Price of gold dropped $84 /oz. today

[timo2]

My boss just came by to tell me he told me so...

He has been predicting a drop in gold and silver for a few months... he thinks gold is going to drop below $1,000... he said the hard part is to predict when it will go back up when people start seeing that the current market / gvmt spending can not continue as is....

you know the old saying "alarmists are always right, it just depends upon which one!"

 

[clifp]

Morningtstar is quite bearish looking for a $1100 price based on the marginal production price of gold miners.

I don't have any gold, I am thinking $1200 might be a good entry point.

 

[haha]

I'm betting that gold will drop to $600-700 by 2015

If this happens, only a few miners will cover their cash costs, and none will cover their all-in costs.

Ha

 

[traineeinvestor]

We've had a small allocation to silver for several years*. Added a bit more silver today even if the only justification is that it looks cheaper than it has for some time - which is not entirely rational.


* and a few ounces of gold in a safe deposit box

 

[Tyro]

Most of what I heard & read puts the target @ $1200, estimating that to be the cash cost production. Anything below that price puts producers in jeopardy of going under.

Cash Cost vs. Marginal Cost | eHow.com

gold $1200 - Google Search

Tyro

 

[sheehs1]

Don't have any gold or silver. It was too high before I considered buying. At this point, I am holding off as this could be a multi-year trend down. I tend to look at the potential downside. That and the fact there are other things to invest in that pay me more to hold. Gold ran up fairly quickly when one considers where it had been prior.

I sold my commodity ETF 2 weeks ago.

 

[MichaelB]

A interesting paper from GMO on gold prices just published. It looks at the impact from emerging market consumers, particularly India and China, something GMO has highlighted in the past as an important factor in the decade long appreciation. The conclusion

The concept of gold as a general insurance policy against systemic risks is dangerous, especially today. Gold prices are driven both by global monetary policy and emerging markets consumers. Emerging markets have been a significant positive force on gold prices for such a long time that it’s easy to forget that their impact on gold can very well go in both directions. Gold prices not only have extensive exposure to China and India, but their exposure to these countries is pro-cyclical by nature. Given both the cyclical and structural challenges the Chinese and Indian economies are facing, we believe the risks to gold prices today are particularly high.

 

[REWahoo]

A interesting paper from GMO on gold prices...

Wow. I knew amazing things were being done with Genetically Modified Organisms but I had no idea they had evolved to the point they were publishing economic papers...

 

[haha]

A interesting paper from GMO on gold prices just published. It looks at the impact from emerging market consumers, particularly India and China, something GMO has highlighted in the past as an important factor in the decade long appreciation. The conclusion

Thanks for posting this , Michael. I read it, and it is definitely interesting and to the point of what drives gold prices.

GMO is a high quality source for sure. Jeremy says buy natural gas, copper or copper producers, and phosphate producers. Which last basically means buy Morocco, so it is not easily done.

I hope if anyone on the board is in the copper industry, or knowledgeable about copper, he or she will post about copper producers.

Ha

 

[MichaelB]

Gary Shilling, who has been calling the deflation and debt issues for over a decade, has suggested staying with US and Canadian based resource companies and avoiding the emerging market country's resources.

Looking at the GMO resources fund, even though Grantham's view is petroleum will not be a problem and potash the critical resource, the fund portfolio is mostly petroleum. Looking at a fund I have invested in the past, Vanguard Precious Metals and Mining, the top 4 holdings (1/3 of the total portfolio) look like the implementation of Grantham's resource story: Hochschild Mining (gold and silver), K+S Aktiengesellschaft (fertilizers), Potash Corporation of Saskatchewan (Potash) and Umicore (Recycling)

 

[rbmrtn]

Here's a link to a paper that discusses some of the issues with gold and why it's fair price is closer to $800/oz

The Golden Dilemma by Claude Erb, Campbell Harvey :: SSRN

 

[Onward]

Here's a link to a paper that discusses some of the issues with gold and why it's fair price is closer to $800/oz

The Golden Dilemma by Claude Erb, Campbell Harvey :: SSRN

Excellent paper. Thanks.

 

[imoldernu]

Zero Hedge has a reputation here on ER, as the "Chicken Little" of investment.
Whether for entertainment or curiosity, today's piece on "Gold".
Are We On The Verge Of Witnessing The Death Of The Paper Gold Scam? | Zero Hedge

The legal claims on physical gold far exceed the amount of physical gold that the banks actually have by a very, very wide margin. And right now the bankers are scared out of their wits because their warehouses are being drained of physical gold at a frightening rate. So what happens when their physical gold is gone but they still have lots and lots of people with legal claims to gold? When that moment arrives, it will represent the end of the paper gold scam.

... more in the article.

 

[RobLJ]

Thanks for posting this , Michael. I read it, and it is definitely interesting and to the point of what drives gold prices.

GMO is a high quality source for sure. Jeremy says buy natural gas, copper or copper producers, and phosphate producers. Which last basically means buy Morocco, so it is not easily done.

I hope if anyone on the board is in the copper industry, or knowledgeable about copper, he or she will post about copper producers.

Ha

Purportedly, China has been stockpiling copper as its growth tamps down (I won't say weaken). Same with steel. That said, I like the materials, energy, and ag rather than gold, although I own a very small amount of the miners (about 1.5%) and have watched all the gains of the last two years melt down in about 4 months. Gold is a fear trade, to a lesser degree inflation, but I'd prefer the materials (and real estate) to gold for inflation. If one is afraid of apocalypse, buy rice, beans, ammunition, drugs, solar panels, and a lot of whiskey. And figure out how to farm and where.