..time to short gold..%%$$$

[scalf]

/images/graemlins/grin.gif..merely a technical play..big short time..

jmho

gl

/images/graemlins/smirk.gif /images/graemlins/spade.gif /images/graemlins/tongue.gif

[GeorgeF]

I bought some ASA @ 41. I don't see an especially bad chart. ASA also sells at a discount to NAV which could help me in the future. I also don't see much buy gold propaganda in the press.

http://finance.yahoo.com/q/bc?s=ASA&t=6m

[maroondude]

"buy gold propaganda" or Goldbegs as they are called in my industry come and go, but should not be dismissed too lightly. Fundamentaly, I believe that gold is overvalued, but some of the people I work with are claiming that there could be shutdowns/slowdowns of gold production which would greatly effect supply. In general, be wary of speculating the gold markets. It have a 50 pip spread, trades with 100:1 leverage, and can break really hard when it makes a move.

[OrangeCat]

Probably not a good idea to short gold for a couple of reasons: The dollars decline and the gold ETF which should be available before year end.

http://www.indexfunds.com/archives/articles/staff_20030611_gold_etfs_to_test_retail_investor_d emand.php

[maroondude]

Well Gold hit a 12 year high yesterday, I just think we are in for a correction. As long as supply holds at current levels (there were some rumors in the markets early this week that it was not going to)I see no reason why gold should be valued at much more that 415 per troy oz. The only reason people are buying it now is that they are scared and are following everybody else.

[laserboy]

The price of gold is practically unchanged from a year ago in terms of Euros or any other sound currency. The "rise" in price is more a reflection of the weakening US dollar more than anything else. The same can be said of "rising" oil prices.

The reason people are buying gold is because they are becoming increasingly aware of just how worthless the US dollar realy is.

[maroondude]

Well,
Laserboy does has done a pretty good job summing up the position of the bears and Mr. Greenspan's comments tend to support some of those worries. The thing is that even if you believe that the USD is fundamentally weak, I believe that it would not be wise to short the USD with AUX. The reason why I say that is that if you are not making a bet based on the strength or weakness of gold itself you could short the doller with greater liquidity and with a much closer bid ask spread in the Forex market. The CHF (Swiss Franc)for example is very closely linked to the price of gold, but has a 3-4 little number spread rather than a spread of 50 for gold. Something I would think a lot about is the JPY or the GBP as well, but I will save that talk for a later conversation.

[laserboy]

[ QUOTE ]
Well,
Laserboy does has done a pretty good job summing up the position of the bears and Mr. Greenspan's comments tend to support some of those worries. The thing is that even if you believe that the USD is fundamentally weak, I believe that it would not be wise to short the USD with AUX. The reason why I say that is that if you are not making a bet based on the strength or weakness of gold itself you could short the doller with greater liquidity and with a much closer bid ask spread in the Forex market. The CHF (Swiss Franc)for example is very closely linked to the price of gold, but has a 3-4 little number spread rather than a spread of 50 for gold. Something I would think a lot about is the JPY or the GBP as well, but I will save that talk for a later conversation.

[/ QUOTE ]

Trading foreign currencies takes a tremendous amount of expertise in foreign markets as well as a large amount of capital. In both cases, much more than the average individual investor has to spare. Given some of the advice you have given, I find the fact that you work in finance somewhat disturbing.

For people that really want to profit from the collapse of the dollar, I recommend READING and LEARNING as much as possible on foreign markets and commodities. Jim Rogers' books Investment Biker and Adventure Capitalist are a good start.

[maroondude]

Well actualy, it takes less capital to trade the FX markets than it does to trade the gold markets. So what I said was quite right in terms of risk for the retail trader. Having said that, neither of these types of investments are for people without a good bankroll,time and dicipline. And I stand by my comments that I think the USD will get a bounce over the next 6 month to a year. If nothing else the Fed will jack up interest rates the way they did under Volkler 20+ years ago.

[laserboy]

Gold and commodity ETF's, mutual funds, or individual stocks can be invested in with far less capital and with far less overhead. ETF's in countries rich in natural resources and with fiscally responsible central banks (basically the opposite of the US in both cases), for starters.

What evidence is there in Alan Greenspan's past that would lead you to believe that he would ever do the right thing? He has been an absolute failure at everything he has ever done in both public and private enterprise. When the going gets tough, he will try to "fix" the economy the only way he knows how - by printing money. He couldn't carry Paul Volcker's jock.

Regardless, the US dollar is screwed either way. Interest rates do not change the fact that the US economy is rotten to the core. We are a country with no natural resources that produces nothing, the twin deficits aren't going anywhere. Volcker has gone on record of predicting complete economic collapse within the next five years. Warren Buffett and Stephen Roach have made similar comments. Not exactly the tinfoil hat wearing goldbug type...

[Scuba Chuck]

Laserboy, I'm impressed. Very knowledgeable. Not many readers of Steve Roach on this site I bet. Maroondude, you sound very "green", and I wish you the best of luck in your profession.

Besides the fall in the dollar - which is a very powerful reason enough to consider gold, there are two other very important reasons to be long gold.

First is rising inflation. Next to the falling dollar, it's the second most likely/probable trend going forward, one that will last for many years. Despite what Greenspan says when he flaps his lips - particularly the following quote:

From the Nov. 10 FOMC meetings...
"Inflation and longer-term inflation expectations remain well-contained."

Inflation is not well-contained. Consider this, the CPI (which serves the government, not the people), the most common index used to measure inflation, excludes two very important consumption components to human existence. Food & Energy. Think a significant rise in these two areas might affect middle income America's pocket books? The Dow Jones AIG Commodity index, which is made up of 84% food and energy, is up 22% annualized (74% total) over the past 2 years and 9 months. Does that look like it's contained? And if you doubt this trend will continue, consider this. As the Chinese and Indian economies continue to expand, what do you think their growing middle class will be spending their money on? Perhaps the lifestyle that Americans enjoy? We're talking about an increase of demand of basic commodities on a massive scale.

But besides demand, is any one paying attention to the amount of money being printed around the world? Despite the trillions of US dollars printed over the past 36 months by the US (Follow money supply), Japan printed $1.4 trillion dollars worth of yen just to buy US bonds. Printing money (paper) to buy someone else's money (paper). Most people aren't aware that there is a global currency war going on, and the winner is the one with the cheapest currency. Does anyone care that the governments' can print money at will, especially at the magnitude that they are doing it at?

Third reason is panic. Which I hope doesn't happen. But there could be a major global psychological shift away from the desire to own US paper dollars. Currently, 75% of the world reserve currencies are denominated in US dollars. As I said in a previous comment about the falling US dollar, study the current account deficit. The natural reaction for a significant current account deficit is the fear that we will not be able to cover our debts. That's when foreigners sell dollar denominated assets, which could lead to panic. I hate to rant too much about panic, because if this occurs, it is likely many years away, 7-15 years in total. But there are other reasons for panic as well. They all revolve around paper dollars.

To sum up, current reasons to consider gold as an investment
1. Falling US dollar
2. Rising Inflation
3. Panic

PS - Roach's best article of the past two years was written last week. "Why the dollar must fall."

I invest to help me keep my money. To gamble, I play poker.

[laserboy]

Well in all fairness to the fine folks at the Bureau of Labor and Statistics, how many of us actually spend money on trivial stuff like food and gasoline? /images/graemlins/wink.gif

I think anyone with half a clue recognizes the fact that the CPI is a complete sham. Try telling someone in Southern California that housing, education, gasoline, and healthcare are increasing at 2%/year or whatever fraudulent statistic they are putting out. It's actually pretty mindboggling, the level of audacity the government has in reporting these statistics. Replacing the price of steak with the price of hamburger, claiming the price of gasoline isn't going up because the new federally mandated fuel additives have made gasoline "better", hedonic adjustments to show that the price of electronics keeps going down...

The most instructive thing about the CPI is to recognize the lengths to which the government will go to manipulate these statistics and exactly why they are doing it. They know inflation is rampant and yet are doing everything they can to suppress it. (Everything except balancing the budget and trade deficits/stop printing money at full steam - that would be too politically unpopular). When the central banks try to artificially suppress something against the will of the free markets, bet on the the free markets.

[Scuba Chuck]

Do I sense a hint of Bill Gross in your comments? Remember one thing. Not all Americans are intellectual. 70% of Americans think GW Bush found weapons of mass destruction in Iraq. The populous will believe anything. This is your opportunity. Carpe Diem. The world is your oyster, if you have the vision and patience. Good luck. Oh, you won't need that, just aviod the BIG MISTAKE.