oneoldude

How the Gold Game Could End

Oh, one thing I forgot to mention. The author is indeed wrong in his basic premise. That premise being that the game in gold will end

The game in gold has been going on for thousands of years. And while its price has gone up and down in relation to all currencies, especially fiat currencies, the game has never ended. Indeed, gold has essentially maintained its purchasing power in real terms (inflation adjusted) since the beginning of time.

As an inflation hedge, it has historicaly had no equal. But that does not mean profits in real terms. So, the game goes on. Speculation on when it is relatively low and relatively high. Yup. Buy low and sell high if you are a bull and sell high and buy low if you are a bear. Yes, the gold game goes on.

Good luck all.

How the Gold Game Could End

Here we go again. It seems that when there are more than a couple correct answers to a question, serious polorazation takes place. Everyone is right in this discussion, including the author.

Should the investing public continue getting out of the gold trade, then GDX may have to start liquidating its gold holdings and that may happen at the same time that the IMF and others will be manipulating the market for lower gold prices. Should this happen, then the price will fall like a rock. $500 or lower gold prices might well be in the picture.

On the other hand, in the world wide fight to prevent a monster deflationary spiral, all the freshly printed fiat currency will produce massive inflation if, and only if, the money supply significantly increases velocity.

Indeed, both scenerios could easily occur. First, a massive decline, and then, a moon shot to $2000 plus per oz of gold.

Personally, I am not making predictions re what will happen. I was fortunate enough to ride AUY from gold's recent lows and after gold topped out at $1000 I got out at $950. Now I am waiting for the market to tell me when to get back in because I think there will be significant inflation in our future. I hope it will be much lower from here. It is all about timing. And both sides of the argument may well be correct.

Good luck all.

Plenty of Room for Gold to Go Higher

Well, I am one of those people who liquidated all his "productive assets" in his Roth IRA and bought AUY. Those "productive assets" are down more than 30% and AUY is up 60%. Not too bad for an unwashed, uninformed member of the masses.

Now I have a nice buffer for that account looking into the future. And the future of gold seems quite bright in the long term.

The last time I made a trade like this was in the early 1970's when Nixon closed the gold window. I bought actual gold then at $35 per oz (in the form of double eagles) and rode it to $300 per oz. No I did not ride it up to the $800 peak back then. But the profit was sufficient to pay my way through college, law school, a divorce and left me enough to set up my law practice.

Back in the 70's the danger was stag-flation and gold was being held to a ridiculously low price by the open window before the window closed. At that time there was little intervention in the gold market by our Fed and the common cry was that gold was a barberous relic. The trade worked perfectly.

Today there is a great deal of manipulation in the gold market by central banks. We are facing a deflationary future in the intermediate term and a potential stag-flation or outright inflation when prices settle down and industry starts to crank up again. This should be due to all the fiat currency being printed all over the globe. I feel the price of miners does not adequately value the current price of gold given the cost of production, especially in the more efficient miners. Also there is dilution in some miners due to some share offferings among a host of other factors that tug on the price of gold and the miners. So the situation is not as pure and as sure as it was in the 70's.

But it seems to me that the dollar is going to weaken on an absolute basis relative to gold and perhaps other curriencies as well although a relative decline to other curriencies is not necessary for gold to go up relative to the US dollar and all other curriencies at the same time. I also believe that Fed long bonds will carry a higher rate in the future due to all the money being printed and the worsening US economic situation. These seem to be a good bet to me and I will keep my longs in AUY and in TBT (TBT has also been good to me) for the time being. Of course I may change my mind at any time and take profits depending on how the fundamentals seem to have changed.

Good luck all!

Decoding What Gold Is Telling Us

Excellent analysis. Kudos!

I agree with you wholeheartedly. I got into AUY near the lows and have substantial profits in it. I did the same with PAAS.

But what bothers me now is the inrush of new money and all the talk that gold is the only trade that is currently working. Silver is of course gold's little brother but seems to have an excellent (low) valuation in relation to gold at this time. I start getting the heebie jeebies when there is such a large public discussion and rush into anything I hold. It smells like a topping process for the intermediate term is stirring.

Oh my! Whether to hold, or sell and buy lower down. Decisions, decisions!

Good luck all.

Is the Second Great Depression Imminent?

The real question is how to profit from the comming oil depletion. Any ideas as to what investments (companies) will be able to provide profit to investors with little risk that the local Gov will not apply an excess profits tax or nationalize the industry?

I guess the same question applies to gold and the comming decline in the US $.

My oh my, all these opportunities and where to invest.

Reports Indicate China's Ecosystem Is Too Far Gone to Support a Growing Economy

Paul,

Went to your web site. It has some interest being that you are there.

But let's be sure to point out that China and the U.S. are very close to being the same land size. And interestingly, according to the CIA World Book, China has about 14.86% airable land and the U.S. about 18%. China has permanent crops on about 1.27% of its airable land and the U.S. on about .27%. Note that China's use is about 5 times that of the U.S. That nicely matches the the four fold population difference given that China's agricultural efficiencies are not up to U.S. standards.

I have not yet been to China, but I have flown the length and breadth of the U.S. many times. Each time I do so, I am amazed at the massive areas of undeveloped and unfarmed arid land in the U.S. I suspect the same can be said of China given the World Book stats I have cited here. If I am correct, this means that there is an extraordinary potential for growth in the use of airable land in both countries.

In a sense, China has the some of same problems they had in the 1950's. In those days China was on a massive infrastructure building spree. People were building roads with their bare hands. Developed nations offered modern road building equipment on the cheap to help out all those labouring Chinese. The Chinese Gov declined. Their reason ... The added efficiency would put many people out of work!

At this time in the world economic cycle, there are people being laid off in China as in the rest of the world. Many will be going back home to the farm. And the Gov is doing what it can with infrastructure and other spending to give people jobs. Eventually the world economy and China's economy will rebound. Eventually the peasant farmers will die out and more productive farming will become the norm. Eventually the one child policy will be formally modified (informally it is already happening). Eventually the pollution problems will be resolved. Eventually the water scarcity will be resolved. Things will improve. China will become the world's economic superpower.

In the meantime there will be stumbles and bumps. There will be shortages of commodities. There will be corporate profits made and lost. There will be gains and shrinkages in GDP growth. There will be opportunities for investors and speculators in all of these cases. But to suggest that all in the long run is lost, is way too shortsighted for me. But then again I am just oneoldude that has watched the passing parade for more than a few years and have been impressed at the determination and inventiveness of the Chinese people. I expect them to continue their successes over time.

Reports Indicate China's Ecosystem Is Too Far Gone to Support a Growing Economy

"How can a nation’s economy grow when its soil is rapidly eroding and its water is rapidly becoming so polluted that it isn’t just unsafe to drink. It’s even unsafe for fishing, farming and factory use."

Perhaps a look in the rear view mirror of history might help answer this question.

As a child, during the late 1940's and throughout the 1950's, I was constantly told by school teachers (and later by college professors) that the U.S. was soon coming to an end because of soil erosion, air and water pollution, population explosion, lack of available land (they don't make it any more) and the inability of the third world to provide its own food supply.

Since that time it has become clear that there is a whole lot of land available. Been in an airplane lately? Also, modern farming has reduced soil erosion, new industries have popped up to provide help in the realm of water and air pollution, population growth has not stopped but has been controlled in various parts of the world by individual choice and in other parts by government control.

This is not to say that there are no continuing problems in these areas. But looking at history shows that mankind has a great propensity to deal with problems and to continue to successfully march toward the future. Indeed, it often appears that many of the problems might be better viewed as opportunities.

Bottom line is, that during the 50 years since I was a child, the U.S. and the world has increased GDP, increased the standard of living, increased life expectancy, increased education and in general moved toward a more comfortable future for all. And all of this motion and growth has occured in the context of inevetable economic cycles of boom and bust.

China will do the same.

Investing in China's Next Boom

Chinese provincial farmers are among the most conservative persons on planet earth. Their savings rate is extraordinarly high, and with good reason, given the scarcity and expense of health care and the lack of a social safety net for retirement.

To presume that provincial farmers, en masse, will simply sell their only source of income to take a chance in the big cities and to presume that they will completely change their thousand year old traditions in an instant is a presumption that is hard to swallow. Even harder to swallow is that even if they did sell their only income source, that they would go on a spending spree that is completely a-typical for that group of people.

If you had said that, over time, as the provincial farmers die off that their property would be sold and the proceeds passed on to their children (if that is even possible in China) and that their city dwelling children would go on a spending spree, then that is a reasonable supposition. But that will take time, a lot of time. And with the RE market crashing in China, I suspect that the boom you describe will perhaps begin to occur some time in the future, but not right now. Timing will be the thing.

It's 1974 for the U.S., but 1929 for China

Articles like this one show that there are opposing views on everything.

For those with actual experience and knowledge about the "real deal" in China, please enlighten us about your point of view regarding what is "really going on." And please give us all some data to support your opinions of error in the original article.

From my point of view, China is facing a recessionary/depressio... environment. But with a still positive GDP. That is sort of an oxymoronic statement, but the Chinese Gov needs GDP growth probably over 6.5%, or so, to keep the society stable. The real question is how long it will take for a recovery in GDP (faster GDP growth) and how fast the commensurate broad corporate profits increases, that should coincide with faster GDP growth, will take.

Inquiring minds want to know.

Gold Equities Should Reward the Patient

GMiki,

Deleveraging by whom? Certainly not by the government. They are leveraging our country's future! Leveraging the future by printing money has always resuted in reflation (inflation).

So in principle I agree. The only real question is timing. I am probably getting in early but I am buying gold, silver, and commodities in general.