Speculation & Gold

[outspoken]

You might be interested in this Austrokiwi

http://www.businessspectator.com.au/bs.nsf/Article/Chinas-gold-tsunami-pd20110208-DUSTE?OpenDocument&src=kgb

Global inflation concerns are adding to gold’s luster, with a recent report predicting that Chinese demand for gold as an inflation hedge is resulting in unprecedented physical demand for the precious metal, which will likely push prices higher this year.

...What’s more, it is clear that gold is being bought as an investment, rather than for jewellery. According to World Gold Council figures, Chinese retail demand for gold jumped 70 per cent between October 2009 and September 2010, but in the same period the demand for gold jewellery rose by a much more modest 8 per cent.

...The newsletter notes that total Chinese demand for gold in 2010 is expected to reach approximately 600 tonnes, just behind India’s 800 tonnes. This would mean that together the two countries would account for more than half of estimated world mine production of 2,652 tonnes in 2010

[Austrokiwi]

Yep it is interesting...........at the moment the wires are full of contradictory views and stories. I see now Kit co is reporting its going to go up again....... Will be interesting to see what happens to ETF holdings over this week. May be the last few weeks were a temporary sell down.

For me it is worrying that investment is the main driver of price.....what would we say if the same scenario happened with pork bellies ie: the price was driven by investors not the consumers. { its hypothetical I don't want to get into that discussion that Gold is not a commodity)

[Austrokiwi]

Now Reuters is reporting that Brazil will increase production. Of course if prices drop in the mean time the plans may be shelved:

http://af.reuters.com/article/metalsNews/idAFN089486820110208

[Austrokiwi]

an interesting article:

http://www.numismaster.com/ta/numis/Article.jsp?ad=article&ArticleId=18177

Theres a few statements in it that caused surprise for me. In particular, I think I have read it wrong, the US gvts adversion to economic democracy.


Later note: A quick look at Wikipedia gave me a little insight...... Economic democracy can in one sense be equated with communism.

[Commercial Dan]

Inflation, destruction of fiat currencies around the world are on their way in historic fashion. The west will have to start again, there is too much debt to absorb.

A 'new world order' is on its way...

[muppet]

A 'new world order' is on its way

What are you going to do about it, CD?

[Commercial Dan]

What are you going to do about it, CD?

Buy as much silver and gold as you possibly can

[Steve Netwriter]

There is a subtle and difficult to grasp concept which most appear not to have grasped yet.

Most people seem to think as investors. If one sector is going out of fashion, is falling, they look for another investment sector to move into.

They consider supply and demand, whether the sector has consumers. They think that buying into a sector in which consumption is rising will lead to an increase in their investment.

In troubled times, when sectors A, B, C are in trouble, they seek sector D. Yes, everyone always needs toothpaste, so invest in toothpaste. Toothpaste is consumed, there will always be a demand for new toothpaste.

The conclusion from this way of thinking is that consumption is an indicator of whether investment is sensible.

In times of severe risk, at times when the local 'money' becomes risky, what do people actually do? Do they see toothpaste as the "go to safe haven"? Do they buy a stock of toothpaste, knowing it will safeguard their savings? Most people think that buying something that will be in demand is the way to safeguard savings.

But, there is a rather subtle and difficult concept to grasp, and it is that vehicles for saving that are not consumed make more sense. Those vehicles have little consumption, little use, except as a store of value.
And only one vehicle exists which is THE store of value chosen. Yes, Gold.

Gold is not the safe haven store of value because it is consumed, because there will always be a consumption demand for it, but in some strange way, because of the opposite, because it is not much consumed, and because of its properties.

Most will rile against this idea. But consider the situation when all around is collapsing, when demand for things, things consumed, is collapsing, when demand for toothpaste is falling, in such a situation no consumed sector is a safe haven.

The one safe haven that is not negatively affected by falling consumption is the one in which there is little consumption. The sector that does in practice become the "go to" sector in times of risk, simply because it is the best safe haven sector, and has a long history of being such.

Investor demand is really safe haven demand. It is a flow away from risk to safety. From inflated 'money' systems to the historic 'money' system which cannot be inflated because the quantity is so restricted by nature.

A rising investor demand for gold is not a negative for gold, it is a positive. It shows that the paper 'money' system is suffering from growing mistrust.

Reading FOFOA's blog, which takes time and effort would lead to mush enlightenment for those who take the trouble and start with an open mind, ready to have pre-conceived ideas changed:

http://fofoa.blogspot.com/2009/12/gold-ultimate-un-bubble.html

[eri]

new record

US$1435

http://www.kitco.com/charts/livegold.html

currently NZ$1918

[Commercial Dan]

I'm telling you buy buy buy precious metals, I hear that J P Morgan are now accepting gold as loan security...the world is changing, make sure you change with it!

http://www.reuters.com/article/2011/02/07/us-jpmorgan-gold-idUSTRE7162SG20110207

[Austrokiwi]

I'm telling you buy buy buy precious metals, I hear that J P Morgan are now accepting gold as loan security...the world is changing, make sure you change with it!

http://www.reuters.com/article/2011/...7162SG20110207

I am going to sound negative again................. If your going to buy gold do it as part of a diversified portfolio. Understand the risks and the costs of owning gold. Don't get caught up in Hype. There are just as many people saying sell gold now as those that are saying buy. Gold is at a high but......Given the turmoil in the middle east it is surprising it hasn't shot up higher......there are indications that hedge funds, previously big buyers, are quietly selling off their holdings. Gold is extremely volitile this week it could be up, next week down.

The other factor to consider is how much movement has to occur in gold for you to make a profit. Currently the NZ mint is selling gold at NZ$2062 oz and buying it for NZ$1870. So buying today you are immediately exposing your self to a risk of loosing NZ$192.00 per oz. To break even gold would have to go up a further US$142.00 ie a gold price of US$ 1571.00. To make a profit it would have to move significantly more than that. I am sure commercial Dan is going to say its going to make that price easily........... But if your buying its your money not CDs!

[eri]

us$1440 and NZ$1940 overnight

[67910241]

The other factor to consider is how much movement has to occur in gold for you to make a profit. Currently the NZ mint is selling gold at NZ$2062 oz and buying it for NZ$1870. So buying today you are immediately exposing your self to a risk of loosing NZ$192.00 per oz. To break even gold would have to go up a further US$142.00 ie a gold price of US$ 1571.00. To make a profit it would have to move significantly more than that. I am sure commercial Dan is going to say its going to make that price easily........... But if your buying its your money not CDs!

Austro, it's good but,

1) there are ways of buying gold, silver, whatever near if not below the spot price, even for small, retail buyers like myself. I've recently bought a couple of 100yo British sovereigns in admittedly rough condition but below the current US spot price converted into NZD. No disrespect for the NZ Mint, but those who can't afford to pay their big old spreads don't need to.

2) the Big Players - Hedge funds are quite possibly run by monkeys. The Dow/Nasdaq run is based on horrible P/Es, grossly optimistic future earnings estimates, USD that is getting devalued quicker than the earnings denominated in USD grow, and basically exponential growth assumptions. All absolute BS when faced by permanent energy shortages for at least 5 years to come. Energy price growth will ultimately kill any Western (and some Eastern) growth, and Easterners are happy to buy Western precious metals at the current price from however wishes to sell. Hey they're still buying real estate in China. That's arguably overvalued by a much higher % than Gold or Silver are.

3) The USD is crumbling away and will continue to do so for as long as the USDs are getting "quantitatively eased" by that little bald fella in charge of the US Fed so much of the current asset price growth is purely inflation driven.

[Austrokiwi]

Good point 67910241. At least their are other options that allow you to buy below spot.


When I first started buying gold it was sovereigns I discovered that works well in most countries except NZ. YOu may be surprised at that but in most regions of the world Sovereigns are exempt sales tax. In NZ GST is payable. The other thing to be aware of with soveriegns are there are a great many fakes in the market. When I found that out in 2003 I checked and found 1 of 13 sovereigns was a fake. I then switched to philharmonkers and bars. I would suggest you be very suspicious of any sovereigns that are sold below spot. I recall on visit to NZ I droped into an antique shop and looked at some half sovereigns.... one was an obvious fake..... it was of a slightly larger diameter.... however when I pointed that out the the dealer she insisted the reason it was different was because it was produced in a different year ( load of rubbish!!!!). When buying sovereigns always use scales that weigh to 2 decimal places.



My concern with CDs post was its "religious like" enthusiasm...... invest with your head not your emotions. the funny thing about gold is too often emotions rule ( I half suspect its genetically hard wired into us).

[67910241]

My concern with CDs post was its "religious like" enthusiasm...... invest with your head not your emotions. the funny thing about gold is too often emotions rule ( I half suspect its genetically hard wired into us).

My suspicion is that some people just find it easier to be driven by emotion and fervour to overcome the naturally instinctive fear. I too need to resort to this sometimes. I reckon there's nothing too wrong about it as long as your track record shows more wins than losses when you do employ it.

And I agree that the PMs just aren't very likely to be the "sole" ingredient of someone's investment success, but they do seem to make more sense taking up a nice chunk of one's portfolio than usual in times like these when most of the fiat currencies are used in a fashion not much better than spam email by very those who create them.