Gold in a bubble and/or going to $3,000

[jtabeb]

Re: Gold in a bubble and/or going to $3,000

You do no fundamental analysis and then make predictions, Worthless. You are now officially on my ignore list, congrats!

[skidder]

Re: Gold in a bubble and/or going to $3,000

I see your point but in 1980 the stocks/gold were redeemable for a currency that was still viable. I'm not trying to game the sale of gold versus the stock market and I do realize that a target of 1:1 was historically a good time to swap into stocks. Yes, stock ownership would be better than holding a non viable currency but gold would be a better hedge since it is actual money in a hyperinflation. What I want to know is how to assess a NEW currency imposed on the US populace in terms of whether or not to sell gold for this new currency or hold it. This question might be better posed in another thread, sorry for the confusion.

[nero3]

Re: Gold in a bubble and/or going to $3,000

I see your point but in 1980 the stocks/gold were redeemable for a currency that was still viable. I'm not trying to game the sale of gold versus the stock market and I do realize that a target of 1:1 was historically a good time to swap into stocks. Yes, stock ownership would be better than holding a non viable currency but gold would be a better hedge since it is actual money in a hyperinflation. What I want to know is how to assess a NEW currency imposed on the US populace in terms of whether or not to sell gold for this new currency or hold it. This question might be better posed in another thread, sorry for the confusion.

I think you will survive the hyperinflation if you hold some us stocks, as stocks tend to do very well if you come out of a hyperinflation, while gold will go down, the broader market will stagnate during the hyperinflation up to a certain point. During the hyperinflation, maybe a gold coin can buy insanely much only to tank later.Buy blue-chip stocks, and forget about timing it. That's my opinion. A long term real price for gold is around 400-450 in todays money, and it's far, far above that trend line.

I think a hyperinflation in the dollar is extremely unlikely (less than 0,5 %), and one of the main reasons is the fundamental value of all those US companies, all the US wealth, that will have a stabilizing effect on the dollar, as people simply choose to buy stocks and solid multinationals on the cheap rather than than have overpriced metals or some emerging market stock trading at a P/E of 100 as the Taiwanese market in the 90-s.

[Raz]

Re: Gold in a bubble and/or going to $3,000

Good question, however I have provided a lot of information on what might happen, if not a criticism you could take it as a challenge for you to say why it wont be so. ( a longer bull-market in stocks), gold could already have peaked. If it was to come down, I guess it could drop to 4-500 dollars in real terms ( after a final peak in gold I think 800 dollars will be hit relatively fast). If it looks like there won't be QE3 4 etc, because the economy already looks to strong, and the market is looking ahead at interest rates rises at the time QE2 expires, lets say housing starts to pick up too, look at construction demand, could surprise to the upside. Then imagine the dollar strengthen, The dollar is as low now as in 78, and 95 and 08 roughly, should it really move any lower? oil peaked when it was this low last time. Rather it seems sensitive to rise any minute if there is any good news, thereby gold is vulnerable as well. I seems to detect from these discussions that the psychology supporting gold is weaker now, and shorting silver almost looks like a sure thing.

You say that Chomsky posed a "good question"; you then proceed to completely ignore it and launch into some unsubstantiated babble
about the economy, housing, Dollar, gold and psychology.


Are you by chance a member of the Norwegian Parliment? Mayor of Oslo? You seem to have an amazing penchant for not answering a direct question.


Attempting a clear and substantive conversation with you is like boxing with a cloud.

[skidder]

Re: Gold in a bubble and/or going to $3,000

[QUOTE=nero3;187125]I think you will survive the hyperinflation if you hold some us stocks, as stocks tend to do very well if you come out of a hyperinflation, while gold will go down, the broader market will stagnate during the hyperinflation up to a certain point. During the hyperinflation, maybe a gold coin can buy insanely much only to tank later.Buy blue-chip stocks, and forget about timing it. That's my opinion. A long term real price for gold is around 400-450 in todays money, and it's far, far above that trend line.

I think a hyperinflation in the dollar is extremely unlikely (less than 0,5 %), and one of the main reasons is the fundamental value of all those US companies, all the US wealth, that will have a stabilizing effect on the dollar, as people simply choose to buy stocks and solid multinationals on the cheap rather than than have overpriced metals or some emerging market stock trading at a P/E of 100 as the Taiwanese market in the 90-s.[/QUOTE/)

You don't make any sense to me with that statement above. It's not grounded in fact or rationale. Good luck and I'll leave you with an excerpt from Steve Savilles report. If you don't understand what he is saying here then I'd start some research. I'd also recommend you re-read some of EJs fine analysis on the subject.

Gold Update

Steve Saville
email: sas888_hk@yahoo.com
Posted Jan 18, 2011
Below is an excerpt from a commentary originally posted at www.speculative-investor.com on 16th January 2011.
Long-term price targets are meaningless

Many commentators like to speculate on where the dollar-denominated gold price is ultimately headed. Some claim that it is destined to reach $3,000/oz, others claim that it won't top until it hits at least $5,000/oz, and some even forecast an eventual rise to as high as $50,000/oz. All of these forecasts are meaningless.

Long-term dollar-denominated price targets are meaningless because they fail to account for the change in the dollar's purchasing power, and the only reason a rational person invests is to preserve or increase purchasing power. To further explain by way of a hypothetical example, assume that five years from now a US dollar buys only 20% of the everyday goods and services that it buys today. In this case, the US$ gold price will have to be around $7,000/oz just to maintain its current value in purchasing power terms. To put it another way, in our example a person who buys gold at around $1360/oz today and holds it will suffer a LOSS, in real terms (the only terms that matter), unless the gold price is above $7,000/oz in January-2016. Considering a non-hypothetical example to make the same point, a resident of Zimbabwe who owned a small amount of gold and not much else would have become a trillionaire a few years ago, and would also have become broke.

The purchasing power issue is why the only long-term forecasts of gold's value that we ever make are expressed in non-monetary terms. For example, throughout the past 10 years we've maintained that gold's long-term bull market would very likely continue until the Dow/gold ratio had fallen to at least 5, and would potentially continue until Dow/gold reached 1.

If we were forced to state a very long-term target for the US$ gold price then it would be: infinity. The US$ will eventually become worthless, at which point gold will have infinite value in US$ terms. But then, so will everything else that people want to own.

[c1ue]

Re: Gold in a bubble and/or going to $3,000

The purchasing power issue is why the only long-term forecasts of gold's value that we ever make are expressed in non-monetary terms. For example, throughout the past 10 years we've maintained that gold's long-term bull market would very likely continue until the Dow/gold ratio had fallen to at least 5, and would potentially continue until Dow/gold reached 1.

Is it just me, or is it amusing that comparing gold's value to dollars is bad, but comparing gold's value to the Dow, which is denominated in dollars, is good?

They're both paper, representational (i.e. fictional) assets.

[nero3]

Re: Gold in a bubble and/or going to $3,000

[QUOTE=skidder;187145]

If we were forced to state a very long-term target for the US$ gold price then it would be: infinity. The US$ will eventually become worthless, at which point gold will have infinite value in US$ terms. But then, so will everything else that people want to own. [/FONT]

I did not read the full article, but in general, I think the forecasts, both those around 1600, or those around 3-6000 mostly is in the category of projecting a bubble and that is in a sane argument, most of these forecasts don't involve inflation outside 25 % range. Gold is really on a path other bubbles have been on before. Then you have the less credible forecasts, and that extend into the category of gold never being able to get into a bubble, because "gold is money, (and hold your breath now), have been money for thousand of years". I'm sure those who never sold any gold in 1980, and held on to it all the way to now, were thinking along those lines, because they waited for hyperinflation.

[skidder]

Re: Gold in a bubble and/or going to $3,000

I'm with you in the respect that I wouldn't necessarily want an asset denominated in a currency that is worthless. However, a stock is supposed to represent a partial ownership of a company and if it trades on other markets it is also denominated in other currencies. Assuming the company continued to operate then one would think it had some value even if the currency with which you purchased it was unviable. There are other reasons to question holding stock though. One is that the DTCC restricts taking physical possession of share certificates so your "ownership" resides on hard-drives and is still subject to gov't control/restrictions, should they so choose. Also the market in which they trade is also controlled by the gov't and subject to shutdown and manipulations by various entities.

[flintlock]

Re: Gold in a bubble and/or going to $3,000

Well said. I tend to limit what I say about my own (quite modest) positions as well, for much the same reason.

Thank-you, also, for not resorting to negative or ad hominem attacks, despite how tempting that might seem, given the tone of some of the other posts.

X2, well said PC.

[flintlock]

Re: Gold in a bubble and/or going to $3,000

I think you will survive the hyperinflation if you hold some us stocks, as stocks tend to do very well if you come out of a hyperinflation, while gold will go down, the broader market will stagnate during the hyperinflation up to a certain point. During the hyperinflation, maybe a gold coin can buy insanely much only to tank later.Buy blue-chip stocks, and forget about timing it. That's my opinion. A long term real price for gold is around 400-450 in todays money, and it's far, far above that trend line.

I think a hyperinflation in the dollar is extremely unlikely (less than 0,5 %), and one of the main reasons is the fundamental value of all those US companies, all the US wealth, that will have a stabilizing effect on the dollar, as people simply choose to buy stocks and solid multinationals on the cheap rather than than have overpriced metals or some emerging market stock trading at a P/E of 100 as the Taiwanese market in the 90-s.

Someone correct me if I am wrong, but don't national economies tend to fair badly during periods hyper-inflation? ( not that I believe we'll necessarily see it) If so, how is selling your gold for stocks going to help? Stocks in what? Automobile manufacturing? Who buys cars during a depression? Banks? Technology? Stocks may fair better than cash of course, but I still think I'd find gold or possibly other commodities a BETTER choice in that scenario.

Yeah sure, when the economy starts to recover, then begin selling gold to buy other investments. But that could be a long time off. Of course there are better choices if you are buying stocks with 100 P/E ratios or "overpriced" commodities. But the real question is where exactly do you think we are in the cycle of inflation/recovery. If you think all these little debt problems will blow over and we are actually on the upswing as many in the establishment would have us believe, then by all means buy away before the prices go up! If you believe as many on this forum do, that things will get worse before they get better, and higher inflation is coming, then going all in on stocks could possibly be a disaster.

I'm not worried about my ego, so here. Currently I am about 40% Gold, 43% Oil/energy, 12% various tech oriented stocks, the rest(5%) is misc stocks. The gold and oil didn't start out that high a percentage of my investments, they GREW themselves to that percentage. That does not include cash or RE I own( I no longer consider RE an investment). If I'm wrong I'm wrong. The problem with not explaining your positions in advance is that it appears to allow you to talk the talk without actually walking the walk. But I can see both sides of that in fairness. But being more specific in term of what you actually own can lead to greater credibility.

[nero3]

Re: Gold in a bubble and/or going to $3,000

Someone correct me if I am wrong, but don't national economies tend to fair badly during periods hyper-inflation? If so, how is selling your gold for stocks going to help? Stocks in what? Automobile manufacturing? Who buys cars during a depression? Banks? Who can afford loans? Stocks may fair better than cash of course, but I still think I'd find gold or possibly other commodities a BETTER choice in that scenario.

No. You would need to exchange your gold while it was inflated and those stocks were dirt cheap, then wait. The other way would be to wait for the economy to improve and exchange your cheap gold for expensive stocks.

[touchring]

Re: Gold in a bubble and/or going to $3,000

Although i'm not totally sure if gold is a bubble, but the rise of gold has coincided not just with the WTO agreement with China but with the rise of India as well.

Has anyone got statistics for the consumption of gold by various countries?

[Raz]

Re: Gold in a bubble and/or going to $3,000

The view that it's a secular bear-market and you only put your money at gold while you watch soap opera is to easy I think. I suspect what's going on in China is giving cracks to that whole idea. But let's see. it seems the professionals are dumping gold now, while individual investors are loading up.

Do you base your remarks upon any facts, or does everything just "seem" to you?

The most recent COT numbers are in violent disagreement with your assertion/opinion.

[nero3]

Re: Gold in a bubble and/or going to $3,000

Do you base your remarks upon any facts, or does everything just "seem" to you?

The most recent COT numbers are in violent disagreement with your assertion/opinion.

What worries me is that everyone from barrick gold to who knows who else are thinking (we must remove those hedges, and those were the guys who was short when gold was at an all time low), now are going against the market of speculators, I hope thats not what you are bullish about. I read the report in a bearish way for gold, at least the last one I read, from January 10 or 11.

I posted the data about futures trading, and you also see from the results of Goldman Sachs today. They upped their trading in equities, while they cut trading in commodities. They was back to their 2004 levels in trading in commodities. JP morgan traded more, but it is not obvious it's on the long side to me. And as I recall, 2004 was the year the commodity bubble inflated (as shown with the divergence between non exchange traded commodities vs exchange traded ones in price). I don't want to make to much of it, but it could be a warning sign they are reducing their exposure. Gold also failed to show any strength today relative to the significant weakness in the dollar, oil even fell, silver fell.

If I was to explain it. It could be that there is a outside buying pressure on the US equity market for some time coming from outside the US (as the numbers also show) given that both dollars and stocks weakened today, unlike in the past where the dollar could have rallied in the same environment. If the dollar is really going stronger, there is likely to be sector rotation, into more large cap stocks that are able to take advantage of a stronger dollar.

This is one stock that would love commodity prices to crash: http://finance.yahoo.com/q?s=KEP&ql=0 It looks very bullish, it's got the same base building as you see in many tech, blue-chips like Intel. It says one thing: weaker commodities and a stronger dollar.

One other thing, is recent newspaper articles about the gold bubble going bust. I have looked through the late 70-s. You did not find that at the wrong times. You had it in 75, and in 80.

[metalman]

Re: Gold in a bubble and/or going to $3,000

I posted the data about futures trading, and you also see from the results of Goldman Sachs today. They upped their trading in equities, while they cut trading in commodities. They was back to their 2004 levels in trading in commodities. JP morgan traded more, but it is not obvious it's on the long side to me. And as I recall, 2004 was the year the commodity bubble blew up (as shown with the divergence between non exchange traded commodities vs exchange traded ones in price). I don't want to make to much of it, but it could be a warning sign they are reducing their exposure. Gold also failed to show any strength today relative to the significant weakness in the dollar, oil even fell, silver fell.

If I was to explain it. It could be that there is a outside buying pressure on the US equity market for some time coming from outside the US (as the numbers also show) given that both dollars and stocks weakened today, unlike in the past where the dollar could have rallied in the same environment. If the dollar is really going stronger, there is likely to be sector rotation, into more large cap stocks that are able to take advantage of a stronger dollar.

This is one stock that would love commodity prices to crash: http://finance.yahoo.com/q?s=KEP&ql=0 It looks very bullish, it's got the same base building as you see in many tech, blue-chips like Intel. It says one thing: weaker commodities and a stronger dollar.

One other thing, is recent newspaper articles about the gold bubble going bust. I have looked through the late 70-s. You did not find that at the wrong times. You had it in 75, and in 80.

i'll translate nero3 for you...

i didn't buy any gold when it was cheap.

i don't own any commodities like silver.

i own stocks'

i pray to god gold falls hard so i won't look so silly for not buying it all these years.

missed the boat so i blah, blah, blah about intel & 1980 vs 1973 vs this time is like that time & newspaper articles tell you this & blabity blabity blabity blab... any asset i don't own with a high price is a 'bubble'... blah... blah... blah

blah, blah, blah...

yahoo forums are filled with this... motley fool. etc.