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You No Longer Have to Be Crazy to Buy Gold
The good news is that you no longer have to be crazy to buy gold.
Until recently, certifiable believers chasing the barbaric relic were driven by a host of urban legends and wild conspiracy theories which frequently appear on the pages of zero hedge, such as the imminent bankruptcy of the US Treasury, Fort Knox holding only titanium bars that had been painted gold, Weimar style hyperinflation that is just around the corner, or the gold ETF (GLD) owning only paper, and not physical gold.
No more. The long term structural demand for the yellow metal is now so well known, that I can read about it in the tabloids while waiting in line at Safeway. There is an emerging market central bank bidding war going on, with India and China trying to outmaneuver each other to raise their gold holdings to developed world levels. The EC or the IMF may sate that demand by selling off their remaining holdings to bail out Greece. A rising emerging market middle class also brings large, newly enriched consumers from countries that have long cultural preferences for owning gold and silver over paper fiat currencies.
Now that we have decisively broken through to a new all time high, how high can we go? Surely peak gold is upon us. Barrick Gold (ABX), the world’s largest gold producer, would not be hacking out new mines under incredibly harsh conditions at 15,000 feet in the Andes if there were easier supplies to develop.
My own long term gold forecast has been the old inflation adjusted high of $2,300 (click here for the call at http://www.madhedgefundtrader.com/January_4__2010.html ). But higher altitudes beckon. If you want to take gold up to its historic peak in world GDP last seen in 1980, that would see gold at $5,300. Also, keep in mind that the total world gold supply has increased since then from 110,000 tonnes to 170,000 tonnes. For gold to recover the old peak percentage of the world monetary base, M3, it would need to rise to $5,700.
Then there is the granddaddy forecast of them all. After the US allowed the price of gold to float from $34/ounce in 1971, it rose 2,500% to $850. An equal move of the 1999 $250 bottom would take us up to $6,250. I think I’d be a seller there.
The great thing about gold is that, absent a dividend or a coupon, you can never claim it is too cheap or too expensive. While the current production cost at the big mines is around $400/ounce., the only certainty is that there are now more buyers than sellers. Look at the table below of the performance of gold so far, relative to other bull markets of the last three decades, and it is clear that we are only just getting started.
To see the data, charts, and graphs that support this research piece, as well as more iconoclastic and out-of-consensus analysis, please visit me at www.madhedgefundtrader.com . There, you will find the conventional wisdom mercilessly flailed and tortured daily, and my last two years of research reports available for free. You can also listen to me on Hedge Fund Radio by clicking on the “Today’s Radio Show” menu tab on the left on my home page.
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An increase in troll traffic usually bodes well for gold. It means Nadler is desperate
Funny that the contagent hit China and Europe, but America would rather spend their fun bux on _____ .
I never appreciated how contentious precious metals were. Everyone with assets of any size should have some, especially gold, then silver. If nothing else its a universal currency. For whatever odd psychological reasons humans have deemed gold valuable for thousands of years. Silver too. And other things like salt, spices, tulips, lol.
Certainly over the past century gold has done a nice job of preserving buying power, but over a few years or even a few decades not so much.
Typically it pays over the long hall to invest in what others lack an interest in that has some good long term prospects. Clearly people are shaken up enough after the past decade or so that gold is going to be popular with the middle classes and the investment classes of many countries for years to come.
Whether that results in increase in value in local currency is anyone's guess, but one suspects that as long as governments keep putting money in peoples pockets gold will be in demand.
I would be very surprised not to see gold re-enter the 900s in the near future, just due to margin calls and panic selling.
Thats because life was dull for thousands of years (and women have always liked shiney things). It was the only status symbol/sex getter that could be easily transported and divided.
In the modern era, energy is the best logical choice of currency if it could be easily stored/transported. That is probably what they were really trying to do with the carbon credit thing.
Good points, although I didn't understand your previous shoe shine boy comment. I don't know of a single person who owns physical gold, and I watched the video on Youtube of the guy trying to sell a gold Maple Leaf for $50 on the street and nobody buying. Contrast that to houses in 2007 and dotcom stocks in 2000 and there's no logical way you can say the public's behavior toward gold is even slightly similar to what it was towards Pets.com and a 3rd home in Vegas. Just saying.
The three grand I traded for physical in 98 placed me in the nut job category before being a nut job was cool. Can't wait for the day when a couple coins gets me outa debt forever.
If people believe in representative democracy, they'll believe anything, even that gold is money!
Oh good... Now I can go to cocktail parties without people thinking I'm some kind of rightwing survivalist... whew...
Yeah, us crazy people who bought it because of all the crazy conspiracy theories bought ours way below $1200. I'm glad you don't have to be "crazy" anymore.
The problem with crazy is staying solvent until everyone realizes that you were a genius all along.
Crazy like a fox; I still have a substantial cash position, and that is why.
That $6k gold will not seem so brilliant when a cup of coffee costs $50.
However, if you kept your CD or 401k or cash under the mattress - then cups of coffee will be off the menu (like most everything else!)
Gold will preserve your capital in real terms - it will not make huge profits (unless you are trading it with leverage). It is a wealth preservation strategy. Which is perfect when most other strategies are leading people to the poorhouse.
Exactly, though I wonder how much net worth one must have to make the effort worth it. If you're 55 with a couple hundred grand to protect it makes sense. If you're 25 with 10 grand - that will just keep you out of the poor house a few extra months but won't be life changing.
Maybe those without a nest egg are the ones making the "can't eat gold" argument. They are better off playing with leverage to get rich off the colapse as that's the only hope of not getting reset to zero with all the other proles.
Gold will also kick the shit out of your debt. Bye bye mortgage.
Then again, during the Weimar Republic, at the end of the Hyperinflation, one ounce of gold would buy you an entire block of prime commercial real estate in the heart of Berlin. Or so I have read on ZH. Make of that what you will.
Did a little search and this :
The sum of $500 would translate into 25 ounces or thereabouts.
My local high volume retail bullion and coin dealer says all calls and trades are sells.
Perhaps the heavy hitter sell-side is not as strong as it once was. Don't put all your analysis eggs into the coin dealer basket:
COMEX Large Commercials Break Ranks http://tinyurl.com/2363r2tconventional wisdom huh
"titanium" ?
MHFT have you been listening at all? Google "specific gravity" please.
Alert reader Trial notes that titanium is not as heavy as tungsten. C'mon MHFT, check facts please.
Other than that, crazy ol' moi has been a buyer of gold for decades. That would be physical gold, not a hedge fund or GLD...
So they're not so hard to move around in Fort Knox!
But he also wrote "titanium bars that had been painted gold", not plated, so the joke's on you...
I got a tip from a shoe shine boy to buy gold.
Does that mean anything?
According to the Groucho Marx Rule of Investments? SELL!!
I actually remember seeing the Groucho Marx interview with Dick Cavet or Johnny Carson where he explained how he lost EVERYTHING in the stock market.
PBS ... American Experience + The Crash of 29. He lost his shorts!
Yep - everyone chases fiats while Chumbawumba and Co plan for great escape. Anyone want to start a flotilla of 330ft yachts and sail to Tahiti? Chumba -whattaya think mon?
Who is this new little twit on Cnbs talking shit about gold at every turn? He is more stomach wrenching then beeker Neil. He sure seems like a plant (cheerleader) for the big banks and is quite pompus at that.
I've already dealt with him in earlier comments:
Why do people "inflation adjust" the price of gold? If there is an episode of inflation that causes the dollar to weaken and gold to rise in dollar terms, that price change in gold is inflation. What is causing changes in nominal gold prices if not inflation? So why "inflation adjust" something that is always adjusting to inflation in real time?
A straight comparison of the dollar price of gold (or any asset) in 1980 and 2010 is virtually meaningless because whereas gold hasn't changed, today's dollar is a shadow of its former self.
Although gold "only" reached a nominal $850 in 1980, it was far more expensive (in real, purchasing power terms) at that point than it is today at $1200.
Good one, given certain assumptions
isn't part of the point of gold not what its someday hypothetical dollar value might be but that after the Weimer-style inflation, when you're negotiating with the posse comitatus for your food they won't be interested in your fiat, it'll be your sister or your gold.
either that, or to bribe your way out of the concentration camp.
I'm long gold but even I don't believe that for a minute.
If fiat currency goes the way of the dodo bird and I have tangible goods to sell I'm not taking gold in return. I'm taking other goods that I need.
LOL,
Yeah, when they come to round me up to bring me to camp FEMA, I'll be like,
"wait, let me get one thing from my safe before we go. I'll need this for the guards later..."
Yes... that is one point. But, it does not have to come to that.
On that note I envision paying a pilot to get me and the familia to some remote hideaway...
"You No Longer Have to Be Crazy to Buy Gold"
...but it sure helps!
OK, I laughed.
I am the perfect proxy for physical gold holders.
Bought at around $400.
Will not begin to sell until at least $2500.
Does not care if it goes back to $400 or anywhere in between... will buy more.
My personal "gauge" if you will is my monthly expenses. I expect one ounce of gold to cover one ounce of expenses at the top. I will not begin to sell until one ounce approaches 50% of my monthly expenses.
Until then... sovereigns stacked in neat little rows bitchez! Pre-1964 dimes, quarters and half-dollars bagged and going nowhere bitchez!
In ancient Rome there was a time when 1 oz. of Silver bought 600 lbs of wheat.
A very interesting "gauge". Thank you, kind sir.
And I will certainly add to my stash, as you also point out, buying on the dips.
One thing is certain, it's going to be an interesting ride.
US fixed gold at $20.67 in 1900, so gold hasn't conserved wealth as well as even T-Bills.
Nadler, cut it out, you said gold would go down when it was 800
This isn't a market to add positions into- there's a trillion dollars looking to kill speculators outside every asset class.
Follow the yellow brick road...
How about a tax on gold ownership?
"Gold Gets All Political". Adrian floats the disturbing possibility that governments, looking around for easy sources of revenue, may decide to tax the private ownership of gold. Whether it's possible or not is another question entirely... but it is food for thought... and I suggest you take the time to run through this article and the link is here.
This is from Ed Steer's daily update.
http://www.caseyresearch.com/displayGsd.php
GLD at 850 by september!
I'm buying miners when GLD hits 850, cash will do for now
Only a FOOL would get GLD/SLV and ZH'ers know it.
www.zerohedge.com/article/guest-post-gld-and-slv-disclosure-precious-metals-puzzle-palace
If you do not physically hold it you do not own it.
Agree, the real value of GLD and SLV is close to $0. These funds are great for some speculation but must be avoided at all cost if you're trying to protect your wealth.