Friday, January 06, 2006

 

Will Geopolitical Events Push Gold Over $1,000?

A reader wanted your take on this editorial. "A melt down is on the near horizon, far exceeding that of Chernobyl Ukraine, but this time, will be intentionally done, probably by summer, and Gold will pop to over $1000/oz, virtually over night, and maybe to $1500/oz."

"With moderate-of-late Sharon out of the political picture with a stroke, it will be difficult for Perez to hold the middle ground in Israel's politics to secure a centrist political party victory supporting Palestinian statehood and unilateral withdraw and moderation, as the Likud party chief, and former Prime Minister, Benjamin Netanyahu resurfaces from the shadow's of the parting Sharon. It wont take long either after the March Israeli election."

"The big surprise this day was the lack of a big gold move to the upside. The Gold Cartel must have been in play big time this day, or no one has their eyes open. This may be the cause of staggering open interest driving force in today's action."

Comments:
I'm no mideast expert, but I am skeptical of huge movements of gold. Mainly because I have been following/buying/selling the stuff for over twenty years and I haven't seen it move that much. One thing to consider is, what would $1,000 gold mean for the US dollar?

I remember when the old Soviet Union was around. At the time they were the largest producer of gold, or close to it. At one point they were forced to admit they made more profit by manipulating the market than they did by mining the metal itself!

Why does gold go down when it events say it should go up? And the thing that frustrated me to no end, was when gold would start on a nice healthy upmove, some central bank somewhere would float a rumor about selling many tons, and the price would drop like a rock. Thus beating down longs.

I would be happy to see the yellow stuff get to $700 or $800. At $1,500 we may not have an economy anymore.

As far as Iran, I have read they have 'Sunburn' missles fron Russia that could sink every tanker in the gulf. If true, I doubt any country wants to risk that. Oil would go through the roof.
 
I think the "how" is incorrect, but the end conclusion isn't far off.

Israel certainly won't strike Iran until all Security Council options have been exhausted. Yesterday's snub of El Baradei has already set the wheels in motion for non-military international action. (Which of course, won't work for a variety of reasons, but mostly for the same reasons that let Iraq persist with violations of international law for a decade after UN sanctions began to be enforced).

Iran could certainly be the straw that breaks the camel's back. But one can't help notice that the camel is already limping.

The dollar crisis is now in full swing. China is cashing out. Saudi Arabia is frantically cashing petrodollars for gold and real estate (we won't go into why the latter is a mistake), and Bernanke is about to take office. The pieces are all in place for a dollar meltdown. My guess is that when the real estate crisis starts in earnest this Fall, Bernanke will cave to political pressure and repeatedly lower rates. And its important to remember that he won't only lower rates because 'mom and pop homeowner' are screaming, he'll also lower rates because the debt default level will begin to threaten the US banking system as a whole. Another period of low interest rates (not Iran) will be the nail in the coffin for the US dollar.

When the Fed's rate drops. The dollar will tank. The Chinese will not only divest themselves of dollar holdings, but they'll remove the dollar from the Yuan's currency basket. *Then* gold goes to $1000.
 
I hold Gold in Coin, ETF, and Funds. Unfortunately I feel like if it continues to do well, the economoy will not. Truly a double edged investment. If it keeps goin, it heralds a possible doom for the economy. There are very few scenarios in which Gold reachs new heights and the economy does not have its deviations from underlying fundamentals revealed.

Nothing above states anything those on this Blog don't already know. Just haveing one of those sobering moments, where I hate bein right(or at least looking at the Data as is and not as meida/financial gurus present).

Heaven help Mr. and Mrs. Jones and Smith, I hope I'm wrong again , when I say "they don't see it coming". Somehow I don't think I am. :(
 
OC bear,

I've found bags of silver US coin to be a low mark-up asset that is very liquid.
 
Heaven help Mr. and Mrs. Jones and Smith, I hope I'm wrong again , when I say "they don't see it coming". Somehow I don't think I am. :(
# posted by OC BEAR : 6:58 PM

You are right, in that they don't see it coming, but few ever do. When things rarely go wrong for so long the masses come to believe they never will...
 
P.S. Will gold go to a $1000.00 and higher? Yes how long will it take? I have no idea. As for the Dollar, the die is cast...
 
Ben, I have been thinking about buying bag or two of silver coins, but I dont really know where I can do that. Any suggestions?
 
Mike,
They are very liquid, and any dealer worth their salt will have access to bags of silver.
 
The problem is I have never bought physical metal. I don even know where the dealer is in Chicago.
Does old coins dealers have them?
Diamond jewelers?
 
Usually yes, almost any coin dealer will have 1 OZ coins. If you buy 20, normally you get a nice lil plastic tube to keep them in. Some peeps worry about tarnish and what have you, I don't not looking at them as unique investment, just tradeable weight.

Please note you will pay a slight premium on spot price and tax if applicable in your state.

I know of some independant dealers who will wave tax(if applicable) if you buy more than 1K worth of precious metals(but don't tell Arnold, pretty sure he can kick my butt).
 
Mike,

Even people who aren't planning to buy right now should shop around for the best prices, because typically the dealer who marks up the least will do that most of the time. I always start in the yellow pages. And don't limit yourself to your immediate area. The price they give you will be some amount over spot. Write it down and compare. Then, when you are ready, call them all again. Jewelry stores may be OK, but some just buy from the dealers and mark it up.

OCbear,
While it's true that silver will sell by it's weight, I have found that an untarnished bar or coin will make the sale go smoother. Plus, it just looks better. If you buy a 100 oz bar, for instance, leave it in the plastic sleeve. Acids from human skin will leave make a stain, over time. The nice thing about bags of coin, besides the lower cost, is they won't stain and you can throw them in the attic and they'll be fine.
 
How likely does everyone think it is that the Silver ETF will be approved? And if approved, what kind of bump in price (w/o other factors) would you expect? Might buying silver coin now be even a smarter play than gold? Thanks.
 
Austinyankee,

It's true that silver usually goes up more than gold, in percentage terms.

It's also true that it usually falls more than gold.
 
Looking back at this thread, I see that something needs to be explained. Bags of silver coin are typically old US coinage dating from when the silver content was very high. There is no numismatic value, as the coins are very worn and kept in volume.

They are fun to get out and look at. You can handle them and many have a very nice design. Dimes and quarters, mostly.
 
Thank You, all guys!
It is really fun to see more than 10 posts on this blog. Honestly, I have been bored by HB2. However I am addicted to BH2 like most of you.
But, I practical guy and I want to have a use of my knowledge, that is why I want to incurage you to post here more often, because with so little volume of commments the quality is better.
Back to the subjest.
The reasons I want to by bag of old coins are:
-if paper money fail I will have some metal money,
- if it goes to really bad econony and rioting city I can possibly carry some silver for basic shopping needs; I can't do this with silver certificates or bricks of gold,
- silver has better upside potential than other metals,
-plus, because those coins are old, in real future mania, some "college kids" or others may want to pay huge premium with the idea that: "they are not making them any longer" which may proven to be the best investment.
 
Ben, I have been thinking about buying bag or two of silver coins, but I dont really know where I can do that. Any suggestions?
# posted by Mike C., Chicago : 6:53 AM

Mike, As has been posted there are many options regarding purchase. Take a look at www.apmex.com nice honest site. I've never had one problem. As to bars or coins everyone has an opinion. I prefer a mix, but favor 10oz. bars. I like maple leafs over the eagle only based on price. Same amount of silver. I'm very happy to see increased volume on this blog. I'm sure in the months to come it will pick up. Hang in there everyone...
 
wmbz,

I also like the 100 oz bars. Englehard bars are easy to sell. The reasons are I rarely buy or sell smaller amounts and they fit nicely in safe deposit boxes.

While we're being practical, those new to silver may not realize how heavy just a few thousand dollars of silver can be. Be prepared for moving it around. Get yourself a strong hand case, not too obvious. Over 20 years ago, when I was 19 I had been accumulating 100 oz bars and some Krugerands in a safe deposit box. I was moving, so I went to collect everything and brought the bank bag that I had used to bring them in. It was so heavy, I had to sling it over my back like a sailor's kit, and the corners of the bars were stabbing me in the back.
 
Ben, Makes a good point. Silver can get heavy in a hurry. I for one would not purchase anything larger than a 100oz. bar. I have never worried about storing Silver, no one knows what you have unless you tell them...
 
Thanks for all the great info. I've been following this blog for a few weeks and it's nice to see things picking up.

Hopefully, some more of the housing bubble people will come on over. I'm still curious about what effect a silver ETF would have on silver prices. Would one expect an initial pop?
 
I'm still curious about what effect a silver ETF would have on silver prices. Would one expect an initial pop?
# posted by AustinYankee : 8:59 PM

Austin, I for one believe that if the Silver ETF is approved the price of silver will rise. Silver(poor mans gold) is but a blip on the radar screen of most investors. However if it can be traded electronicaly the game will change. That's why the Silver Users Association is so opposed. They know what the out come will be...Rising prices. At least that's the way I see it.
 
Why not just invest in GLD? The spread is lower than physical metals and you can trade it immediately.

Or is the economy going to get so bad that electronic trading might break down? I have theorized scenarios where this would happen, but haven't taken any action to protect myself from it.
 
As Ben mentioned above Apmex.com is the best source I've found. You can buy the 100, 1000 bags of silver also.
The metals are definately on a tear..
I have been reading about the gold junior stocks. Doug Casey, Frank Holmes etc..Fell like I should buy some more metal ,but the producers have the potential for a more percentage increase

---
Silver ETF : My thought is it would never happen. There is way more Gold than Silver ,and to get the ETF started would require how many millions of oz's ? Effectively creating a bull run. I have read in many reputable places that there is way more silver traded than physical metal. If this bull keeps running the potential is incredible
 
A few people have asked how to buy gold and silver metal (as in "not paper").

I haven't done this yet, but will probably move some of my paper over to the hard stuff in the coming weeks.

I'm thinking about using Goldmoney.com to buy pure gold and silver.

Has anyone else used this service?
 
Ben,
I'm a avid reader of your housing blog but haven't spent any time here. Keep up the great work. I would like to know the best way to get in to gold and silver for someone just starting out.
Thank you
 
WOW!!! This is definitely more like it!

I've always felt that this was a more appropriate arena for discussion of macro issues, especially since those go directly to the value of gold, etc.

Keep it up!
 
Here's my recommended approach.

If you're not worried about government & currency stability and just want to ride the rocket... go with the Gold ETFs. No markup, highly liquid, etc.

OTOH, if you believe history has a nasty habit of repeating itself... pay cash, buy physical, keep it close, have smaller amounts handy (in case you need to actually buy something with it), and don't tell anyone you have it. Oh, and while you're at it, having a gun and a German Shepherd doesn't hurt, either. ;)

Guess which camp I'm in?
 
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