Gold

[airedale]

What kind of time frame are we looking at?

In any time frame from one minute to eternity it still looks flippant.

[Skol]

In any time frame from one minute to eternity it still looks flippant.

Gold's been one of the worst investments on the planet for the last year, I doubt it's going to change.

[Skol]

For those of you with some time on your hands, google 'The Golden Dilemma', a paper by Erb and Harvey, PDF format.

Gold should be $780.

[airedale]

For those of you with some time on your hands, google 'The Golden Dilemma', a paper by Erb and Harvey, PDF format.

Gold should be $780.

Yes, strange isn't it how the markets can remain irrational.

[Skol]

For those of you that haven't got the patience:


One more reason to avoid gold


DAVID BERMAN

The Globe and Mail


Published Friday, Jun. 08 2012, 2:22 PM EDT


Is gold really a good hedge against inflation?

That’s the popular impression, or at least one that is drummed into our heads by gold enthusiasts. But gold’ s track record tells a very different story.

Claude Erb and Campbell Harvey, an international business professor at Duke University and a research associate of the National Bureau of Economic Research, have examined gold’s track record in great detail in a new research paper (via Abnormal Returns) entitled “The Golden Dilemma.”

The title is actually a bit misleading, because there isn’t much of a dilemma here at all: They argue that gold offers little value to investors, other than as a speculative play.

As a hedge against inflation, gold’s record certainly appears distorted. The authors found that the price of gold has swung wildly around the U.S. consumer price index since 1975 – and the current level of the CPI index is so far below the price of gold that it implies gold should trade at about $780 (U.S.) an ounce, or about half today’s price.

Another way to look at it is to divide the price of gold by U.S. CPI. Since gold futures trading began, this ratio has averaged 3.2, with a low of 1.46 in 2001. Today, the ratio is a sky-high 7.3, which implies that something is out of whack.

“Since the start of gold futures trading the only other time the real price of gold has been roughly as high as it is today was in 1980,” the authors said in their paper. “Following the real price high in 1980, the real price of gold, as well as the nominal price of gold, fell significantly.”

Gold enthusiasts would respond, “Duh! Gold is telling us that a big spike in inflation is coming.”

Well, Mr. Erb and Mr. Harvey have looked at that too, and have discovered that there has been no correlation between moves in the price of gold and changes in the annual inflation rate, going back to 1975.

Is this time different? The price of gold is already implying an inflation rate of at least 8 per cent a year over the next 10 years, based on the price-to-CPI ratio. That’s at odds with the bond market, which is implying an inflation rate of just 2 per cent a year.

Even if inflation does indeed rise well above the Federal Reserve’s comfort zone, averaging an appalling 5 per cent a year over the next decade, the price of gold would have to slide more than 3 per cent a year to get back in line with the average price-to-CPI ratio.

No doubt about it, gold is a scarce resource – and Mr. Erb and Mr. Harvey note that if everyone devoted, say, 2 per cent of their assets to it, the price would march considerably higher as demand outpaced supply.

But this argument can apply to any asset. If everyone loaded up on shares in Wal-Mart Stores Inc. or baseball cards or Australian shiraz, prices would also soar.

Okay, those assets aren’t going to do you much good if society falls apart – and gold bugs love the fact that gold is gold, no matter what happens.

But Mr. Erb and Mr. Harvey have some bad news for survivalists too: Throughout history, gold owners don’t always get to hold onto their gold when their cities are sacked.

“Gold is viewed as being durable and largely imperishable, characteristics which make gold its own safe haven against the ravages of the world,” they said. “It is not necessarily a safe haven for the owner of gold.”


Exactly, who was it posted a while back whose father died suddenly? The father had buried gold in the garden and they dug up the entire yard looking for it, to no avail.

[skid]

Aw man this all makes me feel terrible cause I bought some gold about the time this thread started-but hang on-turns out its worth alot more than when I bought it--now thats not so bad after all----put that in your pipe and smoke it,Mr Erb--which is probably what he has been doing

[elZorro]

The start of a technical breakout from the triangle formation, and thanks to a sentence or two from the ECB, it's in the positive direction for US$gold.

http://www.ino.com/blog/2012/07/chart-to-watch-9/

When you see a sharp spike or drop in gold over an hour or two, it's usually because of some comment made to the media that affects the moneyprinting scenario, currently the likelihood of QE3 or other bailout events.

By Wednesday, a picture emerging..

http://beforeitsnews.com/gold-and-pr...b-2430524.html

And by Friday..

http://www.financialsense.com/contri...ree-week-highs

The Moneychanger's thoughts on all this.

Gold likely to break out soon, Equedia.

[elZorro]

A chart showing the gold price breakout. The commentator thinks QE3 is highly unlikely, the FED can set deposit rates lower to stimulate lending.

http://www.ino.com/blog/2012/07/char...e-week-gold-8/

Silver also racing away overnight, up to $28.

Options for the ECB in Europe. They could print money too.

[Skol]

Hey JB,

You backin' the truck up at these 'low' prices?

The consensus of opinion seems to be that the Fed will do nothing.

Will that set off the 'big one'?

[JBmurc]

Hey JB,

You backin' the truck up at these 'low' prices?

The consensus of opinion seems to be that the Fed will do nothing.

Will that set off the 'big one'?

will be buying some more later in the year quite time of year for my income....Stoked with my gold producer CVR only @ 50% production ramp up in their first project and already cash-flow positive with low overheads looking good for my second 10 bagger