Posted: Mon Dec 12, 2005 7:26 pm Post subject: Re: When to Sell Gold
dukat wrote:
I think gold should be sold if you can make a profit....and also if you think it's going down soon.
Well no crap!
I think the idea was, what would indicate that it was going down soon. I asked my grandfather, who lived in Germany through WW2 and the post-war collapse, if it was time to sell. He said heck no. I asked when he would sell and he said "I'm not selling it!" His position is like others here that it is an emergency fund for hyperinflation.
My opinion is, this is still a speculative market. Greenspan has said "we have lost control of the budget" and the World Bank recently said that there would need to be a controlled devaluation of the dollar in order to avoid an uncontrolled devaluation of the dollar. So the people who know are anticipating that and buying gold now. Once this real devaluation occurs and hits the news, the big boys will sell off to all the suckers and the price will drop. Check out what happened in the late 70s.
I also advocate holding a small amount of gold and silver as an emergency fund, "small" being relative to your own personal situation. This situation could be different than the 70s, since resource depletion might cause central banks and others to lose faith in the fiat money system, in which case a total currency collapse might happen. Other useful commodities in such a situation could be toothpaste, soap, toilet paper, food, water, bullets. But gold and silver would still be useful as a medium of exchange, which is how currency originated anyway.
Joined: Sep 14, 2004 Posts: 6468 Location: Rural Virginia
Posted: Mon Dec 12, 2005 8:31 pm Post subject: Re: When to Sell Gold
capslock wrote:
I think today is an excellent time to sell gold. Any time gold or silver or other precious metals reach new territory is the right time to sell. I know this is very simple-sounding, but there are many players who could change the price of gold in unpredictable ways. Taiwan is a large holder of gold reserves. Production is another issue. Then there is the pull from investors who could continue to drive the price higher. Then there is the possibility of a drop in the value of the paper dollar. All these things can affect the price of gold, but in the here and now, it is high, so sell now.
Gold is not in new territory. It's been much higher in previous decades.
I disagree emphatically with those saying "sell now." Since about 2000, gold holders who resisted the urge to sell have been rewarded by ever-higher prices.
A lot of factors are now in place for a long bull market in gold. It seems to me that gold is just now waking up.
The key to successful investing in anything is patience.
Posted: Mon Dec 12, 2005 11:00 pm Post subject: Re: When to Sell Gold
Heineken wrote:
I agree with those saying that gold is an asset of last resort, meaning it should be the last one you part with.
I belong to the camp that believes that the value of gold is relatively fixed, with fiat currencies fluctuating against it.
Sell it only if you have to. And remember that when you sell it, you'll get only play money in return.
The point at which to sell gold is when you think it's fully appreciated relative to other assets. When is oil cheaper than gold? When you can trade an ounce in for 10 barrels? 20? When is Uranium cheaper? Platinum? Silver? My strategy has always been to buy investments that are on "sale" in historic terms.
Having said that, I take issue with your implication that gold isn't also play money. For me, the difference between gold and the U.S.D. is that gold is shiney, and it's a little bit tougher to increase it's circulation. We saw massive inflation in terms of gold when the Spaniards started taking gold back from America, and we aren't entirely safe from a repeat of that.
I make my conservative investments by investing in companies that produce the stuff that helps me maintain my standard of living. Stuff like utilities and their fuel producers, oil companies, transportation, media, and real-estate. (Here in the Midwest, real-estate prices aren't quite as inflated.) I know that any of these investments can easily lose value, but chances are, if they do, my lifestyle will cost less.
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I disagree emphatically with those saying "sell now." Since about 2000, gold holders who resisted the urge to sell have been rewarded by ever-higher prices.
Why not at least trade it for silver? Silver hasn't appreciated quite as much, and is due for a bit more of a bump-up relative to gold. I traded in some of my oil stocks for coal when oil had its big run-up, and I haven't regretted it.
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The key to successful investing in anything is patience.
For me, the key to successful investing has been accurately assessing a resource's value and investing accordingly. Sure, you pay less overhead on your investments via commissions, etc, and you get to pay the capital gains tax (actually, on gold, you pay something like 60% capital gains, 40% regular income if you make a round-trip in 6 hours or 6 years since it's a commodity, but that's another story). But if you carefully add things up and believe that another investment is fundamentally and dramatically cheaper than yours', it makes perfect sense to switch.
If you can justify, using more than just your gut feelings, that 8.5 barrels of oil are worth dramatically more than an ounce of gold, it makes no sense to hang on to gold for the sake of long-term investing. That's not to say that I'd necessarily sell it now, or that I'd sell all of it if I decided to.
Quote:
His position is like others here that it is an emergency fund for hyperinflation.
It's always wise to have a variety of investments on hand in uncertain times. Gold is definately a good option. At the same time, I question the wisdom of putting more than 10-20% of one's assets into a specific investment in order to reduce risk. Throwing in inflation-indexed federal bonds or FDIC-insured inflation-indexed CDs will offer much of the protection (not quite all) that gold offers- and in normal times, will be guaranteed to provide returns above inflation and never decrease in value.
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well part of my interest in gold is as protection against inflation. The other reason is to ride the wave as investors bail out of the stockmarket and also seek protection against inflation.
Here are some other great options in keeping up with inflation:
1) Dividend-paying oil majors. Royal Dutch, among other companies, tries to have its dividends closely track inflation. And the oil companies certainly have the means. Oil tends to go up when inflation hits- or one might even argue that oil prices have driven inflation.
2) As mentioned above, FDIC insured inflation-indexed CDs. If you're counting on somewhat normal economic times- even something akin to the '70s or the great depression, you can count on those CDs to keep their guarantee of keeping up with inflation and getting paid upon maturity. Sometimes there's a somewhat hefty minimum deposit, however. (IE: $10K)
3) Other commodities producers- everything from lumber to mining companies to energy (besides the oil majors I mentioned above.) These guys tend to have revenues keep up with inflation, too, and it's nice to diversify a little from oil if you're trying to minimize risk.
It's healthy to stay diversified if you're a conservative investor. Having said that, I take the money I don't *need* and put it in the stock market. Oil stocks are kinda like slot machines with 110% payouts.
Joined: Sep 14, 2004 Posts: 6468 Location: Rural Virginia
Posted: Mon Dec 12, 2005 11:14 pm Post subject: Re: When to Sell Gold
I'm not quite sure what your point is overall, GoIllini. Your strategy seems to be too heavy on the trading and too light on the holding for my taste, though.
I think there is an enormous difference between gold and dollar bills. Gold has intrinsic value (at the very least, as jewelry); dollar bills have no intrinsic value whatsoever and therefore create the risk of 100% loss for their owners, depending on events.
Joined: Aug 13, 2005 Posts: 603 Location: BlueRidgeVA
Posted: Tue Dec 13, 2005 1:45 am Post subject: Re: When to Sell Gold
nuhax wrote:
Nevertheless, in the next few years there is eventually going to be a correction due to the many credit excesses and money supply expansion.
But what happens when the credit and mortgage bubble collapse? Hard and heavy deflation would result - during which the central banks may be unable to pump up the money supply because nobody is taking on debt.
Under these conditions, paper money could gain in value. And there might not be much of market for gold because gold is essentially an inflation hedge. It might be nice to hold through a deflation as a safety factor but it would probably not prosper.
Posted: Tue Dec 13, 2005 2:00 am Post subject: Re: When to Sell Gold
Quote:
Hard and heavy deflation
No, not at first at least, because Helicopter Ben will be in charge and he'll do a money drop. The Fed won't allow deflation under any circumstance. Read the paper on the lessons of Japan. Deflation is a worst case scenario--inflation is preferred and in the case of an emergency they'll over-pump not under-pump.
Because central banks conventionally conduct monetary policy by manipulating the short-term nominal interest rate, some observers have concluded that when that key rate stands at or near zero, the central bank has "run out of ammunition"--that is, it no longer has the power to expand aggregate demand and hence economic activity. It is true that once the policy rate has been driven down to zero, a central bank can no longer use its traditional means of stimulating aggregate demand and thus will be operating in less familiar territory. The central bank's inability to use its traditional methods may complicate the policymaking process and introduce uncertainty in the size and timing of the economy's response to policy actions. Hence I agree that the situation is one to be avoided if possible.
However, a principal message of my talk today is that a central bank whose accustomed policy rate has been forced down to zero has most definitely not run out of ammunition. As I will discuss, a central bank, either alone or in cooperation with other parts of the government, retains considerable power to expand aggregate demand and economic activity even when its accustomed policy rate is at zero. In the remainder of my talk, I will first discuss measures for preventing deflation--the preferable option if feasible. I will then turn to policy measures that the Fed and other government authorities can take if prevention efforts fail and deflation appears to be gaining a foothold in the economy.
Preventing Deflation
As I have already emphasized, deflation is generally the result of low and falling aggregate demand. The basic prescription for preventing deflation is therefore straightforward, at least in principle: Use monetary and fiscal policy as needed to support aggregate spending, in a manner as nearly consistent as possible with full utilization of economic resources and low and stable inflation. In other words, the best way to get out of trouble is not to get into it in the first place. Beyond this commonsense injunction, however, there are several measures that the Fed (or any central bank) can take to reduce the risk of falling into deflation.
Posted: Tue Dec 13, 2005 8:23 am Post subject: Re: When to Sell Gold
nuhax wrote:
The Fed won't allow deflation under any circumstance. Read the paper on the lessons of Japan. Deflation is a worst case scenario--inflation is preferred and in the case of an emergency they'll over-pump not under-pump.
So, chances are that the US will go the way of Argentina, then?
Posted: Tue Dec 13, 2005 11:21 am Post subject: Re: When to Sell Gold
Really, as long as you don't have dollar bills in your hand or money in the bank you'll be fine. Instead of buying gold, you could buy computer chips, clothes and other things of value, unfortuantly alot of these things devalue over time unless it's an antique item. If someone gave you $10,000 dollars now and said look after that money for me, without investing in the stockmarket, what items can you really buy that will retain the value of the $10,000?, there is nothing at wallmarket, spend 10k on various items and you'll might get $10 scrap for it afew years later. Only metals are items that can retain marginal value over time besides antiques and it's very risky buying antiques because there is a flood of them and you might have trouble selling them in the future if the senario is different than today.
It really boils down to is trust in the dollar. 6 months ago I could have been earning interest in the bank on my money at 4% and pay any tax gains on that, or brought gold as I did and see it climb (in my currency) 28%. I would invest in the stockmarket and all the funds if I had faith in the system, but I can't see the stockmarket constantly return 10% each year to investors much longer. Look at oil, it's back upto 61.6, whats happening here? Peakoil or Inflation or both? Right now the future is very uncertain, and holding precious metals is safer than having the dollar worth in credit at the bank and it's common belief that these metals are currently undervalued as I remember a person was paid 1 ounce of silver for a days work in times gone past. I did recommend selling gold now for the short term, but that really was more for people who are holding mining stocks as small drops in the price of gold hurt them, and small increases can double them.
I would also like to mention that the other metals have fallen down from their peak. The only precious metal that has withstood the hard knockdown today from the previous days high well is Gold, so look for gold to drop somewhat because they are all interconnected and generally move with each other.
Posted: Tue Dec 13, 2005 1:56 pm Post subject: Re: When to Sell Gold
Heineken wrote:
I'm not quite sure what your point is overall, GoIllini. Your strategy seems to be too heavy on the trading and too light on the holding for my taste, though.
I think there is an enormous difference between gold and dollar bills. Gold has intrinsic value (at the very least, as jewelry); dollar bills have no intrinsic value whatsoever and therefore create the risk of 100% loss for their owners, depending on events.
I'm not a huge fan of jewelry, so I still find myself wondering, "How can gold help me?"
One of the best ways, IMHO, to reduce your risk, is to hedge against what you'll need in the future. Maybe you'll need electricity. Maybe you'll need oil. Maybe you'll need food. Whatever you'll need, you can make investments now to make sure that stuff is available to you when you need it.
Gold doesn't run your car. It doesn't put food on your plate. It doesn't get electricity to your house. Sure, you can trade oil in for gold, food, or electricity in the future, but you can't be sure what gold will be worth, relative to those resources, at that point in time.
Quote:
Read the book "Empire of Debt" and get back to me if you still think gold is a poor investment at these levels.
Gold = universal store of value throughout history of civilization.
Dollar = piece of paper of value equal to strength of American hegemony.
Yes; the U.S. dollar isn't a good investment. That doesn't mean, however, that gold is necessarily all it's cracked up to be.
But why buy gold with U.S. dollars when you can buy something else that you think is cheaper?
Posted: Tue Dec 13, 2005 4:44 pm Post subject: Re: When to Sell Gold
Like I said, there are huge players in the gold markets that can cause it to behave irrationally. Today it is down to $524.10 on COMEX. Is this because Russia is dumping huge quantities? Or is it a mere blip? Gold can be difficult because it can be difficult to make it 'do work'. It is very hard to make interest on your gold unless you exchange it for a paper medium, such as a stock certificate or gold-based mutual fund share.
It is not a universal medium of exchange. Not very many people will accept it for exchange of goods and services. Even struck coinage of a known quality isn't what most people want in exchange for their goods and services. Exchanging gold for currency is always expensive. And their is little evidence that gold could be used as such in the event of a breakdown in civil government. I would rather have a warehouse full of hand tools in those circumstances than a pile of gold.
At $524, it remains higher than it was recently, and I think this is a great time to sell. A friend of mine sold their Krugerrands last week and paid off the rest of their home mortgage with the money.
Posted: Tue Dec 13, 2005 5:29 pm Post subject: Re: When to Sell Gold
capslock wrote:
At $524, it remains higher than it was recently, and I think this is a great time to sell. A friend of mine sold their Krugerrands last week and paid off the rest of their home mortgage with the money.
Higher relative to a few years ago. What about 1981? What about the dow/gold ratio?
Throw in Bernanke's promise of inflation and where could this go? $5000, $10,000, $50,000? I don't know but I'm sure not calling this a top. What if central banks across the world start to unwind their dollar reserves? It may then be harder to transact in dollars than in gold.
Joined: Apr 21, 2004 Posts: 508 Location: Republic of Texas
Posted: Wed Dec 14, 2005 11:58 am Post subject: Re: When to Sell Gold
The Rude Awakening put out an article yesterday on this topic. It discussed the gold/crude ratio being near a historical low at 8 or 9. Over the past 20 years it has ranged from 6 to 33. They assume a ratio of 20 could be expected in the next few years along with $100 oil giving a gold price of $2000/oz.
Posted: Wed Dec 14, 2005 1:55 pm Post subject: Re: When to Sell Gold
You guys.
If this is about how to protect your investment, the best way to protect your investment is to buy land with water rights. This way if the world's economy collapse, you can at least rent out your farm land to farmers and share in the produce to feed yourself.
Land with water rights is the safest bet.
If this is about investing in markets, then buying a position and hedging against it will protect your investment. This way if the market goes up, you make money. If the market goes down, you only lose a little.
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