For all of you gold experts out there, I purchased some shares of a gold mutual fund in my IRA account and it has increased 40% in less than a year.  Is now a good time to sell or is gold going to continue to rise?

...

awgee?  awgee?  anyone?  anyone?

I bought a couple of gold coins & have a couple of 100oz silver bars.

As far as I can see, what you are dealing with is luck, given that
the stock market is being brazenly manipulated.  But then it probably
always has been. 

I think that the mkt is due for a steep drop, and gold to go up, but I
can’t see gold going to 5 grand, or the mkt dropping to 5000.  30% off
is my signal to buy back into the stock mkt.  From peak that is which
was about 14,400.  So about 9000 or so.  So I am just sitting back and
waiting.

Now is a great time to buy gold. Oil/gold ratio looks good for a short term raise in gold as well as all the inflationary pressure that looks to have no end in sight.

Liz,

I wouldn’t hold your breath waiting for the market to hit 9000. Look at what happened recently every time the market tried to dip under 12k, the FED steps in frantically pumping up a balloon with a bunch of holes in it. If you want to see your 30% off or more value simply price the market in a stable currency (say, gold). For the rest of the year I’d expect to see 12k-13k oscillation.

Keep you gold atleast through this year, enjoy outperforming the market

Awgee, please enlighten us with your GREAT knowledge on Gold O wise one.

I have received a few pms lately asking my opinion on the near term and longer term price action of gold. With the sender’s permission, I am answering here instead of as a private message.

First, I do not consider myself a goldbug. I have no particular fascination with the metal, nor do I consider gold to be a particularly good investment most of the time. Gold does not pay a dividend, nor does gold accumulate interest, nor can you eat it, nor can you live in it. Historically, gold is a retainer of value, especially during inflationary times.

I think this country, and the world as a result of this country’s monetary policies, is beginning to experience increasing price inflation due to massive monetary inflation and the constant restrainment of price inflation through investment asset inflation. Examples of investment asset inflation would be equities, real estate, OTC derivatives, bonds, etc. Some, if not all of these investment assets are deflating, especially OTC derivatives, and the Federal Reserves response to asset deflation will be monetary inflation, on a historic scale. Examples of monetary inflation would be lowering of the overnight rate, lowering of the discount window, exchanging treasuries for asset backed securities, guaranteeing the Bear Sterns takeover by JPM,
and the $150 billion stimulus rebate, and there will be more. IMO, monetary inflation, price inflation, and dollar devaluation are inevitable. There is nothing the Federal Reserve or the US government can do about it now. A huge boulder has started rolling down a large hill and the only thing that can stop it is the bottom of the hill.

IMO, politicians and bankers are able to print money and retain power through a fiat currency and fractional reserve central banking system. Rothschild once said, and I am paraphrasing, “Give me control over a country’s money, and I care not what government is in control.“ I do not think either politicians or power brokers will allow this country to revert to a gold based or precious metal based monetary system. Politicians and bankers can not create gold, but they can create fiat currency. I do not see any reason why they would give up that power. Do you?

I have conflicting opinions on the future of stock prices. On the one hand, a deflationary environment will have a deleterious effect on a consumer economy, and on the other hand, as the Fed prints more money, it has to go someplace and the easiest place for it to go is through the stock market.

Which brings us to the big question. How high will the price of gold go? Or low?

To answer that, I prefer to consider the historic value of precious metals vs. the historic value of fiat currencies. All fiat currencies in history have reverted to their inherent value, which is zero. Historically, gold and pms have been used as a store of wealth or value, especially when people do not trust currency or government. So, to try and figure our what gold will be worth in terms of dollars, I find to be of marginal use. I prefer to think in relative terms. I think it best to consider what assets will be valued during a highly inflationary period, and my answer is commodities. I think we are six years into a 20 year commodities bull market, relative to other asset classes. Why 20 years? Because that is the average length of time for a commodity bull market. If I knew how to invest in wheat, and rice, and oil, I would. But I don’t, so I own gold and precious metals. Actually I am slightly invested in some Canadian oil stocks.

So, my best GUESS on what the top price of gold will be in dollar terms? $1700 or whatever price gold is selling for when the Federal Reserve again fools the public and pretends to connect the dollar to gold. (They won’t really, but they will come up with some convoluted, complicated smoke and mirrors that will fool the American public into thinking that the dollar is tied to gold). Or if the Fed does not pretend to connect the dollar to gold, one ounce of gold will approach one share of the Dow. What I mean by that is if the DOW is $10,000 in dollar terms, then gold will approach $10,000 per ounce in dollar terms. I have no idea what the DOW will be. Historically, one ounce of gold approaches a 1:1 ratio with a share of the Dow just before it crashes. And when gold crashes, it really goes off a cliff.

I think I answered all the questions asked of me, even if indirectly. 

Anybody care to weigh in on this:

http://money.cnn.com/2008/06/20/markets/thebuzz/index.htm?postversion=2008062011

This guy doesn’t know what he is talking about. Probably some air head 30 year old rookie. When in doubt, I generally look up to the older Americans for advice who’s been through the ups and down of our economy. This what the olders Americans are saying.

“We face a 75% chance of a financial crisis within 5 years” - Paul Volcker, former chairman of federal reserve
“The U.S. does not have more than a 10% chance of avoiding Economic Armageddon.“ - Stephen Roach, Morgan Stanley
“We are confronting a day of serious reckoning” - Robert E. Rubin, former Secretary of the Treasury
“Gold still represents the ultimate form of payment in the world. Fiat money, in extremis, is acceptable by nobody. Gold is always accepted.“ - Alan Greenspan

How big is our problem? $74,000,000,000,000.00! That is $74 Trillion dollars!

When in doubt and when every place to invest is tanking, When you cannot trust Bernanke or the U.S. Government, Americans will turn to Gold. This Panda knows!!!

Gold produces no income, and costs money to store.  Unless you are holding physical gold in inventory in your own safe, it is very likely in the event of a complete financial collapse that electronic record of your ownership of some gold will be worth as much as the paper its not printed on!

“It gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.“ Buffet on Gold during a 1998 presentation at Harvard.

awgee - 20 June 2008 08:19 AM

Anybody care to weigh in on this:

http://money.cnn.com/2008/06/20/markets/thebuzz/index.htm?postversion=2008062011

I think that guy is making things up. I remember the frenzied trading in commodities back in the late 70’s/early 80’s when gold was driven to it’s absolute height. I really don’t think there is anything new going on.

In my lay opinion, there is a lot of money sloshing around the world markets right now. From pension funds, retirement accounts, sovereign wealth funds, hedge funds, and private equity firms; they are all chasing returns, and moving markets in the process. This is causing inflation in things that people buy everyday, in turn degrading the real value of the money being invested which causes more agressive pursuit of profits on investments.  This money gets pulled prior to the contract expiration, and reinvested in the next “opportunity” and driving up prices in whatever their target is at the time. When mortgages blew up, the smart money was already moving on to oil and gold, from there it’s gone to commodities, maybe next it will go back to the stock market (doubtful) or foreign credit markets or possibly tulips. Whatever the path, when the music stops and the world recession begins, precious metals will be the only safe place to protect the purchasing power of that ‘money’ until the next boom. When that time hits, gold will do exactly what it did in 1980 as last-minute investors try to hide from inflation. When the price of gold matches inflation expectations, the smart money will bail and dump everything into government bonds until the recovery begins.

That’s just my opinion =)

Awgee and Nude,

Do you feel the same way regarding foreign curriencies like Euro, Canadian Dollar, Swiss Franc, Norwegian Krone. Swedish Krona, and the British Pound and you so do with precious metals. My one concern with foreign currencies is that the foreign governments can also print their currency just like we do with the dollar. Do you guys feel that precious metals is a safer place to put your money than foreign currencies when the world recession begins? What do you guys think about Silver? Is it under valued compared to Gold?

I can’t speak for awgee, but fiat money is just toilet paper when the government backing it has no way to support it. So, no… I don;t think any currency will be immune to a global recession and some will suffer far more than others. In a world where currency is traded on open markets, what a dollar worth is relative to other currencies. There may come a day when $1000 in gold is only worth 325 euros rather than the ~750 it is today or it could be worth 1500 euros next year. I know that is not very helpful, but there is only so much you can do to protect the buying power of your capital. But let me offer this word of advice: if you are buying precious metals to protect yourself in case of all hell breaking loose and fiat money becoming worthless, then don’t rely on some ETF or electronic vault. If worse does come to worse, the only way to truly be positive that you have something worth trading for guns, seeds, butter, and booze is to take physical possession of whatever PM you own. I like Canadian Maple Leafs and US Buffalos although there is a smal premium over the spot prices.
 
So, anyone want to explain why a one ounce .9999 pure American gold coin with a face value of $50.00 will cost you $932 at Monex and $1200 from the US Mint itself?

Hmmm, I still expect the mkt to go below 10,000, and we are back at 11,8 for the dow.

A few gold coins some cash money, some booze as nude says.

Some canned goods, and read Lucifer’s Hammer if you want to read some sci fi
suggestions as to what imaginary people did in advance of an imaginary meteor
strike.  Needles, thread, bleach, jerky.  Etc.

Nude - 20 June 2008 05:08 PM

I can’t speak for awgee, but fiat money is just toilet paper when the government backing it has no way to support it. So, no… I don;t think any currency will be immune to a global recession and some will suffer far more than others. In a world where currency is traded on open markets, what a dollar worth is relative to other currencies. There may come a day when $1000 in gold is only worth 325 euros rather than the ~750 it is today or it could be worth 1500 euros next year. I know that is not very helpful, but there is only so much you can do to protect the buying power of your capital. But let me offer this word of advice: if you are buying precious metals to protect yourself in case of all hell breaking loose and fiat money becoming worthless, then don’t rely on some ETF or electronic vault. If worse does come to worse, the only way to truly be positive that you have something worth trading for guns, seeds, butter, and booze is to take physical possession of whatever PM you own. I like Canadian Maple Leafs and US Buffalos although there is a smal premium over the spot prices.
 

Nude and Awgee, I current hold a good chunk of my cash in Canadian Dollars and Euros. Do you guys recommend that I convert all of this into Gold. Foreign Cash just seems like a safer investment to me as the price does not fluctuate so much like Gold and Silver. Again, I can be completely wrong.

What’s your opinion in carrying silver?
Panda

Panda,

I highly recommend you read A Random Walk Down Wall Street, by Burton Malkiel. I also recommend you read many of the other books cited in that book. Once you get through that, then we can restart the book thread from back in the day. Hopefully you will graduate to Mark Douglas, and we can all have a great discussion about trading and investing. Baby panda steps, baby steps…

PANDA - 20 June 2008 06:52 PM

Nude - 20 June 2008 05:08 PM

I can’t speak for awgee, but fiat money is just toilet paper when the government backing it has no way to support it. So, no… I don;t think any currency will be immune to a global recession and some will suffer far more than others. In a world where currency is traded on open markets, what a dollar worth is relative to other currencies. There may come a day when $1000 in gold is only worth 325 euros rather than the ~750 it is today or it could be worth 1500 euros next year. I know that is not very helpful, but there is only so much you can do to protect the buying power of your capital. But let me offer this word of advice: if you are buying precious metals to protect yourself in case of all hell breaking loose and fiat money becoming worthless, then don’t rely on some ETF or electronic vault. If worse does come to worse, the only way to truly be positive that you have something worth trading for guns, seeds, butter, and booze is to take physical possession of whatever PM you own. I like Canadian Maple Leafs and US Buffalos although there is a smal premium over the spot prices.
 

Nude, I was afraid of this. I wonder what Awgee’s opinion is. I agree with you that the Gold ETF route is not the safe way to go. I assure you that when things get bad the government will interfere by trying to confiscate our gold, or try to put some crazy tax to the gains, or make it illegal for Americans to hold gold assets. Several years ago, I opened up my Swiss Bank account and already stocked up on Gold Bullion/Coins/Bars. If you have your assets in foreign soil, the U.S. government can’t touch it.

Nude and Awgee, I current hold a good chunk of my cash in Canadian Dollars and Euros. Do you guys recommend that I convert all of this into Gold. Foreign Cash just seems like a safer investment to me as the price does not fluctuate so much like Gold and Silver. Again, I can be completely wrong.

What’s your opinion in carrying silver?
Panda

Before we go any further, let’s examine the underlying issues. Either you have so much money saved up that a rapid change in relative valuation of either the dollar, the euro, or the loonie is going to drastically change your net worth or you are trying to provide yourself something to use as money when the world economy collapses.
 
If the kind of price swings that occur in the currency exchange markets are really going to make a difference in your bottom line, then you need to get your money back into whatever currency you use where you live because you don’t make enough money to be playing in that arena. If the loonie goes back to the exchange rate of 2004, you are going to lose a lot of cash. Same with the Euro. If a rapid change won’t make a difference then quit worrying about it. Split up your cash equally among countries you might like to spend a few years visiting if things get wierd at home and keep it there until we get past all of this drama.
 
If you are trying to horde some metal to survive a sudden financial meltdown, you had better be able to fly your own plan to Geneva if you want to get your gold because you won’t be able to pay for an airline ticket with funny money. If it’s just a hedge against inflation, fine. But if you really think the government is going to outlaw gold ownership again then you had better have a plan to get to it, already in place and already paid for because credit cards and portraits of dead presidents may not be enough. Not to Godwin the thread, but look back at all the Swiss accounts held by German Jews prior to Hitler invading Poland; thousands of them went unclaimed because the owners COULD NOT GET to them. My gold and cash is in a safe hidden in my house with a nasty alarm and some other nearly fatal surprises for those who snoop for it. If it gets to the point that gold becomes the only money, the government won’t have a chance to confiscate it because neither it nor I will be here. Call me paranoid, sure, but what good is a back-up plan when you can’t execute it?
 
If you are just trying to avoid inflation eating away at your money, buy some TIPS from the Treasury. We have some of them, and some other investments that keep us from worrying too much. There is only so much you can prepare for, only so much you can worry about, and the truth is that if we do get to that point, we have far more important things to worry about than how rich we are. For example, when was the last time you butchered a cow, harvested corn, refined crude oil, tended to an orchard, or built a windmill? We, as a country, are so dependent on grocery stores, gas stations, electricity, and indoor plumbing that we, as human beings, are going to be in a world of hurt if that all goes away.
 
I can’t recommend an investment strategy because I’m always wrong and I don’t want my ineptitude to hurt anyone. I recommend that you write out your needs, find ways to ensure continued access to them, and then follow through with preparation so that you can execute the plan when the time comes. Visualize each step and look for possible problems and solutions to those problems. Then double check everything and hope for the best.

graphrix - 20 June 2008 10:25 PM

Panda,

I highly recommend you read A Random Walk Down Wall Street, by Burton Malkiel. I also recommend you read many of the other books cited in that book. Once you get through that, then we can restart the book thread from back in the day. Hopefully you will graduate to Mark Douglas, and we can all have a great discussion about trading and investing. Baby panda steps, baby steps…

C’mon Graph, we are not investing in the 80’s or the 90’s. I read this book many years ago right out of college, it is a great book for investing in the era of Peter Lynch, but it does not teach you how to invest from 2000 - 2020. The game is very different this time around.

CapitalismWorks - 20 June 2008 12:06 PM

Gold produces no income, and costs money to store.

  True.  And why historically, has gold been a store of value or wealth?

CapitalismWorks - 20 June 2008 12:06 PM

Unless you are holding physical gold in inventory in your own safe, it is very likely in the event of a complete financial collapse that electronic record of your ownership of some gold will be worth as much as the paper its not printed on!

“It gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.“ Buffet on Gold during a 1998 presentation at Harvard.

In US dollars, the price of gold was $300 when Buffet said this in 1998.  Price of gold in US dollars in 2008, $945.  A share of Brk.A was $70,000 in 1998 and closed today at $118,665.  Gold has appreciated 215% since Buffet’s talk and Brk.A has appreciated 69% since his talk.  But, gold did not produce income and cost something to store.  Hmm-m-m.

awgee, Googling around, I found this tidbit.  It appears that during the GD the Gubmint did indeed demand the return of gold coins:

QUESTION: Hello, and thanks heaps for your answer. Is it okay if I ask one more quick question? I read during the great depression that the government made all the people who had gold give it back to the government, and that they could only keep $100 worth.. Would silver therefore be better do you think, or did they make them give that back too? Thanks heaps for your time

Remember, money is technically the property of the State.  And as such it can be recalled, and replaced with new or different money. That is what happened to the gold coins.

So why buy gold coins with a $50.00 face value…..couldn’t this happen again?  Wouldn’t ingots be a better choice ?

signed: Chicken Little

Trooper - 13 July 2008 06:53 PM

awgee, Googling around, I found this tidbit.  It appears that during the GD the Gubmint did indeed demand the return of gold coins:

QUESTION: Hello, and thanks heaps for your answer. Is it okay if I ask one more quick question? I read during the great depression that the government made all the people who had gold give it back to the government, and that they could only keep $100 worth.. Would silver therefore be better do you think, or did they make them give that back too? Thanks heaps for your time

ANSWER: It is true that US gold coin was required to be returned to the government (since it was US money and not personal possessions) and replaced with paper money.  Silver was continued to be used in coins until the 1960s. 

However, gold in the form of jewelry was not outlawed, and as such could not be taken by the government.

Remember, money is technically the property of the State.  And as such it can be recalled, and replaced with new or different money. That is what happened to the gold coins.

So why buy gold coins with a $50.00 face value…..couldn’t this happen again?  Wouldn’t ingots be a better choice ?

signed: Chicken Little

When was the last time you lugged around a few ingots? Better to buy Canadian Maple Leafs and not worry about what our Government does.

That makes sense Nude, thx.

But these are awfully purdy…

Upper/lower do you still think that the dow won’t have a 9 handle soon?
If you are still around.

This is to answer a few more pms.

My understanding of the confiscation of gold by FDR is about 180 degrees from what was described in Trooper’s post above.  First, the Depression had nothing to do with the confiscation of gold.  Gold was confiscated so that the Federal Reserve and the banking system would have complete control over money.  They were successful.  I will have to look up to see exactly what was confiscated, but I seem to remember that US currency gold coins were not confiscated and bullion and foreign coins were.

Of course, it is impossible to predict what the government would do in terms of confiscation, but the one example of confiscation by FDR is not enough of a past to base the future on.

I prefer 1 oz. American gold eagles because I think it would be difficult for the US gov to confiscate US currency.  I also like 100 oz. silver bars.  Next best is 1 oz. American gold eagles in a safe deposit box in a US bank.  Of the paper or electronic forms of gold, I would guess that bullionvault.com or goldmoney.com would be ok, but not as safe or real as physical gold.  Next would be the ETFs: GLD and SLV.  Next the large major producing miners.  And lastly paper gold from Perth mint or Kitco.

I like purchasing physical gold from tulving.com because his prices are less.  It appears he sells to the precious metal coin dealers, so when you buy from him, you are buying at wholesale prices, but just as when purchasing wholesale, you have to buy bulk.

The easiest way to sell bulk precious metals is to sell them back to Haines Tulving or a coin dealer.  But you can probably get the best price by selling them on Ebay in small amounts, such as single one ounce coins at a time.

I know nothing about numismatics, so I buy precio