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The New Bubble - Gold


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BUT........ and Bubb you'll be aware of this the US decision to stop compiling the M3 looks suspiously like a sign that the US will start printing $ to inflate away the US debt. That could be a trigger for the $ falling.

The money creation process is entirely reversible and entirely as fast through the FRB platform.

Not publishin the M3 could equally be to hide the amount of monetary deflation the bank has in mind.

I'll remind you, FED interest rates rose 400% last year... What do think that could do to the global money supply and economy ?

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Gordon Brown should be held accountable for that sale once the shit hit the fan. Those reserves belonged to the country and at the very least he should have debated it in the commons. Did he do this at the time? Does anyone remember? <_<

Nope he just announced it, sold the gold and used the money to buy euros. Nice one Gordon. Very prudent.

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Not sure if gold is really a mugs game, but for the average investor it's difficult to make serious money out of it. You buy gold at $500+ an ounce, and it has to go to $1000+ before you've doubled your money. Banks won't give you a mortgage, based on the title deed to the gold, to gear up.

Of course one could use futures and spread betting to gear up, but for most investors that's not a realistic option. You might be right long-term, but in the short-term you can get shaken out of your position - so even if gold goes to $1000 by 2010, unless you've got deep pockets you're shaken out if there's any fall.

OK, you could buy gold miners, but which ones?

And is gold always a hedge against recession? If the Indian and Chinese economies go into recession, doesn't that mean reduced demand for gold?

And if there is a mega, mega recession, can you be sure that the institutions holding your gold will stay afloat? Are you going to buy physical gold and keep it under your bed?

As I've already suggested, in my opinion too many people seem to think that the late 1970s will play out all over again. Does history really repeat itself? And if history does repeat itself, consider the possibility that there'll be a big fall before the rise.

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And is gold always a hedge against recession?

Gold is a hedge against inflation, not deflation.

As I said in another thread a while ago, it really all comes down to what the stupid money does. If Joe Average starts to see gold as his next pension, then it could hit $10,000 in a few years... if not, and there's a recession, it could be lower than today.

I'm actually surprised that the central banks haven't been selling to drop the price below $500 again. Maybe they're running out of gold to sell.

I just wish I'd had more money to put into gold and mining shares a few years ago when it was obviously cheap, rather than today when it's looking a bit bubbly for my taste.

Edited by MarkG
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I think its on its way up becuase people with cash were hoping BOE rates to go up, it didnt so the money is piling into gold now. Just look at todays jump in prices. In addition on March 26 2006 the Fed will stop publishing how many $ they print. This says to me and I expect alot of others that the $ is to be diluted to avoid an internal recession/crash and they are not worried about johnny foreigner who is holding their $.

So when the currencies weaken and assets are over priced go back to basics and start again.... Gold. :)

Thankyou :)

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Nope he just announced it, sold the gold and used the money to buy euros. Nice one Gordon. Very prudent.

Gordon Brown has a lot to account for, but I suspect that in his usual arrogant way he will keep his mouth shut about his economic crimes and to continue to hide behind the lifeless cardboard cutout image of himself that he projects.

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Yeah, for the medium term (50 years or so) I suspect that gold is still a good buy at these levels, but in the short term (2-3 years) I wouldn't be surprised to see it drop back 10-20% if there's a recession and no bubble buying. In the long term it's likely to become irrelevant, unless we get a major collapse... there's plenty of gold in the rest of the universe, if we can get to it.

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Aren't UK house prices a UK phenomena?

Aren't Gold prices an international phenomena?

So when the "ordinairy" bloke in the pub starts talking about *GOLD* will that make any difference to the price of GOLD?

Surely the "buying power" of the ordinairy bloke in an ordinairy (UK) pub has absolutely no impact on the "price of gold" which is an international phenomena controlled by HUGELY wealthy international dudes such as Asian central banks etc

Maybe UK based sheeple can affect UK house prices, but can they make the slightest impact on the internationally traded commodity that is GOLD? :ph34r:

Love your 'Yakuza in Car' badge. Where did you get it?

Program on tv here yesterday (news, actually!) reporting young ladies buying little wooden cases of gold bars like they were cosmetics. The latest 'must have' for young ladies. (serious trend setters here,btw)

The news also reported that there was only 30 years left of gold below ground before it's all gone! (so fill your bags now).

Peak Gold anyone? What would do for the mining stocks? Come to think of it does anyone know if such an estimation is possible? Clever geologists please chip in.

Finally the yen is really weakening badly (no poo,man). Stocks at 5 year highs and record gold prices. I think all is not well with our 'recovery' but we will see.

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DrBubb,

You're perhaps not the average investor. Making sense of junior mining share shares requires a certain amount of skill and research. And even if the gold price goes up, that's no guarantee that the share of your junior miner will do the same. As for futures and SBs...

Personally feeling very bullish about the stock markets - any fall in property prices might actually help. SIPP reversal is also good news for UK stocks, as I would guess that some of the money earmarked for property will have to go into equities.

As for technology - some of the tech companies around are in better shape than they were five years ago, but their share prices are multiples lower.

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The latest 'must have' for young ladies.

Lots of chicks dig gold and men who give them gold: IMHO it's one of the biggest reasons why it's maintained its value over the years.

Surely the "buying power" of the ordinairy bloke in an ordinairy (UK) pub has absolutely no impact on the "price of gold" which is an international phenomena controlled by HUGELY wealthy international dudes such as Asian central banks etc

If I remember correctly, there's something like a hundred thousand tons of gold in the world. If every bloke in Britain bought an ounce this weekend, that would be about 1% of the entire world supply stuffed under our matresses. If every person in China bought an ounce, they'd have nearly 40% of the world's gold.

That's another reason why gold has held its value: there simply isn't much of it... less than an ounce for every person on the planet.

(P.S. Please correct me if I'm wrong about the total amount mined)

Edited by MarkG
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MarkG is correct.

Money needs to be universally accepted as a store of value, easy to store and transport, and crucially difficult to create.

Now when the chap who is about to take over from Greenspan says things like "The US government has a technology called a printing press...that allows it to produce as many US dollars as it wishes at essentially no cost." Bernanke 2002.

The you have to start wondering whether you want to be holding $. In the absense of any real productivity increase each $ the US prints decreases the 'real' value of the $ you hold.

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Can somebody tell me, if buying gold is a hedge against inflation.

If I put 10 to 20% of my savings into gold as I understand is the recommended amount , as 80 to 90% of my savings is still going to be in cash, if there is high inflation is it going to make much difference to my

general wealth overall? Im sure i`m missing something!

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Can somebody tell me, if buying gold is a hedge against inflation.

If I put 10 to 20% of my savings into gold as I understand is the recommended amount , as 80 to 90% of my savings is still going to be in cash, if there is high inflation is it going to make much difference to my

general wealth overall? Im sure i`m missing something!

In the long term, yes gold is a currency with stable real value. But "long term" means decades. Cycles tend to be long. Many have pointed out that gold has been a dismal store of value since the early 1980s. Well, it has been no worse than the dollar actually, observing that the $/Au xchange rate has wandered about between 250 and 500 over the last 25 years. But except for that particular period (of fairly cheap and plentiful oil and falling interest rates) gold did pretty well in holding its real value. If you compare gold to the price of oil since the end of the war, there have been variations but the long term average has stayed about the same (and we are still well below the long term average of I think 17 barrels of oil per ounce). I have read somewhere that in the time of Nebuchadnezzar (spelling?) a loaf of bread cost about the same in gold as it does today.

Obviously there are other ways of storing your money. The problem is, the combination of possible Peak Oil combined with US's currency weakness make the next ten years rather hard to read. I suspect more and more people are starting to appreciate that we could be moving into quite a different situation that we have no prior model to anticipate. So getting some gold looks more and more attractive. As others have pointed it, relative to the amount of wealth sloshing around in the world, gold is amazingly cheap. Just a tiny shift out of stocks into gold would send the price way up.

I have mixed feelings about the current rise. It is peculiarly consistent at $10/week, for instance. Is it a managed rise? And it is attracting too much attention. Gold has climbed an amasing 13% in the last month. There could be a "spike" too early leading to a fall-back and disillusion. I was hoping for a nice slow rise over the next year so I could load up steadily.

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I commented that gold was a bubble ages ago - when everyone here was screaming BUY! Don't follow the herd - the real treats are always in the other direction.

Yes and if they took your advice they would have lost money! The herd have not even heard of this in any real numbers yet.

The majority of the herd are still in BTL. :D

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I couldn't care less if gold is the new bubble.

My primary aim with investment is preservation of capital. The secondary aim is making a respectable real return on that capital.

Until recently I'd never held gold, for all the reasons that have been put forward by sceptics on this thread. The arguments that have been articulated against gold are reasonable and shouldn't be dismissed. However, I come back to my primary aim - preservation of capital. In thirty years of investing I've never experienced a time when systemic risk has been so high. No matter how I spread my investments, no matter how much I lean toward ensuring liquidity and near-cash, now matter how I try and hedge against both deflation and inflation, there now exist scenarios where complete loss of capital is a possibility.

...unless I hold gold.

For this reason I have a been a (reluctant) buyer of gold over the past three years. I haven't got anything like the 10%-20% portfolio allocation that some have suggested, but I've got an amount that I would have thought irrational only half a decade ago.

If the price of gold drops by half do I care? No.

If gold drops to zero do I care? No.

If the world financial system collapses through a systemic crisis initiated in the derivatives market, do I care? Yep, you bet I do...

...but at least with my gold, I'd be a one-eyed man in the land of the blind.

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GOLD has a long, long way to go IMO.

But a brief pullback here (to under $500 to shake out the nervous nellies) would not be surprising.

GOLD will not be in a bubble comparable to property until:

+ It is mentioned every night on the news,

+ Most of your friends own it,

+ It has exceeded 1980 prices ($850), and maybe is at least double that

Try bringing it up at a drinks party or dinner, and see how many have any idea about owning gold.

Compare that with the number of people who are in BTL.

It is quicker, easier and cheaper to buy Gold. It will be widely owned, before the Bull is done

definitely agree on all counts doc.

....maybe a small point of contention if most of your friends are "trying" to own it...and the best they can get hold of is a couple of 1/10 krugers.

...gold,adjusted for inflation now would see about 2k us$/oz in todays money(at peak)......but given bubble mania of late I could easily see it exceeding this once the media hype starts.

and the best bit is,if the uk/us are up the creek defecit-wise,then both currencies weaken.

I think the growth prospects in the US are better,so I expect sterling to weaken further in the medium-long term.

if our property bubble really goes pop then we could in theory be looking at parity,given the over-regulation diktat from the EU

1.65ish next year will do me just fine though.

Edited by oracle
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There's something very nice about a "gold rush" that actually involves gold.

Pissed about for ages trying to find a way to get exposure to gold. But mining companies don't appeal, and it's hard to find a fund that tracks the index (there is one, but you need to be able to trade on NYMEX). So in the end I bought some real coins. You pay a premium of about 5% over the spot gold price, but what the hell - and I was curious anyway to see a real gold coin.

Very disappointed when they arrived (by Royal Mail Special Delivery! expecting a man in a helmet at least). Gold coloured and satisfyingly heavy, but just basically a lump of clunky metal. What do folk see in it? How come it's worth so much?

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don't get me wrong. i'm not bearish on gold. even as a bull it pays to recognize the bubbly nature of gold and to understand why something is going higher. observing the start of a bubble is still a decent enough reason to buy.

on a 1 year horizon i'd definitely like to be long. but some of the justifications i've heard recently for being long gold are quite preposterous. hence i'm having a go at shorting this stuff with a tight stop loss.

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on a 1 year horizon i'd definitely like to be long. but some of the justifications i've heard recently for being long gold are quite preposterous. hence i'm having a go at shorting this stuff with a tight stop loss.

I see some pretty good reasons for a long position, and I'd agree with you on one year, maybe 8 months, depending on how fast things move (don't forget the net - anyone can buy gold online tonight if they want, which wasn't the case earlier)

Which justifications do you think are preposterous? What sort of time frame you looking at for the correction?

(ps yeah this is in the wrong forum, but hey, once it's posted we can't shift it, and anyway if it had been in investments I wouldn't have seen it.)

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