Nothing like President Obama speaking that spikes gold out of the negative and into positive territory...

Dumb question

It seems the price of gold and silver is driven by ETFs as of today. What drove the price 30 years ago?

It does?

There are a lot of people buying ETFs where they might have bought physical back then. Clearly some people are buying ETFs. No idea what the breakdown is or how to figure it out, though.

ETFs would just make it easier for the average joe to buy some gold, assuming that the ETFs are actually buying gold.

ETF's are buying gold and storing it at 0.4% surcharge at GLD. In SGOL, its stored physically in a Swiss Vault somewhere in Europe, I forget the country.

So its like Sammy the Bull and the 18th avenue crew booking your bets, you will get paid if you win...

I don't think any of this means ETFs are "driving the gold price". Gold and silver prices are clearly being driven by fundamentals and currency debasement.

I agree, but maybe ETFs are making the swings larger?

Didn't the margin requirements change for silver cause a large price drop recently?

Yes, but ETFs are not leveraged position holders on the commodities exchanges. At least, the main ones aren't. I'm sure there are some leveraged PM ETFs out there, but I don't think they are that important in terms of price action.

This is what all the TV stock prognosticators fail to understand...

If there was a Gold buying kiosk in every grocery store, would that drive the price up in your opinion? The easier it is for people to buy something, the more it drives the price up, the harder it is, the more it drives the price down.

At least that's how I'm looking at it and defining the terms "drive up".

If there is anyone who has bought an ETF that wouldn't have bought physical, that means the price is higher than it otherwise would be (ignoring short positions).

A local bookie set the O/U on gold price to close 2011 at $2085. I have 1 week to bet this. Thoughts?

Isn't there a profitable way to bet against this but buy gold to hedge?

No,all he'll take on it is 2k

If you buy 9 ounces of gold, but bet against him for $1800.

If Gold hits $2035, you lose your bet, but you are ahead from the Gold. If Gold stays below, you win your $1800 bet, so as long as gold is above $1600 you are ahead.

If it drops below 1600, you are out money, though.

Are there any Gold Futures markets out there where you can see if he is offering the wrong side of the bet and just freeroll him?

Depends on what kind of Vig he is taking but going under with your bookie and buying 3 Jan 20th calls on GLD ~ 195 would give you huge upside. If gold closes the year well below 2085 you basically break even, if it close just above and you sell your calls Dec 29th/30th you probably lose a little bit, but if gold closes just below (say in the 2025-2084) you win your bet and sell your options for > 1k and win 3k and if gold shoots the moon and breaks 2200 in early December you can make a bundle.

Of course if he is taking a big vig you cant win, and you have to sell your options at the end of December, and have to be sure you get paid by your bookie.

Working off a $2,000 bet-

The vig will hurt you on this trade. 3% for the gold and you are behind $500 right of the bat assuming you can sell it back at spot. 5% from the bookie means hes paying you out $1900 and you can win $1400 at the most if it comes in under $2085, so gold has to stay above $1675 for you to win anything (assuming $1830 purchase price).

The $1830-$2085 range is sweet- netting you $1400- $3695.

Above $2085 you get $295 + $9 for every $1 gold is above.

On the other hand if you just buy 10 ounces of gold you

1. Lose $10 for every $1 gold loses.
2. Win $10 for every dollar gold gains once you are above your purchase vig.

You don't have that super nice range from $1830-$2085 but if gold is above $2085 you are up a min of $2,000 and making $10 for every $1 in gold price increase.

I found my crazy coin guy! We chatted a bit about politics, he then informed me that 'Barry' is his favorite president ever, before making some no-so-thinly veiled racist comments about our fearless leader.

Then he sold me two 1/10th ounce gold eagles for 20$ per coin less than online, and two 43$ silver eagles. Great success!

I would just buy the gold and make a quick 14%...

This has to be adjusted for vig and commissions, but...

Take the under for $2000 and buy $2000 worth of call options on gold futures, or on something that tracks gold, like GLD, which may be more convenient.

For example, 2 GLD 183 Jan '12 calls will cost you about $1980. You break even if the GLD calls expire worthless since you win the bookie bet. You make money if your GLD options finish in the money but not high enough to make you lose the bookie bet. You break even if you barely lose the bookie bet, and you make money if you lose it by a lot.

The blue line below is the P&L from the options alone, and I added the red line, which is the P&L when the bookie bet is added. (this assumes that GLD at 203 will roughly correspond to gold at 2085, which the current ratio of gold to GLD suggests)



(note there is still some risk that needs to be managed with this position, since the bookie bet ends on 12/31/2011 but the options don't expire until 1/21/2012, and the possibility that GLD will fail to track gold well enough)

Gold up $50, Silver up $1.25.

and boom goes the dynamite.

Are you TomCollins' gimmick account? He just said that last night and I lolled cause, who says that.

Vig is 10% on either side

You could simply risk the vig on the small chance end up just over 203, and put on the trade as suggested, or adjust the strike price and/or quantity of the calls so that the p&l is always positive.

So where do people think the price of gold is going in the next week? Down as money gets put into dollars after announcement of more easing? Or up instead....