Is this The Cliff

Fully agree with you InfleXion ; I think there's already been a 'whiff of deflation' (in Q3 2012) ... and Helicopter Ben has already loaded up the Greenback pallets: we're gased up & ready to fly! (Do you see a "great buying opportunity" = Au target on a 'correction', ~ 1550-1575 in Q1 21013 ?)

 

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yep its a long way to the bottom...

 

It's interesting to think about. During the 70s companies paid out higher dividends and increased them pretty much in line with inflation. I would say the inflation of the 70s was easier to handle because it was easier to find a job and raises generally kept up with or surpassed inflation - at least for the people I knew. Companies weren't as cruel back then and tried to keep people on the payroll. And buying investment real estate was a layup as far as profitability is concerned. For someone with significant investments, I would think deflation would be worse due to the low interest rates and falling markets. But for someone with a secure job, deflation might be better. So the answer is --- it depends on a person's personal situation.

 

One possible negative for gold next year is that with increased buying by central banks, there will be increased shorting in the futures market to earn an income stream on the bullion holdings. The central banks aren't just going to sit on a sterile asset. They will basis trade it.

 

Once-upon-a-time. That is not true anymore. Retail prices can remain high (or even advance) as global commodity prices (business levels) fall. Also, there can be global deflation (in USD$) even as a (Dollar-pegged) currency's retail prices increase exponentially. In nominal paper, things can get screwy. I think we've been seeing that since 2000 or so; this supercycle collapse is far from over.

As for Gold/PMs, the 'market price' can drop while dealer's premiums RISE ... or they can decide not to sell (or go-out-of-business, etc.) instead. Imagine a scenario where 'low mkt price' (COMEX PM Fix) co-exists with almost nothing available in coinshops or dwindling shows (except at much higher real prices.) See how many LCS have shuttered already: is that business niche healthy, growing?

And why is the cost-of-living rising still, if we're trapped in a dis->deflationary cycle which began in 2000? In deflation, overall business declines and that seems to be what's happening around the USA. This economy is still in contraction - that also explains why companies still aren't hiring (or hire only a depressed wages) and 'healthy' corporations remain parked in cash. So - for the 99% - why isn't cost-of-living automatically FALLING in this so-called "deflationary environment"? Reading inflationists and deflationists battle it out for years - no one seems to explain the conundrum ... nor do I pretend to understand it, either.

I think today's 'problem with deflation' is that it's an AGGREGATE measure based on purely paper assets (where credit is money, just as promissory paper is money >> M3+?) Nowadays, even fmr Fed Chrman Greenspan isn't sure how to define money (as he famously admitted before Congress.) So how & why should we expect any prices to be strictly rational in such a fluid and ever-debasing system? The genii is out of the bottle, I fear... the Paper's failing and so these mixed signals make sense.

"The Fed is out of bullets" means exactly THAT, to me. That's the Number One Reason to HOLD a monetary alternative/ real hard asset, not think of bullion as an 'investment.' On the contrary, it's 'the Hedge Against' the now-failing Paper-Game. Longer term, I'm very bearish and - at the bottom - suppose adjusted home prices in most areas will probably have dropped another ~ -40% (with US stocks ~ -80% ; US bonds ~ -95%!) But the 'adjustment' will be relative, buried in e-zeros. That's HUGELY 'deflationary' for americans' (All-Paper) wealth ... yet retail commodities (eg. food/gas) will still be higher too. Go figure, this is the conundrum of modern deflation. And doesn't it ALWAYS end in hyperinflation/ devaluation?

Look at most retail prices in deflationary Japan, for example, since 1997. Did things (not rubbished paper assets, but actual retail products) get cheaper by the numbers there?
I-don't-think-so. It won't be different here either. The Great Reset - which MUST happen - will be brutal and painful for all. That's where kicking-the-can-down-the-road leads us.

Just my two cents ... and yeah: I do hope I'm very very wrong on how it plays out.

 

Is there's any evidence that recent buyers (the Iranians, Venezualans, Russians and Chinese) have done/ will do this, for US paper? Meanwhile, the Germans are clamoring to KEEP (secure) theirs; that's contrary to your hypothesis, too.

So who will do what Uncle Sam sez, now? Can you name one CB that wants to dump bullion to pay its debts? Going forward, I doubt bullion (as opposed to the Dollar - a more obvious short) will be debased by yet another round of New York- & Washington-orchestrated manipulation.

Those salad days are over - O. (and Little Timmy?) doesn't have that capital to blow, either. The Gold - once dumped - now ex-reserves - cannot be dumped again. Perhaps they could seize GLD's reserves to repeat? There'd be a huge row in Britain over that; doubt it'll ever happen. And Gold will probably go parabolic when the Dollar fails in such dire desperate circumstances.

If LMBA had wanted worth-less Treasury paper, wouldn't they have swapped out already? So who wants the worth-less promissory paper instead of bullion, NOW?

I don't see Gold 'failing' until AFTER a new global currency regime is established/enforced - and we're maybe a decade from that eventuality.

Agree that Gold's paper downside (GLD) matches US paper - but bullion might be a very very different story. And that is where things get interesting, I believe.

 

And that sort of self interest isn't good for all?

Inflation by degree is direct encouragement of risky financial decisions. The antithesis of responsible monetary decisions on a personal and public level. Of course, public perspective is always about the short term, so inflation's effects are far more attractive in that venue. There's always greater taxation/confiscation as an option after all. Do we have such 'outs' as private citizens?

Inflation steals stored dollar/paper wealth. To avoid time value based theft, folks are motivated to add risk to their savings equation. Even if it were true that bonds could offset that risk safely, it's risk all the same. The thought continues, as public policy demonstrates, that since tomorrow's paper will be cheaper than today's, we should engage in credit based transactions...a doubling down type of risk. That behavior has become systemic even on a private level. What happens when these risks turn out badly for those that take them...bailout of one type or another...mainly a penalty to the fiscally responsible parties since it is they that will likely fund it in real terms. So, remind me, what good is inflation? Inflation creates more of its own down side until the entire system is sure to burst. What was so wrong with the value of the dollar back in 1900 or 1930 that made it necessary to demote it so greatly to where we find it today? Has income really offset all of that value destruction? I expect it's a rigged game that transfers wealth to those that can control it. But what do I know...I'm only following the money trail with such thoughts.

On the other hand, deflation is rewarding to those that have saved for the future. Why teach a child to save when spending it all immediately yields the greatest realizable benefit? If inflation is short sighted, I suggest that deflation is the compliment thereof. Have no shame in advocation for a mild/stable deflationary trend. That would promote healthy long term financial decision making, not the ever greater gamble that inflation has yielded.

I wonder how much of this inflation/deflation concern is a false dichotomy. How about a policy of net zero inflation/deflation as the goal? Oddly, our low interest rate environment is closer to that now than it has been in recent decades, yet the inflationary effects are still building (coming home to roost really).

 

Is there any evidence that they don't? central banks aren't stupid or unsophisticated as you hypothesize. There are many threads on Cointalk where folks complain about how central banks act through futures and other means to depress the price of gold, but rarely do folks make the connection between this and the perfectly normal policy of turning gold into an earning asset without giving up physical possession. And there is no conflict between keeping bars secure and earning an income stream from them through the futures market.

 

I don't have to prove it false. You insisted they will &have.

So, do you have any evidence the Iranians and other anti-Dollar Gold buyers use USD-future markets as you declare: YES OR NO?
No, you don't. And it's by no means intuitive they will. Your declaration is a very dubious proposition, on the face of it.

And you should know yours is a fallacious argument from ignorance, cloudsweeper99.

I also have not "hypothesized central banks are stupid" either. Why do you put words in others' mouths, for your straw-man jeremiads?

 

I have mentioned this before, but the Iranians right now are neither anti-dollar nor pro gold. They are importing gold from Turkey and other locales as a way around UN imposed sanctions.

To argue their actions today has any other ramifications other than this is completely misses this fact. Take away UN sanctions and Iranian imports of gold drop back down to historical levels immediately. Btw, I am pretty sure a large amount of these gold imports are going back to the international market in barter situations, so this is not true gold "investment" anyway.

The German issue is only one of ensuring proper accountability, a very German thing to wish for.

As to Venezuela, it would be curious to see how much of the gold Chavez famously took out of London is still left. I will bet anyone on this board that when its all said and done Venezuela will be shown to own no gold anymore, all of it has been spent on social programs.

 

You cannot prove it is false and I can't prove that it's true. Central banks don't normally telegraph what they are doing behind the scenes. But I think the probability is very high that they aren't as stupid and lazy about managing their affairs as you make them out to be. Everyone who reads this is entitled to form their own opinion.

 

You may have mentioned this before, but it's still only pure conjecture - uninformed opinion, actually. And contrary to statements made by the parties themselves: so why argue, contentiously, against reality? You didn't know the Iranains are dumping Dollars for Gold?

The Iranians have made many very loud & public anti-Dollar declarations, for years now. I'm surprised you didn't know this! Google is your friend too, medoraman.

10/18/2009: "Russia and Iran Now OFFICIALLY Talking of Dumping Dollar for International Trade"
http://www.washingtonsblog.com/2009...f-dumping-dollar-for-international-trade.html

1/8/2012 7:19PM: "Iran, Russia dump dollar for rial, ruble"
http://www.presstv.ir/detail/220020.html

10/22/2010: "Crisis of Fiat Currencies: US Dollar Surpluses Converted into Gold; China, Russia, Iran are Dumping the Dollar"
http://www.globalresearch.ca/crisis-of-fiat-currencies-us-dollar-surpluses-converted-into-gold/22031

12/1/2010: "China, Russia, Iran Dumping Dollar for Gold"
http://fisherpreciousmetals.com/2010/12/china-russia-iran-dumping-dollar-for-gold/

Zerohedge does a fair job summarizing events on this topic (2012):
http://www.zerohedge.com/news/india-joins-asian-dollar-exclusion-zone-will-transact-iran-rupees

Another article recently appeared in the NYT, alluding to Iran's Gold activity in Afghanistan, maybe you didn't see it? The suggestion - unsubstaniated - is that Iranians are accumulating/routing Gold through Afghanistan too; there's also a thriving black market currency market for unknown elements (maybe the Iranian govt, maybe narco-terrorist cartels or pecunious individuals. It remains unclear.) This murky trade continues and the muddled story's not finished, either.

I haven't described any of these players as "stupid or lazy" but an obvious explosion in Gold demand in recent years begs a question or two. From where, and why? It's not about Americans buying, certainly. I think it's complex and far, far more significant to the bullion story & ultimate POG than we know here or can confirm now. But that hypothesis (that what's happening behind the scenes w/physical is more important) remains a matter of conjecture & opinion, yet.

For now, Paper Gold still rules. That might NOT always be the case. We shall see.

 

Something is going on. Is it covering margin calls? People selling their PM's to cover other positions? The fiscal cliff? Something has spooked the herd. Silver is down almost a buck today, and still dropping.

 

Yes, as a political stunt Russia, Iran, and others have publicly stated they wish to move away from dollars. What I am referring to is a very distinct HUGE increase in gold EXACTLY when the UN imposed sanctions. Then, we hear about large amounts of gold a few weeks later starting to move through back channel, black markets.

Gee, I guess that is my "uninformed opinion". I guess you simply believe in lucky coincidences.

I guess "uninformed opinion" is 2012's "personal anecdote".

 

Is it time to catch this falling knife?

If it hits $25, I'll put some funds into it. Hoping for that opportunity.

 

I'm thinking around $28. I was going to offer about $10 a piece for $100 face of half dollars. It's a gamble. I don't really want to spend $2000 this week and have it go down to $1800 next. That's the chance we take...

 

I would say it is a "normal" correction considering that gold and silver are highly volitile. If gold closes below about 1625 and stays there a few days, all bets are off. Maybe it's just another dip; maybe it's more.

 

Didn't you get the memo? Independent thought is no longer acceptable. If it isn't in the media or on the internet, it can't possibly be true.

 

Against the bullish sentiment/hopes of the board - and a bull call by Cloudsweeper99 - I made a contrarian bearish call (over a month ago):
http://www.cointalk.com/t217473/#post1572612

On that thread, abit lower, I also called a target low POG: http://www.cointalk.com/t217473/#post1572988

fwiw, that's about $70 lower than today, about a -4.1% decline from here. How likely is that, now? In volatile days of recent years, I seem to recall Gold moving that much +/- in 2-3 sessions and suggest it's distinctly possible in the next few weeks too.

Cloudsweeper99 also made another bold call (which I disagree with, but am willing to reconsider.)

fwiw we're only about 20 bucks and maybe a week or two from that reckoning, folks. So, do others agree with that number & call as "the end of the Gold Bull Market"?