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Guest Post: Is The Gold Trade “Crowded”?
Submitted by Jeff Clark of Casey's Report
Is the Gold Trade “Crowded”?
It’s true that GLD’s assets just passed the $50 billion mark, and
that it’s the second largest U.S. ETF. Yes, mints had difficulty
filling orders when the Greek crisis broke. And yes, the gold price is
up nine years in a row.
But those who look at statistics like these are missing the other
side of the equation. I think it’s less about how much money is already
invested in gold and more about what’s available to invest.
After all, one could be impressed that China, for example, invested
$14.6 billion in gold over the past few years – until you realize they
have $2.45 trillion sitting in reserves.
So, how much is invested in gold, and how much is available?
According to hedge fund Paulson & Co, if you added up all the
money invested in gold ETFs, it would total $78.3 billion (at $1,200
gold). The amount of money currently sitting in U.S. money market
funds, on the other hand, comes to $2.849 trillion.
In other words, all the money invested in gold ETFs represents just
2.7% of what is sitting in cash. Put another way, if just 5% of
available money market funds ($142.4 billion) were to move into the
gold ETFs, it would almost triple the current value.
But what if it’s 10%? And what if Doug Casey’s call for a modern-day
gold rush comes to pass?
Those who claim the gold market is crowded will also point to
Paulson’s extraordinary high percentage of funds sitting in yellow
metal investments. Yes, he’s got a $3.4 billion stake in GLD – but the
critics didn’t look under the hood. Most of those holdings are from the
fund’s employees (including John himself), not outside
investors. Not exactly an overheated trade.
To some, the amount of money invested in gold may “feel” high, but
it’s a relative pittance compared to what’s sitting idly on the
sidelines, waiting for a reason to move and a place to go. And when you
consider that the vast majority of U.S. citizens don’t own any
form of gold, this is a market that is the opposite of crowded. There
is a lot of money that could hit our sector.
And it’s not just precious metal funds. I interviewed Andy Schectman
of bullion dealer Miles Franklin, and Kevin Brekke, our
Switzerland-based editor, told me it was the most informative interview
we’ve published this year. Why? Because based on what Andy sees week
after week regarding supply, he’s come to the conclusion that we’ll see
a serious drought of bullion when the average citizen begins to buy
gold. Meaning, if you wait to buy until everyone else does, you may find
yourself out of luck. And the data I present this month backs up that
claim; in fact, you may be surprised at some of the findings.
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Nah,
You're okay. I'm sitting heavy in metal & cash. I figure the cash is for now, the metal for my children. If the next 20 years is like the last 20 years, a nominal inflation rate has been factored in for the future, 1% - 3%.......have you ever seen the exponential curve of 3%...I can wait.
Janice, my sentiments exactly. I hold Gold for my kid, and FRNs for the here & now.
+ $1190
Smiddy,
The KEY to your analysis is correct, BUT..............the answer is simple, Don't get too greedy, and do not wait for the shake out.
Signs, signs, everywhere signs..........LOOK for them, and you won't be LAST MAN OUT.
Smiddywesson - Good post
Most in the coin business here expect a price explosion too, but some fatigue has set in since 2008. As they say, waiting is the hardest part. I almost hate selling common ones you look at it and say to yourself did I just give away thousands of dollars?
I too am waiting to buy. When you see an entry point please let me know. btoneyshipcut.com
Smiggywesson : I agree with much of what you wrote, and it may all come to pass as you say, however - what if you are ready to buy into the "trade of a lifetime" and there is no gold to buy at that time? You may find you are stuck with you incrasingly worthless dollars.
the paper people and the gold bugs are always at war.....so to say..
I learned some time ago never bring a knife to a gun fight.
some time ago I learned when I go camping.. back packing.....paper money is not good......
unless I camp behind Denny's....LOL
but that defeats the camping thing...
to go camping is to rough it..what I eat is what I bring in or what I can eat off the land...
so to say I can not eat gold....LOL
I can not eat paper...LOL
why I own gold....?
paper is not wealth.......it is a means of trade....land.....a moon rock....gold...is wealth..
so many say in the end time gold will not help you..trade....barter....
yes I agree,,,,,,,but you all fail to understand is if it gets to this ....nothing will help you..
you all will be in the woods digging and turning over all the rocks for a grub to eat.
so to place the gold bugs as a grub eating people in the end time....sad ...the grub eating people left on earth
will be gold bugs...
paladin,
You need to understand the context of your statement.
"so many say in the end time gold will not help you".
You are correct, but used in that context is from a Biblical verse from Revelation.........meaning, NO matter how much you own, whatever it is, will be WORTHLESS,and be thrown into the streets,If you are not IN CHRIST Jesus.
Here we are not neccessarily speaking of the END TIMES....But, of the END times for paper money.in USD term specifically.
To be honest the best survival tool in the European "Wilderness" is cash - you have to go very far and wide to find a wild area although they do exist .Even though almost all the land is managed in some way.
Its feels good to give some cash for cheese to some Sheppard up the mountains who is scrapping a living from summer grazing and of course EU subsidies.
How do yee guys deal with that bear thing? - our guys are cute and cuddly but I heard Grizzlies not so much.
Paladin,
Are you Velobabe?
He can't be, his ears are symmetrical...
on Fri, 07/16/2010 - 18:08
#474644
But Jim, you promised $1,650!!
this is what you posted.....RobotTrader
Jim Sinclair said the date of the 1650 trade....of gold..look it up and why it will go there
RobotTrader .....I wish you would just say I hate gold.....as to post the crap you posted.
so RobotTrader look at the dates of what was said......not the SPIN you posted
DosZap
I understand what you said...
and I know all about the end game of paper money.
what I talk about is the paper people not to hold gold......in the end game
gold will not help you.....you must barter.....
if you live on the 33rd floor of new york city and the market is dry....of the food you eat.....game over
Its 1932 soon to be 1933.....gold is the new reserve currency......all the money has been spent just as in the roaring 20's there will be no new credit available. IT will happen soon and quick. IF bernanke comes out with qe 2.0 now there will be a run on the dollar. It has to be swift and when no one is watching. Gold is in a massive cup and handle. The dollar index in a massive head and shoulders. Oh god its coming we are in asset deflation and monetary inflation now. Go physical and miners. The dollar will remain for now only in a reverse role as all currencies will bounce off gold. They are going to set it so high regardless of M3 M2 or M1 or whatever formula they use. The treasury will be solvent instantly. You will be able to get an ounce of gold for your treasuries lets say at 20000 per ounce as they will not want gold to compete with the dollar. With gold reset in the 30's they still didn't get much inflation. The thing that will bring us America down is the new formula for oil as we are utterly dependent on it. The dow will bottom at appox 7000-9000 and will go up to 15000 - 20000 next year just in time for the new taxes. The big players will buy all the bridges and roads from the states to again make them solvent. They will charge you. Arizona just sold their senate buildings to someone as an example. They have all the cash and they have all the gold. Get a big people eating dog and some more fire arms as its going to be a doozy and its coming quick now. gold is your only lifeline...........meanwhile there will be shortages of everything CIRCA Argentina 1999-2005
And silver.
HUFFPOST: Tim Geithner Opposes Nominating Elizabeth Warren To Lead New Consumer Agencyhttp://www.huffingtonpost.com/2010/07/15/tim-geithner-opposes-nomi_n_647691.html
Great find, thanks.
RobotTrader
???????
wealth...
what is it.
paper??
land ...gold ....a moon rock..
ask this.....can you print it....no
can you manufacture it.....no
it is wealth
RobotTrader
I am waiting...
Wonder when folks will stop mistaking GLD for gold. GLD is missing the 'o', no ounces
Could investments in gold feed deflation? Both Keynes and Hayek agreed that one cause of recessions/deflation was the investment of capital in non-productive assets, which is what gold is - setting aside its monetary utility. If enough capital finds its way into gold as an inflation hedge, it would seem that capital flow could feedback into deflation.
You people are better off investing in dirt clumps.
"You people" being ...... ?
And if your comment is in reference to those who buy and hold gold, for the 432,983rd time, gold is NOT an investment, it is a form of financial insurance and ultimate savings that cannot be debased or corrupted by the financial elites, much as they try with their Ponzi paper schemes.
I agree, the amount of money invested in gold compared to cash and other "stuff" is pretty small. On the other hand, gold is a pretty thinly traded commodity and the risk of a price collapse is high if there is large selling volume. Fortunately, most of buying the stuff are doing so to hold and we can ride out the dips. As long as the world keeps not looking so rosy, gold does.
Claiming there's so much money in money market funds, and therefore lots of upside potential for gold, is like saying there is a huge growth potential for Hooters restaurants in Islamic countries, because as per now they don't have any.
Paladin has a good point, you can't eat gold.
We have built modern society into a highly efficient system of on demand delivery which feeds millions of helplessly dependent people crammed into small geographical areas. Any disruption of this complex dance would lead to disaster.
This would seem to bolster the argument that gold could rise too quickly for a trader to catch the move. But I can't help thinking that if this comes to pass, wouldn't food or bullets be a better thing to store for the post apocalypse? A desperate man will sell you his possessions for a few gold coins, a dying one won't, but he will lay your head open with a pipe.
Screw gold, I'm investing in Hormel, and putting away a few hundred cases of Spam. You can't eat gold, but you can eat Spam. Keep your distance, it's mine, all mine.
That just shows how insignificant gold is everywhere except in minds of the gold bugs. If all of that simply went away, world and life would still go on tomorrow.
Gold was a piss poor investment 1985-2000, now it's been on a roll for past 10 years. Catching gold fever is a form of insanity, where a person will start believing everything else to be worthless, and that he will find someone to cash his gold out with when the time comes. But just like in 1985, one will never know early on when is the time, and when they do, there is nobody stupid enough to take the other side of the trade, especially in the case of physical bullion.
See this is the thing here.
Everyone is looking for an "investment." They want their money to "make money" for them. That's a ponzi. Everyone wants the ponzi.
Gold peaked in 2000. Nothing that has happened since has been inconsistent with a commodity after it achieves peak supply. Those looking for gold to crash back to 200 are ignoring that.
Just wait until we fall off the oil production plateau. The days of money just "making money" and idiots lookin for "the trade" to earn wealth by doing absolutely jackshit productive are ending.
Dunno how gold bugs could go broke. They aren't making leveraged trades.
Everyone here owns a car, right? And, each and every minute, the market value of that thing goes down. So you buy it and a few years later it's worth half then a few years more, half again.
Are you BROKE because of this? Gold has a 10,000 year history of being worth something, as do a variety of other commodities, including alcohol and pussies.
Broke is about cash flow.
It depends how broke you feel, after the bubble subsides and you've lost 75% on the value of your gold. That 75% could have been much else, now it's a lump of inert metal sitting in your safe deposit box, or under your back yard oak tree.
what bubble? gold peaked in 2000. That is when the price started rising.
I really honestly cannot pretend to have respect for people who are "traders" who complain about the ponzi and the bezzle.
You claim bugs worship the metal, well traders worship paper and ponzis and have no freaking clue about production or macroeconomics
You can't easily fake gold yet all the fiat assets are "fake " to begin with, " the most money is not even paper these days . If there is a run on the assets supporting the paper ,or digital, currency which is leveraged highly then the physical asset will gain value.
One only has to look at the shadow banking system to see how unlimited the printing of "money" can be ( in whatever form, even as derivatives which now out numbers the value of all cash/currency) or the digital creation.There is a limited supply of (presently known) a physical commodities.
Wonder how many shares of GLD are sold short...like many ETFs, its a good hedging mechanism as it leaks value against the underlying anyhow. In many cases (see the FXE etc) they are all sold short, which would make the entire listing a big net zero.
LOL
what a load of crap
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