Buy Gold? The world is coming to an end.

Mar 29 08:59 UTC 2002

One of the more interesting spam that I usually delete without
reading somehow caught my eye and I actually read the 'come on'.

It is a fact that the price of gold is up - those who bought gold
last summer are happy in that the $US value of gold is in fact up
significantly right about now.  Usually these come-ons have some 
plausible story as how the price of gold is projected to rise in
the future (and never does) on account of some one factor or another.

In this case it has and is.  How odd.  Apparently what is going
on is that the japanese goverenment come 4-1-2002 is reducing the
amount of insurance on bank diposits from unlimited to 75K$US.  
Why the Nippon government decided to do this is open for debate
but the fact remains that trillions of yen are now diposited in
nippon banks without insurance come april fool's day.  Pessimists
conclude this is when the chickens come home to roost and the 
entire banking system in nippon fails as 'assets' evaporate.  So
it seems 'prudent' japanese savings account holders are 'liquidating'
and moving into gold as the performance of the US stock market ain't
been exactly stellar on account of the 'dot com bomb'.  By some
accounts gold bullion dealers in nippon have seen traffic in excess
of 1000% of a year ago. (figure half that in reality and still
significant.)  The japs are moving from the yen into gold.  
The jap banks in order to cover the withdraws sell US treasury notes
which they hold trillions of (no shit) and so the value of the
treasury notes that the US issues to offset the US national debt
plummets (sorta a 1929 kinda thingy only different).  So what?

Seems to me I owe a fixed $US value in 'currency' on the house
and I get paid a fixed $US in money in salary (me own little
balance of payments deficit).  Seems to me that if 'deflation' hits
that take home pay in $US is worth more in buying jap goods and
if I leverage it by buying gold...

The problem is that as the 'price' of gold goes up suddenly, that
means more previous 'non performing' gold mines now become profitable
and worth producing thus driving the cost of gold down as the supply
increases.  Seems to me its a spot position at best.  

response 2 of 13:

Mar 29 14:58 UTC 2002

Hmm...actually, looking at #0 again, wouldn't the best thing to do to 
cash in on this be to buy stock in gold mines?

response 4 of 13:

Mar 29 18:34 UTC 2002

The inherent difference in prices is between "consumers" and "dealers".
This isn't just a commission. If you buy gold from your neighbor, of
course the buying and selling price are the same. But if you buy gold
from the dealer, it will cost more than if you try to sell gold to
the same dealer. That's how they profit. This is true of most commodities.
You can buy a new  car from a dealer today, but you won't get the same
price if you try to sell it back to the dealer tomorrow. They have no
reason to buy it, so they won't pay as much. This more more than a
commission issue - it is supply and demand in action. 

response 8 of 13:

Mar 30 00:12 UTC 2002

Back to gold.  Currently the 'spread' is about 11% and typically goes
down as the price per oz goes up.  Thus a 1oz canadian maple costs
about 336$US with gold at 302$US.  Assuming that the reason for the
price spike is as represented - the japanese buying gold as a 
hedge against currency problems after 4/1/02 - if the price for 
gold goes to 350$US some time in the next month then you can sell 
the oz and pocket 14$US (4.1% in one month, not bad).

The problem for the gold mining stocks is that it takes them too long
to bring mothballed mines back online, and if this price rise is
temporary then the cost of re-opening may not be covered resulting in 
a loss.  The gold mining companies are aware that they are too 
far removed from the 'retail' end of things and want to structure 
much like the platinum and palladium markets are, but again that 
takes time.

It does seem to me that a short term position in gold bullion coins (not
ingots) is not such a bad idea (for about the first time in a decade in
my opinion).  

response 10 of 13:

Apr 1 02:10 UTC 2002

Hmm, maybe its just me, but when dealing in items of that expense
I'd like to walk in and buy it, so I'm willing to pay extra.  By
all means 318.61 is a good price for the maple.

response 12 of 13:

Apr 13 18:29 UTC 2002

The nutritional value of gold is about equivalent to that of a month-old
chocolate chip bagel.  Or at least the hardness is.