times. Like other commodities and asset classes it is subject to speculation. However, in the long run (say 50,100+ years) it's price in terms of fiat currency will be proportional to the amount of fiat currency that exists. To the extent that we have fractional reserve banking and central banks that are happy to see the money supply increase, the price of gold, and other commodities, will rise. If the money supply shrinks for whatever reason (such as through the effects of the current credit crisis, or central banks that target the money supply) then its price will fall. Of course, supply and demand factors will also affect the price, but these factors are a lot more stable with gold than with many other commodities, and in the long run will have only limited impact. I'm a long term holder of gold and other precious metals. But at the present time I see possibilities for deflation and I'm therefore buying some puts. If you think the money supply is going to expand, buy gold and other precious metals, if you think it is going to contract, then perhaps sell. If you think it is going to be stable then it's all about normal economic forces of supply and demand (which of course includes speculation).

[siamamerican]

I've said it before, but since I've nothing better to do today I'll say it again. Gold is a commodity. Simple as that. Due to it's peculiar characteristcis it is also a good store of value, hence it's use as currency, and as the backing of currencies in previous times. Like other commodities and asset classes it is subject to speculation. However, in the long run (say 50,100+ years) it's price in terms of fiat currency will be proportional to the amount of fiat currency that exists. To the extent that we have fractional reserve banking and central banks that are happy to see the money supply increase, the price of gold, and other commodities, will rise. If the money supply shrinks for whatever reason (such as through the effects of the current credit crisis, or central banks that target the money supply) then its price will fall. Of course, supply and demand factors will also affect the price, but these factors are a lot more stable with gold than with many other commodities, and in the long run will have only limited impact. I'm a long term holder of gold and other precious metals. But at the present time I see possibilities for deflation and I'm therefore buying some puts. If you think the money supply is going to expand, buy gold and other precious metals, if you think it is going to contract, then perhaps sell. If you think it is going to be stable then it's all about normal economic forces of supply and demand (which of course includes speculation).

Good post. What is a fiat currency? I don't invest in commodities because of their speculative nature and lack of personal investment knowledge. With productivity improving the last 100 years, it seems companies are a safer investment. Gold's productivity can't improve and therefore the price is dependant on supply, demand, and speculation. If you look at the returns on gold the last few years, it has been incredible. If you take out the last 3 years, it was an awful investment the prior 30 years, unless you were able to time the market. Gold seems to be an investment for market timers.

I definitely could be very wrong - just my humble opinion.

p.s., is there an internet source that supplies the spread between money supply and gold prices? I assume the spread is at near record levels.

Edited March 29, 2008 by siamamerican

[IMA_FARANG]

Back in June, we were discussing on thaivisa.com whether gold was a good hedge when the baht seemed to be weakening, airlines were struggling to avoid horrendous losses, General Motors shares were being rated as "junk" etc etc.

I see gold has gone up 8% in the three months since then, and is being "tipped" to go up another 8% in the next three to fifteen months.

(From yahoo news today: " Many analysts are looking for gold to target $500 and above next year for the first time since 1987.")

I had a friend some years ago when something similiar happened...he worked in Saudi Arabia and was making a good salary then. He bought gold at $600 an ounce, he bought gold at $700 an ounce, and so on. He wanted to wait until it got to $1000 an ounce, then he was going to sell. It peaked about $900 or so. By the time he could sell it dropped over $300 dollars an ounce. He figures that he probably spent most of his yearly salary to pay for that gold.

Right now speculators are bidding up gold. They hope to cash in at the peak, and sell at a profit. You, as a regular person, won't be able to get in at the peak. You are a sucker, who puts his money in for others to take out as profit. That is your purpose. That is how the big guys will make their money.

Do whatever you want, I can't stop you. Myself, I need my money to feed my family and pay their rent. I can't afford to play big time capitalist. Maybe you can...good luck.

[sonicdragon]

I've said it before, but since I've nothing better to do today I'll say it again. Gold is a commodity. Simple as that. Due to it's peculiar characteristcis it is also a good store of value, hence it's use as currency, and as the backing of currencies in previous times. Like other commodities and asset classes it is subject to speculation. However, in the long run (say 50,100+ years) it's price in terms of fiat currency will be proportional to the amount of fiat currency that exists. To the extent that we have fractional reserve banking and central banks that are happy to see the money supply increase, the price of gold, and other commodities, will rise. If the money supply shrinks for whatever reason (such as through the effects of the current credit crisis, or central banks that target the money supply) then its price will fall. Of course, supply and demand factors will also affect the price, but these factors are a lot more stable with gold than with many other commodities, and in the long run will have only limited impact. I'm a long term holder of gold and other precious metals. But at the present time I see possibilities for deflation and I'm therefore buying some puts. If you think the money supply is going to expand, buy gold and other precious metals, if you think it is going to contract, then perhaps sell. If you think it is going to be stable then it's all about normal economic forces of supply and demand (which of course includes speculation).

Good post. What is a fiat currency?

A fiat currency is a one that is not backed by physical assets. All currencies in the world are now fiat, or backed by fiat (eg Hong Kong which operates a currency board backed by US dollars). The key point is that most currencies used to be backed by gold - which created a limit on the amount of new currency the central bank could "create". That's not to say that a gold standard is necessarily a good thing - it also has drawbacks.

I don't invest in commodities because of their speculative nature and lack of personal investment knowledge. With productivity improving the last 100 years, it seems companies are a safer investment.

I certainly do not advocate investing in gold over investing in equities. I believe in a balanced diversified portfolio of investments in different asset classes.

Gold's productivity can't improve and therefore the price is dependant on supply, demand, and speculation.

....and on the supply of money. It's really quite crucial with commodities.

If you look at the returns on gold the last few years, it has been incredible. If you take out the last 3 years, it was an awful investment the prior 30 years, unless you were able to time the market. Gold seems to be an investment for market timers.

I definitely could be very wrong - just my humble opinion.

Well, if you take out the last 3 years, and look at, say the previous 40 years, these are some interesting statistics:

US per capital income in gold ounces:

1965: 62

2005: 71

US weekly wages in gold ounces:

1965: 2.7

2005: 1.4

S&P 500 in gold ounces:

1965: 2.2

2005: 3

p.s., is there an internet source that supplies the spread between money supply and gold prices? I assume the spread is at near record levels.

I don't have a link to a chart, but money supply numbers are readily available. However, there are different definitions of money supply, and arguably it needs to be adjusted for changes in "velocity of money" Anyway, one often-used definition of money supply, M2, was around $500billion in 1965. It was around $6.5 trillion in 2005.

[siamamerican]

I appreciate you taking the time to answer my questions. Your explanations make complete sense and are easy to understand. Your numbers show that gold has substantially underperformed the S&P if you take out the last three years. A different story if you add back the past three years, but my gut tells me it is due for a big drop. I usually avoid investments that have already had a steep increase in value, so I won't be investing in gold in the near term.

As for diversifying, I never bought into it. My friends think I'm crazy, but it seems to work for me. I have a limited time in the markets ( 5 years ) so time will tell if this strategy works. I’m a numbers person and by my calcs, diversifying across investment classes doesn’t increase returns in the long term, but I might be missing something.

Thanks again

[sonicdragon]

I appreciate you taking the time to answer my questions. Your explanations make complete sense and are easy to understand. Your numbers show that gold has substantially underperformed the S&P if you take out the last three years. A different story if you add back the past three years, but my gut tells me it is due for a big drop. I usually avoid investments that have already had a steep increase in value, so I won't be investing in gold in the near term.

As for diversifying, I never bought into it. My friends think I'm crazy, but it seems to work for me. I have a limited time in the markets ( 5 years ) so time will tell if this strategy works. I'm a numbers person and by my calcs, diversifying across investment classes doesn't increase returns in the long term, but I might be missing something.

Thanks again

The principle of diversification is that it reduces risk. It can also increase returns. It's the idea of an "efficient frontier" in portfolio theory. Basically, you have investments in non-correlated assets which reduces the overall variance of returns (risk) in a portfolio. Taking any combination of assets with a particular risk, you can adjust the portfolio such that there is a higher expected return for exactly the same risk, until you reach the efficient frontier. If you plotted all possible expected returns vs variance of returns there would be a convex efficient frontier where, which is made up of points where you can either increase your risk with a lower expected return, or increase your expected return with a lower risk, but without being able to increase both. Google "portfolio theory"+"efficient frontier" for further info. You mentioned being a numbers person - if you're very interested, start by reading this:

http://en.wikipedia.org/wiki/Modern_portfolio_theory

One of the problems with modern portfolio theory is that correlations between assets and asset classes are not stable over time - if they were it would all be very easy. And in certain periods (very recently for example) correlations can break down altogether - this is a formidable problem in risk management. Well established ideas from physics, engineering and various branches of mathematics are currently being applied to this problem. Actually, many advances in finance, particularly quantititive finance and risk management, come from those disciplines (one of the most famous being the black-scholes option pricing formula which was "discovered" in the 1970s but is actually based on the physics of heat transfer, which was well understood a hundred years, or more, before)

[siamamerican]

The principle of diversification is that it reduces risk. It can also increase returns. It's the idea of an "efficient frontier" in portfolio theory. Basically, you have investments in non-correlated assets which reduces the overall variance of returns (risk) in a portfolio. Taking any combination of assets with a particular risk, you can adjust the portfolio such that there is a higher expected return for exactly the same risk, until you reach the efficient frontier. If you plotted all possible expected returns vs variance of returns there would be a convex efficient frontier where, which is made up of points where you can either increase your risk with a lower expected return, or increase your expected return with a lower risk, but without being able to increase both. Google "portfolio theory"+"efficient frontier" for further info. You mentioned being a numbers person - if you're very interested, start by reading this:

http://en.wikipedia.org/wiki/Modern_portfolio_theory

One of the problems with modern portfolio theory is that correlations between assets and asset classes are not stable over time - if they were it would all be very easy. And in certain periods (very recently for example) correlations can break down altogether - this is a formidable problem in risk management. Well established ideas from physics, engineering and various branches of mathematics are currently being applied to this problem. Actually, many advances in finance, particularly quantititive finance and risk management, come from those disciplines (one of the most famous being the black-scholes option pricing formula which was "discovered" in the 1970s but is actually based on the physics of heat transfer, which was well understood a hundred years, or more, before)

I'll read the links you posted in the next few days when I have some spare time. I get the risk factor, but to be honest have a hard time grasping the higher returns. Yuo seem to know what your talking about and at bare minimimum it is woth doing some further resaerch on diversification. I did read one well respected author ( forgot his name ) and didn't agree with his analysis. He had many example, showing how diversified portfolios outperformed the S&P. I thought this analysis was worthless. It is easy to put together diversified portfolios that perform exceptionally well in hind sight. The trick is to do it in the future.

Thanks agian for the info, and to be honest, you are most likely right.

[siamamerican]

The principle of diversification is that it reduces risk. It can also increase returns. It's the idea of an "efficient frontier" in portfolio theory. Basically, you have investments in non-correlated assets which reduces the overall variance of returns (risk) in a portfolio. Taking any combination of assets with a particular risk, you can adjust the portfolio such that there is a higher expected return for exactly the same risk, until you reach the efficient frontier. If you plotted all possible expected returns vs variance of returns there would be a convex efficient frontier where, which is made up of points where you can either increase your risk with a lower expected return, or increase your expected return with a lower risk, but without being able to increase both. Google "portfolio theory"+"efficient frontier" for further info. You mentioned being a numbers person - if you're very interested, start by reading this:

http://en.wikipedia.org/wiki/Modern_portfolio_theory

One of the problems with modern portfolio theory is that correlations between assets and asset classes are not stable over time - if they were it would all be very easy. And in certain periods (very recently for example) correlations can break down altogether - this is a formidable problem in risk management. Well established ideas from physics, engineering and various branches of mathematics are currently being applied to this problem. Actually, many advances in finance, particularly quantititive finance and risk management, come from those disciplines (one of the most famous being the black-scholes option pricing formula which was "discovered" in the 1970s but is actually based on the physics of heat transfer, which was well understood a hundred years, or more, before)

Well, I thought I was a numbers person. Being at the top of my statistics class in college, is my claim to fame. The link you posted was a little humbling. I got the gist of it and understood the concepts if not the formulas.

We all have our risk tolerances and betting the farm on a few stocks isn’t for me. I believe in keeping an open mind and at the same time, not over analyzing. Trying to determine the perfect diversified portfolio in lieu of picking the best values isn’t a strategy that I favor.

Over diversifying has it risks also. I know this isn’t news to you – you seem to have the investment game down. In the end, I try to keep it simple and accumulate knowledge along the way. Currently I hold a diversified portfolio (30% international, 25% cash investments, and the remainder in US stocks). The mix has changed over the last 5 years and I’ve done quite well. This year I’m down 9% (13% yesterday), but I don’t expect to always have 20%+ returns every year, except last year (8%), since getting in the markets 5 years ago.

Edited April 2, 2008 by siamamerican

[Naam]

Price Of Gold, Up 8% in three months

and down 15% in two weeks. too much fluctuation for my liking and no real proof for the claim "intrinsic value".

disclaimer: for reasons unknown i might soon buy some gold besides the gold Mrs Naam hoards in various safes and bank lockers. but don't ask for an explanation! since 9 months i am buying all kinds of "assets" and have no idea why. could it be that old age dementia has caught up with me (see my recent purchase of 108 acres agricultural land with 385 meters river front) ?

[Naam]

Martin - the success of europe, america, Hong Kong (former brit colony) and even Singapore is based on capitalism. So until that rule is broken I think its wise to follow the trend.

we have spent quite some years in former british colonies. among these nearly five years in Nigeria. needless to say that Nigeria (like any other country where the british Raj had a say for a century or so and introduced culture, law and order) is one of the most advanced countries on this planet. no corruption at all, an excellent infrastructure, peepal who speak betta english than mah(not so)humbel self, no analphabets like in my home country Germany, free health care for all citizens, virtually each and every one owns a villa with a pool...

p.s. did i mention that i lived in Pakistan too? another bright example how british colonial rule could catapult a country to one of the top dozen countries on this planet

Edited April 2, 2008 by Naam

[LaoPo]

"As far as where we're heading, probably $500 by April 2006 and $600 a year later."

Well, 'Mali', it your forecast of $600 in April 2007 proved to be a bit low!

(But if you were thinking in terms of 'purchasing power of October 2005 US dollars', then maybe not so far astray.)

"Where will be in April 2008 in 'price' of gold and purchasing power of US dollar?", asks he, reeling from the price he had to pay for a packet of butter , in bahts, in the Tops Supermarket in Khon Kaen yesterday.

Martin & others....

You're answering to a topic that had it's last post in October 2005;

That's 2 1/2 years ago.

LaoPo

[VegasVic]

Gold had its dead cat bounce off $910 back up over $940 (only to head down to $890 a few days later). Gold will continue on this trend making lower lows and lower highs, and sometime over the next few months Gold will have a big down day(over $100/ounce) and this will be the catalyst to shake out many of the speculators. I hope that many of the "innocents" who got sucked into this frenzy have sold off their position, if not then caveat emptor!

[bingobongo]

support for gold isnt until $850-$830 per ounce, silver is better play right now

$ has made short term bottom and should bounce

[LivinLOS]

Been moving house for last week(s)... Still surrounded by boxes but the nerve center is set up again

Well sharp sell off... Thought once it blew past 910 that 850 would be on the cards.. I still think an 850 test or even a 780 is possible.. All part of exactly what this bull run has done before.. I remember the feeling when it pulled back from low 700's to 580 levels.. And here we sit at 900+..

Still think 1250 - 1350 this year.