Gold strategy in the current economy

[Errol]

China Imports Record Amount Of Gold In December On Price Drop

Gold imports into mainland China from Hong Kong surged 94 percent to an all-time high last year

http://www.bloomberg.com/news/2013-02-05/china-gold-imports-from-hong-kong-gain-to-all-time-high-in-12.html

[Injin]

Well quite. As I said, injins points aren't that relevant to analysing the gold price on a daily basis or even a yearly basis probably.

Taleb in his new book antifragile very nicely outlines why you don't want to analyze the price of anything very often.

The more you check, the higher your noise to signal ratio.

[Errol]

Taleb in his new book antifragile very nicely outlines why you don't want to analyze the price of anything very often.

The more you check, the higher your noise to signal ratio.

Agree completely. Best to buy gold and just forget about it (or check the price every 6 months to a year). I've never understood these people who comment on $100 movements (either way) as if they are important in the grand scheme of things.

[Injin]

Agree completely. Best to buy gold and just forget about it (or check the price every 6 months to a year). I've never understood these people who comment on $100 movements (either way) as if they are important in the grand scheme of things.

That will be your last post then, I take it?

[Errol]

That will be your last post then, I take it?

No, I just post news items and other stuff as a matter of record and so that other people can see them (if they want).

I've sat through this gold market since 2000/2001 and have seen enough large falls and large rises to know how irrelevant they can be in the grand scheme of things (ultimately of course totally irrelevant as value in existing paper money will cease to be an issue and is not something that concerns me - I've said previously that I measure by ounces only).

Edited February 5, 2013 by Errol

[quibble]

That will be your last post then, I take it?

I'd like to know what Injin's gold strategy is in the current economy. Why did you choose to buy gold (and at what price did you buy into it), how do you feel about hoarding it along with the rest of us (somewhat dirty?); what is your exit strategy?

Thanx

[padington]

It's possible the whole currency crashing thing has been priced into gold already and now it's only really got one place to go if things don't crash and that's south. Don't put your house on the stuff. I would say beginning exiting soon in small increments would be a very wise thing to do if you bought in 2001. Don't be greedy hey.

[erat_forte]

It's possible the whole currency crashing thing has been priced into gold already and now it's only really got one place to go if things don't crash and that's south. Don't put your house on the stuff. I would say beginning exiting soon in small increments would be a very wise thing to do if you bought in 2001. Don't be greedy hey.

Exit into what, padington?

[killerbee]

Bingo.

If you accept that value is a property of the human mind, you realise that gold won't help you as much as knowing about people will.

I accept it, but does it help? No, it makes no difference now and it will make no difference tomorrow.

Edited February 6, 2013 by killerbee

[Errol]

"For more than a millennium, gold has served as a store of value and a medium of exchange. It has broadly managed to maintain its real value, even as various currency regimes have come and gone. The reason is that the supply of gold is not at the whim of any governmental power; it is fundamentally supply constrained. Total outstanding above-ground gold stocks – the amount that has been extracted over the past few millennia – are roughly 155,000 metric tons. Each year mines supply roughly 2,600 additional metric tons, or 1.7% of the outstanding total. This is why gold can be thought of as the currency without a printing press.

The downside of gold is that it generates no interest. One ounce of gold today will still be only one ounce next year and the year after that. Because of this, gold is sometimes referred to as a non-productive financial asset, but we feel this characterization is misleading. Rather, we believe gold should not be thought of as a substitute for equities or corporate bonds. These have equity or default risk and therefore convey risk premiums.

Instead, gold should be thought of as a currency, one which pays no interest. Dollars, euro, yen and other currencies can be deposited to receive interest, and this rate of interest is meant to compensate for the decline in the value of paper currencies via inflation. Gold, in contrast, maintains its real value over time so no interest is necessary."

-- Nicholas J. Johnson & Mihir P. Worah, PIMCO

[Errol]

"Concrete objects have served as money for most of human history; we may therefore speak of commodity money. A great deal of trust was placed in particular in precious and rare metals – gold first and foremost – due to their assumed intrinsic value. In its function as a medium of exchange, medium of payment and store of value, gold is thus, in a sense, a timeless classic.”

-- Dr. Jens Weidmann, President, Bundesbank

[padington]

Exit into what, padington?

3d printer companies, medical research companies, land with a natural resource supply, tiny start ups that make sense, developing your own idea's, art, produce you will need in the coming years that will keep, Chinese antiques ...

... and gambling companies if you have no conscience.

[padington]

One day also news might come out that may upset the whole gold market one day, nothing is a given ...

http://www.the-scientist.com/?articles.view/articleNo/34274/title/Microbial-Metallurgy/

[quibble]

One day also news might come out that may upset the whole gold market one day, nothing is a given ...

http://www.the-scientist.com/?articles.view/articleNo/34274/title/Microbial-Metallurgy/

Shock news! Bacteria makes gold out of gold ions. sell sell sell.

[Gigantic Purple Slug]

Shock news! Bacteria makes gold out of gold ions. sell sell sell.

I posted something on this a while back.

There is a lot of gold around. Just in quantities so small it is difficult to extract. Maybe this will be a way of economically doing it. Or maybe not.

But in a world of rapidly changing technology, it is one indication of how positions can change quickly.

Edit : Look up aluminium if you want to see a fall from grace.

From wikipedia :

Before the Hall-Héroult process was developed in the late 1880s, aluminium was exceedingly difficult to extract from its various ores. This made pure aluminium more valuable than gold.[50] Bars of aluminium were exhibited at the Exposition Universelle of 1855.[51] Napoleon III of France is reputed to have given a banquet where the most honoured guests were given aluminium utensils, while the others made do with gold.[52][53]

Edited February 6, 2013 by Gigantic Purple Slug

[quibble]

I posted something on this a while back.

There is a lot of gold around. Just in quantities so small it is difficult to extract. Maybe this will be a way of economically doing it. Or maybe not.

But in a world of rapidly changing technology, it is one indication of how positions can change quickly.

If we come up with a method of limitless energy production, then it could be extricated from seawater.

But inferring anything from the transformation of gold ions to gold, when it's already done easily:

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

Gold ions in solution are readily reduced and precipitated out as gold metal by adding any other metal as the reducing agent. The added metal is oxidized and dissolves allowing the gold to be displaced from solution and be recovered as a solid precipitate.

is up there with http://en.wikipedia.org/wiki/Alchemy

[Gigantic Purple Slug]

If we come up with a method of limitless energy production, then it could be extricated from seawater.

But inferring anything from the transformation of gold ions to gold, when it's already done easily:

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

is up there with http://en.wikipedia.org/wiki/Alchemy

No. It's not the transfer. It's the concentration (or at least it was in my article). The bacteria concentrate the stuff for you. So you go from a position where it is disperse and not viable to extract to one where it is.

[quibble]

No. It's not the transfer. It's the concentration (or at least it was in my article). The bacteria concentrate the stuff for you. So you go from a position where it is disperse and not viable to extract to one where it is.

Your (perhaps unrelated) article about (difficult at the time) extraction of aluminium?

Back to the point, it seems pretty easy to extract gold from gold ions?

edit: typo

Edited February 6, 2013 by renewable

[Gigantic Purple Slug]

Your (perhaps unrelated) article about (difficult at the time) extraction of aluminium?

Back to the point, it seems pretty easy to extract gold from gold ions?

edit: typo

Hmmm.

Let me try again.

Gold is present in seawater in very low concentration. It is not financially viable to extract it. But if you could find some way of concentrating it cheaply it would become viable. That's what the bacteria can do. The reason it does it is because it is in ionic form. The bacteria doesn't like gold ions (toxic) but doesn't mind gold because it is inert. So it changes the gold ions to gold (I agree not a magic or difficult thing to do), but in that process concentrates them into lumps of gold which can then be viably extracted.

Anyhow, that's not really the point. The point is disruptive technology is by it's very nature unpredictable and comes out of nowhere - wham ! Rendering old values useless. I could think of any number of ways how this could happen. For example someone could come up with a cheaper way of flash coating electronic connectors instead of using gold. That would remove demand from the marketplace. And so on. You could think of hundreds of different things like this.

Likely ? Probably not. Possible ? Well yes, I think so.

[quibble]

Hmmm.

Let me try again.

Gold is present in seawater in very low concentration. It is not financially viable to extract it. But if you could find some way of concentrating it cheaply it would become viable. That's what the bacteria can do. The reason it does it is because it is in ionic form. The bacteria doesn't like gold ions (toxic) but doesn't mind gold because it is inert. So it changes the gold ions to gold (I agree not a magic or difficult thing to do), but in that process concentrates them into lumps of gold which can then be viably extracted.

Anyhow, that's not really the point. The point is disruptive technology is by it's very nature unpredictable and comes out of nowhere - wham ! Rendering old values useless. I could think of any number of ways how this could happen. For example someone could come up with a cheaper way of flash coating electronic connectors instead of using gold. That would remove demand from the marketplace. And so on. You could think of hundreds of different things like this.

Likely ? Probably not. Possible ? Well yes, I think so.

No, probably not. Gold extraction from seawater using bacteria would work about as well (i.e. be about as cost effective - perhaps even less so) as simple evaporation. But it would be great if they can find a way to extract gold from gold mine tailings with less environmental damage.

Alchemy is perhaps the only truly disruptive technology. Or a massive gold meteor impacting the earth - in which case monetary systems would be the least of our problems!

[padington]

Hmmm.

Let me try again.

Gold is present in seawater in very low concentration. It is not financially viable to extract it. But if you could find some way of concentrating it cheaply it would become viable. That's what the bacteria can do. The reason it does it is because it is in ionic form. The bacteria doesn't like gold ions (toxic) but doesn't mind gold because it is inert. So it changes the gold ions to gold (I agree not a magic or difficult thing to do), but in that process concentrates them into lumps of gold which can then be viably extracted.

Anyhow, that's not really the point. The point is disruptive technology is by it's very nature unpredictable and comes out of nowhere - wham ! Rendering old values useless. I could think of any number of ways how this could happen. For example someone could come up with a cheaper way of flash coating electronic connectors instead of using gold. That would remove demand from the marketplace. And so on. You could think of hundreds of different things like this.

Likely ? Probably not. Possible ? Well yes, I think so.

Well said, also the market doesn't need a working disruptive technology, just the reality check of a possible one around the corner for the price to Change fast. I'm not saying Dont stack any gold, just don't put all your eggs in one gold basket. It's amazing how often the favourite horse falls.

[Compounded]

Well said, also the market doesn't need a working disruptive technology, just the reality check of a possible one around the corner for the price to Change fast. I'm not saying Dont stack any gold, just don't put all your eggs in one gold basket. It's amazing how often the favourite horse falls.

It's a better bet than money in the bank.

The shame is there is no sure way to preserve purchasing power.

[Errol]

Hmmm.

Let me try again.

Gold is present in seawater in very low concentration. It is not financially viable to extract it. But if you could find some way of concentrating it cheaply it would become viable. That's what the bacteria can do. The reason it does it is because it is in ionic form. The bacteria doesn't like gold ions (toxic) but doesn't mind gold because it is inert. So it changes the gold ions to gold (I agree not a magic or difficult thing to do), but in that process concentrates them into lumps of gold which can then be viably extracted.

Anyhow, that's not really the point. The point is disruptive technology is by it's very nature unpredictable and comes out of nowhere - wham ! Rendering old values useless. I could think of any number of ways how this could happen. For example someone could come up with a cheaper way of flash coating electronic connectors instead of using gold. That would remove demand from the marketplace. And so on. You could think of hundreds of different things like this.

Likely ? Probably not. Possible ? Well yes, I think so.

Same thing applies for basically any investment, company, asset anywhere in the world at any time.

[padington]

It's a better bet than money in the bank.

Well that's not true, if you put your money into gold 60 days ago, 6 months ago or even 12 months ago it would be worth considerably less now.

Same could be true for many other buy times in history ...

http://politicalmetals.files.wordpress.com/2011/04/600-year_gold.gif

[Errol]

Obviously not scientific, but very amusing. Not really the type of result you would expect if there was a bubble (if anyone thought there was):