CoinMiner

Missed the Move in Gold? Crude Oil Could Be an Alternative Commodity Play

Hi, I like paired trades myself.

One thing not yet noted here, however, is that much of the GLD rise has been underpinned by physical Au purchases. China, India and other asian and mid-east countries have been strong buyers of physical gold for the past couple years.

This forces up the paper price, and GLD - which must maintain a certain level of physical gold in storage (at least according to their prospectus) - must then purchase even more physical gold.

You can verify this thesis by noting the premium that physical gold, especially small fractional gold pieces, has held over the spot price the past 12 months (although the premium has backed off recently).

*Extremely few organizations or banks or individuals hold physical oil.*

p.s. I like your web site.

Should I Invest 10% of My Portfolio in Gold?

The replacement for the USD will not be an existing currency. Instead a new currency will replace the role and function of the current USD; the dollar may still exist for national trade.

One cannot dismiss the intent behind the Russian president, Medvedev, passing out a new coin to the leaders at the G8 summit. Currently, three of the eight have publically called for a new unit of international trade.

Just a matter of time before that minority position becomes a majority position. And yes, do believe gold will function quite well as that shelter in the storm during the transition period.

Gold Price Manipulation: So What?

Sure, maybe manipulation or control in a market manages the price of an asset. Perhaps an artificial price of that asset does little to change the FUNCTION of that asset.

However, intervention on a scale to constitute manipulation will - over time - completely erode public confidence in that particular market. That market will fail and ultimately be replaced by another with greater transparency.

There ARE reasons to consider the pros and cons of 'managed' economies irrespective of the price of any one thing on any given day.

Poor Demographic Prospects Point to Higher Gold Price

Long term demographic studies show that as a person ages they tend to turn illiquid assets into more liquid assets so they can then either spend on short term needs (insurance, medical treatment) or pass along to their heirs without triggering tax sales (inheritance tax or capital gains tax).

So, the boomers *should* be selling gold at this point of their life. However, the reality is that they *should* have - but never did -bought more metals and other tangible assets, rather than hock themselves into debt as they've actually done.

Thus, the supply of boomer metals for sale is not at the high cycle it should be.

Instead, the latent demand for metals/hard assets from the next two generations will increase as they realize the mistake their parents and grandparents made and be forced to choose savings/hard assets over debt/paper.

Could Investors Be Wrong (Again) About Treasury Bonds (TLT)?

I agree that there remain a number of unknown variables out there, which make this market such a tricky one to play. However one thing I'll wager is that geopolitical uncertainty, such as "Iran out of control" - the example used above - rarely forces long term yields much one way or another.

Think of it this way - when was the last time you heard an investor say/blog: "Gee, that government is collapsing and their neighbor doesn't look so hot either - think I'll go buy more government paper promises!".

Not likely; the higher probability bet is they'll increase their defensive positions in short term cash, commodities and gold, and local real estate.

The Myth of Gold Confiscation

Roland, nice write-up.

You state that holding gold 'is another matter' from hoarding gold.

Where was Roosevelt's legal authority to determine the threshold here? How was the definition of hoarding proscribed, except via government fiat decree? Government regulation of my personal stores is not compatible with their expressed powers.

Let me ask you this - how much food am I allowed to keep at my house? Is it up to you, or a government executive, to deem a sufficient amount? How does that comport with my rights to pursue life and liberty?

Dangerous waters and lack of internal logic support that premise.

Barrick Gold: A Hedge Against the Dollar and Inflation

Chris, Nice analysis.

One thing I have noticed is that ABX managed, since the Lac Minerals days, have made very shrewd moves based upon company reserves and properties. One thing they have had more difficulty with is accurately 'guessing' the future price of gold.

i.e. their hedge book history. They are now in the position of 'winding down' losing bets when they could have benefitted from this recent upsdie in price of gold.

Hence, another play is to focus on the obvious ABX targets, based upon previous takeover history and patterns, before actual takeover announcement.

This tack has also worked for me regarding potential KGC takeovers.

Both KGC and ABX have manged their takeover targets remarkably well. In part the mining sector has an easier time of merging mining operations than other sectors/industries.

Gold Against Stocks Over the Decades: Not as Impressive

Archaeology indicates that gold has traded as a currency and functioned as a store of wealth for over 6,000 years. 60 years is one percent of that time and thirty years is one half of one percent of that time. Stocks have only traded for roughly 600 years. Your analysis only covers a thirty year period.

Why did you choose that arbitrary time span? (Hopefully not just to reinforce your initial thesis.)

How many of those companies that were one in the Wilshire have gone bankrupt in 30 years? In the majority of corporate bankruptcies common stock becomes worthless. For example, had you chosen the original DOW 30 to analyze against gold performance, you would learn that 29 or those 30 companies no longer exist. That’s right 96.7 percent of your investment would have been wiped out. This type of analysis usually leaves out that fact also, go figure.

After looking at the longer time scales, and broader horizons; and against financial and economic benchmarks rather than just fiscal ones – the reasons men, banks, and governments gravitate towards gold become clearer.

Thanks for your article.

Gold: Now Demonstrating Trust in Obama

Just because something is unpopular (allowing bad debt written off through corporate bankruptcy) doesn't mean it won't work. Even though the political will does not favor mass corporate bankruptcy, no government can prevent certain cases. General Motors is a prime example. They are to present a 'negotiated re-structuring' plan to congress tomorrow. That is just an euphemism for bankruptcy.

We can either swallow the bitter medicine now (bankruptcies) or live on ‘quality of life medicine’ (massive monetary inflation) for the foreseeable – and unforeseeable – future. Or, collapse when the medical regimen (‘stimulus’/inflation fails.)

Fact is the government will try to prevent brand name corporate marquee bankruptcies under the header of ‘saving jobs’, but they will let the common fools restructure mortgages (principal forgiveness= YOU pick up the tab) for political expediency.

The WSJ Is Right - U.S. Should Return to a Gold Standard

The current regime running the USA will allow neither gold nor silver to circulate as currency. There is simply too much ability to manipulate the finance and banking systems using fiat and usury - especially now that the regime is calling the shots on what CEOs can get paid, who gets first dibs on loans, etc.

When things get much worse, they will scrap the US dollar for a system of international digital credit. This will ostensibly be 'backed by gold', though specie will not trade. However, gold and silver are making a resurgence as trade in the black and gray markets.

Sorry Gold Bugs, It's Time to Sell

Jake,

Interesting analysis. Your first point is that GLD does not pay interest/dividend. That is correct. However, that was also correct on 12.30.04, when you bought the position. You have not provided income production as a reason for your purchase. I checked your blog and website and could not find the reasons for your buy on that day since I could only find your calls going back to May 2007.

If your primary fundamental reason for selling is as true as when you bought, why sell now when GLD displays MUCH stronger technical’s than, for example, last February, or much weaker technical’s – such as last August? Just THIS week GLD broke out of a two year trading band, to the UPSIDE, on VOLUME.

Reasons 2 and 3 I agree are fundamentally against GLD, but these are fundamentally against all other commodities to, including oil.

Hence reason 4 withstands scrutiny the strongest. I would place short term money on your longs (e.g. OIL) also, they seem sound bets. However, you are selling a 4-year long position in the money for a short term trade. It will likely take several months (and a few very obvious test of the 50 DMA to the upside) for OIL to create a bullish technical position – fundamentals aside. In other words, you are trading a sound position (GLD trading over 50 and 200 DMA – though short term overbought) for a speculative one (OIL waaay below strong resistance). You are not replacing your sound money position with another sound position, only a more speculative one.

In sum I disagree with your tactics more so than your strategy.

(Disclosure: I remain long physical gold and silver since February 2000 and will sell into IV of Primary THREE of THREE. GLD provides a nice vehicle for short term trading only.)

Happy Trading.

A New Place for Investors to Find Silver

Never understood the reluctance to maintain physical metals. The storage objection stands out as a red herring IMO.

One can maintain several hundred thousands of dollars of gold bulion - or millions in certified coins -in a shoebox. Amounts of silver that size are not necessary since silver coinage has always been for day-to-day mercantile transactions, not for larger dollar settlements. Hiding a shoebox is NOT an insurmountable task; rather an increasingly necessary skill in today's world.