Question: At what downside price for gold would make you puke?

I suspect that there has been some serious puking going on lately looking at current price.....
I can sympathise with you.....I convinced my wife to buy newcrest many years ago and I got them @$27 only to watch them plummet to about 16-17 not long after. My wife then asked how are shares were going.....oooooooops....

 

Screw it, at $5 an ounce I will melt mine down ( cause I'm a greeny at heart) and make sinkers out of it all and go fishing.

 

Just tell her it's in the Red, chicks like Red...

Seriously though my number of ounces has not changed despite the drop in price, but when I look at the prices of some of these miners and the absolute sodomizing they have taken in the market recently I just cant help myself, SLR, NST, NCM, KCN and on and on. I look at my metals a think whoo down a little there, but then I look at some of these shares and think F#ck me check out the discount price of that at the moment and then I head to the sales threads. Just SLR alone I got in and out of with a small profit and put it into something else but now I'm like a sheeple at the door of a boxing day sale. I will gladly take a small loss on some metals to get a bite out of some of these at current prices. It's like penthouse quality at sleeping in the car prices at the moment.
I don't gamble at all really, not on Horses or at a Casino, shit don't even buy lotto tickets but you would have to think an ounce of gold or three wagered on some of the above at current prices is pretty damn fine odds huh ?

 

Good points you make, these are very cheap at the moment

 

I agree.....if gold does test the $1150 mark.....oh man the potential multiplier on these stocks will be a once in a lifetime opportunity..

 

Ill be puking if it goes below 1000 dollars than Ill clean up the puke and go buy a couple 5 oz bars and some mining shares.

 

Actually I've become more comfortable with the idea of $1250/oz gold

However I'd be starting to get queasy at that pivot on $1200/oz if that were to happen - which I keep saying SHOULD happen, at least short-term, to take pressure off the Evil Empire and let the US Fed get on with the business of transtitioning USD to equal reserve currency with the Yuan within next 5 years.

On the other hand anything to reduce the strength of all Western currencies over the next 5-10 years is probably a good thing in terms of domestic economic activity, manufacturing, exports etc...

It's just that the prospect of transforming Europe - the old country - and anything linked to that system into a low-cost manufacturing base to serve the new rising Eastern economies hasn't really hit home yet.

That means Australia too - and everything here - real estate optimists take note & beware...

 

The lower the better for me.

I hedge both my private stack and my SMSF physical holdings using a private CFD account.

Thus, through the hedging account, the price slide has been allowing me to syphon the value of my SMSF into my private accounts, whilst still retaining every single oz of the physical SMSF holdings.

A sort of win-win-lose situation.

Me win
SMSF win
Gubmint lose.

 

Daily Reckoning has an interesting allusion:

My only worry is getting cash to buy more metals in these very frightening times.

 

Someone on Alan Kohlers 'Inside Business' recently suggested $700-800 per ounce was
the 'natural level'.

 

Link? Can't find anything about it on Le Google

 

Don't know about a link, but I think it was either last Sunday's show or the one before. I think Marcus Padley was one of the guests.

 

Can't find the text on ABC website but the show was 21/04/2013

 

Found It!


MARCUS PADLEY: There's a theme underlying gold, Bitcoins and resources, which is all of them are based on something which is extremely hard to value. What is the commodity price that underlines the resources sector? How you value an ounce of gold it - it doesn't earn anything.

ALAN KOHLER: So, Mike, you sent me a long-term graph of the gold price during the week, which I found very interesting. What was that - what were you trying to - well how do you see the gold price?

MIKE MANGAN: Well gold has done pretty well over a long period of time, probably the last 40 years, but within that period of time, it's half and it's doubled and tripled and halved again. So it's been quite a ride. But certainly in the last 13 years, since about 2001, 9/11, or whatever it was, it's done very well. So, to me, this is a correction. I still think there is a lot of fear out there, there's a lot of disbelief in what central banks are doing around the world. And in fact you called argue that the weakness that we've seen in the economic numbers in the last week or two suggest that they're gonna have to do more quantitative easing around the world.

ALAN KOHLER: And what's been disappointing to everyone about gold is that they expected gold to keep rising because of the money printing, the quantitative easing that was going on because gold usually goes up as inflation expectations rise, but, Giselle, it hasn't.

GISELLE ROUX: But inflation expectations have not - have actually come back and in fact there's been no signs anywhere of emerging inflation and inflation ...

MARCUS PADLEY: That's what the bond market's saying as well, yeah.

GISELLE ROUX: Really, the bond market's saying the same thing. So without any inflation, there isn't really the strong rationale. I mean, as Marcus says, there's no fundamental behind the gold price beyond its marginal cost of production, which is somewhere probably at the total true costed margins, somewhere of $1,000. It's not gonna fall below that number or you start to get mine closures.

MARCUS PADLEY: Well, you will get mine closures. The long-term inflation adjusted price is $250 to $500.

GISELLE ROUX: But you can't - if you take the cost of extracting gold is very different to CPI that you would be calculating just off a (inaudible) CPI or another CPI.

ALAN KOHLER: A couple of American boffins put out a paper last year that valued gold according to inflation at $800 an ounce.

GISELLE ROUX: But that comes - again, it comes back to how you measure inflation as opposed to the cost of extracting an ounce of gold, which is very different to the CPI.

MARCUS PADLEY: But, you know, how do you - it's very different to every other commodity because what you've got is a commodity - whereas Nev Power's iron ore is gonna get used up next year and he has to replace it, the gold is cube 20.4 metres by 20.4 metres by 20.4 metres that is an inert lump of metal. And the only thing that's changing is a bunch of headless hot potato passers running around it deciding what price they're gonna pay. And the inert lump of metal, with all its brains knows that nothing's really changing.

MIKE MANGAN: And that's why central banks have how many thousands of tonnes in their vault?

MARCUS PADLEY: 'Cause it's stable!

ALAN KOHLER: In fact the reason - part of the reason the gold price fell was because Mario Draghi, the head of the ECB, has suggested that the way that the European countries need to get out of debt is by selling their gold, which has scared the pants off everyone.

MARCUS PADLEY: But the interesting thing is that there is no - all those apparently genius insiders with their reasons for buying it whilst the price is going up, have no reason why it shouldn't fall and they're silent at this point. Plus - let me just finish, Alan - this is exactly at the opposite end of the spectrum of what everyone's trying to buy at the moment, which is income. Zero yield.


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This guy thinks it is significantly overvalued as well.

[youtube]http://www.youtube.com/watch?v=VkKjr02uOB8[/youtube]

 

http://www.zerohedge.com/news/2013-05-18/it’s-official-gold-now-most-hated-asset-class

 

Without knowing your personal situation (and not really wanting to either) it is hard to be precise but I would say you are not oz for oz on an after tax basis ie. the personal CFD account profts would be taxable capital gains at your marginal tax rate (maybe with a CGT discount) and the SMSF losses would be quarantined. Even if you had profits to offset against in the SMSF most likely the tax differentials would chew up some of those ounces.

Not trying to be a party pooper or anything but the gubmint almost rarely lose when it comes to stiffing the populace.

 

You are correct, but not totally correct.
It is difficult to maintain exact oz for oz balance for a number of reasons, such as CFD contracts trading in 500oz Ag and 10oz Au, FX volatility etc.
Also, I don't use a static hedge for obvious reasons - I wouldn't want to sideline myself for any up moves. So I actively hedge, which usually involves taking a good sized bit out of any price moves, but are obliged to leave a little on the table.
However, it is quite easy to compensate, for example, by adjusting the number of contracts you trade, and adding to good running positions, etc. I am close enough to be smiling.

As for tax, I can't offset anything to do with an SMSF as far as hedging goes. But, there are always a number of work-arounds for most tax situations. At it's most basic, assuming a CGT rate of my marginal rate would assume the account is held in my name.
Regardless of tax rate, you can easily adjust for tax liabilities by adjusting the position sizing of your trades to compensate.

 

I wouldn't pay too much attention to any of these overpaid mouthpieces. I sure as hell have never heard anything from their mouths which actually showed insight to world economics and money flow. Since when have these people lead the pack on anything in the last 7 years. They are all good at explaining after the event. How many of them came out two years ago and warned of the imminent rise of the u.s dollar and laid out the reasons why? How many spoke against th euro and foresaw the problems it was going to create? These people are here and now analysts and I wouldn't find anything they say to be of use as it is not reliable and lacks much foundation. These are old school economists who have failed to realise that the old theories of economics are plain wrong but they are too overpaid to really have to worry.

 

Fair enough - like I said was a general comment based on knowing next to nothing about how you are running your hedges, tax situation etc.

I will say though it sounds like you are "over hedging" and therefore taking on more risk in paper ounces than your physical stack. Nothing wrong with that but more risk does require a higher potential return to justify it.

To be completely honest it sounds like you are not really hedging at all but actively trading for speculative gain. Again, nothing wrong with that if you choose to do so.