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  #1  
Old 08-03-2007, 04:02 PM
gonebroke2 gonebroke2 is offline
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Default finally gold getting some respect

markets hammered again and gold is green, up over 1%.
i think the divergence between the general market and gold will be here soon. Gold going to $2000/ounce. Gold stocks are going to go bonkers. For those in it, I hope you enjoy the ride. I know I will.

I also stated at beginning of year that if gold doesn't outperform the general market, I would quit posting here. 5 more months to go. See you at gold 800.
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  #2  
Old 08-03-2007, 04:09 PM
Fishhead24 Fishhead24 is offline
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Default Re: finally gold getting some respect

Agree, and like silver even better!
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  #3  
Old 08-03-2007, 04:47 PM
DcifrThs DcifrThs is offline
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Default Re: finally gold getting some respect

[ QUOTE ]
markets hammered again and gold is green, up over 1%.
i think the divergence between the general market and gold will be here soon. Gold going to $2000/ounce. Gold stocks are going to go bonkers. For those in it, I hope you enjoy the ride. I know I will.

I also stated at beginning of year that if gold doesn't outperform the general market, I would quit posting here. 5 more months to go. See you at gold 800.

[/ QUOTE ]

- what has caused the demand for gold in this market?

- what will cause that demand to increase many times over to cause gold to go to 2k?

- what will happen when the US recovers and dollar becomes relatively more attractive again?

- will gold still be highly demanded when the US recovers? why?

- what are the major demand factors you see for gold in the near term(months) and long term (many years)?

Barron
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  #4  
Old 08-03-2007, 06:49 PM
hlacheen hlacheen is offline
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Default Re: finally gold getting some respect

Can you explain the reasoning behind your $2000/ounce prediction? Also, in what time frame are you expecting this to occur?
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  #5  
Old 08-03-2007, 07:06 PM
irunnotgood irunnotgood is offline
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Default Re: finally gold getting some respect

OP my gold stocks sold off today at the clos ewith the rest of the market. WTF?
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  #6  
Old 08-04-2007, 04:58 AM
kimchi kimchi is offline
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Default Re: finally gold getting some respect

[ QUOTE ]
[ QUOTE ]
markets hammered again and gold is green, up over 1%.
i think the divergence between the general market and gold will be here soon. Gold going to $2000/ounce. Gold stocks are going to go bonkers. For those in it, I hope you enjoy the ride. I know I will.

I also stated at beginning of year that if gold doesn't outperform the general market, I would quit posting here. 5 more months to go. See you at gold 800.

[/ QUOTE ]

- what has caused the demand for gold in this market?

- what will cause that demand to increase many times over to cause gold to go to 2k?

- what will happen when the US recovers and dollar becomes relatively more attractive again?

- will gold still be highly demanded when the US recovers? why?

- what are the major demand factors you see for gold in the near term(months) and long term (many years)?

Barron

[/ QUOTE ]

I've also been bullish on gold for a long time. It's price when traded in $US is relative though. Gold may well go to $2k/ounce but if gold were traded in Zimbabwe Dollars and it's price skyrocketed it wouldn't be such a big deal. I think measuring gold against a basket of global currencies is more appropriate here are some graphs in global currencies back to 1971 .

A case can always be made for the bears and bulls of every market. I think the demand for gold is going to increase due to a number of factors. I've listed a few less discussed factors that some gold-bugs believe to be drivers of the future price of gold.

Global central banks have been playing around with fiat currencies for some time now and people are realising how their currencies are becomming debased and slowly turning to gold as a medium for exchange (such as electronic gold grammes), as a safe haven, a store of wealth and real money. The premium of money in the price of gold has been eroded with our 'experiment' with fiat curencies and this monetary premium might return to the price of gold.

Governements will always resist this as it forces financial discipline and prevents them from defecit spending their way through short-term situations. If gold functions as money then governments will not be able to print more. They'll have to reduce spending, raise taxes or acquire more gold.

Central banks are starting to buy rather than sell gold. When Gordon Brown (the new UKPM) was Chancellor of the Exchequer, he sold 200 tonnes of British gold (this was around the turn of the Millenuim) and bought Euros with the proceeds. The price of gold increased 40% and Euros decreased 20%(against GBP) in the months following the sale, and the gold price has continued to rise ever since. Central banks may start to compete with one another to replenish their gold reserves.

Mining companies also keep substancial hedge positions that were required in order for them to obtain financing. Due to the 2-decade long slump in prices, miners were required to place short positions in the gold market to gain financing from banks. The unwinding of these positions can privide substancial upward pressure on the gold price since covering shorts is the most cost-effective way for mining companies to increase their effective gold reserves.

Before the Yen & Kiwi dollar carry trade, gold was often used as it could be borrowed and sold as an 'interest free loan' and the proceeds used to buy debt or other interest-bearing vehicles. I'm not sure how much of this carry trade still exists after golds' ascent over the last few years, but further rises can result in further unwinding of these positions. If gold were to increase rapidly, this short-squeeze could bust some carry-traders meaning the investors and banks who lent their gold won't get it back and will have to buy more.

I also think gold will return as a standard portion of a balanced portfolio for Wall Street money managers. The long underperformance of gold embarrased managers who advised a 10% holding of gold and miners. Gold may return as a standard part of asset allocation, along with the traditional stocks/bonds/cash mix used by the majority of retail and pension investors.

Gold didn't provide the hedge people thought is would during the 1987 crash. Gold was already 6 or 7 years into an established bear market at that point, but the fundamentals and technicals of gold are very different today should a similar financial crisis happen. The increasing popularity of derivatives also provided alternative ways of hedging your portfolio. These alternative hedges are only as good as the counter-party's ability to pay up. Gold is not anyone else's liability as it has its own intrinsic value.

Asia's increasing wealth in this century can also provide substantial upside. China's governent only recently legalised the ownership of investment gold for its citizens (I think it was 2 years ago or so). With their burdening middle class and almost perverted admiration of gold, Asian retail buying of gold can only increase.

I wouldn't be surprised if the Asian exporters began to refuse the payment of a US currency constantly being devalued and demanded gold as payment for future exports.
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  #7  
Old 08-04-2007, 07:51 AM
Fishhead24 Fishhead24 is offline
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Default Re: finally gold getting some respect

Gold and silver will rise because the dollar is slowly and steadily turning into crap.

The time is not that far away when all purchases will be made with metals, as paper money will be absolutely worthless.
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  #8  
Old 08-04-2007, 08:10 AM
Fishhead24 Fishhead24 is offline
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Default Re: finally gold getting some respect

What investors should, however, clearly understand is that, since 2002, all asset markets have risen in tandem and have become very closely correlated. So, when for whatever reason liquidity shrinks, all asset markets could be vulnerable to massive liquidation! (Certainly liquidity will evaporate when markets sell off - but what will be the catalyst?)

The investment, which is least correlated to asset markets would appear to be a diversified portfolio of cash, farm land, and precious metals. In particular precious metals could benefit from financial turmoil!

Gold will at least maintain its purchasing power, both in a period of high inflation and also if asset markets implode.
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  #9  
Old 08-04-2007, 11:25 AM
gonebroke2 gonebroke2 is offline
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Default Re: finally gold getting some respect

case for gold:
I believe that gold is going to go to $2000/ounce because of an inevitable currency crisis. The USD used to be backed by gold until Richard Nixon ended that on August 15th 1971. Now the USD is backed by nothing; the only thing that it is backed by now is faith. Throughout history, all fiat money (paper backed by nothing) has returned its intrinsic value which is nothing. I believe the USD will suffer the same fate but this is over a very long time period, maybe not in our lifetime. First a little background on the USD. The current world reserve currency is the USD. It achieved world reserve currency status because the most important commodity in the world today, oil, is traded in USD. I don't want to turn this into a political thread but some of the following is necessary to say. I believe the US made deals with certain Middle Eastern countries to offer them military protection in exchange for cheap oil and a promise to trade oil solely in USD. Saddam Hussein threatened to trade Oil in alternative currencies and we all know what happened to him. Iran has threatened the same thing and who knows what will happen to them. My point so far is that the USD has been able to survive so far because it was indirectly linked to oil. It wasn't backed by oil directly, but indirectly in the sense that it was necessary to own dollars to buy oil. This is one of the main reasons a bankrupt country like America has been able to keep the USD in demand. Now on to why I think gold is going to go bonkers and the dollar is going down the drain.

First, I would like to say Kimchi (few posts up) did a great job stating his case for gold and I hold very similar beliefs. My original post was basically going to reiterate his case. Read his post first. Below are some of my own comments.

If America traded as a corporation on the stock market it would have already been delisted years ago. America as a corporation is broke. America has been printing unlimited amounts of paper money for years and it is finally going to bite them in the ass. Most of that printed money is now in the hands of foreign nations. China and Japan have about 2 trillion USD in their reserves. They have already lost a ton of money just holding their reserves because the USD is being devalued and they are looking for a way out. Like Kimchi said, they might start refusing to accept USD. The demand for the USD is going to go down and this will add further upward pressure to gold.

The inflation rate as reported by the CPI is bogus. Inflation is an increase in the money supply, not an increase in prices. Inflation causes an increase in prices, not the reverse. I believe that the correct way to calculate the true inflation rate is by measuring M3 growth. Nowandfutures.com & shadowstats.com believe that M3 growth is 10-13%. So the inflation rate is 10-13%, not the 3% the bogus CPI figures tell you. Ask yourself why the Federal Reserve stopped printing M3 figures last year. On the other hand, gold cannot be printed out of thin air. There is a finite amount of gold in the ground and on average, the amount of gold mined each year only adds about 1% to the existing supply of gold worldwide. Therefore, the inflation rate of gold is approximately 1%. So if gold is currently fairly priced, then it should theoretically move up in percentage terms the difference between the growth of paper money vs the growth of gold 13%-1% = 12%. This will allow holders of gold to maintain purchasing power. That is assuming gold is fairly valued today and I don't think it is. I think it is extremely undervalued.

Most bull markets are driven by greed. The beauty about this gold bull market is that it is going to be driven by greed & fear. The fear coming from a fear of a currency collapse. The market for gold is so small relative to the general stock markets of the world, that if only a handful of investors jump into gold it is going to go ballastic. If you look at the historic gold bull runs, some of the shares went from below 1 dollar to triple digits. I think that history is going to repeat itself, but on a much grander scale. I am putting my money where my mouth is and I am placing relatively huge bets on the gold sector. I like to take plunges in the stock market and pick a handful of stocks and bet heavily on them. In my opinion, that is the only way to play the game.

Conclusion:
1. The USD is going down the drain because of excessive money supply growth.
2. Foreign countries are becoming less willing to hold dollars.
3. Sub-prime mess is going to spread to ALT-A and Prime and the derivatives exposure might bring down the entire financial system. I expect 50% of current hedge funds to go broke or close up shop within 5 yrs.
4. If the Federal Reserve lowers interest rates in an attempt to save the economy and the housing market, the demand for USD will sink as foreign currencies will offer better yields. This will be super bullish for gold.
5. If the Federal Reserve raises rates, that will temporarily save the dollar but crash the stock and housing market. This will also be bullish for gold because M3 growth will rise to over 20%. This will be necessary to avoid a depression. Gold in the late 70's increased dramatically during a period of rising interest rates because the real interest rate was negative. Interest rates went to 20% during that time.
6. Best way to play the sector is by buying the stocks as they tend to rise more relative to the physical metal.
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  #10  
Old 08-04-2007, 11:29 AM
gonebroke2 gonebroke2 is offline
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Default Re: finally gold getting some respect

[ QUOTE ]
OP my gold stocks sold off today at the clos ewith the rest of the market. WTF?

[/ QUOTE ]

When margin calls start kicking in and people are panicing, people throw out the good with the bad. Adam Hamilton did a great job writing this piece, read it:
http://www.zealllc.com/2007/pmbears.htm
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