The Gold & Silver Price Thread

[GoldFinger1969]

Thought this very bullish piece on gold (see page 6) might be of interest to some here. These guys tend to be among the 'perma bears' on stocks (hence bulls on bonds/gold) but Albert Edwards is very well-respected in financial circles.

 

We can also discuss the price of gold/silver in this thread, too.

 

FWIW, I do not ascribe to this apocalyptic viewpoint, but it is an outlier possibility on the left-hand side of the Bell Curve. If this scenario comes to pass, gold goes to $3,000/oz. and most of your numismatic gold pieces triple or quadruple.

 

Edit: OOPS...not sure how to attach a PDF, so I include the main excerpts below and a link:

 

http://www.advisorperspectives.com/newsletters14/pdfs/Bearish_Forecasts_from_Two_Top_Strategists.pdf

 

"It’s been nearly 18 years since Albert Edwards forecast an “ice age” in which bonds would outperform equities. He’s been right until just recently, when cumulative returns on the two classes converged. But Edwards insists that his thesis is still accurate – deflation will be the force to propel bonds over stocks, he says. Dylan Grice, meanwhile, warns that the markets operate on an unstable equilibrium that could devolve into apocalyptic conditions.

 

The two spoke at Societe Generale’s annual research conference in London on Jan. 14. Edwards is the firm’s global strategist. Grice is the director of research at Edelweiss Holdings, a Zurich‐based investment manager. Prior to that, Grice worked alongside Edwards at Societe Generale.

 

“We are one recession, one slip away from outright deflation, both in the euro zone and in the U.S.,” Edwards said. That would adversely affect equities, he said.

 

If that message wasn’t sufficiently foreboding, Grice warned of a societal breakdown that would be far more disruptive.

 

Those ascribing to Grice’s dour outlook should hold a very defensive portfolio, he said. Cash should be held in gold to provide “optionality.”

 

“Gold is the oldest and purest form of capital,” he said. “If I’m right, the potential for gold is to explode.”

[GoldFinger1969]

23 Reasons to be bullish on gold, courtesy of ZeroHedge:

 

http://www.zerohedge.com/news/2014-01-08/23-reasons-be-bullish-gold

[Eric Hazen]

Gold is still in a downtrend although it does look like it could reverse that soon. Will it outperform other investment vehicles? That is yet to be seen and totally speculative.

[GoldFinger1969]

Gold is still in a downtrend although it does look like it could reverse that soon. Will it outperform other investment vehicles? That is yet to be seen and totally speculative.

 

I hold gold as disaster insurance against a Lehman-style moment (maybe from China or Europe) that cascades throughout the banking system. Remember, in September 2008 you had PIMCO (the mega-bond house) actually have some of its senior super-wealthy executives telling their spouses to goto the ATM's and get all the cash it would let them take out.

 

These aren't late-night nuts forecasting the Apocalypse, they are guys worth hundreds of millions (billions) of dollars who work in the financial markets and are among the most level-headed thinkers around (if they weren't they wouldn't be entrusted with trillions in assets).

 

If that scenario ever comes to pass, you won't have time to buy gold. It won't be like the 1970's when you had months and years to buy. You'll have no time, or at most days or weeks.

 

Again...I don't subscribe to this theory but I admit it's possible.

[SkyMan]

If a financial apocalypse hit's we're all pretty much screwed anyhow. Unless you are a farmer (and even then most farmers would have serious issues), a true financial apocalypse would lead quickly to all sorts of other issues. Just think of the Depression and Hitler... and nowadays we have atomic weaponry.

[GoldFinger1969]

If a financial apocalypse hit's we're all pretty much screwed anyhow. Unless you are a farmer (and even then most farmers would have serious issues), a true financial apocalypse would lead quickly to all sorts of other issues. Just think of the Depression and Hitler... and nowadays we have atomic weaponry.

 

By apocalypse I mean that there is a banking crisis that lasts weeks or months, equities (maybe bonds) get hit, but gold and precious metals fly upward. They may give all or most of it back.

 

I am talking about a situation not unlike late-1978 to early-1980 when gold tripled and silver went up 8-fold. Just in a more compressed time frame.

[Eric Hazen]

I agree with SkyMan; enjoy the ride when gold turns bullish. If we find ourselves in an apocalypse we'd all be better buying food and not hording cash. Crashes tend to take time to develop and don't happen as quickly as most think.

 

These are monthly bars, you can see we're still in an uptrend but at an overbought level. I expect the correction will last for a few weeks and I'm shorting rallies.

 

[e1cnr]

I love gold, liked gold a year ago and even more now that it has dropped 30%.

 

 

 

 

But as far as going all-in on investment bubbles pushed by salesmen, my favorite is tulip bulbs.

 

I have had to eat my investments in the past because I was broke, and bulbs taste better than metals.

[wdrob]

I have recently been purchasing a good number of stocks in some mining exploration companies and a certain mining company that has a large mount of cash reserves and a respectable D/E ratio.

 

Keep in mind that these are not high dollar stocks and could be considered penny stocks since they are just above $1.00 per share right now.

 

Question I have is this; am I making bad investments based upon the scenarios that you describe above?

 

Should I be running for the hills?

 

 

[RWB]

Eric: Why the distorted scale on the graph? Were they trying to squeeze in a log scale?

[GoldFinger1969]

I have recently been purchasing a good number of stocks in some mining exploration companies and a certain mining company that has a large mount of cash reserves and a respectable D/E ratio. Keep in mind that these are not high dollar stocks and could be considered penny stocks since they are just above $1.00 per share right now. uestion I have is this; am I making bad investments based upon the scenarios that you describe above? Should I be running for the hills?

 

The money you put into these companies should be considered SPECULATIONS and not INVESTMENTS. They should comprise a small % of your portfolio since if your reason for investing in them pans out, you will earn multiples of your original capital.

 

If their debt levels are manageable or nil, when or if gold moves you could see their stocks move up tremendously. However, it's not the same thing as buying leveraged company stocks in March 2009. Gold stocks have suffered from unique offsets to the rising gold price in recent years. Companies that were supposed to mint money at $1,500/oz. were instead bleeding cash. Companies like Barrick paid billions for worthless properties.

 

The whole industry needs a primer on capital discipline.

[GoldFinger1969]

2014 MS 70 Silver Eagles: Seeing them much cheaper on Ebay and getting e-mail promotions for them under $50 a coin....I thought a few weeks/months ago they were asking $70-$80.

 

Anything to cause this big a price drop ? Haven't noticed it in the past without silver plunging.

 

Anybody buying any ?

[jpcienkus]

I bought a bullion MS 70 a couple weeks ago for $50 delivered. I don't have definitive evidence, but I think the huge mintage numbers are catching up with the series. At current bullion prices + BP over spot + grading fees, I wouldn't be able to do much better than that. All further purchases of bullion ASE's in 2014 will be in plastic tubes.

 

At the end of last year, I was seeing 2013 MS70's being offered in the mid to low $50 range.

 

I purchased 3 proof coins from the U.S. Mint, but still want one graded. I'm waiting for prices to drop a little before purchasing one.

[GoldFinger1969]

I bought a bullion MS 70 a couple weeks ago for $50 delivered. I don't have definitive evidence, but I think the huge mintage numbers are catching up with the series. At current bullion prices + BP over spot + grading fees, I wouldn't be able to do much better than that. All further purchases of bullion ASE's in 2014 will be in plastic tubes. At the end of last year, I was seeing 2013 MS70's being offered in the mid to low $50 range. I purchased 3 proof coins from the U.S. Mint, but still want one graded. I'm waiting for prices to drop a little before purchasing one.

 

Sounds like a good strategy -- selective buying of the premiums, when they are On Sale. (thumbs u

 

I know the price of silver can distort it, but all things equal, would you expect the price for any graded ASE to be much lower at year-end when they are no longer 'new' and the next year is just around the corner ? I haven't really noticed this phenomenon with gold and haven't looked enough with silver.

[jpcienkus]

I don't have enough time/experience in the hobby, but in general, I would say yes. The big difference would be in the mintage. If you look at the early years of the Silver ASE, mintages were below 10M, now they're 3x - 4x that amount. If, for some reason, the mintages were to shrink again, I would say the price drops at the end of the season would be much different.

 

BTW, I've been reading all the threads about gold and trying to learn. I couldn't see pulling the trigger on bullion gold when it was near $3K / oz., but have become more interested at current price levels.

 

I recently purchased my first 4 gold coins. One was the 2013 reverse proof buffalo, one a 18700's australian sovereign and the other two early 1900's $2.5 indian heads.

[jpcienkus]

In addition, I'd like to add a double eagle to my collection this year. I've enjoyed reading all the threads you've been starting. I'm learning a lot.

[GoldFinger1969]

I don't have enough time/experience in the hobby, but in general, I would say yes. The big difference would be in the mintage. If you look at the early years of the Silver ASE, mintages were below 10M, now they're 3x - 4x that amount. If, for some reason, the mintages were to shrink again, I would say the price drops at the end of the season would be much different.

 

Sounds logical....by 10M I trust that is 10 million.

 

BTW, I've been reading all the threads about gold and trying to learn. I couldn't see pulling the trigger on bullion gold when it was near $3K / oz., but have become more interested at current price levels.

 

Gold's peak was just over $1,900/oz. in late-2011, but I agree buying here makes sense. Just save some powder if we re-test sub-$1,000 levels (I don't expect it, but a financial panic could knock $400 off gold's price in a heartbeat).

 

I recently purchased my first 4 gold coins. One was the 2013 reverse proof buffalo, one a 1870's australian sovereign and the other two early 1900's $2.5 indian heads.

 

Nice....congrats. The Reverse Proof is a beautiful coin, wouldn't buy a bunch at the premium they command but wouldn't mind 1 or 2. I'm looking to add another Saint or a Liberty Head in coming weeks/months.

[GoldFinger1969]

In addition, I'd like to add a double eagle to my collection this year. I've enjoyed reading all the threads you've been starting. I'm learning a lot.

 

Thanks...far more knowledgeable people here than I but as a fellow newbie I have been paying close attention to common and some of the semi-premium coin pricings.

 

Are you looking at a Saint or a Liberty ? And will you be buying from a local dealer, a show, online, or an auction ?

[jpcienkus]

Definitely a saint. Likely online auction.

 

My bad about the gold peak. Couldn't remember off the top of my head.

 

I only paid $1640 for the reverse Buff. Yes, a premium over other bullion, but it was the first of it's kind

[GoldFinger1969]

Definitely a saint. Likely online auction.

 

Let me/us know what you eventually buy. Have never done an online auction for anything other than sub-$200 coins on Ebay.

 

I only paid $1640 for the reverse Buff. Yes, a premium over other bullion, but it was the first of it's kind

 

You got a good price. Congrats ! (thumbs u

[GoldFinger1969]

Gold back above $1,300.........

[GoldFinger1969]

Here's a great piece on gold, central banks, its value through history, and some excellent charts and tables.

 

Financial Analysts Journal is put out by the CFA Institute; their pieces can be long on quantitative BS and short on everyday use for investment professionals (I've butted heads with them more than once ) but this is one of the more readable and useful articles in recent years.

 

Hope some of you find it interesting:

 

https://www.dropbox.com/s/yjegvtk32pjv6lo/TheGoldenDilemna_FAJ_July-August2012.pdf

[GoldFinger1969]

Here are some tidbits that I put into my recent Investment Newsletter concerning gold.

 

First, an excellent article on Gold from last year with some really good tables and graphs. Some of the quant stuff may put you to sleep, but I found some of the longer historical charts very interesting:

 

https://www.dropbox.com/s/yjegvtk32pjv6lo/TheGoldenDilemna_FAJ_July-August2012.pdf

 

Second, recent comments on gold's direction:

 

BARRONS this week had some excellent commentary, both pro and con on gold moving higher:

 

ANXIETY ABOUT THE FED may be feeding a rally in gold. Last week, gold futures rose 3.1%, closing at $1,379 per ounce, a new high for the year. The precious metal has recouped only a small portion of the losses it suffered in 2013, and it remains well below its all-time high of $1,921 per ounce, reached in 2011.

 

Even so, the move sparked a new debate about whether the commodity, and the stocks of gold miners, are headed higher, or if they have already risen too high. Ned Davis Research analyst Neil Leeson issued a report on Friday arguing that investor sentiment, as measured by a proprietary index, is nearing its historic top.

"We have now reached excessive optimism in gold," he wrote.

 

Optimism in gold often depends on pessimism in the rest of the market. Putin's aggression and China's weakness have lifted gold bulls. But gold is not just responding to turmoil in international markets. Michael Dudas, an analyst at Sterne Agee, notes that gold miners bottomed just days before the Fed announced the taper, and have been rising ever since. Central bank policy appears to have had an impact.

 

That dovetails with a longstanding argument by Fred Hickey, who writes the High-Tech Strategist newsletter and sits on the Barron's Roundtable. Although he paid dearly in the 2013 gold rout, Hickey thinks the commodity's recent move vindicates his thesis that Fed money-printing has destabilized markets and will eventually cause stocks to crash. While the Fed is moving toward tighter monetary policies, the great unwinding is bound to shake the market—and perhaps lead to another round of quantitative easing, Hickey argued last week. He expects the rally to last, with gold hitting "$1,500 to $1,600 at least."

 

Hickey owns Central Fund of Canada (ticker: CEF), a closed-end fund that holds physical gold and silver in Canadian Treasury vaults. But he also owns several gold miners, which rise much faster than the commodity when times are good (and are often punished more severely when they're bad). So far this year, the Market Vectors Gold Miners ETF (GDX) is up 31%, versus 15% for the commodity. One reason: Once gold is above the miners' production and development costs, any price rises tend to flow to the bottom line.

 

The miners received their comeuppance in 2012 and 2013, when the drop in gold exposed bad investments during the boom. Nearly every major company in the sector has changed CEOs and vowed to preserve capital. Dudas is in the "it really is different this time" camp. "Finally it appears that the industry is managing its businesses for a $1,100 gold price," he says.

 

One gold miner whose fortunes could continue to improve is Agnico-Eagle Mines(AEM), a Canadian miner whose shares are up 31% this year after falling 50% last year. Agnico-Eagle faces less geopolitical risk than competitors, as its main mines are in Canada, Mexico, and Finland. Dudas expects its production to grow 20% in the next two years even as most of its peers expect flat to negative growth. Agnico recently cut its dividend payment to conserve cash, but it remains one of the few consistent dividend payers in the industry. It has been paying a dividend since 1983. "That's extremely rare in this business," says Dudas.

 

Commentary from the Financial Times on India’s latest moves:

 

India’s government says that Gold imports in the first 11-months of 2013 totaled 655-tons. However, illegal smuggling of Gold into India was around 25-tons per month. Customs officials have only been able to catch only a fraction of the illegal Gold shipments into India. Thus, there was a huge movement of Gold from West to East last year.

 

A well-known newsletter, gold manager, and Swiss investor chime in:

 

GMT thinks gold prices have bottomed out. The price of the yellow metal is +10% so far this year, and holding above $1,300 /oz. Frank Holmes, CEO of US Global Investors, said on Feb 19th, he expects gold prices to reach $1,400 /ounce in 2014. On Feb 14th, the Global Money Trends newsletter also predicted that Gold prices could climb towards $1,400 /oz. in the months ahead. Global investor Felix Zulauf of Zulauf Asset Management wrote on his blog on Feb 18th that he expects a final “wash-out” in gold prices this spring, but then predicts prices will be on the rise for a longer period.

 

“Since the Gold market is very oversold from a cyclical point of view after declining from $1,920 to $1,180 in more than two years, investors should take a constructive and contrarian view of gold and accumulate step by step on weakness,” Zulauf advised. “It may take a few more months until the dimension of risk in the credit system become more visible, but I expect this to be on the table in the second half at the latest, when the price of Gold should be higher again. Even gold mining stocks can be purchased with a 12-month view, as they have been beaten down badly and are cheap on a valuation basis. They are, however, not for widows and orphans,” he advised.

 

Zulauf warns about China: (1) A large expansion and acceleration of credit not matched by GDP, as credit growth is still 2.5 times faster than GDP but slowing. (2) An aggressive expansion of a shadow banking system (wealth management products WMP) that has similarities to the US- subprime loans. (3) Massive investments in property leading to a bubble in many locations.

 

Like many other analysts, Zulauf thinks the next major credit crisis will emanate in China. “While I am as impressed as others by China’s economic performance over the last 2-3 decades, we shouldn’t overlook the fact that, particularly since 2008, the economy enjoyed the most dramatic credit boom ever seen in modern history.”

 

“China became the second largest economy in a very short period. In the last five years, China’s total credit outstanding more than doubled and grew more than the equivalent of the total US- commercial banking sector, namely the equivalent of $14 trillion.

 

That is equivalent to 150% of their current GDP. Moreover, the balance sheet of the Chinese central bank showed the biggest balance sheet expansion since 2000 of all central banks, which is testimony of an ultra-easy monetary policy,” he added.

 

“Credit growth in the years leading to the bursting of previous bubbles has been 40%-50%, as was the case in the US from 2002-2007, in South Korea in the mid-90’s and in Japan in the late 80’s. China’s credit growth has been by far higher than all of those. Now, we see all the signs one usually sees before the bubble bursts.”

[RWB]

Pretty graphs. Can you do more colors? Can you make 'em twinkle and sparkle? Me like shiny sparkles....

[GoldFinger1969]

Pretty graphs. Can you do more colors? Can you make 'em twinkle and sparkle? Me like shiny sparkles....

I am not even at the Photoshop For Dummies stage, Roger...

 

But if anybody wants to receive my Friends & Family Newsletter or check out my stuff on the web, let me know.

 

I can also post specific stock research (gold mining stocks, if someone wants). I don't get quite as much theme stuff on the gold sector, for instance, but it's implicitly looked at during the longer company reports.

[RWB]

How about a nice energy supplier analysis with a 5-year horizon. ROI on a 4-company basket based on $200k invenstment at PMV. Domestic or ADRs only.

PS: no puts or calls.

[GoldFinger1969]

How about a nice energy supplier analysis with a 5-year horizon. ROI on a 4-company basket based on $200k invenstment at PMV. Domestic or ADRs only. PS: no puts or calls.

 

Probably best to post in the WATER COOLER.

 

If you want general sell-side research on Large Supermajor/Driller & Supplier/ E&P reports, I'd be happy to post some. Just posted a bunch of Sanford C. Bernstein stuff and they are tough to come by.

 

I also write the Oil & Gas Income Portfolio newsletter here:

 

https://www.portfoliochannel.com/account/oil-and-gas-income-portfolio/

 

30-Day Free trial for anybody interested.

 

OK, back to Gold & Silver......

 

 

[RWB]

Just responding to the kind offer....

Oil & gas is not "energy" - much bigger than that.

[GoldFinger1969]

Just responding to the kind offer....

Oil & gas is not "energy" - much bigger than that.

Check this out.....

 

http://boards.collectors-society.com/ubbthreads.php?ubb=showflat&Number=7531899#Post7531899

[Raisethis2]

English..................do you speak it?

 

This stuff's way over my head. But then again, so's most everything else.