Speculation & Gold

[muppet]

And down to NZ$1413.
Silver at NZ$23.54.

[Austrokiwi]

Even Kitcos getting real

Well in PI we talk about real house prices as compared to nominal seems Kitco are now introducing an index that reflects the real value of gold. What interests me is a gold bullion dealer is pulling away from the US$ as a reserve currency in that they see the need to value gold against a basket of currencies. The index is mentioned at the end of the article in this link. ( Interestingly they are saying the real value of gold is actually 794.61 an oz)

http://www.kitco.com/ind/nadler/oct062009A.html

[Austrokiwi]

CNN is starting to ring the warning bells ( but I must admit US$10,000 oz would be very nice!!!)

http://money.cnn.com/2009/10/06/pf/gold_investing_bubble.fortune/index.htm

[Baron Silas Greenback]

I wonder how Steve ike the fact his beloved gold market is increasingly a pawn of large headge funds?

[Sepherial]

I wonder how Steve ike the fact his beloved gold market is increasingly a pawn of large headge funds?

You are mistaken. A Hedge fund dosn't take possession of vaulted gold bullion.

[Baron Silas Greenback]

You are mistaken. A Hedge fund dosn't take possession of vaulted gold bullion.

I never said that it did?

And if you [think] the gold commodity market is based on real gold vaulted bullion... you might be in for a big shock.

[Sepherial]

I never said that it did?

You implied that hedge funds controlled the price of gold. Hedge Funds hedge with specialty markets such as trading within derivatives etc

And if you the gold commodity market is based on real gold vaulted bullion... you might be in for a big shock.

I don't really understand what you have written in this sentence?
Why would I be in for a big shock?

[Baron Silas Greenback]

You implied that hedge funds controlled the price of gold. Hedge Funds hedge with specialty markets such as trading within derivatives etc



I don't really understand what you have written in this sentence?
Why would I be in for a big shock?

Because yu dont understand the effect large player slike hedge fubnds can have on the price of gold.

http://www.usagold.com/analysis/j-kosares-20061017.html

"There are more than 8000 hedge funds in the US with $US 1.2 trillion in assets, more than double the figure five years ago, according to Hedge Fund Research."1 Despite what their name implies, hedge funds typically concentrate assets into a couple of asset classes, rather than actually "hedging" risk by diversifying exposure. Certain funds have, for example, made very large one-way bets on a rising price of gold. The sheer size of the assets managed by these funds can literally move markets farther than they should have gone as capital flows in, and reverse them more decisively than they otherwise would have as investment pulls out. This unprecedented concentration of capital has resulted in a market phenomenon that some informally refer to as a rolling bubble.

[Sepherial]

Because yu dont understand the effect large player slike hedge fubnds can have on the price of gold.

Really?

This essay offers one possible explanation for this erratic price movement related to the rapid growth of hedge funds and their investment tactics

As per J Kosares essay. One possible explanation.

[TonyMacaroni]

Aussie trader on the movements of gold and silver in the last 24hrs and the breakdown of the USD index below 76 support and implications thereof.

From: http://www.youtube.com/watch?v=KeOB5vfSVUI&feature=sub

[eri]

the stubble, the shirt and the hawking would have be acceptable if he had actually sat down and worked out what he was going to say before turning on the camera

if you look like a bum and mumble along with the vague train of thought of a bum

people aren't going to watch you for a full 7 minutes while they wait for something that could have been said in 1

[Austrokiwi]

Eri: Well said

[eri]

a few hours ago gold spiked to another new record of $1060, now settling at $1050

the economist is as puzzled as astro

GOLD fascinates investors more than any other metal. The latest surge in bullion—nominal prices topped $1,050 an ounce during Wednesday October 7th, a record—has generated headlines that would not have been seen if a less glossy metal such as nickel had reached a new peak.
That is because gold was once the linchpin of the global monetary system and is still seen by many as a hedge against inflation. But if investors are really frightened of price rises, it is hard to see evidence in the government bond market. There has been a modest increase in inflation expectations (measured by the difference between the yield on inflation-linked bonds from that on conventional bonds). But the Treasury bond market is only pointing to average inflation of 1.9% over the next 20 years.

Other explanations for gold’s rise are even harder to credit. Some reports cited this week’s decision in Australia to raise interest rates, a classic case of the post hoc ergo propter hoc fallacy (just because one event occurred first, that does not mean it caused the second).
Conventional explanations of supply and demand do not work, either. Mining production is slightly up year on year; jewellery demand is down by 13.8%. The main demand has been led by investment. Retail and institutional investors have been buying gold through exchange-traded funds, which allow them to have a pooled stake in bullion. This avoids the extra risk of buying shares in gold mining companies (which might have incompetent managers or shallow reserves) or the complexity of using futures. ETF Securities says its fund now has some 8.4m ounces (worth over $8.7 billion), an 110% increase over the past two years.
But blaming the rise on ETF purchases does not answer the fundamental question; why do investors want exposure to gold at all? The dollar is the prime suspect. Gold’s rise coincided with a fall in the greenback on a report (since denied) that oil-producing countries were talking about replacing the dollar as the pricing currency. When the dollar falls, as it has since March, risk-averse investors tend to buy gold. That decision has little opportunity cost now that interest rates are so low (gold has no yield, of course)

Can the trend go further? Christopher Wood of CLSA, a broker based in Hong Kong, has a long-term target of $3,500 an ounce, the equivalent in purchasing-power parity terms of the metal’s 1980 peak. Mr Wood says investors see gold as a hedge against the depreciation of paper currencies, particularly those in the west. Gold is not just a hedge against inflation, in his view, but a safeguard against financial meltdown; that is why gold and Treasury bonds can do well at the same time. If he is right, we will all be melting down our wedding rings before long.

http://www.economist.com/businessfinance/displayStory.cfm?story_id=14588300&source=features_box_main

[Austrokiwi]

Today in Europe and ( likewise the US) it will be interesting to see what happens with the gold price ( currently already down in US$ terms). Speculators and day traders often tidy up their positions in preparation for the end of the weeks trading. It could see a sell off later in the day or a consolidation.

[tpr2]

the stubble, the shirt and the hawking would have be acceptable if he had actually sat down and worked out what he was going to say before turning on the camera

if you look like a bum and mumble along with the vague train of thought of a bum

people aren't going to watch you for a full 7 minutes while they wait for something that could have been said in 1

lol....he was quite accurate at one point..."I'm crapping on here....."

Well said.