Bumble

The markets were waiting for the press release from the FOMC meeting. This was issued at 14:00 EST, which is 19:00 GMT. The Fed's comments were interpreted as 'dovish', meaning less chance of an interest rate increase, or of further monetary tighteninng. This was positive for gold, so traders moved into long positions.

I ordered 100 tons of gold for my personal stash this morning. Somebody at the dealer must have leaked the news.

Brexit may not happen, and if it is postponed, the pound is likely to continue to rise. Also, this is seasonally a strong time for gold because of the Chinese new year gift giving. If it were me, I'd wait a couple of months, but it's never a bad idea to buy a regular amount and benefit from cost averaging.

Seasonal factors favour the gold price in the first quarter. My own guess would be $1300 to £1350 by the end of March. After that, either a fall back in the summer, or possibly further gains if the stock markets are making serious falls.

1262 maybe. Let's not get too excited!

I'm not a Dent fan either, but to be fair to him, he does have one thing right, which is that one of the major factors that influence future developments is demographics. Everybody gets older at a rate of one year per year and this is not going to change, so the future distribution of people by age is entirely predictable. Most western countries are about to tumble over the demographic cliff as the baby boom generation retires and this will have major consequences. Dent thinks that the next financial crash, when it comes, will result in a huge deflationary bust that will send all prices, including gold, downwards. This will only be true if governments and central banks sit on the sidelines and do nothing. We know from experience that they won't. Their response will be to print money and reduce interest rates, and they will keep doing so until price inflation is restored. This will be positive for gold, not negative.

I think it would be rash to suppose that last Thursday's sharp rise in gold and silver means that these prices are now off to the races. These were short term moves in response to falls in the stock markets, which made investors jittery. The significant thing is that it was gold and silver that caught the money moving out of stocks. The money could have gone into bonds, cryptos, or dollars, but it didn't: these all went down too. Gold is still holding up as the safe haven asset of choice.

@Mildred"Preventing any possible deliveries" does make sense. You have entered into a long contract, i.e. a contract to purchase physical metal. If you don't sell or cancel this contract, then the counterparty will deliver this metal to you, or rather, to your broker, since the contract is probably in a nominee account. Since your broker does not want their entrance lobby to be filled up with crates of metal belonging to their clients, it is part of their terms of service that you close your position in advance of the completion date.

Most silver (about 60%) is consumed: it is used industrially and it is not valuable enough to recycle. There is a healthy supply however, and plenty of silverware that could be scrapped.

Commodities can go below their cost of production, sometimes for years. Uranium has been substantially below the cost of production since the Fukushima disaster. Closing a mine is expensive. It is not like turning off a tap that can be turned on again later. There are lots of regulations to be complied with to ensure that the mine is safe and non-polluting.

In the case of gold, the stock to flow ratio is so high that potentially the price could go below the production cost for ages, as long as there are parties willing to sell their stock.

Interesting chart:

Andrew Maguire doesn't give any details, but reading between the lines it may be that the German customer he refers to was an owner of Xetra-Gold bonds. These bonds are similar to commodity ETFs like GLD in that they claim to be 100% backed by physical gold and they allow for delivery if a customer owns a sufficiently large holding. Xetra-Gold is issued by Deutsche Börse Commodities and Deutsche Bank is one of its partners. According to the Xetra-Gold website, customers do still have right of delivery and some make use of this facility. Usually with bonds of this kind, there are provisions in the small print that allow the fund to settle in cash if they choose, so refusing to hand over physical gold is not technically a default.

On the other hand, if the customer owned allocated bars, i.e. the gold was his own property, that would be a serious issue. A bank could only legitimately refuse to return a client's property if they suspected criminal activity or if they were under orders from a regulator, a central bank or from law enforcement authorities.

Andrew Maguire goes on to suggest that bullion banks are clamping down on withdrawals of gold in expectation of bank bail-ins. This may be true, though it is just a speculation. It does emphasise the importance of holding gold outside the banking system.

Seasonally, this is usually a weak time for the gold price. 2016 was an exception because of the brexit vote, but we can usually expect the price to be weak until late August or September, and then weak again in Nov/Dec. If gold is going to reach $1400 this year, it will probably be in Sept/Oct.

Price volatility will remain, simply because gold itself is volatile in price. Or if you prefer to think of it the other way round, fiat currencies are volatile against gold. Either way, if you are a merchant and want to accept K-coins as payment, you may have to buy some currency hedging to protect your revenue. Current Litecoin transaction fees average 14 cents USD per transaction, and do not scale up with the amount transacted, so they are pretty cheap. If Kinesis offers yield to its stockholders, minters and depositors based on transaction charges, I don't see how they will be able to keep the fees that cheap.

The other interesting facet of a new currency is that the Russians and Chinese might use it, either overtly or covertly. After the Russian 'invasion' of Ukraine, the USA imposed sanctions on Russia in the form of denying them access to the SWIFT system of international payments. An international crypto currency fully backed by gold might be just the thing that wealthy Russians and Chinese choose to use instead.

Some perspectives:

1. This venture is attempting to create an entirely new currency to compete with existing ones. This is so ambitious that governments and central banks are likely to try to put a stop to it. The corporation may be based in friendly jurisdictions, but if major governments outlaw its use, or even just regulate it so heavily that it becomes too irksome to use, customers in most countries will not use it. Financial regulators are already gearing up to regulate cryptos. The cryptocurrency space will not remain a wild west indefinitely. The case for banning cryptos will be the same as that for banning cash: it is used by criminals, drug dealers, money launderers, terrorists, etc. Not a good argument, of course, but it carries weight with the ignorant.

2. At a minimum, regulations will require proof of identification, proof of source of funds, anti-money laundering provisions, and FATCA style disclosure requirements. Switzerland, Singapore and Lichtenstein may be sovereign states but they are coming under huge pressure to comply with regulations like these. Some financial institutions have avoided trading in cryptos precisely because they couldn't prove source of funds.

3. Price volatility may become an issue, as it has for other cryptos. Speculators in gold and silver have simpler ways to expose themselves, including leveraged vehicles. Users who just want to transact worldwide at low cost can use Litecoin or the Bitcoin lightning network. Yes, they're not backed by anything but confidence, but most users are unlikely to care: they'll go where the fees are lowest.

4. Cryptos generally are not ready for mass adoption because they are too awkward to use for the non-tech-savvy. You have to install wallet software on your computer and smartphone and learn how to make safe copies of your keys to cold storage. You also have to worry a lot more about security. One piece of malware and all your crypto has gone and is never coming back. Smartphones are completely and utterly insecure. They are designed to share information and that is what they do. You should never put any data on a smartphone that you would not wish the whole world to know. John McAfee has been working on the design of a secure smartphone, but it is likely to retail at $1000 or more. Most people do not know how to secure their computers adequately. This might be less of a problem for Kinesis, if it is centrally managed, but there still remains the issue of user authentication. With my bank, I need my card and PIN to log in to online services, and I have several other channels for authenticating myself if I need to. Without two factor authentication with physical tokens I would be reluctant to trust a transactional money system.

5. Gold backing is nice, but if there is a systemic financial collapse, governments might decide to ban all private ownership of gold. Even if the gold is safely stored in Switzerland or Singapore, it doesn't help me if I can't get it, and I am forced to sell it to the central bank at some nominal price.

Dealers in coins and bars operate on pretty slim margins, since it is a highly competitive business. Silver miners are price takers, not price setters. They cannot choose to sell silver at some price that leaves them a satisfactory margin. About 75% of mined silver comes from mines where it is a by-product of the mining of other metals, such as copper, zinc or lead. These miners are not going to produce more (or less) silver, just because the silver price has moved up (or down). Even an increase in silver price to $25 won't affect thier production, and will only slightly increase their earnings. Their profitability derives mainly from the base metals they produce, so to ask what their margin is on the silver is barely relevant. The flip side of this is that if demand for base metals goes down, less silver will be produced, even if silver demand is high. The other silver miners produce mainly silver, but typically their costs are higher. It varies quite a lot depending on location, but silver mining costs are not far from the current price of around $16. Here, for example, is First Majestic's statement as of January 2018. (This is from https://www.firstmajestic.com/news/2018/index.php?content_id=343)

As you can see, they are struggling to make any profit margin at all at current prices, but they and other primary silver miners will experience much higher earnings if the silver price were to rise to say, $25.

Sixgun, I like what you say and I hope you are right. My only reservation is that for the last two years the commentator Andrew Maguire has been saying the same thing about physical demand for gold being about to break the paper market and cause a sharp rise in price, and it hasn't happened yet. He is an experienced professional PM trader so I'm sure his facts and figures are correct, but the capacity for the manipulators on Comex to hold the price down shows no signs of ending.

I don't tend to worry about the price of gold on the short term. But, for what it's worth, there was a price take down on Friday 10 November.

According to information on Kitco, 4 million ounces, or over 120 tonnes of gold, was sold on Comex in the space of 15 minutes. The 120 tonnes are of course just paper contracts and represent a high level of leverage. This is a lot, even by the standards of previous take downs. In the past, selling 10 tonnes could drive the price down $15 or more. Now it is taking 120 tonnes to drive the price down $10. On the whole I would say this is a bullish sign for gold. Cyclically, gold is often weak in Nov/Dec and picks up in Jan/Feb.

Not sure why my post went in 3 times - I think the server was slow to acknowledge so my browser retried automatically. Maybe a mod can delete the duplicates. Thanks.

It is rarely a bad idea to cost average yourself in by buying small tranches, even after a rise in price. The price could go much further up from here and you might miss out. There was a further attempt at a smash down in price yesterday (Aug 29), probably because this is the expiry date for futures contracts and some market participants wanted a lower price to get their positions into the money. After an $18 fall, the price seems to be recovering again. If the price holds above £1310 for a few more days, the momentum traders may switch to a long position and drive the price much higher - maybe up to £1350 or more.

It is rarely a bad idea to cost average yourself in by buying small tranches, even after a rise in price. The price could go much further up from here and you might miss out. There was a further attempt at a smash down in price yesterday (Aug 29), probably because this is the expiry date for futures contracts and some market participants wanted a lower price to get their positions into the money. After an $18 fall, the price seems to be recovering again. If the price holds above £1310 for a few more days, the momentum traders may switch to a long position and drive the price much higher - maybe up to £1350 or more.

It is rarely a bad idea to cost average yourself in by buying small tranches, even after a rise in price. The price could go much further up from here and you might miss out. There was a further attempt at a smash down in price yesterday (Aug 29), probably because this is the expiry date for futures contracts and some market participants wanted a lower price to get their positions into the money. After an $18 fall, the price seems to be recovering again. If the price holds above £1310 for a few more days, the momentum traders may switch to a long position and drive the price much higher - maybe up to £1350 or more.

I doubt the Korean crisis is all that significant. Donald Trump and Kim Jong-Un are feeling insecure and are playing to their respective home audiences by talking up the issue, but it is in neither of their interests to do anything but talk. I think it is more likely to be a combination of some major investment companies switching to a long position because of fears of a recession, and the start of seasonal buying, Sept-Oct and Jan-Feb being usually strong for gold demand.

On Friday Aug 25 2017 an attempt was made to drive the price of gold down by selling 21,000 contracts on NY Comex in the space of a few minutes. A contract is 100 ozt of gold, so this amounts to over 2 million ounces, or over $2.5 billion worth of gold. This is actually not uncommon, particularly on Fridays, but this time it didn't work. The price bounced straight back. Look at the green lines on the charts below. This seems to me quite positive. In recent years when gold was knocked down it stayed down, but now it is proving resilient. This may well be an indicator that serious amounts of buyers are starting to move back into gold and are keen to buy the dips.

The main resistance point seems to be about $1300 or £1010 per Toz. I would wait to see these levels hold for a few days running before calling a breakout.

Anyone else think it is odd that gold is going down while bitcoin has risen to an all-time high? Is this just a long-term trend in bitcoin price resulting from the fact that it is still a new currency and its ownership is widening? Or is it that there are no leveraged instruments for shorting bitcoin?