Commodities (including Gold BUGS)

mono627 · 27-08-2019 5:12pm

pearcider wrote: »

Official CPI is dubious since they changed the rules in 1980 and 1990. You can find the old rules at shadow stats where the official CPI is more like 6-7 %. The government manipulate the inflation rate in a number of ways using for example hedonic quality adjustments (newer cars are better because they have sat navs even if you don’t use them) and quality substitution (the price of fillet steak has gone up but the consumer can switch to a cheaper cut). They also remove the price of food and energy during volatile periods and they give heavier weight to white goods such as refrigerators and televisions even though consumers don’t regularly purchase these.

Of course the government wants higher inflations as this improves tax returns nominally and also eases the burden of both the welfare state and the gigantic debt it incurs. Unfortunately such a policy is dangerous as once inflation takes off it is very difficult to reign in.

Regarding the devaluation of fiat and the need to devalue the USD in order to avoid economic collapse Mark Carney made a presentation on this at Jackson Hole. Gold and silver will protect your savings in this new order as they will be part of any new global currency basket. They can’t increase the supply of real money by more than a few percent - unlike fiat notes. We have been warned.

https://www.bankofengland.co.uk/-/media/boe/files/speech/2019/the-growing-challenges-for-monetary-policy-speech-by-mark-carney.pdf?la=en&hash=01A18270247C456901D4043F59D4B79F09B6BFBC

Is your whole argument that the inflation figures are off? If that's your argument then I respectfully disagree with your whole thesis. I by no means think CPI or PCE are perfect, they have plenty of flaws in the way they're measured but discounting them completely is ridiculous.

Have you looked at commodities lately? GSCI commodity index? Do you factor commodity prices into the mix at all?

Has fillet steak gone up in price? When was the last time you checked the price of Live Cattle? That's not a bullish chart mate. We're on the opposite end of the inflation scale at the moment, it may change, but that's where we are.

I'm well aware of the theory that low interest rates can create inflation and that there's always the potential that it's brewing under the hood we're nowhere near that now by any standard measure.

We've missed all of the inflation targets for nearly a decade.

If you're so well read in your history then surely you're aware that when we need to we can jam on the breaks for interest rates very, very quickly if inflation does come about. The knock on effects are pretty bad for asset prices but it's been done before.

mono627 · 27-08-2019 5:21pm

pearcider wrote: »

I am curious why you think gold and silver has gone up. What use is gold if not as money. Also why do the major powers hold so much gold reserves..?

I've been bullish both gold and silver for quite some time. I think the break through the $1400 level in gold was very significant. But I'm most certainly not long because it's an inflation hedge.

In fact I think for the first time in a while I think we can get a gold and dollar move to the upside.

There's so many reasons to be long gold at the moment.

I think there's a rising probability of a recession in the States. I think we're pretty much there in Europe. Trade Wars. Inverted yield curves. I could honestly list off a long list of reasons. I even think there's an argument for bitcoin at the moment.

And this all comes from someone who normally advocates against the majority of non-incoming producing assets such as gold.

For what it's worth I also don't think gold represents the best trade in terms of risk reward at current prices. The trade for that was when it went through the $1400 level. The best trade that I can see now is on the short end of the US curve - Eurodollars and 2 Year Notes. That's where I've placed my bets anyway.

pearcider · 27-08-2019 5:42pm

mono627 wrote: »

Is your whole argument that the inflation figures are off? If that's your argument then I respectfully disagree with your whole thesis. I by no means think CPI or PCE are perfect, they have plenty of flaws in the way they're measured but discounting them completely is ridiculous.

Have you looked at commodities lately? GSCI commodity index? Do you factor commodity prices into the mix at all?

Has fillet steak gone up in price? When was the last time you checked the price of Live Cattle? That's not a bullish chart mate. We're on the opposite end of the inflation scale at the moment, it may change, but that's where we are.

I'm well aware of the theory that low interest rates can create inflation and that there's always the potential that it's brewing under the hood we're nowhere near that now by any standard measure.

We've missed all of the inflation targets for nearly a decade.

If you're so well read in your history then surely you're aware that when we need to we can jam on the breaks for interest rates very, very quickly if inflation does come about. The knock on effects are pretty bad for asset prices but it's been done before.

Volcker could raise interest rates because the debt to gdp ratio was tiny, the US consumer was a prudent saver and the US government was running a balanced book. So the exact opposite of the situation now. That’s my point. This time the Fed will have to let the inflation burn the whole charade to the ground. I’m long gold but it sounds like you are too?. The fed will actually be forced to cut again this year or the stock market is goosed. Im not a trader but my long term price for gold is that an ounce of gold will buy the Dow by the time the bull turns.

mono627 · 27-08-2019 5:48pm

pearcider wrote: »

Volcker could raise interest rates because the debt to gdp ratio was tiny, the US consumer was a prudent saver and the US government was running a balanced book. So the exact opposite of the situation now. That’s my point. This time the Fed will have to let the inflation burn the whole charade to the ground. I’m long gold but it sounds like you are too?. The fed will actually be forced to cut again this year or the stock market is goosed. Im not a trader but my long term price for gold is that an ounce of gold will buy the Dow by the time the bull turns.

I wouldn't argue against being long gold. And as I've also said I don't think long gold is the best trade out there either. I think the front end of the US yield curve is.

I just don't think being long gold because there's inflation is in any way correct.

pearcider · 27-08-2019 6:02pm

mono627 wrote: »

I wouldn't argue against being long gold. And as I've also said I don't think long gold is the best trade out there either. I think the front end of the US yield curve is.

I just don't think being long gold because there's inflation is in any way correct.

There is a bit of consumer inflation it’s more than 2% but not outrageous at least not in the advanced economies. In many large countries such as India Brazil Iran Russia Turkey South Africa and Argentina it is quite significant. It can jump from 2-5-10 in days as well if the velocity of money picks up.

Huge inflation in property and the stock market though. These asset classes are ripe for tremendous falls.

Gold for me is not a trade. It’s at best an investment for my children and at worst a form of insurance for my cash in the bank. Also I don’t know anything about bitcoin but it seems to me it’s correlated to equities...so not a great place to be.

mono627 · 27-08-2019 7:07pm

pearcider wrote: »

There is a bit of consumer inflation it’s more than 2% but not outrageous at least not in the advanced economies. In many large countries such as India Brazil Iran Russia Turkey South Africa and Argentina it is quite significant. It can jump from 2-5-10 in days as well if the velocity of money picks up.

Huge inflation in property and the stock market though. These asset classes are ripe for tremendous falls.

Gold for me is not a trade. It’s at best an investment for my children and at worst a form of insurance for my cash in the bank. Also I don’t know anything about bitcoin but it seems to me it’s correlated to equities...so not a great place to be.

I think I will have to just agree to disagree with this inflation argument. I don't think you can just make up your own inflation figures.

The standard inflation figures (CPI and PCE) say we've been roughly 1.7% average for a decade, below the expectations of 2%. Commodities are also really weak looking at the GSCI commodity index. Hence low inflation.

What does it matter if there's inflation in Venezuala, Argentina, Turkey? What effect will that have on gold?

Of course stock markets are overvalued, we've had low rates for a decade, there's not many other places for money to go. But trying to pick the top of a ten year bull rally is a mugs game. It's a low quality trade.

For me, gold is not a long term solution. I don't think any fixed dollar assets are. It is the right place for a while. Not sure how long. Long term I think you'll always be better off in quality businesses.

But hey, that's what makes a market.

Hope you do really well in your gold mate.

Voltex · 27-08-2019 8:50pm

My own worry in is in the realm of corporate bonds. The level of non-financials corporate borrowings as a % of GDP is the highest since records began in the US...basically corporations gorging on almost zero rate loans. When some of the investments banks started citing tougher trading conditions in Q2, fund managers started pulling money from equities and into fixed income - hence the yield curve inversion, which is all the way from the 1 year/20 year.

There's some very big US corps badly exposed like GE whose bonds are trading close to junk right now. Therefore as an alternative...I'd be buying gold, but not as a currency hedge.

mono627 · 27-08-2019 9:22pm

Voltex wrote: »

My own worry in is in the realm of corporate bonds. The level of non-financials corporate borrowings as a % of GDP is the highest since records began in the US...basically corporations gorging on almost zero rate loans. When some of the investments banks started citing tougher trading conditions in Q2, fund managers started pulling money from equities and into fixed income - hence the yield curve inversion, which is all the way from the 1 year/20 year.

There's some very big US corps badly exposed like GE whose bonds are trading close to junk right now. Therefore as an alternative...I'd be buying gold, but not as a currency hedge.

100%. That BBB market is frightening with the sheer amount of debt. Junk bond market won’t be able to take a downgrade of any of the bigger boys (GM, GE, AT&T).

If and when a recession actually comes along it’s going to be a complete clusterfcuk.

Corporates really lost the run of themselves altogether.

As you said just another reason to own gold at the moment.

Mach 3 · 27-08-2019 11:25pm

The way I see it we have three old fashioned variables that are going to come to a head over the next year:

1) People
2) Central Banks
3) Political

Slice or dice it any way you want, it will come down to the reaction of each variable to the other. Every thing else is peripheral.
Same auld, same auld, but maybe just maybe this time is different.

pearcider · 03-09-2019 7:06pm

Quite the day in the silver and gold market. Another key resistance taken out by gold and silver up 5%..imagine if a genuine crisis happened.

Mach 3 · 03-09-2019 8:58pm

pearcider wrote: »

Quite the day in the silver and gold market. Another key resistance taken out by gold and silver up 5%..imagine if a genuine crisis happened.

Be careful with that key resistance on gold. If you were in early it could wise to take a slice off and go for a pint. See how it is by the end of the week. Check out weekly closes around this level from years ago on the way down. It is easy to get back in after the air is clear.
As far as I'm concerned silver broke key resistance weeks ago. The spike one night in 2016 didn't come close to the real key resistance level in Silver.

pearcider · 04-09-2019 1:23pm

I don’t day trade myself. But I wouldn’t fight the biggest bull market we will ever see in precious metals. There are still quite a few head winds to gold notably FED rate not at zero yet and USD still relatively strong. US is almost certainly in recession already imo but once it does and the Fed cut to zero and restart QE, gold will explode.

JMMCapital · 04-09-2019 6:14pm

I own both Gold and silver physically. I've picked out a few stocks to invest in too so i'll be buying into them as soon as i lodge money into my trading account. I'd like to have 10% of my portfolio in Gold/Silver probably be close to 20% with stocks included, listening to Ray Dalio and Peter Schiff it's always good to have atleast 10% of your portfolio invested in gold.

pearcider · 04-09-2019 6:50pm

JMMCapital wrote: »

I own both Gold and silver physically. I've picked out a few stocks to invest in too so i'll be buying into them as soon as i lodge money into my trading account. I'd like to have 10% of my portfolio in Gold/Silver probably be close to 20% with stocks included, listening to Ray Dalio and Peter Schiff it's always good to have atleast 10% of your portfolio invested in gold.

Still a great time to get into the junior miners and explorers I think. These boys are going to clean up when gold takes out its previous USD high and we enter recession. Most of a gold mines expenses are correlated to the industrial commodities like oil and if those costs collapse in gold terms, as they should in a bust, their margins will simply be unreal.

Mach 3 · 05-09-2019 10:20pm

pearcider wrote: »

IBut I wouldn’t fight the biggest bull market we will ever see in precious metals. 0

This put me thinking and I had a look around-and I havn't seen any of the " we buy your gold" stalls in any of the shopping centres like the last biggest precious metals "bull market".
Good business idea for you.

pearcider · 06-09-2019 12:03am

Mach 3 wrote: »

This put me thinking and I had a look around-and I havn't seen any of the " we buy your gold" stalls in any of the shopping centres like the last biggest precious metals "bull market".
Good business idea for you.

The writing is on the wall for the USD. Once the t bills go negative and they surely must, gold will be the only game left in town. Where else is there to go? The world will return to the discipline of the gold standard which was abandoned by a foolish and profligate US administration 47 years ago. The result has been the largest credit bubble in history. All of this has happened before and was well known even to the ancient Greeks. Eventually the rush will be to gold. For there is no other form of money that doesn’t have counter party risk.

drunkmonkey · 06-09-2019 12:16am

pearcider wrote: »

The writing is on the wall for the USD. Once the t bills go negative and they surely must, gold will be the only game left in town. Where else is there to go?

What do you make of buying legal title to gold in Brinks vaults with a digital token https://medium.com/paxos/introducing-pax-gold-physical-gold-on-the-digital-blockchain-30335b377fa2
It's launching this month..

pearcider · 06-09-2019 1:27am

drunkmonkey wrote: »

What do you make of buying legal title to gold in Brinks vaults with a digital token https://medium.com/paxos/introducing-pax-gold-physical-gold-on-the-digital-blockchain-30335b377fa2
It's launching this month..

I would view it as one more sign that the return of the gold standard is inevitable. Not sure of the veracity of paxos contracts but for me the old adage would apply, if you don’t hold it you don’t own it. In a genuine crisis (collapse of USD, bond market collapse, major war etc) I’m not sure how the guarantee of delivery would hold up.

BrokenArrows · 06-09-2019 9:29am

Gold took a dive yesterday. A bit of a correction after a no deal brexit became less likely.

I think gold is great place to make a quick profit, but you have to pay attention as it swings rapidly. Any news around the world is likely to swing the price rapidly in any direction. China/US relations, Brexit, European economic output, exchange rates, base interest rate changes, wars etc.

Ive been in and out of gold plenty of times over the past few years, mainly buying into funds tracking gold miners. The problem with miners is that the price tends to crash hard when the gold price drops. eg. The gold price dropped 2% yesterday, but miners dropped about 4.5% on average. But on the other side they also rise more when the gold price rises.

BrokenArrows · 06-09-2019 8:20pm

Another loss for gold today as the US job report was lower than expected.

Miners taking a hammering, down 10% on average over 2 days. That's good for me, I'll jump back into them when things turn around.

Mach 3 · 06-09-2019 9:03pm

BrokenArrows wrote: »

The problem with miners is that the price tends to crash hard when the gold price drops. eg. The gold price dropped 2% yesterday, but miners dropped about 4.5% on average. But on the other side they also rise more when the gold price rises.

Do you use this knowledge to your advantage?

BrokenArrows · 07-09-2019 12:28am

Mach 3 wrote: »

Do you use this knowledge to your advantage?

Yes. I've been trading in and out of gold miner funds for the past few months.

I would have made more profit had it just been left in at the start of the bull run in gold. But you can't predict gold over a long period of time. It's affected by so many factors you just need to work with what you know in any given week.

I've made 45% returns in the past 3 months.

Totally unsustainable outside of a bull market.

Mach 3 · 11-09-2019 11:20pm

Mach 3 wrote: »

This put me thinking and I had a look around-and I havn't seen any of the " we buy your gold" stalls in any of the shopping centres like the last biggest precious metals "bull market".
Good business idea for you.

And there goes Trump - on about banning non tobacco flavoured vaping.
Bet you guys seen those stalls in the shopping centres.
Well done to anyone that did use this knowledge or intends too.

pearcider · 12-09-2019 1:20am

Mach 3 wrote: »

And there goes Trump - on about banning non tobacco flavoured vaping.
Bet you guys seen those stalls in the shopping centres.
Well done to anyone that did use this knowledge or intends too.

Will be interesting to see what Draghi does today. Rate is at 0.25% and incredibly the market consensus is that he will cut to zero to give the last bit of monetary stimulus to the euro system that is available. Will he go below zero as suggested in a recent and widely publicized IMF paper by Ruchir Agarwal. Note the IMF chief is taking over from Draghi on 1st November. To borrow a phrase from Steve Bannon the “party of Davos” may be signaling that a major inflection point of the international monetary system is approaching.

From my reading of it gold wins either way. If Draghi disappoints the markets, gold will go up as fear of global recession returns. If he stimulates, gold may suffer short term but will actually be bullish long term as this represents a central bank white flag on interest rate “normalization” and therefore it’s defense of the current monetary system.

For the precious metal investor, heads we win, tails we win. Jean le rond d’Almabert is surely smiling from above.

pearcider · 20-09-2019 4:47pm

The Fed have pretty much restarted quantitive easing - at least 75 billion a day until October 10th. They don’t even know what caused the mini credit crunch on Tuesday but what should be clear is the system is perilously unstable due to artificially low interest rates. All that stands between the abyss of a credit collapse is the feds credibility and it’s already stretched balance sheet. I fully expect their balance sheet to go back above 4 trillion and continue to rise. Who will bail out the Fed when the US deficit is already a trillion...who knows but he who holds the gold will make the rules.

JMMCapital · 21-09-2019 10:55am

pearcider wrote: »

The Fed have pretty much restarted quantitive easing - at least 75 billion a day until October 10th. They don’t even know what caused the mini credit crunch on Tuesday but what should be clear is the system is perilously unstable due to artificially low interest rates. All that stands between the abyss of a credit collapse is the feds credibility and it’s already stretched balance sheet. I fully expect their balance sheet to go back above 4 trillion and continue to rise. Who will bail out the Fed when the US deficit is already a trillion...who knows but he who holds the gold will make the rules.

China ironically, they have been bailing the US out all a long. Maybe trump should start to show a little more respect

pearcider · 21-09-2019 1:27pm

JMMCapital wrote: »

China ironically, they have been bailing the US out all a long. Maybe trump should start to show a little more respect

Can’t see it unless they inflict a decisive military defeat on the US. China would have to replace Wall Street, SWIFT and all the chicanery of the monetary system. Also no rule of law means no trust by investors. China is a paper dragon.

Mach 3 · 18-10-2019 10:08am

Seasonal trends for Oil over different time frames.

Mach 3 · 28-10-2019 1:28pm

I took a look at Gold and I know I'd get any amount of takers on this bet - I think we see $1420 before we see $1620.
The question one would have to ask is what would have to happen for either target to be hit? and is Gold the best bet based on your answers?

(Less than 3 months)

pearcider · 19-02-2020 1:23am

That bet isn’t looking great for you now. I’m still long gold and long the miners. The fact that we’ve breached 1600 with the dollar so strong is disturbing but unsurprising to people who see the insane monetary policy of the central banks for what it is. Insanity. Unfortunately there is no way out for the central planners except for a complete collapse of the credit bubble either by raising interest rates or massive money printing and inflation.

Commodities (including Gold BUGS)

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