<< <i>Gold is UP because it is denominated in DOLLARS, as is OIL. IF the dollar keeps falling, gold and oil will keep rising. END OF STORY.
For example: lets just say 1 oz of gold cost 500 euros and that doesn't change.
Lets also say 1 oz of gold cost $500 dollars. Thus $1 = 1 euros.
Lets say the dollar gets cut in half. So $2 = 1 euro. What is the price of Gold ???
Now 1 euro still buys 1 oz of Gold. But gold is denominated in dollars, so you have to convert your 1 euro to $2 and your 1 oz of Gold cost $1000 and ounce.
When your money (dollars) are losing value, it 'appears' that gold is going up, but it is NOT, because it is still only worth 500 euros. >>
You forgot to consider supply and demand. As the dollar falls and the economy crumbles people have less money to spend on gold and less money to invest in the markets, putting a damper on demand. Have you seen Walmart's numbers this year? Consumer spending is way down. The end of easy credit will also hurt demand. As the price of gold rises less people are willing to buy into it too. Smart money doesn't buy high and sell low after all. If I had a pile of gold right now I'd be selling.
When everyone says to buy it is usually the top, because everyone who wants to buy had brought already so future demand will decrease as the price increases.. I see it going to maybe $725 and than reverse course.
Coin Collector, Chicken Owner, Licensed Tax Preparer & Insurance Broker/Agent. San Diego, CA
You forgot to consider supply and demand. As the dollar falls and the economy crumbles people have less money to spend on gold and less money to invest in the markets, putting a damper on demand
It was the above stagflation scenario in the 1970's that propelled gold from $42/oz to $875/oz, during a recessionary period. Consumers weren't spending lavishly on non-essentials, but they were buying coins and gold quite steadily from 1975-1980.
Gold demand is world wide, not just the USA. We are a drop in the bucket really. In fact other that investment buyers and wedding bands, the average American cares nothing about gold, not so in India for example where the jewelry trade is huge. Asian investment gold is huge and getting larger. Under this growing demand the miners are fighting higher energy costs and harder to get to gold.....net effect is a production shortfall. Old mines aren't being tapped and new ones are 5-10 yrs away.
And in the process they backed Tulips (or derivatives) as the long term investment vehicle of choice and applied favorable tax treatment to them.
Um, what kind of tax treatment do the profits on derivative financial instruments actually get? With all due respect to Longacre, what hare-brained tax attorney prepared the brief that could justify any kind of favorable tax treatment for a kiting scheme like this? Even worse, who actually ok'd a favorable tax treatment for this type of profit? SEC? Just curious.
Q: Are You Printing Money? Bernanke: Not Literally
<< <i> When everyone says to buy it is usually the top, because everyone who wants to buy had brought already so future demand will decrease as the price increases.. I see it going to maybe $725 and than reverse course. >>
You are about the fifth or sixth person on this 50 to 60 post thread suggesting top, or sell now. Correct me if I am wrong, but I believe I am the only one to publicly announce buying gold above $700 per ounce during this current run. As I almost always do, I will cut my losses if I am wrong. With gold having only closed above $700 on about a dozen other days in all history, it looks like I am in the minority. Most of the other gold bulls bought at lower prices and have been holding their gold for years, some of them have had their gold for many, many years. That said, the market doesn't care what I think or you think or what the other fine folks on the forum think. The market is going to go where it is going to go.
If a person wants to see near total bullish consensus go read the thread about key date coins.
Red, I don't see the massive volume this time like we saw in the run to $740 last year.
We need sustained price above $740 with volume. >>
Reading charts can be like reading tea leaves. Like I said, I look at a lot of charts, and may be wrong. If I am wrong, I will cut my losses, as I almost always do. That said, I have seen similar chart patterns before, where a prior top provides temporary resistance, on a break out from a flat base just below the old top. These smallish moves in gold seem magnified because of the tight trading range during the past year.
I am sure quite a few folks are shorting gold trying to find the top. As always, for every buyer there is a seller.
No, everyone on TV and radio is talking about how great the stock market is, how you just can't beat it in the long run, only idiots and "gold bugs" and tin foil hatted tar paper shack living eccentric idiots buy gold and shun stocks.
For every one person advocating gold, there are 10,000 advocating stocks. If you had as many people worshipping gold like you see the stock market worship on CNBC etc gold would be $20,000 perounce.
The next bubble will be the precious metals bubble. It has yet to happen. Remember in the late 90's everyone talked about how much their tech stocks went up at parties? A few years ago people talked about how many houses they owned. Next, people will be talking about their gold and silver.
Gold and silver will take off like you've never seen. The question is when and how far will it go.
Don't forget the effect that inheritance will have on this current period. The biggest transfer of wealth from parents to the boomer generation is now occurring. This will have a huge effect on various asset classes.
To those that are convinced that gold just reacts to the dollar, a quote from Julian Phillips via Kitco.com. A pay particular attention to the last sentence of [which it was before 1980]. Gold will show us that there was indeed a time before 1980-1982 when different rules and economic sanity applied.
Gold is listening, as are gold investors and they will listen still more as they protect themselves against the future as well as against today’s concerns. More and more people will become gold investors. The price of gold today isn’t being driven by the simple demand and supply formulae of the typical commodity markets, it’s being driven by concerns over the present and future state of the global financial and monetary system. It will rise in direct proportion to further drops in confidence, rises in uncertainty and the growing need for a sound financial and monetary system that can accommodate the emergence of nearly half of the globe’s population. Gold is being elevated to the status of a sound investment in these extreme times [which it always was before 1980].
I have been wrong at least as often as all you guys -- maybe even more often. Having said that, I'll now say this: As far as 4-figure gold in the next year or two is concerned, count me as a skeptic. But, it is fun to watch and prognosticate.
WH
PS: Today's London PM Fix is at $716.35 now making this the longest streak ever for gold above $700!
"As the dollar falls and the economy crumbles people have less money to spend "
The Wall-mart crowd probably aren't your typical owners of gold. There are 10 million millionaires in the US this year and they probably aren't buying gold for a play, but they are likely to be buying in because their stock portfolios are in the dirt, their hedge funds are frozen, they can't refi their jumbo, and their 401k's can't be tapped so they have to have something liquid. Besides, if they are going to Europe in the fall, gold is the great Euro/USD equalizer.
<< <i>No, everyone on TV and radio is talking about how great the stock market is, how you just can't beat it in the long run, only idiots and "gold bugs" and tin foil hatted tar paper shack living eccentric idiots buy gold and shun stocks.
For every one person advocating gold, there are 10,000 advocating stocks. If you had as many people worshipping gold like you see the stock market worship on CNBC etc gold would be $20,000 perounce. >>
Nice Dennis Miller rant.
Noone is right all the time, but you don't go broke taking some profits. Even though I bought some 2007 W gold before the Mint pulled the plug, I'm off the sell some 2005 and 2006 gold.
While gold and the PCGS Generic Gold Coin Index are at multi year highs, the gold coin index is nowhere near the high it reached in May 1989. In fact, according the the PCGS website, the Generic Gold Coin Index is still 66% lower than its high in 1989. Contrast this with the price of gold being only around 15% lower than its high in 1980. Why?
During that 1989 spike, generic MS65 saints were fetching $4000+. Today MS65 saints fetch $1300. They did reach $1775 back in May 2006. However the quality of 1989's MS65 was far better than today's. Today's MS65 would likely be equivalent to MS64's of 1989. And back then MS64's were in the $1500+ range. Add to that the limited number of slabbed generic gold that had been made and the $4000 price could be justified for that time. With almost 20 yrs of slabbing since, the pops have skyrocketed, and grading has loosened up several times. The same case can be made for MS65 Morgans which fetched $600-$1000 briefly as they initially became slabbed and in great demand. By 1989 they were still in the $350-$500 range. Today? $120 yet they fell to as low as $74 a few years ago.
So one big problem with comparing indicies 20 years apart is that they are measuring apples to oranges when it comes to quality. Many of those 1989 MS65's are today's MS66's ($2600) and MS67's ($8000). While those are all losers except the upgrades to MS67, that's what happens at asset peaks, reason is tossed aside.
I still have a problem with "research" that looks back to gold's 20 and 30 year history and proclaim what a bad investment it is. What is totally ignored is how good it has done in the past 6 years. By the time the bull market is over the same people will proclaim what a poor 30 and 40 yr history gold has had (lol).
Yup $350 gold in 1980 dollars if you believe the CPI stats since then. Dollar crapping or whatever, gold is going up. We've been printing dollars willy nilly since 1996 to fuel each successive asset boom, yet gold continued to tank until 2001.
That is why gold seems to be somewhat undervalued. In the same time span we have jacked the money supply over 13 times. Yet the net price of gold has dropped? Today we are printing money at a pace of 13-14% per year. Will gold stay put at this $350 net value forever? Meanwhile cars cost 4X as much, college costs are up 8 to 10X, homes are up 5 to 10X as well. In that environment gold is about the same price. Hmmm?
<< <i>While gold and the PCGS Generic Gold Coin Index are at multi year highs, the gold coin index is nowhere near the high it reached in May 1989. In fact, according the the PCGS website, the Generic Gold Coin Index is still 66% lower than its high in 1989. Contrast this with the price of gold being only around 15% lower than its high in 1980. Why?
>>
Wasn't this time period around 1989 when investors were tending to buy certified coins like stocks? The grading companies were still new...... it was hyped that all MS65's were now equivilent and could be bought and sold sight unseen, just like stocks, etc.? So basically we had a bubble..... new grading companies, coins being traded like stocks in a portfolio,..... prices got to be out of proportion..... and as we all know, all MS65's are NOT equivilent.
Well it's certainly interesting that the fed is going to lower interest rates by half a percent this week. Nothing like putting a bandaid on a crisis that requires major surgery.
Only to raise interest rates for the next few years so as to entice the Chinese to buy more debt so the socialist security checks can go out to the "boomers".
For the most part all MS65 Saints in 1989 were treated as about equal. Getting a premium for anything in a holder back then was sort of hard. Prices were high enough as is.
As far as the FED dropping rates next week, what if they don't? Nothing says they have to. As Mr. Early said, we have to go the other way to entice buyers of Treasuries. Even Greenspan in his new back expects interest rates to go up to double digits in future years.
Think it is a pretty good time to hold on to PM"s in whatever form right now, at least til the current "uncertainties"stablize somewhat.....I canceled my recent 07-W gold set but went with some Maple 5-9"s. 30,000 mintage. Have to remember to save enough cash for coming mint products of interest.{Reverse Plat-Madison spouse}
Comments
<< <i>Gold is UP because it is denominated in DOLLARS, as is OIL. IF the dollar keeps falling, gold and oil will keep rising. END OF STORY.
For example: lets just say 1 oz of gold cost 500 euros and that doesn't change.
Lets also say 1 oz of gold cost $500 dollars. Thus $1 = 1 euros.
Lets say the dollar gets cut in half. So $2 = 1 euro. What is the price of Gold ???
Now 1 euro still buys 1 oz of Gold. But gold is denominated in dollars, so you have to convert your 1 euro to $2 and your 1 oz of Gold cost $1000 and ounce.
When your money (dollars) are losing value, it 'appears' that gold is going up, but it is NOT, because it is still only worth 500 euros. >>
You forgot to consider supply and demand. As the dollar falls and the economy crumbles people have less money to spend on gold and less money to invest in the markets, putting a damper on demand. Have you seen Walmart's numbers this year? Consumer spending is way down. The end of easy credit will also hurt demand. As the price of gold rises less people are willing to buy into it too. Smart money doesn't buy high and sell low after all. If I had a pile of gold right now I'd be selling.
San Diego, CA
It was the above stagflation scenario in the 1970's that propelled gold from $42/oz to $875/oz, during a recessionary period. Consumers weren't spending lavishly on non-essentials, but they were buying coins and gold quite steadily from 1975-1980.
Gold demand is world wide, not just the USA. We are a drop in the bucket really. In fact other that investment buyers and wedding bands, the average American cares nothing about gold, not so in India for example where the jewelry trade is huge. Asian investment gold is huge and getting larger.
Under this growing demand the miners are fighting higher energy costs and harder to get to gold.....net effect is a production shortfall.
Old mines aren't being tapped and new ones are 5-10 yrs away.
roadrunner
Um, what kind of tax treatment do the profits on derivative financial instruments actually get? With all due respect to Longacre, what hare-brained tax attorney prepared the brief that could justify any kind of favorable tax treatment for a kiting scheme like this? Even worse, who actually ok'd a favorable tax treatment for this type of profit? SEC? Just curious.
I knew it would happen.
It is more of a double top than a true break out.
Red, I don't see the massive volume this time like we saw in the run to $740 last year.
We need sustained price above $740 with volume.
<< <i> When everyone says to buy it is usually the top, because everyone who wants to buy had brought already so future demand will decrease as the price increases.. I see it going to maybe $725 and than reverse course. >>
You are about the fifth or sixth person on this 50 to 60 post thread suggesting top, or sell now. Correct me if I am wrong, but I believe I am the only one to publicly announce buying gold above $700 per ounce during this current run. As I almost always do, I will cut my losses if I am wrong. With gold having only closed above $700 on about a dozen other days in all history, it looks like I am in the minority. Most of the other gold bulls bought at lower prices and have been holding their gold for years, some of them have had their gold for many, many years. That said, the market doesn't care what I think or you think or what the other fine folks on the forum think. The market is going to go where it is going to go.
If a person wants to see near total bullish consensus go read the thread about key date coins.
link to that thread
/edit typos
<< <i>I tend to agree with LALASD4 on the chart.
It is more of a double top than a true break out.
Red, I don't see the massive volume this time like we saw in the run to $740 last year.
We need sustained price above $740 with volume. >>
Reading charts can be like reading tea leaves. Like I said, I look at a lot of charts, and may be wrong. If I am wrong, I will cut my losses, as I almost always do. That said, I have seen similar chart patterns before, where a prior top provides temporary resistance, on a break out from a flat base just below the old top. These smallish moves in gold seem magnified because of the tight trading range during the past year.
I am sure quite a few folks are shorting gold trying to find the top. As always, for every buyer there is a seller.
But everyone on TV and radio is talking about buying gold.
Charts are not always right but it shows how people are betting with their money.
I am not always right either, I only shoot for 60%.
San Diego, CA
For every one person advocating gold, there are 10,000 advocating stocks. If you had as many people worshipping gold like you see the stock market worship on CNBC etc gold would be $20,000 perounce.
Gold and silver will take off like you've never seen. The question is when and how far will it go.
As the dollar falls and the economy crumbles people have less money to spend
Current income tax revenues look pretty darned high for the economy to be crumbling.
To those that are convinced that gold just reacts to the dollar, a quote from Julian Phillips via Kitco.com. A pay particular attention to the last sentence of [which it was before 1980]. Gold will show us that there was indeed a time before 1980-1982 when different rules and economic sanity applied.
Gold is listening, as are gold investors and they will listen still more as they protect themselves against the future as well as against today’s concerns. More and more people will become gold investors. The price of gold today isn’t being driven by the simple demand and supply formulae of the typical commodity markets, it’s being driven by concerns over the present and future state of the global financial and monetary system. It will rise in direct proportion to further drops in confidence, rises in uncertainty and the growing need for a sound financial and monetary system that can accommodate the emergence of nearly half of the globe’s population. Gold is being elevated to the status of a sound investment in these extreme times [which it always was before 1980].
roadrunner
WH
PS: Today's London PM Fix is at $716.35 now making this the longest streak ever for gold above $700!
The Wall-mart crowd probably aren't your typical owners of gold. There are 10 million millionaires in the US this year and they probably aren't buying gold for a play, but they are likely to be buying in because their stock portfolios are in the dirt, their hedge funds are frozen, they can't refi their jumbo, and their 401k's can't be tapped so they have to have something liquid. Besides, if they are going to Europe in the fall, gold is the great Euro/USD equalizer.
millionaires in US
<< <i>No, everyone on TV and radio is talking about how great the stock market is, how you just can't beat it in the long run, only idiots and "gold bugs" and tin foil hatted tar paper shack living eccentric idiots buy gold and shun stocks.
For every one person advocating gold, there are 10,000 advocating stocks. If you had as many people worshipping gold like you see the stock market worship on CNBC etc gold would be $20,000 perounce. >>
Nice Dennis Miller rant.
Noone is right all the time, but you don't go broke taking some profits. Even though I bought some 2007 W gold before the Mint pulled the plug, I'm off the sell some 2005 and 2006 gold.
Ren
Today MS65 saints fetch $1300. They did reach $1775 back in May 2006. However the quality of 1989's MS65 was far better than today's. Today's MS65 would likely be equivalent to MS64's of 1989.
And back then MS64's were in the $1500+ range. Add to that the limited number of slabbed generic gold that had been made and the $4000 price could be justified for that time. With almost 20 yrs of slabbing since, the pops have skyrocketed, and grading has loosened up several times. The same case can be made for MS65 Morgans which fetched $600-$1000 briefly as they initially became slabbed and in great demand. By 1989 they were still in the $350-$500 range. Today? $120 yet they fell to as low as $74 a few years ago.
So one big problem with comparing indicies 20 years apart is that they are measuring apples to oranges when it comes to quality.
Many of those 1989 MS65's are today's MS66's ($2600) and MS67's ($8000). While those are all losers except the upgrades to MS67,
that's what happens at asset peaks, reason is tossed aside.
I still have a problem with "research" that looks back to gold's 20 and 30 year history and proclaim what a bad investment it is. What is totally ignored is how good it has done in the past 6 years. By the time the bull market is over the same people will proclaim what a poor 30 and 40 yr history gold has had (lol).
roadrunner
<< <i>so basically gold is at 350 if you adjust for inflation in 1980s dollars?
i feel it is not gold going up, it is the dollar crapping.
fiat currency + lack of trust = disaster >>
Dollar crapping or whatever, gold is going up. We've been printing dollars willy nilly since 1996 to fuel each successive asset boom, yet gold continued to tank until 2001.
That is why gold seems to be somewhat undervalued. In the same time span we have jacked the money supply over 13 times. Yet the net price of gold has dropped? Today we are printing money at a pace of 13-14% per year. Will gold stay put at this $350 net value forever? Meanwhile cars cost 4X as much, college costs are up 8 to 10X, homes are up 5 to 10X as well. In that environment gold is about the same price. Hmmm?
roadrunner
<< <i>While gold and the PCGS Generic Gold Coin Index are at multi year highs, the gold coin index is nowhere near the high it reached in May 1989. In fact, according the the PCGS website, the Generic Gold Coin Index is still 66% lower than its high in 1989. Contrast this with the price of gold being only around 15% lower than its high in 1980. Why?
Wasn't this time period around 1989 when investors were tending to buy certified coins like stocks? The grading companies were still new...... it was hyped that all MS65's were now equivilent and could be bought and sold sight unseen, just like stocks, etc.? So basically we had a bubble..... new grading companies, coins being traded like stocks in a portfolio,..... prices got to be out of proportion..... and as we all know, all MS65's are NOT equivilent.
The bubble went bust. and prices readjusted.
Only to raise interest rates for the next few years so as to entice the Chinese to buy more debt so the socialist security checks can go out to the "boomers".
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
As far as the FED dropping rates next week, what if they don't?
Nothing says they have to. As Mr. Early said, we have to go the other way to entice buyers of Treasuries. Even Greenspan in his new back expects interest rates to go up to double digits in future years.
roadrunner
<< <i>Fed Interst Rate Cut = Boost in gold prices >>
If they really cut 1/2% it should be a huge gain. Anything else is very bearish.
Silver is likely to get left in the dust.