Speculation & Gold

[Austrokiwi]

MIners perspective:

Its interesting to read how the mining group percieves the price of gold. The only thing is with this article is they say the price of gold in 1969 was $200.00 oz. I assume they mean in equivalence to todays value (inflation adjusted terms) as gold was fixed in value by the Breton woods agreement.

The current gold price is way above average - Major

Going back hundreds of years, the average price of gold is close to half the price at which it is currently trading
Author: Mineweb Reporter
Posted: Saturday , 10 Oct 2009
Johannesburg -
In 1969, at around $200 an ounce, gold was trading at its lowest ever level.

Since then it has been rather a wild ride and, while it has been hitting records in nominal terms frequently in the last few weeks, the 1980 price of $2,000 in today's terms was its zenith.

So, where is it likely to go from here? Gold bulls will tell you that the way forward is ever upward; after all it is only half the way to its all time high. But, there are a some, like Cadiz Corporate Solutions analyst Peter Major, who are not that sure.

"It may have touched $2,000 back then, but the world was a different place quite considerably compared to what it is now, and I'll still say the long term price of gold going back hundreds of years is somewhere between $550 and $600.

"So that fact that gold's hit $1,000 means it's trading way above an average. I'm wary of it going up much more from here," he says.

The rest of the story is here: http://www.mineweb.net/mineweb/view/...0532&sn=Detail




Although the article tends to match my own perceptions it is still based on historical data. It is the market that sets the price of a commodity not historical graphs. The article should be taken with a good dose of healthy suspicion in exactly the same way that articles that suggest gold should be worth more than US$2000.00 ( also based on Historical data) should be viewed.

[Bob Kane]

I heard that gold in $NZ has done very badly this year - and getting worse each month.
Maybe SteveNet will publish a graph of this.

[Sepherial]

Some facts:

the Indian market is generally regarded as the worlds largest for gold, last year it slumped due to resistance to the gold price. This year it may slump again.

Some other facts:

India is th largest consumer market.
China is currently the largest purchaser and producer of gold.
Interbank transactions is the largest market.
It is no longer 1980.

[Steve Netwriter]

Came here and wasn't logged in !!!
So no ignore feature.

Since you asked so nicely Bob:



Certainly GoldNZ$ is down from the peak at the beginning of the year.
Only up ~40% since late 2007 now

The Kiwi is certainly flying high at the moment.
Will it last

I think it is useful to put this into a longer-term context looking at a collection of currencies:




What's interesting about this chart is that you can see how, although the currencies fluctuate against each other, they tend to do so within a fairly narrow band, and you can see how that band has fallen against gold.
IMO one must view gold as another currency option, but one with very different characteristics to the other paper currencies. It is a little like the carry trades. They operate by identifying currencies good to borrow in and currencies good to exchange into and invest in. The paper currencies versus gold are like that, but in which the paper currencies do well in economic growth periods of stability, and where gold does better in periods of instability of decline.

Here's a longer term one for GoldNZ$:

[Steve Netwriter]

eri,
If you're going to quote the Economist, I think it only fair to also post a safety warning

Here you go:

Here They Go Again

http://www.fgmr.com/here-they-go-again.html

September 18, 2009 - Certain segments of the media rarely give gold a fair shake, particularly when it approaches important price levels. These publications time and again take bald pokes at gold. So when I see articles doing that, I like to poke fun at the article, but more importantly, set straight its misrepresentations and errors about gold.


One publication that is consistently on the wrong side of the gold market is The Economist. Using its pathetic record of anti-gold articles, I have already documented its curiously timed invectives with what I call "Gold’s Infallible Indicator". See also "Gold’s Infallible Indicator - Six Months Later".

http://www.fgmr.com/golds-infallible-indicator.html

http://www.fgmr.com/golds-inflallible-indicator-six-months-later.html

I am praying for the Economist to do a front page cover on the imminent crash in gold

[Austrokiwi]

Some other facts:

India is th largest consumer market.
China is currently the largest purchaser and producer of gold.
Interbank transactions is the largest market.
It is no longer 1980.

HI Sepheral My comments were in regards to retail gold not all commodities, or global markets. The Chinese Reserve bank may have been the the biggest buyer recently but according the world gold council china is only the second largest purchaser of gold ( I don't doubt that China may one day over take Indian and become the largest purchaser) but at the moment unless you can show the World Gold council stats are wrong your assertion that China is the largest purchaser of retail gold is wrong.

If you were meaning state purchases then it is interesting to note that China's gold reserves ( not mining) only come out at 6th highest in the world.

As for largest producer: could be but can you give us the source of your information so we can check it ourselves?

In regards to the 80's no it isn't the 80s but we wouldn't want see gold investors hurt in the same way they were then, would we? Knowing history is the best way of avoiding its mistakes.

[Austrokiwi]

Well Sepharal, in time, may end up being right about China being the worlds biggest retail market for gold. The current largest market India does not appear to like the current gold prices. The Union Bank of India is predicted this years total gold sales ( for India not the bank) will total around 600 tonnes; about 100 tonnes less than last year.

[eri]

set a new record of US$1070 today, now $1065

[Austrokiwi]

Yep its even got Richard quest on CNN excited..................next shoe shine boys will be telling us to buy gold.................( now where have I heard a story like that before?)

[TonyMacaroni]

Brief discussion of the mechanics of the USD and Silver carry trade and implications of the reversal of carry trades:


From: http://www.youtube.com/watch?v=lHQR85_dgxY

[Austrokiwi]

TM:That Aussi guy just doesn't impress me. I would need a lot more INfo before I would trust him. He takes a huge logical jump from Silver leasing to Silver carry trade. Gold is also leased, and swapped yet he does not apply the same principles to gold.

Who is he? Whats his background and when is he going to tuck his shirt in?

[Austrokiwi]

sell or hold?

Interesting article repeats a sentiment I read elsewhere about 2 months ago. That earlier opinion held that gold would be good till February 2010 and then experience substantive reverses. I guess only time will tell:

Sell gold or hold till February

Either way, investors in an enviable position
Don Vialoux, Financial Post Published: Saturday, October 24, 2009
Gold bullion entered into a period of seasonal strength in the second week in July. Gains since then have been significant, thanks mainly to weakness in the U.S. dollar. Where does gold bullion go from here?
Seasonal Influences According to Thackray's 2010 Investor's Guide, gold bullion has a period of seasonal strength from July 12 to October 9. The trade has been profitable in seven of the past 10 periods for an average gain per period of 4.8%.
This year, short-term momentum indicators recorded a buy signal on July 10 at US$907.30 per ounce. Short-term momentum indicators remained positive after Oct. 9, the average optimal exit date. Profit-taking for the current period of seasonal strength is pending. The likely timing of a technical sell signal is this week. Gold also has a second period of seasonal strength from the end of November to the beginning of February.
Technical Influences Gold's breakout above its high at US$1,033.90 per ounce at the beginning of October implies a significantly higher technical target. Gold completed a two-year reversal pattern with an intermediate-term technical target of US$1,300.
However, its US$80 gain since the beginning of October has been excessive and a period of consolidation is likely. Short-term momentum indicators (Moving Average Convergence Divergence, Relative Strength Index and Stochastics) are overbought.
The end of the current seasonal trade will occur when short-term momentum indicators roll over and record sell signals. Intermediate downside risk is to $941 U.S. per ounce, its 200-day moving average.
Fundamental influences Most of the strength in gold bullion is due to weakness in the U.S. dollar, which fell to a 13-month low last week and has yet to show technical signs of bottoming.
The annual US$1.4-trillion government deficit announced last week encouraged international investors to accelerate their efforts to diversify their holdings out of U.S. dollars. On the charts, the U.S. dollar is deeply oversold and due for a short-term recovery.
However, fundamental reasons for the weak U.S. dollar have not been resolved. Government spending continues to accelerate and deficits continue to grow. A brief recovery in the U.S. dollar and subsequent weakness in gold will be followed to a reversion to current trends.
Gold faces a barrier to significant short-term gains. The International Monetary Fund (IMF) plans to sell 403 tonnes of gold into the market in an orderly manner in unison with sales by European central banks. However, negotiations with the Chinese government to purchase at least part of the block are rumoured.
The IMF has an incentive to liquidate at least part of the block before the end of this year to support emerging nations that have suffered unduly from the world financial crisis. A deal to distribute proceeds of the sale could become part of an international agreement on climate change scheduled for negotiation in mid-December in Copenhagen.
Completion of an agreement to sell the block is the likely trigger for the next major upside move in the price of gold.
What to do Investors holding gold bullion are in an enviable position. Should they take profits during the current period of seasonal strength that started in July or should they wait until the end of the next period of seasonal strength from the end of November to the beginning of February?
Holding between now and the end of November implies downside risk of about 10%. On the other hand, holding until next February offers intriguing upside potential. Investors will make the decision this week based on their personal investment circumstances and ability to take risk.
---
- Don Vialoux, chartered market technician, is the author of a free daily report on equity markets, sectors, commodities, equities and exchange-traded funds. Reports are available at www.timingthemarket.ca. Mr. Vialoux does not own gold bullion exchange-traded funds, gold bullion trust units or gold bullion certificates

Read more: http://www.financialpost.com/story.h...#ixzz0V1lWS2J7
The New Financial Post Stock Market Challenge starts in October. You could WIN your share of $60,000 in prizing. Register NOW

[TonyMacaroni]

Brisbane Bullion Company shipping to NZ

FYI - anyone looking for physical bullion these guys ship to NZ at much lower mark up than NZ Mint.

https://www.ainsliebullion.com.au/

Can check out daily prices here:

https://www.ainsliebullion.com.au/Pricesheet.pdf

Prices in AUD - will ship insured for $50A + $12 per ounce of gold or Kg silver. They have Perth Mint bars and coins available for immediate delivery which is better than the waiting times for NZ Mint.

This is by no means an endorsement of now being a good time to buy or not, as Austro has pointed out commodities, including gold and silver could be in for another correction in the short term but who knows...

[Steve Netwriter]

A quote from FOFOA (Friend Of a Friend Of Another):

This is the point. Gold is money, not a commodity. But the CB's have tried to shove gold up with the commodities, to convince the sheeple it is a mere commodity, a mere investment.

And I also quote John Exter who served six years as Vice President of the Federal Reserve Bank of New York in charge of gold, silver and international operations:

“Most people today think the Fed, despite its running the printing presses at higher and higher speeds over the last three decades, has been doing a good job. I see it on the road to a far worse disaster than in the thirties.”

“The entire world’s monetary system is in serious disequilibrium. Since money runs like water, both within each currency and among them, market forces work every minute of every day trying to restore equilibrium, while central banks worldwide, especially our own Fed, intervene every minute of every day to prevent it. So uncertainty abounds. Markets do not like uncertainty.”


“Eventually markets will win, as they always have, so you should bet on markets. The problem is timing. Confidence erodes, but very slowly.”


“The safest and most liquid asset will be gold. It will be [by] far the biggest run out of paper money into gold money in history. I cannot say when, but it is now months, not years away.”

He got the timing a little wrong.

[Austrokiwi]

and coke is life!

The concept that Gold is money is a marketing ploy............Coca Cola used to say coke is life but no one was expected to believe that. To see that people are still being suckered into the idea that gold is money is sad. A book that stevenet writer once recommended ( as Did I) defines money as "an agreement within a community to use something as a means of payment". In the NZ community the agreement dictated by law is that legal tender is money. Gold hasn't been money since at least 1967.

I have said this before: Gold was once a store of wealth and, in the form of circulating coins, money. In the modern world it is no longer money but it still is a store of wealth. It is possible ( with arguable degrees of possibility) that in the future gold will be money again. Gold is a commodity readily converted to money, but to invest in it one must treat it as a commodity.

As a store of wealth Gold can seem like money...............I don't see any one saying Property is money.....though it is one of the most often used stores of wealth.