Gold strategy in the current economy

[The Masked Tulip]

Gold's Fair Value Is $800 an Ounce

Mark Hulbert advises investors not to expect gold prices to pop back anytime soon. He points out gold's fair-market value may be no more than $800 an ounce.

http://live.wsj.com/video/golds-fair-value-is-800-an-ounce-2013-04-16-111152250/EEB6D8E1-F0AA-47B0-A55B-706C2038D57B.html#!EEB6D8E1-F0AA-47B0-A55B-706C2038D57B

[Take Me Back To London!]

Gold's Fair Value Is $800 an Ounce

http://live.wsj.com/video/golds-fair-value-is-800-an-ounce-2013-04-16-111152250/EEB6D8E1-F0AA-47B0-A55B-706C2038D57B.html#!EEB6D8E1-F0AA-47B0-A55B-706C2038D57B

Thanks for the link, Masked Tulip. You had me worried for a moment until I watched the vid. It is being put forward that gold's fair value is $800 because of gold's historical ratio to CPI. CPI in The USA is currently just under 1.5%, if one believes that, and is a government measure that bears no relation to the calculation methods of CPI 20, 30 or 40 years ago. On previous US CPI measures, price inflation would be in the order of 7 to 8%.

Going back to when gold was $800, 5 years ago, the amount of dollars in existence has more than quadrupled.

[Crashman Begins]

Slump in gold price releases years of pent-up retail demand

http://in.mobile.reuters.com/article/idINDEE93I06M20130419?irpc=932

SINGAPORE (Reuters) - Gold retailers struggled to cope this week as parents buying dowries, casual shoppers and tourists snapped up bars, coins, nuggets and jewellery as a slump in the price of the yellow metal released years of pent-up retail demand.

The price decline in the past week, the steepest in 30 years, has tarnished gold's appeal for the portfolio investors whose money had fuelled a 12-year bull run. As investors rush out, consumers that were priced out of the market for years have rushed in.

[Guest_FaFa!_*]

Slump in gold price releases years of pent-up retail demand

http://in.mobile.reuters.com/article/idINDEE93I06M20130419?irpc=932

SINGAPORE (Reuters) - Gold retailers struggled to cope this week as parents buying dowries, casual shoppers and tourists snapped up bars, coins, nuggets and jewellery as a slump in the price of the yellow metal released years of pent-up retail demand.

The price decline in the past week, the steepest in 30 years, has tarnished gold's appeal for the portfolio investors whose money had fuelled a 12-year bull run. As investors rush out, consumers that were priced out of the market for years have rushed in.

SE Asias answer to Joe Bloggs piling in is not a good sign. Ordinary people will get creamed when the big boys start selling again.

[wherebee]

SE Asias answer to Joe Bloggs piling in is not a good sign. Ordinary people will get creamed when the big boys start selling again.

I'd perhaps agree if it was Joe public piling into financial schemes involving gold investment; funnily enough there were quite a few of those schemes in Sing and Malaysia last few years - some ended in fraud and tears - but they were never that widespread. I would also be interested if anyone has stats on whether this gold rush by retail investors for metal in the hand was all CASH or actually credit based (people borrowing to buy). If the latter, then yes, a bad sign.

[Errol]

SE Asias answer to Joe Bloggs piling in is not a good sign. Ordinary people will get creamed when the big boys start selling again.

Nope. They would just buy more. A sale is a sale. Ounces are the key not dollar valuations.

[pepactonius]

Gold will not reach $5000 in the next 10 years.

Even though I'm officially a goldbug (based on my avatar pic), I certainly hope you're right. If gold reaches $5000/oz, this means the dollar is toast, probably along with the US itself.

As a natural pessimist, I'm afraid that the dollar could well collapse at some time in the next 10-20 years. However, it's encouraging to read the knowledgeable posters on this thread explaining that things are different now, and no matter how out of control US government spending gets, it won't cause any inflationary problems or currency crises. Let's hope these posters are right, and the currency problems that happened in Brazil and Mexico (for example) in the past few decades can no longer happen these days.

[Guest_FaFa!_*]

Even though I'm officially a goldbug (based on my avatar pic), I certainly hope you're right. If gold reaches $5000/oz, this means the dollar is toast, probably along with the US itself.

As a natural pessimist, I'm afraid that the dollar could well collapse at some time in the next 10-20 years. However, it's encouraging to read the knowledgeable posters on this thread explaining that things are different now, and no matter how out of control US government spending gets, it won't cause any inflationary problems or currency crises. Let's hope these posters are right, and the currency problems that happened in Brazil and Mexico (for example) in the past few decades can no longer happen these days.

1. The US government currency is not just used internally but also as an international trading currency unlike the Mexican or Brazilian currencies. Hence there is always strong demand for the dollar.

2. Moreover many developing countries are running trade surpluses with the US, again creating a strong demand for the dollar.

3. Japan has been running substantial deficits for almost 20 years, not much sign of inflation. Indeed they are needing to double the monetary base over the next 2 years in order to try to reach their target of 2% inflation.

4. The US is one of the most, if not the most, technologically advanced countries in the world. Their population is well educated, they have large amounts of natural resources, sound demographics and the worlds pre-eminent military. It is very hard to see them being displaced as the world leader.

5. Moreover the US govt deficit will decrease over the coming years and the economy will recover. It would have recovered long ago if the Republican nutters had not obstructed everything and if Obama had not been wedded to the neo-con idea that the US can run out of money.

6. The only country that could possibly replace the US is China. They are a non-starter with poor levels of education, weak military, endemic rent seeking, corruption, hideous demographics and a heavily polluted country which offers poor living standards as evidenced by their major brain drain and middle class immigration levels.

7. US dollar demand will therefore remain strong well into this century.

Hope that answers your question

Edited April 21, 2013 by FaFa!

[Errol]

1. The US government currency is not just used internally but also as an international trading currency unlike the Mexican or Brazilian currencies. Hence there is always strong demand for the dollar.

2. Moreover many developing countries are running trade surpluses with the US, again creating a strong demand for the dollar.

3. Japan has been running substantial deficits for almost 20 years, not much sign of inflation. Indeed they are needing to double the monetary base over the next 2 years in order to try to reach their target of 2% inflation.

4. The US is one of the most, if not the most, technologically advanced countries in the world. Their population is well educated, they have large amounts of natural resources, sound demographics and the worlds pre-eminent military. It is very hard to see them being displaced as the world leader.

5. Moreover the US govt deficit will decrease over the coming years and the economy will recover. It would have recovered long ago if the Republican nutters had not obstructed everything and if Obama had not been wedded to the neo-con idea that the US can run out of money.

6. The only country that could possibly replace the US is China. They are a non-starter with poor levels of education, weak military, endemic rent seeking, corruption, hideous demographics and a heavily polluted country which offers poor living standards as evidenced by their major brain drain and middle class immigration levels.

7. US dollar demand will therefore remain strong well into this century.

Hope that answers your question

(1) Quickly being changed. Yuan swaps being set up everywhere.

(3) No sign of inflation? Record gold prices in Yen?

(4) It has already been displaced.

(5) There is no recovery and the US is slowly slipping into third world status.

(7) Dollar demand is weakening every day. Every month. Only one way it's going to go now.

Edited April 21, 2013 by Errol

[Guest_FaFa!_*]

(1) Quickly being changed. Yuan swaps being set up everywhere.

(3) No sign of inflation? Record gold prices in Yen?

(4) It has already been displaced.

(5) There is no recovery and the US is slowly slipping into third world status.

That's right, no sign of inflation in Japan thus far. Given I live here, I will be sure to let you know. If the price of gold is a measure of inflation I assume prices have dropped 25% in two years, massive deflation.

I spend a great deal of my time in the third world and have been to the US. your opinions are laughable.

[Errol]

We will see. With more that 47.8 million people on food stamps (15% of the population), unemployment of close to 20% (the 'official' figures are a joke), budget overrun of $1.5 trillion, trillions upon trillions of debt, a currency fast being abandoned by the BRICS and others, a people more divided than ever before etc etc, I think America is heading in one direction only.

Oh and btw, I hold dual citizenship (US and British).

Edited April 21, 2013 by Errol

[Fortune]

Within 7 days, the "price" of gold (and probably silver) will go to zero. Then just watch what will happen next...

[Gigantic Purple Slug]

Within 7 days, the "price" of gold (and probably silver) will go to zero. Then just watch what will happen next...

That's what I like, a clear prediction with short time scales !

[pepactonius]

1. The US government currency is not just used internally but also as an international trading currency unlike the Mexican or Brazilian currencies. Hence there is always strong demand for the dollar.

2. Moreover many developing countries are running trade surpluses with the US, again creating a strong demand for the dollar.

3. Japan has been running substantial deficits for almost 20 years, not much sign of inflation. Indeed they are needing to double the monetary base over the next 2 years in order to try to reach their target of 2% inflation.

4. The US is one of the most, if not the most, technologically advanced countries in the world. Their population is well educated, they have large amounts of natural resources, sound demographics and the worlds pre-eminent military. It is very hard to see them being displaced as the world leader.

5. Moreover the US govt deficit will decrease over the coming years and the economy will recover. It would have recovered long ago if the Republican nutters had not obstructed everything and if Obama had not been wedded to the neo-con idea that the US can run out of money.

6. The only country that could possibly replace the US is China. They are a non-starter with poor levels of education, weak military, endemic rent seeking, corruption, hideous demographics and a heavily polluted country which offers poor living standards as evidenced by their major brain drain and middle class immigration levels.

7. US dollar demand will therefore remain strong well into this century.

Hope that answers your question

2) Is running trade deficits a good thing for the US -- it seems it would be better to run surpluses.

4) You always hear about how bad US education is, compared to the advanced countries. Demographics are far from "sound" (with all the baby boomers reaching retirement now), although perhaps not as bad as in certain other countries.

5) It's not clear that there is any meaningful recovery for most people in the US, and the outlook for most going forward seems bleak. Errol might be right about the US declining into 3rd world status -- we'll see.

6) I'd think that a revamped/rejuvenated unified Europe could well replace the US and China, and become the next superpower. A lot of folks are saying that the EU must unite into one country (effectively) to save the Euro. If all of Europe does somehow unite, adopting German technology, work ethic, economics, culture, language, along with the traditional militarism, maybe Europe could become the next superpower. I don't know how well all this would go over on the non-German countries, however.

[live in hope]

Chinese Gold & Silver Exchange Society Runs Out of Gold... Importing from Switzerland and London

http://www.zerohedge.com/news/2013-04-19/chinese-gold-exchange-sold-out-begins-importing-switzerland

According to a bangkok newsite, the gold jewelry is selling like hot cake since the price drop.They cannot produce the stuff fast enough. The asians know the real value of things more than us. If it good enough for them........

[Take Me Back To London!]

Something to listen to this Sunday. Cool headed, serious in-depth thoughts and positive comments on the PM market.

Jim Puplava’s Big Picture: Fast and Furious- Paper Gold vs. Physical Gold - The Real Story Behind Gold’s Decline

Kathryn Derbes of KDerbes Precious Metals LLC - “We’re Completely Out of Silver Eagles - They’re Gone”

In this segment of the Big Picture Jim looks at the large decline in gold and silver, and gets into the reasons behind the carnage, as well as the huge difference between “physical gold & silver” and “paper gold & silver”. Jim notes that investors should know why they own gold, understand it, and then leave it alone. Also, Kathy Derbes CFA, and CEO of KDerbes Precious Metals LLC, joins Jim in this segment. She notes the current record buying of physical precious metals, last seen during the Lehman crisis, and says her firm is “completely out” of Silver Eagles. Kathy is not even taking orders for more Eagles, as it may take six to eight weeks or more to acquire them.

James J Puplava CFP with Kathryn Derbes CFA

http://www.financialsensenewshour.com/broadcast/fsn2013-0420-3.mp3

[Guest_FaFa!_*]

2) Is running trade deficits a good thing for the US -- it seems it would be better to run surpluses.

World trade sums to zero so if someone is running a trade surplus it stands to reason that someone else is running a deficit. It would be better if trade were balanced. All having a surplus means is that you are making a claim on a deficit countries' goods and services at some point in the future. In employment terms, jam today not necessarily tomorrow.

4) You always hear about how bad US education is, compared to the advanced countries. Demographics are far from "sound" (with all the baby boomers reaching retirement now), although perhaps not as bad as in certain other countries.

Top 100 world universities dominated by the US. US people the most productive per capita in the world. Those are the real stats, not some anecdotal stuff you read in the media. Baby boomers are a developed country phenomenon worldwide - like I say the US will continue to grow its population during this century, unlike much of Europe, China or Japan. Plenty of room for growth.

5) It's not clear that there is any meaningful recovery for most people in the US, and the outlook for most going forward seems bleak. Errol might be right about the US declining into 3rd world status -- we'll see.

Like I said before, I have spent time in the US and the third world. US has a long way to go before we start talking about a decline to third world status. The gap between rich and poor in the US is concerning and pockets of extreme poverty will remain. Nevertheless, US, in the aggregate, will remain dominant.

6) I'd think that a revamped/rejuvenated unified Europe could well replace the US and China, and become the next superpower. A lot of folks are saying that the EU must unite into one country (effectively) to save the Euro. If all of Europe does somehow unite, adopting German technology, work ethic, economics, culture, language, along with the traditional militarism, maybe Europe could become the next superpower. I don't know how well all this would go over on the non-German countries, however.

I think the chances of that are vanishingly remote. Basically you are arguing the entirety of Europe is going to abandon its culture and become German. Surely a recovery in the US is more likely. Europe is screwed until they abandon the Euro, IMHO.

[clv101]

6) I'd think that a revamped/rejuvenated unified Europe could well replace the US and China, and become the next superpower. A lot of folks are saying that the EU must unite into one country (effectively) to save the Euro. If all of Europe does somehow unite, adopting German technology, work ethic, economics, culture, language, along with the traditional militarism, maybe Europe could become the next superpower. I don't know how well all this would go over on the non-German countries, however.

Very unlikely, Europe simply doesn't have the natural resource foundation to become a superpower.

[The Masked Tulip]

According to a bangkok newsite, the gold jewelry is selling like hot cake since the price drop.They cannot produce the stuff fast enough. The asians know the real value of things more than us. If it good enough for them........

And it is Western bloke proposes to Thai ladyboy season?

[bearwithasorehead]

Jeeze. Not again. We're going round in circles here. Errol has been very clear (umpteen times) in this thread (read it!) that he thinks gold will go much higher in the medium term. I agree with him (but the difference between myself & Errol is that he reckons that gold will become officially recognised as a monetary component, I personally guess that very high gold prices will enforce a real return on fiat).

You have to relise that long term gold holders have heard (caged, guarded) bearishness from the likes of RealistBear for half a decade! Wrong, wrong, wrong.

I can't speak for Errol, but he's mentioned $3,000 per ounce before. Which is at least my minimum target.

A challenge to the paperbugs: not one of you has made a single proper bearish prediction (RK's $1,000 target is the closest, but that can easily be passed off later as an interim bottom in the unlikely event that the paper price can get pushed that low). There must be at least a single paperbug amongst you (just one, a sole person, come on) who is willing to say: "Gold will not reach $3,000 in the next 5 years". Not the usual tedious couched crap "gold will probably maybe perhaps not go much higher this year". A proper prediction along the lines "gold will not go to $3,000 before 2020".

Mine is: "Gold will go over $3,000 per ounce before 2018".

Come on, there must be at lest one sole paperbug here with the cahonas to make an actual prediction.

Gold will go to $900-$1100 within 18 months. Absolutely. Guaranteed. This is approximately the band it was in in spring 2010.

[Errol]

Link to the recent 'Secret world of Gold' documentary - http://maxkeiser.com/2013/04/22/the-secret-world-of-gold/

It ends on the most important question: Where is the gold?

Edited April 22, 2013 by Errol

[Errol]

China Hasn't "Seen This Gold Rush In 20 Years"

Trading volume on the Shanghai gold exchange jumped to a record high on Monday

http://www.zerohedge.com/news/2013-04-22/china-hasnt-seen-gold-rush-20-years

[The Masked Tulip]

Clive Maund's view of gold - very bearish, thinks it is the first signs of a liquidity crunch and the start of bad things in stocks with IRs eventually rising sharply.

http://clivemaund.com/article.php?art_id=68&PHPSESSID=b9c6d963494d26638593656decaa12be

And silver;

http://clivemaund.com/article.php?art_id=67&PHPSESSID=b9c6d963494d26638593656decaa12be

[Errol]

Nothing would surprise me. I can only see demand for physical going up though if we get more large price drops.

[Venger]

Nothing would surprise me. I can only see demand for physical going up though if we get more large price drops.

Gold is what it is, and at the right price, has advantages for those who own. Looks to me like the gold price is falling in a trend with other commodity prices. Brent Crude down 16% on a February peak. Copper down 13% in 2013. Rubber on the Tokyo market down 8% last week. Winners and losers with that, lower prices equals opportunities for those who haven't already committed. Just need housing stock to now give back some of their hyperinflated gains of the last two decades.

REUTERS (22/04/13): Commodities slump sends slow ripples through world economy

Having poured $400 billion into commodities over the past decade, many investors are now selling. Their confidence that risky assets could only float higher on a rising tide of cheap central bank money has crumbled as the global economy fails to respond to the stimulus.

The Aus guy might be right about still feeling confident about growth in Asia, but that doesn't mean buying Aus commodities at costly prices way above what Asia can pay to support and maintain such growth. Even India sees the advantages of falling oil prices, and the lower subsidy it will begin to pay. putting more money on its side of the balance sheet.

Full story: http://www.reuters.com/article/2013/04/22/us-commodities-economy-idUSBRE93L08X20130422?feedType=RSS&feedName=businessNews