Guest Post: Should I Buy Gold At Its All-Time High?
Submitted by Simon Black of Sovereign Man
Should I buy gold at its all-time high?
There’s one question that I’ve been seeing over and over for the last several weeks as the price of gold has taken out its all-time highs and continued a nearly uninterrupted ascent: Should I buy gold now?
It’s understandable, especially for people who don’t own precious metals yet. Nobody wants to be the sucker who buys gold at the top, only to watch it crater back to $1200 or below. But here’s some food for thought–
The US dollar is shattering historic lows against currencies like the Swiss franc, Australian dollar, and Singapore dollar. Any currency that isn’t a complete disaster is now being viewed as a safe haven. And the mainstream world is now, finally, waking up to the reality that the United States might actually default.
Never mind that the government has been insolvent for years and the evidence of such has been widely available to anyone willing to look at basic facts. Literally, only in the last week have people finally began to consider the possibility of a US default.
Here in Europe, the situation is arguably even worse. No one is being shy about a default in Greece– it’s discussed openly now by policymakers, and major financial institutions are preparing for a restructuring. And with its public debt more than 120% of GDP, Italy will not be far behind.
Governments no longer have the benefit of operating behind a curtain; their financial imprudence and technical insolvencies are now under the spotlight for all to see… and confidence is fading quickly.
The more people lose confidence in the dollar and euro, the more they look for alternatives. Large institutions and money mangers collectively control trillions of dollars within the financial system. Unallocated capital– funds held as cash and not being actively invested at the moment– must be held somehow, somewhere.
This is the chief reason why so many smaller currencies are surging. Compared to the dollar and euro, the Swiss franc looks incredibly safe, and money managers have a much higher degree of confidence that their Swiss bonds will be repaid than they have in the US or eurozone.
The more capital flows into these smaller currencies, the more they’ll appreciate against the dollar and euro. It’s simple matter of supply and demand– increased demand for the Swiss franc coupled with excess supply of US dollars means a stronger franc in US dollar terms.
Ultimately, this is the primary reason for gold to go higher in the long term.
Large financial institutions are increasingly looking at gold as a safe haven; it’s becoming less of a speculation and more of a store of value… and unlike most of the other available asset classes, precious metals are not politically sensitive.
Even stronger currencies like the Swiss franc have limits to their appreciation. At some point, the Swiss National Bank will impose capital controls to thwart the rise of its currency. Oil and agricultural commodity prices will likely be regulated and speculation outlawed if prices become too high.
But if gold goes to $2,000… $3,000… it may be an embarrassment to central banks, but it won’t become a populist issue. You won’t see any Tunisian merchants setting themselves ablaze because the price of gold is too high… and not too many politicians looking to fix the price.
Even if they do try to regulate gold prices or even make it illegal, you can be sure that the gold trade will continue to thrive in the rest of the world– especially in Asia and the Middle East.
So instead of worrying about buying gold at its all time high, ask yourself another question instead: Over the next few years, do you expect that these broken, bankrupt governments will inspire confidence among institutional investors, or do you think that confidence will continue to erode?
If you’re leaning towards the latter, you can be sure that more money will flow into gold, and that prices will rise.
Yes, there will be price fluctuations. Whenever the US government announces that it has finally reached a debt deal, there will probably be a correction. Given what’s coming in the next several months and years– debt downgrades, more budget battles, government shutdowns, asset seizures, etc., any correction will be a small blip along a long-term rising trend line.
And in case you’re still worried that you’d be a sucker to buy gold at $1600, consider that, if you don’t, in three years you’ll probably feel like a sucker for not buying gold at $1600 when you still had the chance.
(11 votes)
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Gold is cheap, bitches.
I am Chumbawamba.
I asked myself the same question when gold was at it's all time nominal high of $487.00
Glad i answered it right.
I disagree with the premise. Gold is worth exactly what it was when you bought it at $487.
The real question is, "Should I Sell Dollars At Their All-Time Low?"
And BINGO was his name-O!
It need not be difficult. Sell a third when it goes into overbought territory. Buy a third when it falls into oversold territory.
If you hold none currently, but your first third now, if it falls much more, add your second third. If it falls even more than that, add your last third and then refer to the above. When you are all in, your pm holdings should be 10-30% of you porfolio, depending on your stomach and vision of the future.
Keep it simple, stupid.
Gold will go DOWN over the next few days, because I just bought some today.
Gee Mr presents a good plan if you do not have any (or much).
Chumba is right, gold is CHEAP! See you guys at our party when we reach FOFOA's $55,000.
I just bought 20 oz phsical in Canadian dollars. It was options exp and the CAD was at an all time high. Total after it hit my pocket, $31,120 CAD,
Somebody has to paint the tape.
you will be happy a year from now.. no worries. throw it in the safe and continue on with your evening.
Awesome Red Pill. Train of thought is correct of course, but all time low? I think the FRN can and therefore will have it's day of implosion.
Soonish too. AS I said on another thread, mark 15th august. I saw a huge sign for that being Dollar Tipping point day.
And as for the premise of this Black Tale, I say NO!
Buy Silver.
ORI
http://aadivaahan.wordpress.com/2011/07/27/pre-cursor/
is the trend your friend?
if yes, then yes, sell. very carefully. duh.
silver was recently 30:1 v. gold (before the margin increased)
now, silver is 40:1 v. gold
silver is on sale! trust me!
i was gonna post that lightning hasn't struck me, yet.
then i saw ORI'z post!
GAHhhhhaahhhh!
C'mon Slewie! Silver hug!!!
;-)
ORI
well, ok.
you were pretty tough on i_shah the other day; i though g_bat was gonna kick you right in the cunt, there
i-shah is a pretender to the sufi throne Slewie. A silver tongued pretender is all.
ORI
When people start to reject dollars en mass, Ole ink jet Bennie will screaming, red faced and wild eyed "GOLD IS NOT MONEY!!", while screwing himself into the floor boards, like a twisted Rumpelstiltskin.
..paints a funny picture anyway
What makes you think Ben cares? He's a hired hand. He has no skin in the game.
Exactly. I've been buying silver for over a year now thanks to reading ZH. Since then, the GSR has steadily decreased until the margin hikes. When silver closed around $49 that one weekend, the GSR was around 36:1, so I went into my local coin shop and traded 36 eagles per one gold eagle. After the margin hikes I traded two gold eagles for 44 silver eagles EACH.
To be clear, I converted 72 silver eagles into 88 silver eagles within the span of three weeks. The only cost was fuel(neglibile since the coin shop is 8 miles away), and $100($50 flat "swap" fee each time because he always rounds the GSR down).
I like to describe playing the GSR like this: there's heavy traffic on the highway, 2 lanes each way; sure you can stay in one lane and still get there, but most often you'll get there quicker if you know when to change lanes.
There will be more margin hikes, expect it.
The REAL QUESTION IS exactly who will you "sell" your worthless DEBT BACKED FRN's to?? The gold i TRADED for my worthless frn's, will be integrated into what ever the next fiat cycle is, if that should happen. So, tell me again how debt is wealth?
I realize this is hard to understand from your perspective, but, wish and try as you might, no one can stop this, we were warned, and chose to disregard the warning. Fortunately, this will bury the Keynesian theory, hopefully forever. We are now in catch 22, there is one more step to go, it is important to understand that any step taken will not reverse the course under any circumstances. That realization is forthcoming.
Some thoughts from McEwen on the debt crisis and it's impact on gold.
http://goldandsilverlinings.com/?p=1469
If you think the dollar is low now, wait til next week, (ad nauseum)
If you think the dollar is low now, wait til next week, (ad nauseum)
I bought in big right after the tech bubble when it was around 320/oz. I was called insane for buying it - my broker friends literally turned on me like rapid dogs. But the tech bubble made me realize that there were no more adults in the room running things. I also bought more at 1K as I realized we really were on a runaway train with a conductor (the bernanke) as high as a kite on ketamine, crack and LSD.
Now, if I didn't already own some I would say, buy it at the dips.
DIPS = each time the Govt lies and says they have a plan that will work.
It happens every few months. Then gold drops for a bit on the lie - then a few weeks later the lie is exposed and gold goes back up. There is no easy fix anymore, so you know when they talk about one that they are lying. Simple. A real fix will be something that will scare the crap out of the American populace as well as the rest of the world.
Gold will only fall back if there is a full acceptance of a (reasonable) austerity plan. You will know it is a real plan because it will scare the crap out of Krugman, Lies-man, et al. Ultimately, with the players in office now, I doubt we'll see that effective plan (both scary and effective) until it is far too late.
Also I think in the end they'll have to print their way out of this as deflation is not an option to them. Plus I have history on my side. Only Volcker had the balls to act in a responsible way, and that was a fluke - the best futures indicator is that Obama showed Volcker the door in January.
What does the "O" stand for Roger?
"Nothing."
http://youtu.be/AXGWescUeQs
+++++++++++++++ for great taste in old flicks and being a gold bug! next thing ya know you will tell me you believe in the Holy Bible and the Constitution of the United States! at which point the FBI will Flag You for being a Home Grown Terrorist. But I will dig you! and so will your other Brothers and Sisters here! who knew there were chicks with brains out there? news to me, it was.
Should I buy at an All-Time High? It doesn't matter, you'll get a chance to buy at its next all time high and then again and again and again and again...
Meanwhile I'll stick to the dips.
If you look at one of the charts from this post (this chart has shown up twice in the last few days), there is a pullback each and every time the debt ceiling is raised.
Maybe it will be different for the first time now, but the chart indicates 100% historically that a pullback of some kind occurs after the debt ceiling is rased.
http://www.zerohedge.com/news/time-debt-ceiling-hike-really-different
Manthong,
Scary thought your handle.............LOL
Correctomundo, it's because the idiots actually think something positive has occurred.
When in reality, the real cost of metal just went up, and the currency dropped even more..But, hey......take advantage.
It's already beginng Gold is down to $1,616.00 from $1,625.00, and Silver has lost $0.52, from $41.00.
But what' will dip first - the price of gold or the value of the dollar?
The gold is cheap -- I fully agree. And $1600 is nothing compared to what is around the bend.
The I am Chumbawanba bit means you are an idiot. Listen Chumba, we went over this before, drop that nonsense you baffoon. Have you gotten busted for drinking and driving since your last episode about a month back?
Trust no one who is wearing a paper bag on their head.
LOL, gets another green one!
"Should I buy gold at its all-time high?"
Of course not. Only if you want to lose money.
excellent logic critique. Need to keep people thinking.
I bought but I am Canadian. My dollar is at a 3 year high. I figured, time to sell.
Is this a poll? Damn they are both correct statements. Choices, choices.
money
is not gold
Be fair, Bernanke didn't lie. Gold is NOT money!, It's WAY better than money and more effective than Zanax, helps me sleep well at night.
No FRNs can claim that for me anyway.
the Central Planners are getting nostalgic for the metal.. from their buying habits are telling me any way.
http://www.youtube.com/watch?v=40Cs_Y3ZJjo&feature=related
If I were us....I'd stop thinking about PMs in terms of dollars at all. When the dollar goes to 0, PMs go to infinity. They'll be "worth" whatever they'll buy at the local farmers' mkt or barter site. They'll be worth...your Life.
Correct answer is gold is fairly priced. It's always fairly priced.
I just found this out: from januari 2012 it's not going to be cheap anymore. Excuse me please if this is old news, I don't believe I've seen it before.
Hidden in a healthcare bill there is supposedly a tax on gold coins and bullion effective januari 2012.
Not that it matters much for us, most of the folks here either have enough gold, or are planning to buy asap.
the populace however... is going to be fleeced.
very weird that constitutional money (gold) is going to be taxed...
http://www.moneynews.com/StreetTalk/New-Tax-Gold-Hidden-Obamacare-health...
Reporting $600 (or more!) transactions on IRS 1099 forms has already been yanked out! Start taking notes, friend.
Simon Black Rulez!
I wonder what the gold /ipad exchange rate will be in 3 years...
Which version? In 3 years we'll be at version Ipad 7.0 with the build in ice crusher and coctail shaker.
Needs to come with an app for measuring the tungsten content of your money...
But it still won't have a danged USB port...
Agreed. Nothing goes straight up. This is not the dip. Buy the dip.
wise words, but some people only have the courage to buy things when they are going up. so then they miss dip and never buy.
It's this kind of thinking that is the problem if you ask me (I know no one did.)
Dollar cost average your acquisitions of both gold/silver. Waiting for the top/bottom is, in my opinion, very dangerous right now. At any moment something could cause even more economic collapse and currency devaluation. There is a possibility of "default" and if something like this were to send gold/silver in the $1700/$50 range then it will be difficult to say if that's the top, or if it will keep going. You run the risk of waiting for a correction that, since silver's been consolidating for months now, might never come. I bought silver @$12, $17, $28, $34 and now I bought more at $40/oz. I didn't want to buy it, but I dollar cost average my acquisitions and don't le the price in terms of dollars bother me.
If you're buying gold/silver at the "bottom" because you're planning on getting a higher return then good for you, that's a dangerous game that most lose. From experience setting a bi-weekly date, or a monthly date is best. I understand the debt ceilling talks/etc but if as I want to point out you're buying this for a quick gain or quick return you're doing this for the wrong reasons. Your investment time-frame for precious metals should be in the decade range. Not the week or month range. With this mentality, it's a screaming buy @$1600 and even more so since it has broken that ceiling it's already hit $1625. Who's to say it doesn't scream past $1700?
People and the markets are generally pissed off and tired of this bullshit government/debt ceiling/printing money/recession/depression talks. You have surging demand from central banks for the first time, you have a monetary metal that's also industrious and more rare than gold some say.
Don't ask yourself if you're buying at the top -- Ask yourself why you're buying and buy for that reason. Ignore the dollar amount because I am nearly certain 12 months after you purchased it, you will be in the black on your investment. I bought silver in november of 2010 when people were calling the "top" for silver at $30/oz. I dollar cost averaged and got it on a dip to $28 or so. This turned out in my favor, but now looking back, I've made about $12 off of every ounce I bought. I don't measure my gains in US dollars though... I look at overall purchasing power.
Oh yeah and there's that whole "price suppression" thing we've got going on. Throw in the ratchet effect the Fed's dealing with and I'd say you have some pretty good reasons to buy as much as you can at whatever price... and that whole HKMEx coming online and possibly printing a much different free market price for gold and silver... Keep in mind the price you're paying right now is already artificial in nature. If they lost the grip (not saying this is going to happen tomorrow) tomorrow for example, I don't think it would go to $1700. I think it would go much, much higher.
Just my two cents and how I've learned to let the price move where it will while I build up my physical savings account.
Very nicely written tekhneek.
+ $1605
My plan is even simpler, when I have some fiats come my way, I just and buy. I look at the price, sure, but it does not influence my purchase decision. I never try to time my purchases (no BTFD), instead, it has worked over the deacdes if I BTFSpike! I have been buying gold since the 1980s.
Physical only!
Couldn,t agree more. Fundamentals havent changed, just more emphasis.
I made decision at the start of this year to stop saving, economise for 2 years and buy £1000 of pysical every month. Whether I got 50 Oz at the start of the year or 25 Oz this month I don't care, it's my hedge against the collapse of the currency. I'm buying while I can abd while stocks are available.
If things get really bad then I win because any fiat I have is likely to be a risky asset, likely worth not much but my silver will always be worth a lot or a little and will always be tradeable. Unlike a failed currency.
It's a hedge, you decide what you can afford to do and go buy physical. Whether it's a few grams of gold a month or a few Oz of silver or a monster box, look at the fundamentals and make the decision.
If anyone doesn't understand this, then go fuck yourself, see you in hell.
Keep on stackin
Finally a realistic view from sovereign man.
I agree. this was one of the better gold related articles written here in a while. I am one of those concerned about the rapid rise in gold, and this has paralyzed me.
Gracias.
YES!! REALITY METATAG IS BACK!
Only if you are in it for the long haul.
Do what I do.Every time you get a paycheck buy 50 GAEs and put them away.
Your stack will grow in no time!
Dog
You buy $75k+ in gold coins every time you get a paycheck? *cough*bullshit*cough*
slow_roast,
Thanks I needed that!.
First real laugh I have had here in a LONG time.(<:
If so, He/She is one lucky dude/ette.................
You allocate $80K from every paycheck to gold?!?
That is if by GAE you mean Gold American Eagle and 50 was not a type error.
Or perhaps you get fewer paychecks then the average person.
Or perhaps you are very wealthy!
You buy $75k+ in gold coins every time you get a paycheck? *cough*bullshit*cough*
==> a paycheck buy 50 GAEs and put them away.
Methinks you meant:
" buy a $50 GAE"
C'mon....I cannot believe anyone bought into that!
Um, dollar cost average? You never know when the true de-coupling hits...
My money is on the fiat crack addicts. Or should I say my Gold (and Silver) is on the fiat crack addicts.
Fish gotta swim, fiat has to create debt.
Fish gotta swim, fiat has to create debt.
Fish gotta swim, birds gotta fly,
Fiats gotta crash, ...
But I don't gotta crash with it!
Ditto. Addicts getting real scratchy lately; little *gold* bugs crawling all over their skin.
Let us try that excellent image again from another source.
Buy.
I plan to once today's slaughter in Silver gets cleared away like deadwood.
Price up or down, what does it matter as long you have physical control?
Whatever is it you're buying, buying at tops is never a good thing. Wait for some minor corrections at least. The seasaws on the way to 2,000 and +
Naah!
I have been BTFSpike since the 1980s. I am WAY ahead on my physical holdings. Gold is something you CAN buy and HOLD.
Chumba kicked off this comment thread right. Gold IS cheap!
Doubt me?
fofoa.blogspot.com
Top gold analyst out there IMO.
just watched story on CNN advising people how to SELL their gold...John Q Public is on the wrong side of this trade...
1980 Au high: $850
2011 Au $850 adjusted for inflation per BLS: $2328.44
Au may have hit a nominal high but it still has a ways to go to test the 1980 $850 level once inflation is factored in
But what do I know
In 1980, gold traded at 6x the value of the S&P 500 according to Barry Ritholz's charts (source: http://www.ritholtz.com/blog/2011/07/bulls-bears-piigs/).
Today, that would be $7884 per troy ounce. That's a lot higher than the $2328.44 you get from your inflation-adjustment calculation. In other words, gold can go significantly higher.
Peter Schiff often mentions 1:1 Dow to Gold so $12,000+ perhaps or they'll meet somewhere in the middle between the two.
I think 6,000 is a more likely intersection.
agreed...problem is how are you going to calculate the value of Au? Relative to some other asset obviously...my calculation compares the price of Au to the $...yours to the value of the ES...however you then must figure (it seems to me) the value of the ES in $...I may be wrong but that seems like two steps instead of one..I don't disagree with you btw and find your figure intriguing to say the least...
btw the comparison to the 1980 high is NOT a projection. It is a backwards looking comparison simple point...Au is NOT as expensive as in 1980...finis
Thanks for that.
crowded trade
Please explain how so, if less then 2% of global financial assets are in gold?
He can't and won't explain it. He might try to bullshit about it, but he has no credibility on that issue.
You are correct on gold not being a "crowded trade". In fact, it's the opposite of that.
And only 1% - 3% of Americans own physical, non-jewelry gold.
Give you another green Bay!
What ever you do, you own it, dont sell. Hang in there.
I am experiencing the same long periods between sell at a profit in Silver this afternoon because the people want to buy at lower and lower prices and forcing the sellers to drop prices to sell... the weak ones who need money now.
I am a strong one and can wait a while.
Gold Eagles did not move for about 5 days while the impasse over (Mexican stand off) between the sellers and buyers at the 50 dollar spread. Someone collasped it and suddenly the Eagle bullion spread is half and the buying and selling has resumed for now.
Someone IS buying and more someones is selling.
This is not the time to be getting into paper money. I have that written into my heart. Call me a bull if you want... but be careful until this whole poltical soap opera playes out for the USA one way or the other by AUG 2.
IGNORE THE MEDIA whipping the people into a froth.... That is all noise.
As far as Reid's comment of boner's big wet kiss, I say Reid's bill is a dry hump in the ass.
Yuppers, every spare fiat I can "part with" gets "monetized" in PMs.
acquiring, not trading.
In REAL terms Gold is nowhere near a top. In REAL terms $ has lost 95%+ of its purchasing power since the fed was opened in 1913...
gold is 16 times cheaper now vs the money supply than it was in 1980 peak terms. it is no where near a top. this is 1980 gold at 50 dollars.