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Gold

Discussion in 'Sports and News' started by The Big Ragu, Sep 9, 2009.

  1. cranberry

    cranberry Well-Known Member

    I was wondering how long it would take you to post on this thread this morning. Sell high, Ragu. The time to be buying gold was last year when you invested -- not now.
     
  2. The Big Ragu

    The Big Ragu Moderator Staff Member

    Don't worry about me. :) I trade. I don't invest. I have indicators that are telling me to own it right now, but I also have limits that would automatically sell me out at a certain price drop. I have to, because I am very leveraged (I have this ability because of my established history).

    My original buy was on gut instinct. That usually scares me, because more bad comes from gut instinct than good. But you saw my posts on here at the end of last year (politics *gasp*) and what I saw coming and I just felt it.

    I saw TARP first, then saw the spending bill and the Fed policy, and even though my trading philosophy begins and ends with "you can't predict the future and don't try to," I went against my golden rule and invested (bad word to me) on "fundamentals." (another ugly word that makes people do stupid things). I never invest and never will again. I trade. I try to buy something at one price that I think I will be able to sell at a higher price. This is opposed to investing, where you own something for its intrinsic value.

    I couldn't help myself, though. I had a very strong gut feeling that the elected ones and the Fed would create a mess, and that it would just sit there like a brick in your stomach for a while afterward, and that got me looking at precious metals and currencies again -- even when the indicators weren't quite as strong as they have been. I went by "feel."

    At a certain point, though, I began to see ways to leverage owning gold and that got me back into trading, which is where I should be. I trade solely based on momentum. If the indicators (they are moving averages and averages of moving averages I calculate on my own) say buy, I buy. If they are neutral, I get out for the time being. If they told me to go short, I'd go short. A monkey could do it. You just do what a couple of simplistic indicators tell you to do. It's not full-proof and it similar trading strategies have created losses for people in commodities and currencies, but when it comes to gold and the last year, it has been well. ... gold.

    In any case, even though I have owned gold since $734 an ounce, I haven't bought and held it. I have been trading in and out of it for months, and have been more successful than I ever imagined I could be at avoiding the some of the dips and riding the run up. I also dabble in currencies, and as much as I love gold, I am even more nimble on a FOREX platform. So at the same time I have been long gold, I have been selling the dollar, which has boosted my gains (I consider them the same trade, though). Honestly, the way my publishing work has been going (business has fallen off a lot), this has been a saving grace. I never wanted to make this a full-time career, and I won't, even though I have a feel for it. It's soulless work. But it has been easy -- the momentum indicators have been so strong. And I have a little more time on my hands than I did a year or two ago.

    I'd never tell anyone to buy gold -- I didn't when I started this thread. And you can't predict the future. (People who think they can are the ones who go wrong). But right now, there are strong indicators telling me to hold on. I wouldn't suggest anyone else do that unless they think they have a way for determining for when to sell and I would never suggest anyone play around with the kind of leverage I am (although no broker would approve the account for someone without a history).
     
  3. The Big Ragu

    The Big Ragu Moderator Staff Member

    For the 1 1/2 others who care about this thread.

    Gold hit an all-time high of $1227.50 overnight and is sitting at $1215 as we speak. Seeing as it just found support at $1200 in the last 2 days and the run up in the last three months has been more than 25 percent, the price, which wasn't even at $1,000 an ounce when I started this thread, is going haywire.

    A lot of factors. When the Dubai debt crisis hit, there were two days of selling and it was down to around $1130. But that was because everything was selling off. In times of uncertainty, investors actually tend to flock to gold, and a little bit of that happened when people realized the world wasn't going to end. It was kind of predictable. A lot of people started buying on the price dip.

    The dollar continues to weaken, which makes gold more attractive, and countries with dollar-based assets continue to buy gold -- some on the sly, but the news leaks. India bought about 200 tons from the IMF within the last two months and China has made it clear that it is in the market, and may be buying on dips. Even smaller central banks, like Sri Lanka, have announced $500 million plus purchases recently (within the last day or two).

    Mostly, though, the momentum is only partially linked to the dollar weakness and central banks trying to get away from their treasury and dollar holdings. This run up is too great. Investors see that gold has been going up in price and more money has been flowing in -- whether through commodities or through ETFs (GLD is the big one). So it could be bubbling. ... Or there could be enough support to take it several hundred or even more than a thousand dollars higher. As long as the major currencies look so weak (all the debt from those spending sprees is going to keep killing the U.S. for example), there could be short-term bubbles and corrections, but I'd be surprised to see the trend not have support for a while longer.

    But who knows? Worst thing you can do is think you can predict the future. This run up has just been insane. Fun for me, but insane.
     
  4. doggieseatdoggies

    doggieseatdoggies New Member

    Gold is still a gamble.

    But I feel a little more financially secure, knowing that Obama is having his Jobs Summit. Probably will include Obamagirl for entertainment, Tiger Woods (hey, he's stimulated the paparazzi industry lately), bank attorneys and Chinese anything. I know they'll have all this addressed, at least on the surface, before the 2010 mid-terms.
     
  5. The Big Ragu

    The Big Ragu Moderator Staff Member

    An ounce is currently sitting at between $1240 and $1241 an ounce on COMEX. All the financial markets are freaked out about the health of the world's economies and gold has been the place on Friday and today where people have been fleeing for safety. It's been a weird day. The European debt crisis is hitting home. There is talk that several banks, most notably France's Societe Generale are about to get hit with their own derivatives write downs similar to what (should have) bankrupted several of the large U.S. investment banks, except with the debt underlying the obligations not mortgage related, but related to several countries that have institutions issue bonds beyond what they can pay back. Greece, Spain and Portugal are obviously getting a lot of attention, and French and German banks have billions of dollars of exposure to those countries. It has also moved beyond the euro zone to Hungary, which is saying it is about to default. A lot of the gold buying right now are investors and hedge funds exposed to the Euro. They are buying gold denominated in Euros to try to act as a buffer against their bad currency bets. So even though the Euro weakening is strengthening the dollar, which would means you would expect gold which is denominated in dollars on the commodities markets to lose money, the overall level of panic and the frantic buying of gold in Euros is actually raising the price in dollars.

    Meanwhile the Euro is in a freefall. The recent losses have put the euro between $1.18 (in US dollars), where it traded when it debuted in 1999. Right now it is between $1.19 and $1.20. The Euro was trading at more than $1.50 at the end of last year.

    A few things. Some big hedge funds that have been seriously shorting the Euro for a while, including George Soros who has been known (and convicted by the French) to illegally manipulate things if he can. Supposedly, several of those very large funds have met privately to work out strategy for shorting the Euro and have been slowly working away on the currency markets. They have a boatload of money, but not enough to destroy a currency -- unless the central banks are complicit. And there are signs right now. The euro dropped to its lowest-ever level against the Swiss franc on Friday, and there has been no sign that the Swiss National Bank is intervening to stem franc strength. Up until now, the Swiss were stepping in to try to buy Euros to prop it up, and if they are not going to do that, it is a tacit admission that they know it is a losing battle.

    Which means that the Euro could be going to 1 to 1 against the dollar. Some people are even betting that the Euro is going to disappear entirely, not a crazy bet given that there is so much bad debt lurking out there and I don't think it has been fully acknowledged yet. It could create the second wave of the world financial crisis, with the European banks melting down this time, instead of the U.S. banks, and if (I think it may be when) that happens, what happens to the Euro?

    So: Buy gold if you think all the volatility is going to keep propping it up (with the added benefit that all this world debt has to lead to inflation eventually, which is when gold shines, pardon the pun). But be aware that when I started this thread 9 months ago it was at $1,000 an ounce, so there is always the risk that this is a speculative bubble (Even if it is, watch the price the next week as there is a flight to safety and everyone exposed to the Euro freaks out. We are going to see up and down volatility that is crazy).

    Or: Short the Euro and try to ride George Soros' coat tails (he did single-handedly destroy the British pound in the early 90s) if you think a collapse is on the horizon.

    A really great opportunity just passed: shorting some of the large European banks, especially in Germany and France. Anyone who started doing that with options when the initial Greek debt fears hit months ago has made a fortune. The European banks are getting hammered and if they have a derivatives crisis the way it looks like it is shaping up, there will be a repeat of what went on with the U.S. banks in Europe.

    For anyone who wonders how this affects them. There is spillover into the U.S. in interesting ways. The commercial paper market, which is the most vital source of short-term lending for banks and companies has suddenly turned illiquid again. When investors started avoiding commercial paper in 2007, it was one of the first warning signs of the banking meltdown. There are several European banks that have been unable to renew billions of dollars of U.S. commercial paper recently because no one wants to lend to them. They are no longer seen as stable enough. And the ones who can find sources of funding are finding it much more expensive. Spain's Banco Bilbao Vizcaya Argentaria was trading at a 0.32 percentage point rate, compared with 0.19 percentage point for GE Capital Corp, according to one story I read last week, and in that WSJ story, it said that BBVA has been unable to renew about $1 billion of U.S. commercial paper since early May. U.S. money market funds (where Joe Sixpack goes to get a bit more return at a perceived level of safety) have been paring back exposure to holdings of any debt issued by European banks. Basically when these managers saw the bailout of Greece and keep reading about other European governments having trouble servicing their debt, it made them nervous about company and bank debt from those countries. So it is creating liquidity and short-term lending problems again, which has helped keep the economy from recovering. That means anxious investors are scaling back funds to banks, and the banks have been tapping currency swap lines that the U.S. Federal Reserve set up in an effort to make dollars available overseas via other central banks. This is our hidden debt -- what the Fed has been doing, and even though they have their reason for doing this (to try to prop up the world's economy), it is putting us in deep. The Fed said last week that it provided $1.25 billion to foreign central banks in the last week of May with the majority of the funds going to the European Central Bank. This stuff is misunderstood and not followed by most people because the Fed can do this stuff with very little oversight. Regardless of what you think about it, our central bank, the European Central Banks, the daily announcements about the debt problems trying to manage expectations, and the European commercial banks that are starting to leak info about a possible disaster, suggest there may be another meltdown coming.

    If you made it this far. ... and 1) you don't want to think about it as a money-making opportunity, or 2) really don't care about another looming financial crisis that can sink the world's economies for a few more years, here is one way to use it to your benefit. If you have a job and have some vacation coming up, start planning your trip to Europe. The dollar is getting stronger (not because the dollar is in a good place, but because the Euro is melting down).
     
  6. old_tony

    old_tony Well-Known Member

    At that price for an ounce, buying a panning kit and going to a river in the Rockies might be a good career choice. Come up with an ounce a week and you're looking at more than 60K a year.
     
  7. The Big Ragu

    The Big Ragu Moderator Staff Member

    You may be right about going panning. The people who are arguing this isn't a speculative bubble, point out that even at $1200 + an ounce, on an inflation-adjusted basis, gold is still 30 percent below its highs in the 1980s. Whatever the reality, China, India and Russia and other countries have been changing their dollar based reserves into gold reserves for the last few years because of our meltdown and subsequent piling on of government debt. And now much of Europe is fleeing to gold to try to hedge against their currency which is getting killed by debt problems. U.S. investors were already there.

    Gold is a very small market. The supply of gold is limited. Even a small interest in the gold market can boost the prices, which is what we are seeing. What anyone should ask themselves is are these reasons fundamentally sound?
     
  8. bydesign77

    bydesign77 Active Member

    I was just thinking the same thing! Two ounces a week, and it's six figures... how hard can two ounces really be?
     
  9. Boom_70

    Boom_70 Well-Known Member

    I bet the average Championship ring has at least 2 ounces of gold. Steal on a week.
     
  10. Michael_ Gee

    Michael_ Gee Well-Known Member

    Prospecting economics are the same as they've ever been. One thousand people go bust for every one who turns a profit. It's like fishing or football betting. The people who know where the gold is ain't talking.
     
  11. The Big Ragu

    The Big Ragu Moderator Staff Member

    At a record $1262 an ounce.

    http://www.bloomberg.com/apps/news?pid=newsarchive&sid=ajCnkJr1lxUE

     
  12. The Big Ragu

    The Big Ragu Moderator Staff Member

    Record $1276 an ounce a few minutes ago, with trading still very active. Up more than 15 percent so far this year and about 27 percent since I started this thread almost exactly a year ago, when it hit $1,000 an ounce.

    http://www.reuters.com/article/idUSTRE67F05920100914

    People aren't buying because of inflation fears--it is based on fears about the markets. But with the continued forced low interest rates and the plans for even more "stimulus" spending, and talk about quantitative easing by the Fed to try to inflate away the debt mess we are creating, inflation is going to severe be when we see the effects of all the bad monetary and fiscal policy. That certainty is certainly built into the strength gold has shown and will probably continue to show.
     
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