Thesis change time? Gold approaching $760

[labasta]

Re: Thesis change time? Gold approaching $760

Dear EJ and Fred,


I value your predictions and timing immensely. You seem to have quite a few varied opinions amoung your posters, but I generally listen to you rather than them. I would greatly appreciate (and other itulip members) if you could give us a head's up near the time on when to buy gold. I know in the long run gold is going up a lot to meet the DJIA, but is it right that according to yourselves there will be a deflationary period (2 to 6 months) before the POOM?

Does this suggest the New Year as a good time to purchase gold? Is it possible for you to give a fairly accurate time frame for start of the poom (gold purchase time). If not now, then just before the event would be fine also, such as what you did with the Dec 2007 bear market prediction.

I would be eternally grateful as quite a bit of money is likely to come my way soon and I would like at least 10% in gold.

I've been told by a friend who trades commercial paper (poor him, they are relying on the fed to bail them out) that gold is to go to $500 in the short term then rocket up massively as mega currency inflation takes hold. My issue of course is timing.

I have already stockpiled on temporary imported goods (1 to 2 years worth) and tinned food (1 -2 month's worth) ready for the imported goods inflation ala Iceland. I may have been a little early, but I am replenshing the stock pile as I use it up.


Gratefully yours


Labasta

[Chris]

Re: Thesis change time? Gold approaching $760

Labasta, if you're buying to trade you probably don't need timing advice. If you're buying to protect wealth then the buy level around this range in relatively unimportant.

Also, as far as I am aware, iTulip do not give investment advice.

[ajerimez2]

Re: Thesis change time? Gold approaching $760

Well, that's just great. iTulip doesn't endorse gold as an investment, but it has a prominent front-page link to realtime gold prices, and 50% of the forum conversation is focused on gold. Ha.

Hey, maybe this negative sentiment is a good sign? Now that EJ is fed-up with gold and Peter Schiff thinks it's going down to $600/oz, maybe the bottom is near?

Boy, do I sound like a goldbug or what?

[phirang]

Re: Thesis change time? Gold approaching $760

Well, that's just great. iTulip doesn't endorse gold as an investment, but it has a prominent front-page link to realtime gold prices, and 50% of the forum conversation is focused on gold. Ha.

Hey, maybe this negative sentiment is a good sign? Now that EJ is fed-up with gold and Mega's pet monkey thinks it's going down to $600/oz, maybe the bottom is near?

Boy, do I sound like a goldbug or what?

To EJ's credit, he's more of a wealth-preservation guy than anything else.

Beyond that, you're on your own in this market.

[labasta]

Re: Thesis change time? Gold approaching $760

Itulip doesn't have to give investment advice, just macro observations like the Dec 2007 bear market equivalent would be enough. Something like "Time to go long on gold" similar to "Time to short the market" would suffice.

I understand if what I am talking about is too short term and akin to speculation or if you have not the required information yet as to what the probablities are. Fair enough. I'll keep my ear to the ground the best I can and make decisions accordingly.

I'm looking at bullionvault as well as coins in the event of a non-collapse. I have to find out the sell/buy margins on coins as well.

I don't want to presume too much at this point as I'm not in any money yet. I am a little superstituous.

[Chris]

Re: Thesis change time? Gold approaching $760

Itulip doesn't have to give investment advice, just macro observations like the Dec 2007 bear market equivalent would be enough. Something like "Time to go long on gold" similar to "Time to short the market" would suffice.

I understand if what I am talking about is too short term and akin to speculation or if you have not the required information yet as to what the probablities are. Fair enough. I'll keep my ear to the ground the best I can and make decisions accordingly.

I'm looking at bullionvault as well as coins in the event of a non-collapse. I have to find out the sell/buy margins on coins as well.

I don't want to presume too much at this point as I'm not in any money yet. I am a little superstituous.

Yes, but you missed the call to go long gold (so did I). It was in 2001.

[FRED]

Re: Thesis change time? Gold approaching $760

Itulip doesn't have to give investment advice, just macro observations like the Dec 2007 bear market equivalent would be enough. Something like "Time to go long on gold" similar to "Time to short the market" would suffice.

I understand if what I am talking about is too short term and akin to speculation or if you have not the required information yet as to what the probablities are. Fair enough. I'll keep my ear to the ground the best I can and make decisions accordingly.

I'm looking at bullionvault as well as coins in the event of a non-collapse. I have to find out the sell/buy margins on coins as well.

I don't want to presume too much at this point as I'm not in any money yet. I am a little superstituous.

The trouble with trying to time the latest currency depreciation based reflation is that the government doesn't send out a letter to warn you.

Before the days of stealth devaluations when the US government devalued the dollar 37% since 2002 while proclaiming a "strong dollar policy" (read: lied) in the old days it went like this.

First, claim that unilaterally abandoning the international gold standard is temporary and will strengthen the dollar. Claim that you will no way, no how, devalue the dollar.

Second, years later, devalue the dollar, not once but twice.

ONCE upon a very recent time, only a banana republic would devalue its money twice within 14 months. But last week, when the U.S. did just that by cutting the value of the once almighty dollar another 10%, the step proved to be both internationally popular and politically easy. In contrast with the four months of testy negotiations that were required to swing the 1971 devaluation, only five days of whirlwind conferences were needed to bring about last week's large and surprising reduction—which made a total slash of 17.9% since December 1971. Foreign moneymen agreed with the U.S. view that cutting the dollar once more was the best way to end what had become a new and virulent world monetary crisis. When the deed had been accomplished, Treasury Secretary George Shultz proclaimed it almost with pride, saying: "There can be no doubt we have achieved a major improvement in the competitive position of American business." - The Winners and Losers from Devaluation, TIME, Feb 26, 1973

It was not yet legal for US citizens to own gold, so Americans were defenseless.

Last week the government sat down with the largest banks and told them to sign on the dotted line to accept government purchases of shares: no negotiation.

Anyone who has not developed a strong sense that anything is at this point possible has not been paying attention.

[jtabeb]

Re: Thesis change time? Gold approaching $760

Anyone who has not developed a strong sense that anything is at this point possible has not been paying attention.

"nothing is available" would be a better conclusion.

I will put it to you ALL this way. I get a large bonus mid-year every year. I'm banking on the fact that no more will be able to go into bullion because it won't be available!

READ AND UNDERSTAND. Whatever the reason, the price is going down, and the result is the PHYSICAL supply is drying up (getting bought up).

Yeah it would be great to buy gold at $500,/oz but what if you buy it and it never shows up at your door, how you gonna feel then? Smart, or not so smart.

THAT is the situation you need to be prepared to accept if you are "waiting" for better prices.

Normally, gold price goes up, demand goes up. Gold price goes down, demand goes down. That is NORMAL gold behavior. (demand is positively correlated with price).

Right now, Gold price is going DOWN for what ever reason and DEMAND is GOING UP! (demand is negatively correlated with price)

So make sure that you are not counting you chickens before you even have EGGS!

Sure you MIGHT be able to buy 1000oz silver bars or 400 oz gold bars. Not very liquid if you ask me. (unless you know a lot of people that have $340,000 in cash just lying around) SIZE does MATTER, and in this case SMALLER is certainly BETTER.

Don't believe me? Try getting change for a $1000 dollar bill at a gas station, then get back to me.

[ASH]

Re: Thesis change time? Gold approaching $760

"nothing is available" would be a better conclusion.

I will put it to you ALL this way. I get a large bonus mid-year every year. I'm banking on the fact that no more will be able to go into bullion because it won't be available!

READ AND UNDERSTAND. Whatever the reason, the price is going down, and the result is the PHYSICAL supply is drying up (getting bought up).

Yeah it would be great to buy gold at $500,/oz but what if you buy it and it never shows up at your door, how you gonna feel then? Smart, or not so smart.

THAT is the situation you need to be prepared to accept if you are "waiting" for better prices.

Normally, gold price goes up, demand goes up. Gold price goes down, demand goes down. That is NORMAL gold behavior. (demand is positively correlated with price).

Right now, Gold price is going DOWN for what ever reason and DEMAND is GOING UP! (demand is negatively correlated with price)

So make sure that you are not counting you chickens before you even have EGGS!

Sure you MIGHT be able to buy 1000oz silver bars or 400 oz gold bars. Not very liquid if you ask me. (unless you know a lot of people that have $340,000 in cash just lying around) SIZE does MATTER, and in this case SMALLER is certainly BETTER.

Don't believe me? Try getting change for a $1000 dollar bill at a gas station, then get back to me.

Good observations. It does make me wonder.

The disconnect between "paper" gold and physical bullion has been much remarked upon around here. My original theory was that there are two categories of gold investors (large vs. small), motivated by two different goals (standard macro or trend investing vs. currency crash insurance), trading in two different media (paper vs. physical). I initially suggested that the two groups of gold investors view the world very differently and hold gold for different reasons, which is causing the disconnect between paper and physical gold prices. Specifically, I suggested that the larger "professional" investors trading in paper might be trying to trade near-term disinflationary/deflationary pressures, whereas the (arguably less sophisticated) small-timers might be hoarding gold because they were expecting an abrupt end-of-days collapse. Now, the discrepancy between paper and physical gold prices would seem to defy gravity -- or at least arbitrage -- if paper gold were freely convertible into physical gold. I had thought perhaps the rate of conversion was limited by the physical fabricating capacity available, but maybe there is more to it. One possibility that may appeal to the less trusting among us, is that the paper/physical price discrepancy indicates that the physical gold isn't actually there to back the paper gold, which is why no one is converting the large bars held at depositories into smaller units for resale at higher prices. Here's a third thought: maybe the market for small-denomination physical gold is actually fairly small in dollar terms compared to the market for large-denomination gold bars, and the institutions with the gold bars have simply concluded that if they go to the trouble of converting any substantial portion of their bar holdings into smaller units, they will quickly saturate the market, and not realize any great profit through the paper-to-physical arbitrage.

Can this be tested? We have observed that 400-oz gold bars are still out there. I think this is probably the same size that backs most paper. There is therefore little barrier to conversion from paper, as there are no refabrication costs, and no issues of fabrication capacity. If there's nothing too funny going on, then a price-per-oz for 400-oz bars should be fairly close to the spot price, and the price reflected in paper gold markets. Tonight, I see that the most recent spot price for gold is $783.70; Kitco advertises a 400-oz bar for $315,680 ($789.20 per oz). I leave it to someone with more financial resources than myself to verify that prompt delivery of such a bar can be arranged, but this seems consistent with the idea that there is a bottleneck between conversion of institutional bars to coinage or smaller bars -- and not necessarily a lack of physical gold bars behind the paper. Doesn't prove anything... just that a fairly straightforward explanation for the paper/physical discrepancy seems plausible.

That said, this argument for why there is a price discrepancy between paper and physical gold doesn't change the fact that there is a shortage of small-denomination physical gold on the market. I wouldn't think it changes the thrust of jtabeb's point much at all.

P.S. For any who care -- when I reported to Mobilization Command on Friday, they told me that just two days earlier, word came down that deployments out of the IRR were being pared down from 1800 Marines to just 350... and that my particular group wasn't going to receive orders after mobilization screening. I might still be on the hook, but my chances of staying home just went up.

[Guest]

Re: Thesis change time? Gold approaching $760

I have an accout n Switzerland (fully declared so I have no problem mentioning it). I have zero problems buying any gold or silver I want there in any size. Beware of leaning too much on positive thesis reaffirmation.

[ASH]

Re: Thesis change time? Gold approaching $760

I have an accout n Switzerland (fully declared so I have no problem mentioning it). I have zero problems buying any gold or silver I want there in any size. Beware of leaning too much on positive thesis reaffirmation.

Excellent. What barriers are there to you importing small denominations in Switzerland and selling here for a profit? I presume there are taxes, insured shipping costs, etc.? Do these expenses pretty much cancel-out the price differences?

[Guest]

Re: Thesis change time? Gold approaching $760

Ash -It never crossed my mind. Apart from the white knuckle ride from losing 30+% of my net worth in PM's in recent months (mostly fickle lady silver) I am also keeping both mitts gripped to the steering wheel at my job to make sure we don't wind up in the ditch or that I personally wind up in the ditch and they drive off without me. I've been a little "distracted" guy. As for the importing, I have the clear impression you can indeed order a mini-contract right here in the US. The importing would seem to me an extraordinarily costly and cumbersome endeavor. I ship everywhere worldwide via a steeply discounted contract with DHL, light goods, and they are eating us alive on "fuel surcharges".

Best wishes for your service deferment.

Excellent. What barriers are there to you importing small denominations in Switzerland and selling here for a profit? I presume there are taxes, insured shipping costs, etc.? Do these expenses pretty much cancel-out the price differences?

[cakins]

Re: Thesis change time? Gold approaching $760

Good observations. It does make me wonder.
the (arguably less sophisticated) small-timers might be hoarding gold because they were expecting an abrupt end-of-days collapse. Now, the discrepancy between paper and physical gold prices would seem to defy gravity -- or at least arbitrage -- if paper gold were freely convertible into physical gold.

Yes. If you want to be "sophisticated," buy unbacked, worthless paper in the middle of a crisis in finance. The nice man with greasy hair and smile said that going for physical is for rubes in trailers.

Sheer sophisticated genius. I'm sure all of you wealthy sophisticated geniuses will fell very elite when you find out you've been conned.

[ASH]

Re: Thesis change time? Gold approaching $760

Yes. If you want to be "sophisticated," buy unbacked, worthless paper in the middle of a crisis in finance. The nice man with greasy hair and smile said that going for physical is for rubes in trailers.

Sheer sophisticated genius. I'm sure all of you wealthy sophisticated geniuses will fell very elite when you find out you've been conned.

Just to be clear, I do not count myself among those "arguably sophisticated" gold investors. I'm actually not talking about individual investors at all. I am specifically thinking of professional investment bankers and fund managers. My thinking is that these types might have a more detailed scenario in mind for the short term evolution of this crisis, and be trying to trade the disinflationary/deflationary period. Greater familiarity with the markets and economic theory (what passes for greater "financial sophistication"), more and better sources of information, and the natural predisposition of the profession would all combine to give a professional speculator the confidence to attempt this. This category of investor would, in my opinion, be more likely to trade in paper, both through familiarity with complex financial instruments, and out of necessity, given the size of funds involved.

I intended no slight to those who hold physical gold as insurance against a collapse. I hold it myself. In fact, because I am not sophisticated enough to make confident near-term predictions, I'm not doing any trading right now.

Your comments seem to reinforce my theory that those most inclined to buy in the physical market are (a) individuals rather than institutions, and (b) more concerned about systemic risk than trading gains. Even if one personally thinks the paper dubious, there's no reason to believe that all other market participants share that view... or that your view represents most of the money in the market.

You have a better explanation for the anti-correlation of paper and physical gold prices?

[jtabeb]

Re: Thesis change time? Gold approaching $760

You have a better explanation for the anti-correlation of paper and physical gold prices?

Since you asked....

If you are in a hall of mirrors, how do you tell where the REAL YOU is?

Put your finger on your damn nose! That thing you feel with your finger? That would be reality. Do that and think for a moment. What does your brain say?

My personal opinion is that the reason why there is the disconnect from paper gold and physical gold is that a rise in the gold price would be the RINGING BELL that would signal that the FIAT is toast. If you look at the gold price in EVERY OTHER currency, what do YOU SEE.? I see a GOLD RUN LOOKING AT ME!

I think we have our leading indicator that the bell has just tolled for FIAT. It is the difference between spot and physical.

WHY? I THINK it is being managed that way by some folks that DO NOT want this signal to be picked up by J6P.(Ask anyone how is gold doing now? "Terrible" they answer, "just look at the PRICE!" "And Silver is EVEN WORSE!")

HOW? Well, there sure is a whole hell of a lot of juice that just got put into the financial system. And, that Juice IS NOW DIRECTLY CONTROLLED BY THE GOVERNMENT since the government ASSUMED control of these firms when it nationalized them.

So if the government finds itself TRAPPED, and has to print tons of money to make the system whole, how could you hid the EFFECT of all that printing? By making the paper gold price go down. But what if these actions CAUSE a gold run because people are not THAT STUPID and realize that "hey physical Gold is Cheap. It's the only thing that will protect me from inflation AND if I hold it, they can't FUCK with it (like they can with EVERYTHING ELSE, what are they going to do, turn it into lead?). And, there is less and less available to buy, so I should rush and buy some NOW."

That is EXACTLY what I think is happening right NOW.

The government is inflating like crazy WHILE supressing the gold price, which is CAUSING the run on physical gold.

I think this is IT, and we should find out very soon if indeed this IS IT. SO, if I'm right, Dollar strength could be very VERY short lived.

I am not personally taking the long dollar bet. I do hold cash, gold is not one of the choices in the Thrift Savings Plan. But as soon as I see "IT", that cash is going right into equities BECAUSE they are a decent NOMINAL (not real) inflation hedge.

I think a lot of you are playing with FIRE, with your over-analysis of what's really going on.

I hope I'm NOT correct, but fear that I am.


That's my honest opinion, hope it helps, not hurts your decision making process.

I think anyone is crazier than a shit-house rat if they think that they will be ABLE to purchase a sizable amount of PHYSICAL PMs in the future with their APPRECIATING DOLLARS.


If that is not WILLFUL suspension of disbelief, I don't know what is.

Again, hope I'm wrong, but if not, YOU HAVE BEEN WARNED (maybe, for the last time).

P.S. Does ANYONE at this point think that WAITING to buy (some, or more) is PRUDENT RISK MANAGEMENT? God help you if you do. (And I mean that, more than I can express in words)

Take care all. We can ALL(myself included) share a good laugh if I'm wrong. But if I'm right, there won't be a ocean big enough to contain the tears.