GOLD
What is with all this fascination with gold? Just because the price of gold plummeted last week, it seems to me I'm hearing about gold and silver as if we are having a run up in price - not a crash.
OK, according to Zeb's philosophy of investing :) we want to invest long in things that are going up and sell things that are going down. There, it is that simple. Buy low - sell high (or sell high and buy it back low).
No wait, human behavior is never that simple because we have all kinds of emotions attached to MONEY!. For those that do not get upset by the Christian Bible: "For the love of money is a root of all kinds of evil. Some people, eager for money, have wandered from the faith and pierced themselves with many griefs." I Timothy 6:10.
Now, view the USA's financial system (Federal Reserve, Banks and the liquidity), and then ask yourself what happens in those institutions when they pursue money at the expense of everything else? They manipulate the currency and set up schemes that Ponzi would turn over in his grave with envy, and that gentle reader is why I study currency. The bankers have wandered from the faith - and folks that faith is our faith as users of their services as a people that they will do what is honest and right executed with integrity. They above all people must have integrity or we will lose faith -- this is not Christian faith in Jesus, but all people's faith in their government which includes currency and all finance. IN general politicians and bankers hate gold because it is very hard to manipulate gold's real value (whatever value means by the way).
OK, Ron Paul, let me sidestep whether gold is money or not. We can agree that gold for 1,000s of years is a store of value, and it is used off and on as a medium of exchange by the empire in control of the world. We can also agree (Mr. Paul and I) that fiat money is always (in history) abused, and the "people" return to gold as a store of value.
Let me try this on you. Does it make any sense to you, that the price of any asset is what the price is? The price is the only fact you have at this moment in time that is not questionable. The only question is where is PRICE GOING from here? If it is going up from here, give me some please, and a side helping would be welcome. If the price is going down, I'll wait a while. After all it is my money, and nobody cares about my money like I do.
Do you want to know what the value of gold in terms of time and price is at the moment? Sure you do, and I will tell you. But you are not going to like it. As a very general estimate, value is where most of the trading has taken place since the top that was reached September 5, 2011. The number is more valuable if it is also an even number, something that humans react to, and there is no magical reason they should: they just do.
And that number is? 1600.00.
We are far below that, and yet taking a longer view, gold (and precious metals) are only in a correction. Another behavioral measurement traders do is to look for a 50% retracement from the previous low to high.
October 1, 2008 was the last significant correction before the high in 2011. The low was 681 on the current futures contract. The high on 9/2011 was 1923.70 (I thought I was going to be rich :( That is a 1,242.70 move (round to 1242). 50% of 1242 is $621.00, and 1923.70 - 621 = 1302.70. Would you like to see this? Come on, you know you do, but be reminded that all your life you've been told that numbers are not meaningful; only science is. None-the-less, all trading programs that try to measure human behavior (and take advantage of it) use these numbers. There is no other explanation for how consistent certain patterns occur for no scientific or rational reason.
The following is a monthly chart:
The market turned and bounced upward close enough to the 50% retracement as to be, well astounding. Now go back to the comment on 1600, and we have a tradeable range (not an investment - tradeable) between 1600 and 1300. (Round the 1302 to 1300, and you will find this number, 1300, being analyzed and rehashed by all the talking heads.) In the context of the long range, gold has nowhere even began to reverse the trend. (Wait - though -- one is not ready to invest in a market like this because the market must consolidate and determine what the price that fair value is. Is it in the range I just discussed? Which brings one around to understanding liquid markets through Auction Theory and Behavioral Finance. Dr. Richard Thaler discusses this in "Advances in Behavioral Finance". However, Auction Theory is another field of study was started at Chicago Mercantile Exchange. )
Let's look at Gold on a daily basis, and the drop looks like and feels much worse than the monthly chart.
If you sat through this decline, then your goals are either as a long term investor or you are collecting gold (and silver) for possibly chaos. Ha... I just know you are asking (not!! unless you are technician) does the 50% retrace hold on the upside? Well if it does, look at 4/9 and measure to the low on 4/16. THat is $268.60 -- 50% * 269 = 135 -- from the low it is 1321.50 + 135 = 1456.50. Interesting, Gold as of yesterday was not that far away from that point.
Will you buy if it penetrates that point? Well that depends on your system of determining when to buy in. Investors should not in any way be buying at that point. Patience is a virtue. AND DON'T YOU FORGET IT. (Would someone remind me of that everytime I get impatient on the fear or the greed side?)
Ending on this note:
While the drop has spooked many people, others see this as an opportunity to accumulate the metal.
That is fine, except the spread on the bid ask price of physical bullion has skyrocketed. The premiums have gotten out of hand. Asset Strategies International (ASI) is a boutique precious metals company. My history with them is they treat one correctly, and Rich Checkan told me that Silver Eagle Coins are selling at a 24% premium to silver prices right now.
Folks, that is no way to make money if you are investing. Silver has to rise substantially to cover the premium cost, and we can expect the premium to narrow (which means you loose premium if you liquidate). Then you also have to pay commission.
Just a few months ago, you and I could buy silver bullion coins for just 4-5% over the spot price.
Forget about buying "junk silver". Junk silver coins have been very popular ever since Howard Ruff recommended them back in the '80s. It use to be easy to buy a bag of coins for about 4% over spot price, but not anymore. There is very little supply on the market in the USA.
Gold Bullion is available, but you must not buy it from your local gold dealer (unless you know she/he is reputable). When you buy gold bullion coins be sure they lock in your price. Reputable coin dealers will lock the spot price when you wire in your money, and even if you have to wait weeks for delivery you know what you paid per ounce.
Finally, investing in any asset is about determining your BELIEF in the "big picture". If you believe there will be global inflation in the next 5 years at the level we observed during President Carter's regime, then buy all the precious metals you can afford to buy. However, here is a warning: We are still in a deflationary stage -- which means liquidation of debt (and liquidation does not mean it is getting paid off). (OK, gentle reader: I believe in portfolio allocation, but I know as well as you do that putting all your money in one basket and then leveraging can make you very rich - or very busted if you guess wrong in either time or price or both.)
Inflation? Deflation? What will it be?
Returning to Mr. Sinclair... http://www.jsmineset.com/ I don't know if the Federal Reserve has gold or not. What I do know is that GOLD AND SILVER ARE HOT HOT HOT on the spot bullion market.
For my friends in California:
======================== Source (M Lobardi, MBA)
Hong Kong-based Chow Tai Fook, the world’s largest jeweler by market capitalization, reports some of its stores are completely sold out of gold bullion bars. The company said it has not seen demand like this for gold bullion since the 1980s. (Source: Financial Times, April 22, 2013.)
The Hong Kong Gold & Silver Exchange Society says it has run out of the majority of its holdings, as the society’s members are struggling to meet the demand for gold bullion from retail customers.
Meanwhile, volume on the Shanghai Gold Exchange reached a record high on April 22, when 43.2 metric tonnes of gold bullion changed hands. That’s a 42% increase in trading volume from April 19. (Source: Shanghai Gold Exchange web site, last accessed April 23, 2013.) China is the second-largest gold bullion purchaser in the world after India.
Similarly, sales of gold bullion at the United States Mint are nothing but robust. So far in the month of April, the U.S. Mint has sold 175,000 ounces of gold bullion in coins. In April of 2012, the Mint only sold 20,000 ounces of gold bullion in coins. Demand for gold bullion coins has increased 775% from the same period a year ago. (Source: United States Mint web site, last accessed April 23, 2013.)
And yesterday, the U.S. Mint reported it ran out of small American Gold Eagle coins. Sales of coins weighing one-tenth of an ounce were stopped due to strong demand.
Moreover, the demand for the other precious metal, silver, is very strong too. Demand for silver, according to the U.S. Mint, is up 100% so far from this time last April. The Mint has already sold almost 3.07 million ounces of silver in coins in April, compared to only 1.5 million ounces in April of 2012.
The Hong Kong Gold & Silver Exchange Society says it has run out of the majority of its holdings, as the society’s members are struggling to meet the demand for gold bullion from retail customers.
Meanwhile, volume on the Shanghai Gold Exchange reached a record high on April 22, when 43.2 metric tonnes of gold bullion changed hands. That’s a 42% increase in trading volume from April 19. (Source: Shanghai Gold Exchange web site, last accessed April 23, 2013.) China is the second-largest gold bullion purchaser in the world after India.
Similarly, sales of gold bullion at the United States Mint are nothing but robust. So far in the month of April, the U.S. Mint has sold 175,000 ounces of gold bullion in coins. In April of 2012, the Mint only sold 20,000 ounces of gold bullion in coins. Demand for gold bullion coins has increased 775% from the same period a year ago. (Source: United States Mint web site, last accessed April 23, 2013.)
And yesterday, the U.S. Mint reported it ran out of small American Gold Eagle coins. Sales of coins weighing one-tenth of an ounce were stopped due to strong demand.
Moreover, the demand for the other precious metal, silver, is very strong too. Demand for silver, according to the U.S. Mint, is up 100% so far from this time last April. The Mint has already sold almost 3.07 million ounces of silver in coins in April, compared to only 1.5 million ounces in April of 2012.
That sounds like awfully good marketing material for a business based in Silver.
Look at:
http://www.gravyboatantiques.com/gravyboatantiques.html They will be happy to discuss a business in silver that may reduce the premium to be paid at the moment.
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