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Gold ultimate hedge fund - 1/24/2010 3:24:35 PM   
pahunkboy


Posts: 33061
Joined: 2/26/2006
From: Central Pennsylvania
Status: offline 		http://fofoa.blogspot.com/2010/01/gold-ultimate-hedge-fund.html

This is an interesting read- on how paper gold is not going to pay off.   It is not a light read so beware.
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RE: Gold ultimate hedge fund - 1/24/2010 4:19:12 PM   
Kirata


Posts: 15477
Joined: 2/11/2006
From: USA
Status: offline 		Would you please explain what particular political or religious aspect of gold investing you'd like us to discuss?

K.

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RE: Gold ultimate hedge fund - 1/24/2010 4:26:30 PM   
zephyroftheNorth


Posts: 8159
Joined: 10/5/2009
From: The Great Frozen North
Status: offline 		You never know, Master Kirata, perhaps the gold comes from religous objects or Newt Gingrich's gold wristwatch 

zeph


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RE: Gold ultimate hedge fund - 1/24/2010 5:01:31 PM   
pahunkboy


Posts: 33061
Joined: 2/26/2006
From: Central Pennsylvania
Status: offline 		excerpt -->

Obviously, this is the way it all started years ago, with the physical trading and its fundamentals dominating the lesser paper trading. But the market evolved with the paper contractual trading becoming 100 or more times the size of the physical side. But everyone already knows all this, right?

What doesn't seem to be obvious is the "why for" the paper market grew so large. It grew to dominate because world wide dollar expansion reached its "non hedged" peak. In other words, the dollar's timeline was ending as its ability to produce non price inflationary economic gains came into sight.

In order to push dollar holdings further, international players needed and purchased "paper financial hedges" to balance their risk. Within their total mix of derivative hedges were found "paper gold price hedges"; modern gold derivatives. The important thing to remember is that these positions are not and never will be used to demand physical gold. They are held to buffer financial and currency risk associated with holding any form of dollar based asset. To work, these items don't need to really perform "dollar price movements" in the holders favor as much as they need to be present in the portfolio to act as insurance stickers. In that truth, these paper gold positions act like FDIC insurance at our banks.

While so many of our gold bulls salivate at the prospects of some player calling for delivery and driving the gold derivatives market to the moon; it ain't gonna happen! Our world of dollar based gold derivatives has grown so large and become so integrated into supporting (hedging) international dollar assets, the central banks will band together to crush any delivery drive.

This is in the ECBs interest as I will explain in a moment.

If some big player said he was going to take 100 million ozs out of the paper gold market, the Central Bank systems would just order him to trade out for liquidation only and go to the cash market to buy his gold. Don't think I'm confusing Comex positions and their rules as being different from the rest of the world gold market. What works on comex works everywhere when the system is at risk. The controlling governments, who's domain Bullion Banks reside in, would, could and will force those holders of bank busting positions to simply cash out for the good of their system./snip

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RE: Gold ultimate hedge fund - 1/24/2010 7:15:25 PM   
InvisibleBlack


Posts: 865
Joined: 7/24/2009
Status: offline 		Dude ... India just bought 100 tons of gold from the IMF. I'm fairly certain they took physical delivery. I think China bought something like 400 tons last year as well. Again, I'm fairly certain they took physical delivery.

Unless they're cooking the books (and I grant you they may be) the United States holds around 8100 tons of gold in its reserves.

The odds of any individual player withdrawing his gold holdings and being unable to redeem them in specie and being forced to "cash out" in U.S. dollars is incredibly low - unless you're talking one of those fiscal apocalypse scenarios where the U.S. has hyperinflation and no one wants dollars and the whole world attempts to withdraw their holdings in gold simultaneously.

Is it wise to perhaps have some hard currency on hand? Yes, it probably is.

Are paper gold holdings - like ETFs, Comex contracts or whatever, worthless and doomed to total ruin - I don't believe so.

All of those paper instruments exist because it is difficult to buy, store and trade gold or silver. It's easier to move the paper around and have the gold stockpiled somewhere else. In the event of a total meltdown where the exchanges crash and you can't contact your broker and it's "head for the hills boys and grab your guns!" - well, yes, those paper gold contracts will be worthless - and so will your stock certificates, your currency, and much of everything else you own.

Abarring that, I wouldn't be too worried.

< Message edited by InvisibleBlack -- 1/24/2010 7:16:17 PM >

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RE: Gold ultimate hedge fund - 1/24/2010 7:27:09 PM   
pahunkboy


Posts: 33061
Joined: 2/26/2006
From: Central Pennsylvania
Status: offline 		Black- I am not worried.

The point of the piece, is that paper promises are iffy- and that we are evolving into a different way of thinking about wealth-

ETFs- and such are fine up to a point-  the gist of the article is hard to grasp at first read.  Perplexing that Harvard was too stupid to manage its own money and could very well bankrupt over this.  They are supposed to be smart at Harvard- even compared to other colleges....  yet the Harvard folks were conned by the derivatives.   ..so much for the best and the brightest.

As to how much gold the US has that is a mystery.  When you factor in that during a war the gold and silver gets stolen.  So that has been done big time WW1 -WW2.


:-)

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RE: Gold ultimate hedge fund - 1/24/2010 8:22:09 PM   
MichiganHeadmast


Posts: 726
Joined: 8/13/2006
Status: offline 		I notice folks who sell gold are quick to assure us gold is a good buy.  And will only go up, and up.  And up.

Kinda like the real estate folks did.

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RE: Gold ultimate hedge fund - 1/24/2010 8:42:29 PM   
InvisibleBlack


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Joined: 7/24/2009
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quote:

ORIGINAL: MichiganHeadmast

I notice folks who sell gold are quick to assure us gold is a good buy.  And will only go up, and up.  And up.

Kinda like the real estate folks did.


Nothing goes up forever. Every market has cycles. Anyone who tells you differently is lying.

A clever person could've made a lot of money in the housing market and some did. A lot of people only buy in too late, at the top of the market, and then sell out at the bottom, at the crash - losing everything.

I think we're going to see a dip in gold as the dollar rallies and then another price spike later on in the year when the currency falls again - so I think it's possible to make some money buying gold on the downside and then selling it down the road when the price rises. On the other hand, what do I know? I wouldn't triple-mortgage the house based on my advice. I'm just some random stranger on teh intarwebs.

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RE: Gold ultimate hedge fund - 1/24/2010 9:17:05 PM   
pahunkboy


Posts: 33061
Joined: 2/26/2006
From: Central Pennsylvania
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quote:

ORIGINAL: MichiganHeadmast

I notice folks who sell gold are quick to assure us gold is a good buy.  And will only go up, and up.  And up.

Kinda like the real estate folks did.



Oddly tho there are alot of shops that buy gold. 

(in reply to MichiganHeadmast)
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