How much will an Ounce of Gold be worth in two years? - Economics -- Two Plus Two Poker Forums

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How much will an Ounce of Gold be worth in two years?

View Poll Results: How Much Will an OZ of Gold be Worth in USD on December 17, 2011

Less than $900

4 5.88%

$900 - $999.99

3 4.41%

$1000 - $1099.99

1 1.47%

$1100 - $1199.99

5 7.35%

$1200 - $1299.99

5 7.35%

$1300 - $1399.99

5 7.35%

$1400 - $1499.99

3 4.41%

$1500 or more

42 61.76%

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12-17-2009 , 03:50 PM

The 13th 4postle

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Just give your best guess.

How much will gold be worth in U.S Dollars on December 17, 2011?

Last edited by ElliotR; 12-17-2009 at 04:30 PM.

12-17-2009 , 03:59 PM

The 13th 4postle

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Poll question is for 2011. Not 2009 LDO. My mistake.

12-17-2009 , 04:02 PM

owsley

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Join Date: Mar 2007 Posts: 3,277

This is like asking if you should set the line of the Colts vs the Lions at -1, -2, -3, or -4.

12-17-2009 , 04:02 PM

KUJustin

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Join Date: Mar 2004 Posts: 3,346

Quote:

Originally Posted by owsley

This is like asking if you should set the line of the Colts vs the Lions at -1, -2, -3, or -4.

Yup, I was all set to make my uninformed guess of $2,500. I could have saved some fake math in my head if I looked at the options first.

12-17-2009 , 04:04 PM

The 13th 4postle

banned

Join Date: Oct 2006 Posts: 11,244

Quote:

Originally Posted by owsley

This is like asking if you should set the line of the Colts vs the Lions at -1, -2, -3, or -4.

And what's wrong with the example you used yourself? Setting the line at -2 or -4 is a big difference.

12-17-2009 , 04:05 PM

TomVeil

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Yeah this is a no brainer for me. Between 1500-2000 if you want to get more specific.

12-17-2009 , 04:28 PM

Losing all

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The dollar will be no more. Gold will trade at 666 infidel scalps per ounce.

12-17-2009 , 04:33 PM

ElliotR

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I had to fix the Poll, which reset all previous answers.

12-17-2009 , 04:57 PM

SenorKeeed

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Quote:

Originally Posted by The 13th 4postle

And what's wrong with the example you used yourself? Setting the line at -2 or -4 is a big difference.

The line would be at least -14.

12-18-2009 , 01:22 AM

#10

The 13th 4postle

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Quote:

Originally Posted by mjkidd

The line would be at least -14.

Oh, I misunderstood. I forgot the Lions we're terrible.

12-18-2009 , 01:30 AM

#11

SenorKeeed

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Join Date: Jul 2006 Posts: 37,478

But really all your middle options are mostly the same. No one is going to have a strong opinion about gold being at 1000 or 1300. People either think it will be lower, much lower, higher, much higer, or much much higher. Or they don't really know and just pick around the current market price. A better poll would have been

<600
between 600 and 900
between 900 and 1200
between 1200 and 1600
between 1600 and 2200
between 2200 and 3000
>3000

12-18-2009 , 02:47 AM

#12

The 13th 4postle

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Join Date: Oct 2006 Posts: 11,244

Quote:

Originally Posted by mjkidd

I disagree, I think the price history of Gold shows that such a wide discrepancy in prices in very unlikely. Also making predictions with ranges so wide makes them practically meaningless. I could estimate $1200 in my head, go with your option C and have a correct prediction even though I was 25% off.

12-18-2009 , 02:55 AM

#13

SenorKeeed

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Join Date: Jul 2006 Posts: 37,478

Your goal in constructing a poll should not to present options that you think are most likely. The goal should be to most accurately determine the distribution of opinions of the people being polled. The fact that 10 out of 15 people voted for one option demonstrates that you've made a bad poll.

12-18-2009 , 04:09 AM

#14

Jupiter0

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Join Date: Sep 2009 Posts: 2,470

I don't know. Paul Van Eeden has been the master at gold calls among other things. see here

http://www.youtube.com/watch?v=bHdXT...eature=related

and he has the value based on his actual money supply index at 800s now. freaking awesome analysis on other pages of this site.

http://www.paulvaneeden.com/Gold

I'm pretty bearish on USD so who knows though...

12-18-2009 , 05:25 AM

#15

RollinHand

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It will but worth

Spoiler:

12-18-2009 , 06:59 AM

#16

maxtower

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You guys really don't think the government can put off currency problems for a paltry 2 years?

12-18-2009 , 07:13 AM

#17

TomVeil

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Quote:

Originally Posted by maxtower

You guys really don't think the government can put off currency problems for a paltry 2 months?

Maybe?

12-18-2009 , 10:42 AM

#18

tolbiny

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Quote:

Originally Posted by maxtower

You guys really don't think the government can put off currency problems for a paltry 2 years?

Depends on what you mean by "put off".

2005- gold gained~25%
2006- ~15%
2007- ~30%
2008- ~0%
2009-if it closed today ~25%

For gold to break 1500 2 years from now you need $400 in appreciation- over 2 years thats not exactly "currency crisis" given the price action since 2000.

12-18-2009 , 11:12 AM

#19

J.R.

Econ Forum Czar

Join Date: Sep 2002 Posts: 8,292

Quote:

Originally Posted by maxtower

You guys really don't think the government can put off currency problems for a paltry 2 years?

Exponential growth monster and credit deflation. G is trying to step in front of the train to keep the credit bubble alive. How will this work out?

Q3 credit growth
households -2.6
business -2.6
local G 5.1
Fed G 20.6

Quote:

Debt of the domestic nonfinancial sectors is estimated to have expanded at a seasonally adjusted annual rate of 2¾ percent in the third quarter of 2009, about 1¾ percentage points slower than in the previous quarter. Private debt contracted in the third quarter, while government debt expanded.

Household debt contracted at an annual rate of 2½ percent in the third quarter, its fifth consecutive quarter of decline and the largest decrease on record. Home mortgage debt fell at an annual rate of 3½ percent, a significantly steeper decline than in the second quarter, while consumer credit contracted at an annual rate of 3¼ percent. Other components of household debt expanded in the third quarter, partially offsetting the decline in mortgages and consumer credit.

Nonfinancial business debt contracted at an annual rate of 2½ percent in the third quarter; the decline was widespread across credit market instruments.

Government debt continued to grow in the third quarter. State and local government debt expanded at an annual rate of 5 percent, 1½ percentage points faster than in the second quarter. Federal government debt increased at an annual rate of almost 21 percent in the third quarter, somewhat slower than in the second quarter, but nonetheless the fifth consecutive quarter of growth exceeding 20 percent.

http://www.federalreserve.gov/releas...Current/z1.pdf

Quote:

The ONLY major player still borrowing money in big amounts was the United States Treasury Department (line 3), sopping up $1481.2 billion of the credit available — and leaving LESS than nothing for the private sector as a whole.

Overall total credit in the economy shrank at an unprecedented annual rate of -$275.6 billion.

Private sector credit fell at an astonishing - $1.8098 Trillion.

http://ndainfo.wordpress.com/2009/12...n-annual-rate/

Quote:

On an aggregate basis while total non-financial debt increased in 2.8% forQ3 all of the growth came from increasing debt from Federal and State government. In fact with this release of the Z1 report, we are seeing 5 quarters of negative growth in household debt and 2 quarters of negative growth in debt by businesses. Oh and by the way rate of decline is increasing.
...
While it may not be easily evident from the above chart, the bulk of the lending is being provided by the Federal Reserve followed by households and the Federal Government. So far we have the Federal Government doing both the borrowing (more of) and the lending (less of) and the Federal Reserve providing most of the lending into the credit markets. And in spite of this backstopping by the Government and the Federal Reserve we have the credit markets continuing to shrink.

Summary

So we have consumers with shrinking balance sheets (both on the asset side as well as on the credit side) coupled with declining net worth and highly leveraged real estate. We have corporate that have seem to have maintained profits via reduced capex spending and they appear to be slightly overvalued based on Tobin Q ratio. And finally we have the Federal Government with increasing social expenses that can be met via deficit financing as long as interest rates stay low. In addition, we have the credit markets that appear to be supported (via both borrowing & lending) by the Federal Government and the Federal Reserve. To us this backdrop does appear to be supportive of an organic sustainable recovery.

http://updownsideways.wordpress.com/...a-perspective/

12-18-2009 , 10:31 PM

#20

Sholar

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Are there options out there that would give some way of getting the market estimate for this question? Just curious.

12-19-2009 , 12:48 AM

#21

J.R.

Econ Forum Czar

Join Date: Sep 2002 Posts: 8,292

Quote:

Originally Posted by Sholar

Are there options out there that would give some way of getting the market estimate for this question? Just curious.

http://quotes.ino.com/exchanges/?r=NYMEX_GC

quite the market

12-19-2009 , 11:08 AM

#22

Sholar

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Quote:

Originally Posted by J.R.

http://quotes.ino.com/exchanges/?r=NYMEX_GC

quite the market

Thanks for the link. I'll need some expert assistance to properly interpret those numbers, unfortunately, which is why I asked. It looks to me that the price is around $1150, but are the volumes high enough to believe that this is accurate? In addition, there are costs related to buying an option two years from maturity which might make this number ($1150) lower than the market's best guess for the price of gold.

I assume some of that is captured in your "quite the market" quote, but if you wouldn't mind spelling it out for me, or directing me a place that would explain it, I'd appreciate it. I can also ask in BFI if that would be more appropriate.

12-19-2009 , 02:23 PM

#23

J.R.

Econ Forum Czar

Join Date: Sep 2002 Posts: 8,292

Some ideas:

12/18.09 COT report

How to read COT report
Ted Butler discussing COT numbers

Its quite the market for a lot of reasons, like extreme, large short positions in both. These are margin contracts and COMEX just raised the margin prices, for example. Gold in hand v. a paper promise of rights wrt to gold in the future are not the same.

=============

Backwardation is a tricky concept and IMO you need LIBOR and lease rates too but the argument is backwardation in the monetary metals implies loss of confidence in the paper instruments and both the desire and ability to take immediate possession without the use of margin. Not that there is backwardation now but the idea of what it is and what is represents can be helpful.

Quote:

The normal structure of the majority of futures markets, a few are excepted, is one in which the nearer contracts trade at a discount to the distant month contracts. The reason for the higher price in the distant months is that those prices include the cost of storing the commodity or warehousing it, plus the insurance needed to cover the stored commodity in the event of theft, fire, etc and interest costs. Under normal conditions, the price of those distant commodities converges with the cash price as the time for delivery draws near. That makes sense since if you are no longer storing the stuff, you no longer need to pay for the warehousing nor do you need to insure it, etc.

In backwardation, the front or “nearer” contracts trade at a premium to the distant month contracts. Markets that go into backwardation are markets that are marked by exceptionally strong demand for that particular commodity or exceptionally low supply at current prices. What the market is attempting to do is as Antal states in his piece – that is, to draw out sufficient supply from potential sellers to meet the current levels of demand. If I cannot get you to sell me your scarce apples at $0.25 each, I raise my bid to $0.30. I might be able to make you a bit more willing. If that still did not do the trick, I would have to raise my bid even higher to perhaps $0.35 each in order to entice you to sell that same apple. If you look at the board for “Apple Futures” and see that apples for delivery in June of next year are going for $0.30 but you can sell them now for $0.35, chances are that you will sell those apples to me instead of waiting 6 months, during which anything might happen in the world of apples!

An example of a market that went into backwardation occurred back in the Minneapolis wheat market not all that long ago in which traders bid the price of the front month contract to a never-before-seen price of nearly $25 bushel for wheat! To give you an idea how extreme that was, wheat generally sells for anywhere from $3.50 - $5.50 or so. The market was telling sellers that it wanted hard spring wheat at any price and was willing to pay that price as long as the wheat was delivered RIGHT NOW.

http://fofoa.blogspot.com/2008/12/fe...wardation.html

=============

a different take:

Quote:

In Treatise on Money (1930, chapter 29), economist John Maynard Keynes argued that in commodity markets, backwardation is not an abnormal market situation, but rather arises naturally as "normal backwardation" from the fact that producers of commodities are more prone to hedge their price risk than consumers. The academic dispute on the subject continues to this day.

http://en.wikipedia.org/wiki/Normal_backwardation

Last edited by J.R.; 12-19-2009 at 02:29 PM.

12-19-2009 , 03:36 PM

#24

Sholar

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Thanks for the links, I'll have to take a look. Generally speaking, since the cost of borrowing money is low now, and the cost of storage for gold is always pretty low, I'm not sure I see why the futures markets wouldn't be a good guide here (especially since the relative production/consumption of gold to gold available is low). Definitely something I'll have to think about more, especially if the consideration at the high end is that currency collapse/market collapse/counterparty risk is affecting the price a great deal.