Will Gold 'Bubble' Burst?

Quote: Wizard

Let me throw this out there -- within three years, probably much less, gold will be under $500 oz.

I have no expertise at all in this area, but I too suspect that the price of gold will fall from its current level. However, I am skeptical that it will drop to $500/oz. in the next three years without some extreme and unexpected turn of events -- synthetic gold, anyone?

Can you short a sale of gold? What's the time limit on resolving such short sales? It would seem that there could be some market in which the Wizard could get action on his throw-this-out-there belief.

Quote: Doc

Can you short a sale of gold? What's the time limit on resolving such short sales? It would seem that there could be some market in which the Wizard could get action on his throw-this-out-there belief.

Of course you can. You can make bets on the price movement of any item in the market. It is the world's largest casino -- puts Macau, Vegas, and Singapore to shame.

I admit I don't know the specifics, so I would talk to a broker or someone more experienced in these areas.

Easiest way to short gold is to short or buy puts in one of the gold holding ETFs, such as GLD. It's not perfect correlation, but it's close enough.

I recently sold my GLD calls that I bought a month ago. My timing could have been better but oh well. I should have anticipated the Fed move. On to the next trade :)

Quote: Wizard

On a related topic, suppose I find a buyer for my four gold coins. Let's use the American Eagle as an example. What would be a fair price relative to the spot price of gold? Don't they sell about $50 above the spot price, perhaps for the silver content, or production costs?

Sahara Coins based on Gold: $1662.20
American Gold Eagle (PFT) rounds up the price to nearest dollar, adds $15 and will buy them for $1,678
But they sell them for an additional $134 or $1,812.

That gives you a pretty firm $134 range for the coins. Why would the seller sell it for less than he can sell it at the store? And why would a buyer purchase it for more than he can purchase at the store. It would seem that the 'spot price' + $50 or $1777.60 is a fair price for a private transaction done in cash.

Coins are always sold for more than the spot price because they are a specified weight and they are easy to exchange for goods and services. If you are selling a small ingot, then I would pay the spot price.

Sahara coins is the sole authorized dealer in the Las Vegas area.

Quote: pacomartin

Sahara Coins based on Gold: $1662.20
American Gold Eagle (PFT) rounds up the price to nearest dollar, adds $15 and will buy them for $1,678
But they sell them for an additional $134 or $1,812.

Thanks Paco, good answer. So, if anyone is interested I'll sell for $50 above the spot price per coin. Compared to a store you'll save $84 plus sales tax.

1. It may have cost $500 an oz to mine in 2008 or 2009, but in 2012, I suspect it costs closer to $700 per oz to mine. It's tough to say, since the only answers readily available come from Answers.com - a very unreliable source.
2. Yes I remember those hot tech and dot come stocks like Google, Yahoo, Apple, and Microsoft that were such a fad. As a matter of fact, I still own them. (My father in-law razzed me over the Google stock saying, "They have no assets! They have nothing! Just office furniture! Where's the value?".
3. Crisis with the Euro, a weak dollar in my mind = Gold Value.
4. If the democrats happen to take the presidency again in 2012, the run away spending will continue, the dollar will continue to weaken, and the demand for gold will continue to soar.

It may seem as though it's a fad to buy gold here in America, but in 2011- 2012 the biggest buyers are currently outside of the US. In China and abroad they don't see it as a fad. They see the dollar fading from the world's currency. They are continuing to buy.

FYI: I am NOT a doom and gloom guy. On the contrary I believe the best is yet to come and I want the best for my fellow man and country. I would like to see everything turn around, but we all must face reality for the next 10 years.


By the way, copper pennies anyone?

-Keyser

When we get into mining asteroids, which is coming,
they're likely to find some that are mostly gold. What
then, it will make our gold worthless overnight.

Quote: EvenBob

When we get into mining asteroids, which is coming,
they're likely to find some that are mostly gold. What
then, it will make our gold worthless overnight.

I'll worry about that when I'm 65 and space exploration is that common place. I think I'm being optimistic at 30 year window as well. Right now, man is much more earth bound and earth centric.

Quote: Wizard

Compared to a store you'll save $84 plus sales tax.

Did you really pay sales tax for what is essentially a bullion purchase? I trade silver a lot more than I ever trade gold but I don't think gold will fall back below 1,000 It has a large variety of participants that are all buying for different reasons. You should ALWAYS fade central banks as they tend to sell the dead lows a top tick the buys. Gold has not gone parabolic yet and I really need to see that behavior to really get a bubble.

If you want to express your gold opinion and make some serious $$ buy some long dated puts on GLD they will be relatively cheap and if you are right you would probably see a 50:1 payoff minimum.

We're a long way from mining asteroids, actually, a very long way.

There are several issues, of course: setting up a mine in zero gravity; the extraction itself; travel from the asteroid to the planet and from the planet to the asteroid, and landing a full freighter through an atmosphere.

I'd say at least 80 years before you could come up with something viable that could mine. The rate of transfer of these minerals won't make any market price go down, and the mining company would not have any interest in mining at a rate that would bring the value of the mineral below its production costs. I really doubt for example that you would be able to mine gold on an asteroid at anything short of about $10K/oz.

Plus, asteroids are moving. Some thing that is close by today may not be close for 10s of years again.