Gold

[Aaron]

Gold has a lease rate I.e an interest rate that fluctuates with supply & demand.
It's only really wholesale quantities that can take advantage of it & typically its quite low but I have seen gold lease rates spike to double digits and I think from memory once I remember it spiking to around 40 - 50% very briefly.

The interest rate doesn't normally drive investment but does help offset the holding cost, I.e the USD interest cost.

When lending money people usually ask for a return on capital (interest rate) so nothing special there. I guess it is not so easy lending gold bars.

Gold staying above $2,000, you reckon this is in anticipation of a Fed interest rate cut. I think it was Airedale who pointed out to me that gold is also affected by the strength of the US dollar.

Early days yet but I would be nervous shorting gold at $2,000. So you sell the gold but what do you invest in at 5% while you wait for the price of gold to fall.

[airedale]

Hi Aaron, the US$ index has fallen from 107 in September to 102.8 today. That is the reason for gold to break up above the $2000 us resistance.

[Daytr]

When lending money people usually ask for a return on capital (interest rate) so nothing special there. I guess it is not so easy lending gold bars.

Gold staying above $2,000, you reckon this is in anticipation of a Fed interest rate cut. I think it was Airedale who pointed out to me that gold is also affected by the strength of the US dollar.

Early days yet but I would be nervous shorting gold at $2,000. So you sell the gold but what do you invest in at 5% while you wait for the price of gold to fall.

I'm certainly not nervous, but so far I have been proven wrong on the trade. I always trade with a stop & short positions are always relatively small. Anything priced in USD will have an inverse relationship with the dollar, just like the NZD.
Hamas just bombed Israel in the midst of the ceasefire by looks, so that may underpin gold further.
We launched off $1,815 largely based off the conflict in Gaza and the USD weakness of late has spurred it on.
However, the cost of carry is still over 5%, which is pretty high to hold a position.

[Aaron]

I'm certainly not nervous, but so far I have been proven wrong on the trade. I always trade with a stop & short positions are always relatively small. Anything priced in USD will have an inverse relationship with the dollar, just like the NZD.
Hamas just bombed Israel in the midst of the ceasefire by looks, so that may underpin gold further.
We launched off $1,815 largely based off the conflict in Gaza and the USD weakness of late has spurred it on.
However, the cost of carry is still over 5%, which is pretty high to hold a position.

Just trying to understand better. The cost of carry of 5% is what you are charged while you hold/borrow the gold? I assume you then sell the gold and invest the proceeds somewhere while you wait for the price of gold to fall and buy it back at a lower price before you return it to the owner. What are you invested in while you wait? and I guess your stops will have you buying back the gold if it goes over a certain price.

You don't need to tell me your stop level as this might encourage SailorRob to start buying gold, I just wondered where you put the cash while you wait.

[Daytr]

Just trying to understand better. The cost of carry of 5% is what you are charged while you hold/borrow the gold? I assume you then sell the gold and invest the proceeds somewhere while you wait for the price of gold to fall and buy it back at a lower price before you return it to the owner. What are you invested in while you wait? and I guess your stops will have you buying back the gold if it goes over a certain price.

You don't need to tell me your stop level as this might encourage SailorRob to start buying gold, I just wondered where you put the cash while you wait.

It's the cost of buying forward I.e futures. It's the USD interest rate less the gold lease rate otherwise known as contango. If the lease rate is higher than US interest rates which is rare in gold its termed backwardation. I.e you can buy at a forward price cheaper then the current spot price. It's the method used for exchange rates, one interest rate minus the other.

What I am doing is not a physical transaction its an ETF sold forward so I don't receive the proceeds of the sale, however I do get positive funding i.e. the circa 5% as a credit for each day I hold. Its actually lower than that on the sell side spreads involved. To close out the position I just buy it back and the net of the proceeds of the buy & sell are paid if I make money, otherwise I pay if I get stopped out etc.

Gold trading isn't for everyone as it can be quite volatile and can trade counter intuitively at times.
Its a fickle mistress & silver is even more volatile.

[Aaron]

A bit like BBOZ and BEAR for shorting the Aussie market I guess. Not shorting as such but the manager doing the shorting should be making money if things are crapping out and your shares or units should be increasing in value.

[SailorRob]

Imagine what Munger would have said to Day Trader.

[Daytr]

Imagine what Munger would have said to Day Trader.

You have a very boring imagination.
Lighten up for @#!% sake

[mistymountain]

You are also wrong,

Some great points from Aaron, but you cannot invest in Gold, only speculate.

Bollocks!

Speculation implies Hope for a Blow Off Price Spike Top in any Asset Class. Usually commodities. And Yes! This could happen to Au (like Uranium beginning to Do) with a rapid Price hike over 3 years to US$3000 +

But

Invest in Gold in:

The Miners (many have healthy Dividend Yields) on the ASX and US Markets. Plenty of Blue Chip stocks if you prefer safer options.
The Royalty Companies: low risk but income stream guaranteed. Many have growing Yields as their Royalties increase. Most are quarterly too. Tho Oil and Gas ones monthly. Can't beat cold hard cash to reinvest each month! Yup... Reinvest...

Cheers

DISC: Hold Physical Au, Hold and Buying: Royal Gold, Barrick, Van Eck ETF, Franco Nevada, Gold Royalty , Sandstorm, Perseus, Evolution, Northern Star, Newmont , and various Junior Small Caps.

[mistymountain]

And , before I forget, Buy Physical to Own. Simply Own. No Investment or Speculation Motivation. Just Own.

https://goldprice.org/

Over 20 years of learning about Finance , Gold has increased in NZ$ over 434% . That's not a bad place to store NZ $. Bring on the next 20 years....

Bollocks!

Speculation implies Hope for a Blow Off Price Spike Top in any Asset Class. Usually commodities. And Yes! This could happen to Au (like Uranium beginning to Do) with a rapid Price hike over 3 years to US$3000 +

But

Invest in Gold in:

The Miners (many have healthy Dividend Yields) on the ASX and US Markets. Plenty of Blue Chip stocks if you prefer safer options.
The Royalty Companies: low risk but income stream guaranteed. Many have growing Yields as their Royalties increase. Most are quarterly too. Tho Oil and Gas ones monthly. Can't beat cold hard cash to reinvest each month! Yup... Reinvest...

Cheers

DISC: Hold Physical Au, Hold and Buying: Royal Gold, Barrick, Van Eck ETF, Franco Nevada, Gold Royalty , Sandstorm, Perseus, Evolution, Northern Star, Newmont , and various Junior Small Caps.