Gold Reaches $500/oz!

[malco]

After a week or so of struggle, gold finally struggled over $500 an ounce earlier today. Currently it's dropping away, with a bit of luck it'll fall back to 480 or even less and give us a chance to nip in and load up for the next climb.

[Guest Riser]

After a week or so of struggle, gold finally struggled over $500 an ounce earlier today. Currently it's dropping away, with a bit of luck it'll fall back to 480 or even less and give us a chance to nip in and load up for the next climb.

Looking at the chart you can see why $500 is such a psychological barrier for gold to break through we are probably currently in the hands of traders who see strong resistance at $500 even though it means nothing when you consider inflation adjusted prices. I suspect the central banks and those looking to drive the price of gold down have been waiting for this opportunity and will now do all they can.

Much of the strength in this rally can be seen during overnight trading in the Far East, every time the UK and US markets drive the price down, they say thanks very much and buy at discounted prices, whether this will continue after the traditional buying period ends at Christmas is another matter but this gold bull seems very strong

EDIT: Once we break $500 then what used to be reistance should act as support giving new investors more confidence to join the party there is an example of this after the 1980 spike.

Edited November 29, 2005 by Riser

[Civil Servant]

I'm unsure as to whether breaching $500 will cause more folk to pile in (as the BTL brigade etc. start to read about gold on the BBC) or whether it will trigger a lot of sell orders. I've set aside a further sum for putting into gold, to build on existing holdings bought some time ago (but still below 7% of my STR fund) and will probably spread the timing of this investment to try and balance these risks.

Not very sophisticated I know, but hey-ho, still got to keep the day job going....

[Fancypants]

I'm unsure as to whether breaching $500 will cause more folk to pile in (as the BTL brigade etc. start to read about gold on the BBC) or whether it will trigger a lot of sell orders. I've set aside a further sum for putting into gold, to build on existing holdings bought some time ago (but still below 7% of my STR fund) and will probably spread the timing of this investment to try and balance these risks.

Not very sophisticated I know, but hey-ho, still got to keep the day job going....

I'm looking for a good entry point for a portion of my burgeoning (but still small) house deposit. The fact that gold has suddenly gone overground is making me feel a bit uneasy. I'd be quite pleased if things calmed down for a few weeks now.

[oracle]

I'm looking for a good entry point for a portion of my burgeoning (but still small) house deposit. The fact that gold has suddenly gone overground is making me feel a bit uneasy. I'd be quite pleased if things calmed down for a few weeks now.

no need to panic.do your homework on market cycles.

this has the feel of the 1970's -1980's cycle about it....so commodities are where it's at for another 10 years!!!!!...with resultant rises in interest rates globally.

[Guest]

Oracle,

The problem is that commodities aren't as wizzy as the Internet or as sexy as Sarah Beeny.

[BandWagon]

Oracle,

The problem is that commodities aren't as wizzy as the Internet or as sexy as Sarah Beeny.

10 years ago no-one wanted to touch property, it was dull and boring and prone to losing money.

[mercsl]

My target is $510-512 within the next few days,

followed by a pullback into Christmas, and then a good run higher in January.

Just a guess- no guarantee. But that is how I am trading it now

- -

"The problem is that commodities aren't as wizzy as the Internet or as sexy as Sarah Beeny."

Gold will be more whizzy than internets, and sexier than Sarah before this big cycle is done.

And Property investing may be like the plague when is done.

I listened to a laughable internet on Bloomberg, they were asking one of their "experts" whether

Gold might be going into a bull market if it stays above $500. The expert was doubtful.

He failed to point out that Gold has quietly Doubled in the last 4 years. Property doubles in 4 years, and it

is on everyone's shopping list. Gold doubles, and they wonder if it is headed towards a Bull market.

Question: which do you want to own??

Well it only taken it 20 years to get back to the $500 level...

Why don't you show everyone a graph with the price of gold inflation adjusted Your $500 could buy WAY more back in 1980

I think the US price index was 86.9 approx in 1980, october 2005 is 199.2 so investing $500 in gold in 1980 would give you $218 today..some hedge against inflation

Edited November 30, 2005 by mercsl

[OnlyMe]

Well it only taken it 20 years to get back to the $500 level...

Don't laugh, that could be happening in a lot of markets soon.

[oracle]

My target is $510-512 within the next few days,

followed by a pullback into Christmas, and then a good run higher in January.

Just a guess- no guarantee. But that is how I am trading it now

- -

"The problem is that commodities aren't as wizzy as the Internet or as sexy as Sarah Beeny."

Gold will be more whizzy than internets, and sexier than Sarah before this big cycle is done.

And Property investing may be like the plague when is done.

I listened to a laughable internet on Bloomberg, they were asking one of their "experts" whether

Gold might be going into a bull market if it stays above $500. The expert was doubtful.

He failed to point out that Gold has quietly Doubled in the last 4 years. Property doubles in 4 years, and it

is on everyone's shopping list. Gold doubles, and they wonder if it is headed towards a Bull market.

Question: which do you want to own??

absolutely doc, doubts about gold

complacency about property.

I'll go for the doubts every time!!!

[oracle]

Well it only taken it 20 years to get back to the $500 level...

Why don't you show everyone a graph with the price of gold inflation adjusted Your $500 could buy WAY more back in 1980

I think the US price index was 86.9 approx in 1980, october 2005 is 199.2 so investing $500 in gold in 1980 would give you $218 today..some hedge against inflation

erm nope!!!!.....If you had bought gold in 1980 (for $500)....that would be more like $1500 in todays money.....inflation was absolutely rampant then.

IF this going to be the new bubble,then we could be talking about $3000/oz plus at peak!!!!

what can make it the new bubble?

1)increased demand for jewellry from asia.

2)continued political instability/war/terrorism

3)foreign central banks buying(well spotted bubb)

4)flow of capital from property to HARD currency....if the trade defecit stays bad.

5)media hype leading to real global speculation.

6)poor relative performance of stockmarkets

7)commodity price inflation,feeding through to official stats.

I think the top 5 are the main drivers,of course 4 and 5 will only happen when the smart money has been overweight for ages and is looking for the exit at the best price possible....so I'm sitting tight with mine until I see it splattered all over the papers and everybody talking about it down the pub.

[colonel faulkner]

erm nope!!!!.....If you had bought gold in 1980 (for $500)....that would be more like $1500 in todays money.....inflation was absolutely rampant then.

Erm, yes.

Merc's point seems valid. If you bought 1oz for 500 USD then, and sold it today, you could only buy a third (using your figures) as much stuff as you could have done then with that same 500 dollars.

[Tempest]

I am no gold expert but having lived (child) through 70s, (adolescent) through 80s and (adult) from 90s on my view of gold has always been coloured by what happened in the 70s and early 80s (I remember watching the "Money programme" with my dad on BBC2 on Sunday nights.

My simplisitic view can be summarised as (1) gold can be a good short term hedge against inflation which may devalue paper (eg fiat money) assets; (2) when it rises rapidly and persistently it is telling us that some people (and then more people) are moving out of those paper assets; and (3) probably because something is not right with the market/economy in which those paper assets are.

Gold is not of itself weath creating (although I agree it can be traded profitably) and therefore not a good long term growth asset but more a temporary haven from turmoil (or potential turmoil).

Reading this thread my qustions would be: what is the gold price now telling us about the state of our western economies and is it actually all that bad if you factor in inflation (ie should we only be worried if gold hits $1500+)?

I would love to see a "real" inflation adjusted gold price over the last 35 yrs since the gold standard was dropped. Would that tell us more? Anyone?

[Guest Riser]

I am no gold expert but having lived (child) through 70s, (adolescent) through 80s and (adult) from 90s on my view of gold has always been coloured by what happened in the 70s and early 80s (I remember watching the "Money programme" with my dad on BBC2 on Sunday nights.

My simplisitic view can be summarised as (1) gold can be a good short term hedge against inflation which may devalue paper (eg fiat money) assets; (2) when it rises rapidly and persistently it is telling us that some people (and then more people) are moving out of those paper assets; and (3) probably because something is not right with the market/economy in which those paper assets are.

Gold is not of itself weath creating (although I agree it can be traded profitably) and therefore not a good long term growth asset but more a temporary haven from turmoil (or potential turmoil).

Reading this thread my qustions would be: what is the gold price now telling us about the state of our western economies and is it actually all that bad if you factor in inflation (ie should we only be worried if gold hits $1500+)?

I would love to see a "real" inflation adjusted gold price over the last 35 yrs since the gold standard was dropped. Would that tell us more? Anyone?

Here you go, I have taken the US$ price Max and Min back to 1970 and adjusted using the same UK inflation weights used by Nationwide, I know this won't be exact as exchange rates will be different but gives a good indication. If anyone has annual Sterling gold prices I could easily substitute.

Looking at the chart we are nowhere near any peak in prices at present, if there is a gold rush then prices over $2000 are quite possible

$ gold adjusted for UK inflation

[FTBagain]

Riser,

Interesting graph. Looks very like the housing market for the same period, if delay by about 1 to 2 years!

House prices down gold up at this phase of the cycle?

And a very big thanks that graph will come in very handy.

[mongoose]

Well it only taken it 20 years to get back to the $500 level...

Why don't you show everyone a graph with the price of gold inflation adjusted Your $500 could buy WAY more back in 1980

I think the US price index was 86.9 approx in 1980, october 2005 is 199.2 so investing $500 in gold in 1980 would give you $218 today..some hedge against inflation

Buying gold in 1980 would have meant buying at the peak of that cycle. Look a bit further back and you could have bought at $35 in 1970.

It's all about timing - you have to decide whether gold is undervalued or overvalued at this point in time, and what the movement in price will be over the coming years. I certainly feel it is on an upward trend and am putting my money where my mouth is.

[Manic Miner]

Here you go, I have taken the US$ price Max and Min back to 1970 and adjusted using the same UK inflation weights used by Nationwide, I know this won't be exact as exchange rates will be different but gives a good indication.

Good work with the graph Riser, it illustrates how gold is historically cheap, which is to be expected after the sell off by central banks over the last couple of decades.

The question is when confidence in the dollar and US debt collapses where do the petro-dollars and supluses from the Asian producers go? I'm guessing they'll accumulate gold, which IMHO will lead to something pretty vertical out beyond the right hand side of the chart. Anyone have an opinion of when though?

[FTBagain]

Buying gold in 1980 would have meant buying at the peak of that cycle. Look a bit further back and you could have bought at $35 in 1970.

It's all about timing - you have to decide whether gold is undervalued or overvalued at this point in time, and what the movement in price will be over the coming years. I certainly feel it is on an upward trend and am putting my money where my mouth is.

Me too. Although Mrs FTBagain isn't so sure!

[Guest Riser]

Hard hitting report in todays Telegraph slams Brown's gold sales saying they cost UK £1.5 billion, prudence my ar$e.

Brown's great bullion sale has cost us £1.6bn

Brown's great bullion sale has cost us £1.6bn

By Ambrose Evans-Pritchard (Filed: 01/12/2005)

With gold surging to 22-year highs of more than $500 an ounce, Gordon Brown's fire sale auction of most of Britain's bullion reserves has so far cost taxpayers £1.6billion.

The Chancellor ordered the Bank of England to sell 60pc of its gold in 17 auctions between July 1999 and March 2002..................

This was a foolish and politically inspired act," said Ross Norman, director of TheBullionDesk.com.

"He should have looked more carefully at gold's fundamentals. South African mine supply is at the lowest level in 53 years, while we're seeing fresh demand from China and India," he said................

Gold has yet to breach stiff resistance at $509.25, reached in a brief "bear-trap" spike in 1983.

If it can break higher, gold could charge straight up to the next peak of $711. "If it breaks $500 an ounce, it's going to $700," said Issy Bacher from Cycle Trends.

The latest buying follows an announcement by Russia that it plans to raise the share of gold in its fast-growing reserves from 5pc to 10pc, suggesting that central banks may now be switching to the buy-side.

Stephen Lewis from Monument Securities said gold was sending a message about the imbalanced state of the world economy. "Central banks have stuck to their easy credit stance for too long. Investors are losing faith in paper currencies," he said.

PS this thread may be better in financial

[assetpriceinflation]

I would urge everybody who has read / contributed to this thread to read the following article;

http://www.financialsense.com/editorials/b.../2005/1129.html

All summer long i was weighing up the inflation v deflation debate for the future before finally siding with inflation. This thesis would support that view and i'd therefore expect GOLD to rise strongly over the next 4 years.

Perhaps to $700/oz by end of 06 and wouldn't rule out $1200 - $1500/oz by 2010.

[paradox]

Just read this article very carefully.

Three things occur to me.

1) the only way to protect yourself in this situation is hold commodities, a coffee farm or a tin mine in a cheap place to live would be ideal. That way you are protected both ways - if the Fed is successful in ramping up inflation to meet the overvalued asset prices then the price of your coffee will go up with it. If they are not successful then you are not going to be hit by the collapse of equity and housing bubbles.

2) Could the arguments in the article be linked to the decision of the Fed to stop publishing the M3 figures.

3) I am scared!

[Tempest]

Riser, thats a great graph, many thanks.

Very interesting - we are nowhere near the highs which signal meltdown/high inflation (nor would I expect us to be). But clearly the tide is turning. I can see $500 as a new floor in a couple of months and more rises in medium term (not necessarily because inflation or other catastophe is here but because of fear in investors that something has to give sometime, somewhere to solve the structural problems).

Would gold mining shares be a good hedge? I see a lot of gold ramping on other sites and can understand the trading attractions but one could have raised good arguments for gold this time last year and look where equities have gone in that time.

There's always premium bonds I suppose...

PS Riser, how different woudl the graph look with exchange rates reflected - my suspicion is that it might affect the earlier years but not so much the later ones.

[Guest Riser]

I don't think I would call Japan a soft landing, someone must have a graph but prices are currently much lower than the peak, also the US economy was in a different part f its cycle so it wuld be wrong to draw comparisons although Brown has been buying Dollars like crazy this year to support the US increasing our exposure from something like $100 Billion to $180 Billion in the last 12 months. When the dollar crashes it will make the £1.5 Billion he wasted from the gold sale look like peanuts.

Gold futures resume climb; copper tops $2.10

SAN FRANCISCO (AFX) -- Gold futures resumed their climb toward $500 an ounce

Thursday, attempting to recoup the losses from the previous session, while

copper prices rose to new heights above the $2.10-a-pound level. December gold

was last at $498 an ounce, up $3.40. December silver tacked on 4.5 cents to

trade at $8.325 an ounce. On Monday, it traded as high as $8.375 -- that's the

highest futures price since 1987. At the same time, December copper futures

continued to reach record levels, trading up 2.5 cents at $2.10 after a high of

$2.105.

Brown throws more UK money down the toilet

EDIT: After spending a week consolidating it looks like gold is now making a decisive break through $500 next stop $515 after that $700

Edited December 1, 2005 by Riser

[GCS15]

Buy some soveriegns for goodness sake. $500 oz is still cheap

[oracle]

Erm, yes.

Merc's point seems valid. If you bought 1oz for 500 USD then, and sold it today, you could only buy a third (using your figures) as much stuff as you could have done then with that same 500 dollars.

we seem to have our wires crossed.

if that same $500 accrued interest at the rate of inflation...a zero real growth scenario,then that amount would be about $1500 now.

which is why gold is actually cheap now. at $500 now,that would equate to about $175 "old" dollars.

so in that sense what you are saying is correct,that the asset you held has just lost 2/3 of its value.....but that's the price you pay for getting timing on an investment wrong,and not having the guts to cut your losses if you start to lose money.

you could say exactly the same for many shares,bonds,commodities....and property.

......if the average 3 bed ends up at 100k in 2009,when it cost that much in 2000...you have LOST 9 years worth of inflation,compounded.(if you want to do the maths,even with government fiddled figures that will work out something like 30%)