Gold Bubble?

[Steve Herschbach]

I hope the world does not fall apart. I do think supply and demand does matter with gold however. We have pretty much exhausted the easy sources of gold and are approaching a "peak gold" production point any moment now. New mines are not being discovered and developed at the same time the number of potential buyers is expanding worldwide. Demand will only increase while supplies get ever tighter. The price is almost bound to strengthen long term.

[LuckyLundy]

Now we as prospectors deal in physical gold...the rest of the world trades paper gold. Now if all them paper holding gold bugs would call for physical gold in their safety deposit box, gold would be where we all want it!

Rick

[Norvic]

Bloody hell Relichunter you and I wouldn`t want to get around the camp fire, lots of rum would be drunk but bugger all detecting. Hegemony and supremacy? I see the US as the first "empire" in the worlds history that hasn`t taken over conquered territory rather have tried to bring them democracy. Some successes some failures, you are the worlds policeman, and that is costing big time. No crooks love the cops and bugger all law abiding.

 

Lot of our gold mines in OZ are only just turning a profit at current price so I`d think price won`t get down to 700 in OZ again, or our dollar will be worthless, but with the manipulation that goes on in the worlds financial markets, I am sure those manipulators can only guess on that as they are out manipulated by others(they play Monopoly without much concern for the world). From my perspective as a prospector the gold price is too low as Steve has pointed out the supply is getting thin.

 

Rick, that deposit box of ours is going to become more popular.

[Steve Herschbach]

Here is a chart from an interesting article at http://www.kitco.com/ind/Holmes/2015-04-06-SWOT-Analysis-Could-Gold-Production-Peak-in-2015-as-Exploration-Spending-Drops.html that speculates gold production will peak this year and drop going forward due to a dearth of new discoveries in the last 20 years, even as gold prices moved higher.

[Norvic]

 

From the same website, note the massive swings(max to min) in short selling from 2013 to now, wonder why that is going on? Must be telling us something.

[Rob]

Physical gold as a buy an hold investment is a poor choice. As you hold it, what does it give you? It doesn't produce anything, it doesn't pay dividends. It just sits there and looks at you. Your money isn't working for you.

 

If you need the cash value from gold you find, sell it as soon as you can after finding it, then go look for more to sell. If you have funds to invest and are looking for a passive investment (much like a physical gold investment) park your funds, for the long term, in an ETF that holds high yield equities. Historically over the long term (20+ years) equities have outpaced gold in terms of capital appreciation.

 

As of late, the price of gold has been fluctuating between $1150 - $1250....back and forth. These price movements being driven by geo-political events as well as monetary policy from the worlds central banks. If you have an appetite for risk and think you know where the price of gold is headed in the short term....then play the ETF -GLD (yes paper gold) it's easy to purchase and sell. If the price pops in a day or two or the same day.....sell. Do that a few times a year and you're actually making money. If you think the price is going to fall then short the GLD.

 

Some additional reading from Warren Buffet.....

 

 

Perhaps my favorite take on gold investing comes from Warren Buffett, the iconic investor behind Berkshire Hathaway. Delivered at Harvard in 1998, it goes a little something like this:

“(Gold) gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.”

The idea is simple: There is no use for gold, only some arbitrary "value" we place on it. Sure, gold was historically used as currency — but why not Cowry shells, which were one of the earliest forms of currency in China? Just because it's rare and some people value it doesn't mean that gold is an "investment," especially to someone like Warren Buffett who is concerned with statistics like book value and cash flow.

More recently, in 2009, he echoed these thoughts in a CNBC interview. He was asked, "Where do you think gold will be in five years and should that be a part of value investing?"

“I have no views as to where it will be, but the one thing I can tell you is it won’t do anything between now and then except look at you. Whereas, you know, Coca-Cola (KO) will be making money, and I think Wells Fargo (WFC) will be making a lot of money, and there will be a lot — and it’s a lot — it’s a lot better to have a goose that keeps laying eggs than a goose that just sits there and eats insurance and storage and a few things like that.

For the record, gold was around $900 then, and has tacked on about 45%; Coke stock is up 100% and Wells Fargo is up 200%. That doesn't include dividends, or subtract the cost of ownership that Buffett points to.

Another great line from Warren Buffett about gold came in October 2010, when he told Ben Stein:

“You could take all the gold that’s ever been mined, and it would fill a cube 67 feet in each direction. For what it’s worth at current gold prices, you could buy — not some — all of the farmland in the United States. Plus, you could buy 10 Exxon Mobils (XOM), plus have $1 trillion of walking-around money. Or you could have a big cube of metal. Which would you take? Which is going to produce more value?”

Gold is right back to where it was in late 2010 when that interview aired, at around $1,350 an ounce. Meanwhile, XOM stock is up 35% not counting dividends, and farmland continues to appreciate at a rapid rate. (For instance, one report says Iowa farmland just jumped 17% in six months.)

It's hard to tell what the future holds for gold prices. I remain very bearish based on cascading risk of redemptions out of asset-backed ETFs like the SPDR Gold Shares GLD, +0.30%

[Steve Herschbach]

I never buy gold. Never will. I subscribe to the LuckyLundy school of thought - Find Low and Sell High!

It is easier to sell high when the price is high, but right now the price can go low as possible as far as I am concerned. People will stay home and I will have the goldfields to myself, and maybe more claims would get dropped, opening up even more places to prospect.

[Norvic]

Lot of truths in what you say Rob, but and a big but, the stocks you mention are those that have done well and because you mention them down the track it is somewhat easy to do, you don`t mention the ones that have gone out the back door, gold unlike those has and will always hold value, it may seem I`m splitting hairs here but a important part of any investment portfolio should be physical gold in my view, even though it costs you to hold. To give an example of where I`m coming from could you absolutely guarantee a stock that will outperform gold in the say next 10 years, or could Warren Buffett? Plus of course I am governed a wee bit by the attraction finding gold has.

 

Just another wee bit about gold, it is believed the lack of gold help lead to the downfall of the Roman empire, apparently as this empire expanded it relied on a large mercenary army which it paid for with gold. As its gold resources dwindled away (higher demand than supply) it started mixing other metals with the gold, chiefly brass, the mercenaries twigged to this the rest is history. The question has to be asked, when considering where gold is going, have we learnt from the Romans rapid growth?

[Hard Prospector]

The US stock market has soared to new heights but not because of corporate growth and prosperity. Most of these gains have been made via massive cuts, restructuring, hanging onto capital and in many cases buying back stock. You can only drop so much weight before becoming sick and weak. In 2016 the federal minimum wage is set to go up 10%, which should increase costs of almost everything (inflation,....ouch!)   My take is the next few years  look bright for gold but not the economy

[Norvic]

Have been reading up a wee bit on current gold prices and the direction it`ll take. Seems the majority of the financial wisdom is pointing to gold going down more. I`ll go with the contrarians and go for the gold price rising. Contrarians seem to get it right more often than not.