I bet that the European Central banks are glad that they dumped their Gold, at $265 an oz.
markglicker
Posts: 1,486 ✭
Smart fellows. They can handle my money, any day.
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Do the conversion to Euros before you laugh at them.
Now the metal has raised it's head and people are grabbing it up as fast as they can claiming it is the vault of choice to store monetary value and it will beat inflation and it will offset the weak dollar, it is the financial salvation. So, when PM is quiet no body wants any but when it is nearly twice the value of just a couple of years ago people suck it up like it was their only chance of survival. But, it is always like that, where people don't want it because it isn't go-go enough but when it's hot and expensive they will sell their assets to get some. It will be most interesting to see where generic gold coins and bullion coins go from here...a lot of folk have been stocking up, little by little, to "insure" themselves against weak currency, and international unrest, and high energy costs. Maybe this time it will pay off.
The bomb that I'm looking for is some sort of indication that China has pulled a Bunker Hunt and quietly cornered ownership of the gold mining stocks through third party transactions while everybody was out looking for oil and worrying about terrorists. If that happened/happens then hold on to your PM, it's going to be a moon shot.
So, here's your pity post! I do have an appreciation for your insight into these complex financial issues, we have a lot of talent here.
Since the beginning of 2003, SP 500 up 45%, Real estate, I'm sure much higher in most "warm" areas, and gold along with it. I guess the motley fool rule is , BUY HIGH, SELL LOW???
Do you think gold is "high" along with real estate? I don't think we have yet begun to define what high really is......At $450 gold, generic Saint Gaudens in MS65 were about $1300-$1400 and yet with gold $50 higher they are still at those levels.....When do we get the price explosion in generics?
When does the rare coin market go into the stratosphere?
$20 Saint Gaudens Registry Set
<< <i>When do we get the price explosion in generics? >>
Price explosion in generics is a myth. Buying bullion is the way to ride the gold market.
Why is it you feel generics are not a way to get a double whammy effect?
$20 Saint Gaudens Registry Set
Of course to take advantage of it you have to be disciplined to sell 1/3 of your holdings on the advance. By the 1/3 back on the retrace.
And those "smart" central bankers (such as BOE that dumped 50% of their gold at $265) along with all those "smart" hedged gold mining companies, still have to go back out into the market at some time and buy the gold back....at higher prices...that are escalating faster than nearly all currencies at this point.
roadrunner
John -
Gold coins and Gold bullion are two completely different animals. The big gold buyers (banks, consumers like Asia in regards to gold jewelry), could care less about a double eagle. I bet most bankers don't know what a double eagle is, except as a golf term!!!
Their futures have gone up. They are pleased, and they will sell them.
I'll take the word of long time insiders in the gold mining/currency markets such as Jim Sinclair about the massive risk that still exists with hedged miners. Many of them have been bleeding since gold started crossing $350 and it has continued. I don't believe they have balanced that risk appropriately with futures. What would Sinclair, a CEO of a mining and exploration company have to gain by mistating the risk the hedged miners have taken? Heck, the guy even took full pages ads in the trade journals just a few years back warning his fellow miners of the massive risk they were taking back when firms like Barrick were leveraged to the hilt. Not all have taken his heed.
roadrunner
<< <i>It's not nearly as bad as you think. When they sold, the Euro was around 85 cents and now it's close to $1.30
Do the conversion to Euros before you laugh at them. >>
Yes, the gold chart in Euros or Japanese Yen may be much more revealing than in USD. Few Americans invest in gold bullion. The sleeping elephants are the Chinese and Indians (Asian Indians). If their economies continue to grow, their strong cultural biases towards holding gold can make the price go up, up, up in the long run. A lot of ifs, to be sure, but that is the kind of thing that secular bull markets are made of and have the potential to make prices go up ten fold over time.
When you are a central bank, the unfortunate truth is that you usually have to buy near the top and sell near the bottom. They are run by bureaucrats with nothing at stake and politicians with axes to grind, and also have to move in size. That combination often leads to really bad investment decisions.
<< <i>Do the conversion to Euros before you laugh at them. >>
Ok, so they sold for 312 Euros instead of 384 Euros and they sold for Euros that were only worth 65% of what the Euros they could get today. (In terms of Dollars) Doesn't sound any better to me.
Huh? It's significantly different.
In dollars: $500/265 = almost a 100% increase
In euros: e312/384 = 23% increase ... over several years
If they used the cash properly to increase the economic activity of the country, a 23% increase over several years could be seen as paltry.
<< <i>It's not nearly as bad as you think. When they sold, the Euro was around 85 cents and now it's close to $1.30
Do the conversion to Euros before you laugh at them. >>
I interpted that to mean that you were saying that the bankers didn't really do as bad as it appeared since the value of the Euro had changed. And there seemed to be an implication that if you ran the figures in Euros it wouldn't be as funny.
A 100% increase in dollars over several years still seems to be better than a 23% increase over the same number of years. The question of whether of not they did the right thing would depend on what return they got on the money they got for the gold. If the return, figured in dollars, was better than 100%, or in EEros better than 23%, then they made the right move.
The question is why are long term US bond rates signaling very low inflation, but gold signaling very high US inflation?? One of these bellweather rates is wrong. Or something else is going on---
You interpreted it correctly. Despite the appearance of gold doubling in dollars, it has not done anywhere near that in euros.
My post was on the premise that this opening quote "Smart fellows. They can handle my money, any day" was dripping with sarcasm. Otherwise, what exactly was the point of the thread?
<< <i>Gold mining companies BUY FUTURES to protect their mining. Just like farmers protecting their crop prices.
John -
Gold coins and Gold bullion are two completely different animals. The big gold buyers (banks, consumers like Asia in regards to gold jewelry), could care less about a double eagle. I bet most bankers don't know what a double eagle is, except as a golf term!!!
Their futures have gone up. They are pleased, and they will sell them. >>
They also sell forward production. It's a balanced transaction.
Check out my current listings: https://ebay.com/sch/khunt/m.html?_ipg=200&_sop=12&_rdc=1
Check out my current listings: https://ebay.com/sch/khunt/m.html?_ipg=200&_sop=12&_rdc=1
Euro is at $1.12. Gold sale of twenty years ago was a disaster for the Europeans.
I thought this would pop up in the PM forum.
An awful lot of fun names from the past in this thread !
You need to look at compound interest etc. to make such a judgment. Their timing was, in hindsight, a couple years too early. But gold in vaults really doesn't do anything for a bank or a country.
Gold in a vault for a country is a form of insurance and stability. Just because someone doesn't make a claim on their insurance policy, we don't say that the insurance really doesn't do anything for them.
Gold in a vault insures nothing. This is especially true once the money in circulation was 100x the value of the bank deposits in gold.
Gold fascination is a historical fallacy born of a science anomaly: gold and silver are found in nature unalloyed. For centuries (millenia?) they were the only shiny things primitive man saw. It wasn't until metal refining was developed that we had other MORE USEFUL shiny things. It is amazing that gold has not faded away. Throughout all of recorded human history, iron and copper were far more useful and important. But man never lost his lust for the yellow stuff. My army of bronze would crush your army of gold.
Gold has zero value without people's emotional attachment. In truly hard times, you throw gold bricks at the marauders, I'll try lead and gunpowder. We'll see who restores order more quickly.
I read at least a dozen posts before I realized that this discussion was from 2005.
However, the point made by @tradedollarnut is a good one. The price of gold can't be viewed in US dollars alone because it's a worldwide market traded in different currencies. The price of gold can go up in dollars while going down in other currencies and vice versa. Exchange rates between the currencies are a variable that will determine if gold is going up or down in a specific currency.
I have heard all this before that gold really shouldn't be worth anything and as you say "gold has zero value without people's emotional attachment." One can say that about a lot of things including paper money. Bottom line--regardless how you personally feel, gold has maintained value for thousands of years and that isn't going to change in our lifetime (usually I would hedge my bets and say "it is unlikely to change" but to think that gold has been a holder of value and wealth for thousands of years and that will change in our lifetimes?---no that won't happen).
ut man never lost his lust for the yellow stuff. My army of bronze would crush your army of gold.
Except you are ignoring the one thing that wasn't true when people decided to use gold as a store of value: price variability.
For centuries, the exchange price was held relatively constant by force of arms. Insurance isn't insurance if it is fluctuating in value. Doesn't do you much good on the day your house burns down if the value of the insurance had dropped 50%.
And your claim that "holder of value" won't change in our lifetimes is demonstrably false. It already has. That is why central banks sold off so much of their reserves.
My point is simple---you stated that gold should hold zero value. That flies in the face that throughout history gold has held value. Whether it is $285 an ounce or $1275 an ounce or $5000 an ounce, people are willing to pay for gold for security and stability. Central Banks selling some of their reserves at $285 means nothing---in fact gold has quadrupled since then. Also, other countries have increased their reserves during this time period like China.
Your statement that gold should have no value except for "people's emotional attachment" is the same argument that a rare coin should not be worth $10,000 or $1,000,000 etc. The same thing can be said for art work that costs hundreds of millions of dollars.
If you really are sure that gold will become worthless or close to worthless in your lifetime, there are many financial instruments that let you bet the price of gold will go down and can be leveraged. IF you are so sure, you can make millions upon million of dollars.
Well, zero was a bit of an exaggeration. There are some industrial uses of gold. But 90% of the gold uses are cosmetic and hoarding.
You cannot in one paragraph tell me that gold "holds value" and that the price can range from $285 to $5000 an ounce. That is not "holding value". The fact is that ANY commodity has some intrinsic value and you could argue "holds value" including iron, copper, lead and beans. Gold is only "special" because of a historical quirk.
Since people have been irrational about gold for 5000 years, I don't feel the need to predict that will change completely in the next 5 years so I will not short gold. However, that does not make the attachment to gold more rational.
The "Great Migration" of 2016-2018 is a much bigger disaster for Europe and the EU. They reap what they sow...
I think you made my argument when you said "since people have been irrational about gold for 5000 years..."
Some wise person once said "Gold will never be worth nothing.".... That is the closest thing to economic truth that can be stated. Cheers, RickO