Gold strategy in the current economy

[Errol]

[Errol]

[wish I could afford one]

Post running an analysis of Gold Priced in £'s including UK Housing and the FTSE 100 priced in Gold Ounces.

[The Masked Tulip]

I've got a feeling in my water. Had it since start December. It doesn't happen very often but it may signal a shift in the relative strength of the various asset classes.

And the relationship between the various assets may no longer follow the patterns we have become used to in the last few years.

I don't want to go into it any more in case I offend anyone who is tied to an opinion. (As a trend follower, I don't actually need to act on it.)

All I would say is, pay particular attention to the behaviour of the various key asset classes over this next year for signals.

Try cranberry juice.

[Democorruptcy]

There's a chap here asking Is it time to buy gold again? by using a Coppock Indicator (the time people mourn after a bereavement).

An analysis showed, that if the funds went into a money market account paying interest at the federal funds rate when not invested in gold, this strategy would have provided an average annual return of 11.2% versus 9.5% for a continuous investment in gold from October 1, 1970 to December 31, 2012. Or, put another way, an initial investment of $100 would have grown to $8,750 when implementing this strategy versus $4,600 for a permanent investment in gold.

[sombreroloco]

It's extremely risky to buy gold now. You either expect the final stage of this bubble to grow even bigger and sell at the right time, or you expect a massive correction (30-40%) and then buy again.

The Baltic Dry Index is timidly raising again. Usually when the BDi goes up, GLD goes down.

http://www.bloomberg.com/quote/BDIY:IND/chart

[warpig]

Utter utter rubbish. Gold's purchasing power increases more quickly in a deflationary environment than an inflationary environment. The only metric gold bull's must fear is rising interest rates, nothing else matters. If we have negative real interest rates gold is going up, nothing else matters. Allow me to correct this for you.

It's extremely risky to buy <insert>anything but</insert> gold now

It's extremely risky to buy gold now. You either expect the final stage of this bubble to grow even bigger and sell at the right time, or you expect a massive correction (30-40%) and then buy again.

The Baltic Dry Index is timidly raising again. Usually when the BDi goes up, GLD goes down.

http://www.bloomberg.com/quote/BDIY:IND/chart

[robmatic]

Utter utter rubbish. Gold's purchasing power increases more quickly in a deflationary environment than an inflationary environment. The only metric gold bull's must fear is rising interest rates, nothing else matters. If we have negative real interest rates gold is going up, nothing else matters. Allow me to correct this for you.

Strange how gold has been trading in a fairly narrow £ range for well over a year then.

[warpig]

What's strange about it?

Strange how gold has been trading in a fairly narrow £ range for well over a year then.

[Democorruptcy]

If we have negative real interest rates gold is going up, nothing else matters. Allow me to correct this for you.

That's not actually correct is it?

I would agree if you had said the more negative interest rates become then the more gold will go up. The two things are not the same.

We have had negative real interest rates for ages but gold is down since 2011? It's the change in real rates that makes the difference? e.g. higher inflation and rates not going up then gold has more chance of going up, flat inflation and rates going down gold has more chance of going up, higher inflation compensated by higher rates gold may not do as well. If real rates were stuck at -1% for years with no change, gold might stay the same?

[warpig]

IMO just because your statement is true doesn't prove mine to be false. These are not mutually exclusive events, one is merely the extension of the other. If you still disagree, perhaps you could explain why you think this is the case. It seems to me you're discounting market manipulation as the main reason for a flat('ish) gold market over 2012, I would vehemently contend that position.

I would argue the longer we suffer negative real interest rates, the more money will find it's way to support higher gold prices, because a zero yield is better than a negative one.

That's not actually correct is it?

I would agree if you had said the more negative interest rates become then the more gold will go up. The two things are not the same.

We have had negative real interest rates for ages but gold is down since 2011? It's the change in real rates that makes the difference? e.g. higher inflation and rates not going up then gold has more chance of going up, flat inflation and rates going down gold has more chance of going up, higher inflation compensated by higher rates gold may not do as well. If real rates were stuck at -1% for years with no change, gold might stay the same?

Edited January 14, 2013 by warpig

[Democorruptcy]

IMO just because your statement is true doesn't prove mine to be false. These are not mutually exclusive events, one is merely the extension of the other. If you still disagree, perhaps you could explain why you think this is the case. It seems to me you're discounting market manipulation as the main reason for a flat('ish) gold market over 2012, I would vehemently contend that position.

I would argue the longer we suffer negative real interest rates, the more money will find it's way to support higher gold prices, because a zero yield is better than a negative one.

Ah... manipulation, the old blank trump card. All I'm saying is that past events have shown that it does best when real rates change. I assume you don't dispute that?

It's got purchase and storage costs, so a zero yield is negative real without a rising price to compensate for costs.

[azogar]

a bit of fun....

http://www.youtube.com/watch?v=AX64SdDqbhg

ps. for the pseudo-intellectuals who cannot cope with linear charts: http://i1018.photobucket.com/albums/af304/triple-agent/chartvoodoonomics2.gif

[warpig]

Well you had those 7 or so coordinated margin hikes over nearly as many days, that crucified the price in late 2011. If that wasn't manipulation then what was it? Margin hikes are supposed to reduce volatility, but the excessive and repetitive margin hikes simply and surreptitiously caused a waterfall decline. In addition to this, there has been extreme selling at critical junctures on the gold and silver charts, one recent trade forced 3/4 of US annual silver production on to the market over a 15 minute period. When supply exceeds demand the price has to stabilise at a lower equilibrium. This is basic economics... If I had 50 houses to sell in a town, would you put them all up for sale at the same time and create a buyers market? It's counter intuitive and likewise you see gold trading in high volume in the Asian overnight access market. Why would you sell lots of something when there's fewer buyers around? These people are trading to make money, not a loss and yet some would try and convince me these traders, who are incidentally earning hundreds of thousands of pounds a year, don't understand simple supply and demand. I object to being taken for a fool.

The CFTC does nothing because they claim they can't find any proof, but in all likelihood it's not because they're incompetent, it's because they're complicit. The government admit to meddling in the stock and bond markets to ensure stability, so why do people find it hard to believe they manipulate the gold market? After all it's a monetary metal, they have good cause and the London Gold Pool is proof they've managed the gold price before. So if you don't think the gold price is manipulated, please show me what evidence you have.

No I don't dispute it, I agree with you, but as I said, it doesn't necessarily follow that stagnant negative real interest rates, cause a flat gold price when you consider other variables.

True there are costs but it's closer to zero than nearly all other investments.

Ah... manipulation, the old blank trump card. All I'm saying is that past events have shown that it does best when real rates change. I assume you don't dispute that?

It's got purchase and storage costs, so a zero yield is negative real without a rising price to compensate for costs.

[Democorruptcy]

So if you don't think the gold price is manipulated, please show me what evidence you have.

I do not have any proof as to whether at times the gold market is manipulated up or down.

Anyway good luck with your investments.

[Errol]

Bundesbank To Commence Repatriating Gold

The German Bundesbank is developing a new approach as to where its gold will be stored. According to exclusive information, to be fully announced on Wednesday, the bank will in the future hold less gold in the New York Fed, and no more hold in Paris (Banque de France). As a result, the distribution of German gold, of which 45% is held in New York, 13% in London, 11% in Paris and 31% in Frankfurt, is about to change.

Stunning news.

http://www.zerohedge.com/news/2013-01-14/it-begins-bundesbank-commence-repatriating-gold-new-york-fed

[azogar]

Bundesbank To Commence Repatriating Gold

The German Bundesbank is developing a new approach as to where its gold will be stored. According to exclusive information, to be fully announced on Wednesday, the bank will in the future hold less gold in the New York Fed, and no more hold in Paris (Banque de France). As a result, the distribution of German gold, of which 45% is held in New York, 13% in London, 11% in Paris and 31% in Frankfurt, is about to change.

Stunning news.

http://www.zerohedge.com/news/2013-01-14/it-begins-bundesbank-commence-repatriating-gold-new-york-fed

i took the text from the quoted source and ran it through google translate:

http://www.handelsblatt.com/politik/deutschland/reserven-bundesbank-will-deutsches-gold-zurueckholen/v_detail_tab_print/7629600.html

Bundesbank will deutsches Gold zurückholen

Nach der Gründung der Bundesbank wurden große Teile der deutschen Goldreserven aus Sicherheitsgründen bei den Alliierten deponiert. Nun soll das Gold aus New York und Paris zurückgeholt werden.

FrankfurtDie Bundesbank hat ein neues Konzept ausgearbeitet, wo sie künftig ihre Goldreserven lagern will. Nach Informationen des Handelsblatts (Dienstausgabe) sieht dieses Konzept, das am kommenden Mittwoch bekanntgegeben werden soll, vor, den heimischen Standort aufzuwerten, in New York dafür weniger Gold zu lagern und überhaupt kein Gold mehr in Paris zu horten.

Damit reagiert die Notenbank auch auf einen Bericht des Bundesrechnungshofes, der die Jahresabschlüsse der Bundesbank prüft und ihr empfohlen hatte, ein aktuelles Lagerstellenkonzept zu erstellen und zu dokumentieren.

Derzeit lagert das Gold der Bundesbank ihren Angaben zufolge in New York, London, Paris und Frankfurt. In der amerikanischen Notenbank Fed lagern 45 Prozent der insgesamt 3.396 Tonnen Gold, in der Bank of England in London 13 Prozent, in der Banque de France in Paris elf Prozent und im Hauptsitz in Frankfurt 31 Prozent. Diese Verteilung soll sich nun ändern.

Bundesbank-Vorstand Carl-Ludwig Thiele hatte bereits vergangenen Herbst gesagt, es gebe keinen zwingenden Grund mehr für eine Lagerung in Frankreichs Hauptstadt. Ursprünglich hatte die Bundesrepublik zur Zeit des Kalten Krieges und der deutschen Teilung aus Sicherheitsgründen ihr Gold auf verschiedene Partnerländer, so auch Frankreich, verteilt. Dieses Argument gilt nicht mehr. Gegen Paris spricht noch ein weiteres Argument: Anders als in London oder New York bekäme die Bundesbank im Falle einer Weltwährungskrise keine Devisen.

Bundesbank wants to bring German gold

After the establishment of large parts of the German Bundesbank's gold reserves for safety were deposited with the Allies. Now, the gold from New York and Paris to be retrieved.

FrankfurtDie Bundesbank has developed a new concept, where she wants to continue storing their gold reserves. According to information of the Handelsblatt (service delivery) sees this approach which will be announced next Wednesday before, to revalue the domestic locations, in New York for less to store gold and even to hoard any more gold in Paris.

Thus, the central bank reacts to a report of the Federal Court to examine the financial statements of the Bundesbank and had advised her to create a current bearings concept and documented.

Currently, the gold of the Bundesbank outsourced their claims to New York, London, Paris and Frankfurt. In the American Federal Reserve store 45 percent of the total 3,396 tonnes of gold in the Bank of England in London, 13 percent, in the Bank of France in Paris eleven percent and 31 percent at its headquarters in Frankfurt. This distribution is about to change.

Bundesbank board member Carl-Ludwig Thiele had already said last fall that there was no compelling reason for storage in the French capital. Originally, the Federal Republic had during the Cold War and the division of Germany for security its gold to various partner countries, including France distributed. This argument no longer applies. Paris still speaks against another argument: Unlike in London or New York, the Bundesbank would receive in the event of a world crisis, no foreign currency.

[eztiger]

I'd get ready for the biggest paper operation we are ever likely to see, whilst they acquire the physical needed to send to Germany.

Of course, they don't have the ability to give everyone their gold back, so panic first, panic best.

Also look for massive moves between repositories used by the CO(n)MEX/CME.

EDIT: if you don't believe me, see the now-ancient Veneroso study:

http://www.gata.org/node/5275

The numbers just don't add up.

Get ready for the price of Tungsten to suddenly shoot up more like ;P

[Democorruptcy]

What about Graphene?

Outperforms copper

http://www.redorbit.com/news/technology/1700615/new_material_could_replace_traditional_metal_at_nanoscale_widths/?source=r_technology

Graphene coated copper is 100 times more corrosion resistant

http://www.gizmag.com/graphene-metal-corrosion/24434/

If graphene reduces the need for copper.... where does that leave silver?

[Errol]

[The Masked Tulip]

I suppose their gold had to be held by the 'victors' after WWII. Hard to argue that that's still necessary to contain the nazi threat, so no one will be able to stop them.

It's certainly very interesting, and shows a, typical of this stage of the cycle, growing insularity and distrust of others.

Fear of Soviet invasion was the main reason why Germany held so much gold in London and NY.

[azogar]

How much of it from tooth fillings?

that's held in Switzerland

[Gigantic Purple Slug]

http://www.bbc.co.uk/news/world-asia-21055206

Amateur finds massive gold nugget.

[sign_of_the_times]

decent move up in £'s this week

silver above £20 too

[Traktion]

decent move up in £'s this week

silver above £20 too

Bitcoins are at £10 each now too.

It's a shame I only have about 3 of them at the mo though!