Soros says sell gold

Hobo-Jo has made a few posts recently about why he thinks that gold is a good investment. But my search skills are lacking and I can't find the one I'm looking for.

Anyway, George Soros, the billionaire investor who famously broke the Bank of England at the end of the British membership of the ERM, thinks that gold is a wee bit overpriced:

http://www.telegraph.co.uk/finance/financetopics/davos/7085504/Davos-2010-George-Soros-warns-gold-is-now-the-ultimate-bubble.html

I find it interesting that gold and property have shown similar rapid price rises, and yet the serious Doom and Gloom crowd think that houses are too expensive, whilst gold will rise and rise.
 
hmmm will I take the advice of Soros or Paul Tudor Jones (who famously shorted subprime issues), John Paulson and other top hedge fund managers who are piling into Gold, not to mention India, China, Russia, etc?

I think I might look at the facts and make up my own mind, not rely on the interpretation of the "experts".

By the way, Gold is only sitting around 30% above it's 1980 USD high, how far above 1980 prices is housing?
 
What are the facts as you see them ?
Why do you consider this a relevant statement ?
I'm pretty sure I've covered my opinion on the reasons for Gold in previous posts on here, might try and dig them up later tonight if I have time.

The facts simply from a supply/demand point of view:
Gold supply is decreasing, some claim we may have seen "peak Gold"
Gold mining grades are decreasing (increasing costs to mine)
Demand (specifically investment demand) is increasing
Central Banks are net buyers again (first time in decades?)


It wasn't really a relevant statement, it was in retaliation to this:
I find it interesting that gold and property have shown similar rapid price rises, and yet the serious Doom and Gloom crowd think that houses are too expensive, whilst gold will rise and rise.
Which was just as irrelevant.
 
Gold is a nothing investment.

It doesn't give you a return on your money.

You can't use it in any practical sense.

It just sits there.

The price of gold is purely down to the whim of investors. Everyone piles into gold when stockmarkets go down hill. But once they pick up again and people start wondering why they've got all this gold it's going to be crash time...in my opinion of course.
 
Everyone piles into gold when stockmarkets go down hill.
The market is definitely in a "correction" now, and some think a "bear", but Au is on the way down as well. Ag, which is both a precious metal and a commodity, has fallen much further than Au.

Don't ask me for an explanation. :)

Australian's attitude towards gold are irrelevant. The Yanks like it because their dollar is under pressure (they want return of capital more than return on capital) and neither the stock market nor real estate are attractive to them. The Chinese like it because they (the Gov) don't want more US$s and the people don't trust banks.

There are a lot of "wealthy" in the US who traditionally buy Gov bonds for safety. 3 month bonds currently give 0.02% (something like that) return and long dated ones still don't match inflation and when redeemed you only get USD back which, in 10 years time, may only buy half what it does on the international market. And they do like to holiday in Europe! :D
 
Gold and Silver markets are manipulated and controlled even more than RBA interest rates! I don't see Gold as an investment, but more as a store of wealth. (yes I know the arguments). Fact is an ounce of gold pretty much holds its value in what it will buy - leaving aside its paper money value going up and down. A good way to save for the long term - especially coins with little value other than metal value.

The main one however is a hedge on the AUD dropping - if that matters to you. This week the very strong AUD dropped on issues totally unrelated to the strength of the Aus economy - so we're as volatile as ever and if there's a hiccup internationally we'll head down again, but gold will almost certainly go up since it's priced and traded in USD. I see gold as a win-win option to keep an umbrella for a rainy day. Sovereigns are also lovely to look at when you're feeling nervous. lol
 
Yes I've seen that - happens rarely but does happen. I hope gold drops the 40 percent predicted for silver (how I'll never know) and then I'll sell everything not nailed down on ebay and buy useless, just sits there, gold because then it will be an investment!

Actually the gold and silver market are said to be so tightly controlled that they say the reason that gold goes up during public holidays in the US is because the gnomes are at play and don't push the price back down until they're back at their desks.
 
Julie, for the last couple of weeks both gold and AUD have been going in the same direction - down.

It's because Australia is a gold producing country and the markets link the AUD to the price of gold

http://www.investopedia.com/articles/forex/06/CommodityCurrencies.asp
Gold traders may also be surprised to hear that trading the Australian dollar is just like trading gold in many ways. As the world's third-largest producer of gold, the Australian dollar had an 84% positive correlation with the precious metal between 1999 and 2008. Generally speaking, this means that when gold prices rise, the Australian dollar appreciates as well
 
My comment about gold versus house prices was me being a bit mischievous. :)

If I had a stack of gold related investments then I'd be inclined to offload them at this point, because, as Hobo-Jo pointed out, the price of gold is 30% above previous record highs.

I'm not sure where I'd invest right now, but the German and Japanese property markets could be attractive. The Economist has their prices being 15% and 33% (respectively) below the value that their rents would suggest. (The US is around fair value at present, the UK is nearly 30% too high, and Australia is 50% over!)

http://www.economist.com/businessfinance/displaystory.cfm?story_id=15179388

I'd agree with the above points about low yields and inflation eating into it. At present the UK base rate is 0.5% whereas CPI ticked up to 2.9% last month, and will be higher this month with the rise in VAT (local equivalent of GST) that came in on 1st January.
 
If I had a stack of gold related investments then I'd be inclined to offload them at this point, because, as Hobo-Jo pointed out, the price of gold is 30% above previous record highs.
Now would be a ridiculous time to offload any gold related investments. We've just seen a 12% correction in the price of the metal (US$1225 to $1175) and around a 20% correction in the price of the XGD (ASX Gold mining index). This is a short term correction in a long term bull market. Now is the time to be buying and suspect this will be obvious in a few weeks time.

Your comment makes little sense. The high that I was (and now you are) referring to was 30 years ago. Your inference that Gold is a sell because it's 30% above a 30 year old high is preposterous. What does that make property if an asset is not worth 30% over a 30 year old high?

In regards to short term Gold, here is a chart showing a trend from the low in October 2008 to now:


It tested the support line last night and also potentially formed a double bottom with the December 22nd low.

Fundamental/Technical reasons we may see Gold rise short term:
- US Treasury auctions finished last night (when on, Gold is often driven lower)
- Bernanke reappointed as Fed Chairman with Senate vote
- Increase of US debt ceiling by $1.9 TRILLION
- Chinese New Year (heavy Gold buying time for Chinese)
- February options expiry past (26th Jan)
- May see trend continue with strong rise at start of month (see last 6 months, excluding December)
 
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All solid reasons to be long gold, for trading. Don't see where the long term fundamentals are, though. Gold doesn't disappear. Most of the gold dug up in the last 5000 years are still around. With a high enough price, supply comes out of (literally) hiding. Talk to the Hunt Brothers.
 
Gold is a nothing investment.

It doesn't give you a return on your money.

You can't use it in any practical sense.

It just sits there.

The price of gold is purely down to the whim of investors. Everyone piles into gold when stockmarkets go down hill. But once they pick up again and people start wondering why they've got all this gold it's going to be crash time...in my opinion of course.

Couldnt agree more Tubs. Speculating / trading is one thing - but as an investment - HELL NO.

You're 4 - 6% behind the eight-ball from day one with gold (the amount any decent conservative "growth" investment - i.e. property, shares will yield) before you even start to compare capital growth. Run a 4 - 6% difference in return through a compound calculator over 10 or 20 years and see how much more capital growth (and implied gold price needs to be) to match the most conservative shares / property investment.

Add in the fact that your actually exposed to USD / AUD movements and Gold price - i.e. what are you actually "investing" in?

Also hard to leverage gold - both from a availability of credit / security perspective, and also no yield to cover holding costs. Go out and try to leverage $1m in gold over the next 20 years and see how well you go!

Gold is a mirage for bearish suckers. :D
 
All solid reasons to be long gold, for trading. Don't see where the long term fundamentals are, though. Gold doesn't disappear. Most of the gold dug up in the last 5000 years are still around. With a high enough price, supply comes out of (literally) hiding. Talk to the Hunt Brothers.
I'm not really sure what the Hunt Brothers have to do with the point you are making, it was a fairly unique situation, perhaps you could elaborate?

While most of the points in my last post were short term positives, the increase in debt ceiling and reappointment of Bernanke are bearish for the USD and bullish for Gold with a medium term outlook.

You're right about most Gold not being consumed, but perhaps a more sensible look at things would be to divide the number of ounces of Gold by number of people on the planet at different times. This would give you a more accurate picture of long term supply. The last Gold bull market did not have the benefit of countries like China/India with billions of potential buyers taking an interest...

Trogdor, I believe a little Gold is a good thing to hold as part of a portfolio if for nothing more than insurance in the case of fiat currency problems, but agree with your sentiment it shouldn't form a large part of a portfolio in any long term plan. I see it as a medium term trade (max 3-5 years).
 
Because most gold isn't consumed, higher prices brings out all the 'old' supply. People dig up old jewellery, etc and sell into the record prices. The only reason they won't is if they expect prices to keep going up, with no return in the meantime. Is that really a sustainable bull market? How do you factor in all the 'supply' from people who wouldn't know inflation if it bit them? Most don't see an old gold ring as an investment. How do you quantify the amount of loose gold that's out there, just waiting for a good price to be sold?

I'd like to know how much gold 600m chinese subsistence peasants can afford to buy. As much old gold as suburban housewives can sell at those shonky kiosks in the West?

I have no idea how much gold should be, because I can't quantify the demand and supply. No one NEEDS gold, it earns no income, there is tons of supply out there (because it doesn't disappear), and it's actually pretty useless. Longer term, supply doesn't even need to come from mines: 5000 years of gold is lying in vaults and sock drawers.
 
Hobo-Jo, looking at gold in inflation adjusted terms, it's nowhere near its 1980 high, but it is inline with other spikes in its value.



I'd be inclined to sell up because it's still a strongly rising market, and could well turn. I think that there might be better long term buys elsewhere.
 
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