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Down with Gold (obsession)!

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November 23, 2009 – Comments (14) | RELATED TICKERS: GLD

Every couple of weeks I try and find more gold or gold mining companies to short in CAPS.

I see it as a huge capacitor of my CAPS score... charging up more and more and more.. I'm waiting for the discharge to happen - probably in 2010.

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 I was at an exhibit at Emory University in Atlanta this last weekend, at the Carlos Museum.  The collection contains numerous artifacts of Amerindian, Roman, Egyptian, and Middle Eastern origin.  There were some really beautiful silver and gold objects - especially gold figures made by Costa Rican indians.

 The Amerindians viewed gold as special because it was rare, and didn't tarnish like silver or copper.  However, they did mix up to 50% with copper because of the beautiful reddish color of the metal.  

 The artisans there appreciated gold because of the beauty in the final objects that they made.  It served a useful purpose in making art and jewelry.  

 The same people were confounded by the Spanish, who simply lusted for the gold itself (much like current investors).  The Spanish took all the beautiful objects, simply melted them down, turned them into coins or ingots that just stayed locked in a vault.

 Present day gold investors are like the Spanish.  They are going after this shiny metal, just to have some locked up hidden away.  I can understand making gold into beautiful jewelry, a wedding band, or a panel for a church.  Lusting after a GLD fund or a krugerand is nuts.  

 All this gold demand, spurring large-scale mining and ecological destruction to "preserve wealth".  F**king idiotic.

 I am growing excited about the upcoming bursting of the gold bubble.  I think it'll happen about the time the FED first raises interest rates, but I am not sure when it'll begin.  All I know is that the higher gold prices go, the greater the crash will be.

 Gold for jewelry buying is already crashing in demand.  Nowadays, an artisan or jewelry customer doesn't have to choose between gold, silver and copper.  There is a modern world of materials.  This gold bubble might just drive away customers and change the underlying structure of the gold market this time.

 Other materials include: Modern silver alloys that don't tarnish (argentium silver), platinum, palladium, polished stainless steel, bronze/copper, and a whole world of undiscovered modern alloys.  

 Its the same as any other market.  When silicon gets unaffordable for solar cells, companies that make thin film become enormously profitable.  When gold gets unaffordable for people.. XX will be started as a new trend.  

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 So, you buy a bunch of krugerands at 5% above spot.  Right.

 Now, a year has gone by at gold spot is up 15%.  You go to sell.  Now you have to sell below spot 5%.

 Now, the IRS comes in and takes a 30% tax on your profits.

 So, your net gain is a measly 3.5%?  Wouldn't a CD at a bank be better?

 ---

 -Rof 

14 Comments – Post Your Own

#1) On November 23, 2009 at 11:23 PM, 100ozRound (29.40) wrote:

Most people that hold physical gold tend to hold it longer than a year....most hold it for decades....

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#2) On November 23, 2009 at 11:43 PM, FleaBagger (29.21) wrote:

Mining has a negligible impact on the world's supply of gold, which is mainly affected by the willingness or unwillingness of current gold owners to sell. So I don't feel like I'm meaningfully contributing to ecological disaster when I buy a krugerrand. Also, the very reasons you cite as good reasons to want gold are the very reasons it has always maintained its value better than fiat currency or consumer goods: people want it about as much this century as the last, and will want it as much next century as this, and it doesn't become obsolete or tarnish.

It's perfectly reasonable to buy gold when you expect financial crisis, especially of the currency crisis type that Bernanke is openly manufacturing. Don't be a hater, be a participater.

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#3) On November 23, 2009 at 11:45 PM, rofgile (99.29) wrote:

Here's my current list of gold mining companies:

GBG Great Basin Gold Ltd. (USA)

HMY Harmony Gold Mining Co. (ADR)

NGD New Gold, Inc. (USA)

NSU Nevsun Resources (USA)

GSS Golden Star Resources Ltd. (USA)

UXG U.S. Gold Corp

EGI Entree Gold, Inc.

NG NovaGold Resources, Inc. (USA)

BVN Companhia de Minas Buenaventura SA (ADR)

GFI Gold Fields Limited (ADR)

EGO Eldorado Gold Corp (USA)

GG Goldcorp, Inc. (USA)

ABX Barrick Gold Corp (USA)

GOLD Randgold Resources Ltd. (ADR)

NXG Northgate Minerals Corp (USA)

IAG IAMGOLD Corp (USA)

MFN Minefinders Corp. Ltd. (USA)

AUY Yamana Gold, Inc. (USA)

AAUKY.PK Anglo American plc (ADR)

JAG Jaguar Mining

ANV Allied Nevada Gold

SGRCF.PK San Gold Corp.

CDE Coeur d'Alene Mines Corp

XRA Exeter Resource Corp.

GORO.OB Gold Resource Corp

HL Hecla Mining Company

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 If anyone knows of additional companies, let me know so that I can add them to my list!

 -Rof 

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#4) On November 24, 2009 at 12:31 AM, ozzfan1317 (79.25) wrote:

I red thumbed a bunch of them free points Yay..lol...Gold wont stop going up immediately but common sense says once interest rates go back up it will pull back and the miners will take a big hit.

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#5) On November 24, 2009 at 12:31 AM, starbucks4ever (97.43) wrote:

rofgile,

I think the bubble will burst before the Fed raises rates, for otherwise it has no end. 

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#6) On November 24, 2009 at 1:01 AM, UltraContrarian (31.20) wrote:

rofgile,

Looks like you left out AEM, AU, NEM, VGZ, PZG, RGLD, DROOY, GRZ, SA, GRS, KGN, LIHR, FCX, NAK, THM, RBY, IVN, RIC, KBX, AZK, AGT, MDW, CGR, FRG, ROY, BAA, TRE, SFEG.OB, SRCH.OB, and MGOL.OB among others.

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#7) On November 24, 2009 at 1:34 AM, awallejr (85.54) wrote:

One I hold simply as a hedge:  LGCFF.PK

As for a bubble.  I don't see it at current prices.  As I said in an Alstry blog, it plays into both inflation and chaos (11.10.9...IT NOW BEGINS....UNPRECEDENTED!!!!!!!  comment 25).  I only point that blog out becuase Jim Cramer used those same terms on his show's opening the next day about gold(confirming in my mind that he reads my blogs ;p).

It will also be interesting to see how these new gold miner ETFs will impact mining stock prices.

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#8) On November 24, 2009 at 8:07 AM, kaskoosek (55.71) wrote:

I disagree. The FED can not raise interest rates anymore.

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#9) On November 24, 2009 at 8:13 AM, rofgile (99.29) wrote:

Thanks UltraContrarian!

  I added a bunch more to my CAPS today.  I'll probably wait another month or two before adding the remaining.  I'm following my strategy for a bear market investing, where I buy securities on a monthly basis as I don't know when the bottom is.   Conversely, I don't know when the top is for gold - and this blog definitely is NOT calling the top.  So, I add more downthumbs every other month.

 -Rof 

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#10) On November 24, 2009 at 8:23 AM, whereaminow (< 20) wrote:

Gold prices will go down, if the people holding gold are willing to sell it. That's called marginal selling. 

Gold mining companies are affected by the price of gold, the marginal buyers and sellers of gold.   Some of them are crappier than others. Some are affected by gold price movements more than others.

You will have to explain to me how shorting every gold miner you can find is any less idiotic than goldminingxpert's attempt to short the market.

David in Qatar

 

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#11) On November 24, 2009 at 9:22 AM, rofgile (99.29) wrote:

David in Qatar:

 Honestly, it isn't different from what GMX did (stupidly) - except I am not doing this with real money.  Alas for GMX...

 In CAPS I am not attempting to call the top.  You won't see "The Gold Top .. Month 11 Day 23" blogs from me.   I don't know if the top will come soon or not.  The good thing is that in CAPS I can short without margin calls.  I can afford to wait two years, four years... :)

 With the large number of miners I can add more shorts periodically, using a dollar-cost-averaging strategy.  

 -Rof 

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#12) On November 24, 2009 at 9:39 AM, whereaminow (< 20) wrote:

rofgile,

Fair enough. I don't have much love for miners either.  Good luck with you play.  I think everybody knows that the Fed can crush mining stocks if it has to.

David in Qatar

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#13) On November 24, 2009 at 10:03 AM, XMFSinchiruna (27.35) wrote:

 whereaminow

I think everybody knows that the Fed can crush mining stocks if it has to.

Not everybody  ;P

The Fed is caught between a rock and a hard place, and higher interest rates won't stop gold since that does nothing to solve the fiscal impairment behind the USD ... and indeed only raises borrowing costs for the massive deficits projected.

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#14) On November 24, 2009 at 1:43 PM, chk999 (99.97) wrote:

I don't think we're near the gold top yet. I remember the last one vividly and two things have to happen first.

1. Gold has to hit a bizzare valuation in buying power. The $800 top was about the equivalent of $2400 today. I think looking at the price of oil in gold is a good metric when that gets way low, top is near.

2. Just as the buying power of gold gets strange, "pundits" show up who talk about it doubling again and say how the price can never go down from the current levels.

At that point, go short gold and hang on.

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