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Morning Gold Fix: August 12
Courtesy of www.fmxconnect.com
Gold opened Wednesday’s trading at
$1202.8 per 100 troy ounces. While it rallied as high as 1208, the
metal could not sustain these gains and fell below 1200 again, closing
out the day at 1197.5.
Today,
August gold was up 5.6 to $1202.4 per 100 troy ounces as of 8:21 AM
EST, this morning. The September U.S. dollar index was up .806 to
81.730. October platinum was up 2.3 to $1539.3 per 50 troy ounces.
Silver was up 5.2 cents to 18.210.
Gold Headed for $1300?
Yesterday Goldman Sachs released its latest commodity recommendation.
It is calling for Gold to touch $1300 by year end. The report is pretty
sparse in comparison to some of the other serious research we have read
from Tudor, Barclay’s and other banks. But that does not mean it is
wrong. It means that Goldman has its finger on the pulse and think a
tipping point may be near, fundamental, structural, cash flow or
otherwise. So they are putting out a red herring. Here it is in the
nutshell:
· We like Gold
· Real interest rates are at zero.
· Opportunity cost to own anything with real rates at zero is very low
· The dollar will weaken in the face of Fed debt monetization
· Buy dollar denominated assets.
· Buy Platinum (go figure)
· But be careful because we could be wrong.
We’d
like to add the following as long term gold bulls on a relative value
basis. Real interest rates will remain near zero for an extended period
of time. Even as the fed raises rates to “combat” inflation, they must
keep the opportunity cost of owning stocks low. Therefore interest rates
will lag in the rally and real rates will remain subdued. Even in
deflation, gold will drop less than other assets we feel, tallest pygmy
and all…
And remember the great
depression? When dollars were scarce and most valued? That was because
of fractional reserve banking. And the dollar was backed by Gold. Not so
much today. The fed will find a way eventually to sufficiently punish
hoarders of dollars. Inflation will come.
Historically
when Goldman recommends something to its clients in a public fashion
like here, it has almost always (in our opinion) positioned itself long
in advance of the report. Nothing wrong with that. It is putting its
money where its mouth is in my opinion. Clearly that ability can be
abused, and has been at different times by different banks. We published
a humorous primer on flow trading here.
What
will be interesting to us is how will the market react. In the past, a
recommendation by GS was as good as …well… Gold. And often times its
target would be hit and penetrated well beyond expectations. This was
more of a comment on faith and trust in Goldman’s word by the public
than a fundamental move upward. How much does the public believe in
Goldman’s commitment to the client these days in light of recent
events? We’ll just have to see.
If the market responds well i.e. if they get a lot of buy orders from their “idea”,
then expect another recommendation , a reiteration if you will of their
opinion with much better reasons. Right now, let’s call this a red
herring recommendation. One caveat, this could just be its exit
strategy, although we doubt it in light of recent bad press.
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Up $17 at present time.
Goldman lemmings
More than 30% of ZH investors said that gold would be 2000 an ounce by June.
http://www.zerohedge.com/content/spot-gold-june-1-2010-200000
More than 30% of ZH investors are wrong.
Permit me to jump way up in line here, I would like to advise the ZH community that most of the below is the same as what has been said before! Sr. VP at JPB Johnny Bravo vs. the pro-gold guys (like me!).
Please carry on...
I think gold will fall reasonably, lets say to 1100 before hitting 1300. But don't take this as a "sell". It's only a temporary dislocation between buyers and sellers in the midst of liquidity or lack of it..
Yes, it will fall below 1200 today but only because JPMorgan et al will short the shit out of it . They'll suck in a few more longs and then the smack down will commence...Wait for, wait for it.......
We should love gold like we love our freedom. Nuff said.
But you can't eat freedom.
nothing short of a gun will part me from my physical. i am surprised there is so little discussion anywhere on the ongoing, dire state of physical supply.
get it while you can.
100g bullion bars and Krugerrands, buying those lovelies every week.
No place for investors to run?...I think they will head for the metals. If the economy is seen as tanking...world wide as it appears to be. People will head for the only security left...metals. Bonds are becoming too risky for long term tying up of cash and the short term ones are about as good as stuffing a mattress....might as well have it easily accessible.
Easily accessible...to you...and...
Gold: The Weapon of Choice!
They will beat their gold shares into swords.
$1202.4 per 100 troy ounces as of 8:21 AM EST s/b per ounce; 100*1202.4=$120,240 per contract which represent 100 ounces
So treasury inflation protected bond yields can reach zero, meaning the gold price should get to ~$1780/oz. U.S.
Why buy inflation-protected bonds when we are in deflation?
I think Europe is buying gold again with their euros
Nothing can stop gold
Agreed regarding the Europeans.
In fact, any citizens of any country, whose currency is in trouble, and would traditionally turn to dollars, will increasingly turn straight to gold instead.
Or silver. That is where we might see the first breakout; stocks of silver available to fend off physical demand, are now very thin.
Silver is the weak flank in the manipulators strategy; it easy to manipulate the price since it is a tiny market; but it would be very difficult to satisfy a surge in demand for physical.
Yeah, I've been thinking that's why silver has been slammed so hard lately. The very shorting is like flashing neon saying come and get it. Our financial overlords are too clever by half.
So; they're going to hit Op-Ex again this month.
Watch out for some action around mid-day as there are 30-years on the block today and Benny always gets nervous.....
In December 2009, Goldman estimated an average 2010 gold price of $1350.00. So how is this worthy of any interest? Thanks for another useless report.
"But be careful. We could be wrong." Tee hee.
http://precious-metals-investing.suite101.com/article.cfm/gold_price_for...
At one time, $1000/oz. U.S. was considered to be the psychological turning point for the bullion price. But a change didn't come in when breaching 1K. Seems that ~$1300/oz. is now the number.
The average cost to mine an ounce of gold worldwide is ~$500/oz. U.S. It aught to dawn on the investor crowd at some point that the gold sector is looking at profitability while a widespread decline is in the cards for practically the whole economy.
I think more and more are beginning to get the picture, but unfortunately many are investing in ETF's, not understanding the difference. They're going to get burned.
That's because the price target for the previous pattern and gold's resistance is at 1300.
The fact that it costs less than 500 dollars to mine is an argument against the fundamental valuation of the metal at these levels.
You are confusing price with value.
Value is price. All of the valuations I've seen of gold at levels like 5000 or 50000 make the (erroneous) assumption that gold is the only thing that dollars can buy.
All the valuations I see of gold at high levels are something like
There's X dollars and X tonnes of gold, so gold is worth X dollars an ounce.
Except that dollars are worth so much MORE than gold...
Gold will be back in the 600-700 dollar level (more than reasonable margins) when the "crisis" is over.
What is the production cost of a Federal Reserve Note with Benjamin Franklin's picture on it?
Oh, it cost less than ten cents to produce so you'll gladly sell me yours? Great. Here's a dime.
But what is the production cost of a dime? Only five cents? Well I'll give you two nickles for your C-note.
What is the production cost of a nickle? Six cents? Now we're getting somewhere!
Ever get the feeling that price discovery for monetary instruments in this day and age is a little fucked up? Where's a free market when you need one?
But a dollar is worth a dollar is worth a dollar.
Gold is worth whatever the market sets as its price.
I would pay a dollar for a dollar, but I wouldn't pay 2.5 times the production cost to buy gold.
The value of the dollar is relatively fixed. The speculation price of gold isn't.
The value of the dollar is relatively fixed.
The price of gold is relatively fixed -- you'll be clued in if you get my drift -- they hack at its support with their shovels and picks --- dicks.
And when that dollar fix and the old gold fix fall apart and they are nixed, which would you hold in your bag of tricks?
Excerpted from "Horton Hears a Helicopter"
The dollar was worth 80 25 years ago.
The value of gold was worth 400 25 years ago.
The value of gold has increased without a decrease in the value of dollars.
The value of gold is not tied to inflation, it is tied to speculation.
The dollar was worth 80 25 years ago.
80 what?
The value of gold was worth 400 25 years ago.
400 what?
Not only are you swapping out yardsticks, but your yardsticks shrink or swell at the whim of the bankers.
An ounce of gold is an ounce of gold is an ounce of gold. Its purchasing power has increased due to the deflation of gold in relation to available goods.
The dollar was worth the same versus all other currencies 25 years ago.
Gold has increased in value based on speculation over the last five years or so.
The thing that is irrationally priced is gold.
The dollar was worth the same versus all other currencies 25 years ago.
Great! I will trade you my Zimbabwe currency for your FRNs, dollar for dollar, just like 25 years ago. Hell, I'll let you make a profit and give you two for one.
That'd be mighty rational of you.
Thank you, thank you, JB for the single most IDIOTIC thing you have ever said in this forum!
So you REALLY think the fiat dollar has the EXACT same purchasing power as it did in 1985? Shop much? Apparently, you don't at all.
And for the last fucking time, shill, the US Dollar Index is NOT a measure of the value (i.e., purchasing power) of the dollar! In no way whatsoever! That is the one of the most idiotic and disingenuous pieces of crap you (and Jon Nadler, your anti-gold soulmate) have tried to peddle. The dollar index only measures the dollar against other, equally depreciating currencies, and so any particular value of it can and does represent radically different REAL value of the dollar over years and decades as the dollar undergoes its continued depreciation against real goods and services.
Wow, it's akak!
It's a surprise that I didn't see you the entire time that gold's rising wedge I predicted broke and you saw a 100 dollar drop in the price.
Actually, it's not a surprise.
And now here you come again spouting off the same BS now that the gold price is retracing its 50% fib level.
Even in terms of purchasing power, things cost anywhere from 100 to 200% more since 1980.
Yet gold's price is up more than 400%.
Gold is fairly valued at around 600-700. Not the current levels.
Now shoo, fly! Go away again after gold hits 1220 and drops, like I said it would.
I'm sure I'll see you the next time it has a technical dead cat bounce like its having now.
I was the only person that predicted a drop in the gold price on this site when it was at 1220 earlier and 1265 recently.
All the people that heckled me for being RIGHT mysteriously disappeared, much like they will after they are proven wrong for the third time..
Just admit that you don't know investments from your own asshole, akak!
Apparently I do know otherwise, as I am not invested in JohnnyBravo.
But once again, troll, gold is not an investment --- it is money, and a means of saving and preserving wealth. But that is irrelevant to a gold-hating, pro-establishment shill such as yourself.
You don't know anything. You predicted a 25000 dollar gold price before the last time it broke down.
Now that you've almost broke even on your recent gold purchases you want to come act like you know what you're talking about.
Gold only preserves wealth if it maintains its current prices.
I remember hearing in 2006 that housing was the best investment anybody could make because it only goes up in price.
I wonder what happened to the people that bought houses as a store of value?
The same thing that happened to goldbugs in 1980. History repeats itself, and this time will NOT be different...
.
And even after I point it out, you CONTINUE to spout your hate-filled lies!
I predicted nothing, asshole --- but thanks for once again clumsily deflecting the argument and evading my refutation of your lies and bullshit.
And in your inability to distinguish price from value, your once again demonstrate and explain your inability to comprehend the value of holding gold over depreciating paper faux money.
After you spend half your post attacking me personally, you call me hate-filled. My god, what a hypocrite.
As far as price and value, I completely understand. The price is too high for the value. The price costs more than the value of the asset, even though price SETS the value temporarily.
Yet, the price is much higher than the cost to extract. I'd say that the price is too high, not the value is too low.
I guess you forgot about Google.
akak
on Mon, 06/28/2010 - 16:07
#439847
If gold ever reaches or exceeds, say, $25,000 an ounce (in today's dollar terms), I say we hold a national ZeroHedge convention and celebration somewhere to toast the new paradigm, and our good fortune. After all, ANYONE holding more than an ounce or two of gold will be able to afford it!
http://www.zerohedge.com/article/gold-assumptions-vs-reality
He calls me a liar, I reproduce his post, and then... silence as the crickets chirp.
Where's this asshole commending me on predicting gold's breakdown as he posted the 25000 an ounce prediction?
.
You are still a blatant liar, you fucking asshole and troll!
I NEVER made such a "prediction"! That post was made in jest, actually POKING FUN at those predicting the near-term five-digit price of gold!
LIAR!
From the same thread: (you liar!)
by DoChenRollingBearing
on Mon, 06/28/2010 - 21:39
#440554
akak, I believe I already invited you to the party that Gordon_Gekko and I first agreed to in order to have a few drinks to celebrate if/when gold sets to $50,000 / oz (close enough to fofoa's $55,000 average probability price). Chumba said he wanted to come too (I believe he said: "Phuck yeah!". As did Hulk, RockyR and a few others.
Hulk wanted a party at $1500, but I told him 1 drink only, and at home.
$50 k we should all meet somewhere central (meet me in St. Louis?) and have a raucous fiesta baby! I promise no Middle East talk though. Guns, yes. ZeroHedge and gold haters, yes.
Bravo you're welcome to come, I will not harm you at all, but I cannot say what the fanatics will do...!
I am going to invite fofoa too, it was HIS prediction that gold will LEAP to the moon as gold returns to its historical role: best wealth protector there exists.
by akakon Mon, 06/28/2010 - 22:46
#440648
I'm there --- count me in!
Never been to St. Louis; Chicago would be a great rendezvous too. It would be awesome to meet you guys, and relive the bad ol' days of fiat! Yes, GG, FOFOA, Nuinut, Rocky, Hulk, Chumba, maybe we can even invite Peter Schiff, Ron Paul, James Turk, Ted Butler, John Embry, Eric Sprott, and Jim Sinclair, and make it a REAL bash!
And LOL that you can't keep the others from hurting me.
What? Like some impotent broke dick old men are going to hurt me?
.
I am guessing that you frequently miss the punchline of jokes as well.
"Knock knock"
"Who's there?"
"Johnny."
"Johnny who?"
(You can fill in the rest.)
you don't have a clue about the state of capacity within the mining industry do you? or what it's been like over the past 20 years......
Mines were shutting down in the 1980s and 1990s because the price of gold was too low.
The same mines are producing again.
I don't know what I'd know living in a gold rich state though...
.
You clearly don't seem to realize that gold production was not only flat but declining throughout the 2000s, and is not projected to materially increase in the coming years either, as the richest mines and deposits are slowly and steadily being depleted. Peak gold may have already come and gone in 2001. Some of the richest ores being mined today would have been considered nothing but mining waste 50 years ago.
Wow, no facts or sources, and the assertion that peak gold MAY have come and gone.
What a strong argument.
I remember Peak Oil in 1974 or whatever too.
Oh wait, I wasn't born yet. Oil surely didn't peak then either, despite the claims of people like you at that time.
we don't need to produce the facts as it's been shown here and others ad nauseum, check GATA. Or even pick up Jim Rogers book "hot commodities"....but what does he know.....being a billionaire and all.
capacity overutilisation and underinvestment are two very potent things. Just like you said, prices were low, it was a bad investment to open up a new mine (well perceived to be bad anyways), so they didn't, and now they've depleted their current mines already in production. It takes years to open a new mine and bring supply to market.....
Just because it was posted here doesn't mean that it's true.
How many times has this site been bearish on everything but gold?
How many times has this site predicted gold prices above 2000 and even much higher than that?
They closed old mines that they are now producing in again since the price rose.
And that doesn't even take into account that they might find more supplies, like they have been with oil over the last 30 years...
like I said, finding a new mine and getting it to produce takes years.......just like with oil. Go pick up Jim Rogers book, I haven't read anything about it on ZH so we know it's not evil ZH propaganda. If you don't want to buy the book, search the interwebs.
.
.
You keep trying to substitute bluster for knowledge and reason, but it keeps failing Johnny old boy.
The fact is that few if any gold mines were ever closed due to the suppressed price of gold in the 1990s, and if you knew ANYTHING about gold mining, you would know that. The fact is that any mine requires such an extensive and long-term investment before the first ounce is even produced that it would take a far greater price decline than has ever been seen to induce the owners to abandon or mothball it, an expensive proposition in most cases itself. No gold mines were shut down due to the fall in the gold price in the 1980s and 1990s --- but a number of potential mines were NOT brought on line as a result.
In any event, I, unlike JohnnyBravo, cannot predict the future with unerring accuracy, but it does appear that barring any radically unexpected production rampups in the coming years, that the peak of world gold production did indeed occur in 2001.
Apparently you can!
"Count you in" for the zerohedge convention when gold hits 50000.
by DoChenRollingBearing
on Mon, 06/28/2010 - 21:39
#440554
akak, I believe I already invited you to the party that Gordon_Gekko and I first agreed to in order to have a few drinks to celebrate if/when gold sets to $50,000 / oz (close enough to fofoa's $55,000 average probability price).
by akak
on Mon, 06/28/2010 - 22:46
#440648
I'm there --- count me in!
Never been to St. Louis; Chicago would be a great rendezvous too. It would be awesome to meet you guys, and relive the bad ol' days of fiat! Yes, GG, FOFOA, Nuinut, Rocky, Hulk, Chumba, maybe we can even invite Peter Schiff, Ron Paul, James Turk, Ted Butler, John Embry, Eric Sprott, and Jim Sinclair, and make it a REAL bash!
.
Give it UP already, you absurd asshat troll!
NOBODY here is buying your lies!
I like the new johnny bravo. He starts out not distorting the truth and then goes right back to the pig trough and chows down double.
'Value is price.' yawn.
Water is cheap, but the value is off the scale. If you have none to drink, you will pay any sum for it.
A lifeboat / parachute / safety belt are low cost to produce. What are their values?
What is the value of a lifeboat, 1 min before a collision with an iceberg, and the minute after?
How are iceberg impacts predicted Johnny, with TA?
I NEED water, I NEED a lifeboat or parachute or safety belt.
I don't need gold.
Gold is elastic, where the demand for necessities is inelastic.
TA is predicting a pretty big iceberg impact on gold after it hits 1220....
Gold is insurance against fiat debasement.
This is not an a question for economics, but for ideology and philosophy.
You are an acolyte of the dollar fiat system. TA is good within a system, so long as that system does not lurch or fail. Goldbugs see the risk of that system failing. Gold is insurance. It may never be needed, but our lifeboats are ready.
I don't expect my house to burn down but I insure it anyway. I wear my seatbelt when driving. In financial matters, I hedge.
Goldbugs have dollars too. Do the dollar-bugs have physical gold? Who is best prepared then, for the uncertain future?
Do you buy insurance AFTER your house burns down, or do you buy insurance before the fire?
If you buy insurance after the fire, you have overpriced insurance that you will most likely not need.
This is what happens when you buy gold as insurance after the financial crisis.
And there it is, you think that the fire has already happened; that the worst is behind us. It is inconceivable to you for example, that the dollar or Euro might tank, or that the recession might deepen?
Like you said to another poster further down this thread, 'good luck with that.'
I believe that gold has more downside potential than dollars at this juncture in the recovery.
Then your TA sucks, as any 6 month chart of the DXY will clearly demonstrate.
Also, since all fiats are racing to the bottom, guess what monetary instrument is going to soar every time one of them exchanges any sort of plunge against its peers.
Eg Today. Abiggs, you out there?
Regards
I was bullish on the dollar when it was at 74, and bearish on gold when it was at 1220, as anybody on this site can attest to.
So, where was my TA wrong?
The dollar is worth ten percent more.
Gold is worth less than it was when I was bearish.
My TA was right.
Only the TA of the "gold to 2000" crowd was non-existent.
The mere word "recovery" is all anyone need ever read from Juanny Barfo before ignoring him completely.
Yeah, I noticed that most of the people that ignored me before were gone the entire time gold was tanking too.
And yet, here they are, now that it's making a fib retracement before it breaks down again.
The "investors" on zero hedge could learn a lot from me.
Instead they listen to people like Chumbawamba that are bankrupt and can't afford internet access for investing advice.
I've been reading your comments for a long time, Johnny Bates. I'll have to say that you are, in the long run, entertaining. You have yet, to my knowledge, to post a link to anything backing up your so-called TA. No charts, no nothing. I may have missed it, but I can't recall having seen a link.
There is something pathological about a person who comes back week after week to espouse a position that is without merit, nor proof. A person who seems to seek verbal abuse. I'll not make suppositions about a childhood that generates that sort of personality since I am not qualified. I'm just making an observation.
The average IQ is 100. I'd say your quotient falls somewhere between 75 and 85. Not short-bus stupid, but clearly all your gears don't mesh. With all respect I would like to suggest that you seek some professional counseling. If you disagree with that, then the quotient supposition is closer to accurate than not.
I can't believe this bored, stale, old argument still goes. And you're in the middle of it, predictably. Do you get paid to convey this message? I fail to see any other reason for you not having gotten bored yet.
If you went either 1,000 years back or forwards in time, the one thing you could be sure had value if you brought it would be silver and gold.
But hey, keep pimping your precious paper dollars.
If you want to wait 30 years to break even on an investment, that's your thing.
The people that bought gold in 1980 didn't break even (assuming that they held gold and didn't sell at a huge loss) until 2009.
Do you want to wait until 2039 to break even on 1265 an ounce gold? I don't.
As far as "pimping my dollars" - the dollar is up 10% this year.
How much has gold's value increased this year? Oh wait. It decreased.
And the folks who bought from 1982 - 2009 have done how well?
If they're still holding, we don't know yet. You don't realize gains or losses until you sell.
.
And you don't seem to realize much of anything, other than how to peddle anti-gold, pro-fiat disinformation and pro-establishment propaganda.
That's funny, since I predicted both recent declines in the price of gold while you were saying to "back up the truck" at 1240.
You were peddling nonsense like "let's have a ZeroHedge picnic when it hits 25000" when I was warning you about the bearish rising wedge ready to break down.
I deal in reality, and you deal in hopes.
Now go away for another month while gold tanks and come back again on the next dead cat bounce.
I'm sure I'll see you again if it ever hits the 1300 dollar target it could conceivably hit.
However, a drop is coming. I was right the last two times I told you and I'll be right this time too.
.
You are a fool, a troll and a blatant liar all rolled into one.
I never made ANY of the statements, nor even implied, what you are attributing to me. I have NEVER made any price predictions regarding gold here, and you know it, yet continue to put words into people's mouths and lie, Lie, LIE as that is your only fallback position in your vitriolic and malicious anti-gold crusade on behalf of your handlers and masters, whoever they may be within the financial and/or political establishment.
You are a liar, and I am glad that you continue to demonstrate as much over and over again. It destroys whatever feeble credibility you may momentarily be able to establishment with the newbies and gullible here.
Bullshit you didn't say that. I'm going to go find the post.
You can bring up any of my past posts, and they all have said the same thing - the CORRECT movement in the price of gold.
I remember your "let's have a zerohedge picnic when it gets to 25000" prediction. Soon it will be here for all to see.
akak
on Mon, 06/28/2010 - 16:07
#439847
If gold ever reaches or exceeds, say, $25,000 an ounce (in today's dollar terms), I say we hold a national ZeroHedge convention and celebration somewhere to toast the new paradigm, and our good fortune. After all, ANYONE holding more than an ounce or two of gold will be able to afford it!
http://www.zerohedge.com/article/gold-assumptions-vs-reality
Damn, I guess you forgot about google, eh?
If gold ever reaches or exceeds, say, $25,000
Are you familiar with the definition of the word, "if?"
You lose again, Mad Max.
Wow, he said IF. That makes his statement a lot different, I guess. It totally changes the fact that he thought 25000 was a good possibility...
He said I was lying that he said it, and there he is saying it... clear as day.
I guess since he said IF that he didn't believe it though. Yeah right. LOL...
Notice how he disappeared since then the entire time gold was breaking down (like I said it would.)
And now here he is again, acting like he knows something.
Any more 25000 dollar predictions, akak?
Try it like this:
If Johnny Bravo ever wised up and realized that gold is money and nothing else, he might stop sounding like such an ass.
And yet, I do not believe that you are capable of articulating anything more intelligent than, "Hee Haw!"
JB,
A couple quick, honest questions:
1. CA deficits are huge and growing due to de-industrialization of the US.
2. Budget deficits are $1.5 - 2B and growing
3. Social programs SS, Medicare and Medicaid are ~$75T and growing.
4. Official national debt is 90%+ of a cooked GDP.
5. The Fed is now monitizing debt.
Given all of these points, do you think we will be able to borrow from creditors indefinitely? Is there a limit?
Monetization of debt has been the official kicking point of Big Inflation and worse throughout history.
If economic activity does pick up, the Fed will have to raise interest rates. That coupled with the short-term nature of our debt will require even more tax revenue siphoned off to service the debt payments, making budget deficits even worse.
Is there any scenario that you can provide that would not require a massive amount of paper printing?
Finally, would you consider this inflationary?
thanks,
We're not borrowing from creditors though. We're essentially monetizing the debt more than anything.
Fed reserve prints money, swaps it for devalued assets to banks who use it to buy treasuries.
I don't consider the action inflationary because the money is not making it to the economy to affect marginal prices.
Even if they did print money and it raised the prices of assets, the prices of the assets would have to be higher than 2008 levels for true inflation to occur.
Assets prices are too high for the money supply. You can print more money without raising the price of assets.
All printing money would do is sustain PREVIOUS inflation.
Also, the price of gold has risen higher and faster than inflation has. The argument could be made that what people believe to be future inflation is already "priced in" to gold. Gold made a 500% return for people in a time of inflation that is far less than that.
People are speculating that the currency will devalue by 80%, when it has not devalued at all since the beginning of gold's run.
That's a very sound argument JB. Thanks. It outlines very well how the Fed is "pushing the string" to prop up (distressed) asset prices. It also describes how the current situation is relatively closed between the Treasury and big banks.
However, what we are positing is that there are two potential triggers for massive inflation:
1. The economy picks up and banks start lending. The 10's of trillions begin to distribute in the economy pushing up prices (as what must happen for an economy to improve...at least in the private sector). The Fed will have to pull all of the $s back in by balancing interest rates against economic activity. History has shown that the Fed will be very hesitant in doing this because the recovery will be anemic due to all the malinvestments. Chances are they will be late. <read big inflation - 1980's style>
2. Ballooning deficits at the CA, Federal budget and state budget will continue to strain our treasury auctions. If the economy continues to worsen the Fed will have to buy more treasuries. Lenders begin to baulk at this because they see this as dollar-negative, the Fed will have to raise interest rates to make them more attractive. As I said before, more tax receipts go to debt and budget deficits skyrocket. <read currency crisis and hyperinflation>
Do you think we will ever reach our borrowing limit? Do you see any danger of lending ourselves money? Can you point to a single government that has been successful in doing so?
If we are reaching our borrowing limit, the game has changed. Mathematically, we are turning the corner of the debt curve. If it doesn't explode now it will when the state bailouts worsen.
But benchmarks matter. Will the price of assets exceed the previous price of assets?
That's the true gauge as to whether inflation happens.
If you're down on a price 30% and it rises 10%, you've still deflated in absolute terms.
They NEED to print dollars to meet demand for dollars. There is a supply shortage of dollars. All printing dollars will do is lead to equilibrium in prices in my opinion.
We can't reach our borrowing limit because we can print money as long as we want to. This may or may not devalue the currency, but we'll never run out of the ability to print.
but we'll never run out of the ability to print.
And that just screams value in your opinion?
If you double the amount of assets and double the amount of money, the value of money doesn't change, does it?
Money and assets are just accounting entries, and accounting is abstract.
If you double the amount of assets and double the amount of money, the value of money doesn't change, does it?
You'll be a rich man in a mere infinite number of years with that strategy.
And you'll be a poor man in five with a "buy and hold gold" strategy.
So, you've looked back at the past 5,000 years and determined that "This time it's different?"
Last post.
We needed prices to fall. We needed to liquidate bad investment (house prices, CDO, MBS) and let the big boys fail. It would have hurt, but we would have had a sound base to build from...but that's a political issue.
The demand for dollars you reference were needed to inflate a bursted bubble. You can't do that without serious damage to the economy. Again, a political issue.
You didn't offer an answer to the question regarding monitization of debt. Admit it, that is unsustainable and will lead to a currency crisis. Our ability to export inflation is coming to an end, either this year or in 5 years. We need to liquidate bad debt, cut spending, and rebuild our industrial base or we're fuct.
I agree and I disagree.
We need deflation to get asset prices back to sustainable levels, but there is also another way to achieve the equilibrium - increasing the money supply.
As other economies are also increasing their money supplies, it will not have a devaluing effect on the dollar as a whole, since the valuations to other currencies are relative.
Monetization of debt is another issue altogether, but that doesn't mean that it will lead to currency crisis either.
First, others are monetizing their debt, which means that we're just staying in parity with other currencies.
Second, the world economy depends on our consumption, which means that we will not go away so quickly. Europe and many others will be toast first.
I agree with you on the other points you made at the end of your post. However, a recovery could feasibly sustain spending.
Anyway, I didn't mean to ignore your question, so that's what I think about it.
Couldn't resist.
You admitted that "others are monetizing their debt, which means that we're just staying in parity with other currencies."
Dude, that IS inflation. If every country in the world debased their currency at 90% a year, the FX market would look exactly the same, since everything is defined in ratios. That's how overall inflation is hidden. Try looking at a graph of assets in weights of Au. In the 30's and in the 80's one ounce could buy one share of the Dow. That leaves a potential factor of 8 increase in the VALUE of Au. I recommend you study the pricipal of the Wealth Cycle. They could meet at 1,000, or 50,000. It's already happened twice this century.
More accuratley, the Eurozone and US are monetizing their debt. Other creditor nations, such as China have massive surpluses. They currently choose to debase their currencies to sustain our consumption. Those are the creditors we can't burn or they would drown us in treasuries. There are warning signs that they are already becoming wary: buying ever shorter-term treasuries, urging the public to buy Au and Ag, creating their own rating system, developing their own treasury market, etc.
Yeah, but the denominator can change as well. That's why the value of assets in terms of gold ratio is decreasing, because the denominator is increasing.
See, here's the thing... all arguments on the future price of gold are "WHEN it becomes the reserve currency" "IF it becomes the new monetary system" "IF China dumps treasuries"
Whens and Ifs are speculative.
Inflation was 150% and the price of gold inflated more than double that amount. That is a fact. That's looking at today, right now.
Gold is worth 600-700, today, right now, when speculation is taken out of the equation.
"WHEN it becomes the reserve currency" "IF it becomes the new monetary system" "IF China dumps treasuries"
Markets look to the future. Have you read the news lately?
what "devalued" assets? any "assets" the banks have, their offloading for 110 cents on the dollar ala fantasy accounting "rules".
Can they sell those assets in the open market for those prices?
Nope. I guess that's not the value then...
yeah they can't sell them b/c the fair value is 0 or approaching 0. Fed is the only market for worthless assets and they're paying top dollar for them........not that doing that benefits them and their agenda whatsoever or anything.
Dear Mr. Bravo
Do you have any idea WHEN the "crisis" will be over?
Thank you
Attila
No. I will bet that it is over before we devolve into a society that relies on bartering and vegetable gardens though.
Of course there is no middle ground. Either it's smiling Ben or Mad Max. No in between. Can't happen.
We're in the middle now.
We're in the middle now.
You believe that current economic conditions reflect a midway point between the Oct. 2007 market high and Mad Max world?
I think your calipers must be a little rusty.
.
Logic and reason, nor honesty, are going to be found anywhere within the hate-filled, anti-gold, pro-establishment ravings of JohnnyB.
Yeah, I guess that I should scrap mathematics that show we're exactly in between the best and worst case scenarios and start making kooky "let's have a picnic when gold hits 25000" posts based on (WHEN the United States becomes Zimbabwe, or IF we print 75 trillion dollars)
Then I could be logical like you.
.
I have no idea WHAT you are babbling about with your "gold to $25,000" nonsense. To attribute any such prediction, or any price prediction at all, to me is an outright and disingenuous lie, and you know it. Your repeated dishonesty and hysterical illogic are pathetic.
Except that I posted your comment twice, along with the URL.
I guess you didn't read the two earlier posts where I replied, so I'll post it again.
by akak
on Mon, 06/28/2010 - 16:07
#439847
"If gold ever reaches or exceeds, say, $25,000 an ounce (in today's dollar terms), I say we hold a national ZeroHedge convention and celebration somewhere to toast the new paradigm, and our good fortune. After all, ANYONE holding more than an ounce or two of gold will be able to afford it!"
http://www.zerohedge.com/article/gold-assumptions-vs-reality
NOW... how is anything I said dishonest?
Is that NOT your post? Did you not believe that it would probably get to 25000?
You wouldn't say such a thing if you didn't believe it to be true.
Now go lie and say you didn't say it again.
.
You are still a disingenuous liar, and you know it.
I NEVER made any such "predition" ---- you conveniently ignore the word "if" --- and in fact made the suggestion in JEST! Which would have been clear in had you included the whole context of the post. But honesty and integrity are aliens within the realm of JohnnyBravo rhetoric.
Go back and read the context of your post. You absolutely agreed that it was going to 25000.
Your post was agreeing with somebody else who believed irrational things.
I guess you didn't "predict" it, you just followed somebody else's prediction that you thought was true.
So you're just a follower with no sense of reality, in other words.
It doesn't change what you believe though. You still believed it would be 25000. Read the thread if you still say I'm lying. The URL is there.
YOU'RE the only person who lies. YOU'RE the only person that disappears when my predictions come true and gold tanks for a month.
You didn't make that prediction in jest and you know it. You were agreeing with that DoChenRollingBearing guy.
You thought it would happen. And now here you are lying, saying you never said it.
God, what a moron.
And now here you are, telling the other people to buy gold, when we all know it's not going much higher.
Who is the person lacking honesty and integrity?
I make predictions, because I have no problem living with what I say.
You chum up with people, and then try to blame them for their predictions because all you did was agree.
You can't even stick to your story. How pathetic. You can't lie and run though in the days of Google.
.
"Pathetic Liar and Troll" are the only logical responses to your hate and dishonesty.
Bravo:
Go back and read the context of your post. You absolutely agreed that it was going to 25000.
So how could you have failed to quote what you consider to be the relevant portion of the post in question? Seems a bit sloppy on your part, I must say.
.
That's because I never made any such prediction, nor implied it ---- I made what I considered an outrageously high quote as a form of humor ("H-U-M-O-R", Johnny --- why don't you try Googling that?), which this crazy gold-hating troll can't seem to recognize, or more likely, is dishonestly trying to use to put words into my mouth.
What's 1576 + 666?
Now divide that by two.
Wow... 1121.
What was the S&P at a couple of days ago?
About 1121.
Damn. Even math agrees with me.
Even math agrees with me.
It's not only math, Billy Preston's got your number as well:
"Nothin' from nothin' leaves nothin' and you gotta have somethin' if you're gonna post at Z"
http://www.youtube.com/watch?v=G_DV54ddNHE
So far, we haven't hit a situation anywhere near as bad as it was in 1929 - which by no means is unrealistic considering the debt loads throughout the Western World - and yet you claim THIS is middle ground between anarchy and "Smiling Ben".
The biggest sacrifice people in Europe so far has had to make, is to cut down on their cable package, go on a PAYG mobile contract, and get a £5 bottle of Rioja rather than £10. And this - in your world of cherry picked stats - is the "middle ground".
What a bunch of fucking bullshit.
It's not in the middle, eh?
1576 + 666 doesn't equal 2242?
2242 divided by two doesn't equal 1121?
I guess that your knowledge of supposedly living through the depression trumps my ability to do basic math calculations...
1576 was a roaring economy. 666 was the end of the world scenario.
We were exactly between these two points earlier this week.
You can parce words, but you can't lie about the math.
Yeah, because some pumped figures which entirely accurately reflects society as a whole are OBVIOUSLY the best grounds for performing this comparison.
How much is your JPM salary again?
So what's your basis for comparison?
Some stories you heard?
I notice you didn't make any, except for claiming that a time period that you didn't live in was worse.
People demonstrating in the streets, strikes, supermarkets running out of food, petrol stations running on empty. Banks closing for days, which means you can't get your precious paper currency out to buy food with. The value of currency dropping which means whatever fuel and food is available, rapidly rise in price.
Oh hey, that's what's currently happening in Greece. And that is just the start - the situation is still escalating down there. No-one's got a clear plan out, because that'd mean slashing budgets.
You think the US can keep running endless deficits, and just print up another $20bn whenever the individual states start running dry?
You think the US can keep running endless deficits, and just print up another $20bn whenever the individual states start running dry?
Yes, he does. He calls it "recovery."
JB,
It is supply AND demand that counts. Also just because it costs $500/oz to mine, that doesn't mean that spending $1000 will get you two oz's. Just like getting 9 women pregnant will get you a baby in one month! The rate of gold-flow out of the ground does not change rapidly. There are real physical reasons why it takes time and up-front capital to initialize production in a new mine, or increase production rate from an existing mine.
Yeah, but demand changes, and it doesn't always increase.
Yep, It can also go up from here. The question is what drives demand? For Gold it is weak currencies. I would say most currencies are weak on any objective basis, and trending weaker. The macro argument says the Gold trend-line is up for the foreseeable future.
The upper trend line for gold is making an ascending wedge.
There is no downtrend in currencies. Dollars are worth about the same today as they were in 1985. The last major dollar debasement was under Reagan in 1984.
Dollars have increased in value since then, only to decrease again under Bush and stabilize under Obama.
Still, the DXY was at 80ish in 1985 and it's at 80ish today.
There is no downtrend in currencies. Dollars are worth about the same today as they were in 1985. The last major dollar debasement was under Reagan in 1984.
The dollar has returned to its 1980s position in comparison to a basket of other currencies. However, in absolute terms the dollar has lost significant purchasing power since the 1980s.
Not 80% though, which is what would justify the current gold price.
But you said there was "no downtrend in currencies." So you admit your error?
Relative to other currencies, there is no downtrend in currencies.
"Inflation" only buys us much more than it did in 1980. While things cost more, we also have more things to buy.
Inflation has improved our standard of living more than anything.
How many people had smartphones, computers, etc in 1980?
Yet now we all have those things and more. Inflation increases, not decreases the standard of living.
You are really running amok today Johnny!
I keep waiting for you to top your previous level of nonsense and absurdity --- and I continue to not be disappointed!
"Inflation IMPROVES our standard of living!"? Simply WOW! I guess THAT explains why my father, a school teacher, could comfortably support a family of five on his sole income in the 1970s, while such a thing is impossible today.
Boy, those Zimbabweans a few years ago must have REALLY been living the high life, with all that inflation that Mugabe and Gono were delivering to them! What benefactors, what saints!
Bravo:
Inflation has improved our standard of living more than anything.
How many people had smartphones, computers, etc in 1980?
So you believe that technical advances and productivity gains come out of a printing press rather than through the blood, sweat and tears of inventors and entrepreneurs?
Great! Print me a starship, I always wanted to try the Capt. Kirk thing.
Wow, another post that compares the U.S. to Zimbabwe, coming from a man that expects a 25000 dollar gold price.
And I'm the one spouting nonsense....
I guess I should conform to your thesis that there is no difference between the U.S. and Zimbabwe. Then I'd be logical.
Then I could say that I'll have a picnic if the gold price hits 25000 soon, like I expect it to get that high. Then I'd be even more logical.
.
You may have made a gold price prediction of $25,000, but I never have, and to keep attributing such to me is an outright lie. But do keep repeating it, and continue to destroy any shred of credibility your feeble pro-establishment arguments may have here.
That's funny. I notice you didn't reply at all to the three other places I posted your post, along with the original URL.
Why don't you reply to the posts I made that copied your post directly and even gave the URL where you made it?
Because you know you said that?
I didn't make it up that you thought we should have a zerohedge picnic at 25000.
I copied and pasted your posts.
I provided a URL to the original post.
You don't reply to the other four posts I made that show you made the prediction.
And yet, you call me a liar when the truth is posted multiple times for all to see.
Bravo, you just made a conditional statement about gold hitting $25,000, just as akak did previously. Therefore, by your own standards, YOU believe that it will hit $25,000.
You said, "Then I could say that I'll have a picnic if the gold price hits 25000 soon, like I expect it to get that high."
JB,
It doesn't matter what the dollar value of gold is. It's what you can buy with it. Again, please take a look at the Wealth Cycle principle.
Regarding inflation: I dissagree COMPLETELY with what you said above.
If you look at the standard of living back in the 60s, where only the man worked, families had 10-20% savings, and pensions were solvent. Compare that with today where both parents work, and overtime is standard, retirements are busted, families "save" 5% (with increasing revolving debt).
This is based on a system that has had conventional raises of 3% in most occupations. This is considered "inflation wage" where it is expected to compensate for the loss of purchasing power of the workers earnings.
If you combine these two observations, you realize that since 1971 when we officially left the gold standard, TRUE inflation has been a complete lie.
But the biggest evil of inflation, in my opinion, is the fact that as a civilization becomes more productive (with railroads, automobiles, and the INTERNET!) citizens should have to work less, with more resources and comfort. What we have seen over the past 40 years is exactly the OPPOSITE! We have been paying the hidden tax of inflation at rates WAY above official numbers. All of the increased productivity and wealth has been funneled to the owners of the Fed and ECB, etc.
And look at what that income got the average family.
A small house, one car, and enough food for sustenance for the entire family.
I can buy all of those things and more for the same family of four today.
People want ipods and smartphones and three cars, and a vacation to Vegas every three months, etc.
Our houses and assets are infinitely more valuable than they were in the 1960s as well.
We live in McMansions instead of Levittowns. If we lived in Levittowns and consumed as much as we did in the 60s, we could still live on one salary.
Inflation has improved our standard of living more than anything.
wow.........please go read "how an economy grows and why it crashes". That has got to be one of the most ill informed statements I've ever seen on ZH (amongst plenty).....
So the standard of living in this country hasn't increased since 1980?
That's funny. I can name at least ten ways it has.
The most uninformed posts on zerohedge are the ones saying "gold to 54000" and such nonsense based on "the United States' similarities to Zimbabwe."
Those are the most uninformed, incorrect people on this site.
All my predictions come true. Can't say the same for goldbugs...
.
JohnnyBravo said:
Do we need any more proof that we are dealing with a narcissist and/or a delusional mind than this?
Show a prediction that didn't come true then.
You can't.
You can't change the facts, sir.
I can post that you said it would be 25000 three times, provide the URL, and you'll just make another attack on another thread, before you disappear again the next time gold tanks.
You're pathetic.
So now, show me where my prediction was wrong. I showed you three times where you said gold would go to 25000.
.
And you STILL keep repeating your hysterical and blatant lies!
I am done with you --- such a dishonest and disingenuous insect troll is not worthy of my time. But please, do keep repeating your malicious lies, and continue to demonstrate your lack of integrity and dishonesty for all here to see. It will help to further discredit you as any kind of rational or honest commentator.
You can look for the post in the URL yourself.
You absolutely said what I said you did.
http://www.zerohedge.com/article/gold-assumptions-vs-reality
If you had any integrity, you would man up.
Yet, you just make more personal attacks.
.
And you keep twisting my words and taking my post out of context --- a classic tactic of the weak debater. Pathetic, really.
Oh right, and that is the direct result of printing Dollars. Got it.
Tell us the story again about how everyone who ever bought gold, bought at the peak, and how everyone who ever bought Dollars, made money out of it. Of your fairytales, I think that's my favourite.
Once upon a time, people bought gold for 850 an ounce. Two years later, it was 250 an ounce.
Then, thirty years later, people thought that "this time was different" and that gold was fairly valued at 54000 an ounce.
These people are high on crack.
The End.
Oh, OK, I can cherry pick dates too.
Once upon a time, people bought Dollars for 1.16 Euro. Six years later, a Dollar was 0.68 Euro.
See how that works? Some people who bought your precious paper Dollars lost money too.
hmm standard of living.....how do you define it? You must think having stupid little "smart" phones so we can all check facebook 100% of the day is a quality life eh?
well lets see, real costs for everything are up via constant debasement of money supply, real wages are flat for decades, wealth gap has grown larger than ever before in recent history, real costs of college are through the roof thanks to cheap and plentiful loans, both mom and dad have to work full time (60 hours a week) to provide the same lifestyle that only one income could 30 years ago.....
oh wait, we have Sirius in our cars now, so life is awesome mirite?
That's funny. My income provides enough money to support a family of four.
.
Our mistake --- we didn't realize that an internet troll living in his mother's basement with three gerbils constituted a "family".
Haaaaaahhaahaa! you two are fun.
Pardon me JB for humiliating you by pointing out what should be completely obvious, but the DXY is only an indicator of how the USD is doing in relation to its fiat ilk, not a measure of its worth to tangible goods with intrinsic value. Eg food.
In the late 70's you could buy a brand name bag of chips and a cola for 50cents all told at a convenience store.
FF to 2010: the same snack and drink are priced around 1.25 each, that's a %500 price increase. And I don't believe wages have kept up...
Regards
Going from 50 to 125 would be a 150% increase, not a 500% increase.
So you've seen the prices of things increase 150% in more than 30 years.
How does that equal a five bagger increase in gold?
He said the chips and pop went from .50 for both to 1.25 each. Try again.