Gold price falling, markets rising

mrposhman

wombat42 wrote: »

Many diverse commentators are bullish gold for the long term. They point to the past performance of gold versus the stock market. Yes i think the jewellry market is currently a negative but isnt a show stopper IMHO.

They is a general lack of confidence in currencies, whether we are in a deflationary of inflationay environment and gold is partly a safe haven currency.

Hugh Hendry is a contrarian comentator who thinks tha gold will tank but it is very much a minority view.

The collapse of our banking system was also very much a minority view but it doesn't mean it didn't happen.

How many of those now professing gold to be at $2,000 or $3,000 also predicted the credit crunch?

wombat42_2

mrposhman wrote: »

The collapse of our banking system was also very much a minority view but it doesn't mean it didn't happen.

How many of those now professing gold to be at $2,000 or $3,000 also predicted the credit crunch?

Hugh Hendry is a maverick who predicted the credit crunch but so did Peter Schiff, Marc Faber and Jim Rogers who are in the gold bull camp.

tradetime

wombat42 wrote: »

Hugh Hendry is a maverick who predicted the credit crunch but so did Peter Schiff, Marc Faber and Jim Rogers who are in the gold bull camp.

Rogers prefers agricultual commodities over gold, and considers there is a risk gold could drop quite a lot in the short term, long term he is bullish. Faber much like myself views gold as overpriced here on a relative basis and recommends base metals over gold, and gold exploration companies with sufficant backing, compared to Rogers he has a much more balanced view of things despite being very bearish on the global economy.

wombat42_2

Here is some hot Hendry action where he locks horns with Liam Halligan:

http://www.cnbc.com/id/29633198



The strange thing about Hendry is that he runs Eclectica which has 5 equity funds
http://www.h-l.co.uk/funds/Fund-prices?func=search&formid=1001&company=1444&sector=&investment=By+investment+name&x=23&y=12

but the only thing he is plugging is his offshore hedge fund (which has done well over the last 12 months unlike almost every other hedge fund). He is even saying short all equities which is undermining his own 5 eclectica funds.

nzseries1

thrupence wrote: »

as to how far the gold price may fall or the market may rise?

The price may fall to £0. The market may rise to biblical proportions.

thrupence wrote: »

And how many more bottoms and legs and whatnot etc etc...

I don't know about you, but two legs, one very big bottom and a very large pile of whatnot.

skywalker83

so it is a good time to buy gold?? i never bought gold before but with the banks giving almost 0 interest i want to try investing.... if it is a good buy to buy gold where do you suggest i buy it from?? any advise is GREATLY appreciated... this would be my first investment and i want to try and make it sensibly! your expert help needed please.
cheers!

bubblesmoney

tradetime wrote: »

Rogers prefers agricultual commodities over gold, and considers there is a risk gold could drop quite a lot in the short term, long term he is bullish. Faber much like myself views gold as overpriced here on a relative basis and recommends base metals over gold, and gold exploration companies with sufficant backing, compared to Rogers he has a much more balanced view of things despite being very bearish on the global economy.

but wont the demand for base metals be decreased in an economic down turn? cant understand that recommendation and the reasons behind it.

agricultural commodities are very risky i feel and more subject to manipulation in comparison to other commodities. also a layperson like me investing can take delivery of the gold unlike other commodities (except some other precious metals). gold is also more easily tradable in jewellery shops in many countries and doesnt take much space to store compared to the value of the investment. although i agree the present price of gold is not very reassuring to buy and expect it to jump by huge margins.

skywalker83- best to read the other threads on savings and investments. dont make hasty decisions. atleast with the money in the bank you might not get interest but atleast you will get the capital back. you might not be that lucky with other investments. start your own thread and see what others say wrt your situation. starting your own thread regarding your query might get a better response.

wombat42_2

bubblesmoney wrote: »

but wont the demand for base metals be decreased in an economic down turn? cant understand that recommendation and the reasons behind it.

agricultural commodities are very risky i feel and more subject to manipulation in comparison to other commodities. also a layperson like me investing can take delivery of the gold unlike other commodities (except some other precious metals). gold is also more easily tradable in jewellery shops in many countries and doesnt take much space to store compared to the value of the investment. although i agree the present price of gold is not very reassuring to buy and expect it to jump by huge margins
.

The argument is that base metals have already been severly hammered so there is a lot of upside potential for them when the recession ends.

Agriculture is almost a sure bet long term. We all have to eat and there are plenty of reasons such as climate change, change of diet, soil erosion, populataion growth etc that prices are bound to shoot up in the long term.

tradetime

bubblesmoney wrote: »

but wont the demand for base metals be decreased in an economic down turn? cant understand that recommendation and the reasons behind it.

agricultural commodities are very risky i feel and more subject to manipulation in comparison to other commodities. also a layperson like me investing can take delivery of the gold unlike other commodities (except some other precious metals). gold is also more easily tradable in jewellery shops in many countries and doesnt take much space to store compared to the value of the investment. although i agree the present price of gold is not very reassuring to buy and expect it to jump by huge margins.

Hi bubblesmoney with regard to raw commodities, and it pretty much applies to all, the thinking behind it is a follows: Firstly it is a long term play, currently we are experiencing a severe contraction in demand, for everything, the net result is that inventories are being run down, supply must contract and is contracting, mines are being idled, some will even be closed, exploration and expansion projects in most cases are being shelved for now, against which the CRB Commodities Index is at a record low in real terms.

So the simple case for commodites is that eventually supply will correct to pace demand, and price will rise again to some more normalised value that will be the first leg, prices have to at least meet the marginal cost of production thus no matter how lomg the recession drags on you should realise a resonable profit.

The next leg is dependant upon the premise that the forces of supply and demand are different, demand is much more elastic than supply, that is it rises and falls much faster than supply, it takes time to bring supply online, secondly the intensity and speed of this has damaged commodity producers more than normal, as already mentioned demand moves faster but in this case demand moved so fast that large inventories were left and prices slashed, revenue lost, thus unlike a normal downturn, where producers would attempt to anticipate a demand return, producers will wait for real demand to be evidenced before increasing the supply, that is likely to spike the price of all commodities as demand picks up, even without the expected inflation of $billions on the sidelines being hoarded. That's my view anyway.

As for agricultural commodities, demand can really only contract so far, people still have to eat, and global inventories are alledgedly at record lows. But since some demand destruction is to be expected no farmers are going to produce flat out, so supplies will contract, meanwhile the worlds population continues to grow. As far as manipulation goes, i will yield to your experience on that since I don't know, what I do know however is that the population keeps rising, and while you can manipulate numbers in ledgers all you want, you cannot manipulate food out of thin air, eventually you have to deliver to the wholesalers, if food is not on the shelves prices will rise.

At the end of the day gold is a play, just like any other commodity depending on your views, right now gold is high food, base metals, enrgy are all cheap, so which do you really think has the most upside, you can buy all the gold you want, and it may well go up from here, but you can't eat it, and it won't keep you warm so you'll have to exchange it at a quantity determined by the people who have the food, and the people who have the energy, that's where the real pricing power lies.

Don't get me wrong, there is a case for gold as well, I just happen to think on a relative basis it's pricey here, there are too many people in it, and many of them have no capacity to weather a significant correction, I buy where I feel there is most upside, when I think the time is right for gold I will buy back in there too.

Below is a chart of the CRB Index going back to mid 2003

Decadent_Fool

skywalker83 wrote: »

so it is a good time to buy gold?? i never bought gold before but with the banks giving almost 0 interest i want to try investing.... if it is a good buy to buy gold where do you suggest i buy it from?? any advise is GREATLY appreciated... this would be my first investment and i want to try and make it sensibly! your expert help needed please.
cheers!

So many different variables to consider, including the term of your investment and how much you need the cash. I personally, believe no as I believe it is the top of the market.