Gold is ready to fall

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
User avatar
LH
Posts: 5490
Joined: Wed Mar 14, 2007 2:54 am

Gold is ready to fall

Post by LH » Thu May 03, 2012 3:31 pm

I have almost capitulated a couple times and bought a gold coin. So it must be ready to run out of buyers and people who will listen to commercials.

1636 currently

: P

User avatar
Random Musings
Posts: 5209
Joined: Thu Feb 22, 2007 4:24 pm
Location: Pennsylvania

Re: Gold is ready to fall

Post by Random Musings » Thu May 03, 2012 3:37 pm

So, are you going to short GLD based upon your prediction?

RM
I figure the odds be fifty-fifty I just might have something to say. FZ

User avatar
3CT_Paddler
Posts: 3222
Joined: Wed Feb 04, 2009 5:28 pm
Location: Marietta, GA

Re: Gold is ready to fall

Post by 3CT_Paddler » Thu May 03, 2012 3:53 pm

I think if/when Europe finds some stability gold will fall. I just have no idea when that will be.

User avatar
rmelvey
Posts: 757
Joined: Sat Sep 18, 2010 5:17 pm
Contact:

Re: Gold is ready to fall

Post by rmelvey » Thu May 03, 2012 4:07 pm

My prediction:

Gold will continue to fluctuate with low correlations to stocks and treasuries providing excellent diversification benefits to disciplined investors :mrgreen:

zotty
Posts: 841
Joined: Tue Sep 15, 2009 5:18 pm
Location: DFW, Texas

Re: Gold is ready to fall

Post by zotty » Thu May 03, 2012 5:05 pm

Gold isn't part of my allocation, but it is shiny.

After a price drop, it is instructive to look at the 10 year chart. It tempers my desires to pay so much for so little.

France Telecom, now that's a pretty chart. too bad i don't have the stomach for individual stocks.
Nadie Sabe Nada

chipmonk
Posts: 625
Joined: Wed Mar 09, 2011 4:32 pm
Location: PDX

Re: Gold is ready to fall

Post by chipmonk » Thu May 03, 2012 5:14 pm

LH wrote:I have almost capitulated a couple times and bought a gold coin. So it must be ready to run out of buyers and people who will listen to commercials.

1636 currently

: P
Likewise.

I almost capitulated a couple times and shorted a gold ETF so I could tick off all the gold bugs. So it must be ready to soar. :-P

User avatar
Cut-Throat
Posts: 2011
Joined: Sun Oct 17, 2010 9:46 am

Re: Gold is ready to fall

Post by Cut-Throat » Thu May 03, 2012 5:55 pm

I have no clue on whether gold will fall or not, but I did buy some gold and silver coins over the last couple months.

I acquired 1 of each denomination of every U.S. coin made, with a few exceptions. I did get all the gold ones though. Cost me about $20 Grand in total.
I thought I'd hang on to them for about 20 years and then sell them. Hopefully at a nice profit. I had a lot of cash paying me about .6% interest and I thought I'd take some elsewhere.

It has been fun and educational also. I have a very nice 1799 Silver Dollar when John Adams was president and Thomas Jefferson was Vice President.
Check it out. http://imgs.inkfrog.com/pix/lovethatcoinguy/094_021.JPG

A lot of Interesting history here and far cheaper than my Wife's 2 Carat Diamond Ring. :mrgreen:
Last edited by Cut-Throat on Thu May 03, 2012 7:45 pm, edited 1 time in total.

Bongleur
Posts: 2066
Joined: Fri Dec 03, 2010 10:36 am

Re: Gold is ready to fall

Post by Bongleur » Thu May 03, 2012 6:39 pm

>I acquired 1 of each denomination of every U.S. coin made, with a few exceptions. I did get all the gold ones though. Cost me about $20 Grand in total.
>

What grade? Interesting statistic for the cost of a comprehensive collection with an example of every type.

I want to get one of those "tribute" coins that is plated with 14mg of pure gold; just to carry around and look for excuses to engage in coin flipping. George Raft's got nuthin' on me.
Seeking Iso-Elasticity. | Tax Loss Harvesting is an Asset Class. | A well-planned presentation creates a sense of urgency. If the prospect fails to act now, he will risk a loss of some sort.

rr2
Posts: 1023
Joined: Wed Nov 19, 2008 10:04 pm

Re: Gold is ready to fall

Post by rr2 » Thu May 03, 2012 7:07 pm

Random Musings wrote:So, are you going to short GLD based upon your prediction?

RM
Reminds me of this thread: http://www.bogleheads.org/forum/viewtop ... 10&t=60549

User avatar
CaliJim
Posts: 2912
Joined: Sun Feb 28, 2010 8:47 pm
Location: California, near the beach

Re: Gold is ready to fall

Post by CaliJim » Thu May 03, 2012 7:31 pm

Be careful out there:

http://sanfrancisco.cbslocal.com/2012/0 ... fake-gold/
An elderly Castro Valley woman has become the latest victim of a con artist who sells phony gold bars, ostensibly to pay for medical care for a sick relative, authorities said Thursday. The woman paid $7,000 for what turned out to be a brick that had been spray painted, said Sgt. J.D. Nelson, spokesman for the Alameda County Sheriff’s Office.
-calijim- | | For more info, click this Wiki

User avatar
Cut-Throat
Posts: 2011
Joined: Sun Oct 17, 2010 9:46 am

Re: Gold is ready to fall

Post by Cut-Throat » Thu May 03, 2012 7:37 pm

Bongleur wrote:>I acquired 1 of each denomination of every U.S. coin made, with a few exceptions. I did get all the gold ones though. Cost me about $20 Grand in total.
>

What grade? Interesting statistic for the cost of a comprehensive collection with an example of every type.

varying grades...Mostly Fine to Extra Fine...Some AU...

User avatar
mephistophles
Posts: 3110
Joined: Tue Mar 27, 2007 2:34 am

Re: Gold is ready to fall

Post by mephistophles » Thu May 03, 2012 7:43 pm

Glad I bought my gold before the prices skyrocketed.

hazlitt777
Posts: 1033
Joined: Fri Aug 12, 2011 4:10 am
Location: Wisconsin

Re: Gold is ready to fall

Post by hazlitt777 » Thu May 03, 2012 8:25 pm

Cut-Throat wrote:I have no clue on whether gold will fall or not, but I did buy some gold and silver coins over the last couple months.

I acquired 1 of each denomination of every U.S. coin made, with a few exceptions. I did get all the gold ones though. Cost me about $20 Grand in total.
I thought I'd hang on to them for about 20 years and then sell them. Hopefully at a nice profit. I had a lot of cash paying me about .6% interest and I thought I'd take some elsewhere.

It has been fun and educational also. I have a very nice 1799 Silver Dollar when John Adams was president and Thomas Jefferson was Vice President.
Check it out. http://imgs.inkfrog.com/pix/lovethatcoinguy/094_021.JPG

A lot of Interesting history here and far cheaper than my Wife's 2 Carat Diamond Ring. :mrgreen:
Just be careful not to overpay. Remember, the most inexpensive way to get exposure to gold bullion is in the form of one ounce bullion pieces. See this conversation:

http://www.bogleheads.org/forum/viewtop ... =1&t=87311

hazlitt777
Posts: 1033
Joined: Fri Aug 12, 2011 4:10 am
Location: Wisconsin

Re: Gold is ready to fall

Post by hazlitt777 » Thu May 03, 2012 8:32 pm

I've seen similar threads about stocks when they fall. And I've seen responses here like this: Guess it is time to buy more.

If gold were to really fall, I would buy more to get my allocation back to where I set it. That is the boglehead approach if you are one of those boglehead mavericks who uses gold too as part of a well diversified asset.

If you are getting cold feet, and are a gold investor, read this article. It may help you sleep better at night.

http://dailyreckoning.com/examining-the ... gle+Reader

p.s. I've been a gold investor since 1996, and as 5% or more of my portfolio since 2003.

User avatar
Lbill
Posts: 4997
Joined: Thu Mar 13, 2008 11:25 pm
Location: Somewhere between Up and Down

Re: Gold is ready to fall

Post by Lbill » Thu May 03, 2012 9:05 pm

I firmly believe that gold will go up in price, unless it goes down. I would strongly advise to buy in the case of the former and sell in the case of the latter.
"Life can only be understood backward; but it must be lived forward." ~ Søren Kierkegaard | | "You can't connect the dots looking forward; but only by looking backwards." ~ Steve Jobs

hazlitt777
Posts: 1033
Joined: Fri Aug 12, 2011 4:10 am
Location: Wisconsin

Re: Gold is ready to fall

Post by hazlitt777 » Thu May 03, 2012 9:16 pm

Lbill wrote:I firmly believe that gold will go up in price, unless it goes down. I would strongly advise to buy in the case of the former and sell in the case of the latter.
I firmly believe that stocks will go up in price, unless they go down. I would strongly advise to buy in the case of the former and sell in the case of the latter....

Actually, just be diversified and rebalance:>)

Bongleur
Posts: 2066
Joined: Fri Dec 03, 2010 10:36 am

Re: Gold is ready to fall

Post by Bongleur » Thu May 03, 2012 10:33 pm

>varying grades...Mostly Fine to Extra Fine...Some AU...

Did you find a package deal or go out and find them piecemeal? Are they slabbed & certified grade? Is there a list of "all" types of coins issued? Probably a book published somewhere... interesting.
Seeking Iso-Elasticity. | Tax Loss Harvesting is an Asset Class. | A well-planned presentation creates a sense of urgency. If the prospect fails to act now, he will risk a loss of some sort.

User avatar
Cut-Throat
Posts: 2011
Joined: Sun Oct 17, 2010 9:46 am

Re: Gold is ready to fall

Post by Cut-Throat » Fri May 04, 2012 6:26 am

Bongleur wrote:>varying grades...Mostly Fine to Extra Fine...Some AU...

Did you find a package deal or go out and find them piecemeal? Are they slabbed & certified grade? Is there a list of "all" types of coins issued? Probably a book published somewhere... interesting.
I bought them 1 at a time. Mostly Auctions on e-bay, Half are slabbed and certified.

Here is one of the most unusual denominations. Made of Nickel - the 3 Cent Piece

Image

Here is a list for you.
http://www.coin-collecting-guide-for-be ... coins.html
Last edited by Cut-Throat on Fri May 04, 2012 7:06 am, edited 1 time in total.

Valuethinker
Posts: 35664
Joined: Fri May 11, 2007 11:07 am

Re: Gold is ready to fall

Post by Valuethinker » Fri May 04, 2012 6:41 am

LH wrote:I have almost capitulated a couple times and bought a gold coin. So it must be ready to run out of buyers and people who will listen to commercials.

1636 currently

: P
Don't underestimate yourself. By virtue of being here and the reading you do, you are still ahead of the mass market investor.

The peaks of bubbles really are ludicrous. I would not say gold is so much in a bubble (yet) as towards the late stage of its valuation rise-- as and when real interest rates rise and Central Banks signal they are tightening, gold is going to do the Wile-E-Coyote.

aac74
Posts: 64
Joined: Mon Apr 30, 2012 2:27 pm

Re: Gold is ready to fall

Post by aac74 » Fri May 04, 2012 9:18 am

If big bull markets go in 3 stages:

Stage 1 = no one notices prices are rising (2001 - 2005)
Stage 2 = professional investors and traders notice (2005 - 201?)
Stage 3 = bubble = public is all in like 90's tech stocks ( ??? )

I'd say we are still in stage 2 climbing the 'wall of worry' rather than falling down the 'slop of hope'.

Unlike tech stocks that rose from a normal base, gold started its rise from a grossly undervalued level (30 year bear market, 30 years of falling interest rates).
Central banks all over the world were dumping gold on the market and leasing it out for traders to short and invest the returns in tech stocks.
Gold was trading way way under the cost of production and miners were keeping their drills turning hoping that the price would rise.
Gold price hedging was keeping many miners going.Plans for new mines were all on hold.
Interest rates were giving CDs and money markets positive returns over inflation.

Cost of production is now between $600 and $1450 and oz (and rising because of past under investment in new mines). Thus $1600 is not a bubble valuation.
Now inflation wipes out any return from CDs. Thus gold's zero yield looks ok as long as it is in a bull market.
Central banks are buying gold including India and China and South Korea.
Miners have closed their hedge books.

It is important to analyse gold more as an inflation proof currency than a tech stock.
Tech stock lost 90% of their value but gold has real value. When its price rises from an undervalued level it never trades at that level again.
Gold will never ever trade at $35/oz or $500/oz ever again. The dollar has lost far too much purchasing power (every central bank in the world is printing money).
Any company can lose 100% of its value, gold can not and we have all of history that proves this.
Any return to some sort of gold backing for currency would need a much high gold price (maybe as high as $10,000/oz)

Thus a few gold and silver coins under the bed now (with a view to hold them for many years) is very different from going all in on tech stocks in 1999

I'd say we are at a similar position to 1974. The gold price is high and property prices are low but the bubble in gold hasn't yet started:

http://www.sharelynx.com/chartstemp/USHLSPOG.php

Valuethinker
Posts: 35664
Joined: Fri May 11, 2007 11:07 am

Re: Gold is ready to fall

Post by Valuethinker » Fri May 04, 2012 9:38 am

aac74 wrote:It is important to analyse gold more as an inflation proof currency than a tech stock.
Tech stock lost 90% of their value but gold has real value.

.....
Thus a few gold and silver coins under the bed now (with a view to hold them for many years) is very different from going all in on tech stocks in 1999

I'd say we are at a similar position to 1974. The gold price is high and property prices are low but the bubble in gold hasn't yet started:

http://www.sharelynx.com/chartstemp/USHLSPOG.php
there is so much (unintentional) irony in that.

Good to know that Apple, Google, Ebay, Amazon, HP, Oracle-- just flashes in the pan. This internet thing, it's just a bubble.

My own guess is that we are a lot closer to 1980 in the world of gold, having risen 5-6 fold since the bottom for an asset that produces no income or yield.

However another doubling is surely possible.

Fat lady ain't singing yet.

User avatar
Lbill
Posts: 4997
Joined: Thu Mar 13, 2008 11:25 pm
Location: Somewhere between Up and Down

Re: Gold is ready to fall

Post by Lbill » Fri May 04, 2012 9:48 am

Fat lady ain't singing yet.
I've noticed they aren't that fat these days. Looking pretty good - how about the one on "Dancing with the Stars"? Za-zoom!
"Life can only be understood backward; but it must be lived forward." ~ Søren Kierkegaard | | "You can't connect the dots looking forward; but only by looking backwards." ~ Steve Jobs

aac74
Posts: 64
Joined: Mon Apr 30, 2012 2:27 pm

Re: Gold is ready to fall

Post by aac74 » Fri May 04, 2012 11:37 am

Silver is an even better bet if we are sitting at a 1974/5 level - could go up many multiples when the panic/mania begins ?

Who ever heard of a bull run ending with prices going sideways for a year ?
If prices fell for a few months from here that would be an even more bullish sign.

Why not buy a few tickets in the silver lottery and hold for the long term ?

http://upload.wikimedia.org/wikipedia/c ... in_USD.png

Good chance that one day silver will trade 1:1 with gold. Might take 10 years or 50 years but it will happen because every day more silver is used by industry and thus it becomes a little more like platinum.
Silver currently trades 50:1 against gold. It is highly undervalued compared to the historic 15:1 ratio.

650 year graph of silver prices and silver/gold ratio from 1344 to 2004:

http://www.marketoracle.co.uk/images/20 ... age002.jpg

BYUvol
Posts: 115
Joined: Sat Mar 24, 2012 3:06 pm
Location: KY

Re: Gold is ready to fall

Post by BYUvol » Fri May 04, 2012 12:35 pm

aac74 wrote: 650 year graph of silver prices and silver/gold ratio from 1344 to 2004:

http://www.marketoracle.co.uk/images/20 ... age002.jpg
I find it extremely difficult to trust anything coming from a name like "Market Oracle". Beware the prophet seeking profit.

User avatar
Cut-Throat
Posts: 2011
Joined: Sun Oct 17, 2010 9:46 am

Re: Gold is ready to fall

Post by Cut-Throat » Fri May 04, 2012 2:55 pm

hazlitt777 wrote: Just be careful not to overpay. Remember, the most inexpensive way to get exposure to gold bullion is in the form of one ounce bullion pieces. See this conversation:

http://www.bogleheads.org/forum/viewtop ... =1&t=87311
I have no interest in bullion pieces, I wanted coins that have History behind them.....I don't even care if I lose money. I like them.

hazlitt777
Posts: 1033
Joined: Fri Aug 12, 2011 4:10 am
Location: Wisconsin

Re: Gold is ready to fall

Post by hazlitt777 » Fri May 04, 2012 2:57 pm

Cut-Throat wrote:
hazlitt777 wrote: Just be careful not to overpay. Remember, the most inexpensive way to get exposure to gold bullion is in the form of one ounce bullion pieces. See this conversation:

http://www.bogleheads.org/forum/viewtop ... =1&t=87311
I have no interest in bullion pieces, I wanted coins that have History behind them.....I don't even care if I lose money. I like them.
I misunderstood then. I thought you were using them as an investment vehicle.

ilmartello
Posts: 1075
Joined: Sun Nov 06, 2011 6:59 pm

Re: Gold is ready to fall

Post by ilmartello » Fri May 04, 2012 3:30 pm

Gold prices rest on fear.
When the fear subsides, so will the gold prices.

May the force be with you.

User avatar
LH
Posts: 5490
Joined: Wed Mar 14, 2007 2:54 am

Re: Gold is ready to fall

Post by LH » Fri May 04, 2012 7:05 pm

Cut-Throat wrote:
hazlitt777 wrote: Just be careful not to overpay. Remember, the most inexpensive way to get exposure to gold bullion is in the form of one ounce bullion pieces. See this conversation:

http://www.bogleheads.org/forum/viewtop ... =1&t=87311
I have no interest in bullion pieces, I wanted coins that have History behind them.....I don't even care if I lose money. I like them.
Sweet, just tell me what you like, I will buy it, then resell it to you : P

(bold underlined added)

Myself, I just like reading/posting about gold : )

hazlitt777
Posts: 1033
Joined: Fri Aug 12, 2011 4:10 am
Location: Wisconsin

Re: Gold is ready to fall

Post by hazlitt777 » Fri May 04, 2012 7:07 pm

ilmartello wrote:Gold prices rest on fear.
When the fear subsides, so will the gold prices.

May the force be with you.
May the force be with you too. This whole "fear" theme gets way overplayed. It is a red herring. The real issue is "Is the fear justified?" Or another question in regard to stocks might be, "Is the confidence justified?"

Now since we are mostly not market timers here, and do not claim to know the answer, or even if we do think we know the answer would not presume to be able to stay solvent long enough for the market to get rational, we stay well diversified. Some of us use gold in that attempt to diversify.
....................

As an aside, today is an example of where the DJIA and gold provided some real diversification value in my opinion. The DJIA went from 13206.59 to 13038.27 while gold went from 1636.31 to 1642.05.

ilmartello
Posts: 1075
Joined: Sun Nov 06, 2011 6:59 pm

Re: Gold is ready to fall

Post by ilmartello » Fri May 04, 2012 7:51 pm

hazlitt777 wrote:
ilmartello wrote:Gold prices rest on fear.
When the fear subsides, so will the gold prices.

May the force be with you.
May the force be with you too. This whole "fear" theme gets way overplayed. It is a red herring. The real issue is "Is the fear justified?" Or another question in regard to stocks might be, "Is the confidence justified?"

Now since we are mostly not market timers here, and do not claim to know the answer, or even if we do think we know the answer would not presume to be able to stay solvent long enough for the market to get rational, we stay well diversified. Some of us use gold in that attempt to diversify.
....................

As an aside, today is an example of where the DJIA and gold provided some real diversification value in my opinion. The DJIA went from 13206.59 to 13038.27 while gold went from 1636.31 to 1642.05.
Gold is advertised by it's defenders as an inflation hedge. However, it seems that whenever we fears of a slow economy or recession, the price of gold goes up, like today, when the US had a poor unemployment report.. This makes no sense since slow growth coming out a financial crisis/deleveraging crisis puts deflationary pressure on the economy, not inflationary pressure.
Hence it's all irrational fear.

NERD777
Posts: 107
Joined: Mon Aug 29, 2011 5:19 pm

Re: Gold is ready to fall

Post by NERD777 » Fri May 04, 2012 8:44 pm

ilmartello wrote:
hazlitt777 wrote:
ilmartello wrote:Gold prices rest on fear.
When the fear subsides, so will the gold prices.

May the force be with you.
May the force be with you too. This whole "fear" theme gets way overplayed. It is a red herring. The real issue is "Is the fear justified?" Or another question in regard to stocks might be, "Is the confidence justified?"

Now since we are mostly not market timers here, and do not claim to know the answer, or even if we do think we know the answer would not presume to be able to stay solvent long enough for the market to get rational, we stay well diversified. Some of us use gold in that attempt to diversify.
....................

As an aside, today is an example of where the DJIA and gold provided some real diversification value in my opinion. The DJIA went from 13206.59 to 13038.27 while gold went from 1636.31 to 1642.05.
Gold is advertised by it's defenders as an inflation hedge. However, it seems that whenever we fears of a slow economy or recession, the price of gold goes up, like today, when the US had a poor unemployment report.. This makes no sense since slow growth coming out a financial crisis/deleveraging crisis puts deflationary pressure on the economy, not inflationary pressure.
Hence it's all irrational fear.
Deleveraging would induce deflation yes. Central Banks seem content to allow themselves to de-lever the banks/economies while increasing money supply thus not allowing deflation to happen. As money supply and the central banks balance sheets increase, inflationary fears arise. If QE3 + happens, gold most likely goes up. If QE3 doesn't happen and the economy rebounds gold will most likely fall. The current market price reflects the estimated probabilities of these scenarios and their outcomes.

Realistically, gold is worth 0 dollars.
Realistically, gold is worth infinity dollars.
Currently you can trade gold for roughly 1650 dollars.

aac74
Posts: 64
Joined: Mon Apr 30, 2012 2:27 pm

Re: Gold is ready to fall

Post by aac74 » Sat May 05, 2012 3:47 am

Looking at the gold price in terms of paper is not very helpful.

A better title for this thread would be 'are interest rates ready to rise' or 'is the dollar going to be protected' or 'is deflation ready to strike'.
I would say that in order for the dollar gold price to fall radically something radical must happen with interest rates to end the rational fear of dollar debasement. There is nothing irrational about fearing loss of purchasing power when CDs yield lower than inflation. There is nothing irrational about thinking that the official inflation number is far too low and that real inflation is 2 or 3 times higher. There is nothing irrational about paying 100 gold coins for an average house.

Gold is a long term inflation hedge, as is land/property and oil. These have proven themselves to be the best long term stores of value.
Now you don't want to hold them instead of stocks/bonds that generate income but a small holding over the long term as diversifier is an excellent idea.

You should also note that in terms of paper currency they don't all work best at the same time e.g. in 2000 gold was a better hedge than property. Now property is a better hedge than gold.

http://www.sharelynx.com/chartstemp/USHLSPOG.php

In 1970 a barrel of oil was $1 or 2 grams of gold. Now oil is $100 or 3 grams of gold.

The value of oil has gone up as it as demand and cost of production has risen but the purchasing power of the dollar has collapsed.

It makes sense to price things in ounces of gold so you don't get fooled into thinking you are getting richer when you are really getting poorer.
e.g. if inflation takes off and the purchasing power of the dollar falls quickly the dow jones could rise e.g. to 15,000. However if gold rises to $15,000/oz (dow 1:1 ratio) that would be a major collapse and you would have lost lots of real wealth. More likely if the dow falls to 7,000 and gold rises to $7000/oz that would represent the same loss of real wealth (dow/gold at 1:1) even though the numbers are different and so is the direction of the market !

Maybe better to capitulate now and buy some coins before dow/gold 1:1 ?
http://home.earthlink.net/~intelligentb ... tio-lt.gif

Is apple worth 9 times what it was worth in 1991 ? I'd say it is:

http://pricedingold.com/charts/AAPL-1990.png

Is Warren buffet just a 90s dot com slowly coming back to earth ? I'd say yes:

http://pricedingold.com/charts/BRKA-1990.png

hazlitt777
Posts: 1033
Joined: Fri Aug 12, 2011 4:10 am
Location: Wisconsin

Re: Gold is ready to fall

Post by hazlitt777 » Sat May 05, 2012 12:24 pm

LH wrote:I have almost capitulated a couple times and bought a gold coin. So it must be ready to run out of buyers and people who will listen to commercials.

1636 currently

: P
Oh just go for it and buy two american one oune eagles. Get your feet wet:>)

chipmonk
Posts: 625
Joined: Wed Mar 09, 2011 4:32 pm
Location: PDX

Re: Gold is ready to fall

Post by chipmonk » Sat May 05, 2012 5:09 pm

hazlitt777 wrote:Oh just go for it and buy two american one oune eagles. Get your feet wet:>)
It's funny, this sounds like a tiny "get your feet wet" investment, but at least for me it really wouldn't be.

Would most Bogleheads drop $3300+ on an investment which might incur a markup (~= load) of several percent if not bought and sold from the right place, and which must be physically protected against loss or theft? That sounds like the kind of thing that I'd research pretty carefully, like buying a car, rather than the sort of thing I'd do on an impulse, like buying a $30 pair of jeans :)

User avatar
Cut-Throat
Posts: 2011
Joined: Sun Oct 17, 2010 9:46 am

Re: Gold is ready to fall

Post by Cut-Throat » Sat May 05, 2012 5:37 pm

chipmonk wrote:It's funny, this sounds like a tiny "get your feet wet" investment, but at least for me it really wouldn't be.

Would most Bogleheads drop $3300+ on an investment which might incur a markup (~= load) of several percent if not bought and sold from the right place, and which must be physically protected against loss or theft? That sounds like the kind of thing that I'd research pretty carefully, like buying a car, rather than the sort of thing I'd do on an impulse, like buying a $30 pair of jeans :)
Not me, because I don't even consider these coins an investment (More like a hobby)....I dropped $20 Grand on about 40 Coins over the last few months. I had about $500K in Cash that was earning .6% and earning almost nothing in the Vanguard Prime Money Market Account.

At least I get to look at and Fondle the coins. ......It made no difference on my Retirement plan at all. I now have a piece of history.....And If they appreciate in the next 15 years, I may even make a profit, if I choose to sell them.

hazlitt777
Posts: 1033
Joined: Fri Aug 12, 2011 4:10 am
Location: Wisconsin

Re: Gold is ready to fall

Post by hazlitt777 » Sat May 05, 2012 5:55 pm

chipmonk wrote:
hazlitt777 wrote:Oh just go for it and buy two american one oune eagles. Get your feet wet:>)
It's funny, this sounds like a tiny "get your feet wet" investment, but at least for me it really wouldn't be.

Would most Bogleheads drop $3300+ on an investment which might incur a markup (~= load) of several percent if not bought and sold from the right place, and which must be physically protected against loss or theft? That sounds like the kind of thing that I'd research pretty carefully, like buying a car, rather than the sort of thing I'd do on an impulse, like buying a $30 pair of jeans :)
LH and I go back a while on this topic. So it is kind of an inside joke. But know, I recommend you not over pay. That is why I suggested places like www.golddealer.com where you can get a fair to a good deal.

Unlike "cut throat" who is not as interested in making money qua gold, since he is buying a collectible coin, I want to make money qua gold when it comes to coins and so usually am speaking to those who wish to do it via gold bullion diversification.

umfundi
Posts: 3361
Joined: Tue Jun 07, 2011 5:26 pm

Re: Gold is ready to fall

Post by umfundi » Sat May 05, 2012 9:49 pm

chipmonk wrote:
hazlitt777 wrote:Oh just go for it and buy two american one oune eagles. Get your feet wet:>)
It's funny, this sounds like a tiny "get your feet wet" investment, but at least for me it really wouldn't be.

Would most Bogleheads drop $3300+ on an investment which might incur a markup (~= load) of several percent if not bought and sold from the right place, and which must be physically protected against loss or theft? That sounds like the kind of thing that I'd research pretty carefully, like buying a car, rather than the sort of thing I'd do on an impulse, like buying a $30 pair of jeans :)
Actually, if you look hard: You can trade bullion coins (American Eagles, Krugerrands, etc.) at about, or at a slight premium over, the spot price. The buy/sell spread is only about $50 for a 1oz gold coin. To that you have to add postage and insurance to ship coins back and forth.

That said, I am a sometime coin collector, but do not see my coins as investments.

Keith
Déjà Vu is not a prediction

Bongleur
Posts: 2066
Joined: Fri Dec 03, 2010 10:36 am

Re: Gold is ready to fall

Post by Bongleur » Sun May 06, 2012 2:17 am

Of course, when everyone is buying the cost $50 is above the spot to buy. When everyone is selling its $50 BELOW spot to sell. There's a big delta if you end up selling at a bad time.
Seeking Iso-Elasticity. | Tax Loss Harvesting is an Asset Class. | A well-planned presentation creates a sense of urgency. If the prospect fails to act now, he will risk a loss of some sort.

User avatar
tadamsmar
Posts: 7753
Joined: Mon May 07, 2007 12:33 pm

Re: Gold is ready to fall

Post by tadamsmar » Sun May 06, 2012 3:40 am

rmelvey wrote:My prediction:

Gold will continue to fluctuate with low correlations to stocks and treasuries providing excellent diversification benefits to disciplined investors :mrgreen:
A disciplined investor is one who would not jump into gold now.

Disciplined gold investors have a longstanding gold allocation. Discipline gold investors are selling to rebalance, given the recent high prices of the last few years.

aac74
Posts: 64
Joined: Mon Apr 30, 2012 2:27 pm

Re: Gold is ready to fall

Post by aac74 » Sun May 06, 2012 4:56 am

It's true that a gold investor may be selling some of their gold now but not to buy dollars or dollar bonds !
They would be rebalancing into property and commodities, particularly natural gas. i.e they are keeping their inflation hedge on because the last 5 years have shown that no mater how big the economic problems central banks can always generate positive inflation. The Japanese central bank in the 90s could have done this if it had wanted to. The Fed generated inflation in the depression by revaluing the dollar against gold after 1932.

The whole point of paper currency (rather than a gold standard) is that you can always create inflation. If you have a massive debt problem inflation is the first and only answer. Japan didn't take this route because they thought deflation would be better than stagflation in a high productivity/high employment economy.
Japan had the option of deflation because their debt to GDP in 1990 was 40%. The US has 100% debt to GDP today and much of that debt is owned by foreigners (unlike Japan). The fed can not allow higher interest rates or deflation because it would trigger default very quickly (rising real value of the debt versus falling tax receipts). This is a totally different world to the early 80s.

Silver might be the better option right now, better long term fundamentals.

It's historically undervalued compared to gold (50:1 price ratio versus a historic 15:1 ratio) and there is more and more industrial demand every year.
New industrial demand could take silver to 1:1 with gold over the very long term.

Plus it's easy to barter with when things get Mad Max:
https://online.kitco.com/bullion/silver ... _1000.html

The bear case for gold is very weak:

http://www.kitco.com/Exclusive-News/

Gold is not in a bubble

Bubbles don't end with year long sideways moves in prices.

Prices fall fast down the 'slop of hope' that contains very big rallies to keep people who bought at the top interested.

If gold was in a bubble there would be massive speculation (like apple and facebook shares) and everyone would be talking about how rich their gold coins were making them.

If it was a bubble all the top hedge funds would be heavy into gold (most seem more into tech shares)
http://www.insidermonkey.com/hedge-fund/

You don't short miners when they are making 52 week lows and are trading at tiny P/Es because they haven't keep up with the gold price.
They are trading as if gold is going to return to $800/oz (halve very quickly)

The reason the dollar appears strong is that every country is printing money and devaluing their currency at the same time.
It's not like the 70s where you could see dollar weakness in the strength of the swiss franc, deutschmark and yen. Now the only place to see the weakness of the dollar is in gold and oil.

If the Chinese fully unpegged the RMB from the dollar its value against the dollar would rocket. This would not be an RMB bubble ! It would just be a reality valuation as gold is today. Gold is at par with the dollar (neither over valued nor undervalued). The 10 year bull market has not created a bubble, just realistic valuation. It only appears high because gold was grossly undervalued due to the 20 year bear market where every central bank was selling and leasing gold like crazy. BRIC central banks where happy to keep their reserves in dollars. This is no long the case and they are buying gold to get out of the dollar.

ilmartello
Posts: 1075
Joined: Sun Nov 06, 2011 6:59 pm

Re: Gold is ready to fall

Post by ilmartello » Sun May 06, 2012 3:52 pm

aac74 wrote:It's true that a gold investor may be selling some of their gold now but not to buy dollars or dollar bonds !
They would be rebalancing into property and commodities, particularly natural gas. i.e they are keeping their inflation hedge on because the last 5 years have shown that no mater how big the economic problems central banks can always generate positive inflation. The Japanese central bank in the 90s could have done this if it had wanted to. The Fed generated inflation in the depression by revaluing the dollar against gold after 1932.

The whole point of paper currency (rather than a gold standard) is that you can always create inflation. If you have a massive debt problem inflation is the first and only answer. Japan didn't take this route because they thought deflation would be better than stagflation in a high productivity/high employment economy.
Japan had the option of deflation because their debt to GDP in 1990 was 40%. The US has 100% debt to GDP today and much of that debt is owned by foreigners (unlike Japan). The fed can not allow higher interest rates or deflation because it would trigger default very quickly (rising real value of the debt versus falling tax receipts). This is a totally different world to the early 80s.

Silver might be the better option right now, better long term fundamentals.

It's historically undervalued compared to gold (50:1 price ratio versus a historic 15:1 ratio) and there is more and more industrial demand every year.
New industrial demand could take silver to 1:1 with gold over the very long term.

Plus it's easy to barter with when things get Mad Max:
https://online.kitco.com/bullion/silver ... _1000.html

The bear case for gold is very weak:

http://www.kitco.com/Exclusive-News/

Gold is not in a bubble

Bubbles don't end with year long sideways moves in prices.

Prices fall fast down the 'slop of hope' that contains very big rallies to keep people who bought at the top interested.

If gold was in a bubble there would be massive speculation (like apple and facebook shares) and everyone would be talking about how rich their gold coins were making them.

If it was a bubble all the top hedge funds would be heavy into gold (most seem more into tech shares)
http://www.insidermonkey.com/hedge-fund/

You don't short miners when they are making 52 week lows and are trading at tiny P/Es because they haven't keep up with the gold price.
They are trading as if gold is going to return to $800/oz (halve very quickly)

The reason the dollar appears strong is that every country is printing money and devaluing their currency at the same time.
It's not like the 70s where you could see dollar weakness in the strength of the swiss franc, deutschmark and yen. Now the only place to see the weakness of the dollar is in gold and oil.

If the Chinese fully unpegged the RMB from the dollar its value against the dollar would rocket. This would not be an RMB bubble ! It would just be a reality valuation as gold is today. Gold is at par with the dollar (neither over valued nor undervalued). The 10 year bull market has not created a bubble, just realistic valuation. It only appears high because gold was grossly undervalued due to the 20 year bear market where every central bank was selling and leasing gold like crazy. BRIC central banks where happy to keep their reserves in dollars. This is no long the case and they are buying gold to get out of the dollar.
Do you consider yourself a Boglehead?
If so, why?

User avatar
stratton
Posts: 11082
Joined: Sun Mar 04, 2007 5:05 pm
Location: Puget Sound

Re: Gold is ready to fall

Post by stratton » Sun May 06, 2012 4:05 pm

LH wrote:I have almost capitulated a couple times and bought a gold coin. So it must be ready to run out of buyers and people who will listen to commercials.

1636 currently

: P
You can always buy a 2x or 3x shorting gold etf. :twisted:

"May you live in interesting times." ought to apply quite nicely to the side effects of daily volatillity adjustments on those type of leveraged etfs.

Paul
...and then Buffy staked Edward. The end.

User avatar
Cut-Throat
Posts: 2011
Joined: Sun Oct 17, 2010 9:46 am

Re: Gold is ready to fall

Post by Cut-Throat » Sun May 06, 2012 5:23 pm

ilmartello wrote: Do you consider yourself a Boglehead?
If so, why?
I think he is here to convince us to Market Time, which is not getting too much traction with me.

I'm retired and prefer to go fishing. Maybe he'll be right some day, but by then I'll be dead.

Bongleur
Posts: 2066
Joined: Fri Dec 03, 2010 10:36 am

Re: Gold is ready to fall

Post by Bongleur » Mon May 07, 2012 3:28 am

>The fed can not allow higher interest rates or deflation because it would trigger default very quickly (rising real value of the debt versus falling tax receipts).
>

Anybody NOT agree with this? IMO the question is how long can they continue to dance on the edge of the knife? >$700 Trillion in off the books credit default contracts of various kinds makes me very nervous about domino effects.
Seeking Iso-Elasticity. | Tax Loss Harvesting is an Asset Class. | A well-planned presentation creates a sense of urgency. If the prospect fails to act now, he will risk a loss of some sort.

aac74
Posts: 64
Joined: Mon Apr 30, 2012 2:27 pm

Re: Gold is ready to fall

Post by aac74 » Mon May 07, 2012 4:16 am

I'm a boglehead because I have 95% in index funds and a few gold coins and gold mining stocks.

I would recommend holding some physical gold and silver forever because they are inflation proof money.
We know this because you can buy just as much oil with an oz of gold now as you could in 1970.

Gold is not just a commodity, it is a currency. Because of its inflation proof nature and inability to print up at will it can enter bubbles at times of high inflation and financial collapse. We are not there yet, we are still climbing a wall of worry and the bigger the pull-backs the bigger the worries will become. Thus you should be buying on gold weakness, not selling. Eventually everyone will be all in and the price will fall from its bubble valuation way way above cost of production. The price will fall down the 'slop of hope' which will have big rallies to keep people in the market that bought in at the top.

When the price of sugar goes up it is just inflation working its way through the system.
Something else will be bid up soon and sugar may go back to its old price very quickly.

In the 70s when the price of gold increased from $35, then to $100, then $200 it never returned to $35 because the rise was a function of previous and on going dollar debasement. It would have taken massive deflation and sky high interest rates to get gold back to $35/oz

When the price of gold goes up it is a sign that there is so much inflation that some people don't want to hold paper currency.
Especially if interest rates are zero and thus the yield on bonds and bank deposits offers no inflation protection.
With the US debt to GDP so high and the US economy so weak central banks like China are desperate to switch some of their reserves from 95% dollars to gold.

When debt is being monetised by deliberate inflation (QE) and the purchasing power of paper money debased (worldwide) you would expect that (as long as there is no bubble mania) the gold price will not fall unless central banks stop printing money, default on their debts, raise interest rates and allow deflation to take hold.

Now at some point you would expect global money printing to spark a bubble in gold but we are not there yet. Not only is the public not 'all in' but neither are hedge funds or central banks. Also remember that gold did not start its run up from a normal base. It began from a price well bellow cost of production. Not only that but the cost of production goes up every year.

Basically gold is cash that can go into bubbles. When you buy it you are just swapping one money for another. Just don't do this in a gold bubble.

Bongleur
Posts: 2066
Joined: Fri Dec 03, 2010 10:36 am

Re: Gold is ready to fall

Post by Bongleur » Mon May 07, 2012 5:24 am

Wonder what the cost of gold production has been thru history. When did it stop being mined with slave labor? IIRC the region of Bulgaria was known for easy to mine deposits (maybe placer?) The Scythians had lots of gold from somewhere.
Seeking Iso-Elasticity. | Tax Loss Harvesting is an Asset Class. | A well-planned presentation creates a sense of urgency. If the prospect fails to act now, he will risk a loss of some sort.

Dandy
Posts: 5292
Joined: Sun Apr 25, 2010 7:42 pm

Re: Gold is ready to fall

Post by Dandy » Mon May 07, 2012 9:06 am

I just don't get gold. It has been a great and terrible investment for centuries. So, I don't deny it as a possilbe investment. But to me what is really the intrinsic value of a shinny metal that has limited industrial uses. It is like investing in baseball cards or comic books, or tulip bulbs - people make millions but i don't feel comfortable on what the "real" value is. So I stupidly expect gold, comic books and baseball cards to drop in value -- like tulip bulbs --instead they often soar.

User avatar
Lbill
Posts: 4997
Joined: Thu Mar 13, 2008 11:25 pm
Location: Somewhere between Up and Down

Re: Gold is ready to fall

Post by Lbill » Mon May 07, 2012 10:20 am

Here's an interesting question posed by Richard Russell: If you had a chance to leave something for your descendants to be opened 100 years from now, would you leave them a wad of dollar bills or some gold coins? I might even include some shares of GM as another choice. There's a pretty good chance that the gold would represent value and purchasing power in 100 years, because it has for the last 1000 years. Dollars? Won't be worth the paper they're printed on if dollar currency even still exists. GM stock - if GM even exists 100 years from now, I'll buy you a Starbucks. Oh, I forgot, Starbucks won't be around either (come to think of it, neither will I).
"Life can only be understood backward; but it must be lived forward." ~ Søren Kierkegaard | | "You can't connect the dots looking forward; but only by looking backwards." ~ Steve Jobs

aac74
Posts: 64
Joined: Mon Apr 30, 2012 2:27 pm

Re: Gold is ready to fall

Post by aac74 » Mon May 07, 2012 11:06 am

The lower interest rates are (currently zero) and the higher government debt is (currently 100% of GDP and rising) the better an investment gold is because the higher the chance of very high price inflation/reductions in purchasing power (or at least the fear of it).

Thus it makes sense at the moment to swap some cash savings (that are earning very low interest) for physical gold and/or silver.
Plan to hold this for at least five years. Only think about selling if gold looks like it is in a bubble and interest rates have risen to match inflation (i.e. steps are being taken to curb inflation).

The kind of inflation fighting you had in 1981 (interest rates at 20% - bond investors being killed) can't happen at today's debt loads.
Any rise in rates makes debt service very difficult and thus raises the risk of default/instant austerity.

With today's debt loads the name of the game is inflation creation and debt monetisation. When central banks set out to do this they always succeed.

Thus it makes sense to hold some of your cash in an 'unprintable' form.

User avatar
tadamsmar
Posts: 7753
Joined: Mon May 07, 2007 12:33 pm

Re: Gold is ready to fall

Post by tadamsmar » Mon May 07, 2012 2:55 pm

Lbill wrote:Here's an interesting question posed by Richard Russell: If you had a chance to leave something for your descendants to be opened 100 years from now, would you leave them a wad of dollar bills or some gold coins? I might even include some shares of GM as another choice. There's a pretty good chance that the gold would represent value and purchasing power in 100 years, because it has for the last 1000 years. Dollars? Won't be worth the paper they're printed on if dollar currency even still exists. GM stock - if GM even exists 100 years from now, I'll buy you a Starbucks. Oh, I forgot, Starbucks won't be around either (come to think of it, neither will I).
You're right buddy, I'd choose gold over a strawman every time.

Who the heck invests in dollars for Pete's sake?

We invest a tiny bit in GM and Starbucks while diversifying against the 100 year thing.

A diversified stock portfolio does OK over the last 100 years while many of companies in that portfolio are gone.

Locked