Why is Gold Going Up?

[raja]

If I understand correctly, iTulip's hypothesis is that gold will rise due to the devaluation of the dollar. Yet it seems to me that dollar devaluation does not seem to be even a factor at all in the present situation.

Right now, gold seems to be rising on a fear that the Euro Zone will fall apart, resulting in some kind of global economic collapse. There is concern that those countries, and the banks that have invested in, are insolvent and wil fall. This would make the dollar stronger . . . and gold would rise, as it is now doing. What's happening seems of a different nature than a disinflationary Ka.

Is iTulip's scenario missing a big part of the picture?

A surge in gold prices shows that investors don’t put much stock in officials, said Edward Yardeni, president of Yardeni Research Inc. in New York. He predicts the metal will climb to at least $2,500 an ounce, having risen about a third since the start of the year and exceeded $1,900 yesterday. Stocks slid as gold advanced, with the MSCI Asia Pacific index less than 1 percent from its lowest 2011 close at 1:31 p.m. in Tokyo.
“Gold is the asset of the last resort when investors have lost confidence in governments and fear they’re out of control,” he said. “Since I don’t see governments getting their act together and moving in the right direction, gold will go higher.”

http://www.bloomberg.com/news/2011-0...ished-for.html

[FRED]

Re: Why is Gold Going Up?

If I understand correctly, iTulip's hypothesis is that gold will rise due to the devaluation of the dollar.

No. That is not our thesis since 2001 when we bought gold. It has developed since September 2001 when the original "buy gold" iTulip article on gold appeared.

Yet it seems to me that dollar devaluation does not seem to be even a factor at all in the present situation.

The thesis is that the US$ Treasury system will break down as US economic leadership breaks down. For an update on this now decade old thesis, read the latest article: Illusion of Recovery – Part II: Global panic into gold - Eric Janszen

Right now, gold seems to be rising on a fear that the Euro Zone will fall apart, resulting in some kind of global economic collapse. There is concern that those countries, and the banks that have invested in, are insolvent and wil fall. This would make the dollar stronger . . . and gold would rise, as it is now doing.

Gold is rising because governments, institutions, and very large private buyers are have become aware of the process of the US$ Treasury system break-down process that we warned about in 2000 as a consequence of the failure of the finance-based economy, later referred to as the FIRE Economy.

Is iTulip's scenario missing a big part of the picture?

In 1999 Edward Yardeni led the army of the ignorant who created the Y2K hysteria. He said:

Last-Minute Y2K Investment Advice From Edward Yardeni

December 15, 1999

Special from Bottom Line/Personal

I am no longer forecasting two years of tough times for the economy and the stock market. Reason: So much progress has been made this year in solving potential Y2K computer problems.

However, I expect a six-month global recession and bear stock market that could start early next year. Triggers...

The dozens of minor Y2K computer and product-distribution problems that are likely to occur starting in January.

A Dow at the 10,500-to-11,000 range--which I would still consider to be overvalued.

Interest rates above 6%, as fears of higher inflation send investors out of stocks and into bonds.

Five months before this, we said on August 1999:

"What the heck's gonna go down after Dec. 31, 1999? Do we at iTulip.com envision a world in chaos ruled by tribal warlords marauding the strife torn land in ox drawn Rolls Royces, plundering suburban America for precious caches of bottled water and canned tuna fish? Time to invest in a bomb silo apartment? Nah. After the clocks roll over into 2000, a lot of crappy software that doesn't work very well and breaks all the time will continue to be crappy and not work very well and break all the time."
- Y2K Policy, iTulip.com, August 25, 1999

When did Yardini become an expert on gold? We can't find any references to gold from him until this year.

We forecast gold to rise to between $2500 and $5000 when the price was $270 in 2001. Now that the price is nearing $2000, $2500 is no longer a bold prediction.

Yardini didn't know anything about Y2K in 1999, didn't know anything about gold from 2001 to 2010, and doesn't know anything about gold now.

[jiimbergin]

Re: Why is Gold Going Up?

Fred,

Great summary.

[Thailandnotes]

Re: Why is Gold Going Up?

Gold is going up because everyone everywhere is suspicious of everything. I have a Thai friend who told me eight months ago that her brother (58-retired) did nothing but stay home and trade stocks. She said, “Anyone can make money in the Thai stock market now. Pick any stock you want. It's going up but not for long. My brother feels really smart because his portfolio is soaring, but I keep telling him to sell some of it and buy some gold as insurance. Before when my husband and I needed to save money to send our kids to college in the States we transferred baht to our dollar accounts to lock in the value of our savings. Now we would buy gold.”

[thriftyandboringinohio]

Re: Why is Gold Going Up?

I'm fascinated by the implications for gold price if people and institutions worldwide try to buy into this very small, very thin physical market.
That topic has been discussed many times here over the years, and it seems to be more likely now.
Some of these scenarios attempt to predict the gold price if 5% or 10% of all worldwide financial investment or all worldwide personal savings try to buy gold, and the resulting price predictions become pure fantasy, because there is nowhere near enough physical gold available to satisfy that kind of demand.

[jk]

Re: Why is Gold Going Up?

I'm fascinated by the implications for gold price if people and institutions worldwide try to buy into this very small, very thin physical market.
That topic has been discussed many times here over the years, and it seems to be more likely now.
Some of these scenarios attempt to predict the gold price if 5% or 10% of all worldwide financial investment or all worldwide personal savings try to buy gold, and the resulting price predictions become pure fantasy, because there is nowhere near enough physical gold available to satisfy that kind of demand.

there is enough gold to satisfy any level of demand measured in money. just not measured in ounces.

[FRED]

Re: Why is Gold Going Up?

there is enough gold to satisfy any level of demand measured in money. just not measured in ounces.

Gold prices have not started to go up in earnest. As our most recent analysis shows, from Q1 2001 until Q1 2009 every major gold purchase by private or public entities was met by major sales by the governments of US$ Treasury aligned countries. Despite this, gold prices continued to rise. Since Q1 2009, US$ Treasury aligned countries stopped selling out of fear being left without sufficient gold reserves in a future global monetary system that includes gold as a working part of the official currency reserve system, perhaps led by a gold-backed pan-Asian currency. What happens if and when countries such as Switzerland and France reverse course and begin to buy gold? In our next article we define the stages of the process from here.

[*T*]

Re: Why is Gold Going Up?

The dollar is devaluing in my view. Just not so much against the Euro. We are in a phase of competitive devaluation. No national currency wants to be the safe haven. It's not just the fear trade, all commodities are moving up.

[Alvaro Spain]

Re: Why is Gold Going Up?

The dollar is devaluing in my view. Just not so much against the Euro. We are in a phase of competitive devaluation. No national currency wants to be the safe haven. It's not just the fear trade, all commodities are moving up.

Do you think the japanese yen could perform the safe haven role that the CHF was doing?

[raja]

Re: Why is Gold Going Up?

No. That is not our thesis since 2001 when we bought gold. It has developed since September 2001 when the original "buy gold" iTulip article on gold appeared.

When you say "devoloped" does that mean changed? Meaning that what you said back in 2001 is not true now?
In my opinion, a thesis that has changed was not a correct thesis.

Gold is rising because governments, institutions, and very large private buyers are have become aware of the process of the US$ Treasury system break-down process that we warned about in 2000 as a consequence of the failure of the finance-based economy, later referred to as the FIRE Economy.

And . . . what is the cause of the US$ Treasury system breakdown? Is it not a failure of the politicians to control the greed of the Financial Elite? Yardini said, "“Gold is the asset of the last resort when investors have lost confidence in governments and fear they’re out of control. Since I don’t see governments getting their act together and moving in the right direction, gold will go higher.”

It seems that you agree with Yardini . . . while at the same time saying, "Yardini didn't know anything about Y2K in 1999, didn't know anything about gold from 2001 to 2010, and doesn't know anything about gold now."

This is confusing.

[Slimprofits]

Re: Why is Gold Going Up?

In 1999 Edward Yardeni led the army of the ignorant who created the Y2K hysteria. He said:

Last-Minute Y2K Investment Advice From Edward Yardeni

December 15, 1999

Special from Bottom Line/Personal

I am no longer forecasting two years of tough times for the economy and the stock market. Reason: So much progress has been made this year in solving potential Y2K computer problems.

However, I expect a six-month global recession and bear stock market that could start early next year. Triggers...

The dozens of minor Y2K computer and product-distribution problems that are likely to occur starting in January.

A Dow at the 10,500-to-11,000 range--which I would still consider to be overvalued.

Interest rates above 6%, as fears of higher inflation send investors out of stocks and into bonds.

Five months before this, we said on August 1999:

"What the heck's gonna go down after Dec. 31, 1999? Do we at iTulip.com envision a world in chaos ruled by tribal warlords marauding the strife torn land in ox drawn Rolls Royces, plundering suburban America for precious caches of bottled water and canned tuna fish? Time to invest in a bomb silo apartment? Nah. After the clocks roll over into 2000, a lot of crappy software that doesn't work very well and breaks all the time will continue to be crappy and not work very well and break all the time."
- Y2K Policy, iTulip.com, August 25, 1999

And Yardeni is a Democrat party consultant.... just. wow.

[Mega]

Re: Why is Gold Going Up?

Mega's thoughts:-

I Expect China or rather her population to play a MEGA part in this drama, what i wonder is if China does what Schiff sez & decouple from the West her currany (RED) will climb quickly in price. Now the BIG question, as the RMB climbs will the people of China SUDDENLY see a "Fall" in the value of Gold, thus they suddenly DUMP Gold & go to RMB?

If so then that sudden movement could cause a World CRASH in Gold as Mega amounts suddenly flood the market?

Mike

[akt]

Re: Why is Gold Going Up?

And . . . what is the cause of the US$ Treasury system breakdown? Is it not a failure of the politicians to control the greed of the Financial Elite? Yardini said, "“Gold is the asset of the last resort when investors have lost confidence in governments and fear they’re out of control. Since I don’t see governments getting their act together and moving in the right direction, gold will go higher.”

It seems that you agree with Yardini . . . while at the same time saying, "Yardini didn't know anything about Y2K in 1999, didn't know anything about gold from 2001 to 2010, and doesn't know anything about gold now."

This is confusing.[/QUOTE]

If you have lost money investing on some itulip idea, I am sorry. I used to enjoy your clear and level headed posts.

[flintlock]

Re: Why is Gold Going Up?

No. That is not our thesis since 2001 when we bought gold. It has developed since September 2001 when the original "buy gold" iTulip article on gold appeared.

I was not 100% clear on this either.

[flintlock]

Re: Why is Gold Going Up?

This is confusing.

Not really. Its called rivalry. Does Coke like to admit Pepsi tastes basically the same? While Yardini admittedly is more like cheap generic Walmart cola in comparison, don't expect a lot of humility from itulip when it comes to "the record". I can understand that sometimes, in these times, you have to fight to get your due. It reminds me of politicians in a debate. They are forced to endlessly sing their own praises or they get drowned out in the noise. But they rarely end up looking better for the effort.