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1. What do you think, will the price of gold will go down? Argument as much as possible.

2. How could the price of gold could go down? What could happen to do so?

3. Would you buy gold today, now, at current the price?

4. Not actually a question. I want to learn as much as possible about precious metals and why are they so valued for thousand of years.

We're certainly having an almost perfect sentiment for a 'bubble state'. Heck, in Dubai they now even placed "Gold ATMs", and i heard there are some that plan to do it on a larger scale.
There are people who said it will first pass 1500, then 2500, then 5000, and even above 10000.

The most loud gold-envangelism seems to be the argument that, in case of a deep-depression everything will go down but gold will go up. I don't disagree with the first, everything will go down, but gold (being a "portable" luxury commodity will collapse too). On the other hand if we're going for a fine W shaped recovery combine with excessive QE (too much inflation) then gold would be a good thing to offset loss on inflation.
In any of those 2 events, gold is just what it is, which leads me to your next question...


Stores a lot of value, takes little space, is quiet portable and independent of authorities. During WW1/WW2 it was perhaps THE most oversold commodity (traded at well below 90% below its real worth), BUT that was in many cases still better than other commodities (except food, but food isn't very portable nor does it store much value).

Its that which makes it so valued throughout our times, it doesn't retain its value at all times but it performs better than most commodities even in the most extreme times.

If we had an extreme event today, similar to WW2, and telecom/internet communication was still intact in some form, and independent cryptocurrencies such as bitcoin were more widely spread than they are now, i think people would more likely purchase them in exchange for food, rather than gold due to its portability advantage AND independence from authorities.

Before investing in gold, everyone should become familiar with its inflation-adjusted historical pricing, as shown in this chart:
http://en.wikipedia.org/wiki/File:Gold_price_in_USD.png

As you can see, if you bought between 1980 and 1982 you would still be showing a loss three decades later.

So timing is everything. The best time to buy gold was 2001. It may still be a good time to buy gold, but only if you sell it before the economy improves.

Gold is a great hedge against inflation. Historically, gold goes up when inflation is high, and gold goes down when inflation is low. But there's one potential catch in using gold this way. If the economy really goes haywire, the government could prohibit private ownership of gold as they did for much of last century. Then, your hedge becomes untradeable.

You'd better ask yourself whether you trust the US dollar more than gold.

Gold is gold.  It is what it has always been.

The US dollar is in terrible shape.  If USA don't default soon, they'll have to pay their debt with printed money.  And then the price of gold will go zimbabwean style.

I think this is a very good point to make:  The U.S. Dollar is incredibly weak (but so is the Euro and most of the other major currencies.... including I might add the Chinese Yuan: it is built upon the U.S. Dollar as well).

There isn't any sort of mechanism or rational of what the U.S. government "defaulting" on the dollar might even be.  Other countries "defaulted", but they owed debt denominated in other currencies.  The U.S. government, at least at the moment, only owes money in U.S. denominated loans and bonds.  When Argentina defaulted on their loans, they simply refused to pay back the loans in dollars, which effectively cut them off from international loans of this nature, but shy of going to war what else are you going to do?  Argentina also let their currency go hyperinflationary, but that wasn't the key point of the "default".

That may also be the case with a U.S. default, but what may happen (and I think quite likely too) is that the U.S. dollar is going to be significantly devalued.  Mind you, China has been playing this game for the past couple of decades and in fact prospered by doing so, although I don't know how they are going to react when others start to play their same game.

The U.S. federal reserve has been essentially "running the printing presses" to create new dollars out of thin air to cope with the American economy.  I don't know the exact figures, but I've seen figures in the multi-trillion dollar range of "new money" being pumped into the U.S. Economy.  This is also relatively new behavior as the Fed has traditionally been rather reluctant to do this so overtly in the past.  With all of this money injected into the economy, it has to go somewhere and it is adding huge inflationary pressure on just about everything.  The main reason the U.S. economy hasn't gone hyper-inflationary yet is mainly that such things take time to work their way through the economy.

The current bet on buying gold right now is to make a guess as to if this hyperinflation is really going to hit or not.  If you think the U.S. Dollar is going to collapse through massive inflation, although it doesn't necessarily have to be hyper-inflation, as even inflation like happened during the Carter administration would be sufficient to make a mess here.  Annual inflation above 10% is something not currently anticipated by most business plans in America.  I would call that a good tipping point right now:  If you think that over the short term inflation (as measured with the CPI and other comparable indexes) is going to go well above 10%, with ensuing political turmoil that will cause internally within America, gold is a good bet even now.  If you think there are "wise and intelligent people" who are in charge of the American government & Federal Reserve and that somehow they are going to prevail against those things which may attack the U.S. Dollar and that inflation is going to stay steady or that deflation is going to happen, sticking with the Dollar might be a wise thing to do.

Historically speaking, the U.S. Dollar has been a pretty good bet, which is one of the reasons why it is a world reserve currency.  Traditionally, due to investment options and other things you can do with dollars besides just simply throwing it under a mattress, dollars have out-performed gold.  I'm talking T-bills and other "safe" ways to park dollars if you have invested into dollars which certainly have out-performed gold.  The presumption now is that gold is going to out perform even T-bills, which may be the case but I wouldn't call that a sure bet even now.  If the U.S. economy goes bust, gold will be nice to have but I think it would be stupid to put your entire life savings into gold as well.

BTW, I think the long-term prospects for bitcoins are going to be better than gold, for many of the same reasons.  If you can get into investment strategies that are bitcoin-denominated investments, you will be doing even better still.  It would be fun to come up with a chart of gold vs. bitcoins, although I think at the moment you would have to reference the exchange rate in dollars to come up with any sort of comparison at the moment.

I dont have time to argue now, but gold will keep going up until the crisis is over, that is it will go up for 4 or 5 years more. If you believe the crisis will be over tomorrow sell your gold now. In all the big crisis the DOW/gold ratio goes to near 1 and we are still at 7. I wont sell until that ratio goes under 3.

Agree with 1 caveat.

The ratio can stay unchanged at a high level even if both go down.

As there are big speculators in the gold market on top of longterm investors, if the crisis gets worse (which I believe it will), Gold will also go down as hedge funds need to unload gold to pay out fund withdrawals and stay liquid.

Hence, Gold is likely to go down towards 1000 and possibly towards 650-850 by 2011/12 before sharlpy turning up and making new highs.

What do you think about paper vs physical?

you want to own PHYSICAL gold, definitely no paper because this will be worthless

have a look at http://www.safewealthgroup.com/ (http://www.safewealthgroup.com/)
(you need to send them a mail to get access, but it is for free. they don't offer a real website for good reason)

they have a great clarity about that and great reputation

they now offer "safestore" for gold, silver and cash notes

@S3052, what do you think of Gold Money http://goldmoney.com/ (http://goldmoney.com/)?

That would happen if the crisis developed as a deflationary correction, but from now on is going to be more and more inflationary.

Look at this lasts months. There are deflationary presures, but the Fed monetizing govt debt everyday is keeping the market up. We are going directly towards stagflation.

I disagree.

We are still overall in a deflation that will accelerate again and will be persistent for some time until inflation kicks in again.

What you see in some mainstream financial coverage is the masking of the deflation becuase noone wants to face reality.

The best way to look at it is to view the Dow Jones / Gold ratio. Then you see that deflation is in full force still, and will further accelerate.

By mid-2011 the rise in prices will start to be evident. Government and media will claim is a sign of recovery.

By 2012 stagflation will be oficially admited.

I concede with Peter Schiff and Gerald Celente, which are among the very few economists who have successfully forseen current financial crisis (google it). Well, Celente actually has like a 20-year long history of valid forecasts.

From their opinions, one might conclude that some terrible financial disaster is coming, one which has not been seen in the history of mankind probably.
Perhaps the perpetual circle of self - fueling debt will create something very unexpected.... Unexpected even for the banksters who probably caused the current crisis.

I hope that this future event will create a chance for Bitcoin to adopt widely.

Also, i wouldn't invest in Gold, since it is usually overpriced and suspectible to price spikes as everybody wants it and it is advertised as a remedy for the crisis. I would rather go silver, platinum which are more stable and predictable. Of course the last currency i would ever choose is dollar.

Both gold and silver are currently manipulated through electronic trades that are not backed by gold or silver.

We will see either a total deflationary collapse, or in an attempt to avoid it we will see hyperinflation in most of the developed world.

So lets cover bother scenarios.


Inlfation: Way up, since more paper chases same amount of gold.
Hyperinflation: WAY, WAY up.
Deflationary: WAY up, this is because currently when the worlds financial system cashes out it cashes out into bonds. During deflationary collapse you will have every government on the planet defaulting. So the cash out will have to occur in the next best go-to asset.


Politicians could implement sovereign money that is strictly enforced by legal tender laws and forbids excessive fractional reserve banking. This would take away the incentive for investors to run for safety as economies can get away from debt and savers can save. This would also end the manipulation of the AU an AG markets and might mean still reasonable gains.

Chances of this happening, basically zero.

Sound fiscal policy is what ended the previous gold bull run.


Yes, but I would buy 10 times as much silver. There are both monetary and industrial arguments behind silver. Gold at $2000 is a steal!


They have value because they can be used as forms of payment and stores of value that are independent of counter party risk. If you have precious metals, you don't need the bank or the government for someone else to be willing to trade goods with you in exchange for your precious metals. If the gov / banking system abuses the currency people always remember gold and silver.

BTW Major note, gold is no where NEAR bubble territory. When people begin discussing gold with the frequency they discussed real estate investment at dinner parties, take your gold and trade it for their assets, the end is neigh, but that's still a thousand days or more away. Start a separate thread if you want to discuss if gold is in a bubble or not, should make for interesting debate :)

Thank you! There is an amanzing amount of knowledge in this forum. And I thank you for that.

This would be extremely bullish for gold.

Politicians would start printing money to pay for political favors and gaining votes and the money would depreciate quickly. Check history, for example the assignat in France. I have not found one example in history where politicians printing money directly does not lead to hyper-inflation.

Government printing money = gold to the sky. This is basically what is happening with QE2 and the rest to come. A central bank monetizing government debt is the government printing money.


The only thing that can bring gold down is if the government decided to default on the debt and start being fiscally responsable. Apart from that, everyone nknows that governments are going to keep printing money to pay the debt.

Surprised I had to scroll down this far to see such a sensible response.  Gold is just a commodity in the modern world, the bulk of it is used either in jewellery or for industrial purposes.

If you need to hold on to wealth, go with baskets.  A selection of precious metals, a selection of currencies.  All your eggs in one basket (so to speak) is a really bad idea.

As for everyone who doesn't believe the current gold price is a bubble: http://upload.wikimedia.org/wikipedia/commons/e/e3/Gold_price_in_USD.png

This is only part of the story.
Gold can be largely overspeculated, price spikes are likely, so it is not the best investment. Other bullions are safer.

If gold is really only ornamental it would no way have the price it has now. Give it another tough.

I studied a little bit and seems gold and USD have a reverse relationship, when USD lowers, gold rises and viceversa. Also we all know gold is overpriced due to speculation. Next, assume that the world is headed to a major conflict, preceded by the fall of the USD. It means that the price of gold will rocket up to the sky. What do you think?

Economics is a very interesting and vast discipline. Like Lorentz's butterfly effect, any little stimuli in the environment can lead to a very big change. I believe that the actual monetary system will fall to it's death and also I see evidence of a very big war coming (possibly NBC and/or using advanced weaponry such as EMP or HAARP) in order to create the prerequisites to achieve the NWO, with it's ultimate goal: the control of every human in the world. I don't know in what order and when these things will happen but that's just a matter of time.

see Peter Schiff's blog: http://peterschiffblog.blogspot.com/2011/01/big-names-are-buying-gold-preparing-for.html

Agree with you on the fall of the monetary system and the war risks.

However, for Gold prices in USD, the current sentiment is typical for PEAKS, not for BOTTOMS.
Gold has turned down and will undergo a major correction (targets 1150, 1050, and possibly down to 850), before the rally continues. Same for silver, copper, platinum, most commodities.

This will likely last months if not a couple of years before the fall of the monetary system will cause Gold to rally sharlply again, above 5000, etc. and Bitcoins as well...

A price is a ratio. Everything's price has an inverse relationship with the dollar. If a dollar gets you less of something now, then that something gets you more dollars than it used to.

Gold/Dolar will go up for two reasons imo. It will go up because everything will go up (dollar going down) and because it is a money and as it becomes widely used it will gain from network effects.

The same goes for bitcoin, but I can't tell how much bitcoin will hold back gold-as-money-use.

at least in the short rum (6-18 months timeframe),
dollar will go up significantly (20%+)
gold will go down (-20 to -40%)

So far, it seems that's the trend.
On 31st of December 2010 it was 1420 USD/ounce and today it's 1342.

If it's lower than 1000 people should buy at least 1 ounce. But how do you know when to buy? One could see it's at 1100 and say: "Oh, it's gonna go lower than that, I'll wait some more". And then it pops to 1500 or whatever.

This is a valid question, indeed - and probably everyone investing and trading has those questions in his mind all the time...

Everyone may have his own method to answer it.
I can only share my personal method, which uses technical analysis and which has guided me for years successfully.

Based on the current price pattern, sentiment indicators, etc. we will likely see a deep correction that may end in the 1050 - 600 area. I know this is broad, but I will give a better update once prices get closer to 1100-1000.
We need to see the full picture then to determine whether prices fall further or build a bottom then and rise.

One good indicator is the "contrary sentiment" method: If most people believe prices will go down, we are close to the bottom. If most people believe prices will go up, we are close to the top.
For perspective: Around the 1400 $ topping area, the percentage of people believing in further rising prices was a whopping 98%. This means that they were probably all already invested and maximum 2% were left who could still buy (but this is not enough to further propel prices upwards). This is a classic example of a top. Then prices are falling and people invent multiple hypothesis why this happens...

Often it is a simple as looking at the title page of the new york times: If it says "gold will rise to 5000$" it's a good time to sell (with some time leeway +- a couple of weeks)

To come back to your question when to buy gold. My personal strategy is to buy physical gold (no paper gold) in the 800-1100 area, and accept a dip to the 600 $ area (if it happens I will buy more).
I expect prices to rally significantly against the dollar in the next 3-5 years (while first undergoing a big correction as mentioned above)

This doesn't seem right to me. I'm "fully invested" in gold, silver and bitcoin, but when I earn I don't hold the extra in dollars I put it in what I think will rise in value. In other words, I'm in that 98% and I'm still buying.

typically you dont have enough funds to stem the selling once it has begun.

Gold has topped out and will decline much more before bottoming, unless you can invest billions

The big players including hedge funds have started to sell and/ or playing the short side

 ???

I'm really confused. How can you say everyone is claiming it's going higher if the big players all think it's going lower?

Every year in mid-February, the companies that recycle and produce rare-earth metals and precious metals, must flood the market with product because of year-end and profit statements. This should bring gold back to 1050 levels or lower if speculators get nervous.

i should share some compelling statistics and charts to illustrate it

The short answer is:
not all are already believing in a downtrend of gold
it was 98% bullish sentiment in december
now it is somewhere around 90%
major bottoms occur when bullish sentiment is below 10%

This means there is a LOT of room on the downside before we get there

I really don't get this kind of claim either. Why do you think the current price doesn't factor in that fact? If it happens every year then it is free money, but there can't be free money sitting there.

It is simply that they never reveal how much they have held back (recovered) until forced by year-end statements and the markets do try to include this adjustment, yet not everyone trades with this knowledge and can sometimes be stung by speculator sell-offs. I will try to find the Forex article from last spring which points this out. Adding linky soon...

Well, if you believe in gold, please consider making a bid for my 20FF gold coin auction on biddingpond.com :)

http://www.biddingpond.com/item.php?id=246

Here two links about sentiment and also about the current Elliott Wave forecast that includes an outlook for Gold as well.

1. The 10 page report is free. You only need to register on the site (also for free)
http://www.elliottwave.com/club/Safeguard-Your-Financial-Future/default.aspx?code=42255 (http://www.elliottwave.com/club/Safeguard-Your-Financial-Future/default.aspx?code=42255)


2. http://www.marketoracle.co.uk/Article25782.html (http://www.marketoracle.co.uk/Article25782.html) see text without charts (for charts, click on the link):
"Over a month ago I began to issue a warning to traders and investors who were long precious metals that a possible correction was likely. Prices were overextended and nearly every 5 minutes a gold investment advertisement was appearing on my television. Additionally gold advertisements could be heard during commercial breaks of many right leaning radio talk show hosts, not that I listen to them or anything.

This article is not about pounding my chest, it is about a learning process that many investors fail to take the time to learn. It is easy to grandstand and speak in analogies when discussing the financial markets, but in the end the name of the game is to buy low and sell high or sell high and buy low depending on which direction a trader expects an underlying to move. I believed gold was overbought several weeks ago and while my timing was not precise, the eventual price action has followed my thought process.

The single greatest threat to profitability for investors and traders is getting caught up in the financial media and punditry. I try to stay away from the financial media at all costs as I do not want my view of the financial markets blurred or altered by the commentary of a so-called expert that I am not familiar with at all. About the time when I was calling for a correction in gold, the financial media was putting out tremendous bullish hype regarding gold and I'm guessing television channels like CNBC had commentators declaring their love and long term desire to own gold in their portfolio.

This is not to say that gold will not work higher in the future. In fact, research from fundamental and technical analysts suggests that gold prices could continue going higher for several years as the United States continues to devalue our currency while running massive budget deficits. No one really knows for sure what will eventually happen, but it would not be shocking to see gold continue to rally in the future. However, the shiny metal needs to wash out some weak owners by moving lower and working off long term overbought conditions before making a run at breaking out to new highs."

Another interesting article about Gold

http://www.elliottwave.com/freeupdates/archives/2011/01/21/-Everyone-Knows--Gold-Should-Be-Rising----Why-Is-Sinking-Instead.aspx (http://www.elliottwave.com/freeupdates/archives/2011/01/21/-Everyone-Knows--Gold-Should-Be-Rising----Why-Is-Sinking-Instead.aspx)

Just a humorous (but correct) page to answer the question "why gold?".  Well, because it's the only thing that could act as a form of money.

http://www.npr.org/blogs/money/2010/11/18/131430755/a-chemist-explains-why-gold-beat-out-lithium-osmium-einsteinium?ft=1&f=93559255

here is a new chart, comparing bitcoins vs. Gold.
http://www.bitcoinbullbear.com/index.html (http://www.bitcoinbullbear.com/index.html)

After I read about that china has become the biggest gold supplier in the world, and there are many source indicated abundant of gold mine store under 500 meter depth, I started to short gold

With help of today's machinery, mining gold can be as fast as pumping out oil, and I don't think chinese will act like OPEC countries to limit the gold output in order to hold the price stable

Some assumptions in there. Most importantly, the crisis can force ppl to sell. This is what happened when the price dropped lately. And this will get worse once the crisis hits the real economy. If the crisis get really bad you might get a Kilo of Gold for a 20 Kilo Sack of Rice. So if you think we're heading for a terrible crisis, don't fill your safe with gold, fill your basement with sacks of rice and corned beef.

So it seems S3052 has been calling for lower gold prices for quite some time and yet the gold price is still up since. Who knows what will eventually happen. We will wait and see.

We gave a sell reco in the 1850-1900 area, so our forecast has already materialized. More downside ahead of us.