The Gold Bull Market

[johnlw]

The gold bull market continues. A new high of $683 an once was hit this week.

Below is a link to a New York Times article about Jim Sinclair. So far, his projections concerning the direction of this market have been very accurate.

http://www.nytimes.com/2006/05/07/business/yourmoney/07gold.html?_r=1&oref=

 

[Maximillion]

Don't buy gold if you believe that Iraq will have an orderly transition, that Israel will have lasting peace with the arabs, that Iran is just bluffing, that the Indians and Chinese will discontinue their centuries old traditions of holding their wealth in precious metals, that central bankers are prepared to impose harsh conditions to maintain economic balance, that Bush will balance the budget.

A safe way to hold gold is either through buying a WEB on a Commodity based country index like Australia or Canada, by holding GLD/NYSE or other Gold ETF, Kruggerrands, Maple Leaf, or similar, real nice bling for your wife, but no more than 10% of Investable assets.

Long Term hold, we may see a pullback to mid 500's, then another move up, and I see a $1,000 as no problem.

 

[2B]

Overindulging in any one asset class is a big risk. Whenever the price of gold is mentioned, there is always a statement that it's "a 25 year high." It might not be exactly a 25 year high but it's close. Back in the mid-70's, gold was higher than now. Silver got up to almost $80.

These are commodities. They also have almost no commercial value if "hording" is eliminated. They are speculation. Speculation may lead to great wealth or something else.

I have known fanatic gold-bugs that have been buying and holding gold for decades. I haven't seen any of them retire to their island fortress yet to defend their hoard of precious metals.

 

[dusk_to_dawn]

Warren Buffet doesn't seem enthused about commodities. He doesn't mention gold specifically but has some entertaining thoughts on metals and oil. He's not always right either, but he has some great one liners.......

<<On a commodities bubble

Buffett: "I don't think there's a bubble in agricultural commodities like wheat, corn and soybeans. But in metals and oil there's been a terrific [price] move. It's like most trends: At the beginning, it's driven by fundamentals, then speculation takes over. As the old saying goes, what the wise man does in the beginning, fools do in the end. With any asset class that has a big move, first the fundamentals attract speculation, then the speculation becomes dominant.

Once a price history develops, and people hear that their neighbor made a lot of money on something, that impulse takes over, and we're seeing that in commodities and housing...Orgies tend to be wildest toward the end. It's like being Cinderella at the ball. You know that at midnight everything's going to turn back to pumpkins & mice. But you look around and say, 'one more dance,' and so does everyone else. The party does get to be more fun -- and besides, there are no clocks on the wall. And then suddenly the clock strikes 12, and everything turns back to pumpkins and mice.">>

 

[kjpliny]

Overindulging in any one asset class is a big risk.  Whenever the price of gold is mentioned, there is always a statement that it's "a 25 year high."  It might not be exactly a 25 year high but it's close.  Back in the mid-70's, gold was higher than now.  Silver got up to almost $80.

These are commodities.  They also have almost no commercial value if "hording" is eliminated.  They are speculation.  Speculation may lead to great wealth or something else.

I have known fanatic gold-bugs that have been buying and holding gold for decades.  I haven't seen any of them retire to their island fortress yet to defend their hoard of precious metals. 

Keep in mind that adjusted for inflation, gold and silver are nowhere close to what they were in the early 80's.  Gold would have to surpass $2000 to pass it's inflation adjusted peak.

 

[haha]

Warren Buffet doesn't seem enthused about commodities.  He doesn't mention gold specifically but has some entertaining thoughts on metals and oil.  He's not always right either, but he has some great one liners.......

<<On a commodities bubble

Dusk to --Could you give link to the rest of this?

Ha

 

[dusk_to_dawn]

For those of you who can't get enough Buffett, here's the link....

http://money.cnn.com/2006/05/05/news/newsmakers/buffett_050606/index.htm

 

[bpp]

Short pumpkins and mice.

 

[d]

a 25 year high

and another 24% up and it will be back to its previous high of more than a quarter century ago.  hope no one here has been waiting that long for the recovery.

 

[2B]

and another 24% up and it will be back to its previous high of more than a quarter century ago.  hope no one here has been waiting that long for the recovery.

I know some that have. They have been in gold for decades.

They are obsessive about how civilization will collapse some day and the only asset of any value will be gold. Every few years something happens and they go nuts about how right they are.

I have several hundred rounds of ammunition and the hardware to use it. If civilization ever does collapse I don't think I would trade one round for a pound of gold.

 

[Gone4Good]

They are obsessive about how civilization will collapse some day and the only asset of any value will be gold.  Every few years something happens and they go nuts about how right they are. 

I have several hundred rounds of ammunition and the hardware to use it.  If civilization ever does collapse I don't think I would trade one round for a pound of gold.

Ditto.

Gold will make some people very wealthy . . . and many more people very poor.

 

[REWahoo]

I have several hundred rounds of ammunition and the hardware to use it. If civilization ever does collapse I don't think I would trade one round for a pound of gold.

These guys appear to have a product that will let you cover all the bases.

 

[Ed_The_Gypsy]

Gold is a commodity. Period.

An old and dear friend has been a gold bug forever. It has been an expensive trip for him in terms of lost opportunities.

IF you want to play the gold card, buy mining company stocks and evaluate them analyitically, as you would any other stock.

Ask a gold bug: OK, what dividends does it pay?

If the world comes down to paying for food in gold coins, you would be better off buying guns and ammo instead of Krugerands. (BTW, my old friend did both. What is sad is that the world has not yet come to an end, but he may soon.)

Gee, the end of the world did not come. Darn. All that teenage angst wasted. The optimists won. Communism is dead (except in Ottawa). I CAN'T STAND IT!! (More wine. Write another letter to the editor. Vote NDP. Mutter, mutter.)

 

[mathjak107]

to me gold is just another vehicle to invest in when its day in the sun comes around..no reason for it suddenley to make a big run except its time..we can all theorize why this time but we dont know ..reminds me of our baseball cards as kids...we stuck em in the spokes on our bikes to get that sound,we flipped em against walls ,we abused them in every way....then decades later they came to life being even more valuble at times than gold....forget the reasons,,,forget the time frame ,its just time to make money with gold

 

[2B]

to me gold is just another vehicle to invest in when its day in the sun comes around..no reason for it suddenley to make a big run except its time..we can all theorize why this time but we dont know ..reminds me of our baseball cards as kids...we stuck em in the spokes on our bikes to get that sound,we flipped em against walls ,we abused them in every way....then decades later they came to life being even more valuble at times than gold....forget the reasons,,,forget the time frame ,its just time to make money with gold

I used to use Mickey Mantle cards on my bike. I was a Philly fan as a kid. The only reason I was a Philly fan is that my grandfather used to take me on the train to Philadelphia to see a game about 3 or 4 times a season...... but I digress.

I knew someone who had a beautiful baseball card collection during the "boom" of card collecting. He decided he would rather have the outrageous cash he'd heard some of his cards were worth. When he tried to sell, no one would give him even 10% of their selling price. Sometimes the hype is just hype.

After that I was glad I used Mickey Mantle cards on my bike.

 

[Maximillion]

Gold is up almos t$20 today, or should I say that it now takes more paper to buy an ounce.

China has been urged to raise their Gold holdings to 3% of their Reserves, increasingly you will see Central Banks move to replacing paper with real money.

The Chinese and the Indians do not trust paper, their History has been one of massive inflations, they also like to be able to grab their monies and run, a lesson taught by years of War Lords and of Bandits.

The Fed will have to move to raise rates as more and more countries turn against the Greenback, the $CDN up almost a cent today, at 0.91 going to 0.95, maybe higher.

I still think an ETF of a commodity based country is a less risky way to participate than outright ownership.

Want to own a good commodity based company, buy Barrick and buy Suncor, long term holds.

I am 35% cash at this time, waiting to see what happens in next 60 to 90 days.

 

[Focu$ed]

Gold is up almos t$20 today, or should I say that it now takes more paper to buy an ounce.
Want to own a good commodity based company, buy Barrick and buy Suncor, long term holds.

Barrick is a very bad choice. They have had the least gains from gold's runup of virtually all the miners/producers as they forward sell (hedge) production and are actually loosing money the higher the price of gold climbs. If you buy a mining company, buy a miner that does not hedge, so that you will benefit from gold price appreciation. BTW some gold stocks, not many, pay dividends. Most can't yet, as they have been turning profitable only in the last few years, and they need to plow money back into exploration and expansion of their current resources. Back in the 70s and 80s, many companies paid as much in dividends as people originally paid for the stock, so the day will probably come, in a few years. For that matter, there are a vast number of Dow and S&P stocks that pay little or no dividends, aren't there? I always find it odd when people bring up the dividend issue. Most people buy stocks for capital gains, no? So why should gold stocks be any different? Posters sometimes equate selling a gold stock in the future at a profit as "the greater fool" theory, but from what I can see, the concept of selling any stock to someone else later at a higher price is pretty much expected no matter what stock we're talking about.

 

[Maximillion]

focu$ed, I like that handle, I would never bet against Munck.

Hedging foreward might make him look like a genius.

 

[2B]

Hedging foreward might make him look like a genius.

Only if gold fall like you know what in a well.

 

[johnlw]

Goldcorp doesn't hedge and it pays a dividend. In addition, their cost per ounce of production is low.

 

[Focu$ed]

Goldcorp doesn't hedge and it pays a dividend.  In addition, their cost per ounce of production is low.

Yes that was the main company I had in mind. I am up 100s of percent on Goldcorp. I believe they will replace both Newmont and Barrick as the institutional favorite.

 

[Maximillion]

In 2003 when Gold was trading at $500 U.S an ounce, it would have cost $710 CDN, Today at $700 U.S. an ounce, it would cost $770 CDN, thus the effect of exchange rates has really negated any profits in terms of Canadian $'s.

Go to ROBT.V. com, they often discuss Junior Golds as well as the Big boys.

 

[camberiu]

I am gradually reducing my exposure to gold. I bought quite a bit back when the gold was selling around $300 range. It was a great investment back then, but I think the heard is beginning to jump in and drive the price up at a neck breaking pace. I believe many of them have no clue what they are doing. It could be just money leaving the real state as the bubble deflates and seeking a new home. So, time for me to slowly leave gold behind (at least for now). Once the metal begins climbing $19 an ouce within a couple of hours (as it just did), it is a sign to me that this is a major bubble looking for a nasty correction.

 

[Maximillion]

camberiu, holding Gold is a protection against the gyrations of the US $.

It is just illustrating that it takes more Greenbacks to buy an ounce.

Canadians have not gained at all by a 40% climb in the price of gold, the currency adjusted up to reflect the lower value of American money.

I am actually thinking of buying a car from a US Dealer, their prices might be substantially cheaper than a local Canadian dealer because of the currency change.

 

[camberiu]

camberiu, holding Gold is a protection against the gyrations of the US $.

I would normally agree with you. That was the reason why I bought gold in the first place. However, one should expect a slow appreciation of gold as the US$ loses value. However, right now I believe that we are seeing tons of speculative money driving the price of gold up, so I am bowing out (for now at least). I bought gold at a little more than US$300 an oz. and now it is selling for US$720 an oz. being that the gold oz. appreciated US$20 within the last 24 hours.

This is pure speculative influx of capital IMHO. So time to cash out my gains and see what happens.