Sheik Rattle Enroll

Groundbreaking WSJ Story on Gold

In order for gold or silver to become more useful as currency or wealth stores the transactional costs of ownership have to go down.

As others have noted, some dealers sell for spot price and buy at 30% below. Even if gold goes up 5% a year and stocks stay level, you're looking at half a decade before you break even. If gold goes up 5% a year and bonds go up 4%, you're looking at a very very long time until you turn a profit.

Long Dollar, Short Oil, Hold Gold?

I'd short both oil and gold in the short term. Oil can drop quite a bit and gold can shed 20% or more. Oil will drop fast and hard before rising sky high again.

Gold Doesn’t Care If It’s IN-flation or DE-flation

Right, it's like saying whoa the purchasing power of the dollar increases in deflationary periods and decreases in inflationary ones. What we need is an analysis of gold purchasing power during a deflationary period under a fiat money system.


On Jun 25 10:41 AM chap08 wrote:

> Unfortunately, you can not draw these conclusions from the data.
>
>
> You are missing the point that for most of the period covered, England
> was on a gold standard: gold WAS money. In periods of deflation,
> the purchasing power of money increases and, since gold WAS money,
> the purchasing power of gold increased (see values in the table given).
>
>
> Now, we have fiat money systems: gold is NOT money (and perhaps gold
> is ANTI money). If the purchasing power of gold increased during
> a future (current?) period of deflation, it would not be for the
> same reasons that it did in the past.

Commodities Today: The Correction Has Arrived

Oil at $35 is an amazing deal if it does retest. I'd say below 60 is pretty low risk.

De-Hedging Trends Remain Bullish for Gold Price

You wouldn't hold gold because we're in the middle of a deflationary period and because every other time gold has been this high it either crashed or in one case went sharply up then crashed. Unless you're talking about short term trading where I'll agree there's the possibility to make some money, as a buy and hold investment, why would you buy high when everything else is low?

On Jun 21 01:02 PM stargold wrote:

> With the USD on the edge of a precipice, the European Banking System
> probably still holding some suprises, BRIC countries already begining
> to talk of new reserve currency and Public Trust in Financial Services
> still Low. Why wouldn't you hold gold.
>
> Talk of a Gold bubble is still being pushed by some of the same people
> who were warning of a gold bubble in 2004. Arguments that we were
> in a Gold Bubble then are probably no more true now than then, with
> gold yet to reach its inflation adjusted peak of the 80's.
>
>
>

De-Hedging Trends Remain Bullish for Gold Price

Ten reasons not to own physical gold:

Barely outperformed dollar over the last three months
Trading near all time highs in terms of purchasing power
Transactional cost of ownership
Price trend is down
Actual demand is down
Speculative demand is up
Bubbles don't only happen to other things
Gold isn't the only physical item with worth in the universe
Remember what happened last time gold had a run like this?
Geopolitical tensions have existed since we've had geopolitics

Time to Exit Oil / Gold Pair Trade

I agree, time to exit oil. There's a good chance it has higher to run but compared to the easy gains from $35/brl to here it's a lot more risky now. On a major pullback or gold rise it might be time to buy again, but I'm expecting gold to pullback too...

The Bull and Bear Sides of Gold

Tell that to people who bought gold at peak prices in the 70s. You're caught up in zooming in on localized trends and ignoring the long term. If you buy high you can hope a bubble continues and sell higher or sell low.

People thought oil would never hit $35/brl when it was at $180. The key is patience and not panicking and buying something just because its going up. There's such a thing as fair value. Look at the cost of a home in gold from 1940 to now. Gold is overvalued in relation to almost every other commodity and asset in terms of historical purchasing power. Sound like a good time to buy? Maybe if you plan on gauging the bubble and selling within a year, but I'm sure a lot of people had that plan in the 70s too.

Gold prices move are like a derivative of the inflation curve. Inflation going up 10%? Time for gold prices to not go up 10%, but to triple! Massive inflation is already priced in for gold, so what's left, pricing in hyperinflation on the order of hundreds of percent? If you believe that then you're better off buying guns and a grain mill.

Ever hear Ron Paul's an ounce of gold is worth a suit, always has been, always will be speech? I get custom made suits for $500. Suddenly gold should magically hit what, $2,000? $4,000? Then it's worth 8x its historical value.

On Jun 05 08:59 AM Rhett wrote:

> Yeah, I'll load up too when gold is $500. Pure nonsense.
>
> On Jun 04 06:07 PM Sheik Rattle Enroll wrote:

Stocks Will Fall 37% or Gold Will Rally 60%

The fact that a large number of investors are holding gold I take to be a bad sign. If that money flows out of gold and into stocks or other commodities there will be a huge gold crash.

If non investment gold demand was increasing I'd take that to be a much more bullish sign.

The Bull and Bear Sides of Gold

I think $750 oz. is a reasonable price for gold, not one that will get you rich, but a good non-bubble fair price. At $500 I'd load up. At current valuations? Questionable. Oil seems to be at a reasonable price right now but not a load up price either. At $35/brl I was buying all I could.

I still don't understand why people seem to believe that precious metals are the only inflation hedge. There's oil, steel, copper, corn, wheat, soy, etc. Even earnings of stocks should go up with inflation raising their share prices. Anything except cash should be an inflation hedge...

How Does $9000 Gold Sound?

How about platinum, palladium, diamonds, etc?


On Apr 27 04:57 PM gold33vain wrote:

> India may turn out to be a non factor in "gold reserves" as their
> religious beliefs would not allow the "private reserves" to enter
> the market to a great degree. In the past 3 mos they sold off "old
> jewelry" for scrap melt, however, they just used the money to purchase
> NEW "gifts" of gold.
>
> If you consider just the jewelry in Hollywood & Long Island,
> we would possibly hold more than India!
>
> No I did not do the math on oil or other commodities. Physical investing
> in oil, copper, zinc, etc are not sensible because of storage problems.

How Does $9000 Gold Sound?

gold33vain: Have you done similar math for oil, steel, copper, etc? I think you'll find the same results...

Oil As Money and the Decline of Energy Earnings

Gold is great if you want to preserve your wealth and never gain any. I'm a huge believer that oil was an amazing deal at 35/brl but wouldn't stake my retirement on it, just some of it. Gold is an entirely speculative commodity at this point with collapsing real demand and a spike recently in investment demand but that money is moving to other commodities.

If you're worried about WW3, I'd rather have medicine and guns than gold, and if you're worried about retirement, I'd rather save in a mix of stocks, bonds, gold, oil, silver, platinum, copper, sugar, wheat, etc.

Keeping all your money in a shoebox in your house might not be the best idea in the world regardless of how much you like the assets inside that box. I wouldn't say keeping a little metals or cash on hand is a bad idea, but are you really going to trust your retirement to a shoebox under your bed?

Gold Testing Downside Support

Massive inflation is already priced into gold. It is unreasonably valued at $1000/oz. There's other cheaper inflation hedges right now. Oil at $35/brl was the deal of a lifetime that many investors missed out on while paying exorbitant prices for gold. I'm looking at soft commodities right now.

My take:
Buy oil at 35-50/brl, sell at 90+
Buy gold at 250-500/oz, sell at 800+

Why Aren't Gold and Silver Even Higher?

Gold prices aren't even higher for three reasons:
1) They already factor in a decent amount of inflation
2) Non-investment demand is down
3) Some profit taking from people who bought gold when it was extremely low and then moved into oil when it was extremely low