Goldman lowers 12 month forecast of Gold to $1390

Read an interesting article today about "conflict gold". India and Dubai is worried the US and EU might sanction goold products from their countries since the gold money is funding civil wars in Africa.

Anyone remember the huge hit diamonds took in the jewelry trade over this same issue? I wonder how much this might affect gold, especially since its impossible to prove it wasn't part of such trade. At least diamonds they could trace the physical stones, you cannot trace purified gold.

Just an issue to watch, since a large amount of gold's demand is jewelry, and subject to the whims of fashion. Remember fur......

 

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Physical supply and demand has nothing to do with gold price. Jewelry is irrelevant. Available gold supply is 7 times that of silver. If that mattered silver would be 7 times more valuable. It is entirely based on paper contracts. If that wasn't the case it would be entirely based on the velocity of money. Maybe the price will go down, but not because of supply and demand which won't be a factor unless there is a supply shortage.

 

Won't happen because like you said it can't be tracked, there is nothing they can do. India and Dubai are probably net importers of gold anyways, what gold products are they selling to usa/eu?

 

Dubai is one of the largest centers of the gold trade, and India one of the largest producers of jewelry. Dubai exports nearly as much gold as it imports. Indian gold jewelry exports is a huge industry, one must not forget that in looking at Indian import figures. I have friends in se asia and china in the gold business, both get gold bars and some jewelry from dubai, the other jewelry from india.

As to the comment that physical demand from gold doesn't matter......i am confused. First this board praises pm as "the only real money", and "something everyone in the world desires", and "there is a severe shortage of pm versus limitless demand", as the reason it will go up forever, but now physical demand for gold is meaningless to its price? I guess i would wonder what IS meaningful to its price if supply and demand is of no concern......

 

Ahh, you are confused because you did not read the 12 commandments of the gold bugs. After you read the "rules" it becomes so clear.

Here is Barry Ritholtz taking a few freindly shots at the stacker crowd


http://finance.yahoo.com/blogs/dail...ments-gold-bugs-barry-ritholtz-123507310.html

 

Man, that was an epic read!

The only one I would add to the list would be "All predictions are 1-4 years out, close enough to scare the heck out of everyone, but far enough most will not remember it when it doesn't happen, and you can make the same prediction again."

 

yes

 

LOL Ted Butler is going to be ticked when he finds out "You are on to him"

 

Gosh, what a sloppy hit piece misreprenting us bugs. Let's set the record straight instead of taking a gold bear's assumptions about what the gold bug arguments are.

#1 Falsehood/Misunderstanding - Gold is currency - Wrong. Gold is money. Currency is whatever is circulating to settle debts. Money is whatever fulfills the requirements for a unit of account and a store of wealth.

#2 Misunderstanding - Price of gold cannot fail, only manipulated lower - Gold price (paper) and price of gold (physical) are 2 different things. Gold price can be manipulated, but the price of gold will only be what someone is truly willing to sell for. Gold price can fail, price of gold can't.

#3 Falsehood/Misunderstanding - If the price of gold is rising, it is doing so despite enormous and desperate efforts by manipulators to prevent the rise - The "gold price" does nothing without the efforts of the manipulators, whether up or down. All movement in paper markets is manipulated via leverage until such time as the physical market takes precedence, or at least until the paper market has zero leverage. Until then we can only guess what the price should truly be.

#4 Falsehood - The world MUST return to the Gold Standard one day - This does not have to happen. It should happen, and Eastern nations are positioning themselves to benefit from it, but as long as every government and central bank in the world is cooperating with each other they can print fiat forever. Of course the price of gold will react accordingly.

#5 Misunderstanding - Central Bankers are printing money relentlessly, and this can only drive Gold prices higher - No, money printing is only indirectly related to price inflation. Monetary velocity is the key component, and as long as newly printed money is not in circulation it neutralizes the inflationary effects until such time as it is circulating. That money can be destroyed before it hits the open market, but that isn't very likely since the solvency of the banking system relies upon it.

#6 Falsehood/Misunderstanding - Gold works whether the economy is good or bad - This is twisting the original assertion which is that gold protects from both hyperinflation and default, but it does not protect against deflation. Too much deflation will lead to default, but if that doesn't happen and we do have indefinite deflation cash is a better investment from a pure profit standpoint, though gold and silver will always be superior from an intrinsic value standpoint. Gold is not an industrial metal. The economy has nothing to do with it with the exception of how much disposable income the citizenry has and what they choose to spend it on.

#7 Truth - Gold will survive after the world economy crumbles - This was ridiculed but no attempt was made to discredit this.

#8 Falsehood - Never admit that Gold is essentially a sucker’s bet - Hmmm, from $20 to $42 to $300 to $1000... outperformed stocks since 2000, still in positive territory over the last 5 years even after the largest smackdown in over 2 decades. Sucker's bet how exactly? Massive selloffs happen in every market. If that's the criteria for a sucker's bet there isn't any other kind of bet.

#9 Truth - Gold is a rejection of government, and their control of fiat money and finance - Again ridiculed, but no attempt to discredit.

#10 Falsehood/Assumption - All Gold discussions must contain ominous macro forecasts - No. It has to do with real interest rates, plain and simple. Negative real interest rates are bullish for metals. Positive real interest rates are good for cash. Ominous forecasts may be a result of the same causation that leads to higher gold prices, but that's just collateral.

#11 Truth/Misunderstanding - Gold is always rallying in one currency or another - There is always something rallying in one currency or another. I have never heard this argument as support for gold, but it's a dumb argument to make.

#12 Falsehood/Misunderstanding - China & India know the value of Gold; the Western world does not - It's not a matter of not knowing the value, it's a matter of priorities. Western nations prioritize debt based currency. Eastern nations prioritize wealth.

#13 Falsehood/Misunderstanding - Bonus rule: Never admit Gold might be falling because it trades on human emotions and psychology and has no intrinsic value whatsoever - The "price of gold" (physical) trades entirely on human emotion and psychology, as all value is derived from the human mind. Without that nothing would have any value. However this value for gold is 100% intrinsic because it has no practical use. If not for the intrinsic value it would be far less valuable than silver. The "gold price" (paper) trades entirely on leveraged paper contracts that nobody can know the underlying reasons for except for the paper traders.

 

While I appreciate the response, I have to admit it basically strengthened his list in my mind. Your answers were basically agreeing with them to an extent, just coloring it. The only outright contradiction was of the "its raising in some currency", which IS a school of thought I have seen posted on CT on occasion.

 

People believe what they want to believe and you are certainly entitled to your opinion.

 

As are we all. I certainly meant no disrespect to Inflexion, and do appreciate his effort to contradict the list. I respect him since he is a PM advocate in a tough environment. At least he is here. I have all the respect in the world for that. Usually when PM is going up bears are nowhere to be seen, and when going down the bulls run and hide. The fact he is still here posting garners a lot of respect in my book.

 

Btw, just for clarity, I also consider myself a PM bull, but I bet many here wouldn't. I spent 15 years fighting the crowd who laughs at PM as an archaic investment, a waste of money, a relic of the past. I very much am a PM bull FOR THE RIGHT PRICE. I have very different reasons than Inflexion and others, but if the silver market were $15 today, or the gold market $750, I would be standing beside them encouraging people to buy PM as a part of your total portfolio.

I simply have different reasons than others, and disagree on FMV price points. So I wouldn't call myself a bear, only a bear at a $30 price point. At $23? I am getting more neutral, but not willing to pull money out of stocks right now to buy more.

I seriously doubt any true PM bear would be here on CT. We might disagree here, but its more a matter of disagreement over price points than disagreements about whether PM is a viable investment. There ARE a lot of PM bears out there, including a ton of wall street, though.

 

His responses were coloring the fundamental bull arguments. I corrected them. The response was not for you. It was for the people being mislead.

You are not a PM bull. You are a Wall streeter who is invested in PMs because you are aware of the fundamental arguments that you nevertheless try to discredit for the sake of your dying industry, and then hide behind the phony PM bull label to gain credibility among those yet to make up their minds. It would be clever if it wasn't so transparent.

 

A wall streeter? In what way? Because I have an MBA in Finance? I do not work in NY, at a bank, or in the financial sector at all.

I guess having a sizable portion of my total assets in silver for the last 25 years, longer than many here have been alive, just doesn't cut it with some. I guess if I do not drink the koolaid of some websites I just am not qualified to own PM.

Oh well. People can either believe someone who has walked the walk for 25 years, or believe websites who make their living trying to get you to make a financial decision out of fear. I cannot force them to choose either way. Sorry I am just not a good enough pm owner for you, since evidently do not agree 100% with your views, I simply MUST be wrong.

 

By your own posts, you are a CPA and have met with the CME personally. Maybe it's a stretch to call you a Wall streeter and I apologize if that was presumptuous, but if you are a PM bull I don't understand why you so often side with the bears. Being pro-CME is contrary to being pro-metal, because it undermines the valuation method. There is no middle ground between truth and lies, and the price mechanism we have today is a lie.

 

I apologize as well if I came off snippy. Yes, I am a CPA, MBA, and a bunch of other initials. I am not a practicing CPA though. Yes, I have been down on Crocker and attended CME classes and been on the trading floors.

I simply am a strong, long time believer in diversification of assets, and believe PM has a role in that, a good role. I have been a bear for maybe 5 years, ever since PM crossed over to above FMV in my eyes. I admit, though, I have the luxury of already owning half a SDB full, so I already had that diversification in place. As such, I was unwilling to buy an ounce more above what I consider FMV. If I had zero ounces 5 years ago I might have been forced to suck it up and still buy, because I do beleive that strongly its needed in a portfolio.

I simply have financial reasons for wishing to hold it, not other reasons people expound. As this is the case, we will continue to disagree on certain reasons you believe are pertinent, and I believe are not. That does not mean we both cannot agree on the value of owning PM, but it will mean our assumptions of FMV of that PM will differ.

I do promise, however, I am not a mole that has been planted here by JPM, COMEX, or another entity. I am like you, a pm owner trying to help others here. We simply disagree on WHY to own it.

 

You don't need to apologize. I feel bad for being so harsh, sorry Chris. It's apparent you do what you feel is best.