Gold strategy in the current economy

[weaker]

I agree with a lot of your points.

I'm Irish and live in the North so I can have two passports... Another one outside these juristictions I don't think is necessary.

I have 4 kids so the shiney stuff will probably be used to fund their education at some point.

My 'gamble' is that sliver does particularly well, when prices eventually rise, and will pay off my mortgage.

I've diversified into various other 'investments' which I think will hold their price relative to inflation.

Currently looking for a small piece of agricultural land for 'personal' use in a different 'governmental juristiction' outside that of sterling.

The 'landscape' of education is changing rapidly; check out "edX" for example! -- Courses on a massive variety of things with Video-Lectures, annotated and searchable, speed-uppable and slow-downable, homework, exams... and free. Save your 100 Oz .

I did hold about 1500 Oz of Silver but my metrics big toe told me $49 was a good point to bail. I sold most of it (acquired below $10/Oz) at $49.. yes, I picked the top (by accident). I'll let my remaining few 100 Oz of physical run for the ride. Oooh-arrrrr.

Yes the assumption is PMs will rise long term as in next 5-20 years. You all may be right but you have absolutely no way of knowing.

If we are #turningjapanese (and the evidence is clearly building that we are) then our currency will soar and we will be in deflation for 2 decades.

I am NOT saying this or that will happen. (Though there is more than 50/50 that it is the latter but NO-ONE knows!)

If you bought g and s in the last decade then you should be OK whatever. But you cannot KNOW it will secure your retirement etc. I will gladly hold on to miners for years and years if the market has restarted a long term trend up. But if not I'm not going to hang around as I have no idea what WILL happen and I would be an idiot and arrogant beyond belief to believe that I do.

The price and trend will tell me what to do. Not what the soothsayers say because they don't know.

Whatever they prognosticate they may be right or they may be wrong but they don't know! That is their arrogance. Remember too their business models require them to be bullish.

Agreed there are no guarantees. Gold has historically and un-intuitively done very well during deflationary periods; perhaps due to the perception that TPTB are losing it...

I don't trust paper, though. Ask yourself, do you actually own any gold? Really.

Edited June 6, 2014 by weaker

[Killer Bunny]

Gold has historically and un-intuitively done very well during deflationary periods

Pls remind - which years was that?

[The Masked Tulip]

Silver is up nicely this morning. Still too early to judge anything from either gold or silver but something to keep an eye on.

[weaker]

Pls remind - which years was that?

Since we haven't really had much of a real delfation since the thirties it's hard to quantify.

I think the argument is based on the financial stress induced by deflation giving a boost to gold.

Perhaps the 'boost' happens just prior to the scare... dunno. I don't think it's as clear cut as gold is a good inflation/deflation hedge.

Edited June 6, 2014 by weaker

[Killer Bunny]

The chart does not show gold rises in deflationary times and I do not know about prior to 1970. I repeat my query.

Is it possible such a statement is bunkum?

[The Masked Tulip]

http://mobile.reuters.com/article/idUSL3N0N70XE20140415?irpc=932

[weaker]

http://mobile.reuters.com/article/idUSL3N0N70XE20140415?irpc=932

It's not as clear-cut as the WGC seems to think.

http://www.zerohedge.com/news/2014-03-22/how-china-imported-record-70-billion-physical-gold-without-sending-price-gold-soarin

This brings us to the speculative conclusion of this article: when we previously contemplated what the end of funding deals (which the PBOC and the China Politburo seems rather set on) may mean for the price of other commodities, we agreed with Goldman that it would be certainly negative. And yet in the case of gold, it just may be that even if China were to dump its physical to some willing 3rd party buyer, its inevitable cover of futures "hedges", i.e. buying gold in the paper market, may not only offset the physical selling, but send the price of gold back to levels seen at the end of 2012 when gold CCFDs really took off in earnest.

In other words, from a purely mechanistical standpoint, the unwind of China's shadow banking system, while negative for all non-precious metals-based commodities, may be just the gift that all those patient gold (and silver) investors have been waiting for.

[weaker]

it's an interesting question.....if....

http://www.zerohedge.com/news/2014-06-09/bronze-swan-lands-goldman-explains-how-china-commodity-unwind-will-happen

if we are right that somehow China managed to push gold lower via gold CFDs, then the unwind pushes gold higher:

Here's how that might work:

In the gold markets, the paper or synthetic 'demand/supply' dominates pricing as opposed to the non-precious metals which have at least a grain of fundamental sense to them still

Throughout 2012/2013 - as the gold CFDs were booming, Chinese demand for physical gold was soaring as the price plunged (due to the forward hedging required in the CFD transactions which pressured gold swaps/futures lower and thus dominated pricing)

As CFD unwinds hit en masse, these flows must unwind (cover hedges and ensure the underlying physical is there... and if not buy it)

This will pressure gold futures prices higher and because unlike in non-precious commodities where spot markets wag the tail of the futures markets - spot gold will likely be dragged higher also (as we know the demand for the physical has been high).

Edited June 10, 2014 by weaker

[Killer Bunny]

1. I note we did not see further clarification (aka clarification) of gold does well in deflation. I'm only asking for evidence of that thrown around statement

2. Another day another $ rise along with PM rise... On verra.

[weaker]

1. I note we did not see further clarification (aka clarification) of gold does well in deflation. I'm only asking for evidence of that thrown around statement

Since we could argue forever about what we even class as a "deflationary period", and behaviour during real deflations e.g. great depression was whilst a gold standard existed, it's not a clear cut argument... but I tried to indicate my thoughts below.

If we took simple recessions (grey areas) as deflationary periods, then the evidence indicates gold does well during those recessions.

If we look at CPI, when it went negative YOY, Gold did quite well just prior (the 'boost' I was talking about, poss due to financial system stress), and pretty well during that epsode.

[Killer Bunny]

Thanks however I remain unconvinced and I will not labour the point

[Errol]

The current 'missing' metals scandal hitting China will move to gold in London/New York at some point. When it does, expect some interesting developments.

[zugzwang]

Since we could argue forever about what we even class as a "deflationary period", and behaviour during real deflations e.g. great depression was whilst a gold standard existed, it's not a clear cut argument... but I tried to indicate my thoughts below.

If we took simple recessions (grey areas) as deflationary periods, then the evidence indicates gold does well during those recessions.

If we look at CPI, when it went negative YOY, Gold did quite well just prior (the 'boost' I was talking about, poss due to financial system stress), and pretty well during that epsode.

Or maybe people buy during a downturn because they've learned to expect a reflationary response from govt?

[weaker]

Or maybe people buy during a downturn because they've learned to expect a reflationary response from govt?

Yes, there may be something in that.

The short recessions in 1990 & 2001 were different in my memory from the 2009+ episode; people (like Schiff) were predicting trouble, and it was/is more a crisis of the financial system requiring a response from Government than I remember 1990/2001 being.

[The Masked Tulip]

Syria. Iraq. Al Qaeda style militia now in control of Mosul and large parts of Western Iraq. In Mosul they apparently gained vast sums of cash in the banks and loads of military kit supplied by the US. Is the Middle East truly about to explode in a major Shiite Sunni war?

Gold? Silver? Oil? Lockheed Martin? BAE?

[shindigger]

Syria. Iraq. Al Qaeda style militia now in control of Mosul and large parts of Western Iraq. In Mosul they apparently gained vast sums of cash in the banks and loads of military kit supplied by the US. Is the Middle East truly about to explode in a major Shiite Sunni war?

Gold? Silver? Oil? Lockheed Martin? BAE?

And Statoil?

[Killer Bunny]

2. Another day another $ rise along with PM rise... On verra.

Well look at that: DX up again and above 200MA. AND. GDXJ up 4.5%!!!

In a rally you want to see GDXJ outperforming GDX and they o/p S and then G. That exactly what happened today.

S 20.5 needs to be taken out. On verra.

[Democorruptcy]

Or maybe people buy during a downturn because they've learned to expect a reflationary response from govt?

It's the rate of change of real interest rates. When recessions hit if real interest rates drop Gold does well.

[The Masked Tulip]

Miners are up considerably. Allied Nevada was down to the 2.70ish last Firday. Closed today at 3.45. Other gold and silver miners doing very well.

[Killer Bunny]

I've been highlighting 19.5 as first important point that Silver needs to take out for the market to be interesting again - as opposed to concerning.

Also, GDXJ has to be outperforming GDX and then S then G. Check, check and check.

So, first hurdle attained and very likely jumped over.

Next is S taking out 20/20.5 for PMs to be on the huge rally I've been going on about for months. As I say, if these are not taken out then I've been wrong, I sell and move on. If they are, then I've long said GDXJ could roughly treble, G 1550/1600. This or next year.

[weaker]

This does not appear to be over by a long shot.

http://www.bloomberg.com/news/2014-06-10/s-p-may-cut-austrian-banks-on-doubts-about-future-state-support.html

S&P May Cut Austrian Banks on Doubts About Future Support

By Alexander Weber Jun 10, 2014 6:44 PM GMT+0100

Austria’s biggest banks were put under review for a possible downgrade by Standard & Poor’s Ratings Service as the government’s plan to bail in bondholders of a nationalized bank reverberates through the sector.

S&P today placed the ratings of seven banks including Erste Group Bank AG (EBS), Raiffeisen Zentralbank AG, Raiffeisen Bank International AG (RBI) and UniCredit Bank Austria AG on CreditWatch negative. It said it may downgrade the banks within three months if it thinks that government support for Austria-based lenders weakens or if industry risks rise.

Austria’s Finance Minister Michael Spindelegger is due to present legislation tomorrow that will force losses on holders of 900 million euros ($1.22 billion) of subordinated debt of nationalized Hypo Alpe-Adria-Bank International AG. The act will effectively renege a guarantee for those bonds given by the province of Carinthia, implying that a fully state-owned bank chooses not to pay some of its debt.

Austria shifts Hypo winding-down burden to investors

Financial Times ‎- 1 day ago

The Austrian government plans to bail in €890m of publicly guaranteed subordinated debt in Hypo Alpe Adria

[Killer Bunny]

Yeah, S&P just confirmed secure status of China. I mean, for goodness sake.

[The Masked Tulip]

I am pretty sure that we have seen our summer gold and silver low. Obama is about to speak on Iraq - let's hear what heh as to say but after that is over I think it is pretty much gas to the pedal between now and the autumn at least.

[The Masked Tulip]

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Edited June 12, 2014 by The Masked Tulip

[200p]

I think it is a good time to take a look at gold for the longer term.