You mean like Apple trying to figure out how many iphones and ipads they might sell and what to price them at. They wouldn't consider the actual cost of production at all ? Would they sell at iphone for $200 if it costs them $300 to make one? Neither do I, but commodities (which includes stuff like oil and copper, not just gold) do have a cost of production and there is definitely a measurable physical supply and demand. Forecasting future supply and demand obviously involves estimates but then so does any other business. The statement that commodities have no fundamentals.
I can confirm that. Look at alot of us. We bought our precious metals from other people that wanted to sell them. Look at me. I bought my silver from people that wanted to sell them. I even gave them $30 an ounce. I hope I made them happy and succeed in their inflation hedge. Now I hope to find in the future someone to gimme the same favor, being a $30+inflation compensation.
The problem is that some talk alike 'the market' is a person or so. It's not. It's a situation. It can't think. It knows nothing. It's people that act in this situation. And price movements unrelated to production, can only be due to the people buying/selling existing stocks, in such a way that ones gain has to imply anothers pain, and the bigger the price movements, the bigger the gain & pain. All these bogus stories around, serve exactly this purpose. To trick people into errors. To make them purchase at higher prices. To make them hesitate to purchase, or even sell, at lower prices, as to complete the rinse & repeat. That's why I like to make clear the scams around. The daily trading volume versus production, the Feds dollar production, the chosed time frames as to predraw any conclusion in order to be able to make believable price predictions. And so on. Instead, I started to look at what they DO. The Comex position. The ETF stock trends. These reflect what they DO, regardless what they SAY.
Exactly. I agree. But supply/demand does not equal fundamentals. Supply/demand equals market pricing mechanism - and we are now in the realms of T/A. Sure, you can fundamentally price Apple stock based on sales, margins, DCF etc. Sure, you can fundamentally price a mining stock on the cost of production, projected production, sales, margins, DCF, etc. However, using the cost of production of gold is NOT using fundamental pricing for the commodity IMHO. It is simply a price point that has an effect on supply. So how do you price a lump of gold using fundamentals? There is no cashflow, dividend, or return on it to determine relative pricing fundamentally. How do you determine if it is under-priced or over-priced? It is simply worth only what the next guy is willing to pay for it. This was the point of No.8.
True, but all the fiat moving around it can have fundamentals pushing them down. Gold can, effectively, stand still while the currencies race to the bottom and a debasing competition.
The article raises valid points which aptly describes the attitude of many gold investors. For all the so called 'fundamentals', gold has been going south for nearly 3 years and may still go a lot lower. The truth is that gold is just a market and will move in a cycle like any other. Good guy, bad guy mentality...evil plots...etc etc............can't deny that doesn't exist. He got it wrong on inflation.........gold is a hedge against government, not inflation. In the end, however, the author fails to dismiss the possibility of a mid cycle bear market..........which is what we are seeing now
That's true as well Credit Crunch, what is often referred to as The Market is just a majority of consumers. You turning Austrian on us? :lol:
Gold does nothing. There is no such common people property alike 'Gold bugs' in this story. The gold price dropped due to more (in terms of ounces) 'Gold bugs' dumping than others buying. Some had a profit with gold. Others had a loss with gold. Where do all those that dumped their 'Gold bug' property have their worth now? Bank deposits? Stocks? Bonds? RE? Etc? There the same happens. One day they'll lose their shirt, for a next cyclic time, there too, and have to come back. There is only one fundamental. The one where you inform yourself, to act better, as to not pay too much, or sell for too less.
I am interested, how do you determine what price is too much or too little? What reference do you use to conclude price is too high or too low?
IMNHO, Gold and silver are NOT investments, they are an insurance policy! An insurance policy where you get back all your premiums after the insured event has, or has not, happened. ...and if a buyer of gold and silver does not sell, he has not made a loss! JMO OC
Case silver. By looking at the amounts silver ordered but nearly never executed (futures market / order cancelled) By looking at the amounts in public stocks like ETFs. By looking at coin sales. By summing up the reported amounts on TheSilverInstitute and comparing. By looking at fiatmoney creation and spending and reserves. By looking at competing markets. By looking at the economical situation, the impact of new technologies and their influence on the degree that people can producing more at a same cost. And so on. It's much like alot in nature, the more influences you can measure and take into account, the more you understand what's going on, and the more you can foresee to happen. For the rest, it's like anything in the human world, behaviour can be analysed, but peoples own small measures all together can bring surprises. But the key remains even here, in the end, you can look at least at what they did and do, and that leads to understanding their incentives and reasons.
+2 Let me spell it out very simply For example: - Beginning of 2014: Gold @ $1250/oz - You buy some gold - Beginning of 2015: Gold @ $1250/oz (after much fluctuation) Why did you buy at the beginning of 2014?
Actually, allow me to elaborate on that point: Gold price in AUD is currently at $1387.78 AUD/oz Let's say I had $1387.78 (1 oz worth) of cash on hand right now. Beginning of 2014: I take out a 1-year term deposit which pays 3.45% p.a. (source: http://www.nab.com.au/personal/inte...ndicator-rates-selected-term-deposit-products ) Beginning of 2015: My term deposit matures, I now have $1387.78 * 1.0345 = $1435.66 cash on hand If I had invested in gold, gold needs to be at or above $1435.66 AUD/oz after 1 year for it to become a better investment than putting it in the bank. Now, let's say I put $1435.66 cash into a 1-year term deposit with the same rate of 3.45% p.a. again. Beginning of 2016: My term deposit matures, I now have $1435.66 * 1.0345 = $1485.19 cash on hand If I had invested in gold, gold needs to be at or above $1485.19 AUD/oz after 2 years for it to become a better investment than putting it in the bank. Cash compounds (ie. after 1 year, you can invest the original amount + interest into term deposit again). Gold doesn't compound, after 1 year 1 kg of gold is still 1kg. Most goldbugs hold on for fear of hyperinflation scenarios, where their gold holdings will elevate themselves to a higher standing than the non-gold holding public. However, in a hyperinflation scenario, you've got much more to worry about, such as keeping your job, food, water, protecting yourself from rampant crime, finding better ways to secure your gold, and worst of all, confiscation by the government.
