Gold strategy in the current economy

[50sQuiff]

There is indeed a compelling case for PMs in a balanced portfolio as an inflation hedge, but that's not the argument our more swivel-eyed goldfingers are making. For them it's an essential element of their libertarian/survivalist fantasy of societal collapse (and as has been pointed out before that doesn't even make sense; trade implies surplus implies social organization, but we'll put that to one side). Ask them when it's time to sell and the answer seems to be when you meet aunty in the thunderdrome.

That brings me to the real problem I have with Au, what are the disequilibrium conditions for that market? We're told it's negative real interest rates, but that's been true for some time.

I won't make any pro-gold arguments, lest I be considered a swivel-eyed libertarian freakshow, but the weakness of the overwhelmingly anti-gold case being presented in the thread could be considered instructive.

For an asset with no fundamentals and heavily effected by sentiment the only thing that is driving it that there is no viable alternative investment. What's to stop it turning on a dime?

Let's assume for a second that your main savings vehicle is a random arrangement of magnetic particles in a Lloyds TSB datacentre. For an asset with no fundamentals and heavily affected by sentiment, the only thing that's driving it is that there's no viable alternative. What's to stop it turning on a dime?

Moreover, at what time do you plan to sell these magnetic particles and convert them into food, light, heat or shelter? I'm sure you have some kind of plan. Could this plan equally apply to gold, by any chance?

Edited July 19, 2011 by 50sQuiff

[MrFlibble]

And it all started off so well this morning...

[ken_ichikawa]

??

Notice how people were queuing up to buy the stuff in the headlines.

Make your own conclusions.

[kenzdawg]

Let's assume for a second that your main savings vehicle is a random arrangement of magnetic particles in a Lloyds TSB datacentre. For an asset with no fundamentals and heavily affected by sentiment, the only thing that's driving it is that there's no viable alternative. What's to stop it turning on a dime?

Moreover, at what time do you plan to sell these magnetic particles and convert them into food, light, heat or shelter? I'm sure you have some kind of plan. Could this plan equally apply to gold, by any chance?

Technically it's not true that cash has no fundamentals; it earns an income as interest, so unlike gold has a p/e ratio. Moreover I'm not even making an anti-gold case, I'm asking how you are judging it as an investment. Simply asserting that gold is superior to fiat may or may not be true, but as investment advice it is next to useless. As Mary says buying gold is taking a bet on the persistence of stagflation/biflation, how are you assessing that? I'm actually thinking of buying gold myself, I just don't want to have to drink the goldbug's ideological koolaid first, tvym.

[ken_ichikawa]

Technically it's not true that cash has no fundamentals; it earns an income as interest, so unlike gold has a p/e ratio.

The problem is cash isn't safe, and it can be VERY easily replicated and reproduced. With no effort infact which is what has been going on for a while.

how are you assessing that? I'm actually thinking of buying gold myself, I just don't want to have to drink the goldbug's ideological koolaid first, tvym.

The debt levels and the unsustainability of the current model our economies rely upon. Put simply if the UK cut public sector spending 100% and increased taxes 100% It would still take years to pay off the debt.

Plus the least painful method of getting out is inflation of which the block grey vote will vote for in large numbers.

As I have said in other posts I really wish I didn't have to do this but they have forced my hand and doing nothing (I consider the 4% bank deals I can get as nothing) is too costly.

[Sour Mash]

Technically it's not true that cash has no fundamentals; it earns an income as interest, so unlike gold has a p/e ratio.

It only earns interest if you lend it to someone. e.g. Loaning it to a bank. Then you have counterparty risk as well as inflationary risk.

Moreover I'm not even making an anti-gold case, I'm asking how you are judging it as an investment. Simply asserting that gold is superior to fiat may or may not be true, but as investment advice it is next to useless. As Mary says buying gold is taking a bet on the persistence of stagflation/biflation, how are you assessing that? I'm actually thinking of buying gold myself, I just don't want to have to drink the goldbug's ideological koolaid first, tvym.

Seems to me more like you're pissed off at missing the huge gains it's already made over the last couple of years and are annoyed that 'goldbugs' got it right so far.

[Bruce Banner]

And it all started off so well this morning...

Yes, but it couldn't last given the vested interests .

[Lepista]

Yes, but it couldn't last given the vested interests .

I think it's going well - one thread, that's keeping most talk about gold concentrated in one place on the main forum. Have there been many gold takeovers on other threads today?

Early days yet, but at steady as she goes.

[The Generation Game]

When the last bear turns goldbug...

[_w_]

I have a theory that amongst all the discussion of whether printing should occur and how should it be reversed i.e. monetary policy tightened, is that we could actually end up with the little heralded possibility of printing (to avoid default and reduce debt burdens) whilst at the same time raising interest rates to more normal levels to control private credit creation. So effectively we reverse the process since the war where the proportion of credit money reached nearly 97% such that the balance of money in the economy has a much greater proportion of m0 perhaps as much as 50%.

I read a paper a while back that said the Fed would be unable to raise rates until they had mopped up some of the QE money. It pointed to a relationship between the quantity of money and interest rates that was unavoidable according to the piece. I don't understand it.

Edited July 19, 2011 by _w_

[The Moderators]

The Moderators have been discussing the requests for a thread about Gold in the economy on the main board.

This present thread seems to be good natured and we propose using it as a basis for a pinned thread entitled

"Gold strategy in the current Economy".

This would be for a period of one month initially to see how it goes. It's up to the posters to use the thread for discussion not disruption.

We will open the new thread now and move this thread to it in a short time.

[The Moderators]

New thread about Gold and its effects on the economy. Trial period of one month - then review

[ken_ichikawa]

The Moderators have been discussing the requests for a thread about Gold in the economy on the main board.

This present thread seems to be good natured and we propose using it as a basis for a pinned thread entitled

"Gold strategy in the current Economy".

This would be for a period of one month initially to see how it goes. It's up to the posters to use the thread for discussion not disruption.

We will open the new thread now and move this thread to it in a short time.

Argh shoe shine moment!

Divest!

[The Masked Tulip]

Perhaps there will be a managed global default, or a Western one at least, which will write off the debts of the US, EU, Japan and us.... and then, overnight, IRs will normalise...

We live in interesting times.

[Sour Mash]

Perhaps there will be a managed global default, or a Western one at least, which will write off the debts of the US, EU, Japan and us.... and then, overnight, IRs will normalise...

We live in interesting times.

Only two ways to achieve such a default:

* Print money to cover the debts ... massive inflation but banks survive and the elite benefit.

* Allow debts to default ... massive deflation, banks going bust, many of the rich elite lose their shirts.

Hmmmm, I wonder which path our masters will choose?

[ken_ichikawa]

Only two ways to achieve such a default:

* Print money to cover the debts ... massive inflation but banks survive and the elite benefit.

* Allow debts to default ... massive deflation, banks going bust, many of the rich elite lose their shirts.

Hmmmm, I wonder which path our masters will choose?

They'll throw money into the incinerators.....

[_w_]

The Moderators have been discussing the requests for a thread about Gold in the economy on the main board.

This present thread seems to be good natured and we propose using it as a basis for a pinned thread entitled

"Gold strategy in the current Economy".

This would be for a period of one month initially to see how it goes. It's up to the posters to use the thread for discussion not disruption.

We will open the new thread now and move this thread to it in a short time.

Thanks for you patience and for trying.

[Georgia O'Keeffe]

The Moderators have been discussing the requests for a thread about Gold in the economy on the main board.

This present thread seems to be good natured and we propose using it as a basis for a pinned thread entitled

"Gold strategy in the current Economy".

This would be for a period of one month initially to see how it goes. It's up to the posters to use the thread for discussion not disruption.

We will open the new thread now and move this thread to it in a short time.

Can we also have a pinned thread on FONDUE

I know theres not much screaming out for it yet but i assure you it is at the beginning of a multiyear bull market, its peoples one opportunity to get in at an early stage, think Apple 1980

[Snugglybear]

My gold strategy. Hang on to my broken gold jewellery.

[tomandlu]

I approve this post, as long as users don't take it as an indication that gold is now open season.

[catmandu]

Well I know very little about gold trading, but it looks like a big sell at the moment - cash in the chips time.

[squire]

Good, glad to see this thread on here. Maybe people can start acting a little more mature now.......

The anti-gold-thread brigade was worse than anyone, even the bugs in my opinion.

Now, looking at the chart it's just dropped over $10 on the back of this thread!

[R K]

I read a paper a while back that said the Fed would be unable to raise rates until they had mopped up some of the QE money. It pointed to a relationship between the quantity of money and interest rates that was unavoidable according to the piece. I don't understand it.

In their last minutes they set out the likely path to reverse QE. Rates increases would appear to come ahead of asset sales in their thinking.

http://ftalphaville.ft.com/blog/2011/07/12/620156/fomc-minutes-from-the-june-21-22-meeting/

– The Committee will determine the timing and pace of policy normalization to promote its statutory mandate of maximum employment and price stability.

–

To begin the process of policy normalization, the Committee will likely first cease reinvesting some or all payments of principal on the securities holdings in the SOMA.

–

At the same time or sometime thereafter, the Committee will modify its forward guidance on the path of the federal funds rate and will initiate temporary reserve-draining operations aimed at supporting the implementation of increases in the federal funds rate when appropriate.

–

When economic conditions warrant, the Committee’s next step in the process of policy normalization will be to begin raising its target for the federal funds rate, and from that point on, changing the level or range of the federal funds rate target will be the primary means of adjusting the stance of monetary policy.

During the normalization process, adjustments to the interest rate on excess reserves and to the level of reserves in the banking system will be used to bring the funds rate toward its target.

–

Sales of agency securities from the SOMA will likely commence sometime after the first increase in the target for the federal funds rate.

The timing and pace of sales will be communicated to the public in advance; that pace is anticipated to be relatively gradual and steady, but it could be adjusted up or down in response to material changes in the economic outlook or financial conditions.

–

Once sales begin, the pace of sales is expected to be aimed at eliminating the SOMA’s holdings of agency securities over a period of three to five years

, thereby minimizing the extent to which the SOMA portfolio might affect the allocation of credit across sectors of the economy. Sales at this pace would be expected to normalize the size of the SOMA securities portfolio over a period of two to three years. In particular, the size of the securities portfolio and the associated quantity of bank reserves are expected to be reduced to the smallest levels that would be consistent with the efficient implementation of monetary policy.

– The Committee is prepared to make adjustments to its exit strategy if necessary in light of economic and financial developments.

[Georgia O'Keeffe]

In their last minutes they set out the likely path to reverse QE. Rates increases would appear to come ahead of asset sales in their thinking.

http://ftalphaville.ft.com/blog/2011/07/12/620156/fomc-minutes-from-the-june-21-22-meeting/

SOMA, is that for real? How ironic

[Thane Tasker]

Good, glad to see this thread on here. Maybe people can start acting a little more mature now.......

The anti-gold-thread brigade was worse than anyone, even the bugs in my opinion.

Now, looking at the chart it's just dropped over $10 on the back of this thread!

Its dropped because they think the US debt can now be raised from 14 trillion to 16.5 trillon, go figure