San Diego Housing Bubble News and Analysis

This is a very tricky question, one I'll admit I'm guessing on.

Let's reflect on guesses that DID work.

Roubini guessed weeks ago that deepening recession will be deflationary and gold will NOT escape downward pricing pressure on commodities.

Also, many good articles (again see Roubini's website) have been written that the Worlds central banks are supporting the dollar. Gold is kinda the enemy of the dollar, because if gold starts rising and people start dumping dollars then momentum can build against the dollar and for gold. So bankers don't want higher gold prices. Central banks may be conspiring against gold.

India's demand for gold fell 70% last month. There are other similar stories. Demand (for jewelry..etc) for gold is falling faster than speculative demand may be rising. However, (GoldTrackes "GLD") shows increasing demand from investors, no question about that.

Now, recently AS EXPECTED gold has fallen as this recession gets uglier CONFIRMING some of the above

The only thing that could reverse that would be TOTAL CHAOS beyond the levels already seen. I'm guessing that won't happen.

So HOLD COURSE on keeping my gold holdings to a MINIMUM (currently 25%) and watch for the bottom in gold prices, then LOAD UP ON GOLD at teh bottom of the recession. GUESSING now I think we are going below $800. Will we go below last resitance level of $750/ounce? I have no idea!

From everything I've read on Gold it sounds like most expect it to peak again somewhere around $1200, though I've heard $1500 and higher.

I have no idea why it's being beaten down, but having read Rich's article on Gold, the slowdown doesn't seem like something that will stick.

My guess is banks or other institutions scrambling for cash are trading in their Gold, but that's just a guess.

http://www.ft.com/cms/s/bf8246aa-8f13-11...

Investors in gold are demanding "unprecedented" amounts of bullion bars and coins and moving them into their own vaults as fears about the health of the global financial system deepen. Industry executives and bankers at the London Bullion Market Association annual meeting said the extent of the move into physical gold was unseen and driven by the very rich. There is an enormous pick-up in investment demand. I have never seen a market like this in my 33-year career,” said Jeremy Charles, chairman of the LBMA. "The gold refineries cannot produce enough bars." The move comes as fears grow among investors over the losses at investments previously considered almost risk-free, such as money funds. Spot gold prices in London on Tuesday traded at about $900 an ounce, more than 25% above the level before Lehman Brothers’ collapse. Executives said gold refineries and government mints were working at full throttle but acknowledged they were suffering shortages, particularly on gold coins.

All currencies are about to start creating more money. Watching gold in a short time frame is not too meaningful. Especially in this market of extreme volitility. The fundementals all point to gold going higher in the next few years. So then it's a matter of timing. If it gets support at $800 or there abouts, it should be ok for the next leg up. If not, then it go to the next support level of around $650. Keep in mind that it costs about $500 or $600 to produce and ounce. And finding new gold is not getting easier.

I'm 30% right now and keeping a close eye on support levels. I'll buy more at $800. And if it breaks down, I'll get more at $700. So I guess I'm getting more no matter what. Kinda funny.

Have you seen platinum?

From $2200 to $980 in 6 months ...

Also, many good articles (again see Roubini's website) have been written that the Worlds central banks are supporting the dollar. Gold is kinda the enemy of the dollar, because if gold starts rising and people start dumping dollars then momentum can build against the dollar and for gold. So bankers don't want higher gold prices. Central banks may be conspiring against gold.

Right now strong dollar is bad for the global economy. GDP kept growing through the first half of the year because of strong manufacturing and strong exports. With dollar back to 2007 levels, unemployment is through the roof and ISM manufacturing index is showing strong contraction.

So HOLD COURSE on keeping my gold holdings to a MINIMUM (currently 25%) and watch for the bottom in gold prices, then LOAD UP ON GOLD at teh bottom of the recession. GUESSING now I think we are going below $800. Will we go below last resitance level of $750/ounce? I have no idea!

Loading up on gold at the bottom would be a remarkably bad idea. As the recession ends, investors will start moving from gold into stocks again, GLD and the likes will start unloading its reserves, prices will crash. If anything, load up on platinum because it will appreciate due to fundamental demand.

My personal sentiment is shifting towards bullish on gold (for now).
Sooner or later, probably sooner, the Fed will have to start pumping more money into the economy to avoid deflation, gold will appreciate. The idea is to buy gold now and sell at the bottom of the recession.

Richard Daughty, the Mogambo Guru
Quote: "I can tell you EXACTLY what is going to happen 'after taking all relevant factors into account', because what is going to happen is the same thing that ALWAYS happens when an idiot government starts creating, or allows to be created, excess money and credit, which is that the money in question will expand and expand, and end up with zero purchasing power while gold, when priced in a currency that has no purchasing power, soars to infinite levels when priced in that currency, and that is what has always happened, anyway, and that is why I am 100% sure, dead-bang sure, no-doubt-about-it sure, can't-miss sure that it will happen again! Betting with gold against a fiat currency in the hands of politicians is the biggest no-brainer on the planet! Whee! This investing stuff is easy!"

Might I remind you that early = wrong on Wall St.
Josh

Bailout passes = gold plunges
bailout fails = gold soars, probably breaks 1000 tomorrow

Let's remember that recessions are fundamentally deflationary. The deeper the recession, the more likely commodities get hit--and gold is at heart another commodity. Absent a Head-for-the-hills panic atmosphere, gold will fall.
I trust gold as a barometer. I think what it signalled in today's big drop is the upcoming recession (predicted by other economic indicators today) will be a doozy.

The big fluctuations in gold are panic driven and dont last very long. But in the long haul, gold is the honest value of FIAT currencies. So from a store of value point of view, it's a good investment foundation.

It has done exceptionally well lately when you compare it to other commodities. If it holds up in price, the mining companies can make good incomes again. Especially if oil trends down. Mines are energy intensive ventures. But there are some strong arquements that gold is in a rising bubble formation. But from a historical analysis, gold rises in real terms after a huge credit bubble bursts and we get strong liquidation pressure. This may occur as early as late October through to December. And right now the technicians are saying it's very "over bought". So I would not be surprised to see it drop for a few weeks or longer. At which time I will probably buy more as the world currencies look unstable going forward.

It has done exceptionally well lately when you compare it to other commodities. If it holds up in price, the mining companies can make good incomes again. Especially if oil trends down. Mines are energy intensive ventures.

It's a relatively useless metal, and its main consumer (jewelry) has been thoroughly squeezed out of the market. So it naturally does not suffer as much as oil or platinum from the global commodity slowdown.

For the same reason it will not enjoy as big a bounce (if any at all) when the recession is over. On the contrary, investors will rush for the exits.

For the last 12 months gold had a strong negative correlation (-2 or more) with the dollar index.

http://tinyurl.com/3fv28u

Correlation -2 means that, when dollar gains 1% against other world currencies, gold price falls 2% in dollars and 1% in other currencies. It did not crash like silver because industrial demand is not a major contributor to its price.

Right now gold is higher than it should be based on this dollar index principle. But if GLD gets into 75 range again, I'd start buying.

Betting with gold against a fiat currency in the hands of politicians is the biggest no-brainer on the planet! Whee! This investing stuff is easy!

I absolutely agree with that.

Now, someone wrote that if the bail out FAILS tomorrow, then gold will RISE. You think so, eh? You coul be right but recent evidence suggests NOT.

Many expected a flight to gold on Sept 29th, the first time the Senate FAILED to pass the bail out.

Apparently you have NOT looked at the gold charts for Sept 29 -> 30, to see what actually happened.

Gold did NOT rise in response to bail out failing in the Senate.

I think the only way gold rises against accelarating deflationary pressures is IF we have real signs of total financial meltdown (beyond what we've already seen) and that scares everyone so deeply they run to gold.

Yes, I think stockstradr is right about the panic aspect. Deflationary pressure is a real price killer. if you look at gold in most recessions, it goes down with everything else. And esmith as well about the valuation aspect. But Bob Hoye, the walking economic history encyclopedia, points out that after a massive credit bubble has burst like in 1873 and 1929, gold does very well in real terms. Well, it's a little hard to tell in 1933 because FDR raised the price from $21 to $35 over night. And in a depression, no less!!
But he claims that central banks will become so crazy with currency creation in an effort to "solve" the problem that people will lose faith in the currencies and go back to gold as in a defacto standard of the market.
No one can predict the future, but I do see central bankers going nuts and I do see massive deflation as well. So, if gold gets in the $700's I'll probably increase my position. But in the meantime, the US$ is treating me ok. But it wasnt for 4 years! I guess timing really is everything.

Gold and silver are being manipulated by central banks on a massive scale. I've been hearing about metals shortages for months now, but I experienced it first-hand today. I called my broker to buy 10K in silver, and he told me that as of two (2) days ago, a restriction was instituted by Fidelitrade that limits purchase of silver to 500 ounces per account.

No exceptions!

The U.S. mint has stopped selling almost all of its gold products, including gold Eagles.

At the end of the day, the laws of supply and demand will prevail.

You simply cannot long suppress the price of something that is clearly in short supply. The smoke eventually clears, and the mirrors one day break.

Metals are the only honest money left. The paper will go up in flames. I only keep enough in dollars to tide me over until people realize they are worthless. Then everyone will turn to gold and silver -- and food, liquor and cigarettes.

Just watch.

"Yes, I think stockstradr is right about the panic aspect. Deflationary pressure is a real price killer. if you look at gold in most recessions, it goes down with everything else."

But don't forget what Bernanke has pledged to do in order to combat deflation: print, print, print. I think inflation is the inevitable government response to deflation. And you will very much want gold when the printing presses start revving up. In fact....I can hear them humming now ;-)

Do you really think a $700 billion dollar loan is deflationary??

Do you really think a $700 billion dollar loan is deflationary??

Depends on the response from our foreign creditors. Of itself no, the 700 billion is inflationary. If however it blows open treasury spreads, you've just opened the gates of hell. That is deflationary and there is NO stopping it once it starts. The rush for the exits would be monstrous.

So in my mind its not that we won't try to print our way out of this mess, its that we will fail. Debt will be repaid or defaulted, equilibrium will be restored and there will be a lot of pain (deflationary) between here and there.

Dead-on-balls-accurate, its an industry term. I'm just not sure what industry.
Josh

Looks like it is kind of a damned if you do damed if you don't kind thing for the US. I think it is safe to assume when the fed and treasury put a gun to your head and say "gimme your money or your going down", the shit is hitting the fan.

I can't see this ending well.

I just don’t get Gold, sure it’s shiny, can be easily molded into different shapes, (I mean that’s way the Egyptians loved it so much).

OK I guess you can use it to patch teeth but I think they found porcelain works much better for that.

My guess Gold goes the way of the diamond .,

I mean to me good agricultural land would be worth something if everything else goes to pot..

Or maybe an investment in a say Foreclosure alley rental home ... Did I just say that hmmm ..

Maybe invest in wind mils ??

But that’s just me I guess.

But anyway good luck with your gold thing...

Go try and find some gold. Heavy manipulation, lots of coin shops looking for gold.

Will jump huge once manipulators buy up as much as they can.

Gold has a very, very long historical record as money and a store of value. Analyzing human behavior trying to use logic can be very misleading. I've done much better in the markets when I went with the behavioral model and discounted the logic model. People tend to do the same thing, time after time...history rhyming kinda thing.
I can buy gold over the Internet or at a coin shop right now, no problem. In Canada, the stuff is everywhere. So I dont know why I keep hearing that it's unobtainable. Maybe in really big quantities?

Go ahead keep believing gold will rise in response to the bail out package passing.

The markets will now give you a harsh lesson in economics. Gold is set to end this week down over 6%.

My buy point still remains $750 to $800 per ounce.

My mistake? I should have DUMPED ALL my gold at $900/ounce instead of holding onto that last 25% of portfolio, but I held that just on "principle" of knowing that yes gold will soar in coming years.

http://www.spiegel.de/international/busi...

Worried about their nest eggs in the global financial crisis, a growing number of investors are swapping cash for gold. Dealers of coins and gold bars are having trouble keeping up with demand.

Robert Hartman sounds a bit breathless as he answers his phone. "This is already a state of emergency," the CEO of the Munich-based gold dealer Pro Aurum tells SPIEGEL ONLINE. For two weeks, he has been unable to fulfil all the gold orders his company has been receiving. Customers are storming its online shop. And the banks the company usually services just keep on ordering. At the company's fulfilment center, orders are packaged seven days a week. "I'm just happy our employees have been willing to do this," he says.

Give a read to Paul Van Eeden. He's pretty conservative and fundemental value investor, all the way. He thinks $760 is a good buy point.

http://www.paulvaneeden.com/

Here's a question you gotta ask yourself:

What MAJOR players are conspiring to pull gold prices DOWN, dropping prices $60/ounce even against the documented increased demand - seen both in the run on physical gold orders AND also the gold ETF is reporting far more inflows than outflows????

Must be some big players (foreign reserve banks) dumping physical gold. Only other element I'm aware of is India's demand said to have dropped off 70% in last few months.

does anyone have any insight into where platinum is going to go? It looks like it has the potential to drop to less than gold, $/oz. Are people are being forced to liquidate and they are liquidating platinum? I realize the dollar is strengthening and I have heard that deflationary pressures are bad for commodities, but what gives with this? Is industrial consumption that depressed already?

does anyone have any insight into where platinum is going to go?

Great question!!

Please someone, anyone, educate us on platinum. Tell us how to make a killing on this metal.

From $2200 down to $900 in six months! Damn, I'm glad I'm not long that commodity.

I keep wondering.. isn't this a good price to buy this stuff?

http://www.investegate.co.uk/invarticle....

Mark Mahaffey, co-manager of Hinde Capital, pointed out that the sale of one ounce gold coins – known as golden eagles – in the US had been halted and reports earlier this month said that South Africa had run out of gold krugerands after a Swiss buyer bought 5000 coins.

Mahaffey said that the US had banned owning gold in 1933 and that if the current crisis is worsened by a rush for gold, governments might act.

He said: “The worst thing for any kind of central banking crisis is everyone buying the oldest currency in the world. Buying gold is a clear sign that investors don’t have confidence in the financial system."

He said that the problem at the moment was that too many people had too much debt and that central banks hoping to address this could devalue everything else in the system.

The fear for anyone who is in credit is that the financial system could become geared towards negating debt which, in turn, would destroy the value of their assets. One way of bypassing this threat is to buy gold.

However a general shift to gold would undermine the power of central banks and their influence on the economy.

With this serious supply and demand issue with gold and silver, does anyone potentially see a quick run up here in the near future as Europe starts to collapse?

It seems like the domino effect is starting to become more clear as Europe is clearly starting to feel the effects of this US meltdown. I have a large portfolio of gold stocks and unfortunately that was a pretty bad move as many of these stocks were affected during these small crashes as of late. I think my gold stocks are down an average of 35% while gold has held somewhat steady from its high of just over $1k/ounce. I also have a large portfolio of physical silver because I believe there is a great upside potential as well, but again any insight would be greatly appreciated.

Well, I'll admit that I'm baffled. Gold continues to go down while the dollar continues to strengthen. It seems like every day the dollar makes a monster move up. This seems to be contrary to what should be happening.

In some ways, I can see how the dollar keeps going up. It appears to be the best house in a really schittty neighborhood. I think Europe is in worse shape than the U.S. and does anyone really trust China or Russia? Russia shut down their markets recently which is no way to build confidence.

I've heard talk on this board about how China could create a new world-crushing currency if they just backed it with gold. However, would people really trust China to administer a global currency even if it was supposedly backed by gold? About the only thing I trust to buy from China anymore is garbage bags. I make sure that anything I eat or eat out of or pretty much anything I would normally touch without washing my hands afterwards doesn't come from China.