Gold In Nice Upward Trend

[ringledman]

http://www.marketoracle.co.uk/Article19209.html

Huge head and shoulders pattern followed by rising channel. Very bullish???

As the West suffers under a statist collapse; time to reassess one's views on gold and precious metals?

Is there a better store of value and wealth out there?

Asian stocks and mega cap Western defensive stocks the only other two serious stores of wealth that I can see...

 

[j26]

A couple of years ago, property was the gold standard (excuse the pun) for generating wealth.

Personally I don't trust the way it's being talked up.

 

[ringledman]

By whom???

Go down your local pub and ask how many of them own gold, and I'm not talking a bracelet they bought for their misses...

 

[greentree]

Gold above €950. Obviosuly the weakening euro is a major cause of this but gold at near 1K an ounce is big news.

 

[ringledman]

Gold above €950. Obviosuly the weakening euro is a major cause of this but gold at near 1K an ounce is big news.

New high in sterling today also. Gold is going to rocket very soon. Only the dollar strengthening keeping it contained so far.

The only real currency out there.

 

[Rory Gillen]

There is no fever like gold fever is what they used to say in the Californian gold rush in the mid 1880s I believe !

 

[snowdrop]

new euro record again

gold has just broken Euro 1000 per oz.

 

[ringledman]

gold has just broken Euro 1000 per oz.

Think it even hit a high in Swiss Francs!

I wouldn't be adding gold at present, too high a risk/reward over the short term and probably cheaper assets out there to buy.

Nonetheless there is no way I am selling.

[broken link removed]

Just how high could gold go?

May 17, 2010, 03:55
Posted byJohn Stepek

Comments (0)
Fears over the euro have sent gold spiking to new highs. But just how high could it go eventually? I've read a lot of interesting calculations recently. On Breakingviews, Martin Hutchinson suggests it could hit $5,000 an ounce or more. Based on consumer price inflation, he says, the $875 an ounce high seen in 1980 is equivalent to $2,400 an ounce today. But if you also consider the huge growth in the world's economic output since then (it's increased about six-fold), and "the gold price could top out at $5,300," says Hutchinson.

Meanwhile, our own Tim Price told readers of his Price Report newsletter last week that you could argue that gold was worth $9,500 an ounce. How? Take it away Tim…

"The partners at hedge fund group QB Asset Management conducted an analysis at the end of 2008 to try and assess the intrinsic value of gold in dollar terms, what they called 'The Shadow Gold Price'. They assumed that US Federal Reserve Bank liabilities were again exchangeable into gold and then divided the dollar amount of current Fed liabilities by official gold holdings. The results will probably surprise you.

"By dividing $2.5 trillion in FRB reserves by US official gold holdings of 8,100 metric tons, they came up with an "equilibrium" gold price of approximately $9,500 per ounce today. That is not their target price for gold necessarily, but it shows just how much potential there is for further gains in the spot gold price as expressed in US dollars."

Those prices might sound outlandish. But I think Tim's last point is the one to bear in mind – it's not so much a target price, as an indication of the potential for further gains. As Société Générale's Dylan Grice wrote in a similar report on gold, the point is that gold is a pretty tough object to value. It doesn't provide an income, now or in the future, which is the way you measure the value of most investments.

So as more and more people become interested in gold, the more likely we are to see increasingly bizarre valuation methods cropping up – such as the "eyeballs per page" measure and the like that used to come up when tech bubble analysts tried to value profitless dotcom stocks.

The point is that gold's bull run won't end when it hits a specific value. It will end when the central banks of the world finally decide that they need to hike interest rates and start protecting their currencies. As the actions of the European Central Bank so amply demonstrate, that doesn't look like happening in the foreseeable future. So you can expect to see gold hitting new highs again and again.

Dominic Frisby, our commodities correspondent, has more on the near-term outlook for gold in Money Morning tomorrow morning (sign up for it here - for free - if you haven't already).

* The Price Report is a regulated product issued by MoneyWeek Limited.
Comments (0)

 

[george.shaw]

Good thread. Interesting article in the Wall Street Journal:
Is Gold the Next Bubble?
http://online.wsj.com/article/SB10001424052748704792104575264863069565780.html

Great chart showing how gold has not gone parabolic and reached bubble levels yet:

 

[j26]

Good thread. Interesting article in the Wall Street Journal:
Is Gold the Next Bubble?
http://online.wsj.com/article/SB10001424052748704792104575264863069565780.html

Great chart showing how gold has not gone parabolic and reached bubble levels yet:

I'm really not convinced - one of the comments to that article was very interesting, and I think valid;
"When a commodity is sold to the lowest common denominator of investor, it's time to start getting nervous."


Another thing I think about is the fact that gold has no real investment value - it will never generate a return. the other indices shown are stock markets, based around shares that can generate a return. Gold has no more value than the psychological factor, and that can change rapidly. Once money starts pouring back into equities, the price of gold will plummet.


Another issue is to look at the gold price from a longer term view, so here's a 36 year chart;
[broken link removed]
It's looking more like a bubble from the longer perspective.


Finally, the level of price growth over the past decade exceeded the level of growth of Irish house prices (something that was able to create some investment return). The chart you posted above charting the rise of gold looks remarkably like the Irish property market from [broken link removed] , and you can see the precipice from which that has jumped.


I'd class gold as potentially attractive, but to me the risks outweigh the realistically prospective returns. I would certainly never consider borrowing to get in to gold, unlike property.

 

[Chris]

I'm really not convinced - one of the comments to that article was very interesting, and I think valid;
"When a commodity is sold to the lowest common denominator of investor, it's time to start getting nervous."

Currently gold is being offered for sale to "the lowest common denominator of investor", but Joe Public hs not been buying gold. None of my colleagues of friends own gold, and I believe that the ownership of non-jewelry gold by the public in miniscule.

Another issue is to look at the gold price from a longer term view, so here's a 36 year chart;
[broken link removed]
It's looking more like a bubble from the longer perspective.

The gold chart looks a lot different if you adjust it for inflation:
[broken link removed]
http://inflationdata.com/inflation/images/charts/Gold/Gold_inflation_chart.htm

 

[j26]

Currently gold is being offered for sale to "the lowest common denominator of investor", but Joe Public hs not been buying gold. None of my colleagues of friends own gold, and I believe that the ownership of non-jewelry gold by the public in miniscule.



The gold chart looks a lot different if you adjust it for inflation:
[broken link removed]
http://inflationdata.com/inflation/images/charts/Gold/Gold_inflation_chart.htm

I don't see how that makes things much different.

The first chart is 2 years old - you have to factor in a doubling of prices and a period of deflation in the intervening period. Gold prices were high in 1983 as the second chart shows, and it's easy to show the real price of a commodity falling from a peak, so the statistical underpinning of the chart is not really sound.
The second chart clearly shows that gold is above its long term average, and the price has risen further since the chart ends in 2009.

Both charts still indicate that gold is currently overvalued. Bar the oil crises, it doesn't look like gold is a good long term investment, and certainly not at current prices.

 

[Chris]

The second chart clearly shows that gold is above its long term average, and the price has risen further since the chart ends in 2009.

Yes it is above it's long term average, and has been for a while, but so has the increase in money supply throughout the world, which is what inflation is. The fact that the increased money supply hasn't yet resulted in huge increases in consumer prices is the main reason I believe gold still has a huge upward potential.

Both charts still indicate that gold is currently overvalued. Bar the oil crises, it doesn't look like gold is a good long term investment, and certainly not at current prices.

I disagree, the 80s nominal peak was due to very high inflation. Opinions on the inflation adjusted price of gold differ but range from $2000 to $2500. And the amount of money printing going on now dwarfs anything of the past, making gold very undervalued
Anyway, this is exactly what makes the market, someone is willing to sell what someone else is willing to buy. Only time will tell who's right, I can wait.

 

[Heymoney]

perth mint certificates, has any done it?

Thinking of investing in this. Small bit of an inheritance from my father and want to buy a house but not just yet. So I reckon this girl has aboout 6 to 12 months to play about with the loot. I'm in two minds about gold like every body else. Scared that the gold run might be topping out but equally persuaded it may have a bit to go yet. Well that's what all of you gold bugs seem to be arguing anyway.

Eitherway, has anyone put money into the Perth Mint Certs? How quickly can you get out and what was the best intermediary in this country to do it with? Any hidden charges or drawbacks? Do they give you the spot price when you quit? x

 

[george.shaw]

Think GoldCore are the only dealer in the EU for the Perth Mint. Like the gold in my possession (possession is 9/10's of the law ! and have bought gold Austrian Philharmonics, 1 ounce - legal tender euro coins, from them and good service and prices.

The Irish Independent had a good article on this the other day:
For a safe haven, there's not much that's as good as gold these days
Irish Independent - Thomas Molloy - ‎May 27, 2010‎
... Muenze Oesterreich AG are among the best. The mint's Philharmonic is the best-selling gold coin in Europe and Japan and can be easily bought and traded.
[broken link removed]

 

[JEON50]

I am probally missing the whole plot here. I was a major buyer of copper, and though retired know, the first thing I do is look at the metal alerts on the What I can tell you when the market is not steady, traders turn to metals. I have seen copper drop 60% in 3 months in 2008, at the moment it is at an all time high because of safe trading, it is over valued by 50% based on demand, and on the brink. When metal fall, its inpossible to know when to buy, as the estimate is 50% in 2010, but it could be 70% 2006 levels

 

[george.shaw]

Think you are missing the point - thread is about gold and not copper.

Copper is a base metal and an industrial metal.

Gold is a precious metal, a finite currency, a safe haven asset and a store of value being bought by pension funds, central banks etc. etc.

Some good articles in the FT and Irish Indo lately:
PERSONAL FINANCE Merryn Somerset Webb
Financial Times - Somerset Webb - ‎May 21, 2010‎
You probably think gold is in a bubble. After all, it hit new highs in dollars, pounds and euros this week – and has pretty much ...
http://www.ft.com/cms/s/2/d6a8da26-64fd-11df-b648-00144feab49a.html


javascript:void(0)

Gold's no bubble - here are some real bubbles



MoneyWeek (blog) - Merryn Somerset Webb - ‎May 27, 2010‎
There is a long way to go before gold hits the kind of levels that should make you want to sell. By Merryn Somerset Webb, May 27, 2010 By Dominic Frisby, ...

ECB rescue package is guaranteed to dent investors' portfolios


Irish Independent - Thomas Molloy - ‎May 13, 2010‎
Without mature bond markets, most money flowing to Asia will end up in stocks and property, so Sharescope agrees with Money Week editor Merryn Somerset Webb ...

For a safe haven, there's not much that's as good as gold these days javascript:void(0);

Irish Independent - Thomas Molloy - ‎May 27, 2010‎

[broken link removed]