Hi Richard

In what way is gold an 'essential commodity'? It is no more than a currency of last resort.

And from the FT today:

'The deteriorating outlook for metals demand made gold’s recent record highs look unsustainable. The yellow metal lost the $930 mark as European equities trade began, trading at $929.50.'

Of course, that's just an analyst talking, but the numbers are real.

Course, if you bought a while ago, then well done! I guess if you buy and hold most things for long enough they'll be an upside at some point.

And who are these manufacturing countries ( by which I assume you mean economies primarily dependent on manufacturing) who are going to see their currencies fall and experience deflation? China, for example? It has serious inflation problems and if it allowed its currency to float tomorrow it would rocket!

Lastly, if we're going to experience a 1930s depression, and expanding emerging economies are going to experience deflation and currency devaluation, as you seem to suggest, who is going to buy all these commodities for which they are the biggest customers?


cheers

Robin - I think movements in gold have been more technically driven than fundamentals driven although I understand that supply is quite tight also.

Gold off 8% today but I'm no more impressed by that than I was by the dramatic increases. Intra day trading can't lead you to a lot of conclusions.

I agree commodity prices will really drop if we have a financial armageddon scenario but that will be because demand from consumers will drop off. As I think demand for gold is driven more by investors striving for safe havens and following trends than by real consumer demand, I would not expect the price of gold to drop like other commodities in such a bad scenario. I think investors could be really competing to get into gold, first to ensure safety, and then because of greed to make profit. This is still IF we reach a doomsday scenario.

So I see further upside to the price yet due to market behaviour although as I said previously the current price of $900-$1000 seems about right. If I had to predict I would say $1150 at end of the year. Another point is if you invest in a fund of gold mining companies during gold price rises you make more profit because net margins improve at a greater rate than the gold increase.

My view is keep investing in CEE property, but I will continue to hold some funds in gold mining companies for the next few years. I'm doing this for a defensive "just in case" play which is why I bought into gold mining companies in the first place. Although I am tempted to have properties in Romania mortgaged in CHF to get lower interest rates, it seems too risky to me in case the CHF strenghtens a lot. I would like to hear others view on whether mortgaging in CHF is wise or not.

Hi Brett

You're absolutely right. IF there's a total meltdown, gold will stay high.

And of course a snippet like that doesn't prove anything - I really just wanted to use it to question some of Richard's assumptions about commodities and on manufacturing based economies.

Gold is a different kind of commodity to oil, wheat, etc. In a meltdown they will go down, gold will rise. But then gold is traded in dollars, so you have another factor to consider - how much has it really risen in terms of your base currency?

Actually there was a piece in the FT the other day , which I think Neil Lewis linked to, pointing out that real demand for gold ie for it to be used to make stuff (the biggest demand coming from China and India apparently ) is down quite dramatically.

From what I read, your strategy is spot on - gold is a hedge rather than an investment and even gold bulls say it should be around only 20% of a portfolio.

My view on currency forecasting - mug's game. BUT, having said that! I'd say the CHF will strengthen relative to all currencies, certainly in the short term. Ron rates are likely to support the Ron, surely, as Romania tackles inflation. The euro must come down soon. Longer term, so long as you're not over-geared, I wonder if the current currency roller coaster will matter very much? Or is that being too glib?

...having said that, maybe Brett's blog really did call gold's peak!


Thursday - Gold futures are down another $30 an ounce in electronic trading after the $59 tumble on Wednesday.

That's a big fall!

"Deflation is debt failure first. Debt failure clear of no monetary expansion will reduce prices."

Deflation will only occur if the FED fails to cause inflation, todays clever - relatively successful attempt to slow / reverse the dollar fall was done by tricking the market to believe the FED would fail to cause inflation - thus the market moved with the assumption that Deflation was / is on its way. The fall in value of US T Bills caused resulted from the market belief that ultimately Deflation not Inflation would rule the roost, this is triggered the gold fall.

Be under no illusion .... inflation is on its way. So far the FED has printed / dumped over 1 TRILLION DOLLARS into the US markets ...... eventually all this toilet paper $ will make its way into the economy and guess where all this money will go?

Roll on the extended commodity boom ...... gold will continue up to over $1600 over this year and next. Hopefully some of this money will head into new EU countries and fuel investment and will no doubt fuel the property boom in currently undervalued locations as investors look for safe havens.

If the FED fails to create inflation then Deflation will take hold and the US will have the worst recession since the 1930's.

This trillion dollars pumped into the markets has to go somewhere, someone I know suggested an interesting idea as to what the US may be planning........

Japans inflationary / deflationary recession period of the last decade provides us with an interesting template. Most people think of this time as a deflationary period, this is because they EXPORTED the inflation via the carry trade, thus partially causing the current globally infationary pressures.

Im too tired to think anymore ....... good night.

A few questions to get the sheeple thinking.

1. How long can the fed keep pumping money - what is their end game?

2. Which country has MORE debt per person ..... US or UK?

3. How do countries get rid of massive debt, what are their options?

4. How will Asian countries (China, India) highly dependent on manufacturing & exports react to the collapse of $ / £ / Euro?

There was an article in one of the papers over the weekend, - head of the BOJ (bank of Japan) said in a statement that the US must stop printing money because it is causing Global inflation - exactly what I posted above.

In their view the FED HAS to use public finances to prop up the housing market by buying all the bad mortgages.