I also enjoyed this post by Jim Sinclair - hat tip to Uknow.. reminded me of Bob Brinker's MOABO call... Also, since I'm in the UK missing my CNBC - is the MSM reporting gold big time back home?
Author: Jim Sinclair
Dear CIGAs,
The question you have is simple: Is this the BIG ONE? The answer is YES! It is so reminiscent of the move from $400 to $887.50 in the 70s that this must be the Big Kahuna of $400 to $1650 in the “Gold Bull Market of the Millennium.”
So order your 5 point seatbelt, fire extinguisher and install water cooled brakes. This experience is going to be like driving Road America in a twin turbo Porsche going 200 mph straight towards a corner you can only negotiate at 60.
The violence coming at gold will set your hair on fire. This is no longer a market for the ordinary investor or the self styled trader. $100 swings will become the norm, not the exception. Gold will take out every Angel as it moves to the $1650 mark in a manner that will blow your mind.
I have seen all this before with the same personalities at the helm so tighten your seat belts comrades in golden arms, because the Big Kahuna is here.
May 10, 2006
Uh, Gold's at $705 right now...
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China, lots of dollars very little gold. They're scooping it up like mad.
http://tinyurl.com/h2ebe
http://tinyurl.com/zpvuz
Tom
Local MSM covered Gold Last Night
The number one rated 10 o'clock news here in San Francisco Bay area did a story on gold at $700, and interviewed people. . .one "expert" said, "I don't see gold going to $1000. . .American like Real Estate". . .hmmmm. . .this guy is likely a "realtor!" . . .on the other hand, if MSM is covering gold, perhaps a short term top is here??
I agree with you Mark, it is becoming pretty mainstream, there is no fear. Also, I know people who are now investing in both gold and real estate.
The Thinker's Thoughts:
Gold is in play. Who knows how high it will go before it hits bottom. People are saying we could see $50 daily price swings. Do you have the stomach for that kind of action? I sure don't, I will sit on the sidelines and let this whole thing play out.
Who does inflation hurt most, the worker living pay check to pay check and paying off loans on his house, car, TV and mattress, or the guy with millions in the bank who is owed lots of money? If you guessed the worker than you guessed wrong. To him, inflation means higher prices but also higher income. He has no money in the bank to loose value, he only has debt that is rapidly devaluing.
The Fed will do what it must to ensure a strong dollar because that is their primary job, to protect the value of the bank accounts of the ritch.
The Fed will do what ever it takes! If it takes 20% interest rates, there will be 20% interest rates.
You fools who think this is the end of fiat currency, do you think you have outsmarted the capitalist establishment? Do you think you are playing a game that you can win?
Diversified long-term investments can be a great thing, but when you start timing the market you are stepping into a casino where every table is rigged. "The Man" has got his finger on the little button under the table that makes the ball land on "00" and he is just waiting for you to put down your life's savings on Gold before he gives it the press.
God's green earth is full of gold, but when prices were $250 an ounce, it was not commercially viable to undertake expensive and risky explorations. If gold stays at $700 an ounce for long you better believe teams of gold hunters will be journeying to the bottom of the oceans and the center of the earth to find more of it. Sure it will take some time for this to happen. At the very least investors in exploration will want to see that high prices are here to stay.
But unlike oil, gold is not consumed. Pretty much every ounce of gold that was ever dug out of the ground is still around somewhere. And gold is being mined 24/7. So basically this means that with every new ounce of gold that hits the market, there is one less ounce of demand for the stuff. Talk about inflation! That’s why the price of gold has been creeping lower for all these years. All we see now is a speculative bubble, froth in the market.
You may have timed the housing bubble but don't press your luck. In the commodities game the house always wins!
At this point, gold is even more speculative than housing. "What wise men do in the begining ... fools do in the end." Be careful.
one point i need help understanding: if other countries dump the $ and buy more gold, would't that weaken the dollar and bring gold higher?
why would one think gold can become a bubble in this case?
I don't care how high or low gold goes. I'm trying to find the best way to protect my wealth from inflation and weakened dollar. thoughts?
the thinker: takes up to five years to get funding, explore, set up mines, extract and bring to market any new mines.
And they are running out. See anybody panning for gold lately?
As for the jittery folks: remember, you don't only make money if you sell at the peak. Just sell gradually when you are in a good price range. Holding on to time the peaks is suicide.
Anonymous said...
At this point, gold is even more speculative than housing
Hmmm... 70% of american households own a home, most with significant leverage and debt, and probably about 0.7% of american households own gold, most buying with cash.
hmmm... what one looks more bubbly?
The Great Mamboni said:
"To 'The Thinker' Mamboni issues a challenge: in all of recorded history, can you name one fiat currency that did not eventually become worthless and extinct, just one? For if you cannot, then 'The Thinker' must renounce his moniker, and recast himself as 'The Unthinker!'"
I will name several fiat currencies that have not become worthless:
The US dollar,
The Euro,
The Yen...
I appreciate the irony of this logic. It is like saying "More people are alive today than have ever lived therefore the majority of people who have ever lived have never died, therefore death is not a certainty, it has only occured in less than half of the people who have ever walked the earth"
Listen, I know the Confederate Dollar wasn’t worth much after the Civil War, but you have to understand, the fiat currency is a relatively new construction and most of them are still in use today. Hell, even the Sadam Dinar could be turned in for new bills. The Spanish Peseta could be turned in for Euros. The only currency that I have ever known to become "worthless" are the confederate notes, and strangely enough, they command a pretty penny on ebay. Sure you can name some failed states who's money became worthless, but they are the exception and not the rule. And after all, gold is just a fiat for wealth because gold does not provide you food, shelter, clothing or any of life's necessities. It is only valuable because we all agree that it is. Doesn’t this sound like fiat currency to you? Sure gold has industrial uses, so does a screwdriver. Sure gold is rare, so is mad cow disease. If gold is so beautiful then why do we mix it with nickle and coat it with rhodium and sell it as "white gold"? Again, its only valuable because people agree that it is. It was only a few years ago that its value was only $250 an ounce, now its $700. Did gold become more rare? Were new uses suddenly discovered?
I'll tell you what you cannot do with gold (besides eat it) you cannot invest gold in a business and let it 'work for you' all you can do is hope that someone doesn’t steal it from you.
5000 years ago in Mesopotamia, Anatolia, and Egypt, gold was nice but iron was money (Wikipedia entry on iron). Iron was not a fiat currency, it was a rare element. You see those guys lacked the technology to understand that iron was one of the most abundant elements on the planet, their only source of iron was from meteorites that fell from the sky. I hate to be the Egyptian who put all his money in iron the day before they figured out how to extract it from rocks.
Did you know that gold is dissolved in the earth's oceans and all we need is the technology to extract it at a cost effective level? The day will come.
Diamonds you say? They can be grown in a lab, the day will come when synthesized diamonds will be more perfect than natural diamonds. And we all know that DeBeers is holding back mining to keep prices down.
Houses, gold, tulip buds, its all the same, its all froth.
But for all of you nut jobs who have lost your faith in the dollar, just send them my way, I will make good use of them.
Today, I believe gold is more “speculative” than housing.
A speculative buyer believes that he can extract quick profit from a short-term investment, a quick buck for little or no risk. Speculative things appeal to our sense of greed.
In this sense, housing was speculative but is quickly becoming less so … but now gold is becoming speculative.
Can you make money in a speculative market?
Yes, but be careful … very careful. Broad speculation will lead to wild and irrational swings in pricing, or even an over-night retreat to low stable prices. Making money will require you to pick the top of this irrational ride and have the discipline to sell before things crash – quite a skill.
There are less risky ways (more rational ways) to deal with inflation or weakening dollar.
Good luck.
mamboni's posts do have some merit. they don't have to be the ultimate truth. he provides valid points to consider.
As I mentioned above, the Dinar survived the Iraqi regime change.
The US dollar (as of the time of this writing) is far from worthless.
The price of gold is not only set by the confidence in the dollar, the price of gold is dictated by the quantity supplied and the quantity demanded. If there is less gold on the market than the quantity supplied decreases and the price of gold increases. If there is too much gold on the market, the quantity supplied increased and the price of gold decreases. If people think that gold is a poor investment than the quantity demanded will fall and so will the price. If people think that gold will get them rich quick than the quantity demanded will increase and so will the price.
Now here's the fun part. The producers of gold will increase production when the marginal cost of producing gold is less than the price at which the gold can sell for on the market. Gold is produced at a diminishing rate of return, that is to say, the cost of producing the first ton is less than the price of producing the second ton, etc. As the price of gold increases, the marginal price of producing more gold falls below the cost of producing another ton. Now production increases. This may happen as more mines are opened and more competitors enter the market. Now as the quantity supplied increases, the price of gold goes down finding a new equilibrium....
(Yes it takes a long time to bring that new production on-line)
And then the bubble pops!
Now the quantity demanded rapidly decreases, but the quantity supplied remains high. Just as it took a long time for the producers to ramp up production, it will take a long time to go through excess stock resulting in a long drawn out period of low prices.
It happened a few years ago with microchips. It is happening right now with real estate. It happened with gold in the late 70s/early 80s...
Geopolitical uncertainty has undoubtedly pushed up the price of gold, but this period of uncertainty will pass.
If you are correct in your hypothesis that the rise of gold is primarily attributable to the lack of restraint the US government has shown in printing out more greenbacks then wouldn’t we see the price of gold in Euros remain constant? Well we haven’t. The Euro has gained some ground against the dollar but not enough to account for gold's rapid ascension. Is your position that the world has finally woken up to the fact that ALL governments are cranking up the printing presses in unison? That is a tough argument to make and I don't buy it.
What we have here boys and girls is a classic bubble, once again fueled by the greedy and the stupid.
This bubble will come and go just like the last bubbles we have seen in recent years.
The Great Mamboni would have you believe that "this time its different." Perhaps he feels that in this new economy gold is king and cash isn’t worth the paper its printed on. Perhaps The Great Mamboni believes that they aren’t making any more gold, so buy yours while you still can or you will be locked out of the gold market forever. Perhaps The Great Mamboni believes that gold always goes up!
But we know better than that! We’ve heard these lies before and we’ve seen the carnage it causes. We’ve seen the Enron employees who lost their 401k's, we’ve heard of the poor first time home buyer who bought that new 'started home' for $700,000 and is now condemned to a lifetime of servitude.
Sure you can play the gold market, you may make a fortune. The tech bubble and the housing bubble made a lot of savvy investors very rich. But I warn you that the commodities markets are difficult to navigate and you may loose your shirt if you don’t know what you are doing.
Can you make money playing gold? Sure! But lets not kid ourselves and say that this new price is somehow justified by new economics because we have heard that one before and its not fooling anybody.
Keep thinking, eventually you may get it.
Tom
Dear Thinker,
Yes money supplies all over the world are increasing...here's last years...
Australia +8.1%
Britain +12.2%
Canada +6.4%
Denmark +24%
US +8%
Euro area +8%
After considering the following perhaps you won't be so smug about your faith the the "dollar"
During the reign of the German Weimar Republic from 1919-1923. In 1919, one ounce of gold was 75 marks. By 1923, it was 23 trillion marks
Just how badly is the U.S. borrowing money? According to the Treasury Department, America's first 42 Presidents (from George Washington to Bill Clinton) borrowed a combined total of $1.01 trillion from 1789 to 2000, Between 2000 and 2005, President George W. Bush has borrowed $1.05 trillion -- and he's got a few more years left to go.
I won't get into the yen carry trade and the historic amount of liquidity that been created over the last ten years. Suffice it to say that infation is definately on its way and to not have protection in the form of precious metals to protect your savings is suicide. If your assets are denominated in US dollars I feel for you.
You can't argue with 5000 years of monetary history.
Very pretty site! Keep working. thnx!
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Nice colors. Keep up the good work. thnx!
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