The Case For $3,000 Gold 1 1

[GoldFinger1969]

At some point, this thread and when it was started should make for some good posts. 

In the meantime, we can discuss WHAT and WHEN that big increase might happen.  I thought about a much higher gold price when this piece talking about Putin and oil prices caught my eye:

"...JP Morgan says Russia could give us a nasty surprise by cutting oil output by three millions barrels a day (3pc of world supply), which is physically possible without damaging its own drilling infrastructure. This would drive prices to an all-time high of $190.

If Putin went for the jugular with a five million cut, prices could reach $380 a barrel."

FWIW, I disagree with the absolute level of the price moves in oil if the output reductions take place. I think Brent/WTI would head for $125 if 3 MM/bbl./d exit, and maybe $200/bbl/d if 5 million barrels exit. But the loss of such output would have guestimates all over the place.

It would depend on the state of economic growth in the U.S. and Europe; China lockdowns and GDP growth, and willingness of OPEC/Saudi Arabia to make up some of the lost barrels.

Nonetheless...an oil price shock, even though it has many DEFLATIONARY and anti-gold variables, would probably be a big boost to gold prices especially if it re-accelerated inflation.

Remember, it was the loss of Iranian oil -- about 4 MM/bbl./d (right between those two estimates) -- that led to gold doubling in price in about 18 months back in 1979-80.

Edited November 25, 2022 by GoldFinger1969

[World Colonial]

You're using the same causality model we've discussed before and it's wrong.

Instead of predicting the price of gold, which is the supposed purpose of this thread, you're implicitly predicting an alphabet soup of other indicators which have varying correlations to the price, but no causality at all.

On 11/24/2022 at 11:25 PM, GoldFinger1969 said:

At some point, this thread and when it was started should make for some good posts. 

It's definitely got the potential to run off into a rabbit hole from which there will be no return.

[zadok]

On 11/25/2022 at 9:34 AM, World Colonial said:

You're using the same causality model we've discussed before and it's wrong.

Instead of predicting the price of gold, which is the supposed purpose of this thread, you're implicitly predicting an alphabet soup of other indicators which have varying correlations to the price, but no causality at all.

It's definitely got the potential to run off into a rabbit hole from which there will be no return.

...well we do have some Alice's here....

[GoldFinger1969]

On 11/25/2022 at 9:34 AM, World Colonial said:

You're using the same causality model we've discussed before and it's wrong. Instead of predicting the price of gold, which is the supposed purpose of this thread, you're implicitly predicting an alphabet soup of other indicators which have varying correlations to the price, but no causality at all.

I think those factors I cited above ARE going to have causality to gold, WC.

Note that I disagreed with the up-moves in oil for the various supply shocks.  I think the prices would be SUBSTANTIALLY lower and probably wouldn't lead to a $3,000 gold price.  But near-$400 oil ?  You ask most people here or in other coin or fianancial forums where gold is at if in 2 months Brent/WTI are trading north of $300 and I'll bet nobody is saying less than $2,500 an ounce.

So yes, I do think a shock like this -- akin to that of 1979-80 with the Iranian Revolution taking 4 MMboe/d off the market -- would be problematic.  One fly in the ointment is that back then 4 MM barrels was about 7% of global demand/supply.  The figures above are 3% and 5%, respecitvely.

On 11/25/2022 at 9:34 AM, World Colonial said:

It's definitely got the potential to run off into a rabbit hole from which there will be no return.

Don't tell the Archbishop of Chicago !!   Catholic joke.....

But hey, what else have we got to do here on a daily or weekly basis ?  Discuss 1-2% price moves in the value of our coins ? 

Edited November 25, 2022 by GoldFinger1969

[World Colonial]

On 11/25/2022 at 2:07 PM, GoldFinger1969 said:

I think those factors I cited above ARE going to have causality to gold, WC.

So-called “fundamentals” don’t have an independent existence.  “They” aren’t alive.  No fundamental event ever bought anything. Therefore, it cannot be causal.

You can claim there is "meaningful" correlation, but I've never seen anyone ever try to prove it, whether pro or con.  Practically everyone just makes assumptions based upon their flawed beliefs.

If you have evidence (actual evidence), I'll change my mind.

[GoldFinger1969]

On 11/25/2022 at 4:21 PM, World Colonial said:

So-called “fundamentals” don’t have an independent existence.  “They” aren’t alive.  No fundamental event ever bought anything. Therefore, it cannot be causal. You can claim there is "meaningful" correlation, but I've never seen anyone ever try to prove it, whether pro or con.  Practically everyone just makes assumptions based upon their flawed beliefs.  If you have evidence (actual evidence), I'll change my mind.

If oil soars, then we'll know.  Until then, it's all just speculation, right ?  

[World Colonial]

On 11/25/2022 at 9:08 PM, GoldFinger1969 said:

If oil soars, then we'll know.  Until then, it's all just speculation, right ?  

You entirely missed my point.

You are so used to thinking in terms of the conventional model that you can't see the obvious.  The "fundamentals" aren't the "cause" of anything; not now, not previously, and not later.

I'll change my mind when you can demonstrate oil buys gold, as opposed to human beings buying both.

Let me know when it happens.

[cladking]

You can't print money, redefine "capital", and continually squelch competition through fiat and monopoly without expecting much higher gold.  

I would expect gold to hit about $3400 even before stagflation strangles our economy.  Where it goes from there will be determined by events at that time but if history is any guide I would expect the solution to be a lot more money printing.  It's not only interest that will soar with inflation but also hundreds and hundreds of government programs that are grossly inefficient and designed to feed the poor and the cities.  These programs will have an even higher inflation than the inflation rate due to their inefficiency.  They must be kept going or there will be rioting.  So much food in this country is "free" now that the effect of the programs will exacerbate inflation.  
 

Inflation spirals.  All inefficiency is rewarded with much higher costs and even efficient systems can be more severely impacted causing bankruptcy and lower overall efficiency.  Any attempt to intervene by central banks could spark hyperinflation.  Inflation always results in destruction and lower efficiency and it will continue until there is a reckoning between the excesses of the past and the needs of the moment.  The government wants to get rid of cash so this is almost certain to happen after the utter destruction of the dollar.  

There are steps that can be taken still to mitigate the problem but no lobbyist will do it and no Congress will vote for it.  Every option is politically unsavory.   Inflation will prove even worse than the cures but we don't care about anything beyond the next fiscal quarter any longer.  

I'm more concerned with our ability to lift ourselves out of the quagmire because the educational system has been broken for more than two generations.  When we come out of years and years of stagflation our leaders will have come from schools that do a better job of indoctrination than of education.  

 

There are some very smart and very capable people who might find some solutions.  Also the fact that the economy is so very highly inefficient could be a godsend since even nominal improvements in efficiency could have huge impact on productivity.  The future is never set in stone and in the modern world this is even more true.  What is set in stone is trillions and trillions of dollars of debt and chickens coming home to roost.  Beyond this we'll enjoy the future the old fashioned way, by living it when it gets here.  

[GoldFinger1969]

On 11/25/2022 at 10:32 PM, World Colonial said:

You entirely missed my point. You are so used to thinking in terms of the conventional model that you can't see the obvious.  The "fundamentals" aren't the "cause" of anything; not now, not previously, and not later. I'll change my mind when you can demonstrate oil buys gold, as opposed to human beings buying both.  Let me know when it happens.

Markets are interrelated.  Buying or selling in one market, particularly illiquid ones, can touch off buying or selling in others.  You have certainly heard how U.S. Treasuries benefit from flight-to-quality during financial stress.

If oil buyers and oil market watchers see the oil market going nuts, they are going to assume it spills over to the gold market.  Especially since many big oil producers like to have gold in their SWFs and Central Banks.

I think a collapse in oil prices would be bearish for gold prices and a skyrocketing price would be bullish.  How much remains to be seen. 

Let's leave it at that. 

[RWB]

On 11/26/2022 at 2:56 AM, GoldFinger1969 said:

I think a collapse in oil prices would be bearish for gold prices and a skyrocketing price would be bullish.

A few years ago, crude oil prices tumbled. Other commodities -- including gold, bulk peanut butter, and pork bellies -- did not.

[World Colonial]

On 11/26/2022 at 9:50 AM, RWB said:

A few years ago, crude oil prices tumbled. Other commodities -- including gold, bulk peanut butter, and pork bellies -- did not.

The problem with the conventional approach is that anyone following it is left to predict a seemingly endless chain of supposedly predictive indicators.

The initial post mentioned oil, GDP, geopolitics, OPEC, GDP growth...Do I have predict each one to get to an accurate gold forecast?  If not, how will I know which ones are predictive and which aren't?

Why not add the price of popcorn and peanuts to the mix?

[GoldFinger1969]

On 11/26/2022 at 9:50 AM, RWB said:

A few years ago, crude oil prices tumbled. Other commodities -- including gold, bulk peanut butter, and pork bellies -- did not.

True...but that was largely oil specific (negative prices) and it still impacted those other items because it's possible (though you can't know for sure) they would have gone UP without the collapse in oil prices. 

Ceteris Paribus.  

Edited November 26, 2022 by GoldFinger1969

[GoldFinger1969]

On 11/26/2022 at 9:57 AM, World Colonial said:

The problem with the conventional approach is that anyone following it is left to predict a seemingly endless chain of supposedly predictive indicators. The initial post mentioned oil, GDP, geopolitics, OPEC, GDP growth...Do I have predict each one to get to an accurate gold forecast?  If not, how will I know which ones are predictive and which aren't?  Why not add the price of popcorn and peanuts to the mix?

Because the underlying fundamentals of popcorn and peanuts aren't even remotely related to the underlying fundamentals of gold.  But that is NOT the case with oil and gold....or inflation and gold....or other factors.

Nobody is looking for a rerun of the 1970's...in fact, you could have inflation and lots of other variables lineup for gold PERFECTLY...and if a few countries or central banks or SWFs decided to unload a few hundred tons of gold, the price of gold would probably go down.

I continue to think that gold is like a giant beachball being held under the water line.  When it bounces up, it will be a big and fast move up.

[RWB]

On 11/26/2022 at 10:43 AM, GoldFinger1969 said:

Ceteris Paribus

But...all things are not remaining equal, nor is there a causal relationship.

[GoldFinger1969]

On 11/26/2022 at 11:58 AM, RWB said:

But...all things are not remaining equal, nor is there a causal relationship.

Market prognosticators would disagree.  It is certainly not a 1-to-1 relationship but I do think -- within certain ranges -- that gold and oil would move together especially to the upside.

If oil doubled or tripled in price...and the Fed and ECB both said they are going to live with higher inflation for a few more years because of the oil shock.....bond yields and gold are both likely to be substantially higher.

[RWB]

On 11/26/2022 at 12:52 PM, GoldFinger1969 said:

Market prognosticators would disagree.

That's why, in part, they are as accurate as the Old Farmer's Almanac.

[GoldFinger1969]

On 11/26/2022 at 1:15 PM, RWB said:

That's why, in part, they are as accurate as the Old Farmer's Almanac.

They get alot right.  Look at the inflation predictions, which have certainly come true.

If you get the Fed unable to get inflation back down to 2% and willing to tolerate 3-4% (because of the labor participation rate and other structural imbalances)...that's a game-changer. 

[World Colonial]

On 11/26/2022 at 10:48 AM, GoldFinger1969 said:

Because the underlying fundamentals of popcorn and peanuts aren't even remotely related to the underlying fundamentals of gold.  But that is NOT the case with oil and gold....or inflation and gold....or other factors.

Nobody is looking for a rerun of the 1970's...in fact, you could have inflation and lots of other variables lineup for gold PERFECTLY...and if a few countries or central banks or SWFs decided to unload a few hundred tons of gold, the price of gold would probably go down.

I continue to think that gold is like a giant beachball being held under the water line.  When it bounces up, it will be a big and fast move up.

I was being sarcastic.

So, how long is the chain of indicators I need to predict to finally get to the price of gold?

[World Colonial]

On 11/26/2022 at 7:13 PM, GoldFinger1969 said:

They get alot right.  Look at the inflation predictions, which have certainly come true.

Gold is cheaper now than when inflation was lower, recently.  It peaked at $2072 and hit a slightly lower secondary peak.  The reason?  Inflation doesn't buy gold either.

Gold is also lower now than it was in late 2011 or in 2012.  Noticeably lower adjusted for price changes.

If inflation caused gold prices to increase, why did this happen?

You don't need to answer.  I already know you are going to tell me it was another "fundamental" that doesn't buy gold either.

People buy (or sell) gold (or anything else) because they are optimistic or pessimistic, period.  The "reason" is a rationalization.

[GoldFinger1969]

On 11/26/2022 at 8:37 PM, World Colonial said:

I was being sarcastic. So, how long is the chain of indicators I need to predict to finally get to the price of gold?

I never said you can PREDICT the price of gold.  I think we look at the supply and demand fundamentals and the exogenous shock potentials and determine if the next big move is likely UP or DOWN.

I think it's up.  Would I bet the farm on it ?  Absolutely not...but I'd rather buy gold at $1,800 and see it drop to $1,600 rather than not buy and see it scoot up to $2,500 and more and hope for a dip to let me get in hundreds higher than the original $1,800 I passed on.

Since the price was freed, gold has made big moves about every 20 years or so.  

[GoldFinger1969]

On 11/26/2022 at 8:42 PM, World Colonial said:

Gold is cheaper now than when inflation was lower, recently.  It peaked at $2072 and hit a slightly lower secondary peak.  The reason?  Inflation doesn't buy gold either. Gold is also lower now than it was in late 2011 or in 2012.  Noticeably lower adjusted for price changes.  If inflation caused gold prices to increase, why did this happen?

You don't need to answer.  I already know you are going to tell me it was another "fundamental" that doesn't buy gold either. People buy (or sell) gold (or anything else) because they are optimistic or pessimistic, period.  The "reason" is a rationalization.

There are lots of reasons to buy gold.  Since I'm a coin buyer, if the price doesn't go up, I still get to enjoy my coins. 

In the 1970's, gold was THE ONLY game in town to protect yourself.  Today, we have so many different financial instruments to protect and hedge against inflation, calamaties, recession, interest rates, commodity prices, falling stock prices, etc....that gold isn't the only thing out there.

I note that in 1980 both the gold marke and the foreign exchange market traded about $1 billion daily.  Today, gold trades about $50 billion daily....and the Forex market trades about $7 trillion daily !  

Edited November 27, 2022 by GoldFinger1969

[EagleRJO]

I was hoping someone would post a topic about "The case for $1,600 Gold".

But it may have already hit a low pivot point at around $1,630 earlier this month when I bought a little more bullion, and now may be on a rebound again.  Spot at $1,600 was the actual target low pivot point I was looking for to get another larger chunk of additional gold bullion bars and coins, and was holding out for that possibility.  Now it's starting to look like that may not happen.  But I have the smaller chunk from earlier this month, as well as a bunch bought in the past at relative lows anyway, so if it does start rebounding I'm okay with that too.  Gives me a little more for the coin slush fund anyway. 

Idk about $3,000 anytime soon, but I could go with around $2,300 to $2,500 earlier next year if the stock market starts to tank again as expected and inflation continues to be a cash-in-hand, savings account, and treasury market significant short term loss.  Except for the capped I-Series bonds at around 10% now.  I wish they would increase the I-Series $15k cap given government policies continue to be a significant factor in inflation rising, and would give people a better short term option.

I was surprised a little that gold didn't continue to rise past the $2,050 recent high point earlier this year in March given those conditions looked like they were going to continue and make gold bullion an attractive alternative.  Now I think it's like throwing darts at a bullion spot board with no bullseye for the short term.

[PSUMAN08]

Traditionally gold has an inverse relationship to the value of the dollar.  The strong dollar has kept the price of gold down.

[GoldFinger1969]

On 12/1/2022 at 10:42 AM, PSUMAN08 said:

Traditionally gold has an inverse relationship to the value of the dollar.  The strong dollar has kept the price of gold down.

It's not helping but it's one of MANY variables.

At least today, gold clearly likes lower rates (of course) and a weaker dollar. 

[GoldFinger1969]

Up $40 today on the lower-inflation news.  We'll see how long it lasts.

Fed talks tomorrow @ 2:30 PM.

[VKurtB]

On 12/1/2022 at 9:42 AM, PSUMAN08 said:

Traditionally gold has an inverse relationship to the value of the dollar.  The strong dollar has kept the price of gold down.

Go look at lots of data. It does not bear your post out at all. Gold ALWAYS overcorrects, ALWAYS, in both directions. Why? Two reasons. 1) Gold buying and selling is over-emotionalized, and 2) Gold retailing is a shameless scam. 

[VKurtB]

On 12/1/2022 at 11:55 AM, GoldFinger1969 said:

It's not helping but it's one of MANY variables.

At least today, gold clearly likes lower rates (of course) and a weaker dollar. 

So you’re now using language like “gold likes”?????? Post the interview where gold said it likes anything. It doesn’t even express opinions about its own storage. I think it’d speak up about that first, if anything. 

[RWB]

RE: "The Case For $3,000 Gold"

The case looks like one of these:

[GoldFinger1969]

On 12/13/2022 at 10:31 AM, VKurtB said:

Go look at lots of data. It does not bear your post out at all. Gold ALWAYS overcorrects, ALWAYS, in both directions. Why? Two reasons. 1) Gold buying and selling is over-emotionalized, and 2) Gold retailing is a shameless scam. 

Compared to other financial scams, gold retailing is small potatos. 

The "traditional" relationship is usually predicated on the 1970's, when Bretton Woods and currencies were in flux and inflation peaked after a 35-year bull market.  If you had PERSISTENT inflation today that would probably be a plus for gold.

Gold, like other financial assets, reacts to certain variables DIFFERNTLY depending on the level of OTHER variables.

Edited December 13, 2022 by GoldFinger1969

[GoldFinger1969]

On 12/13/2022 at 10:34 AM, VKurtB said:

So you’re now using language like “gold likes”?????? Post the interview where gold said it likes anything. It doesn’t even express opinions about its own storage. I think it’d speak up about that first, if anything. 

Stop parsing words.  You know what I meant. 

"All other things equal" -- ceteris paribas -- is tough to replicate but we know what things are good for a rising gold price and what things are bad.  And at times -- like the 1970's -- what is considered "bad" (rising interest rates) can be DWARFED by what causes those rising rates and it's direct impact on gold (namely, galloping inflation).