Financial Info, Please

[Risen]

Silver... I've heard musings that we could see a silver backed currency in the coming years. I saw all the precious metals take a synchronized dive last week. I've heard it explained that this was likely due to " likely panic selling to raise cash for CDS debts and other liquidity requirements such as money market redemptions and so forth." Best explanation I've heard for the sudden sink.

[IlyaK1986]

In the long run, the stock market gives positive returns. It takes a crap on you every now and then in the short term, so you might get raped here and there, but as Buffett said, 5-10 years from now, people will look at this time as an amazing place to buy in.

[Risen]

Yep. As I understand it there were many who got rich though the depression. It's all about planning and taking the opportunities that arise.

[Bella]

Do it like Tony Soprano - hide it in the garden.

[spirilis]

Originally Posted by Udog

Anja, I find myself in the same boat as you, although with less money currently saved up. I'm still learning, but so far there are some trends that my INFP mind has picked up on. Keep in mind I'm still processing information - consider this my 'rough draft' gut feeling.

First, the threat of hyperinflation is real. It won't happen tomorrow, but figure in 2 or 3 years we can expect it. Maybe less, not likely more. So finding ways to guard against inflation may be just as important, if not moreso, than finding 'good investments'. So what are the best ways to protect against inflation?

Gold is a good, safe bet. Problem is the gold market is acting strange, with quality gold being in demand, hard to find, yet being strangely undervalued in relative terms. The terminology is still foreign to me, but it appears finding quality certificates, or getting your hands on the actual gold, is really difficult, while it's easy to find certificates where you agree to let the bank hold onto the gold. Maybe I'm off here, but I just don't get warm fuzzies from all that... it's going to take alot more research before I'd be brave enough to enter the market. I mean, what is keeping the banks from selling more certificates than they have gold? * genuine question *

Silver is treated as an industrial metal... so as production hurts so will its value. It's hard for me to get a feel on future value of silver.

I've also considered exchanging some dollars for the Chinese Yuan. I have little doubt that China's economy will grow stronger while the U.S. will grow weaker. I haven't learned how to best take 'advantage' of that yet, though.

Damn, this post is growing too long. I'll share more thoughts later if someone doesn't convince me I'm way off base.

This post seems to confirm my suspicion-

Investors Hub - BB's Stock Haven () Message Board - Post #1332136

Gold lease rates are rising from 0.25 to 2.5% per month, thats unheard of. Gold peaked at $1032 in March this year; however, since then it has fallen steadily, trading as low as $734. While this fall has been in line with a rising USD dollar, it has also been orchestrated.

Gold has been falling in an environment of rising inflation and rising uncertainty, and I've talked in the past about gold de-coupling from the USD correlation one day.

At this point in time we need to distinguish between different types of gold, i.e. physical gold and paper gold.

Central banks hold a lot of physical gold and it just sits there earning nothing. As we know, central banks have been pumping money into the markets for 13 months now; what has not been reported is that they have also made their holdings of gold available for lease for about 0.25% for a month.

A short seller in gold can sell spot and lease the gold from the central banks at a nominal interest rate of 0.25%. If you sell gold, you receive USD; the cost of borrowing USD is therefore 0.25% (the gold lease rate) - so as long as gold doesn’t go up it is a cheap source of funding.

The central banks don’t mind this, especially when they want the USD up and as a rule they always want gold to fall. A falling gold price is a sign that everything is ok.

However, as you can imagine this is a time bomb because they are leasing physical gold to a paper gold market. At some point in time paper gold will not trade the same way as physical gold.

The demand for physical gold is the highest it has been for years, and this is the problem. Without the paper gold carry trade, you could argue that gold would be a few thousand dollars higher right now.

All is not well in the paper gold market. And this is a sign of an impending big rally in gold.

Lease rates have been skyrocketing over the past month. For the past six years, the 1 Month Gold Forward Lease Rate has chopped about at levels below 0.25 percent. Higher volatility over the past year has seen the rate move as high as 0.5 percent, but only in recent weeks have we seen rates greater than 2.5 percent (see chart below).



On a global scale, the gold market is unregulated and opaque. No one really knows the size of the worldwide short position in gold, but it exists and it is large (at least 10,000 tonnes). Unlike financial markets, there are few rules and regulations on selling gold short. For years, a dark pool of short sales is believed to have been suppressing the natural ascent of gold prices.

The current spike in gold lease rates indicates that demand for physical gold is extremely high and growing quickly. We may well be witnessing the first seeds of the gold price breaking free from the short sellers and the end (death) of the gold carry trade, which so many bullion banks made such large profits on in the 1990's.

The lease rates (available on TheBullionDesk.com) will be the key indicator to watch. If the short sellers in the gold market cannot afford to roll over their positions, they will be forced to close out their trades by buying gold. This could be one potential catalyst (there are many others) that sparks a major gold rally in the months ahead.

We might be on the verge of a nice run in gold prices (due to the short squeeze). How soon, who knows.

[Anja]

Thanks, All, for helping me out with this.

No, I haven't taken any action yet. Sigh.

But your replies have helped me to get more clear with myself.

[Maabus1999]

The problem with investing in gold is itself is hyperinflated by man and speculation. It will be as unpredictable.

Plus the problem with hyperinflation is truly nothing can be protected completely, but gold could keep your money about near the same value of what it used to be.

Example, if gold goes up 100%, you get double your money.

However in hyperinflation, if it goes up near the same amount (among commodities similar to gold) your money relatively is the same amount.

Now gold may give you the best security, but it won't make you rich. It is a security only, and it is all hyperinflated in a sense.