Gold GOING to get Killed!!!!

[iyamwutiam]

Re: Gold GOING to get Killed!!!!

I am going to have to agree with everything she said -because it is so rational. Mark Faber made essentially the same points on that interview -someone posted here.

The long run -not this dip and switch -(we have had dollar rallies before when Gold went from 1100 to 750 or so) and we know how that turned out. This false gold bear trap is to counter the higher yields. Who wouldn't want to push 'investors' into rallying INTO your currency when your past your eyeballs into debt. Which friend of yours are you going to keep lending to -if he makes 14M dollars a year -but for the last ten years is 'forced' to get into more and more of debt at this point he is spending 115 percent of his income just to finance his previous loans and run his lifestyle.

The dollar is dead as of Oct 2008 when Lehman crashed. Yes -countries and companies had a lot of dollar denominated loans and were forced to buy dollars. But the world moves quicker these days and I don't see China/Russia/Singapore being suckered into MBS and other crapola. They have learned their lessons and are dumping them as fast as possible. Look at how China paid of Angola's debt to the IMF in dollars -now they have Oil. minerals and a thankful government, same thing with the 20B given to Russian companies in exchange for natural gas. And now recently Turkmenistan.

They are not stupid -they are diversifying very quickly in to Natural gas -and I fully expect 20 percent or more of China's fuel needs will be met by Natural gas. Its cleaner and in India for sure -almost 50 percent of the cars/ rickshaws/ buses are running on 'cylinders' . The benefit of less pollution is not missed on them either -just ask India.

In short -this is yet another 'trick' play -but as Audrey pointed out -the fundamentals are terrible. 'People' do need to buy clothes, food , and low end consumer products (mostly imported) -they don't need to buy F-18s, AWACs, Satellites etc -which america is supreme in.

Their 'tech' advantage has already hit the wall -as their software is years behind their hardware. Who is going to pay for Vista and a dual core processor -so their computer boots up 3 seconds faster or a minute faster except in the US and Europe.

[grapejelly]

Re: Gold GOING to get Killed!!!!

When/if treasury bonds go to 10% what happens to the price of gold?

gold will be rising in this environment.

Gold will rise when interest rates are rising. When interest rates turn positive, in a REAL sense, then gold will peak.

I think this is years away.

[raja]

Re: Gold GOING to get Killed!!!!

gold will be rising in this environment.

Gold will rise when interest rates are rising. When interest rates turn positive, in a REAL sense, then gold will peak.

I think this is years away.

Two separate reasons to invest in gold:

1. Gold is one of the best ways to protect against a devaluing currency (i.e., inflation or hyperinflation)

2. Gold is one of the best ways to store currency wealth if you think the U.S. economy or the global economy is going to spin out of control. :eek:

High interest rates in Treasuries will not entice gold owners to sell their gold IF there is the fear of possible economic collapse. On the other hand, if there is a sense of stability, high yielding Treasuries will reduce gold investments, IMO.

[Jim Nickerson]

Re: Gold GOING to get Killed!!!!

Two separate reasons to invest in gold:

1. Gold is one of the best ways to protect against a devaluing currency (i.e., inflation or hyperinflation)

2. Gold is one of the best ways to store currency wealth if you think the U.S. economy or the global economy is going to spin out of control. :eek:

High interest rates in Treasuries will not entice gold owners to sell their gold IF there is the fear of possible economic collapse. On the other hand, if there is a sense of stability, high yielding Treasuries will reduce gold investments, IMO.

Here's a pro and con analysis/opinion about gold by Martin Feldstein via Economist's View under the descriptive title "Is Gold a Good Hedge?" http://economistsview.typepad.com/economistsview/

Is Gold a Good Hedge?, by Martin Feldstein, Commentary, NY Times: As I walked through the airport in Dubai recently, I was struck by the large number of travelers who were buying gold coins. They were ... joining the eager rush to own gold before its price rises even further. Such behavior has pushed the price of gold from $400 an ounce in 2005 to more than $1100 an ounce in December 2009.

Individual buying of gold goes far beyond ... gold coins... In addition to buying coins..., individuals are buying kilogram gold bars, exchange-traded funds that represent claims on physical gold, gold futures, and shares in gold-mining companies... And gold buyers include ... sophisticated institutions and sovereign wealth funds. ...

Many gold buyers want a hedge against the risk of inflation or possible declines in the value of the dollar or other currencies. Both are serious potential risks that are worthy of precautionary hedges. ... But is gold a good hedge against these two risks? ... The short answer is no...

Consider first the potential of gold as an inflation hedge. The price of an ounce of gold in 1980 was $400. Ten years later, the ... price of gold was still $400, having risen to $700 and then fallen back.... And by the year 2000, when the US consumer price index was more than twice its level in 1980, the price of gold had fallen to about $300 an ounce. Even when gold jumped to $800 an ounce in 2008, it had failed to keep up with the rise in consumer prices since 1980.

So gold is a poor inflation hedge. Moreover, the US government provides a very good inflation hedge in the form of Treasury Inflation Protected Securities (TIPS). ... Of course, investors who don’t want to tie up their funds in low-yielding government bonds can buy explicit inflation hedges as an overlay to their other investments.

Gold is also a poor hedge against currency fluctuations. A dollar was worth 200 yen in 1980. Twenty-five years later, the exchange rate had strengthened to 110 yen per dollar. Since gold was $400 an ounce in both years, holding gold did nothing to offset the fall in the value of the dollar. A Japanese investor who held dollar equities or real estate could instead have offset the exchange rate loss by buying yen futures. The same is true for the euro-based investor who would not have gained by holding gold but could have offset the dollar decline by buying euro futures.

In short, there are better ways than gold to hedge inflation risk and exchange-rate risk. TIPS, or their equivalent..., provide safe inflation hedges, and explicit currency futures can offset exchange-rate risks. Nevertheless,... gold ... may be a very good investment. After all, the dollar value of gold has nearly tripled since 2005. And gold is a liquid asset that provides diversification in a portfolio of stocks, bonds, and real estate.

But gold is also a high-risk and highly volatile investment. Unlike common stock, bonds, and real estate, the value of gold does not reflect underlying earnings. Gold is a purely speculative investment. Over the next few years, it may fall to $500 an ounce or rise to $2,000 an ounce. There is no way to know which it will be. Caveat emptor .

[metalman]

Re: Gold GOING to get Killed!!!!

didn't get too far with this one... starts off with a fallacy... 'As I walked through the airport in Dubai recently, I was struck by the large number of travelers who were buying gold coins. They were ... joining the eager rush to own gold before its price rises even further. Such behavior has pushed the price of gold from $400 an ounce in 2005 to more than $1100 an ounce in December 2009.'

no it hasn't. wrong.

the rest is also dribble.

[raja]

Re: Gold GOING to get Killed!!!!

Here's a pro and con analysis/opinion about gold by Martin Feldstein via Economist's View under the descriptive title "Is Gold a Good Hedge?"

He's partially right . . . .

In finance, a hedge is a position established in one market in an attempt to offset exposure to the price risk of an equal but opposite obligation or position in another market

Aren't many of us buying gold now because we believe it will "offset exposure to the price risk" of the dollar? Do we not fear that the dollar will become less valuable in relation to gold, so we convert our dollars to gold to avoid the effects of dollar devaluation? Since dollar devaluation is inflation, gold hedges us against inflation.

While gold may not hedge devaluation and the accompanying inflation in some circumstances, it will in others . . . an example of the latter being the present and near-future situation in the U.S.

[malabar]

Re: Gold GOING to get Killed!!!!

In markets with massive government intervention it is hard to forecast near term swings.

However, the rising debt burden and monetization in the US, Japan, UK as well as the incredible growth of bank credit (30% of GDP in 2009) in China seems to me as major instabilities waiting in the wings. In such an uncertain environment what would you like to own? Paper or a monetary asset that cannot be printed and has been used as such for thousands of years.

Gold will likely see violent moves in such an environment but until we have a sound money regime there does not seem to be a better asset for value protection.