Monday, January 26, 2009

Will gold prove to be the safe haven everyone is talking about? Or is it another bubble in the makin

Gold breaks $900 barrier

Gold rose above $900 a troy ounce on Monday, hitting a three and a half month high and posting record highs in euro and sterling terms as investors sought safe haven from troubled equities markets and expensive government bonds. Precious metals traders said that investors, particularly in Europe, were pouring money into gold exchange traded funds – a popular way to gain access to the metal – and also buying physical gold, from coins to large bars.

Posted by flintster1994 @ 03:46 PM (1525 views)
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14 thoughts on “Will gold prove to be the safe haven everyone is talking about? Or is it another bubble in the makin

  • mountain goat says:

    The venerable Richard Russell says: “The [gold] market always does what it’s supposed to, but never when. Is it ‘when time’ for gold? It looks like the long erratic correction in gold is over.”

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  • It’s probably just Michelle Obama loading up PA before her husband crushes the dollar.

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  • mountain goat says:

    Whether you own gold or not, it is fun to watch gold price movements when there is volatility. Gold has such a huge “betting” market with large short positions versus long positions by professional traders who never intend to take ownership of the gold. So when there is movement it tends to go in leaps and bounds as technical resistance or support levels are broken. Then there is a mad scramble to get out of losing betting positions which magnify the price movement. I imagine them running around screaming “sell sell”, but I suppose it is all programmed and done by computer.

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  • Sold at $900 an ounce, as rise from $800 mid january seemed pretty rapid and suggests a correction.

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  • Quote: John Reade, a precious metal strategist at UBS in London, said that the month-on-month change in ETF gold holdings stood at an “impressive” 2.5m ounces. But he pointed that the increase was still much less than the rate of 6m ounces achieved in mid-October, when investors rushed for cover into the precious metal.

    Interesting that Gold was dropping in price during October. I suspect a lot of it was being sold to deal with margin calls etc…but it is clear that other money was fleeing to “safety”.

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  • mountain goat says:

    d’oh – I remember reading the same for the silver ETF. If it hadn’t been for this buying gold and silver would have looked like copper and the other metals that fell off a cliff.

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  • The thing with gold is that not only is it a store of wealth – it’s also money. If it goes down a bit – so what? You’ve still got your gold, agreed,the price might spike a bit from time to time. There is at least one site on the net giving a chart of gold fix prices back to 1970. Study price fixes over nearly 40 years and draw your own conclusions. Gold to me seems a good way to preserve what you have. Thanks to an EU directive, (not much I would thank the EU for), there is no VAT on gold. And no capital gains tax (At present) on British gold coins post 1837. I wish I had put money into gold years ago. I didn’t realise the angles then.

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  • Gold only fell in Dollar and Yen. The fall in dollar terms began a couple months before the election, ended, erm, on the election. Gold up in all other currencies relative to their summer peak in terms of gold. We are half way through the sub-prime bubble, no where near the beginning of the end of the corporate and national bond bubble. I see gold doubling a few times in the next couple of years.

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  • Sold at $900 an ounce, as rise from $800 mid january seemed pretty rapid and suggests a correction.

    Bit premature, in my view. This one has got legs, for the moment….

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  • hpwatcher – depends on your timescale and what you would view as a correction / pullback.

    MG – I read your post over the weekend. First no need to apologise, i was feeling a bit provocative and fiesty, and i welcome opposing views. I probably should have explained what i meant. I actually did respond and then the web site crashed before i could post … and then i got busy.

    Anyway what i meant was that as the market is mostly nominated in $ (comex) then the moves and charts etc should be viewed in that currency, and therefore targets should be viewed in $ terms. Now if at the same time the GBP happens to get weaker than thats a bonus, or not depending on your position. If the market were denominated in £ and had to be exchanged for $ for the spetics then the price would (i know this but cant prove it) react differently. Therefore for me the moves are 2 different things.

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  • Anyway what i meant was that as the market is mostly nominated in $ (comex) then the moves and charts etc should be viewed in that currency, and therefore targets should be viewed in $ terms. Now if at the same time the GBP happens to get weaker than thats a bonus, or not depending on your position. If the market were denominated in £ and had to be exchanged for $ for the spetics then the price would (i know this but cant prove it) react differently. Therefore for me the moves are 2 different things.

    Absolutely right. A degree of the apparent rise is due to strength in the dollar…..or at least that’s what the woman at ATS Bullion said……

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  • mountain goat says:

    TM – I did think at the time you were thinking about erm.. technical trading issues. However, not all gold is bought by people earning in $. My point was that since I earn in GBP then the gold price in GBP is relevant, likewise Euro etc. So that means I would look at the technical issues for gold in the currency that I earn my wages.

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  • mountain goat says:

    FT’s John Authers gives his opinion on the recent gold movement here. Interesting idea that it reflects a view that inflation may be a danger and deflation scare was over-done.

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  • Bubble. The US banks got their second tranche of TARP funds on Friday and, in my view, they threw it straight at the commodities markets again. Crude oil spiked around 10% at about 5pm UK time.

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