Speculation & Gold

[McDuck]

And it does repel the mind to think of gold as a good investment rather than mainstream financial securities. In one sense gold is not an investment at all. It pays no interest or dividend, and provides no income in that sense."

It does repel the mind.

[Bob Kane]

"I would very much prefer to have Alan Bollard running policy within set parameters than be subject to the whims and discoveries of geologists, and the fluctuations in the price of gold as industrial demand changes," he said.

A very good point.

[outspoken]

The Revolt Of The Masses?

Just over a week ago, the Australian government under Mr Kevin Rudd came out with a plan to literally "inject" nearly $A 1000 into the bank accounts of almost every adult Aussie. He also revealed plans to borrow and spend the tidy sum of $A 118 Billion over the next four years. Why? To "rescue" Australia from recession.

This is not a joke, it is being shouted fervently by politicians, central bankers, Treasurers and eminent financial and economic "experts" all over the world. Some if not many of them in all likelihood actually believe it. After all, they have spent their entire lives with the absolute conviction that the solution to all problems, political and/or economic, is to do one of two things. They either regulate it or throw money at it.

Credit, they say, is the "life blood" of the economy. Consider, for a moment, the thoughts on the subject of Henry Hazlitt, an eminent economist and journalist from the past:

"There is a strange idea abroad, held by all monetary cranks, that credit is something that a banker gives to a man. Credit, on the contrary, is something a man already has. He has it, perhaps, because he already has marketable assets of a greater cash value than the loan for which he is asking. Or he has it because his character and past record have earned it. He brings it into the bank with him. That is why the banker makes the loan."
Henry Hazlitt - Economics In One Lesson - 1946

Compare this "old fashioned" insight with the modern practice of almost literally throwing "money" at people with total abandon and with a complete lack of discrimination. For decades, very few thought to wonder about where all this "money" was coming from. It had been almost universally accepted that economic health was measured by the volume of borrowing and then spending the borrowed money. Economics was cut in half with production discarded and consumption embraced as the only economic "problem" left to solve.

The lifeblood of an economy is wealth and the ONLY means of bringing wealth into existence is to PRODUCE it. Money is NOT wealth, it is merely an indispensible medium by which the wealth which exists can be exchanged between those who have brought it into existence. Wealth cannot be created out of thin air. And all the "deficit spending" and/or easy credit schemes in the world cannot PRODUCE it either.

What Mr Rudd in Australia and all his counterparts in all the capital cities of the world are staring at in horror is the inevitable end result of their own meddling. They have created a monster, an economy which is imploding because the artificial demand created by borrowing can no longer be sustained. To prattle about "preventing" a recession or "rescuing" a nation from recession is laughable. The world is IN recession. Productive capacity has for decades geared itself up to meet an artificially induced "demand" which is no longer sustainable. The economies of the world are littered with malinvestments, productive capacity for which the demand which only ever existed on paper or on computer screens has now literally evaporated. The gargantuan deflations in world stock, real estate and commodity markets have already taken place.

For almost two years now, people all over the world have been watching their governments haul interest rates down by main force, pump huge amounts of "liquidity" into banks and pile "stimulus" package after "stimulus" package into a system already choked with obviously unrepayable debt. People have lost paper fortunes on investments of almost all descriptions. And with every new nostrum and every new dollop of borrowed "money", they have watched the situation get still worse.

They are starting to stir.

A poll taken by an Australian paper shortly after it was announced asked Australians if they "approved" of the "stimulus" package announced by their Prime Minister. Fifty-one percent of those responding said no. In the UK, the announcement by the Bank of England this week that they were cutting official rates another 0.50% - to 1.00% - was met by a STORM of protest! The Bank was accused of an assault on savers. Even President Obama's stimulus bill is being seen in a harsher light by Americans. US polls show that support amongst Americans for the bill is falling fast with only 37 percent of respondents "backing" the legislation.

Unlike their political leaders, most so-called "ordinary people" are well aware that their nation is IN recession and that the recession is worsening with frightening rapidity. They have watched all the bailouts and the handouts. They have watched as interest rates have been obliterated. They are beginning to look with increasing suspicion at a situation in which the "seed corn" so vital to underpin any REAL recovery is being mercilessly attacked with the assault on interest rates.

There is a point where even the "full faith and credit" which underpins the entire monetary and financial structure of the world today can no longer command allegience. We are not at that point yet, but every new bailout plan and "stimulus" package brings it closer.

Gold is simply waiting in the wings.

From: The Privateer

[Steve Netwriter]

Adam Hamilton writing about the potential rise of silver:

Silver/Gold Ratio Reversion

http://news.silverseek.com/Zealllc/1233939789.php

And this one he refers to:

Silver Lagging Gold

http://www.zealllc.com/2007/silvlag.htm

Note the volatility on the charts in the 2nd one. That's why I think silver should be treated with care, and gold should be your main precious metals holding.

[Austrokiwi]

Hi Badger I finally saw your response. Everything about the long depression of the late 1900s is debatable some theorists wonder if it really happened. The problem was the poor record keeping. In new zealand most have forgotten that period and you can only catch hints of the pain in fiction and non fiction ocassionally.


Three years ago I would have been cheering Stevenetwriter and your self on. However with more research I have realised a gold standard is not the solution, when it existed the major downside risk was deflation, as damaging as inflation is!

I am not as brave as CD in making predictions but I will state my opinion as to where gold may go this year. I fully expect the gold price to average between US$850 - US$950 oz for the whole year, at the same time I am reasonably worried that it may actually drop mid year to close to US$600 oz.

The reason for that fear is many people have taken defensive positions in gold, driven by hype and fear. At some stage those people ,not used to a lack of income from an investment, will start to become habituated to their fear and will seek investments that provide some monetary return (interest) if that happens Gold will drop fast. In such a case NZ may not see a drop in gold value (against NZ$) as it is possible the NZ Dollar will hide this drop. I believe that although gold peaked in US$ in 1980/81, in NZ$ terms the peak was actaully a few years later.

I also suspect that gold has outrun the fundamentals for now, This week the complete 2008 demand stats should be available those stats will indicate the accuracy of that suspicion.


I would note that making any solid predictions is impossible, the gold price is more influenced by emotion and panic at the moment so anything is possible in the short term.

[Badger]

Hi Badger I finally saw your response. Everything about the long depression of the late 1900s is debatable some theorists wonder if it really happened. The problem was the poor record keeping. In new zealand most have forgotten that period and you can only catch hints of the pain in fiction and non fiction ocassionally.

I doubt any one remembers that far back, but factors caused that period of time to be viewed as a depression, wasnt the use of gold /silver it was government and private interest groups manipulation with agenda's.

Three years ago I would have been cheering Stevenetwriter and your self on. However with more research I have realised a gold standard is not the solution, when it existed the major downside risk was deflation, as damaging as inflation is!

Without being able to increase the supply of paper money and decrease it at a whim on government and central banker manipulation with interest rate tinkering I really dont see how you can have massive inflation and then deflation on a medium of exchange based on gold and silver?

Unless theres manipulation as laid out in the article about MTT's.

I am not as brave as CD in making predictions but I will state my opinion as to where gold may go this year. I fully expect the gold price to average between US$850 - US$950 oz for the whole year, at the same time I am reasonably worried that it may actually drop mid year to close to US$600 oz.

I dont really care where the price goes, thats irrelavent to me.

Im more interested in getting these fraudsters, conmen, bankers, politicians, WTO, UN, IMF, World Bank and Trans National Corporations away from manipulatiing and stealing the value of money that I have had to go and expend energy in accumulating over 24 odd years.

These entities are dangerous to our economic well being and society.

So going off your post, you *disregard* that at some time in the past our ancestors decided that gold and silver were commodities that could be used as money or medium of exchange? remembering no one needed a government decree to figure that out...

So its slowly usurped and replaced by a private money system for private vested interests? All ways under the banner...

"for your benefit"

[Austrokiwi]

The first coinage as we understand it today, was produced by a governmental Authority. The coinage of Lydia made Crossius ( if I have spelt correctly) the richest person of the ancient world, at least in legend. Prior to that coinage the evidence points to pure barter, however it seems there was some form of money. In the natural history museum they have piles of Bronze age bronze ingots..... Torc shaped they are found often in huge piles on digs. The current accepted understanding is that those 'torcs' were used as money.

Money has always been controlled and manipulated by governments, both secular and religious. To escape such manipulations of money I suspect one would have to escape society.

[outspoken]

To escape such manipulations of money I suspect one would have to escape society.

What a good idea :-)

[Badger]

You can barter all you want but sooner or later you run into the problem of the

*coincidence of wants*

[muppet]

Is Now the Right Time to Buy Gold?
by Gabriel Andre

Gold prices jumped above during the second fortnight of January above an important resistance. It's actually a strong signal for a bullish move on the medium-term.

There was indeed a strong resistance that contained the bullish price action in late December. Remember, the price action jumped during 2 months, between October 24 and December 29. It was a 30% rise that failed just below the level of US$ 900 an ounce.

Why did the positive trend end just below $900? Well, the resistance line was actually a strong technical barrier to clear. This resistance is an oblique line that goes through the lower highs (points B, C and E) posted since the historical high price of March 2008 (point A, when Gold price reached $1,057). Have a look at the chart: on early January the price action corrected 38.2% of its previous 2-months rise (between points D and E) after it failed to breakout above the resistance line. It fell back towards $800, (point F, which is a Fibonacci retracement level) and then immediately rose back to eventually clear this resistance on January 23.

Click To Enlarge

Since March 2008, several attempts to break the resistance line have failed. The fact that this line had been tested and validated several times strengthened it. The last attempt to break it succeeded: it has therefore opened the door to a new bullish trend.

As usual, previous resistances become new supports. This time this rule has been confirmed once again. A slight retracement in end of January drove the price action straight to this new support (point G). It means that the market has validated this level (here $875) as a new low.

That's why the medium-term is clearly bullish. Now the price action is expected to test the previous high levels (points A, B and C). Since early December the technical Momentum indicator has been remaining above its 100 level. This does confirm that Gold prices are still well backed.

Good investing,
Gabriel

[Steve Netwriter]

No
The "right time" was last Nov. when all the bears were having a field day saying how much gold had gone down, and how all the bulls were wrong. When sentiment was at its lowest, but the fundamentals were still intact.
As usual, most people are a bit late to the party.

[Austrokiwi]

No
The "right time" was last Nov. when all the bears were having a field day saying how much gold had gone down, and how all the bulls were wrong. When sentiment was at its lowest, but the fundamentals were still intact.
As usual, most people are a bit late to the party.

For speculators may be the right time was last November, But I would say the right time to buy was back in 2002/2003.

[tpr2]

Hi steve

Thanks for those charts.

It makes sense now

[BTDT]

Badger quote: "Im more interested in getting these fraudsters, conmen, bankers, politicians, WTO, UN, IMF, World Bank and Trans National Corporations away from manipulatiing and stealing the value of money that I have had to go and expend energy in accumulating over 24 odd years".

Sorry to say Badger that you can't change this and you can only change that which you have control over or can influence greatly......the rest you can rant and rave about but the fact is things will happen in their own sweet way, the norm/mean will be reverted to with a few changes, and there's nothing you can do about it apart from doing what is right for you!!

[Badger]

Badger quote: "Im more interested in getting these fraudsters, conmen, bankers, politicians, WTO, UN, IMF, World Bank and Trans National Corporations away from manipulatiing and stealing the value of money that I have had to go and expend energy in accumulating over 24 odd years".

Sorry to say Badger that you can't change this and you can only change that which you have control over or can influence greatly......the rest you can rant and rave about but the fact is things will happen in their own sweet way, the norm/mean will be reverted to with a few changes, and there's nothing you can do about it apart from doing what is right for you!!

Define normal? What few changes would they be?

"All that is necessary for the triumph of evil is that good men do nothing."

You better scurry off and do nothing !