GOLD

There has been a bit of sentiment towards Gold, just recently I have had a couple of emails, Business Spectater, John Mauldin to name a couple saying that the US dollar is going to drop and that Gold is going to rise, another rumour is the Chinese are going to start buying it as well..

I was wondering if anyone has bought any, tempted to buy maybe waiting for a couple of particular signs and how they would invest when they do?

If you did invest in Gold would the interest payments on a loan be tax deductible?

Does anyone think that Gold will drop overall in price? (2 year time frame)

Cheers

Chomp

(I do not hold any gold stock)

Hi Chomp,

IMHO this would be unlikely as an owner of gold does not receive any income.
For an investment loan to be tax deductible it has to produce an income (think shares paying dividends and investment property paying rent).

Cheers,

Dan

PS Before making an investment decision speak to your accountant or tax adviser.

if however you sold it for a profit the interest charges would be a tax deduction on your capital gains tax

Thanks ASX & Redman,

I wasn't too sure, thought it might be a silly question at first, but I swear I'm starting to learn somethings from the people on this site.

So double tough luck if you make a loss, seems a bit harsh.

But if you invested in a goldmining company there share price would go up with the price of gold? and they would pay you dividends?

I'm pretty sure I have glanced over a few reports that China has already made it public their intention to move away from US Treasuries into gold, so I don't think it is a rumour. This policy should hasten the decline of the USD and the growth of gold prices.

However, like most investments in the current climate, it is difficult to speculate on the future, though if I had the money to be backing anything, I would definitely be backing the decline in the value of the USD as things settle and investors are willing to once again take on a little risk and pull their money out of US treasuries, because at the end of the day whilst there are still people/countries willing to buy US debt it is hard to see BIG drops in the USD which are probably required to drive gold higher as increased uncertainity is ignited about the potential collapse of the world's reserve currency.

I have made a number of posts about what I think of the USD and the US economy. I don't look at the USD decline as a situation of "if" as much as "when" though obviously knowing what will happen isn't as important as knowing when it will happen, and unfortunately I've read and heard a very wide range of speculation on the issue, varying from it happening within a few weeks, to experts speculating that it may well take 2 - 3 years for inflation of their fiat currency to be realized before the USD starts really dropping. With that said there is not reason why world wouldn't continue down the path it has taken for the last decade, of continuing to buy US debt despite the risk of default or deflation.

I have made a few posts about this topic before and I remember there were at least one or two people on these forums that have moved into gold, I forgot who, and I forgot what thread it was discussed in.

If I had money lying around I would be seriously considering investing it in the GOLD security listed on the asx. That said, I would only be looking at putting my money in gold because I see it as a safe haven with potential upside growth over the next 1 - 2 years due to the chaos that will result from the USD collapse and the havoc that will cause on other investment mediums. This investment strategy is obviously based on my view that things will probably be getting worse before they get better and that the reserve currnecy of the world is in trouble. I should at this point mention that these views are of a 23 year old that is naive to many of the ways of the world is far from the best advice to be acting on.

As for signs, I wouldn't really be looking to "time" the gold market. I think the writing is very much on the wall already, if anything I'm surprised gold hasn't already made its move - and there have been a number of rumours floating around that there may well be some market manipulation presently playing out (highlighted by the disparity between physical and stock gold prices).


Hard to say, considering it is quite difficult to gauge what the world will be like in two years time.

I think the safest statement at this point is that whilst the US economy lingers in peril the gold prices will be strong. Once the necessary market forces have produced the required corrections (on the USD) I'm not sure what will happen after that - I'm sure there will be a lot of politics that will need to be played out, and the result of this will shape how the world will proceed into the future.

With all that said, there is a downside to investing in gold for us Australians; my understanding is that traditionally the AUD tends to move with the price of gold (because we are such a big exporter of it) which would eat into any gains made in the price of gold unlike the USD which, being the reserve currency of the world, moves against the price of commodities like gold and oil. So as I have mentioned in other threads on these forums, ideally if you were going to fully leverage yourself for the possible gains from investing in gold you would borrow USD's to buy gold on the expectation that gold would appreciate along with the AUD as the USD depreciated. Though going about this seems difficult in practice.

Gold charts.

Attached Images

Gold Charts.jpg (76.0 KB, 33 views)

I'll be honest I'm not much of a charts man. I like my fundamentals, but what is your interpretation Tropo.

Gold is a commodity and like any other commodities (at the moment) is in the down trend.
If you like fundamentals for whatever reason (I don't) that is fine...
Link (below) may give you something to think about.
I would treat this article as another point of view.
Have fun....
The Manipulation of Gold Prices - Seeking Alpha

Chris C great post thanks alot,

I read that link Tropo but briefly I have the flu so will give it another read soon, I did like one of the comments below the article, that gold would be linked to supply and demand so I'm not sure I can agree with what he said?

The article is probably one of the most comprehensive reviews of the FED and its systematic manipulation that I have read to date. That said the article largely cemented what I already believed to be the case.

In regards to gold, I guess the real question the article poses is who wins in the long run? Will systematic manipulation of gold price continue to keep it artificially low, or potentially drive them even lower until the inflationary pressure of the USD has passed, or will the rising tide of everyday investors (along with major economies like China) looking to move into Gold as means of wealth preservation overwhelm the market manipulators. I tend to lean with the market winning - but recent history definitely favour the manipulators.

From my perspective, as is highlighted in the article, I can't help but feel that the US is caught between a rock and a hard place at the moment with downside associated with any option they decide to take in regards to the valuation of their dollar. I have been saying for awhile that USD needs to weaken, if not now, definitely in the longer run, I just don't see another way out for the US, and with that weaker dollar gold will appreciate (at least in USD's) regardless of the power of the manipulators. I'm not as certain that the price of gold will appreciate from an AUD perspective.

However the downsides associated with a stronger or weaker USD pales in comparison to the chaos that would result if the world was to obtain the truth about how the FED was dealing with the crisis. Part of me wants to know and wants the truth, but another part of me recognises that this may well be a situation of curiosity killed the cat, considering there is no upside to knowing the truth other than reaching the bottom faster.