The Gold thread

Hi guys, what do ye think about a carry trade shorting right now XAU/USD? It pays ~4.3% interest without leverage. I trade a lot of currencies but I am scared sh!tless of gold.
 
plaudit said:
Hi guys, what do ye think about a carry trade shorting right now XAU/USD? It pays ~4.3% interest without leverage. I trade a lot of currencies but I am scared sh!tless of gold.
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explain please?
 
walk2dewater said:
explain please?
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If I think the price of gold is going to remain below the current price I get ~4.3% on my open position, because holding gold pays 0% and holding dollars pays 5%, so less spreads is about ~4.3%. Leveraged at say 10:1 I would get 43% interest as long as gold stays below the current price which is 589.4. Of course if it goes up I get blown out, but if goes down I clean up.
 

interesting. Who's selling this?
 
Thanks for the explanations...So the dollar should fall against gold but not so much against the Euro.

BTW don't worry about my ignorance, I only put €100 in!! Is a relatively stress free learning process
 
i bought a 1 oz gold panda coin in 1986 for 350 us dollars in new york on the advice of a russian immigrant who was using up all his savings to buy coins every month or so
i send the money order off to the address and after a week or so the gold coin came in a package to my address a cheap lodgings house
no doubt if anyone in my shared house knew it had a gold coin it would probably have been taken
very nice and shiny it was too and 4 safety it got sellotaped under some furniture
the russian was using the gold as a trust fund 4 his young son convinced its value would increase steadily over the years
i sold the gold coin in 1987 on a visit to monteovideo for 450 us_the best offer
ever since gold was delinked from currencies it is not backed by any major or maybe even minor currency
its major use is jewelry
also it has its uses for refugees fleeing lands with worthless local currencies
producers of gold and traders have a vested interest in talking up the future price of gold also the dealers and writers/analysts/economists that write about gold are usually forecasting a future big jump in the price of gold because there is some coming crisis or big currency risk
the russian man made a very bad invest ment seduced by the sales talk of capital appreciation
even allowing 4 the fact coins have some extra value he would have been better in the stock market or deposit interest or housing
also gold has storage cost
no doubt some investors will make money in gold funds as traders anticipate the movements of gold as it flucuates up and down against various currencies
does anyone seriously think that any major currency will lose its purchasing power within its own borders
the central banks have all the tools at their disposal such as interest rates and control of the money supply
of course gold can exist alongside cash but its not getting any interest or dividends just the lure of some big capital appreciation in the future
just some thoughts
 

Thanks for that. Here's my thoughts:

I bought Nortel at C$20 in 2001, after it had reached C$125 in 1999-2000. I thought I had a nice bargain. It went to C$2 and I sold it for C$3. Return is what you get for taking risk, risk means sometimes you lose. My view is that gold is due massive appreciation because of the excessive printing of dollars, euros etc. This is the risk I am willing to take [see earlier in thread]

And yes, gold doesnt pay interest (reason for holding bonds/debt) and doesnt pay out dividends (main reason for holding shares). Gold IMHO is a 'currency' and by buying it you are playing a currency spec trade.

Finally I disagree that the CBs have control. If you think the CBs are still fully in control then you probably think houses are miraclously "worth" more than they were in 2001. CBs made a serious boo-boo with real negative rates at the start of this decade. Take a look at M3 and M4 growth since 2000/01, it is truly astounding how debased the paper in your pocket has become. 2007 is going to be a very interesting year; can't wait to see how the Fed/ECB is going to wriggle out of this mess.
 
plaudit said:
Hi guys, what do ye think about a carry trade shorting right now XAU/USD? It pays ~4.3% interest without leverage. I trade a lot of currencies but I am scared sh!tless of gold.
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If you are so scared of gold why are you betting on it staying below $589. You should be scared because as you say if it goes the other way you get wiped out. The run up on gold in the last few years has killed alot of short sellers because just when they think that gold is returning to its bear market, it does the opposite and they get screwed. If you believe in the commodities story then you should also be in gold if not then you should not be in it. I think gold is alot safer bet then trying to back individual commodities because the bull market will switch from one commodity to the next but gold will be there the whole way through. I for one also believe that the only way out of the financial crisis alot of western countries are in with excessive debts and huge mortgages is to allow inflation to rise alot thereby reducing the real value of the debt to be repaid. I think that the dollar will be allowed to fall in value and the euro and yen will have to fall with it in order for them to stay competitive although not by as much. I think inflation is the lesser evil than deflation and inflation is what we will get. In that scenario gold and commodities are the only game in town.
 
I hold no position in gold at the moment, nor have I in the past. However I am contemplating opening a small short position and if goes against me cut my loss but if it continues to fall then I continue to scale in setting my stop losses so that I close at break even if it goes against me. The idea being to build up a nice juicy carry trade.

The problem is deciding when to get in!
 
Apologies if somebody posted this before but I'm just dipping in here and thought that this was apposite:
 
gold always was very volitile wish i had got rid of my cion ages ago but i will hold off until after christmas yo ho ho santa
 
Yes its true gold has little utility. However its value originates from the fact that for hundreds of years it was the bedrock of the world's monetary system. Of course today the world's monetary system is not backed by gold. If you believe that today the worlds monetary system now not backed by gold but by the american dollar is rock solid then gold is out. If you believe the opposite that it is not rock solid then gold is in. The rise in the price of gold over the last 5 years mean that more and more people are not confident in the worlds monetary system and are buying gold. warren buffet has been known to say things at times and then ten twenty years later he changes his mind. I think he made this quote in the 1980s when the worlds monetary system was very solid and many more people believed in the strength of the american dollar, however this is not valid today. Also it is well known that when silver hit the bottom of its bear market in 1998 Warren Buffet bought a huge quantity I think 11 million ounces the maximum he could legally buy. In the 1980s Warren buffet also said that owning a newspaper was a rock solid investment, today with the power of the internet he has changed his mind.
 
joe sod said:
In the 1980s Warren buffet also said that owning a newspaper was a rock solid investment.
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Are you sure? I don't think he's ever referred to anything as a rock solid investment. Can you tell us where you heard this?
 
this idea of an increase in money supply as in m3 and m4 has got me thinking
is this the printing presses in action printing more dollar euros etc
who controls all this
how is it monitored
are the public informed of all the amounts and times
presumably the central banks are involved?
the point is with cheap goods flooding in from china and cheap farm produce from abroad _prices in the shops show low inflation
of course the increase in money supply is justified by this low inflation
nevertheless the money has to go somewhere_hence high property prices
i guess what im asking is could anyone shed more light on this process
 
I was watching the one and only eddie hobbs last night..he seemed to be quite positive about the gold story. Interesting to see it get such a mention.
 
"Are you sure? I don't think he's ever referred to anything as a rock solid investment. Can you tell us where you heard this?"

He was referring to the newspaper he owned in the 1980s "The Washington Post" and the fact that it was a solid investment which at the time he said would always be solid. However a few years ago he stated even though he still owns it I think, that newspapers like the washington post were no longer a rock solid investment. What I was really referring to was the fact that just because Warren Buffet says something at one period in time does not mean that it is set in stone and that he changes his mind with changing circumstances.

I also watched Eddie Hobbs last night, however I don't think his audience would be able for the volatility in gold and commodities, what would they have done in the last few months with the big correction in gold and commodities.
 
joe sod said:
I also watched Eddie Hobbs last night, however I don't think his audience would be able for the volatility in gold and commodities, what would they have done in the last few months with the big correction in gold and commodities.
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Didn't see the show due to not having a TV but I would be interested in knowing how Eddie Hobbs advised people to buy into gold - e.g. coins, bullion, etf's ...
 
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