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dudemonkey (39.48)

Are gold prices at a peak?

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April 01, 2009 – Comments (7)

This guy is calling for $800 an ounce by year end:

 http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=81178&sn=Detail

This guy is saying we're at a peak and it won't go up much more.  Other commodities are likely to realize larger returns as economies around the world start to recover (maybe not ours, but there are bll markets going on right now outside the US):

http://www.mineweb.com/mineweb/view/mineweb/en/page34?oid=81181&sn=Detail

Earlier this week I saw an interesting fact about gold.  Zero ounces were imported into India for the first time.  This means that global gold demand is driven entirely by fear right now, and that kind of fear isn't going to last.  People are hedging against the collapse of the dollar, but only  5% of the world lives their lives in dollars.

Every time I read mining company news, there's another gold producer that's ramping up production.  It's going to be time to short gold and gold miners soon as all this additional gold enters a market that is seeing reduced demand.  Unless you are a goldbug to the very core, you have to realize that gold follows the laws of supply and demand like any other metal. 

7 Comments – Post Your Own

#1) On April 01, 2009 at 8:01 AM, TDRH (99.65) wrote:

dude,  Hard to say.   There are more factors at work though than supply and demand.    Global financial stability and the dollar strength.   Gold is always worth something and with the fed/treasury moves I have to think that the dollar will weaken and dollar based commodities will rise.   Of course I have been wrong for the last year. 

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#2) On April 01, 2009 at 9:07 AM, dudemonkey (39.48) wrote:

My guess is that gold will continue to go up, but it will be far outpaced by the growth in other commoditied.  I like gold, I think it makes sense to have some in your portfolio, but I think the time to be scooping up fistfuls of gold is long passed.  I'm going long on some other commodities.

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#3) On April 01, 2009 at 9:09 AM, EHoyle80 (< 20) wrote:

Given how often these days gold is touted as the ultimate “safe haven,” it’s not surprising that investors might feel less safe if they knew that the NYSE-Liffe futures exchanges seems to have run out of 1 kilogram gold bars. Futures contracts at NYSE are now backed by the promise of a one-third interest in a 100-ounce gold bar (about 3kgs). Not to worry, however, if you own three of these promises, you can take physical possession of 100 oz refined gold bar.

Via Stock Research Portal

Gold supplies are dwindling, people can't get their hands on enough physical gold.

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#4) On April 01, 2009 at 9:19 AM, XMFSinchiruna (27.35) wrote:

Dudemonkey,

I could line up rational and objective arguments for why we'll be seeing $2,000+ gold for as far as the eye can see, but I'm starting to see that no matter how many cohesive arguments I put together, there will always be some posting these sorts of calls. Now, I don't mind losing a debate against well-researched counter-argument, but I can not afford the time to refute every such claim.

This is a very important topic right now, so if you are going to make a call one way or the other, you owe it to your fellow Fools to bring forward a well-formulated and well-researched basis for your call. Otherwise, you could be raising doubt among people who are trying intently to wrap their heads around some very complex macroeconomic issues. Of course, there is always room for differences of opinion, and I respect yours as I do every fellow Fool, but for those Fools with less conviction than I have about where gold is heading, I feel a sense of duty to counter even the spurious claims... which is a bummer for me. :)

Anyway... who cares if one brokerage house calls for lower gold... they likely have an interest vested in keeping prices lower. SocGen is awash with toxic dollar-denominated assets, so the suggestion of a conflict of interest is not out of the question for any of these houses. That conflict of interest, by the way, is precisely what Glass-Steagall sought to prevent here in the States, and the Act's repeal coincided with commensurate relaxation of norms across Europe.

As for India not importing gold, Springtime is traditionally the weakest period of the year for jewellrey demand, so I see no surprise there.

And finally, your anecdotal observation about miners ramping up production is refuted by the facts. The industry failed to replace its own production for 2008 by a wide margin, and the cancelled projects and reduced capital expenditures executed as a result will have lasting impacts on global production.

Please continue to voice your opinions, but please also be prepared to defend those positions in light of well-researched facts. The stakes are simply too high for us as a community to let anything else pass through unchallenged.

Finally, I make no short-term calls about gold.. anything could happen in the short-term... but what is supported by the events unfolding within the world's currencies is my assertion that the long-term trend remains substantially higher.

Fool on!

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#5) On April 01, 2009 at 9:21 AM, XMFSinchiruna (27.35) wrote:

dudemonkey

May I suggest silver?  :)

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#6) On April 01, 2009 at 10:03 AM, dudemonkey (39.48) wrote:

TMFSinchiruna,

This isn't a call.  I'm not a gold speculator.  I'm passing on what I'm reading since the gold debate continues here on CAPS.  Also, I didn't say that gold miners are increasing production now.  They are ramping up for increased production in the future.  I understand that it takes a while to increase production at a mine and it looks like we'll see a higher supply of gold in the future.  As I'm sure you know, that's how commodity supply works. My apologies for the unclear statement.

I know you disagree that gold is a commodity and that's fine.  I agree with you on some level.  The comment in my post about goldbugs wasn't leveled at you or anyone in particular.  I'm just saying that there has to be a rational component to the discussion (which you bring to the table every time).

My stance on gold is solidifying, and that stance is "I'm not sure it's going to go up at the same rate that it has over the past few years".  I simply can't say and won't place my bet on it.  You seem to be a lot more sure than I am, which I appreciate and I'm listening.  I read all your articles and CAPS blog posts, so if I get to the point where I want to buy a gold miner I know which ones I'm going to go after and they're ones that you recommended.  I'm starting to dig into the fundamentals of other commodities, silver included. 

I guess I'm sidestepping the challenge to defend my statements by saying that I'm not trying to prove a point.  I'm trying to understand the market better.  I've read your analysis of why you believe $2000 gold is reasonable (that's roughly the inflation-adjusted value that gold hit in 1980) and I don't disagree with your thinking. However, I'm not yet SURE that's the case and I'd rather miss out on something big than lose money making a bad call.

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#7) On April 01, 2009 at 1:36 PM, nottheSEC (78.93) wrote:

NO... Although silver may be a better buy,Blogged about it today.

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