Gold is at USD$1680/Oz now

Gold is at USD$1680/Oz now. I am happy cause I bought it cheap at USD400/Oz. But it does not reflect well on the overall world economy. Euro zone mired in debt, US just lift its debt ceiling to borrow more money to cover its old debt...not good...

Sell to close my SLV and UGL call options to take profits.

Sell to close my SLV and UGL call options to take profits. Buy to Open put option for SLV with target expiry date at 16 Sept. This is to expect a drop in silver price once the GOP and Democrats come to short terms agreement on debt ceiling/cutting program. However, in longer term, gold and silver price will continue to go up until the public is convince that USA and EU has managed to resolved their debt problem. Also, expect the FED to declare more money printing (QE3). They have to do this as this is the only way to boost the stock market and job market temporary to help Obama to win his next election. Will buy SLV and UGL call options again after mid Aug 2011.

On Gold

Robert Barone
Posted Jul 20, 2011
Is the price of gold too high? Too low? Is it in bubble territory, ready to drop rapidly? Think about what bubbles are – you know there is a bubble when everyone is trying to participate. For example, during the dot.com bubble, my tennis pro was buying and selling options several times per day! I knew we were in a bubble. I even told him so. And, during the housing bubble, all of the chatter at cocktail parties was about flipping houses as a side business. I knew we were in a bubble (just didn’t know how frothy it really was!) People say to me all of the time when I talk about gold: “I would love to own gold, but its price is just too high.” Hmm! Too high relative to what?

The price of gold certainly can be fickle. After all, unlike other commodities that are essential inputs into some vital process (e.g. the production of energy or food), besides some very minor industrial applications, gold really has few practical uses (jewelry and art excepted). There is nothing intrinsic in gold to give it value. There is no cash dividend or earnings. It goes up and down in value at the whims of investor demand.

Gold does have three characteristics that make it unique: 1) it is rare and hard to find (all the world’s gold is estimated to fit into two Olympic sized swimming pools); 2) it doesn’t change form – all of the gold ever mined is still with us as gold; 3) it cannot be “produced” via the combination of other materials. Thus, its supply is well defined and increases very slowly and at great expense. Thus, it is perfect as a medium of exchange or a store of value.

We all know what makes the demand for gold go up – distrust in fiat currencies, and government deficits resulting in paper money printing. And that, of course, is why gold is rising in value today. As long as that goes on, the price of gold will keep on rising. So, what could happen to make it fall in value? I have listed several things below which could happen – I will let you be the judge of their likelihood:

• The U.S. and the rest of the developed world (Europe) stop running fiscal deficits and stop printing money. There is an immediate opportunity for this to begin in the U.S. if the GOP and Obama Administration can agree on significant spending cutbacks. This means entitlement reform.
  
• The U.S. economy magically finds its feet and its growth rate increases such that the unemployment rate begins to rapidly fall without additional monetary or fiscal stimulus. Interest rates would be rising too.
  
• As a subset of the above, housing prices find their bottom and begin to rise with home sales and new home construction picking up.
  
• The dollar reverses is slide as the premier world reserve currency and becomes demanded because of its intrinsic strength, not just because it is better than all of the other bad alternative currencies (e.g., the Euro). (This requires fiscal and monetary discipline and a reduction in both public and private debt loads.)
  

As long as gold is viewed as the ultimate monetary unit, its value will increase (decrease) with the debasement (strength) of the fiat currencies.

It is time to buy more gold now!

Gold price has drop back to USD$1590/oz. This is the perfect time to buy. Don't miss this opportunity as it will not last for long. Same goes for Silver too.

The Head Of The World's Biggest Hedge Fund Sees "Economic Collapse" Due To Money Printing By Early 2013

As part of its most recent issue The New Yorker has released a must read interview with Ray Dalio - head of the world's biggest hedge fund, Bridgewater. Dalio's fund, which according to some may now be as large as $80 billion, continues to outperform even in this problematic environment, indicating that unlike various other managers who shall remain nameless, and whose wealth is built up almost exclusively on one trade (and that belonging to someone else in the first place), Dalio, despite rumors that he is preparing to leave his current position and is actively seeking a replacement, is still keenly able to adapt to changing macro conditions.
Which is why his warning about future rounds of QE, which he sees as a certainty, should be heeded. Especially since it conforms 100% with the warnings of Zero Hedge - Dalio believes that future inevitable money printing will "lead to a collapse in currencies and bond markets." Dalio is even kind enough to give a time frame. "I think late 2012 or early 2013 is going to be another very difficult period." He is, to say the least, quite diplomatic.

From the full interview:

Dalio believes that some heavily indebted countries, including the United States, will eventually opt for printing money as a way to deal with their debts, which will lead to a collapse in their currency and in their bond markets. “There hasn’t been a case in history where they haven’t eventually printed money and devalued their currency,” he said. Other developed countries, particularly those tied to the euro and thus to the European Central Bank, don’t have the option of printing money and are destined to undergo “classic depressions,” Dalio said. The recent deal to avoid an immediate debt default by Greece didn’t alter his pessimistic view. “People concentrate on the particular thing of the moment, and they forget the larger underlying forces,” he said. “That’s what got us into the debt crisis. It’s just today, today.”

Dalio’s assessment sounded alarmingly plausible. But when one plays the global financial markets a thorough economic analysis is only the first stage of the game. At least as important is getting the timing right. I asked Dalio when all this would start to come together. “I think late 2012 or early 2013 is going to be another very difficult period,” he said.

Translation: enjoy your -0.002% Bills and paying uncle Sam to hold your money while you can.

ETF Securities: Gold Hits Record Highs: Futures Positioning Still Below 1-Year Avg

Gold not only topped $1,600 for the first time ever but has set record highs against other currencies, including the euro and British pound, analysts with ETF Securities point out. “U.S. and EU government officials continue to struggle to find solutions to their respective sovereign debt-problems, driving investors into perceived safe havens,” ETF Securities says. Analysts say that futures positioning by speculators, who are heavily long, rose 29% in the last reporting week but nevertheless remains slightly below the one-year average.

Gold prices extend gains to record high above $1,600/oz

(Reuters) - Gold prices extended gains in Europe on Monday to hit a new record high at $1,600.40 an ounce as investors spooked by the euro zone debt crisis and the threat of a U.S. default bought into the metal as a haven from risk.
Spot gold was up 0.45 percent at $1,600.10 an ounce at 0837 GMT. Silver also rose, tracking gold, to its highest since early May at $40.15 an ounce.
(Reporting by Jan Harvey)