surprised to see news that made sense on mainstream media

vintec · Sep 7, 2011

GOLD will never again fall below $US1000 an ounce.

Talk about a bold prediction. But it's one that veteran gold analyst Keith Goode clearly believes is a prediction safe enough to make.

Of late, all the talk has been of the "how high will gold go" variety. One crowd says $US2000/oz, another $US2500, and one institution (Standard Chartered) even ventures $US5000, in the last case because of the expectation that demand will become so great that huge supply shortages will appear.

Sure, you also hear talk about a gold correction. But you never hear - as you did only a year ago - analysts on a frequent basis predicting big falls to, say, $US700/oz.

This evaporation of the bear forecasts tells you something.

Goode, who now runs his own outfit, Sydney-based Eagle Research, argues that if gold did tumble back into three figures then there would wholesale mine closures.

That would not be allowed to happen because the world wants gold. That very demand will keep the price strong.

China wants it. That is why the world's biggest gold producer is stepping up production even further (but without allowing exports).

Private investors want it. For evidence there is the price (briefly) above $US1900/oz in August and the Perth Mint busier than ever filling orders.

Venezuelan president Hugo Chavez certainly wants it. He has just nationalised the country's goldmining industry in a bid to stamp out rampant illegal mining (and export) of the yellow metal. He is also bringing back to Caracas 211 tonnes of gold held abroad on behalf of the government, 80 per cent of which is at the Bank of England.

Wesley Legrand, a gold enthusiast who runs Adelaide brokerage firm Grand Private Equities, believes the Chavez move is a harbinger of what lies ahead. As the world moves further into financial crisis and developing countries lose faith in paper currencies, he believes more governments will look to retake control of their gold resources.

"You'll see them secure their physical gold and not let it out of the country," he says.

And now the central banks have turned 180 degrees: from 1989 until 2008 they were net sellers, with 1993, 1998 and 2005 seeing them collectively unload more than 20 million ounces in Continued on each of those years. But last year saw the biggest net buying by the central banks since 1963.

But what to make of gold lately? After all, in three days in late August the price fell by about $US200/oz, then in one day bounced back more than $US65/oz.

That's easy, says Goode. Gold experienced similar short-term volatility back in the 1980s. Then along came hedging, which grew apace in the 90s as the gold price sank and explorers and producers desperately locked in forward sales at the best prices they could get.

"Hedging was like pouring oil on troubled waters," Goode says. So much gold was covered by these forward contracts that it took much of the skittishness out of the market.

There's another thing that indicates the strength of belief that gold prices will remain strong: mining companies have been running down their hedge books and aiming to get as much exposure as possible to the rising spot market.

In 2001, when gold finished the year at $US278.10/oz, companies had more than 100 million ounces of metal hedged. As 2006 opened with the gold price on January 2 at $US519/oz, the hedge book total was down to about 50 million ounces. As of June 30 this year, the global hedge book accounts for just 4.2 million ounces.

But look at the (really) long-term picture. Since December 31, 1799, only three decades have witnessed any significant declines in the gold price. Two of those lasted from 1980 after the price dropped from that year's record of $US850/oz until it began easing up again in 2001.

The previous period was from 1864 until 1879, and that gold bust was due to a restoration of fiscal probity after the money printing during the US Civil War.

Before that war, the US government issued no paper money: all its issuances were in gold, silver and copper coins. But to finance the war, the Lincoln administration introduced the greenback and printed $450 million worth of them. The Confederate states increased their money in circulation more than 11-fold.

It was a pale harbinger of where we are now, but back then no wonder gold went from $US20.67/oz in 1861 to $US53.35/oz in 1864. Once the war - and the money printing - was over, gold fell again because the gold backing allowed trust to return to money.

It was this trust issue that provoked an extraordinary article last November by World Bank head Robert Zoellick in which he argued that we should consider using gold as an international reference point against the values of the US dollar, the yen, the pound and the Chinese yuan.

Or even take the short-term retrospective. The reduction in hedging has seen volatility return to the gold market and, in the past five years, there have been some huge one-day falls. But these, it is important to add, have not interrupted the general upward momentum on the gold price in the past 10 years.

So gold fell by 4.6 per cent on August 23. On October 22 last year it fell by 4.27 per cent. In 2009 there was a one-day fall of 4.01 per cent; on June 13, 2006, there was a plunge of 7.3 per cent in one trading session. But 2008 was the whopper: if you take gold's 10 biggest one-day falls, six of those happened in 2008, the year the metal retraced to nearly $US700/oz. But it finished 2008 at $US881, and the next year the metal broke through US$1200/oz.

It's never going to be an uninterrupted ride. In all those years with dramatic falls, gold ended higher in December than it was in January. And just keep looking at the physical picture. As ANZ Research's commodity analysts Nicholas Trevethan and Mark Pervan point out in their latest gold update: "Producers are struggling with ageing mines and dwindling ore grades while new discoveries have failed to match the pace of extraction of many top miners." They say long lead times from discovery to production also suggest "a meaningful mine supply response is still some way off".

In other words, more buyers than sellers, the classic ingredient of a rising price.

Source: The Australian - Going for gold as an investment
Click to expand...

nonrecourse · Sep 8, 2011

I bought the Australian yesterday just so I could have a copy of their gold bullion lift out. The comment about gold probably never going below $1000 again is spot on. I believe that gold will hit $6000 by 2015 and silver will be around $171 a troy ounce. The European and US governments no longer can manipulate the bullion market as they will always have more buyers willing to exchange their devalued currencies for the real thing.

Kind Regards
nonrecourse

Yippe-Ki-Ya · Sep 8, 2011

nonrecourse said:

I bought the Australian yesterday just so I could have a copy of their gold bullion lift out. The comment about gold probably never going below $1000 again is spot on. I believe that gold will hit $6000 by 2015 and silver will be around $171 a troy ounce. The European and US governments no longer can manipulate the bullion market as they will always have more buyers willing to exchange their devalued currencies for the real thing.

Kind Regards
nonrecourse
Click to expand...

i agree with you, but i think you're a tad pessimistic on the silver price

JulieW · Sep 8, 2011

and on the timeline?

hennypenny · Sep 9, 2011

"This evaporation of the bear forecasts tells you something."
Click to expand...

Oh ffs, it just tells you gold is in a bubble. I'm not selling yet but I'm not buying either.

Shaddam IV · Sep 9, 2011

hennypenny said:

"This evaporation of the bear forecasts tells you something."
Click to expand...

Oh ffs, it just tells you gold is in a bubble. I'm not selling yet but I'm not buying either.
Click to expand...

I'm not sure that you could call something that virtually nobody owns or intends to buy as being in a bubble.

Yippe-Ki-Ya · Sep 9, 2011

JulieW said:

and on the timeline?
Click to expand...

I believe it will hit those prices before 2015 ...

The meddlers are stuffing things up at an alarming rate.

vintec · Sep 9, 2011

nonrecourse said:

I bought the Australian yesterday just so I could have a copy of their gold bullion lift out. The comment about gold probably never going below $1000 again is spot on. I believe that gold will hit $6000 by 2015 and silver will be around $171 a troy ounce. The European and US governments no longer can manipulate the bullion market as they will always have more buyers willing to exchange their devalued currencies for the real thing.

Kind Regards
nonrecourse
Click to expand...

anything informative/interesting from the lift out?

nonrecourse · Sep 10, 2011

vintec said:

nonrecourse said:

I bought the Australian yesterday just so I could have a copy of their gold bullion lift out. The comment about gold probably never going below $1000 again is spot on. I believe that gold will hit $6000 by 2015 and silver will be around $171 a troy ounce. The European and US governments no longer can manipulate the bullion market as they will always have more buyers willing to exchange their devalued currencies for the real thing.

Kind Regards
nonrecourse
Click to expand...

anything informative/interesting from the lift out?
Click to expand...

Mostly adverts to buy Gold & Silver, smattering of info if your into paper equities and paper gold certificates

Kind Regards
nonrecourse

hennypenny · Apr 21, 2013

This thread coincided with gold's $1900 peak a couple of years ago.

I think most of us could learn from it (I also missed the top and sold lower).

Log in or Sign up

surprised to see news that made sense on mainstream media

vintec Member

nonrecourse Well-Known Member

Yippe-Ki-Ya New Member

JulieW Well-Known Member Silver Stacker

hennypenny New Member

Shaddam IV Well-Known Member Silver Stacker

Yippe-Ki-Ya New Member

vintec Member

nonrecourse Well-Known Member

hennypenny New Member

Share This Page

Log in or Sign up

surprised to see news that made sense on mainstream media

vintec Member

nonrecourse Well-Known Member

Yippe-Ki-Ya New Member

JulieW Well-Known Member Silver Stacker

hennypenny New Member

Shaddam IV Well-Known Member Silver Stacker

Yippe-Ki-Ya New Member

vintec Member

nonrecourse Well-Known Member

hennypenny New Member

Share This Page

Useful Searches