Gold

[peat]

Almost every day I read a post by some deluded soul who says 'the bottom's in'.

.

Hey Skol
I think the bottom is in

I've been slowly increasing my silver under $20
For the long haul if necessary.

[Skol]

Hey Skol
I think the bottom is in

I've been slowly increasing my silver under $20
For the long haul if necessary.

If you wait, you'll probably be able to buy silver for less than $10. The iShares Silver Trust has 10,396 tonnes.

[elZorro]

The endless conspiracies about the German gold are just that, conspiracies. The Germans don't want their gold back all at once it's that simple, but gold bugs can invent conspiracy theories out of thin air.

http://www.bundesbank.de/Redaktion/E...d_reserve.html

Notice it says 'phased relocation', it doesn't say the gold is missing or stolen.


The SPDR won't be the only ETF selling gold either, others will be doing the same.

Barron's has produced an article on which gold miners will survive at $900 gold, so some analysts obviously believe it's possible.

http://blogs.barrons.com/focusonfund...e-slump-cowen/

The first hint that QE is ending is gonna send gold through the floor.

The first article also states that Germany is asking for all of its 374 tonnes of gold from Paris by 2020 also. They don't need to be in France to exchange gold for Euros. It does seem a bit strange that this relocation is also going to take a long time, 7 years, even though it could all be done overland. They have also assured everyone that they now have room in Germany to store the gold. It won't take up much space.

http://www.nytimes.com/2013/01/17/bu...rves.html?_r=0

England actually charges Germany 550,000 euro a year for storing some of its gold there. Germany will leave all its holdings in England. Strikingly, the USA provides the New York storage service for free, saying that it makes their economy look stronger. France also charges nothing.

Here's an article from 2012 where it states that Germany pulled back 930 tonnes of gold from England, about 10 years ago, and converted some it into new Good Delivery Standard bars. It all checked out fine. On the other hand, France and USA have not done anything more than show Germany the security in place, and have issued annual certificates for the presence of the gold.

http://www.bundesbank.de/Redaktion/E...hiele_dpa.html

So at this stage Germany was only looking for 150 tonnes of gold from USA, 50 tonnes a year. Now it's 300 tonnes, spread out until 2020. If England can send over 930 tonnes in a short time, what is the issue?

Here is one blog post from Drake07 in the Washington Post:

Most of the gold in the Fed's vaults has been rehypothecated and everyone knows it. The problem is like Dave Kransler pointed out the other day, that both China and the U.S. have a vested interest in keeping the price of gold down. The U.S. because fiscally it is a basket-case, and China because they want to accumulate more of the shiny stuff. They are strip mining their country's reserves faster than they can develop mining projects to dig it up out of the ground.

If all of the gold is tied up in derivative contracts that can't be unwound at current prices, then what happens when someone who is not as polite as the Bundesbank shows up and demands their gold reserves, that are supposed to be hanging out in New York?

You know what happens. They are told to get in line or take dollars. Just like Nixon did in 1971. But the minute that happens publicly, the whole gig goes up in smoke. So, is that really what the Fed wants to happen? Of course not, so the Bundesbank allows them to save face, temporarily, and only demand a little at a time, just enough to ensure that the price doesn't drop anymore, thereby eroding the ECB's balance sheet due to their gold being marked to market while the Fed's and China's is not."

It's all about confidence in the dollar - or not. And when the "not" arrives, watch out below!

Regarding the second part of your post that the larger gold miners are still profitable at $900 an ounce, Skol. According to that chart they might be, but would any large company accept that sort of a return on assets? They will by then, be mothballing mines and sacking thousands of miners. There would also be no exploration going on to replace depleted reserves. All the smaller miners would also be well in the red, and soon shut down.

If QE is halted or tapered off, the effect on US stocks will be major, and gold will soon be the benefactor of a safe haven flight of cash.

[Skol]

I wouldn't take too much notice of tossers like Drake 07.

It's standard goldbug BS with the usual conspiracy theories and words like 'rehypothecated', a regular from the gold bug dictionary along with others words like 'fractional', and 'confiscation'.

Gold is just another commodity like lead or feeder cattle, the price goes up, the price goes down, but mostly down and the US, Chinese, or Russian govt. couldn't give a toss, except a few central bankers will be sweating because they got gold fever and paid way too much.

Ask Drake 07 for proof. Bet he can't provide it, just another another in a boring, tedious, endless string of conspiracy theories.

The goldbugs are upset because they're losing money and looking for someone to blame.

Gold is no safehaven, ask the suckers who paid $1,920.

[elZorro]

But aren't we bloggers too, Skol? Why is gold or silver the only "commodities" stored in bank vaults, if that's all they are? I can accept that the USA did put people on the moon, now that you can see the landing spots by telescope. But I'd like to see similar real proof of the overseas gold holdings in USA vaults. The goldbug theories make a lot of sense.

Am I correct in assuming that you think gold will never go above US$1920 again? Your reasoning for that conclusion, is? Could you make the same conclusion about any one share you'd like to name? My point is that it's virtually 100% certain that the price of gold will tend to rise against, or with, a basket of currencies. It has a strong energy content (mining costs), so if energy costs more in future, so should gold. You just can't say that about most individual shares.

Two factors are holding gold down at the moment. The large banks and China are wanting to repatriate or hoard lower cost gold bars, so there is some PR going on, and economies are giving the impression of a slow recovery. Without any major internationally scary situations that the public are generally aware of, there is no immediate rush to buy gold.

[Skol]

I'm afraid you've been reading too much goldbug propaganda EZ.

What banks want gold? Where does it say that? Let me guess, KWN or Jim Sinclair. I've never seen any bank wanting gold, if they want it there's plenty for sale

Gold will go above $1,920, but not anytime soon, could be years, even decades away, gold doesn't always rise, have a look at any gold boom chart and you'll see that when it falls, it stays there for a long time.

Shares are NOT gold, companies make things, gold vegetates in a safe.

The amount of gold you're talking about is actually chicken-feed anyway, all the gold in Fort Knox wouldn't pay the US military budget for 1 year.

The suckers who paid $850 for gold in 1980 still haven't got their money back.
Taking inflation into account gold will have to rise to $2409 for them to break even.

A real safehaven all right. lol

And here's another great precious metals deal, the suckers that bought silver in 1980 at $45 would have to get $128 now to break even.

Not a snowball's chance in hell.

And I've used the official inflation rate, which according to the goldbugs is incorrect, it's a Fed and Govt conspiracy and is a lot higher, so gold and silver bugs will need heaps more to recoup their losses.

"It has a strong energy content". Maybe, but gold isn't a requirement in everyday life like oil or copper. We don't need gold unless you want to escape from Iran or North Korea.

Or you're paranoid!!!!!!!!!!!!!!!

Or you could buy Auckland property which I 100% guarantee will beat gold.

[elZorro]

But many miners continue to lose money even now..

http://www.dw.de/gold-miners-under-p...ces/a-17004009

The top part of the article is factual. The miners expect that longer term it'll be OK. In other words they expect the price of gold to climb back up.

Then the writer says gold was only a good investment while there were fears of massive inflation. That is not the whole truth at all.


Regarding Auckland house prices, you'd better hope Labour doesn't get in Skol, with cheaper houses for the masses..

[Skol]

Even if there was a bout of inflation it doesn't mean gold will increase. This is from Investing Decoded:
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Gold bulls will claim that the federal reserve's quantitative easing will increase the money in circulation and therefore, runaway inflation will take place.

Runaway inflation may very well happen, but runaway inflation will not lead to a bump up in the price of gold. Since January of 2000, the consumer price index has increased by a total of 38%. Over this same period, the CBOE Gold Index increased by 103% (based on Friday's close).

Despite it's recent 65% drop off its record high, the CBOE gold index still has a lot of downside. If the CBOE index were to drop 47% tomorrow, it would be equal to inflation since the year 2000. Gold's huge increase relative to inflation makes the inflation protection argument moot until we start seeing $400-$500 gold.

Now I certainly don't encourage investors to bet against the gold bubble (even though are a growing number of ways, including this index). Gold has been highly irrational and prices could spontaneously move higher in the coming weeks. I would simply avoid gold at all costs and go into much better asset classes like stocks (which are experiencing a nice little summer sell-off).

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$400 -$500 gold!

Re. Auckland house prices, if Labour win the next election and stick their fingers in the housing pie which they will, it will only increase the price of houses and increase rents as landlords attempt to recover any additional taxes or levies they may have to pay.
Any official tampering won't have the desired effect, if there's a CGT, landlords won't sell and the price of existing housing stock will increase.

It's all been done before, and someone my age remembers Bill Rowling's Property Speculation Tax 1973. Like many large companies , politicians have no collective corporate memory, and administrators, whether corporate or central govt. are only interested in their term in office and don't care what happens afterwards, a reason for eliminating bonuses.

The Property Speculation Tax was an abysmal failure and repealed several years later, but at the time it satisfied the left's desire to put the boot into nasty, moneygrubbing 'speculators', a dirty word in the socialist dictionary.

No earthquakes either, thousands of families moving to Auckland from down south, and it's going to be several years before this massive house building programme actually gets under way, so it's reasonable to expect that the existing housing stock will continue to increase in the meantime.

I live not far from a dormitory town, cheaply built 1970's Keith Hay houses sell for between $500,000 and $600,000. Once you move out of Auckland you never get back, it's too expensive. Many of my colleagues have left Auckland and now couldn't afford to buy back the houses they sold. In a popular industrial/commercial area in West Auckland land will cost you $800/sq.m, that's $640,000 for a 1/5 acre.

The other unknown will be the cost of labour. If they can't recruit digger and scraper operators locally what chance have they got finding builders, electricians and plumbers, many of whom have emigrated to Australia during the GFC and thanks to Jenny Shipley, apprenticeship schemes are in tatters. They have to import foreign labour now to re-build Christchurch.

What did Isaac Newton say? "To every action there is an equal and opposite reaction."

http://www.magazinestoday.co.nz/Feat...+hope+for.html

In 1987 the average price of gold was about $450, an increase of 2.9 times to now.

The average Barfoot and Thompson Auckland sale price in 1987 was $130,000, it's now $654,000, an increase of over 5 times.

But it won't go on forever, nothing does, like gold there will come a time when buyers will refuse to pay or find other solutions.

[elZorro]

OK Skol, but since 2000 we've had the GFC in 2008-2009 onwards, energy prices have steadily risen, gold in ground at the right grades is getting harder to find, and so a crude comparison of the gold price with inflation is not the right way to look at it at all.

In fact JBMurc had a post that showed an incredibly strong correlation of the US$gold price with the amount of overseas investment in US Bonds. More recently the gold spikes downward have been correlated with the timing of repatriation of gold to countries like Germany. It's obviously a much more complicated picture than inflation alone. Since the US Bonds graph was so tight against gold, I'd be expecting the gold price to return to following that, once some gold bars have been freed up from the weaker hands.

I guess your political persuasion is towards the right, mine is to the left. The main reason Labour want to bring in a CGT is to refocus investors on higher-producing assets. Assets that make goods that we can export perhaps. It lines up with their across-the-board, easily accessible R&D Tax credits scheme which any SME can apply for. (National canned it). They will not introduce a CGT on the sale of a regionally modest home, and if that means that many slip through the net, too bad. The idea is to refocus, and some big commercial investors might do just that.

[Skol]

I thought gold bugs like physical gold because it's actually in their hands and no one elses. Right?

Well that's why kiwis like property, they haven't got their money in the hands of Alan Hawkins, Ron Brierley, David Ross or anyone else who are likely to lose it for them. it's something that's completely, 100% theirs and no one elses.



A CGT is doomed to failure and will be easily circumvented, there's already a capital gains tax on property anyway. A tax on anything increases the price, there's no exceptions.

Oh, and I forgot, Auckland property up 5+ times since 1987 (gold up 2.9 times) and that doesn't include the rent. How much rent do you get from your gold EZ?

Punters are moving away from gold into more lucrative assets like property and shares and the selloff will continue. The absurd notion that gold is being forced down by the Fed, the Chinese, the banksters or anyone else is pure fantasy.

A conspiracy theory straight out of KWN. 2 years since gold reached its peak and diehard goldbugs still hanging in there hoping for the best...........slow learners.

There's lots of hand-wringing from goldbugs that if the price of gold continues to plummet then the gold miners will run at a loss. Correct, what's the problem? There's plenty of gold around and as gold becomes a less fashionable asset to own, more will make it's way to the auction block.