Gold strategy in the current economy

[R K]

Gold is back at an all time high in £'s and silver is up since the debt ceiling BS.

How bitter and stupid are you!?

Put keep the fear in the market...nothing like a good buying op.

Why the endless ad hominems? Seriously, you sound like any other VI selling any other overpriced asset trying to find greater fools to unload onto.

Warpig asked me for a detailed explanation of my position and I gave it to him. In response I got 'utter nonsense' from him and an unrelated chart.

I've said it's in a bubble.

You've decided that bubble will go on for many years.

I've decided it probably won't. Just like NASDAQ, S&P, housing, 79/80 gold bubble and the silver Hunt Bros cornered market didn't. Of course it may spike up exponentially for a very short period. So did houses - many of those who bought in 05/6/7 still can't get out.

Edit: Btw, I also said US bonds would go up, not down contrary to the bugs claims. You'll have seen what happened to yields.

Edited August 5, 2011 by Red Knight

[Pent Up]

edit: @ Pent up

It comes from the frustration of people constantly being misguided by these RB like schills.

The HPC already happened (in Gold/Silver). The bugs were right...some people just can't accept that!

But ok, you get your way. I'll leave you to sit on that fence in peace.

Thanks. Im not exactly on the fence I'm bullish on gold. But I like to hear everyones opinions.

[Bruce Banner]

edit: @ Pent up

It comes from the frustration of people constantly being misguided by these RB like schills.

The HPC already happened (in Gold/Silver). The bugs were right...some people just can't accept that!

But ok, you get your way. I'll leave you to sit on that fence in peace.

Gold has more than doubled in price recently as I fully expected it to! Do I regret not buying any and making a 100% profit? No, not a bit, far too much hassle for a small investment and far too much risk for a large investment .

[Lepista]

Gold has more than doubled in price recently as I fully expected it to! Do I regret not buying any and making a 100% profit? No, not a bit, far too much hassle for a small investment and far too much risk for a large investment .

You should have tried the third bowl of porridge.

[Guest spp]

You should have tried the third bowl of porridge.

A few clicks over at Goldmoney...the things you've got to do to double your money currency these days.

edit: for money

Edited August 5, 2011 by spp

[Pent Up]

What will the effect be on gold should the US start QE3? the dollar will fall obviously but will this be offset by a surge in gold?

[warpig]

If you didn't understand it you should have said.

In response I got 'utter nonsense' from him and an unrelated chart.

[warpig]

This is the start of the vicious cycle where QE^X invokes additional credit rating downgrades and causes gold to soar. Negative real interest rates is the only indicator you need to watch.

What will the effect be on gold should the US start QE3? the dollar will fall obviously but will this be offset by a surge in gold?

[Pent Up]

This is the start of the vicious cycle where QE^X invokes additional credit rating downgrades and causes gold to soar. Negative real interest rates is the only indicator you need to watch.

We already have negative real interest rates in most of the western world. They can't get any lower really. Do you mean falling inflation? I expect inflation to fall as the global economy slows further and goes back into recession, which should also push gold up at the same time should it.

[Georgia O'Keeffe]

We already have negative real interest rates in most of the western world. They can't get any lower really. Do you mean falling inflation? I expect inflation to fall as the global economy slows further and goes back into recession, which should also push gold up at the same time should it.

ignoring whether gold goes up or down from here which isnt that important id highlight that If the economy goes back into recession that will likely result in Positive interest rates(even at zirp) as inflation will likely fall below zero (which is exactly what happened in 08 for alot of countries), Gold would likely only go up in that case if there was an associated default risk in that country and currency crisis like Iceland,

Edited August 6, 2011 by Mary Cassatt

[Pent Up]

If the economy goes back into recession that will likely result in Positive interest rates(even at zirp) as inflation will likely fall below zero (which is exactly what happened in 08), Gold would likely only go up in that case if there was an associated default risk in that country and currency crisis like Iceland,

You're right. Falling inflation will give positive interest rates after a point. So for real rates to fall further inflation would have to increase. But then so should gold as it's a store of real value.

Can you explain a bit more please Warpig?

[warpig]

Historically, the term inflation best described an influx of money within a financial system (money supply), in recent years, it now describes the effects of increasing the money supply in terms of "increasing prices." The shift in definition, from cause to effect, is a deliberate attempt to obfuscate the issue and reduce the central bank's culpability.

As western governments continue to increase the money supply adinfinitum through QE, this undermines the strength of each currency unit and causes prices to rise in that currency, which includes gold. To put this another way, inflation causes an erosion of purchasing power when the increase of the money supply, grows in excess of the productive capacity of a country. So inflation will continue to rise, as long as they continue to increase the money supply through QE.

The point I was trying to make is, there are 2 plays on gold right now, firstly staying out of a devaluing currency to maintain your purchasing power (contending currency) and secondly, to protect your financial assets in the event of a collapse of the banking system (fear factor). Our Keynesian leaders have painted us in to a corner and are sending the western world in to a death spiral... With each bout of QE it causes the currency to devalue, causing gold to rise in price. The market's response to recursive QE is to reduce the credit rating of that country, which plays in to the fear factor and also causes gold to rise in value.

When we talk about IR's rising, we have to remember this also increases the government's financial liabilities and given the over indebtedness of the western world, they will keep them down for as long as possible, probably until the breaking point. Japan is a good example of this. We must be ahead of the curve with IR's as this defines when to sell our gold, but I think we have a long way to go yet.

We already have negative real interest rates in most of the western world. They can't get any lower really. Do you mean falling inflation? I expect inflation to fall as the global economy slows further and goes back into recession, which should also push gold up at the same time should it.

[warpig]

The reason inflation dipped in 2009, was because the money supply reduced as balance sheets were destroyed and underlying assets were revalued. Additionally, producers reduced their profit margins to maintain the volume of sales. Unfortunately with each iteration of QE, this has pushed up the cost of underlying materials, so producers have been squeezed from both sides. I'm not sure they have the capacity to do that again and clearly QE has dealt with the reduction of the money supply. I personally don't see any short term risk of deflation, given current central banking policy. Gold should continue to rise on the 2 points in my previous post, with rising IR's as the only real concern.

You're right. Falling inflation will give positive interest rates after a point. So for real rates to fall further inflation would have to increase. But then so should gold as it's a store of real value.

Can you explain a bit more please Warpig?

[Pent Up]

The reason inflation dipped in 2009, was because the money supply reduced as balance sheets were destroyed and underlying assets were revalued. Additionally, producers reduced their profit margins to maintain the volume of sales. Unfortunately with each iteration of QE, this has pushed up the cost of underlying materials, so producers have been squeezed from both sides. I'm not sure they have the capacity to do that again and clearly QE has dealt with the reduction of the money supply. I personally don't see any short term risk of deflation, given current central banking policy. Gold should continue to rise on the 2 points in my previous post, with rising IR's as the only real concern.

Thanks warpig. That makes sense.

[Noginthenog]

View Posttricksters, on 20 July 2011 - 07:30 PM, said:

As soon as Joe Public gets involved in heavy investment in the latest big thing, it must, surely, go tits up.....mustn't it?? If 95% of the country all pile into gold, does not that alone reduce its value, just because everybody has it .?

Everyone has a house, have the value of those gone up or down? (or both?)

Cue 95% of the country piling into gold, bring it on....

[warpig]

[SEW247]

You know it's bad when Bullionbypost have stopped taking ordes!

There's a lovely little notice in red when you log onto their website!

[Democorruptcy]

The Bullionvault spreads seem very large for the US vault 1,019 to 1,089 compared to 1,035 to 1,039 for the UK

No sellers only buyers?

[Guest spp]

He who has the gold makes the rules.

[shindigger]

Whoosh!

Hope Baird honour my weekend Bunny Rabbit purchase.

[Errol]

Bugger.

Really want a correction and it goes to $1710!

[Pent Up]

I'm not waiting for a correction now, just going to load up.

£1040 now. Wish I bought more below £1000 a couple weeks back. Oh well.

Edited August 8, 2011 by Pent Up

[Fortune]

Want to have a chat with the head of global commodities at JP Morgue? Come on down and enjoy the party!

http://blythemasters.blogspot.com

Don't forget to show your appreciation! Remember to keep it clean folks.

[guitarman001]

Passed $1700!!

And silver is up a WHACK (should have held mine!)

[SEW247]

Passed $1700!!

And silver is up a WHACK (should have held mine!)

I always judge what is going on by the price of Kruggerands. They are now at £1100+ on Bullionbypost although i expect a dip once the US come on line and the manipulation continues. 1kg silver bars are up from £803 on Friday to £843 although very volatile.

The title to this thread is Gold Strategy and all I can say is that I'm glad I bought 10 oz of Gold last week and 5kgs of Silver just before the shyte storm rolled into town!