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Oxford Economics Looks At The Role Of Gold Under Inflation And Deflation, Finds Average Gold Holdings Should Be At Least 5% Of AUM

Tyler Durden's picture





 

Predicting the future in general is a fool's game, while anticipating inflection points, we have often said, is for market oracles and dummies. That said, one can easily anticipate general themes. The inevitable implosion of an unsustainable economic model is one of them. The only question is how does one hedge best for an event like this. In the past 3 years, precious metals, primarily gold, have served as arguably the best hedge to the absolute loss of purchasing power of the global fiat system. And with increasing global instability, the prominence of gold will only rise. A just released must read analysis by Oxford Economics titled "The impact of inflation and deflation on the case for gold" finds just that, and culminates with the dramatic conclusion that "gold's optimum share of a portfolio to be around 5% in a base long-term
case for the UK featuring 2.25% growth and 2% annual inflation. This is
higher than levels found in typical mainstream investment portfolios,
although this may be in part because the analysis does not include other
assets such as index-linked bonds, foreign securities and other
commodities." Based on anectodal analyses, gold holdings on average at the institutional level are about 1% or less. Which means that a qunitupling in buying interest will have dramatic implications on the future price of gold (it is no secret that we have been and continue to be very bullish on gold). And just like "nobody could have predicted" the implosion of Italy, so soon nobody will have been able to predict gold rising to $2,000, $3,000 and other multiples of $1,000. Which is precisely what will happen as the next and possibly final lap in the global currency devaluation game is nearly upon us. The only beneficiary will be the one instrument that retains its absolute value as fiat around the world is relatively devalued against one another. Regardless, while the attached study does not break any undiscovered secrets, it is a must read for everyone who is still on the fence, or is considering taking profits with gold once again just shy of its all time nominal price.

From the report:

Executive Summary

  • Since 2007 the world has seen a period of considerable economic and financial volatility, during which gold has performed strongly with its price more than doubling. This performance has prompted some reappraisal of gold's properties as an investment vehicle.
  • Over the very long-term gold tends to hold its value in real terms, but short-run factors can move gold away from its long run equilibrium for extended periods. These factors include financial stress, political turmoil, real interest rates, inflation, central bank activity and the US dollar exchange rate.
  • To begin our investigation into gold, we estimate an equation to explain gold price movements over the 1976-2010 period. The modelling approach suggests that all of the factors outlined above are significant short-run influences on the gold price and that shocks to the gold price tend to wear off relatively slowly. The equation also highlights the fact that whilst the current price of gold is comparatively high, the adjustment back to equilibrium could take place via a rise in the general price level, rather than a fall in the nominal value of gold.
  • Using the estimated equation and Oxford Economics? Global Model, we examine the performance of gold relative to other assets from 2011-2015 over a number of variant economic scenarios. We find that while other assets outperform gold in the baseline scenario, gold performs relatively strongly in a high inflation scenario and also does comparatively well in a deflation scenario derived from a wave of defaults in the "peripheral" eurozone countries. This is because such a deflation scenario includes a sharp rise in financial stress.
  • The scenario analysis confirms gold's properties as a hedge against extreme events; properties that may be especially valuable given the considerable uncertainties still facing the world economy.
  • The study then goes on to examine gold's place in an efficient investment portfolio using optimisation techniques and different assumed long-run returns for gold, equities, bonds, cash and property. We find that because of its lack of correlation with other financial assets, gold has a useful role to play in stabilising the value of a portfolio even if the conservative assumption of a modest negative real annual return is made.
  • We find gold's optimum share of a portfolio to be around 5% in a base long-term case for the UK featuring 2.25% growth and 2% annual inflation. This is higher than levels found in typical mainstream investment portfolios, although this may be in part because the analysis does not include other assets such as index-linked bonds, foreign securities and other commodities.
  • Varying the economic assumptions can imply higher allocations for gold. Gold's optimal share rises in a more inflationary scenario, as well as for more risk-averse investors in a limited growth and lower inflation scenario, thanks to its low correlation with other assets.

Full report (pdf)

 

 


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Mon, 07/11/2011 - 14:37 | Link to Comment GetZeeGold
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Get gold.....check.

 

Mon, 07/11/2011 - 15:25 | Link to Comment LongBalls
LongBalls's picture

Question - Of ones gold holdings how should they be invested as a percentage. Physical, ETF's, Mining Stocks? I own physical as of now but struggle with the balance of type to own.

Mon, 07/11/2011 - 15:43 | Link to Comment Janice
Janice's picture

A goldbug would tell you that if you can't physically hold it, you don't own it.

Mon, 07/11/2011 - 15:54 | Link to Comment RockyRacoon
RockyRacoon's picture

An ETF is a type of paper, not a type of metal.

I guess that makes me a bug, per Janice.

Mon, 07/11/2011 - 19:37 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

Rocky and I are in the same club.  If you don´t have it in your warm little hands (paws), it ain´t yours!

I am in with 12% PMs (75% of that in gold).  But then again, I joined the Tinfoil Hat Brigade when I could not take the lies anymore...

Mon, 07/11/2011 - 15:44 | Link to Comment JumpinJonnyK
JumpinJonnyK's picture

I think 5% may be a little low if you ask me.  I am trying to keep around the 15% mark.  Just an FYI for everyone www.goldshark.com is a cost comparison shopping site for gold and silver.  It has saved me money and it's free to use.  Thought I would share

Mon, 07/11/2011 - 16:21 | Link to Comment Whalley World
Whalley World's picture

This morning I sold half of my paper physical in my retirment account (RRSP in Canada) and will get the money (less 20% tax) to put into more physical.  With the world financial markets in turmoil, I need to hold my gold and silver close to home.  All of my phys. was taken out of my bank safety deposit box years ago.

Take possession and sleep at night.

Mon, 07/11/2011 - 14:39 | Link to Comment WilliamShatner
WilliamShatner's picture

Only 5%?

Get moar, bitchez!

Mon, 07/11/2011 - 14:43 | Link to Comment mayhem_korner
mayhem_korner's picture

+1556.

Downside outlier of being "too long" gold = I can live with

Downside outlier of being "too short" gold = I can't live with 

Mon, 07/11/2011 - 14:50 | Link to Comment Bay of Pigs
Bay of Pigs's picture

Roger that.

The next leg up is going to be a big one. Probably 200 points or more.

Mon, 07/11/2011 - 14:48 | Link to Comment Sudden Debt
Sudden Debt's picture

If every fund would go to 5%, gold will be priced at 3000/4000 dollar.

Without the national banks of course which make it go to 5000/6000 dollar.

 

But they do everyting to prevent a price like that.

Mon, 07/11/2011 - 15:16 | Link to Comment mick_richfield
mick_richfield's picture

It will be more than 5% after you lose the rest of your portfolio in the Panic.

Mon, 07/11/2011 - 17:10 | Link to Comment Thorlyx
Thorlyx's picture

good one ! I was also thinking along these lines. If one has 30 % today, it might become 100 % very quickly.  Alternately, 5 % of 1.000.000 invested 10 years ago is already 50 % of the same amount !

Mon, 07/11/2011 - 19:41 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

Aye, aye, Captain!

12% for me.

Mon, 07/11/2011 - 14:40 | Link to Comment mayhem_korner
mayhem_korner's picture

I love it when these guys find the "optimum" in a stochastic analysis with an indeterminate underlying distribution.

Always a deterministic solution to a probabilistic problem.  I call that betting.

 

 

Mon, 07/11/2011 - 15:11 | Link to Comment cpnscarlet
cpnscarlet's picture

Okay...I'll bet on 7.

A reasonable solution.

Oh yeah - I'll go long human nature...sure win.

Mon, 07/11/2011 - 15:11 | Link to Comment Zero Govt
Zero Govt's picture

Mayhem,

not quite sure what you said there but think i agree!!

Oxford Economics recommends 5% of your portfolio in Gold. What would they do with the other 95%?

Gold's gone from $250 to £1,500 in the past 10 years. Would any other part of their 95% out-perform that? So why the hell not go all-in if you're onto a winner!

This absolutely spastic belief in a "diversified portfolio ..spreading risk" suggest you're too timmid or clueless to know which asset class is going to be best performing (ie. 95% of their portfolio will be underperforming)

Mon, 07/11/2011 - 15:21 | Link to Comment mayhem_korner
mayhem_korner's picture

Layman's terms: if the future is uncertain and thus subject to a whole host of possible outcomes, there can be no "optimum"; every strategy will have a maximum upside and a maximum downside.

The way to look at these probabilistic problems is to understand how well you can tolerate the extreme outcomes for a given strategy...that is risk analysis in a nutshell.

Mon, 07/11/2011 - 15:57 | Link to Comment RockyRacoon
RockyRacoon's picture

Where's the "risk" in holding physical gold?   It is valued in fewer dollars (or the fiat du jour)?

So everything else costs less as well.   Not a risk in my book.

Mon, 07/11/2011 - 16:32 | Link to Comment Shell Game
Shell Game's picture

It also lacks the counter-party risk paper assets are plagued with.

Mon, 07/11/2011 - 16:44 | Link to Comment mayhem_korner
mayhem_korner's picture

Holding more gold means holding less of something else.  The risk is that the something else out-performs gold over your time horizon.  If the gold you now hold was instead invested in silver, and silver out-performs gold 3:2 over the next year, you would be better off with the silver, no?  That's the risk.

So if one believes that the best road is to be 100% invested in gold, the measure I look at is ... can you tolerate the worst-case (possible) outcome of gold under-performing its alternatives.  If you can, fine; if not, then you probably ought not be 100%.

 

Mon, 07/11/2011 - 20:53 | Link to Comment Shell Game
Shell Game's picture

Is physical gold an investment or is it security?  I see it solely as a quiet and time-tested store of my wealth.  My trading account, on the other hand, has some diverse competing assets  like SCO, AGQ, DAG, several gold miners and on again/off again short hedges.  The latter is investment, the former is a different beast entirely.

Tue, 07/12/2011 - 01:21 | Link to Comment RockyRacoon
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Moderation in all things, grasshopper.

Mon, 07/11/2011 - 16:23 | Link to Comment Whalley World
Whalley World's picture

Go all in like you are sitting on a Royal Flush

Mon, 07/11/2011 - 15:57 | Link to Comment Pladizow
Pladizow's picture

Those who predict the future, lie, even when they tell the truth!

Mon, 07/11/2011 - 14:42 | Link to Comment Quintus
Quintus's picture

2.25% Growth and 2% Inflation?  That would be the Bank of England's wet dream.  How about the much more likely scenario of 0.0% Growth (IF we're lucky) and 5.5% inflation?

I'll see your 5% Gold allocation and raise you 50%

Mon, 07/11/2011 - 15:37 | Link to Comment grey7beard
grey7beard's picture

>> I'll see your 5% Gold allocation and raise you 50%

50%? Piker.

Mon, 07/11/2011 - 16:06 | Link to Comment Quintus
Quintus's picture

Well, I need the other 50% for silver.

Mon, 07/11/2011 - 14:43 | Link to Comment pstpetrov
pstpetrov's picture

Got gold? I do.

Mon, 07/11/2011 - 14:43 | Link to Comment Flore
Flore's picture

you should go the fulll 100 % in gold.. i did

Mon, 07/11/2011 - 14:44 | Link to Comment problemfixr
problemfixr's picture

Gold and Silver Bitchez...

Mon, 07/11/2011 - 14:44 | Link to Comment Transitory Disi...
Transitory Disinflation's picture

Just when will house prices crash in the UK?

Mon, 07/11/2011 - 15:29 | Link to Comment goldm3mb3r
goldm3mb3r's picture

When rates rise.

Mon, 07/11/2011 - 14:45 | Link to Comment kengland
kengland's picture

5%? I'll take a zero hedge with 100% yellow metal coins

Mon, 07/11/2011 - 14:50 | Link to Comment Shell Game
Shell Game's picture

That 5% number is something I would expect from a nadir of gold sentiment and zenith of $US sentiment, circa 80s-90s.  With world events as they are and writings on the wall as they are, these baffoons come up with 5%? Really?

Mon, 07/11/2011 - 15:06 | Link to Comment Temporalist
Temporalist's picture

They are trying to be realistic I think.  Since you reference the `80 at that time gold investment was 4%.  Presently gold investment is under/around 1%.  If more people, let's say 2% or a doubling of the present investment interest, decide to get 5%, from the 1% now, it will have a major impact.  That doesn't seem so paltry when looked at from that perspective.

 

Mon, 07/11/2011 - 15:40 | Link to Comment Shell Game
Shell Game's picture

I see your point and agree that having more of the public at 5% exposure would be a vast improvement, so perhaps 'buffoons' (thanks TM) was a bit harsh.  I remember 30 years ago hearing advisors suggest 5%-10% physical PMs, so this 5% in current times seem uninspiring to me.

Herd investment has never put much emphasis on capital preservation and fiat realism, and has preferred to emphasize playing The Game.  So, I don't have a lot of respect for most mainstream investment advice.

Mon, 07/11/2011 - 19:49 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

5% - 10% is OK what my banker / investment advisors say.  And they are very mainstream.

I am happy at 12%.  That will likely grow slowly as money comes in.  Buy a little here, buy a little there.  I have been doing that a long time...

Mon, 07/11/2011 - 20:40 | Link to Comment Shell Game
Shell Game's picture

30 years ago 5% was a good number.  When the dotcom bubble burst signs formed that strongly suggested 10% was a better number.  The Fed's QE program, which got started summer of '09 I believe, was another strong signal to increase one's percentage of physical metals in portfolios to 15% or higher.  I'm at the point where all extra money is converted and a good portion of my IRAs have been converted.  Crazy times...

You have a good advisor, Bearing.  But the thing is, in this world of fiat, there has not been mainstream reality. All pro-gold talk has been quite alternative and contrarian.

Mon, 07/11/2011 - 15:23 | Link to Comment tmosley
tmosley's picture

Better than the 0% most buffoons in the profession come up with.

Tue, 07/12/2011 - 01:24 | Link to Comment Urban Redneck
Urban Redneck's picture

Those same buffoons generally can't beat the S&P with a 100% fiat allocation and almost full deployment of capital to the endeavor.

Mon, 07/11/2011 - 16:51 | Link to Comment akak
akak's picture

That 5% number is something I would expect from a nadir of gold sentiment and zenith of $US sentiment, circa 80s-90s.

Are you sure you don't mean, from the Nadlir of gold sentiment?

;-)

Mon, 07/11/2011 - 18:00 | Link to Comment Shell Game
Shell Game's picture

aah, my clever cross-boned provocateur... :)

Mon, 07/11/2011 - 14:46 | Link to Comment PulauHantu29
PulauHantu29's picture

If Paulson had bought more gold instead fo bankrupt Chinese companies and BAC he would be up 40% now instead of losing his investors money. He need sto follow Kyle Bass and UT Retirement System .....buy more gold.

Mon, 07/11/2011 - 14:49 | Link to Comment coppertop
coppertop's picture

and he uses paper gold too.

Mon, 07/11/2011 - 14:48 | Link to Comment Just Observing
Just Observing's picture

Yeah 5% if you want to lose your ass in the next few years.

50% is a lot closer, and only if another 30% or so is in silver.

Add in 10-20% energy stocks/trusts and you have the "well rounded portfolio" for the next decade.

Mon, 07/11/2011 - 14:49 | Link to Comment Bastiat
Bastiat's picture

5% in gold and the other 95% in silver?

Mon, 07/11/2011 - 17:08 | Link to Comment TN Jed
TN Jed's picture

+ 43:1

Mon, 07/11/2011 - 14:49 | Link to Comment Transitory Disi...
Transitory Disinflation's picture
A third of finance directors believes UK economy will double-dip Boardroom confidence in the economic recovery is collapsing at its fastest rate in three years as companies predict falling profit margins and fear the fallout from weak consumer spending in the UK.

http://www.telegraph.co.uk/finance/economics/8629184/A-third-of-finance-...

Mon, 07/11/2011 - 14:57 | Link to Comment Temporalist
Temporalist's picture

Kingworld News interviews ex Goldman Sachs Silver Manipulation Whistleblower Andrew Maguire about the new Gold and Silver exchange in China

http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2011/7/11_A...

300 million customers.  If 1% bought a 10oz contract it would require new physical demand of 1000 tons of gold. (paraphrasing)

Similarly if the same 1% chooses to move into silver it will require 1.6 billion oz of physical to be found (I guess they can dig it out of the ground for $5).

 

Here is summary of interview:

http://tiny.cc/zmzez

Mon, 07/11/2011 - 14:51 | Link to Comment TooBearish
TooBearish's picture

Nice curve fitting - in the 90s I'm confident this "model" would have had you short gold

Mon, 07/11/2011 - 14:52 | Link to Comment apberusdisvet
apberusdisvet's picture

Hmmm.  Anyone wonder what is in the private vaults of the Rothchilds, Morgans, Warburgs, et.?  It sure as hell aint FRNs.

Mon, 07/11/2011 - 14:54 | Link to Comment Temporalist
Temporalist's picture

Ans: The blood of unborn children.

 

Mon, 07/11/2011 - 15:21 | Link to Comment Dr. Richard Head
Dr. Richard Head's picture

Also, the tears of the elderly. 

Mon, 07/11/2011 - 15:00 | Link to Comment francis_sawyer
francis_sawyer's picture

14 year old trannies?

Tue, 07/12/2011 - 01:41 | Link to Comment Fred C Dobbs
Fred C Dobbs's picture

And the rest of us should have only 5% of our wealth in gold. 

This paper is right if written several years ago. 

Mon, 07/11/2011 - 14:55 | Link to Comment MiningJunkie
MiningJunkie's picture

Never underestimate the replacement power of monetary metals within a hyperinflationary spiral - the debasement of the G20 currencies is being speaheaded by the greatest debasement of all and it is not the U.S. dollar - it is the U.S. Federal Reserve "note" which is an IOU from the TBTF banks. But I don't think that CNBS gets it yet.....

Mon, 07/11/2011 - 15:01 | Link to Comment francis_sawyer
francis_sawyer's picture

Yeah... But without all those "notes"... What would KudBLOW use to snort lines?

Mon, 07/11/2011 - 15:02 | Link to Comment mayhem_korner
mayhem_korner's picture

DXY up a full percent today on the fleeing (eu)roaches & gold up $US10.  Wasn't that long ago that USD and gold were moving in complete inverse. 

What's that say about the worth of Au...?  Says 5% is a bought number to prevent a run...

Mon, 07/11/2011 - 15:04 | Link to Comment francis_sawyer
francis_sawyer's picture

Speaking of that... Since we all know that Clinton "didn't inhale" the weed, I'm still wondering why nobody asked him about coke...

I suppose he just stood there looking stupid with a $20 bill hangin' out of his nose...

Mon, 07/11/2011 - 15:12 | Link to Comment Bay of Pigs
Bay of Pigs's picture

Yeah, and he broke his leg chasing hookers at Greg Normans place.

Back in the good ole days when the President spent his time doing something productive.

Mon, 07/11/2011 - 15:29 | Link to Comment Transitory Disi...
Transitory Disinflation's picture

http://farm3.static.flickr.com/2238/2058834501_c756dae9b0.jpg

 

I just cannot tell the difference :)

Mon, 07/11/2011 - 15:09 | Link to Comment DavidDavid
DavidDavid's picture

Way too much bullish talk about gold.  It means that gold is near a long-term top.  We will never see $3,000 gold.  Maybe $2,000 but not $3,000.

Mon, 07/11/2011 - 15:15 | Link to Comment Bay of Pigs
Bay of Pigs's picture

Okay Mr 3 weeks. Maybe read a few more threads before you start making predictions.

Mon, 07/11/2011 - 16:16 | Link to Comment Pladizow
Pladizow's picture

Simply sigh, look towards the floor and nod your head from side to side in pity as you say his name, "DavidDavid"

Mon, 07/11/2011 - 15:15 | Link to Comment mayhem_korner
mayhem_korner's picture

What would push it to $2,000 that would dissipate before $3,000?  Look at the trade stats...no bubble here.  Try some Nos for the normalcy bias.

I'll wager gold spending less time between $2,000 and $3,000 than it takes from $1,600 to $2,000.

Mon, 07/11/2011 - 15:15 | Link to Comment BrianOFlanagan
BrianOFlanagan's picture

gold has merely grown with the MB, M2 and gov't debt and is substantially undervalued based on two of those measures.  The more they print and borrow, the higher gold will go.

http://darienwealth.com/post/7496788343/three-charts-that-show-gold-still-has-tremendous-upside

 

Mon, 07/11/2011 - 15:15 | Link to Comment Temporalist
Temporalist's picture

Thanks for your riveting insight and thorough analysis.  It means a lot...and it's free too!

Mon, 07/11/2011 - 15:27 | Link to Comment Shell Game
Shell Game's picture

Actually... he could prove right.  I could visualize a scenario where paper gold never reaches $3k.  When the actual metal breaks through five digits, its paper cousin will have long gone the way of the Dodo.  Of course, this is no where near the intent of our 3 week old freind. ;)

Mon, 07/11/2011 - 15:32 | Link to Comment BrianOFlanagan
BrianOFlanagan's picture

that will never happen - paper and physical markets both far too liquid and efficient

Mon, 07/11/2011 - 15:42 | Link to Comment Shell Game
Shell Game's picture

Hmm, efficient?  I remember reading where if gold were priced in terms of real inflation it would be at ~$2500 now.  There has been a paper derivative war against PMs for years, so I very much disagree in the efficiency you see in the gold market.  Gold has not been allowed to find real price discovery for decades, when it does, the paper gold market will no longer trade, or at least reflect ever greater lies.

Also, never underestimate the desperate lengths TPTB, and incompetent politicos, will go to keep the status quo..

Mon, 07/11/2011 - 19:53 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

No transparency.  Oops, forgot that!

You take the paper, I´ll take the gold.  It´s OK with you, and it´s definitely OK with me.  See ya on the other side!

Mon, 07/11/2011 - 20:26 | Link to Comment Shell Game
Shell Game's picture

lol, works for me too, DCRBearing!

Tue, 07/12/2011 - 00:21 | Link to Comment JW n FL
JW n FL's picture

I will 3rd that!

Tue, 07/12/2011 - 01:24 | Link to Comment oldman
oldman's picture

OK DD,

I'll take your advice to the bank and see how much I can borrow on my gold, but I have one question for you:

What are you doing at ZH?

Mon, 07/11/2011 - 15:12 | Link to Comment mayhem_korner
mayhem_korner's picture

BTW.  Where's momofader today?  No-show when the Dow drops a buck seventy-five?

Mon, 07/11/2011 - 15:16 | Link to Comment francis_sawyer
francis_sawyer's picture

He's out buying a new yoga outfit from LULU...

You know how it goes... When the going gets tough, the tough go shopping...

 

Mon, 07/11/2011 - 15:13 | Link to Comment Stuck on Zero
Stuck on Zero's picture

An Investment Simile

Gold is to an investment portfolio what lifeboats are to cruise ships, fire escapes are to high-rise towers, spare tires are to cars, and Advil is to partyers. 

T-Bonds are to an investment portfolio what Edsel was to Ford, Vista was to Microsoft, icebergs to the Titannic, and hemlock to Socrates.

 

Mon, 07/11/2011 - 15:17 | Link to Comment Dick Darlington
Dick Darlington's picture

OT: Greece Jan-June budget deficit missed target (again) by a mile (again).

http://www.minfin.gr/portal/en/resource/contentObject/id/aeb8b944-92da-4...

Mon, 07/11/2011 - 15:19 | Link to Comment What_Me_Worry
What_Me_Worry's picture

30% allocation to gilts.  Great job!

Mon, 07/11/2011 - 15:25 | Link to Comment honestann
honestann's picture

The optimum percentage of a portfolio to hold in physical gold in your own paws is somewhere between 90% and 100%.  If 90%, then the other 10% should be in silver... or platinum, seeds, guns, ammo, productive equipment, etc... but nothing fiat, fake, fraud, fiction, fantasy, fractional-reserve debt-toilet-paper-farce.

Mon, 07/11/2011 - 17:10 | Link to Comment Stuck on Zero
Stuck on Zero's picture

For 50% of Americans that's less than one Krugerrand.

Mon, 07/11/2011 - 15:26 | Link to Comment franzpick
franzpick's picture

Gold has been averaging up $28 per month for 30 months: one more year puts it at $1886.  Two more years gives $2222.

Watch it beat both of those targets by months:

http://finviz.com/futures_charts.ashx?t=GC&p=w1

 

Mon, 07/11/2011 - 15:30 | Link to Comment monopoly
monopoly's picture

5%. I don't think so. I cannot remember when I had less than 40% for more than a few days. For me 50%+ has worked very well. Ya know, I gotta sleep at night. It may mean less LULU and PCLN and CMG, but that is ok.

5%. Yikes.

Mon, 07/11/2011 - 15:31 | Link to Comment gwar5
gwar5's picture

Andrew McGuire (KWN interview) reminds us that the new commodities exchange in Asia gives at least 320 million Chinese retail customers access to buy small amounts of physical backed gold product at home via computer through their accounts at the Chinese Agriculture Bank. 

He points out that if just 1% of those customers decided to buy just one ounce of gold it's an instant 1000 ton increase in global gold demand. And the Chinese like gold and silver. The short squeeze on the over-leveraged paper gold products would be severe and dramatic. The effect on paper silver would be even more dramatic. 

Conclusion is that this should accelerate the extinction of debt money creation and paper fiat, ie., demise of Western style banking.

Mon, 07/11/2011 - 16:04 | Link to Comment Thisson
Thisson's picture

If that is McGuire's thesis, then he is wrong for the simple reason that this is a PAPER exchange and therefore it allows for unlimited naked shorting by the oligarchs, just like our Comex does.

Mon, 07/11/2011 - 16:11 | Link to Comment Pladizow
Pladizow's picture

With a population of 1.3 billion everything china does revolves around maintaining social stability.

With this in mind, why would they encourage the public to buy gold and then turn around and short it?

I can't think of a good explanation.

 

Mon, 07/11/2011 - 15:36 | Link to Comment FranSix
FranSix's picture

The market works in subtle ironies. If it's pricing in moving the decimal point one to the right in the oil market, then gold has a fairly long way to go to price in the same inflation. Now, if the currency value has declined by 99.99%, then the gd price should rightly obtain $2021/oz. U.S., after the price fix during the depression era.

Mon, 07/11/2011 - 15:36 | Link to Comment jemlyn
jemlyn's picture

Just reading the latest issue of the AARP mag.  "Sell any gold you have now, while the price is high."  I feel sorry for seniors who trust them.

Mon, 07/11/2011 - 16:03 | Link to Comment RockyRacoon
RockyRacoon's picture

Jeebus -- I should put a buy ad in there.

Mon, 07/11/2011 - 16:16 | Link to Comment Shell Game
Shell Game's picture

I hope you weren't junked by a senior who did...

Mon, 07/11/2011 - 15:37 | Link to Comment apberusdisvet
apberusdisvet's picture

I wouldn't be surprised if we found out that this group was funded by one of the elite foundations (ie. NWO pumpers) because there is a lot of "recovery", "all is basically well" propaganda in these pages. 

Mon, 07/11/2011 - 15:58 | Link to Comment slewie the pi-rat
slewie the pi-rat's picture

blahblahblah gold is good  yay!

no mention whatsoever (that i cld find w/o reading the 46pp pdf. yet) about the newest advisories on +gold+ which recently started advising investors re:  zero counterparty risk when in "physical possession", whatever that might mean, given individuality.

this is important if there is deflation, especially, and the zombies become more recognizable, which would, of course, result in sheer, widespread, panic and horror, beginning immediately with "The Great Bank Run" shown on all channels & series of tubes.  

if anything bad happens, gold is good.

in the long run, we are.  in the short run, if you hear of anything good happening, it is almost certainly bullshit or lies, at this point.  that glass is half-empty for me, right now, not half-full.     

trying to get everything you can under your own physical control is also good preparation for the possible event spectra.   

hopefully, you don't own zombie stuff and zombies aren't holding your stuff, for you.  if one reaches this point, and tries to think it through, the idea that physical gold = zero counterparty risk might come in handy for the thought-problem.

Mon, 07/11/2011 - 16:08 | Link to Comment dumpster
dumpster's picture

nobody will have been able to predict gold rising to $2,000, $3,000 and other multiples

 

nobody only like many gata , sinclair, willie, sprott, et al.. just nobody listens

Mon, 07/11/2011 - 16:10 | Link to Comment dumpster
dumpster's picture

Just reading the latest issue of the AARP mag. "Sell any gold you have now, while the price is high." I feel sorry for seniors who trust them

 

you have to be kidding the latest market experts lol

Mon, 07/11/2011 - 16:58 | Link to Comment caerus
caerus's picture

Seriously...I love the term "scrap gold"  as in "give me all your worthless scrap gold and i'll give you this crisp paper"  Right now your average person is rushing to sell their "scrap gold" "while the price is high" there's a dealer near the checkout line at my local supermarket.  I feel sorry for the saps lined up at his counter.  When the average person is rushing to accumulate gold (and Ag) well IMHO that's a better sign of a top. I got screwed in May but I'm not selling.  Hopefully EGC finds support above 1550ish and ESI around 36 but then what do I know, as i said screwed in May.

Mon, 07/11/2011 - 16:43 | Link to Comment InconvenientCou...
InconvenientCounterParty's picture

Physical gold is a "short" on the global fiat currency ponzi. Not one or the other, but the whole mess. Not perfect, but remarkably effective as more people are recognizing.

Committed longs in just about any commodity space are going to outperform fiat and derivatives thereof on a 5-10 year horizon.

zero taxes, gold to the moon, zombies in the streets, Ron Paul and I get rich. Sounds just about right.

 

 

 

Mon, 07/11/2011 - 17:38 | Link to Comment lawrence1
lawrence1's picture

"Varing economic assumptions ... "
How about considering the possibility of a systemic currency crisis? Is that too far our for our Oxfordites? Would someone please kick them in their intellectual balls. How about, at the very least, 50% in PM. My dentist says you dont have to brush all your teeth... only the ones you want to keep. Sort of my view here ... only the savings you want to be sure to keep, put them in PMs.

Mon, 07/11/2011 - 20:38 | Link to Comment PianoRacer
PianoRacer's picture

The impact of inflation anddeflation on the case for gold
A report commissioned by theWorld Gold Council

Uhh.. I like gold as much as the next guy, and I hold phyzz, but why should this comissioned report be more convincing than the thousands of convincing articles already out there?

 

Tue, 07/12/2011 - 02:43 | Link to Comment ZeroPower
ZeroPower's picture

And silver 0%

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