Gold strategy in the current economy

[sell2rent]

Just now, Blobsy said:

One should never be afraid to take a few chips off of the table, you can always the reinvest if the price takes a large dump.

As long as you have a core holding for the SHTF scenario then you’re covered.

I do think the financial services industry have done a good job of promoting buy and hold, dollar cost averaging and quoting how many bull days you miss in a bear market summarised with a mantra about time vs timing. It is also selective and biased, but is simplistic to work for the masses and probably the only way to prevent dumb money being ******ed by smart money. When actually considering the data more carefully, there is a reasonable case to be made for avoiding the worst bear days in a bear market to avoid losses compared with missing out on the highest gains across multiple asset classes where the dogma prevails. I am allowed to use my brain and decide whether something is over-valued and then be cautious as you suggest.

I also learned this the hard way about buying during the bear market of the noughties and immediately broke the oft quoted rule of the FTSE having no 4 year period in ages that was down, thankfully I mostly paid off my first house as its price doubled. Ever since, market timing of any decision has massively helped me and it has been repeated too many times to look less like an accident. I might call things early and miss the froth, but things inevitably drop below those points later anyway.

[sell2rent]

I'm going to await signs of breakout above $2400 then. I think it is more likely than not that it will occur, but it is equally likely it will retrace brutally at some point below the present level.

[nero120]

2 hours ago, sell2rent said:

I am not buying tech stocks or crypto either for those reasons. I own two tech companies and if they were to be sold their P/E would be ~6, they have no debt, great moats and I understand them and can manage them. I am not swapping those for large cap tech with P/E of say 36 or 60.

The fundamentals as listed I appreciate too. However, gold is speculative as well and it can crash for many years. I called a gold bubble in 2011 on this group, sold it and bought a house pretty much at what turned out to be the long term bottom of house prices in gold. I was “educated” by the gold bugs at the time, thread in the Scotland group. I followed up in 2014 about £250k up compared to holding gold and gold only woke up at the end of the decade.

I am not saying gold is in a bubble yet, but for me it has its time and place to be overweight and underweight.

Happy to hear reasoned argument and how your decisions worked out.

Thing is, you were only right in your call because western govs colluded post 2009 to bail out the financial system via QE and suppression of interest rates and commodities prices. Had they not been willing or able to do that, gold would have continued upwards to $3000+.

Did you factor that into your thinking at the time? Did you realise that you were essentially betting on western govs succeeding in their goal? If so, good call. Otherwise, you were lucky.

[sell2rent]

3 minutes ago, nero120 said:

Thing is, you were only right in your call because western govs colluded post 2009 to bail out the financial system via QE and suppression of interest rates and commodities prices. Had they not been willing or able to do that, gold would have continued upwards to $3000+.

Did you factor that into your thinking at the time? Did you realise that you were essentially betting on western govs succeeding in their goal? If so, good call. Otherwise, you were lucky.

  I would say yes I did:

On 11/07/2011 at 17:10, sell2rent said:

I am now thinking that whilst they may not pull it off, the government will try anything it can do to prevent significant nominal house price falls. They will do all they can to inflate their own debts away and try to keep interest rates as low as they can before a 2015 election. So many of my investment decisions that were theoretically good (eg selling housing, buying defensive stocks) have been thwarted by political interference.

 

[nero120]

2 minutes ago, sell2rent said:

  I would say yes I did:

Good call.

And do you feel the same way now?

Edited April 20 by nero120

[sell2rent]

Just now, nero120 said:

Good call.

How do we keep doing the same? I'm torn now between the Hanke-esque (as I understand it) belief that the Fed should be cutting already as we're headed to a deflationary recession due to the excess tightening and lag effects (after the excess loosening and lag effects) and the gold to the moon monetary debasement scenario. There is a huge tech bubble I want no part in. There is a lot of Western government debt, but that could be rescued if Trump cuts deficits (or the bond market force him to, not sure they will for various reasons).

[sell2rent]

https://www.nationalreview.com/2024/01/inflation-was-always-a-monetary-phenomenon-never-transitory/

vs

The stagflation scenario.

[jiltedjen]

3 hours ago, sell2rent said:

How do we keep doing the same? I'm torn now between the Hanke-esque (as I understand it) belief that the Fed should be cutting already as we're headed to a deflationary recession due to the excess tightening and lag effects (after the excess loosening and lag effects) and the gold to the moon monetary debasement scenario. There is a huge tech bubble I want no part in. There is a lot of Western government debt, but that could be rescued if Trump cuts deficits (or the bond market force him to, not sure they will for various reasons).

In a post growth world bubbles are just a mechanism to transfer wealth, a sort of tax.

many will be burnt as the AI bubble bursts. might of started already.

remove AI and we have stagnation, and it will continue for a good 15 more years now. the only way to do OK, is to brute force your way to wealth, to get yourself into a situation where you can out-save your peers. avoid bubble and hype. buy safe profitable companies which pay dividends. 

 

[sell2rent]

3 hours ago, jiltedjen said:

In a post growth world bubbles are just a mechanism to transfer wealth, a sort of tax.

many will be burnt as the AI bubble bursts. might of started already.

remove AI and we have stagnation, and it will continue for a good 15 more years now. the only way to do OK, is to brute force your way to wealth, to get yourself into a situation where you can out-save your peers. avoid bubble and hype. buy safe profitable companies which pay dividends. 

 

I can agree with avoiding bubbles. The rest is a only a self fulfilling prophecy for those who believe it. I would suggest taking a different approach. The best way I have found is to build businesses that supply goods or services enough people find valuable and on which you can profit. My main interest in gold is a strategy for house purchase and retirement. If you don’t choose to tax me because I am nearly 50.

[The Angry Capitalist]

5 hours ago, jiltedjen said:

In a post growth world bubbles are just a mechanism to transfer wealth, a sort of tax.

many will be burnt as the AI bubble bursts. might of started already.

remove AI and we have stagnation, and it will continue for a good 15 more years now. the only way to do OK, is to brute force your way to wealth, to get yourself into a situation where you can out-save your peers. avoid bubble and hype. buy safe profitable companies which pay dividends. 

 

Yep.

The ruling class pump certain stocks to pay for projects usually oversees.

Enron is an example and Nvidia another.

Pumped via their tools in the controlled media.

That stock is going to tank big.

[warpig]

My view is gold is going up 50% from here and will double by 2027. There will be short term peaks and troughs... that's the nature of markets. I do think we are due a retest of previous support... so if the war saga subsides for now, we will likely see that, but it will be short lived. I can see a short 1-2 month pullback and then it will be off to the races. Only traders should consider selling this peak... and then buy with both hands if it turns resistance to support.

[PrincessNutNut]

Eyes on the bond market again. The US voted through the bill to give the Ukraine the assets "frozen" from Russia.

The question is now: Are there enough Western buyers for Western government debt?

In my view this could in hindsight prove as significant as the decision to de-peg the USD from gold in 1971.

[Dreamcasting]

PMs not doing well this morning. Gold down 1.7%, silver quite brutal at 3.51%

A lot of the recent bidding up was because of the war in the middle east.

[Dreamcasting]

2 hours ago, Dreamcasting said:

PMs not doing well this morning. Gold down 1.7%, silver quite brutal at 3.51%

A lot of the recent bidding up was because of the war in the middle east.

Gold now down 2.38%. Silver being absolutely punished - currently -4.6%!

GBP coming under some real pressure right now also. It won't be long before it's back under 1.20 USD imo. Bailey will see to it.

[nero120]

25 minutes ago, Dreamcasting said:

Gold now down 2.38%. Silver being absolutely punished - currently -4.6%!

GBP coming under some real pressure right now also. It won't be long before it's back under 1.20 USD imo. Bailey will see to it.

Yet "digital gold" is up! Funny that! 

Prob many more shorts losing money in silver, they had to schwack the price. Won't stop it moving higher though, they best use this opportunity to cover.

[Roman Roady]

4 hours ago, PrincessNutNut said:

Eyes on the bond market again. The US voted through the bill to give the Ukraine the assets "frozen" from Russia.

The question is now: Are there enough Western buyers for Western government debt?

In my view this could in hindsight prove as significant as the decision to de-peg the USD from gold in 1971.

Would you mind elaborating on this for those of us without the insight to understand fully.

[Dreamcasting]

16 minutes ago, Roman Roady said:

Would you mind elaborating on this for those of us without the insight to understand fully.

I very much doubt anyone on here can explain anything because the entire system is upside down.

[PrincessNutNut]

6 minutes ago, Roman Roady said:

Would you mind elaborating on this for those of us without the insight to understand fully.

https://www.ft.com/content/e42dd872-f550-47f0-b203-3420cf498fcf

It's not widely reported,  but this bit is critical: The national security package includes a provision that would allow Ukraine to use funds from seized Russian assets to fund the war effort.

Most so called Russian assets are in the form of US Treasuries - which allows the US to decide this in the first place (being the counterparty that owes money).

Bonds are meant to be risk free, that allows governments to borrow cheaply. The US has just told the rest of the world that they're not - there's a counterparty risk.
If they don't like what you're doing, you lose your assets, and have them used against you.

In other words: America has just declared it will default on its debt to Russia. 

If you're China, or India (enter major Western government bond buyer of your choice), what's the message you take away here?

[Dreamcasting]

Diving like a pair of... you know what. Don't worry though, everything else up - apart from GBP

[warpig]

5 hours ago, PrincessNutNut said:

Eyes on the bond market again. The US voted through the bill to give the Ukraine the assets "frozen" from Russia.

The question is now: Are there enough Western buyers for Western government debt?

In my view this could in hindsight prove as significant as the decision to de-peg the USD from gold in 1971.

Quote

He also drew attention to the words of the Chairman of the European Central Bank, Christine Lagarde, that the use of profits from Russian assets could violate the international legal order, calling such an assessment eloquent. "This is a very dangerous precedent," Peskov said.

Earlier, the US House of Representatives approved bills on providing military assistance to Ukraine, Israel and Taiwan, on the confiscation of frozen Russian assets for their transfer to Kiev, as well as on the introduction of additional sanctions against China.

https://tass.com/politics/1778865

[Roman Roady]

1 hour ago, PrincessNutNut said:

https://www.ft.com/content/e42dd872-f550-47f0-b203-3420cf498fcf

It's not widely reported,  but this bit is critical: The national security package includes a provision that would allow Ukraine to use funds from seized Russian assets to fund the war effort.

Most so called Russian assets are in the form of US Treasuries - which allows the US to decide this in the first place (being the counterparty that owes money).

Bonds are meant to be risk free, that allows governments to borrow cheaply. The US has just told the rest of the world that they're not - there's a counterparty risk.
If they don't like what you're doing, you lose your assets, and have them used against you.

In other words: America has just declared it will default on its debt to Russia. 

If you're China, or India (enter major Western government bond buyer of your choice), what's the message you take away here?

Thanks for the explanation...when its put in those terms it sounds quite serious, why isnt it being broadcast more?

[warpig]

Just now, Roman Roady said:

Thanks for the explanation...when its put in those terms it sounds quite serious, why isnt it being broadcast more?

It hasn't happened yet... but it's part way through the process. The whole financial system is predicated on trust between nations... the US being the primary provider of bonds. Private property is the bedrock of western democracy... If this happens, no one will fully trust the US with foreign reserves... It's akin to deliberately shooting yourself in the foot... utter madness. The EU were toying with the idea of just using the interest on Russian assets to fund Ukraine and at the time, even that was considered too risky. If Congress pass this bill... it will be the beginning of the end for the reserve currency and US dominance.

[Roman Roady]

Just now, warpig said:

It hasn't happened yet... but it's part way through the process. The whole financial system is predicated on trust between nations... the US being the primary provider of bonds. Private property is the bedrock of western democracy... If this happens, no one will fully trust the US with foreign reserves... It's akin to deliberately shooting yourself in the foot... utter madness. The EU were toying with the idea of just using the interest on Russian assets to fund Ukraine and at the time, even that was considered too risky. If Congress pass this bill... it will be the beginning of the end for the reserve currency and US dominance.

so the obvious question is why are these Turkeys voting for Christmas?

[warpig]

2 hours ago, Roman Roady said:

so the obvious question is why are these Turkeys voting for Christmas?

Arrogance... 

[nero120]

They are really trying to hammer gold down in the futures market! I think though there are just too many fundamentals pushing the price higher. All this will do is allow the recent big physical buyers (CBs/SWFs/FOs/etc) to load up on cheaper physical gold... or perhaps that's the idea...?

The US is just borrowing insane amounts of money, 10 year treasury auctions are going to get more and more difficult as there just aren't the buyers out there for such a large supply at these yields. More and more are simply going to opt to store their reserves in physical gold.