Why can't people have bought gold on leverage?

[blazespinnaker]

I'm curious.. why is that it is impossible that gold was not bought via massive leverage? Leverage that can unwind just like all the rest.

I'm pretty sure Thiel bought quite a bit on leverage with his hedge fund. Why not other hedge funds?

I think people are too quick to discount efficient market theory. I agree, it can break down sometimes, but I'd be very careful about thinking that I (or anyone below the talent of a Warren Buffet) could spot the times when it does with any reasonable amount of accuracy.

[grapejelly]

Re: Why can't people have bought gold on leverage?

most paper gold is bought I would imagine on the futures market. Isn't that highly leveraged?

[jtabeb]

Re: Why can't people have bought gold on leverage?

I'm curious.. why is that it is impossible that gold was not bought via massive leverage? Leverage that can unwind just like all the rest.

I'm pretty sure Thiel bought quite a bit on leverage with his hedge fund. Why not other hedge funds?

I think people are too quick to discount efficient market theory. I agree, it can break down sometimes, but I'd be very careful about thinking that I (or anyone below the talent of a Warren Buffet) could spot the times when it does with any reasonable amount of accuracy.

It's very hard as a transaction medium to "lever-up" on gold. No bank will take it as collateral (I'm speaking as a retail investor here). Because of storage, authentication, etc.

Trust me, if anyone would have been able to successfully lever-up physical gold, it would have been me. I tried and tried and tried and could not make it work because I couldn't get a debt pyramid going to lever up with. Now contrast that with houses where NINJA's were levering up 1-3-9 rental houses with no actual income of their own, an you can see that in retail channels at least, nothing of the sort was possible in the physical PM markets.

Again that's retail investing and my experience, but no bank I tried would let me loan-lever gold holdings (again because of the collateral issue). That's real physical stuff mind you, I could do as much as I wanted to in the PAPER gold trade like ETFs and gold Stocks, which thankfully, I chose NOT to do.

I don't know if the system is DESIGNED that way to prevent people gaming FIAT into real money, but it sure seems to be the case for us retail folks.
Funny how it takes real earnings (after tax income) to buy real money.


As for Institutional investors, Don't know.

Hope this is informative.

[blazespinnaker]

Re: Why can't people have bought gold on leverage?

It's very hard as a transaction medium to "lever-up" on gold. No bank will take it as collateral (I'm speaking as a retail investor here). Because of storage, authentication, etc.

Trust me, if anyone would have been able to successfully lever-up physical gold, it would have been me. I tried and tried and tried and could not make it work because I couldn't get a debt pyramid going to lever up with. Now contrast that with houses where NINJA's were levering up 1-3-9 rental houses with no actual income of their own, an you can see that in retail channels at least, nothing of the sort was possible in the physical PM markets.

Again that's retail investing and my experience, but no bank I tried would let me loan-lever gold holdings (again because of the collateral issue). That's real physical stuff mind you, I could do as much as I wanted to in the PAPER gold trade like ETFs and gold Stocks, which thankfully, I chose NOT to do.

I don't know if the system is DESIGNED that way to prevent people gaming FIAT into real money, but it sure seems to be the case for us retail folks.
Funny how it takes real earnings (after tax income) to buy real money.


As for Institutional investors, Don't know.

Hope this is informative.

I was referring to paper gold. Though it is interesting regarding the physical.

The reason I think this is relevant is people are all about the naked shorts manipulating the market. What they don't seem to get is the naked leveraged longs on the other side of those trades.

[*T*]

Re: Why can't people have bought gold on leverage?

I had some random guy call me at home a couple of years back offering 2 or 3:1 leverage on stored gold. Didn't trust them. Capital assets group was the name. The guy went on to do land futures.

So it can be done, but it defeats the purpose. Gold is a no-counterpart trade, that is the point. It is also a long trade, and the higher the leverage, the shorter the time horizon.