Gold / Silver dropping - your thoughts?

[Zippyjuan]

Gold hit seven month low at $1248 close in NY.

[oyarde]

Everything is dropping on dollar strength including oil. I do not think it will not last and Gold and Silver will go up from here.

Oil and corn are low , gasoline and diesel are not .

[oyarde]

Gold hit seven month low at $1248 close in NY.

Right now , probably only up $35 from last New Year's Eve .

[oyarde]

Think I will go take a look around tomorrow , see what I can get .

[Brian4Liberty]

Silver broke through the 2014 low, closing at 18.70 today.

18.61 was the beat-down low of 2013.

It opened under the magic 18.61, but went up. A buy signal for many, and probably won't close under 18.61.

[Zippyjuan]

Wow. Gold dropped below $1230 today.

[Vanguard101]

My thoughts are you should buy now. I wish I had a spare 20 grand to invest in gold

[Zippyjuan]

Nobody knows if this is a bottom or not. It could continue or it could change direction. History never repeats but the last time we had a gold bubble in 1980, prices worked their way down (moving up and down along the way) for the next 20 years.

[Carson]

"Gold / Silver dropping - your thoughts?"


Buy Mortimore! Buy!


Then again the stock market seems perched at a the edge of a cliff and we have the Argentina domino falling. It could be time to get back into stocks a few months after some currency crashes out of the system and the market has finished adjusting.

[oyarde]

It opened under the magic 18.61, but went up. A buy signal for many, and probably won't close under 18.61.

I picked up a couple 1800's silver half dimes and an 1899 half , probably go back wed for some more half dimes

[PRB]

I picked up a couple 1800's silver half dimes and an 1899 half , probably go back wed for some more half dimes

back then they actually called them half dimes. not nickels *mindblown*

[oyarde]

back then they actually called them half dimes. not nickels *mindblown*

Yes , half dimes ( and even the 3 cent pc.'s then ) , were silver , nickels came along ( made from nickel ) , around 1866 if I recall ( due to lobbyists ) , my two 1853 , silver Half Dimes I bought today , from the new Orleans mint and Philadelphia mint were silver , and , later , the three cent pc.'s were no longer made of silver , your first example of currency devaluation after the penny went from a large cent to a small cent, which was about ten years earlier , if I recall . The three cent , if I remember was the price of a stamp . I have a beautiful Two cent pc ( 1867), it is the first to have , In God We Trust .

[Jim Casey]

Gold and silver prices will continue to drop through the end of 2014, and will bottom around $10 silver and $1000 gold by early 2015. Then things will get interesting...

Rand Paul will announce his candidacy for US President, and precious metals prices will begin to rapidly rebound. By the time Rand wins the nomination for the Republican Party, precious metals prices will be beyond the stratosphere with silver at $100 and gold at $5000. Once Rand wins the general election metals prices will have passed the mesophere with $300 silver and $10000 gold. When Rand is sworn in as President of the United States, the metals will pass through the thermosphere with $500 silver and $12000 gold.

By the end of Rand's first term gold and silver will have finished their trip to the moon. Silver prices will be $1000 and gold prices will establish a permanent lunar colony at $20000. During Rand's second term, silver will rocket from the lunar colony established by gold and make its way to Mars, landing there at a cool million per troy ounce once Rand leaves the White House.

[oyarde]

Gold and silver prices will continue to drop through the end of 2014, and will bottom around $10 silver and $1000 gold by early 2015. Then things will get interesting...

Rand Paul will announce his candidacy for US President, and precious metals prices will begin to rapidly rebound. By the time Rand wins the nomination for the Republican Party, precious metals prices will be beyond the stratosphere with silver at $100 and gold at $5000. Once Rand wins the general election metals prices will have passed the mesophere with $300 silver and $10000 gold. When Rand is sworn in as President of the United States, the metals will pass through the thermosphere with $500 silver and $12000 gold.

By the end of Rand's first term gold and silver will have finished their trip to the moon. Silver prices will be $1000 and gold prices will establish a permanent lunar colony at $20000. During Rand's second term, silver will rocket from the lunar colony established by gold and make its way to Mars, landing there at a cool million per troy ounce once Rand leaves the White House.

Sounds a bit high , but I can work with that , LOL

[DFF]

Once John Q public realizes that the Fed is bluffing about raising interest rates, then you will see a strong rebound in gold and silver.

[Carson]

Yes , half dimes ( and even the 3 cent pc.'s then ) , were silver , nickels came along ( made from nickel ) , around 1866 if I recall ( due to lobbyists ) , my two 1853 , silver Half Dimes I bought today , from the new Orleans mint and Philadelphia mint were silver , and , later , the three cent pc.'s were no longer made of silver , your first example of currency devaluation after the penny went from a large cent to a small cent, which was about ten years earlier , if I recall . The three cent , if I remember was the price of a stamp . I have a beautiful Two cent pc ( 1867), it is the first to have , In God We Trust .

You must have a beautiful collection by now. I've heard you mention some really interesting finds.

[Zippyjuan]

Gold and silver prices will continue to drop through the end of 2014, and will bottom around $10 silver and $1000 gold by early 2015. Then things will get interesting...

Rand Paul will announce his candidacy for US President, and precious metals prices will begin to rapidly rebound. By the time Rand wins the nomination for the Republican Party, precious metals prices will be beyond the stratosphere with silver at $100 and gold at $5000. Once Rand wins the general election metals prices will have passed the mesophere with $300 silver and $10000 gold. When Rand is sworn in as President of the United States, the metals will pass through the thermosphere with $500 silver and $12000 gold.

By the end of Rand's first term gold and silver will have finished their trip to the moon. Silver prices will be $1000 and gold prices will establish a permanent lunar colony at $20000. During Rand's second term, silver will rocket from the lunar colony established by gold and make its way to Mars, landing there at a cool million per troy ounce once Rand leaves the White House.

If gold and silver are "going to the moon" then the economy is probably going into the tank to drive them up (metals tend to move up the most in bad economies- last peak was in 1980 when we had double digit inflation and double digit unemployment and this peak was during the Great Recession). So you think Rand will destroy the economy and cause hyperinflation?

[Peter4Paul2016]

According to their "survey participants," Forbes believes gold will keep going down this week

http://www.forbes.com/sites/kitconew...-participants/

Inflation is believed to be stable right now, and gold really shines during times of inflation fears...

http://www.bloomberg.com/news/2014-0...month-low.html

Goldman Sachs predicts gold will hit $1,050.

Looking at a gold price chart -

http://goldsilverinvestments.net/rea...-metal-prices/

I think Gold is still on it's way down... But as others have said - we're not fortune tellers!

[helmuth_hubener]

If gold and silver are "going to the moon" then the economy is probably going into the tank to drive them up (metals tend to move up the most in bad economies- last peak was in 1980 when we had double digit inflation and double digit unemployment and this peak was during the Great Recession). So you think Rand will destroy the economy and cause hyperinflation?

Good grief, Zippy, he's joking. And by the way, no, gold is linked to inflation. There is no reason to believe that gold will always -- or ever -- go up in future economic downturns. The economy is bad therefore the price of gold increases? There's no causal link! But there is very good reason to believe it will go up in value whenever the US dollar is rapidly going down in value.

[oyarde]

Good grief, Zippy, he's joking. And by the way, no, gold is linked to inflation. There is no reason to believe that gold will always -- or ever -- go up in future economic downturns. The economy is bad therefore the price of gold increases? There's no causal link! But there is very good reason to believe it will go up in value whenever the US dollar is rapidly going down in value.

Not sure I should have a lot of faith in the future of the unbacked paper dollar.

[Brian4Liberty]

But there is very good reason to believe it will go up in value whenever the US dollar is rapidly going down in value.

And the dollar has been going up recently, so relative to the dollar, gold/silver have dropped.

[helmuth_hubener]

And the dollar has been going up recently, so relative to the dollar, gold/silver have dropped.

It doesn't exactly work like that. Your "recently" is far too short a time envelope. Long-term -- meaning a year, two years, three years -- if there is sustained high price inflation in the dollar then the price of gold will tend to go upward. An example (the only example) would be in the 1970s. Shorter-term, it's anyone's guess.

And if the dollar is strong relative to other fiat currencies, well, gold may go down or it may go up. The link is not that strong for the deflation side of things; that is, gold does not always perform poorly during a deflationary period, and furthermore the dollar becoming stronger relative to other fiat currencies does not necessarily mean that deflation is even occurring.

[Zippyjuan]

Good grief, Zippy, he's joking. And by the way, no, gold is linked to inflation. There is no reason to believe that gold will always -- or ever -- go up in future economic downturns. The economy is bad therefore the price of gold increases? There's no causal link! But there is very good reason to believe it will go up in value whenever the US dollar is rapidly going down in value.

If gold is only linked to inflation, there is no reason it should have hit $1900 since inflation was low. If there IS a strong link between inflation and the price of gold, that would suggest deflation was happening from 1980 through 2004 and again since 2011. Was that the case? (the rate of price inflation was declining from 1980 to 2004 so it does correlate in that manner but we were not in price deflation as the price of gold fell and in terms of monetary inflation, the supply of money increased over that time- M2 more than quadrupled- why didn't the price of gold?).

It does not correlate well with inflation (monetary or price inflation). Gold moves most strongly based on economic fears. Investors fearing losses on other investments seek something "safe" to at least preserve the value of their assets without as much risk of losing them. They move out of things like stocks and bonds into gold- driving up the price. As the economy improves, investors move money out of gold into other options offering higher returns. The price declines again.

[helmuth_hubener]

If gold is only linked to inflation, there is no reason it should have hit $1900 since inflation was low.

Right, there is no reason. Things do things for no or unclear reasons all the time.

If there IS a strong link between inflation and the price of gold, that would suggest deflation was happening from 1980 through 2004 and again since 2011.

What was not happening was high price inflation in the US dollar. Inflation was, in fact a good deal lower during those two decades than most anyone would have expected it would be going into them. So it makes perfect sense that gold would not necessarily be going up during such a time. Sure enough, it didn't (for the most part).

So, relatively speaking, the 1980s and 1990s were deflationary, yes -- relative to expectations. Interest rates kept dropping. Bonds did fantastic. In 1980, you could have bought a 30-year-bond and locked in an interest rate, on average, of 11.27%! For the next 30 years! Can you imagine that? You could have been getting 11% nominal for your money until 2010!

1980 11.27
1981 13.45
1982 12.76
1983 11.18
1984 12.41
1985 10.79

Bonds do good in deflation. Gold does good in inflation. Bonds and gold are opposite in that sense.

rate of price inflation was declining from 1980 to 2004 so it does correlate in that manner

And that manner, Zippy my fine google-eyed friend, is an important one.

It is important -- to me -- that bonds do well in such a situation. And sure enough, they do. It is not as important that gold do poorly in that situation, though often it probably will.

It does not correlate well with inflation (monetary or price inflation).

Actually, it does correlate very well, in a very important way, and one that I find very useful in my portfolio. What way? This way:

When there is high price inflation in the US dollar, gold does well.

That's it! Simple, eh? In every other economic condition, you can't count on it doing well, and you don't need to. It may do well, but you can't count on that. So it's not a total correlation. Price of gold is not some mathematical factor of the level of inflation. When price inflation is low, there is no strong link between price inflation and the price of gold (much less monetary inflation!).

Gold is valuable to have in a balanced portfolio because during a period of high price inflation in the US dollar, it very well may be that nothing else is doing well. So gold has to carry the whole portfolio.

In this very valuable correlation, gold has a 100% track record. Every time there has been high price inflation in the US dollar, gold has gone up very strongly. 100% of the time. Perfect correlation.

Gold moves most strongly based on economic fears. Investors fearing losses on other investments seek something "safe" to at least preserve the value of their assets without as much risk of losing them. They move out of things like stocks and bonds into gold- driving up the price. As the economy improves, investors move money out of gold into other options offering higher returns. The price declines again.

Well perhaps you have a mind-reading machine, but I do not. I'm thrilled to know that you know exactly why investors do things and when they will do them. If you really knew this, however, I have this nagging suspicion that you might not be unemployed and sharing all your wisdom and insight for free on a relatively obscure thread on a relatively obscure message board. You would be rolling in the money, charging $100,000 per hour and raking in the returns on your investment mind-reading brilliance.

So you'll forgive me if I commit the blasphemy of actually checking to see if your confident assertions line up with reality. Let's see: was the year following Sept 11th, 2001 one with a lot of "economic fears"? Yes, I think everyone would agree it was. Did the investment world flee into gold, causing it to zoom upwards in price? Nope, it just muddled along, relatively flat. How about the great crash of October, 1987? That year gold actually went down significantly, from $480 in Oct 1987 to $400 in Oct 1988. And it continued muddling along for the next few years. There was a big economic crisis in 2008, and gold just muddled along. It did not jump in price.

Now following 2001 gold did begin a protracted climb. Why was that? I don't think anyone knows for sure. Because of that lack of understanding (as I see it), would I bet my precious life savings that if a similar event were to happen again that gold would necessarily do the same thing again? No. It might be like 1987 or 2008 instead.

But would I bet that if we saw high price inflation in the US dollar that gold would perform well just as it has in the past when that occurred? Yes.

[Zippyjuan]

How about the great crash of October, 1987?

Gold Price- October 1987:


http://www.sniper.at/stock-market-crash-of-1987.htm

What was happening to the rate of inflation between 2004 and 2010 (the latest gold bubble?) Was the rate of inflation soaring? If your theory is true, it must have been since that is one of the two largest increases we have seen (percentage wise) in gold prices. It was actually pretty stable- staying near three percent (with some points above and some below). Inflation at the beginning of the bubble was slightly higher than the inflation rate at the peak of it.



http://www.tradingeconomics.com/unit.../inflation-cpi


http://www.kitco.com/charts/livegold.html

Let's see: was the year following Sept 11th, 2001 one with a lot of "economic fears"? Yes, I think everyone would agree it was. Did the investment world flee into gold, causing it to zoom upwards in price?

9/11? It was a traumatic event and the trauma continues today but the economic impact was short lived. Gold did spike for a short time and the economy was shocked for a short term but both quickly returned to "normal" levels.

Miraculously, however, the market and business in general bounced back in a relatively short time. By the end of the year, the U.S. Gross Domestic Product (GDP), the total value of all goods and services, had increased over the previous year about 1%, to more than $10 trillion, demonstrating that the economy had not been critically hurt by the 9/11 attacks. In fact, according to the Bureau of Economic Analysis (BEA), GDP increased 2.7% in the fourth quarter of 2001.

Business Takes a Hit
But the immediate impact on business was significant. Gold prices leaped from $215.50 an ounce to $287, reflecting the uncertainty and flight to safety of nervous investors. Gas and oil prices also shot upward as fears emerged that oil imports from the Middle East would be curtailed. Within a week, however, these prices retreated to their approximate pre-attack levels as no new attacks occurred and deliveries of crude oil to the U.S. from its usual sources continued unabated

[helmuth_hubener]

Gold Price- October 1987:

Bzzt, wrong. That chart is for all of 1987. Your implied statement that gold went up from $400 to $500 following or during the crash is wrong. My actual statement that gold went from $480 in Oct 1987 to $400 in Oct 1988 is true.

What was happening to the rate of inflation between 2004 and 2010?

Well thanks so much for asking. There was no clear straight-line trend during this time.

Was the rate of inflation soaring?

No. Again, thanks for asking. Glad I could enlighten you.

If your theory is true, it must have been since that is one of the two largest increases we have seen (percentage wise) in gold prices.

Could you explain what you think my theory is?

Nevermind, you're not smart enough. Here is what you think my theory is:

Gold is correlated to inflation.

Here is what my actual theory is:

When there is high price inflation in the US dollar, gold does well.

That does not mean that gold might not do well during other economic conditions. It also doesn't mean that gold will necessarily do poorly during low or negative price inflation. It means only what it says. What gold will do during times without high US dollar inflation is unknown to me. It is outside the scope of my statement.

I doubt you will ever admit to understanding this. But it really is very simple, and I'm confident that everyone reading this, including, probably, you, will understand it.

[Zippyjuan]

Well thanks so much for asking. There was no clear straight-line trend during this time.

Exactly. Yet gold was on a steady increase. Thus, no correlation between the two. To correlate, they both need to move together.

[Brian4Liberty]

It doesn't exactly work like that.

What doesn't work like that?

Your "recently" is far too short a time envelope. Long-term -- meaning a year, two years, three years -- if there is sustained high price inflation in the dollar then the price of gold will tend to go upward.

My "recently" was meant to be the last few weeks:

Dollar index gains for ninth week, dollar hits six-year high vs yen

(Reuters) - The dollar index posted its ninth consecutive week of gains on Friday and the U.S. currency rose to six-year highs against the yen on speculation that the Federal Reserve may strike a more hawkish tone when it meets next week.

Obviously in the long run, with massive monetary inflation, there will eventually be price inflation in the metals. And most everything else too.

[helmuth_hubener]

Exactly. Yet gold was on a steady increase. Thus, no correlation between the two. To correlate, they both need to move together.

I did not claim a correlation.

I have now explained this slowly, explicitly, and repeatedly in at least three separate posts in this thread alone.

[helmuth_hubener]

What doesn't work like that?

Just because the "dollar is strong" as you put it, does not mean that gold's price will go down.

It most especially does not mean anything whatsoever will happen in the next day, week, month, or even few months. This is too short a time frame. There's a lot of (apparent) randomness in the market from so many participants with so many different goals and ideas doing so many different things.

My "recently" was meant to be the last few weeks:

Yes, and that is too short a time-frame for my statement to be true. My statement is:

When there is high price inflation in the US dollar, gold does well.

That doesn't mean that gold did well every single day the dollar did badly, nor every month that the CPI seemed to be high. Nor even every year where the CPI was high. But over longer time horizons, like 2 years or 5 years or 10 years, that is when my statement has held true.

Obviously in the long run, with massive monetary inflation, there will eventually be price inflation in the metals. And most everything else too.

There has been massive monetary inflation for a very long time now. We just don't know what the future will bring. A balanced portfolio will hold stocks, bonds, gold and cash so as to be ready for whatever may happen. Nothing is inevitable. We need to have humility and circumspection.