A few questions about Gold.
keets
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With all the attention being paid to the high spot price of Gold right now I can't help but wonder if it is good. I suppose on an individual perspective it might be good and some people will make money. That in itself is a little crazy because so many members here deride the thought of investing in the Hobby, but that is apparently a good use of the word where Gold is concerned.
Whatever, I guess.
To the bigger point, when Gold is high, traditionally other things are low. For members who are more in tune with this market and who follow the World economies, how much higher would you expect Gold to go before things settle down?? With so many already out of work here in America and hurting will the high price of PM's drive that or be driven by it?? And what about the US Dollar and the Stock Market?? Historically when PM's are up the other two are down, but it seems that during the past 10+ years that may not be a reliable indicator.
Al H.
Comments
What's the question?
Lance.
My guess is, the flight to precious metals is due to lack of confidence in other investments. The stock market is drunk on free money from the government. Bonds and interest bearing accounts won’t keep up with inflation. Where do you put your money?
edited to add....In no way do I think investing in precious metals is a sound investment, but I will sell what I have if it continues to go up.😊
Currently Gold has and inverse relationship with the USD Index and it's also tracking the 10 year Treasury. The USD has been overvalued for years and it's just been the past few weeks that the Euro has stepped forward and the USD Index has declined.
Tell me where the 10 year Treasury will be and where the USD will be and I'll tell you where Gold will be...
What's the question?
Lance, find the question mark(s) --- ? --- and then read back from that till you find a Capital letter. that's where the question(s) begin.
Good questions.
PM advocates will suggest that this time the upward move is different. As Al Smith said... Let's look at the facts
-interest rates are at historic lows and have moved into negative territory in some countries
-Bond yields are at historic lows
-Unemployment is at levels not seen since the 1930s
-Farm bankruptcies are at levels not seen since the 1930s
-The stock market within about 88% of its all-time which is unbelievable consider the current state of affairs. However, the stock market is simply not what it appears to be. The valuation is predicated on the strength of fewer stocks with a bet that we are in for a V shape recovery
-The dollar has weakened over the past few months and that trend will likely continue given interest rates and debt with nothing compelling happening to support it.
The biggest problems will be how and when small business and various sectors of the economy including but not limited to transports, hospitality/hotel/resorts, oil and financials to recover. For some, the economy was in a transition moving more to buying online instead of at brick and mortar stores. Those that are able to work from home may continue to do so as part of the new norm. So these trends impact all aspects of commercial real estate-retail and office space and vacancies. At some point, there will have to be a downward revision of commercial real estate valuations which will hurt the financial sector. And we have not even addressed health care yet.
So is gold over bought at $1940 or so? Is silver at $24.40 and platinum at $952.00 over bought?
Perhaps... But what are the alternatives? In looking at historic ratios, it seems silver and platinum would have more room to run but there obviously are no guarantees.
So much is riding on a V shape recovery and the US economy to adapt to change that just cannot be explained or quantified at this time. Seems reasonable to have an allocation that hedges your bet.
Experience the World through Numismatics...it's more than you can imagine.
I see three questions. The title says "A question about gold". Which is it?
1) How much higher will gold go before things settle down?
2) Will unemployment drive the price of PM's or be driven by it?
3) What about the dollar and the stock market vis-a-vis PM's?
Lance.
Keets: "Whatever, I guess."
It seems an election year stirs markets, which in turn hurts some sectors , while it benefits others. Am thinking we have to find the roof before we know where the floor is. We are up another couple stories since our lows in 2015.
Now onto colorized coins and who knows how low we will go ?
Perhaps by mid November we may see a plateau. In the interim, good coins keep costing more, from what I see.
1) How much higher will gold go before things settle down?
Nobody knows, of course. My guess would be perhaps another 10% by the election. Higher wouldn't shock me.
2) Will unemployment drive the price of PM's or be driven by it?
I don't see causality either way.
3) What about the dollar and the stock market vis-a-vis PM's?
The dollar and gold have an inverse relationship. The stock market is being fueled largely by massive liquidity infusions and zero interest rates. Those things are also propping up gold, as they are generally inflationary.
I see three questions. The title says "A question about gold". Which is it?
OK, fair enough, I changed the title to avoid confusion.
The law of supply and demand says that as the supply of something goes up, its price goes down. When you magically create trillions of dollars out of thin air and distribute it willy-nilly to the masses, the supply of dollars goes up. The value of each one already out there (including the ones in my 401K) goes down. So, my take is that the value of gold is reasonably steady (at least as much as usual) and the perceived value of the dollar is dropping... thus, it looks like gold, silver, and other commodities are going up.
But, I'm sure nobody has been massaging the true indicators of inflation for the last couple of decades to make it look like we're OK. There are so many parallels here with ancient Rome that it's laughable. Nobody seems to care.
Gold & silver have a ways to run. Not much retail inventory as of this AM. A lot of interest from 'the little guys' jumping into the market.
Is that a bad omen?
Try ordering freeze dried meals (the kind that last for ten years or more). Most companies that deal with it, such as Costco's website are sold out for ten months or longer. Seems that would be the play vs gold.
Or ammunition.
Usually. There's an old Wall Street saying that when your cabbie wants to talk stocks, the top is in. LOL
If printing money and giving it away doesn’t cause inflation and no one seems to care, why not do more?
1) How much higher will gold go before things settle down?
Gold's on its way to 2500. It will settle there as long as the government can hold it. It normally overshoots and then crashes on its way to "stable".
2) Will unemployment drive the price of PM's or be driven by it?
Unemployment is irrelevant to gold prices.
It seems to be relevant because of a high correlation between unemployment and inflation but this correlation results from cycles that can be independent.
3) What about the dollar and the stock market vis-a-vis PM's?
The dollar will continue lower.
Stocks will do what they will. Their prices are determined by perception of profit. Stock prices tend to be negatively correlated to metals but this isn't necessarily true either.
It's likely that bond prices are going to impact stock prices this time round. Nobody will make much profit if bonds suffer.
Don't expect gold to stay at 2500 very long if the FED is still printing money like it grows on trees.
Gold = election insurance
R or D are buying gold, since they figure the country is screwed if the other guy wins.
Probably see higher prices until November 4th.
Then half the country will think the coast is clear and sell their insurance. Lol
How will bond prices impact stock prices?
The printing press is driving the price of gold. I will say the price will slow down around $2,400. Free money isn't free, but try to tell that to people being handed $1,200 and $600 checks every so often.
"A dog breaks your heart only one time and that is when they pass on". Unknown
Between all of the gold sources in the world, current estimates suggest that roughly 2,500 to 3,000 tons of new gold is mined each year. At present, experts believe that the total amount of above ground gold in the world stands at just over 190,000 tons.
So, yes- money is being printed yet about as rapidly, new gold is being mined.
Nope. World gold supply goes up about 1.5 to 2% per year . Currencies on the order of 5-20% if they are not in hyperinflation. That's the basic reason why gold has been under such heavy manipulation at times....to hide the fact that the currency creation rates far outpace gold. The US Govt just sent out $4 TRILL this year....most of it well hidden by the Treasury. That's about a 15-20% increase in one year. It probably doesn't show up in the "official" UST money stocks (M0,1,2) but it's out there nonetheless.
And it's really more about the total sovereign debt ($26 TRILL) than it is about money printing. First of all printed money is fairly stable (M0 and M1). Govt keeps that amount fairly low. It's the M2 with a lot more 'wonk' in it. And M3 was so full of 'wonk' that the Treasury Dept stopped reporting it years ago because the numbers were so big....lol. To really weigh the complete financial picture you need to factor in all the financial derivatives as well, including OTC derivs.
The dollar is not always inversely related to the gold price. You will many periods of several months at a time where they went in the same direction. And there at times when the dollar has been net flat for several while gold made major moves. Aug 2018 to Feb 2020 both of them generally trended higher together. During gold's huge move from April-Sept 2011 both he dollar and gold moved up sharply together. Gold's overall global movement are probably better defined by what non-dollar currencies are doing.....the EUR, CAD, Pound, Swiss Franc, Yen, AUD, Those currencies are probably less manipulated than the USD.
Cash purchases necessities.
Gold buys vanity.
price of physical gold is determined by the faith/trust in the currency it is priced in when it (spot price) is not being manipulated on the futures exchanges (COMEX in the US). Economic miss-management by our central bank has sent the value of the dollar in a downward spiral. Sure, it is stronger than most currencies but that only makes it the prettiest pig in a pig beauty contest as all central banks have failed to fulfill their mandates.
The curve ball in the equation is the ability of large bullion banks, such as JP Morgan, to manipulate downward the spot price in the futures market. As we all know spot price is everything when assigning value to physical gold. Weaker gold, like a strong stock market, give the appearance of a stronger currency and is therefore desirable by those tasked with protecting the economy. At the moment the CRIMEX COMEX is under the watchful eyes of the Department of Justice who has recently charged bank traders with manipulation by "spoofing" the price downward. How long the remaining traders are cautious and how long the DOJ has an interest remains to be seen.
As more of the population becomes aware of the true economic outlook, gold will continue upward. The pandemic has exposed weakness that already existed in the economy. One of three things will make gold "settle down:"
The government is incapable of ever managing the economy. That is why communism collapsed. It is now socialism’s turn - Martin Armstrong
yet each year one oz of gold buys more necessities than does the same amount of cash. Gold buys protection from a declining currency. Vanity is the misconception that the dollar is infallible and that the Federal Reserve is looking after the well being of the general population and not a select group of individuals.
The government is incapable of ever managing the economy. That is why communism collapsed. It is now socialism’s turn - Martin Armstrong
upward move is no different, except there is currently less resistance from the futures market. Everything you mention has always held true: The price of gold has a direct relationship with faith/trust in the economy and in those who manage it. Gold is never overbought or oversold. This faith/trust in the economy is what gets the wrong valuation; gold just respond accordingly.
The government is incapable of ever managing the economy. That is why communism collapsed. It is now socialism’s turn - Martin Armstrong
Too many known and unknown variables out there to pinpoint what’s driving metals up. Heck, for all I know it’s the telemarketers. Sell sell sell sell......don’t buy don’t buy don’t buy!
I'm not seeing much of a move up in numismatic saints (those >1.5X melt) so I'm still buying those.
Dreck & AGE are up.
My prediction is slowly up to 2k by end of summer & will hold until election.
After that, who knows.
My Saint Set
Wait, didn't we have "the greatest economy in the history of the world" prior to the pandemic?
I would expect it to go up until people feel the virus is under control.
more like greatest bubble in the world. Don't forget the FED resumed QE in earnest in late 2019, well before a pandemic affected markets.
The government is incapable of ever managing the economy. That is why communism collapsed. It is now socialism’s turn - Martin Armstrong
Free spending lawmakers pushing Gold to the Moon.
100% Positive BST transactions
Free spending lawmakers pushing Gold to the Moon.
Exactly right - my gold and silver was not purchased as an investment, but as an insurance policy. Actually, I would rather see gold and silver go way down in value. That would mean the Government has got spending under control and I wouldn't have to worry about the value of my pension, Social Security, etc. But, as long as the deficit keeps skyrocketing - what's it now, $26.5 Billion and climbing? - having a PM insurance policy helps me sleep me at night (Along with a stockpile of Food supplies, bottled water, ammo., etc..)
Member ANA, SPMC, SCNA, FUN, CONECA
Gold will see 2k this year and might see 3k next two yearS
$26.5 billion would be much better than the trillions.
$26.5 billion would be much better than the trillions.
Yeah, you're right - perhaps I should have just skipped ahead to quadrillion. At the rate they're spending, it won't take that long to get there.
Member ANA, SPMC, SCNA, FUN, CONECA
Very good post.
That ASSUMES that gold is constant in value. This need not be true.
As a dollar's purchasing power diminishes and it buys less necessities the next year, the rise in gold price relative to the dollar (dollar price of gold) compensates for the loss of the dollar's purchasing power. This is the true meaning of gold's "store of value." I call it dollar insurance. Gold's dollar value is not constant. Over time it's purchasing power remains fairly constant in terms of what it will buy except for when it buys dollars (because their value declined).
Think in terms of how many dollars your gold will buy, not in terms of how much gold your dollars will buy.
The government is incapable of ever managing the economy. That is why communism collapsed. It is now socialism’s turn - Martin Armstrong
What people think of gold is its value.
As an economist told me: “Gold will likely go up from here. Unless it doesn’t. In which case it will stay even. Or perhaps go down. “
The presumption that its purchasing power remains constant is what I would contend is potentially incorrect. Gold today is 20% higher than last year. What is 20% more expensive today than last year?
Gold is essentially the same as it was in 2011. Has there been 0% inflation?
Frankly, why should gold's purchasing power remain constant? Would not innovation in mining make it cheaper to obtain? Does not an increasing supply make it easier to obtain?
A constant purchasing power of gold REQUIRES that economic growth globally be exactly the same as the growth in the gold supply. That seems both illogical and ridiculously restrictive. It would suggest that the industrial revolution was not a revolution at all, unless accompanied by a gold mining revolution of equal magnitude,
Mining innovation does not compensate for the ever increasing difficulty of incremental supply. Meaning every incremental ounce of gold is more difficult and more expense to get out of the ground than the last. Marginal cost of supply.
Here's Something To Drink To - Gold Holds Purchasing Power Vs. Beer
The world’s biggest beer festival will kick off this weekend in Munich, Germany and in an interesting twist for gold investors, the price of beer in gold terms is relatively stable, according to research from a European investment firm.
https://www.kitco.com/news/2018-09-20/Here-s-Something-To-Drink-To-Gold-Holds-Purchasing-Power-Vs-Beer.html
If gold had never existed from the beginning of time your life today would not change one iota.
For reasons already attested here, the world is awash with cash, most of it in the hands of people who have enough already. They're having trouble finding where to invest it. Stocks have been bid up. Real Estate has been bid up (and is in jeopardy in the commercial segments because of stay at home orders and online shopping). It's precious metals' turn.
Here's a warning parable for coin collectors...
If appears borrowing doesn’t effect gold like printing does?
The same could be applied to federal toilet paper, The Dow Jones, Bit Coins, Your Local Bank Dot Com etc.
The whole worlds off its rocker, buy Gold™.
BOOMIN!™
^
Right. So let us spend our energy and efforts on the things that matter and continue to mock the things that don't.
Some people put food on the table buying and selling gold. I would imagine it matters to them. You would probably prefer that people didn't mock the things that matter to you, wouldn't you?