Mark Davis
Footballguy
Had a decent bounce here in the past few trading days. Will be interesting to see if this is a lower high and lower low situation or if there is real support.
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Gold is dropping. (1 Viewer)
- Thread starter Eminence
- Start date
Buddy Ball 2K3
Footballguy
U.S. Mint Suspends Some Gold Coin Sales After Demand Surge
http://www.dailyfinance.com/2013/04/24/us-mint-suspends-some-gold-coin-sales/
http://www.dailyfinance.com/2013/04/24/us-mint-suspends-some-gold-coin-sales/
Since this post, Gold has continued to drop it current sits at $1,256.16. I am not an expert, but this is the cheapest gold has been since about June / July 2010 (past 3 years). It's value was near $1,800 less than a year ago.
Does anyone have any clue if they think it's going to continue to drop or rebound soon? Personally, if it drops below $1,000 I think it'd be smart to invest some money into it. That's just the lowest I can reasonably see it dropping before people all start hopping on-board because it's a "buy-low", driving the price upwards again.
Sand
Footballguy
I wonder how much more it can go down in the medium term - the price of gold now is a bit lower than the mean production cost. I'd expect to see a supply tightening in not too long.
NCCommish
Footballguy
Which means a lot of these mines that were getting there from sifting ounces out of tons of material are going to close. They were only profitable because the cost got so high to start with. Pretty much a classic bubble. Great while it lasts but make sure you are out when the music stops. BTW I see no reason gold couldn't drop well below 1000.00. It wasn't that long ago historically that gold was under 300 an ounce. Wouldn't be surprised to see it there again.
Sand
Footballguy
No doubt. Once the weaker plays close up shop supply will tighten, though. In the short term I can't argue with the thought that gold could dip a bit (or a lot) more.
NCCommish
Footballguy
The absolute lack of any real inflation has killed the gold bug I think. I think we'll see something like what happened in the 80's. It will drop a bit, supply will tighten and it will go up a bit but in the long term it is headed back down to it's more historic levels.
Politician Spock
Footballguy
The "supply" is about as tight as it can get already, when looking at physical supply. To get delivery of physical gold purchases, dealers are stuggling to get their hands on enough to fill the orders in a decent time frame. There's a TON of supply of paper gold assets though. Nobody wants paper gold assets right now.
Politician Spock
Footballguy
Watch and listen to what is reported at the 1:45 mark of this video: http://www.youtube.com/watch?v=NyemAwLD2N0
That is what I'm talking about when I say banks naked short sell gold and silver.
For me to suggest it isn't some act of accusing banks of engaging in something new. Naked short selling of gold and silver is exactly how the banking business began.
People had gold and silver, but using it to buy and sell things wasn't easy. Not only was carrying it around a pain, but the risk of having it stolen was also great. So banking was born by entrepreurs who invested in vautls and then charged a fee to people who wanted the gold and silver stored in the vault. Most of these entrepreneurs were goldsmiths, given goldsmiths were part of the conversations people had about their problems with gold and silver. The goldsmiths would give their customers a note for their gold and silver, for example, one note may be exchangeable for one ounce a gold. Another note may be exchangeable for one ounce of silver. It didn't take long before people began accepting the notes themselves in business transactions. Instead of the note bearer going to the bank to exchange the note for the gold/silver (not much different than going to an ATM) before making a purchase with their gold/silver, the person they were exchanging with would just accept the note itself. The note itself became a form of currency. It's value derived from what it could be exchanged for by the goldsmith (which became "banks"). But again, for this to be a profitable endeavor for the goldsmith (the "bank") he had to charge a fee for his service of holding the gold/silver in his vault, and now with everyone swapping the notes as money, the question of who owes the fees at a given time became unclear.
So the goldsmiths (the "banks") saw another source of revenue. Since they believed there would never be a point in time where all 100% of the notes get exchanged for the gold/silver, they assumed that they could issue more notes for the gold/silver in their vaults than actually exists in the vautls. Say for example, people deposited 100 ounces of gold in their vault, and the bank gave them 100 notes, they assumed they could issue another 10 notes (for example) without worry because society never asks for all the gold back at once. These 10 additional notes dont' go to those who own the gold/silver that was deposited. They instead find someone who wants to borrow it, and is able to pay it back over time with interest due. This is called "Fractional Reserve Lending". The interest due becomes the source of the banks revenue, and if they do it enough, not only can they stop charging people for storing their gold and silver in their vaults, they can incentivize them to store their gold/silver in the vault by sharing some of the interest revenue with them. When the bank finds this person to laon to, the bank has created money. Prior to their decision to do it, there were 100 ounces of money in society there were 110 notes for money (currency), even though there is still only 100 ounces in existence. But they didn't stop with 10% they push it to the limit. Not only for their own greed for money, but also to have enough to share with depositors to encourage them to keep their gold and silver in the bank vaults. Today banks keep the leverage rate around 90% (in 2007/2008 it was WELL ABOVE 90%), but without regulation, or someone keeping a limit on the bank, their greed can compel them to produce a ridiculous amount of reciepts for the gold and silver they have on deposit. This is what the "Free Banking" area was like prior to the Banking Act of 1863. Not only were banks engaging in ridiculous leveraging rates, there were so many different banks issuing notes that society didn't know which notes could be trusted and which ones couldn't.
But banking went even farther than issuing notes for people's gold and silver. People were just as worried about having their notes stolen as they were having their gold and silver stolen. So banks began allowing customers to keep their notes in the vault to, with an agreement to keep an ongoing account of what is theirs in the vault, and when it increased or decreased. This birthed the "bank account". You don't get a note for the note in the bank, like you got a note for the gold in the bank. It would be silly to get a note for a note. Thus the bank account was the next step.
The next logical step was for the banks to do the same thing with the notes in their vautls that they had done with the gold in their vaults. And that is to fractionally lend them out. But this process created an attribute that the gold lending did not. The process of gold being lent out with the issuance of new notes for gold did not cause gold deposits to increase. But fractionally lending out notes does, because what is being lent out is exactly the same thing that people deposit in banks.
For example, if there are 1000 ounces of gold in the world, and all of it gets deposited in banks, the depositors are given 1000 notes for the ounces, and at a 90% leverage rate, 900 new notes are issued to be loaned out. The 1000 ounces of gold and the 900 new notes are mutually exclussive of each other. They are different items. Ounces of gold are not notes for gold, and notes for gold are not ounces of gold.
But do the same process with 1000 notes and there is a HUGE difference. If there are 1900 notes for gold in the world (because 1000 ounces of gold with franctional reserve lending of it produces 1900 notes for the gold), and all of it gets deposited in banks, the depositors are given $1900 worth of value in their accounts, and at a 90% leverage rate, the banks loan out $1710 worth of notes. In the gold example, the process ends there, because notes for gold are different than ounces of gold. But in this case, the bank just lent out $1710 of exactly what depositors deposit into the bank. Which means, that $1710 worth of notes that were loaned at get deposited into the banks. So now, the depositors have $3610 worth of value in their accounts, and the bank has a fresh $1710 on deposit to fractional reserve lend out. That produces $1539 in new loans, which of course those notes get deposited into the banking system to, increasing depositors accounts to $5149 and given the banks a fresh $1539 to fractional reserve lend out. This keeps happening over and over until the original 1000 ounces of gold has nearly $20,000 worth of claims on it via notes and accounts.
This eventually leads people to believe they better exchange their notes (or convert their accounts) for the gold that backs it before everyone else attempts to. Which happened, compelling FDR to make physical ownership of gold illegal in 1933. Not only could no one at that point exchange their notes (or accounts) for the gold anymore, if they possessed gold they had to sell it to the Federal government or face fines and jail. The US dollar was still backed by gold, but given it couldn't be exchanged for it, it was a meaningless backing except in theory.
11 years later, many of the worlds countries formed the Bretton Woods Agreement, to tie their national currencies to the US dollar and make the US dollar exchangeable for gold again. At the time, the US had around two thirds of the gold in existence in the world, so the US dollar was the only national currency that all world currencies could be tied to, in order to tie all world currencies to gold. A country could exchange their goods, services, or their own currency for US dollars, and those US dollars could be exchanged for gold. It was still illegal for a US citizen to own gold, but this new Bretton Woods gold standard allowed other countries to exchange our dollars for gold... and exchange they did.
By 1971, countries were exchanging their dollars for so much of our gold that Nixon had to take evasive action. He "temporarily" ended to gold exchange windows of the US dollar. It was temporary... but it is still closed today.
Today marks the 42nd anniversay of that "temporary" action.
Now, discussing the result of nearly every nation in the world operating with floating fiat currencies for the past 42 years could produce a 100+ page thread itself. It's been hashed out, is being hashed out, and will continue being hashed out ad infinitum. It's not the point of this post.
The point of this post is what the banks are doing in regards to gold and silver. People who have grown to distrust this 42 year experiement (and by people I mean anyone from the average American to governments like China, Russia, and Germany as mentioned in the above video), are fleeing from the dollar. The problem is it's not easy to flee from it. Where do you go? No place is really safe. One of the flees of choice for many is gold and silver. As more and more people flee the dollar and chose gold and silver as their refuge of choice, this causes demand for fold and silver to rise. The more it rises, the more people beging to open their eyes to distrust the dolalr. Rising gold and silver prices lead to more fleeing from the dollar.
As such, the banking industry, which creates 90% of dollars through fractional reserve lending the notes (which are no longer exchangeable for gold) does not want to see people fleeing from the product they create, any more than McDonalds wants to see people fleeing from their desire to eat hamburgers. So it is their best interests to surpress the value of gold and silver. And to do so is easy. Just go right back to the process that banking was born from. Issue more notes for the gold and silver than is on deposit. Some call it fractional reserve lending of gold. But it's the same process as naked short selling it.
Today who knows how many claims on all the gold and silver in the world exists. There could be 2 claims for every ounce. There could be 20 claims for every ounce. There could be 200 claims for every once. NO ONE KNOWS!!! And the US government is NOT going to regulate it. The US government does not want the price of gold and silver to rise anymore than the banks do. The impact internationally would be disasterours.
As such, having physical gold and silver is good if the point of having it is the fear of change. For example, the US government collapses. Having gold/silver will transfer wealth from the old to the new far better than holding US dollars will.
But if the point of owning gold/silver is as an investment to make money in a system that will be around even after you die, owning gold/silver is the DUMBEST investment you can make. It is highly manipulated. It is highly surpressed in price. And the government has many reasons to allow the manipulation/surpression, and little to no reason to stop/regulate it. It will continue to let banks do with gold/silver what they were born doing with gold/silver... naked short sell it.
Depends on who I can get naked with. I will happily buy and sell, trade in and out, if I can do it naked with Sarah Rafferty.
Wingnut
Footballguy
No, but I hear Nicorette prices are about to spike BIG TIME. Might wanna load up if you can.
fantasycurse42
Footballguy Jr.
Actually considering SLV 
Gold was under $500 ten years ago; it was under $1,000 five years ago. After a down cycle since the Ukraine simmered down, it closed at $1,243 today.
Politician Spock
Footballguy
Gawain
Footballguy
If you wanted to hold something for a few years, right now I think platinum is the way to go.
A PGR of less than 1 is very rare. Now why it's rare? I have no clue.
ETA: This relationship is still factored into purchase price as well. You're paying 1300 for a Plat Eagle, whereas you can pickup a Gold buffalo for 50 bucks over spot.
A PGR of less than 1 is very rare. Now why it's rare? I have no clue.
ETA: This relationship is still factored into purchase price as well. You're paying 1300 for a Plat Eagle, whereas you can pickup a Gold buffalo for 50 bucks over spot.
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Maybe you should read my first post for a little context. I've been following this gold drop for close to 2 years now. Smart investors are looking for an opportunity to make a play.
sbonomo
Footballguy
what are you doing here?
Not 'great' but opportunity for profit over the past 2-years, certainly.See graph:
http://postimg.org/image/nm1k8n21l/full/
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fantasycurse42
Footballguy Jr.
With looming rate hikes, why would anyone invest in something that yields 0%?
G
General Tso
Guest
I blame Parker Schnabel.Eminence said:
I don't think it's ever a terrible idea to invest in a commodity that is at a 5 year low, gold especially. It's never going to be worthless and when the world' largest creditor nation (China) controls a vast majority of the gold, I'm sure they have ways to manipulate the price back upwards.
EDIT:
And if you believe the Gold will tumble more based on 'looming rate hikes' then I suggest you invest in DUST which is a reverse index fund of NUGT (it goes up when gold goes down).
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Jefferson the Caregiver
Rebel Without A Pause
I'm no expert but when you look at upside versus downside, gold hasn't been less than $1,000 since 2009 and I think that's a fair floor. I think if we hit anywhere in the $900's, we're gonna see a massive spring upwards.
As far as the stock market crashing, I can't speak on that. But other FBGs in the stock thread are constantly talking about a 'correction' as this bull market has been lasting quite some time. Something, something, sector rotation.
At some point people are going to take their profits from the stock market and start putting into other commodities such as gold. My takeaway is that it has traded higher than this more often than not in the past 5 years. If I'm looking to throw a few racks in something and sit on it, gold is not a terrible idea, imo.
As far as the stock market crashing, I can't speak on that. But other FBGs in the stock thread are constantly talking about a 'correction' as this bull market has been lasting quite some time. Something, something, sector rotation.
At some point people are going to take their profits from the stock market and start putting into other commodities such as gold. My takeaway is that it has traded higher than this more often than not in the past 5 years. If I'm looking to throw a few racks in something and sit on it, gold is not a terrible idea, imo.
The Ref
Footballguy
I'm one of the resident metal bugs. I'd me more inclined to jump in Dust right now then GLD. The momentum and the interest rate environment are more supportive at this time. That said you don't jump into a short at the low.
I think you let this bottom out (and it could be a year or more) and then go long the miners. I've had my eye on IAG for a long time now. I remember saying what a great by it would be at $4.50. Good thing I waited.
sbonomo
Footballguy
BoltBacker
Footballguy
I think you need to diversify your risk by purchasing the gold coins with the chocolate inside.
Andrew74
Footballguy
I stand by this emoji.
The Ref
Footballguy
I'm a long time believer in gold. I'm going to continue to buy some here and there no matter what happens. That being said gold does well in a falling interest rate environment or a really strong economy with steady rates. It seems that we will actually see interest rate increases over the next year or two so I'd say now is a bad time for a short to medium term purchase.
James Daulton
Footballguy
Rohn Jambo
Footballguy
It's not only Greece. Eyes are on China after it lost more than $3 Trillion in last 3 weeks.http://www.bloomberg.com/news/articles/2015-07-05/china-intensifies-steps-to-end-3-2-trillion-stock-rout
NCCommish
Footballguy
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