1. jonb said...

Indian demand is the most important factor. It is up, but from a record low base, and is currently making up a much lower proportion of total demand than is historically the case.

My view is that gold is the next bubble and you should sell. As always, I don't know exactly when the bubble is going to burst, so you should not short sell or spread bet on it going down, as you could lose a lot of money.

3. little professor said...

plus ca change...

Read this article from TIME magazine in 1979, discussing the gold rush as people stampeded away from the dollar and other paper money, fearing economic collapse and hyperinflation. Sound familiar?:

From Bangkok to Bangor, investors are buying up gold−and paying record prices for it. Scarcely a week goes by without a fresh blast of bad news to push up the value of the mystic metal that thrives on crisis. In fact, the 1970s have seen one of the most spectacular gold rushes ever. This reflects a panicky flight away from paper assets−stocks, bonds, money itself.

Until recently, gold was only one of several beneficiaries of the global flight from the dollar. As the dollar plunged, investors also chased after the "hard currencies" that were not being debauched by inflation, especially the Swiss franc, the mark and the yen. That is now beginning to change as more investors conclude that ultimately no industrial nation can withstand inflation and energy-related shocks. Says Guy Field, a London gold dealer: "Last year the high price of gold reflected the decline of the dollar on exchange markets. But gold is now moving ahead on its own accord as people insure themselves against the fickleness of all paper currencies."

Gold fever in the U.S. is so widespread that it is no longer accurate to speak of its victims as if they were right-wing zealots haunted by nightmares of starving marauders. A more typical buyer is New York Suburbanite Phillip Knapp, who is vice president of a paper firm. With a wife, three children and a six-figure income, Knapp seems every bit the successful American who ought to have confidence that the future will be as good to him as the past has been. But says he: "In 1975 I started to worry about where I could put my money. I say one thing to myself: it's not the franc or gold or silver that is going up, it's the dollar that is going down, and that's what worries me. Soon we will all be making $100,000 a year, and instead of increases in buying power we'll have $1 candy bars."

5. harold said...

Flame...

7. p. doff said...

The Royal Mint have just issued a Christmas Keepsake Gold Coin for £79.95 for 1/10th ounce.

£799.50 for an ounce of gold - now that's what I call a mark-up!! Still, you do get a presentation case featuring nostalgic images of Christmas.

9. doom&gloom said...

Flame - EXcellent!

Gold is currently a 'bargain' in inflation-adjusted terms compared to it's adjusted high of over $2000, and the economy was in nowhere near as perilous a state as it is today ;-)

11. doom&gloom said...

actually tending to agree with debtfree, although only due to anecdotals. planning on converting my paper gold into bullion in the near future.

13. amjidk said...

i just purchased a few grands worth @ bullion vault...

15. paul said...

If you take physical delivery of gold it devalues instantly, and most bullion vaults will not take it back, in case you drilled it.

17. doom&gloom said...

Had a look at goldmoney.com and cannot see that is says you can take custody of your gold. Therefore it just looks like a Ltd company using the same business model as bullionvault.com. Personally I don't see bullionvault/goldmoney/etc companies as much better than gold ETFs - they are all just promises to give you physical gold at some point in the future.

Agreed that if you take physical custody of your gold then it becomes a bit tricky to exchange it back to cash again, until it's been reverified. But surely that's what a jeweller is for - I've sold scrap gold to a jeweller in the past. I need to talk to some real jewellers about buying and selling physical gold...

19. d'oh said...

doom&gloom: ETFs, even ones such as Barclays ETFs can be shorted...which means that the companies behind them could just sell shorts rather than actually have the metal in storage. The best ETFs supposedly guarantee that they have at least 90% of the physical required to back the shares. Not all ETFs are backed by physical, so you have to read the fine print. Bullionvault is a different proposition all together. The gold is held by a third party, one of the major bullion storage and delivery firms and it is owned by you, not BV. Now I don't think Viamat would let their name be tarnished by association with a tiny company such as bullionvault that misrepresented its relationship with them do you? (i.e. I expect bv's arrangements with Viamat are exactly what they say they are.) You cannot easily take delivery of gold from BV, but it is possible in dire circumstances. There is also the option of dealing in large bars through them.

Other than taking physical delivery of coins yourself, what other option does one have? Any third party always poses a risk, but most people seem to be happy to keep their money in the bank (which is not what they are doing, they are transferring ownership of their money to the bank, and they become a creditor of the bank...at least with BV you still own the gold.)

A third option is the Perth Mint certificate program. It is less convenient in my opinion than BV and I have read rumours of people supposedly having allocated gold, but then having to wait months for delivery. Who knows whether this is true or not.

str 2007 - I've ordered gold for physical delivery a number of times over the past 5 years from reputable dealers. It always arrived the next day. Always.

21. doom&gloom said...

Of course you could take physical custody then lose it in a burglary. You pay your money, you take your choice.

23. d'oh said...

Oh, btw, who stores Barclays silver? - JP Morgan, one of the biggest short sellers (or so it is said).