Gold in the Low $600s? 14 comments
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Of late, I have read a number of analysts, Jim Rogers even, who have expressed the view that gold could dip to the mid to low $600 level.
Could happen, but I think not. Already, buyers of physical gold are finding anything near $700 to be cheap and so are helping to build a floor under the monetary metal. On that topic, a friend sent this item along last week…
(Gulf News Nov 12) Riyadh: There has been an unprecedented demand for gold in the Saudi market recently, with over 13 billion Saudi riyals (Dh12.75 billion) being spent on the yellow metal during the last two weeks.
Demand is expected to rise still higher as more investors turn to gold as a safe haven in the midst of the global financial crisis, according to market sources.
Sami Al Mohna, an expert on the gold market, said the trend had resulted in a substantial rise in the gold reserves of Saudi investors.
Since soaring to an all-time high of $1,033.39 per ounce in March this year, gold has plummeted 30 per cent.
Gold for December delivery on Monday rose $8.60 to settle at $726.80, roughly the same level at which it traded a year ago.
"Many Saudi investors see this as the right time for making investments in gold as its price is the most reasonable one at present," said Al Mohna.
Needless to say, the Saudis have a lot of money. Not just a lot… but a really, really, big, stupendous mountain of the stuff.
Oh, and like you and me, they’re human.
Which means they can’t help but glance through the morning’s financial news, adjust the reading glasses, and think, “Blessed Mohammed! This is getting really, really serious. Maybe just a little extra gold under the tent right now wouldn’t be such a horrible idea.”
They aren’t alone. We are getting regular reports that at these prices, demand is soaring in India (where price inflation is now running around 11%), and brisk sales have pretty much wiped out physical supplies of small coins and bars in the U.S. and Europe… among other corners of the world.
On that score, a few days ago, correspondent Jim G. sent along the following…
Most of you are probably aware that there’s a shortage of gold bullion coins at the retail level.
What does that mean?
Today I decided to purchase some gold bullion coins. So I called the Northwest Territorial Mint, one of the larger operations in the country or at least the Northwest, so I’ve been told.
I called to see what the availability was. The operator put me through to sales, where I sat for 30 minutes. I finally got in my car and drove 40 minutes there, all the while still on hold. When I finally got there, a woman went in the back to see about bullion coin availability. She was told they were back ordered with 30,000. Not dollars, orders. If I placed an order today, they thought they could fill it in 16 weeks.
To sum, I’m buying… if you know a seller.
While we already know $750 is no magic number below which gold cannot fall or below which it cannot loiter, I take no small comfort in the fact that there is a clear increase in demand at that price. In time, as the dollar continues to participate in the fiat currency race to the bottom, that number will ratchet higher and higher still.
Maybe not overnight, but in the next six months to a year, certainly… or as certain as anyone can be about anything these days.
One thing that could get the show on the road pronto-like has to do with the continuing presence of the other 900-pound gorilla in the room, foreign dollar holders. Like the Saudis, the Chinese have at their fingertips a lot of greenbacks. Actually, not just a lot, but enough to remake the Great Wall.
And they, too, are humans.
And so, over their morning cup of tea, they finger the abacus while watching the daily financial news and say, “Holy Mao! This is getting really, really serious. Maybe just a little extra gold in the rice jar right now wouldn’t be such a horrible idea.”
On that front, here’s some news from Hong Kong…
(The Standard, Hong Kong. Nov 14) -- The mainland is seriously considering a plan to diversify more of its massive foreign-exchange reserves into gold, a person familiar with the situation told The Standard.
Beijing is considering changing its asset allocations during the financial tsunami in order to build up gold reserves "in a big way," the source said.
China's fears about the long-term viability of parking most of its reserves in US government bonds were triggered by Treasury Secretary Henry Paulson's US$700 billion (HK$5.46 trillion) bailout plan, which may make the US budget deficit balloon to well over US$1 trillion this fiscal year.
The US government will fund the bailout by printing new money or issuing huge amounts of new debt, either of which will put severe pressure on the value of the greenback and on government bond yields.
The United States holds 8,133.5 tonnes of gold reserves valued at US$188.23 billion. China holds gold reserves of just 600 tonnes, worth only US$13.89 billion.
Beijing's reserves could easily go up to 3,000 to 4,000 tonnes, Tanrich Futures senior vice president Colleen Chow Yin-shan said.
In another article from Bloomberg, the head of China’s gold association commented that he thought China could triple its reserves.
And there was this quote from that same article.
China has the world's biggest foreign-exchange reserves at $1.9 trillion, according to data compiled by Bloomberg. It is also the largest overseas holder of Treasuries after Japan. China's demand for gold jumped 23 percent in 2007, making it the world's second-largest consumer.
The Asian nation may buy more gold for its reserves on concern the $700 billion U.S. bank bailout will cause declines in the dollar and Treasuries, the Standard newspaper in Hong Kong reported today, citing an unidentified person.
In the final analysis, we can’t say with certainty what path gold will take between now and the time this crisis is over. But until I can see some tangible evidence that it has lost its value as money, I’m a happy holder and, at under $750, a buyer.
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This article has 14 comments:
Burn one if you have it. Flatbush is getting the best of you!
Your assertion that the government will seize gold holds some water as FDR confiscated gold in the '30s. Certainly.
However, Jimmy, some of us have been smart enough to get out of America with our gold before its confiscated. In some cases to places where personal gold ownership has been a matter of course for over two thousand years.
As for Zimbabwe, America is about to become Zimbabwe on steroids. Not because of the new President about to enter office however. Rather, Jimmy, because of the Extremist-Capitalist neo-CON model that has brought the world to the collapse that is now well under way.
As such, one can imagine you'll have allot more time for pro bono work very soon!
If the United States does embark on the sort of paranoid neo-con adventure that you are advertising, the first stop will by Myanmar, not Zimbabwe, and your neighbors will rush across the border to meet our troops, hanging onto the helicopter skids as they take off to the carriers.
On Nov 20 07:26 AM bosun.j wrote:
> Jimmy:
>
> Burn one if you have it. Flatbush is getting the best of you!
>
> Your assertion that the government will seize gold holds some water
> as FDR confiscated gold in the '30s. Certainly.
>
> However, Jimmy, some of us have been smart enough to get out of America
> with our gold before its confiscated. In some cases to places where
> personal gold ownership has been a matter of course for over two
> thousand years.
>
> As for Zimbabwe, America is about to become Zimbabwe on steroids.
> Not because of the new President about to enter office however. Rather,
> Jimmy, because of the Extremist-Capitalist neo-CON model that has
> brought the world to the collapse that is now well under way. <br/>
>
> As such, one can imagine you'll have allot more time for pro bono
> work very soon!
"There has been an unprecedented demand gold in the Saudi market recently, with over 13 billion Saudi riyals (Dh12.75 billion) being spent on the yellow metal during the last two weeks."
...uh, your friend's "source"???...that's as bad as that other idiot "Peter Cooper" and his:
"Since the story broke on this blog, I have received an email from an individual claiming to have personally handled the Saudi deal and confirming its veracity. But nobody appears to have a clue where the gold came from or who actually bought it."
...an email from someone "claiming"??...geez, I would be embarassed to post such tripe!
The article on Saudi gold purchases can be found via Google. Took me about two minutes to locate it here:
archive.gulfnews.com/a...
..."Smarty_Pants"???..... "Dummy_Pants" would be more appropriate...did you even read that article?...the only pertinent part:
"Riyadh: There has been an unprecedented demand for gold in the Saudi market recently, with over 13 billion Saudi riyals (Dh12.75 billion) being spent on the yellow metal during the last two weeks."
...the reporter -- who have I have posted about elswhere -- doesn't provide any source for her information...and where would anyone find corroboration for such a report?...just goldbugs in their eternal quest for an excuse...pathetic!
On Nov 20 11:33 AM Smarty_Pants wrote:
> raytayzmd:
>
> The article on Saudi gold purchases can be found via Google. Took
> me about two minutes to locate it here:
>
> archive.gulfnews.com/a...
David Galland is the managing director of Casey Research, LLC., and the editor of The Casey Report, a monthly letter focused on helping readers get profitably positioned in powerful long-term trends. In recent months, subscribers have made big profits shorting bank, real estate, and financial stocks through easy-to-buy, easy-to-sell ETFs. To allow new subscribers to see for themselves if The Casey Report is right for them, a two month trial offer is available. Learn more now: www.caseyresearch.com/...
It wouldn’t surprise me if in our lifetimes we never see gold back below $700/oz.rised if gold never again drops below $700 an ounce in our lifetimes.
i would be careful about throwing out baseless crap. your claims about the rule of law are laughable - and for a expat, thailand pretty much beats anywhere in the world. the political turmoil in thailand is peaceful open dissent relating to a former prime minister - and the few incidents of violence are from a radical islamic group not supported by the general population of the south. i would have no hesitation of living in thailand - and most places are significantly cheaper than the usa.
"It wouldn’t surprise me if in our lifetimes we never see gold back below $700/oz.rised if gold never again drops below $700 an ounce in our lifetimes." - jeffrey nichols
i would agree. the reason is simply the uncertainty about tomorrow will cause a flight to gold and will build a foundation under this price level.
On Nov 21 12:09 AM The hand wrote:
> "Moving to Thailand in this economic crisis is like trying to find
> shelter from a wildfire in a fireworks factory." - jimmy lathrop
>
>
> i would be careful about throwing out baseless crap. your claims
> about the rule of law are laughable - and for a expat, thailand pretty
> much beats anywhere in the world. the political turmoil in thailand
> is peaceful open dissent relating to a former prime minister - and
> the few incidents of violence are from a radical islamic group not
> supported by the general population of the south. i would have no
> hesitation of living in thailand - and most places are significantly
> cheaper than the usa.
>
> "It wouldn’t surprise me if in our lifetimes we never see gold back
> below $700/oz.rised if gold never again drops below $700 an ounce
> in our lifetimes." - jeffrey nichols
>
> i would agree. the reason is simply the uncertainty about tomorrow
> will cause a flight to gold and will build a foundation under this
> price level.
>
>
>
>
Apparently you did not look deeply enough to find that my name is in fact displayed within my profile page on my site. I'm not hiding behind anything.
Thailand has the longest reigning and most beloved monarch ever. Thai people refer to him as MY King not THE King. Only drunken louts from Germany and Australia seem to get jailed for lese majeste on a regular basis.
As for freedom, I have more freedom here than I had back there. Freedom of speech? On the books there perhaps, in reality nothing close to it. In July I had to go to America for the first time in many years for a funeral. While there a friend and I were often angrily abused by strangers while quietly discussing the relative merits of America, Europe and Thailand. He has lived in Thailand as well and now lives in Europe. When simply quietly speaking the truth nosy patrons at the next table would begin to shout awful slurs and DEMAND we "get the F*** out of my country!" and my favorite "why don't you move to Russia if you don't like it here! MFer" Oh yeah, American freedom, ain't it grand.
Jimmy, I realize that as a lawyer you are programmed to argue. I get it. I can't imagine the burden being a Brooklyn lawyer must place on your psyche. So, as earlier: burn one if you have it.
Chok dee K. Jimmy. Chok dee. (Good luck Mr. Jimmy. Good luck.)
On Nov 21 06:51 AM Jimmy Lathrop wrote:
> Hey Hand, did you know that if you insult the King of Thailand within
> the borders, its a crime punishable by imprisonment? If you click
> on j.bosun's profile, he has a webpage, but you can't find his name
> anywhere. That is because the Thai government monitors his web page.
> There are some things money and gold can't buy but the first thing
> that comes to mind is the First Amendment and freedom of speech.
> I mean, after all, it's what allows you to post your opinions without
> fear of reprisal. Right?