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Old 03.09.2013, 06:18
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Re: Gold Buying

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The cost of producing gold is not a floor to its value, it's what a fool will pay, you believe a greater fool will pay more tomorrow, I am not so sure. Gold dropped well below 500 last time & took many years to recover, of course it's different this time........
And every chance it will drop well below 500 again, plenty of cheap locations exist to produce it much cheaper. The mining companies can simply start digging it upmin mongolia and other locations with cheap labour if needed.

Any fool who thinks gold cant go below a certain value deserves to lose and most likely will as holding for the long term is nothng more than treating it as an investment and refusing to believe you are wrong at your decision to buy at a higher price then finding out its going down not up
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Old 03.09.2013, 06:27
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Re: Gold Buying

The majority of this post reminds one of the saying A fool and his gold are soon parted!
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  #643  
Old 03.09.2013, 08:31
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Re: Gold Buying

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it's just a question of timing. is currency going to be the first to collapse before bonds, stocks, property and gold? if not, you can easily switch and buy into the others after they collapse.

e.g. buy property and equities after they crash.
This idea seems predicated on one or more false assumptions.

First, 'bubbles' aren't created merely by surges in investment. They are invariably 'helped' by an infusion of credit by banks (ultimately the central banks, which create credit out of thin air), which is why they ultimately 'burst' — the perceived increase in value is connected to the cheap credit that feeds the trend. By itself, a mere increase in buying/popularity isn't a bubble, and is highly unlikely to collapse like one.

Second, cash, stocks, equities and bonds all share the same inherent weakness/vulnerability: They're all inextricably tied to (i.e., based on) one or more fiat currencies. That is, ultimately, they're all just paper. When the fiat currency collapses, so does every other paper construct that was based on it. For example, $1000 in cash is just as worthless as $1000 in stocks or $1000 in bonds. Who will trade you something of value in exchange for your paper? Your 'investment' was always based on the assumption that the value of the fiat currency would somehow be sustained vis-a-vis the vehicle it was 'invested' in. Otherwise, what you possessed was simply paper the whole time.

And third, metal (e.g., gold, silver...) is just one of many means of storing wealth that protect its owner from the collapse of fiat currencies. The list of other examples is essentially endless: real estate, lumber, livestock, grain, fuel, shoes, condoms... Each is a commodity by its own right, each has its strengths and weaknesses, but in a world where fiat currency has become essentially worthless, such items retain value and can be traded for something else of value. The same can't be said of 'cash', stocks, bonds, etc. Metal has the historically proven advantage of being compact, portable, and universally recognized as a medium of exchange.

For a real-world history-based illustration, take a look at what people have invariably done every time a central bank's fiat currency was collapsing under hyper-inflation: As soon as they got paid with fiat paper 'currency', they rushed out to exchange the paper for something — anything — of value, in order to store that bit of wealth in something of more stable worth than the paper 'money'. Anybody in that economy who had had the foresight to have already been storing their wealth in such stable commodities (including, but not limited to, metal) had much less reason to panic. A warehouse full of toilet paper, a case of pencils, a truckload of tennis shoes, or a herd of sheep can still be divided, transported and exchanged for other commodities based on supply and demand, and the same goes for metal — but good luck trying to participate in that market with paper that used to be worth _______ merely because somebody else said it was.

As I've already said, I don't advocate buying metal as an 'investment' — i.e., expecting to reap a profit — but as a safe, long-term store of wealth. Rather, being convinced that one or more of today's major fiat currencies is very likely to suffer from uncontrollable hyper-inflation and collapse with inescapable effects on all other fiat currencies, it seems more prudent to routinely exchange a portion of accumulated paper currency for metal (or any compact, portable, and universally recognized medium of exchange) than holding onto significant amounts of anything based on those currencies.

I'm convinced, based on the historical record and the on-going analyses of the likes of GATA, that fiat currencies are less than safe, and that the downward fluctuations in metal prices are more manipulations by central banks and their friends than proof that everything is equally risky. You're obviously free to believe otherwise, but you can't argue away the historical record, and I have yet to hear a compelling basis for assuming 'it can't happen here' or 'that'll never happen again'.

(Apologies for the long-winded post.)
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  #644  
Old 03.09.2013, 10:05
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Re: Gold Buying

I must say that I agree with your points - gold is always safer than any fiat currency. However, your analysis omits an important point: gold and other commodities (unlike currency) is not readily or easily verifiable, and can only be done so at a significant cost. It costs money to verify that what you have is real gold, if you want to use it, as any buyer of gold bars knows.

Also, you need to consider that we live in a country with a very, very strong safe currency. More perhaps than you realise. Maybe gold is 100% safe, but the swiss franc is 99.9% safe. If I lived in any other country then I would consider buying gold. But not Switzerland.

As mentioned, over-inflation causes currncy to collapse, but when was the last time inflation in Switzerland was higher than any other country? As far as "it cannot happen here" or "it cannot happen again", just to say that the Swiss franc since its creation 150 years ago (and that's a loong time) has never been devalued, with the exception around 1936 as the links to gold/silver measures was abolished, but at that time all the worlds currencies were also devalued too by even higher amounts.

What i'm trying to say, is that if gold derives its safety by the fact that there is a limited supply of the metal, the same goes for the Swiss franc. The swiss central bank never "prints money" to fund gov activities in the way it was done 80 years ago in the states. Will the sitiation change? Maybe, but probably not in our lifetimes.
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Old 03.09.2013, 10:29
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Re: Gold Buying

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Drop 100 times in value versus what?


Property yes, gold no. I thought an asset was in a bubble if a large enough proportion of wealth was invested in it. What is the size of the global property market, and what is the size of the global gold market?
Prices of everyday items rise 100 times in fiat, hyper inflation.

There is a huge use for housing, very little use for gold. Daily trading in gold exceeds daily sales in housing, so I don't get your point......or do you mean the value of every house in the world v every ounce of gold?
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  #646  
Old 03.09.2013, 12:24
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Re: Gold Buying

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...It costs money to verify that what you have is real gold, if you want to use it, as any buyer of gold bars knows...
I assume you mean a buyer who has also sold. In my only (admittedly limited) first-hand experience in selling metal, there was no extra expense involved in verification. And I have no reason to doubt that metal still sealed in its original package with its certificate of authenticity (such as what is sold by every Swiss Kantonalbank) can be sold with the same or better ease.

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...Maybe gold is 100% safe, but the swiss franc is 99.9% safe. If I lived in any other country then I would consider buying gold. But not Switzerland...
With due respect, I don't share your confidence. I agree that the CHF ought to be safer than the US$ or the EUR, if for no other reason, because the Swiss central bank seems to be more tightly constrained by Swiss law. However, the CHF has been subject to steady inflation over the years (thankfully not the kind of hyper-inflation that the US$ is headed for, due to the printing frenzy of the past few years). But it's true that the CHF has remained comparatively strong vis-a-vis other currencies.

But more importantly, the CHF is tied to the US$ and the EUR by the almost incomprehensible (and, I suspect/fear, not fully disclosed) relationships among the several central banks. In the last century, the US managed to persuade key post-war European central banks to let the US$ be their 'reserve currency', effectively coercing them into accepting dollars, at least partly in the form of 'foreign aid'. To my knowledge the US$ continues to enjoy the privilege of being the de facto 'reserve currency' of the Swiss central bank, which compels me to have less confidence in the CHF than you have. That also explains why the 'Swiss' bailout of UBS several years ago included a substantial infusion of US$ directly from the US central bank, although that aspect of the package was downplayed.

[You can read about the history of the US$ and the US government's actions, particularly vis-a-vis Europe here — especially in the last section (IV. The Monetary Breakdown of the West).]

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...As mentioned, over-inflation causes currncy to collapse, but when was the last time inflation in Switzerland was higher than any other country?...
Again with respect, I think that's the wrong question. Instead, I would ask: How well is the CHF insulated from the potential effects (direct or indirect) of a hyper-inflating US$ and/or a hyper-inflating EUR? (I don't presume to know definitively what the answer is, but I have yet to see compelling positive evidence that the CHF will simply sail along with its currently apparent stability untouched, when the US$ is taking a nosedive.)

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...Will the sitiation change? Maybe, but probably not in our lifetimes.
I really hope you're right, but I'm not prepared to take that chance. I'd like to think Switzerland is a relatively safe place to be, but I'm not as convinced as you are that it's so safe that precautionary measures aren't prudent.
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  #647  
Old 03.09.2013, 14:51
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Re: Gold Buying

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As mentioned, over-inflation causes currncy to collapse, but when was the last time inflation in Switzerland was higher than any other country? As far as "it cannot happen here" or "it cannot happen again", just to say that the Swiss franc since its creation 150 years ago (and that's a loong time) has never been devalued, with the exception around 1936 as the links to gold/silver measures was abolished, but at that time all the worlds currencies were also devalued too by even higher amounts.
Not sure what you mean by 'The Swiss franc has never been devalued', it's certainly fallen in value over 30% V both the £ & USD at one point in the last 20 years, & The CHF value V the USD in 1980/1 - 2000/1 was the same at one point , just 20 years later.

The PEG to the euro seems very much like a devaluation to me, or did you conveniently forget such recent history

To believe that gold or CHF is a one was bet is foolish.
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  #648  
Old 03.09.2013, 15:47
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Re: Gold Buying

Of course the CHF has been devalued recently, there was parity with the Euro and then 1.20-1.25 was chosen by the SZB for the benefit of the Swiss economy.

So what's the consensus on holding precious metals? 5, 10, 15%? (For hedging)
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Old 03.09.2013, 15:54
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Re: Gold Buying

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Of course the CHF has been devalued recently, there was parity with the Euro and then 1.20-1.25 was chosen by the SZB for the benefit of the Swiss economy.

So what's the consensus on holding precious metals? 5, 10, 15%? (For hedging)
Hedging what exactly, Gold is valued in USD, unless you have a forward sale contract in Gold, why is there any need to hedge your future liability?
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Old 03.09.2013, 16:10
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Re: Gold Buying

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...just one of many means of storing wealth that protect its owner ...condoms...
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  #651  
Old 03.09.2013, 16:29
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Re: Gold Buying

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And every chance it will drop well below 500 again, plenty of cheap locations exist to produce it much cheaper. The mining companies can simply start digging it upmin mongolia and other locations with cheap labour if needed.
If the above is true, then why aren't the mining companies already producing this cheaper gold, in order to make a bigger profit?
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  #652  
Old 03.09.2013, 17:22
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Re: Gold Buying

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If the above is true, then why aren't the mining companies already producing this cheaper gold, in order to make a bigger profit?
Your confusing the cost of digging gold from the ground, with what a willing buyer will pay to own it. It's not so long ago that 250 was all somebody would pay although it cost more to mine at that time.
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  #653  
Old 03.09.2013, 17:33
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Re: Gold Buying

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I assume you mean a buyer who has also sold. In my only (admittedly limited) first-hand experience in selling metal, there was no extra expense involved in verification. And I have no reason to doubt that metal still sealed in its original package with its certificate of authenticity (such as what is sold by every Swiss Kantonalbank) can be sold with the same or better ease.


With due respect, I don't share your confidence. I agree that the CHF ought to be safer than the US$ or the EUR, if for no other reason, because the Swiss central bank seems to be more tightly constrained by Swiss law. However, the CHF has been subject to steady inflation over the years (thankfully not the kind of hyper-inflation that the US$ is headed for, due to the printing frenzy of the past few years). But it's true that the CHF has remained comparatively strong vis-a-vis other currencies.

But more importantly, the CHF is tied to the US$ and the EUR by the almost incomprehensible (and, I suspect/fear, not fully disclosed) relationships among the several central banks. In the last century, the US managed to persuade key post-war European central banks to let the US$ be their 'reserve currency', effectively coercing them into accepting dollars, at least partly in the form of 'foreign aid'. To my knowledge the US$ continues to enjoy the privilege of being the de facto 'reserve currency' of the Swiss central bank, which compels me to have less confidence in the CHF than you have. That also explains why the 'Swiss' bailout of UBS several years ago included a substantial infusion of US$ directly from the US central bank, although that aspect of the package was downplayed.

[You can read about the history of the US$ and the US government's actions, particularly vis-a-vis Europe here — especially in the last section (IV. The Monetary Breakdown of the West).]


Again with respect, I think that's the wrong question. Instead, I would ask: How well is the CHF insulated from the potential effects (direct or indirect) of a hyper-inflating US$ and/or a hyper-inflating EUR? (I don't presume to know definitively what the answer is, but I have yet to see compelling positive evidence that the CHF will simply sail along with its currently apparent stability untouched, when the US$ is taking a nosedive.)


I really hope you're right, but I'm not prepared to take that chance. I'd like to think Switzerland is a relatively safe place to be, but I'm not as convinced as you are that it's so safe that precautionary measures aren't prudent.
About "However, the CHF has been subject to steady inflation over the years" over the long term yes; but has been in deflation for almost 2 years now, see chart.

I always thought deflation was said to be a disaster to be avoided at all costs but we seem to be chugging along OK?

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  #654  
Old 03.09.2013, 18:07
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Re: Gold Buying

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Your confusing the cost of digging gold from the ground, with what a willing buyer will pay to own it. It's not so long ago that 250 was all somebody would pay although it cost more to mine at that time.
Apparently the average cost of production is $727 per ounce.

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And every chance it will drop well below 500 again, plenty of cheap locations exist to produce it much cheaper. The mining companies can simply start digging it upmin mongolia and other locations with cheap labour if needed.
I'm not sure what 'much cheaper' than $500 is - let's say that it's $400. Why aren't these mongolian gold mines with a production cost of $400 per ounce already mining this very cheap to produce gold, and selling it today for $1000 profit per ounce
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  #655  
Old 03.09.2013, 18:27
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Re: Gold Buying

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Apparently the average cost of production is $727 per ounce.



I'm not sure what 'much cheaper' than $500 is - let's say that it's $400. Why aren't these mongolian gold mines with a production cost of $400 per ounce already mining this very cheap to produce gold, and selling it today for $1000 profit per ounce
As far as the mine is conceded, they are liquidating an asset by selling gold, the mine was not purchased for 0 so it's not actually a profit of $1000 an ounce.
They only sell because they believe the price may well be less tomorrow!
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Old 03.09.2013, 18:45
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Re: Gold Buying

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As far as the mine is conceded, they are liquidating an asset by selling gold, the mine was not purchased for 0 so it's not actually a profit of $1000 an ounce.
They only sell because they believe the price may well be less tomorrow!
OK... so apparently there are all these mines with cash costs of $400 per ounce, who are not digging up their gold and selling it at a massive profit today because they believe that gold will be worth more tomorrow. Which companies are these? I'd really like to invest in gold miners that have these kinds of low cost reserves yet can afford to sit on them for years (decades?). Or are they privately owned? This can only make sense if they have a combination of a very low cost of capital and very patient investors.

Logically this means that e.g. Barrick & Newmont are gold bears, and are only selling gold today because they believe that it will be worth less tomorrow... In which case, I'm confused as to why Barrick recently spent $2 billion to close their hedge book.

I thought that I understood the gold market, but this is a whole strange new world...
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Old 03.09.2013, 21:27
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Re: Gold Buying

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Hedging what exactly, Gold is valued in USD, unless you have a forward sale contract in Gold, why is there any need to hedge your future liability?
CHF holders might hold gold to hedge against a CHF devaluation. According to some posters, CHF devaluations happen:

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Not sure what you mean by 'The Swiss franc has never been devalued', it's certainly fallen in value over 30% V both the £ & USD at one point in the last 20 years, & The CHF value V the USD in 1980/1 - 2000/1 was the same at one point , just 20 years later.
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Old 03.09.2013, 21:35
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Re: Gold Buying

I've always wondered about something that I don't remember seeing mentioned in threads like these. Would be interested in the opinions here.

Many of the people that are "pro gold" and "anti fiat" claim that currency is just paper and has no intrinsic value, and that is the reason they like to hold some gold in case something really serious happens.

But really, I think that a vast majority of the value of gold itself is extrinsic. It does have a few industrial applications and it is nice that it is chemically stable (doesn't oxidize), but I really don't think the industrial applications and its inherent shininess (you know, for jewelry purposes) aren't really the reason for the value.

In some kind of doomsday scenario where all the world's major currencies are suddenly worth nothing, I don't think gold would be that valuable anyway - you would instead want to hold non-perishable food, fuel (or other ways to generate energy) and stuff where most or all the value is intrinsic.
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Old 03.09.2013, 22:03
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Re: Gold Buying

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I've always wondered about something that I don't remember seeing mentioned in threads like these. Would be interested in the opinions here.

Many of the people that are "pro gold" and "anti fiat" claim that currency is just paper and has no intrinsic value, and that is the reason they like to hold some gold in case something really serious happens.

But really, I think that a vast majority of the value of gold itself is extrinsic. It does have a few industrial applications and it is nice that it is chemically stable (doesn't oxidize), but I really don't think the industrial applications and its inherent shininess (you know, for jewelry purposes) aren't really the reason for the value.
The reason that gold is often held as a hedge against fiat currency devaluation is it's history of being used as money over thousands & thousands of years. This is why the central bankers of the world hold thousands and thousands of tonnes of gold as currency reserves in their vaults. It's important to remember that the people who define what money is hold a vast amount of gold as money.

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In some kind of doomsday scenario where all the world's major currencies are suddenly worth nothing, I don't think gold would be that valuable anyway - you would instead want to hold non-perishable food, fuel (or other ways to generate energy) and stuff where most or all the value is intrinsic.
The velocity of money has collapsed. The central banks of the world have massively increased base money through e.g. QE. One of the reasons that an individual may want to hold gold might be a belief that the central banks will be too slow to withdraw this new base money when the velocity picks up, which would cause rapid inflation and consequent loss of value of paper money.

Your doomsday complete collapse scenario happily seems extremely unlikely (a continuation of the current competitive devaluation seems hugely more probable). As we've never has a universal fiat system before, nobody really knows what would happen in this event. Perhaps it can be argued that the CHF was the last 'solid' currency - sadly that ended by tying it to the EUR.

As a result, the most recent comparable doomsday scenario can only be localised events. e.g. Jewish people fleeing nazi germany couldn't have carried their wealth out of the country in the form of food or fuel. Argentinians preserved their wealth by holding gold and not perishable food or fuel, etc etc.

Nobody knows how this might play out in a global doomsday collapse scenario. Happily it seems unlikely that we will find out. Let's hope for a nice gentle continued global devaluation.
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Old 03.09.2013, 22:06
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Re: Gold Buying

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OK... so apparently there are all these mines with cash costs of $400 per ounce, who are not digging up their gold and selling it at a massive profit today because they believe that gold will be worth more tomorrow. Which companies are these? I'd really like to invest in gold miners that have these kinds of low cost reserves yet can afford to sit on them for years (decades?). Or are they privately owned? This can only make sense if they have a combination of a very low cost of capital and very patient investors.

Logically this means that e.g. Barrick & Newmont are gold bears, and are only selling gold today because they believe that it will be worth less tomorrow... In which case, I'm confused as to why Barrick recently spent $2 billion to close their hedge book.

I thought that I understood the gold market, but this is a whole strange new world...
About "I thought that I understood the gold market, but this is a whole strange new world..."

Me too, I thought this so called "paper gold" had the objective of tracking real gold prices.
But recently somebody sold a lot of "paper gold" & this hit the price of real gold??
Isn't this a case of the tail wagging the dog?
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