Gold to drop to $1000 or Maybe $900

[TreasureHunter]

Very interesting - I also think gold could stop somewhere below 1,200-1,000 $, maybe 900 $ or so...

As I know - production cost is 1,200 $, so it's less likely for it to go much lower.

What do you think about this production cost issue? Will it limit gold to 1,200 $?

 

[menotcrimex]

^ If you can buy physical Gold for $900 let me know won't you, lmao

 

[Pirocco]

Buy now or buy later doesn't really matter for the Long-term, but...imo, you won't be able to buy the particular bar or coin of your choice if you leave your run too late.

If that doesn't really matter, then why do some sell enough gold to buy back in lower?
And I learn to have patience. It's well possible that I will target a spot price of $20 for a next silver purchase, whether that is over a month, or a year isn't important.
For a reason: do we see general inflation? No.
In your 'long term', it won't be gold / silver alone that rises in price. Also other stuff. And that means that taking care of when to buy, is as important now as it will be then.
Price matters now, and will matter then. Do you buy silver at any price? I bet no. Why then saying that it doesnt really matter?
This all sounds alot like the silverdoctors/zerohedge talk. At $50 they yell this as hard as they yell it today, and the simple fact is that one that waited a couple years, can now buy double the amount silver with the same dollars.

 

[Pirocco]

Not true.
This may be the case if demand was always steady and consistent, but market fluctuations in demand/supply ensure this is not the case.
Short positions do not undo profits made in that market - it is simply forward selling the oz's that would otherwise be sold into that market at a later time. Either way, the oz's will be sold into that market.
If not, then the contract has to be bought back - balancing each other.
I have seen forward selling using shorts deliver much more profit than would otherwise have been made had the physical been sold at spot at a later date.
I agree (actually, I know), commodity producing companies, this short position insurance policy has no baring on production.

Silver dealer.
Holds a stock of 10000 ounces.
Takes 2 short positions of 5000 ounces to hedge the 10000 ounces against price drops.
Price rises.
The silver stock gets worth X more.
The futures market runners remove X dollars from his 2 short positions' accounts.
The short position hedge against a silver price drop, undoes the profits on the silver stock.
Reality?
Only a part of the 10000 ounces will be hedged.
The higher the downside price risk, the bigger the part that will be hedged. In the 10000 ounces stock case, for ex 1 short position thus halve the stock hedged.
The lower the downside risk risk, the lower the part that will be hedged. In the 10000 ounces stock case, for ex no short positions.
For the same reason, a long always finds a short. Because the longs on itself reflect a price down risk, the more long positions, the more short positions will be taken as a hedge, nobody agrees to buy gold/silver in the future if he thinks that todays price is the bottom. He just buys it already now. If he really wants the gold/silver of course. In the gold/silver case, only a low percentage gets delivered, making clear that the main goal of the longs was indeed to chew out some free dollars, at the expense of the dealer.
A part of the gold/silver market is formed by people that try to perform buy low / sell high cycles. A dealer that sells X ounces at $30 to a customer that over Y months wants the dealer to buy it back at $50, can't just refuse. And that's the story behind short positions.
And I wonder if I'm saying here something new to you.

 

[Pirocco]

Grain traders are good examples of people using the futures market to smooth the natural price volatility that happens due to harvests happening in sync. Requires storage capacity though, so not costless.

Grain and most other markets are quite different situations than gold/silver.
Perishable versus non perishable goods, make a huge difference.
In gold / silvers cases, storage cost is a relatively small factor.
In gold / silvers cases, no seasons, no harvests. No hard to predict / complex situations like weather, deseases, grasshopper plagues, and so on.
So the volatility of a price in gold / silvers case, is almost completely unrelated to production / natural elements.
Only to demand side. Alot buying. Alot selling. Repeat.

 

[bordsilver]

Grain traders are good examples of people using the futures market to smooth the natural price volatility that happens due to harvests happening in sync. Requires storage capacity though, so not costless.

Grain and most other markets are quite different situations than gold/silver.
Perishable versus non perishable goods, make a huge difference.
In gold / silvers cases, storage cost is a relatively small factor.
In gold / silvers cases, no seasons, no harvests. No hard to predict / complex situations like weather, deseases, grasshopper plagues, and so on.
So the volatility of a price in gold / silvers case, is almost completely unrelated to production / natural elements.
Only to demand side. Alot buying. Alot selling. Repeat.

Yes, grain markets are noticeably different from metals but the desire for many producers to hedge still exists. Interest payments and input costs are far more predictable than the market price in 3-6 months time. Further, I'd argue that gold/silver production from a given mine is less volatile than, say, grain, but definitely not risk free. No producer knows with complete certainty how much they'll produce because mine flooding happens, earthquakes/cyclones etc happen, bad unpredicted ore zones happen, high wall collapses (eg. Kennecott Utah) happen, workers strikes happen, unplanned grinding mill shutdowns happen etc.

 

[Holdfast]

Buy now or buy later doesn't really matter for the Long-term, but...imo, you won't be able to buy the particular bar or coin of your choice if you leave your run too late.

If that doesn't really matter, then why do some sell enough gold to buy back in lower?
And I learn to have patience. It's well possible that I will target a spot price of $20 for a next silver purchase, whether that is over a month, or a year isn't important.
For a reason: do we see general inflation? No.
In your 'long term', it won't be gold / silver alone that rises in price. Also other stuff. And that means that taking care of when to buy, is as important now as it will be then.
Price matters now, and will matter then. Do you buy silver at any price? I bet no. Why then saying that it doesnt really matter?
This all sounds alot like the silverdoctors/zerohedge talk. At $50 they yell this as hard as they yell it today, and the simple fact is that one that waited a couple years, can now buy double the amount silver with the same dollars.

You've mis-understood what I said.

"you won't be able to buy the particular bar or coin "of your choice"

I buy modern bullion coins that I think will appreciate regardless of the metal price.
The coins I select, may-not be available "if" spot drops too low, so...imo there's a fine balancing act of, when to buy.

It's very difficult to buy coins Pirocco if they aren't made anymore unless a bloke wants to pay a premium. I want to sell to those, who miss the boat.

Sorry if I confused you.

Cheers

H

 

[wrcmad]

Not true.
This may be the case if demand was always steady and consistent, but market fluctuations in demand/supply ensure this is not the case.
Short positions do not undo profits made in that market - it is simply forward selling the oz's that would otherwise be sold into that market at a later time. Either way, the oz's will be sold into that market.
If not, then the contract has to be bought back - balancing each other.
I have seen forward selling using shorts deliver much more profit than would otherwise have been made had the physical been sold at spot at a later date.
I agree (actually, I know), commodity producing companies, this short position insurance policy has no baring on production.

Silver dealer.
Holds a stock of 10000 ounces.
Takes 2 short positions of 5000 ounces to hedge the 10000 ounces against price drops.
Price rises.
The silver stock gets worth X more.
The futures market runners remove X dollars from his 2 short positions' accounts.
The short position hedge against a silver price drop, undoes the profits on the silver stock.
Reality?

Yes, pretty much reality, except the short position hedge against a silver price drop, does not undo the profits on the silver stock. These profits were locked in when the contracts were shorted - that is the purpose of a hedge.

... nobody agrees to buy gold/silver in the future if he thinks that todays price is the bottom. He just buys it already now.

That is what a futures contract achieves - buy now, at today's price... pay later on delivery, at today's price.

 

[grinners]

Silver dealer.
Holds a stock of 10000 ounces.
Takes 2 short positions of 5000 ounces to hedge the 10000 ounces against price drops.
Price rises.
The silver stock gets worth X more.
The futures market runners remove X dollars from his 2 short positions' accounts.
The short position hedge against a silver price drop, undoes the profits on the silver stock.
Reality?

And hence, he has locked in the $1 per ounce profit that he will make per ounce selling to the consumer.

IE: No risk of silver price, simply buying at [sell price minus $1] and selling at [sell price].

He wins and locks in his win with no risk.

 

[Pirocco]

Silver dealer.
Holds a stock of 10000 ounces.
Takes 2 short positions of 5000 ounces to hedge the 10000 ounces against price drops.
Price rises.
The silver stock gets worth X more.
The futures market runners remove X dollars from his 2 short positions' accounts.
The short position hedge against a silver price drop, undoes the profits on the silver stock.
Reality?

And hence, he has locked in the $1 per ounce profit that he will make per ounce selling to the consumer.

IE: No risk of silver price, simply buying at [sell price minus $1] and selling at [sell price].

He wins and locks in his win with no risk.

There is a price upon contract creation.
That is the agreed-upon price of the contract between a seller and a buyer with a deal in the future.
'Strike price'.
Then there is reality.
'Spot price'.
Depending on this reality (the price trend between contract creation and the agreed-upon date of the future deal), one of both sides of the contract, is losing dollars, and the other side, is gaining dollars. On their margin accounts.
So, you describe it as a 'locked in' profit.
But the strike price is only a part of the story.
Depending on the price trend between contract creation and end, that $1 of the strike price can be added to for ex -$3 on the margin account, resulting in a $1-$3=-$2.
So what you describe as 'locked in win / no risk', is not true.
Dealers have to manage their amount short positions, according to what they think is the downside risk of the price. That managing is not locking in anything. If the dominant market behaviour (selling versus buying) goes against what they thought was the biggest risk (down or up), their position(s) can inflict them a loss that is bigger than the gain on the sales of what is hedged (the underlying, gold, silver, ...).
Too much short positions in a price uptrend, undo all their gains on the sales of the underlying, or even more.
So it's for dealers / anyone with a stock silver that tries to hedge it, crucial to know when to dump or acquire short positions, and how many (in case bigger stocks).
See, a hedge is not a guarantee.
It's an attempt.
It can be as wrong as a stacker that buys high and/or sells low.
Because the price moved in the other direction than you thought. The same applies to anyone that buys/sells silver.
So why then talking about 'locking in wins without risk'?

 

[wrcmad]

.

 

[wrcmad]

So why then talking about 'locking in wins without risk'?

Because it is true.
You may lose a bit temporarily on your margin account, but profit balances when commodity is delivered for agreed price.

 

[Ronnie 666]

Plenty gold ? Bron ?

http://truthingold.blogspot.com.au/2013/05/plenty-of-400-oz-gold-bars-available.html


FRIDAY, MAY 3, 2013
Plenty Of 400 oz. Gold Bars Available?
A reader alerted me to the fact that Bron Suchecki, one of the proprietors of the Perth Mint - the notoriously untrustworthy and fractional bullion account seller - made the claim that there's plenty of 400 oz. gold bullion bars to be had on the world market. This is contrary to every news report and first-hand accounting of shortages that have been presented over the last week.

So I have this question for Bron: If there's plenty of 400 oz. gold bullion LBMA-standard bars available, how come it's taking the United States Government SEVEN YEARS to send just 300 tonnes of the said 400 oz. gold bars that it owes back to the German Government and its citizens? Tell me Bron, if you can find an ample supply of bars, how come the Federal Reserve and the U.S. Treasury can not? How come the Chinese Gold and Silver Exchange Society is now forced to back-order bars from Switzerland? LINK

I rest my case.

 

[Altima]

Hmm. I don't get it. Even if there are plenty of bars around, why do they need to buy them at the current prices?

The Fed is the buyer, they can choose whenever they wanna make a purchase. Kinda like in this forum, still plenty of trades up for sale, but I'm not buying all of them cos I'm waiting for a discount later.

I don't like articles that keep harping on shortages of PM when the secondary market is still quite active. Only will I believe this argument when nobody else is selling cos there's really no more gold!

Pls correct me if I'm wrong. Thank you.

 

[grinners]

It can be as wrong as a stacker that buys high and/or sells low.
Because the price moved in the other direction than you thought. The same applies to anyone that buys/sells silver.
So why then talking about 'locking in wins without risk'?

Scenario: You are a bullion dealer

You have 1 ounce of silver in stock at any one time.

You buy that 1 ounce of silver at $24 (spot), and have it for sale at $25.

You hedge the ounce by buying a silver short (one ounce).

Silver drops from $24 to $22. Your silver ounce is worth $2 less, your silver short is worth $2 more.

You sell your silver ounce for $23 (still one dollar above spot) and make $1 profit, replacing the original ounce with a new one at $22.


It cannot be 'wrong', as you are not trying to profit from silver moves. You are locking out potential gains and potential losses:

In a rising market:

You buy that 1 ounce of silver at $24 (spot), and have it for sale at $25.

Silver rises to $26. Your silver ounce is worth $2 more, your silver short is worth $2 less. You sell your ounce for $27 and make your $1 profit, replacing the original ounce with a new one at $26.


The effect of the spot movement has been eliminated from your business.

 

[browski]

Today, May 6, 2013. 10.45am.
Anyone tipping Gold to re-enter USD $1500/Oz by 5pm MEL time?

Each time in the last few week that $1500 has been threatened, there has been a pronounced smackown. Let's see today.

 

[tiddleyetom]

Maybe breaching 1500 midweek, then again with the Israel/ Syrian thing going on it could well breach today

 

[TreasureHunter]

Even today, the premiums are so high.

I was watching the gold and silver prices of a dealer and silver at 23 $ is sold for practically the same price they were offering it for back when it was 28 - 29 $!

Bullion dealers may halt sales if gold drops that low.

Production price of gold is supposed to be somewhere around 1,100 - 1,200 $.

 

[mmm....shiney!]

Prices have not reflected the change in GSR, which implies premiums (for silver) have increased.

 

[VRS]

Today, May 6, 2013. 10.45am.
Anyone tipping Gold to re-enter USD $1500/Oz by 5pm MEL time?

Each time in the last few week that $1500 has been threatened, there has been a pronounced smackown. Let's see today.

$1500's not going to happen

We'll be seeing $1250 before the rebound - I still maintain we're due another sharp drop off the back of DOW & debt, thought last weekend would be it - but any time in May or early June would have same effect on comms prices imho