New Commodities bubble?
Discussion
Gold prices hit a record high yesterday. We also have other commodities such as Cocoa and Coffee which have more than doubled in price since the beginning of the year (partly attributable to environmental factors).
Crude Oil has been moving up rather steadily - assisted by Middle East tensions. Other commodities also appear to have seen rapid appreciation in recent times.
Are we looking at the early stages of a bubble or something more sustained?
Crude Oil has been moving up rather steadily - assisted by Middle East tensions. Other commodities also appear to have seen rapid appreciation in recent times.
Are we looking at the early stages of a bubble or something more sustained?
g4ry13 said:
Gold prices hit a record high yesterday. We also have other commodities such as Cocoa and Coffee which have more than doubled in price since the beginning of the year (partly attributable to environmental factors).
Crude Oil has been moving up rather steadily - assisted by Middle East tensions. Other commodities also appear to have seen rapid appreciation in recent times.
Are we looking at the early stages of a bubble or something more sustained?
I do trade ( that sounds very grand!) oil and gold as certain products create a lot of options premium. Crude Oil has been moving up rather steadily - assisted by Middle East tensions. Other commodities also appear to have seen rapid appreciation in recent times.
Are we looking at the early stages of a bubble or something more sustained?
Here s the voice of very expensive learned experience, there is money to be made, I've done well since the start of the year but and this is critical, it is trading and needs to be treated as such, it is compounded by technical's and leverage which means the underlying can change quickly.
The talk of $95 WTI is possible but it could reverse as quickly and if you're holding on a reversal, it can be painful as volatility comes in.
Anyone who tells you they know where something is going can only offer a partial view because even if the fundamental assessment is correct, the technical and trading side can take you out before that plays out
Oil particularly but also gold, you are swimming with sharks so make sure you know your position sizes, stops and technicals
g4ry13 said:
Simpo Two said:
I thought gold went up when everything else was going down...
Traditionally it was a flight to safety instrument and also a hedge against inflation. But it has been moving upwards along with the rally in equities.
Buy anything that’s going up fomo because greed.
What risk is there? CBs will print out the wazoo and interest rates to zero if anything crashes, which will make your cocoa beans or gold worth even more…
Win win win, buy everything on 5x etf with leverage
asfault said:
Buy iron ore miners they are all down at relative lows, oils proabably in the middle and bitcoin replaced gold otherwise gold should have been much much higher.
Do you really think the type of people who traditionally invested in Gold (a fairly dull and low risk investment) have now moved their money towards Bitcoin? Mr Whippy said:
The everything bubble.
Buy anything that’s going up fomo because greed.
What risk is there? CBs will print out the wazoo and interest rates to zero if anything crashes, which will make your cocoa beans or gold worth even more…
Win win win, buy everything on 5x etf with leverage
Only 5 times? Not trying hard enough......Buy anything that’s going up fomo because greed.
What risk is there? CBs will print out the wazoo and interest rates to zero if anything crashes, which will make your cocoa beans or gold worth even more…
Win win win, buy everything on 5x etf with leverage
One of the issues with Gold, is probably connected or negatively correlated to the magic printing machines. Lots of CBs are buying up Gold right now, so plenty of bid in the market.
g4ry13 said:
asfault said:
Buy iron ore miners they are all down at relative lows, oils proabably in the middle and bitcoin replaced gold otherwise gold should have been much much higher.
Do you really think the type of people who traditionally invested in Gold (a fairly dull and low risk investment) have now moved their money towards Bitcoin? Simpo Two said:
I'm not getting your banter squadron leader. For the uninitiated can you explain what on earth you mean?
He means that the CBs (Central Banks), will keep printing money (or engage in other QE / monetary stimulus) to stop asset price collapses in the event of recession. I thought a wazoo was a ladies front bum, but that doesn't imply unlimited money supply. So that bit less sure on.OoopsVoss said:
He means that the CBs (Central Banks), will keep printing money (or engage in other QE / monetary stimulus) to stop asset price collapses in the event of recession.
QE, ah gotcha, thanks.Scootersp said:
Simpo Two said:
I thought gold went up when everything else was going down...
I think it can go up when there is 'fear' of everything going down? or just general fear/uncertainty feelings.As for gold being like Bitcoin, that makes even less sense!
asfault said:
Pre bitcoin there was nothing else to speculate on that was outside of shares. Bitcoin is the new gold generationally i mean as well.
This is an interesting comment as it suggests Gold is a speculation? when lots see it as a dull/stable/sometime pointless asset.The old guard/gold bug view is that Gold is money, and it certainly was up until a certain point, so they see the excessive money/debt creation resulting in one day a higher price. Gold was made 'not money' a while ago but the value has tracked up ok, and Central banks etc etc still buy it and store it which seems bit counter intuitive. Essentially despite not being 'money' per se it does still have tier one capital status in banking.
So some people still place a high value in it, I don't doubt Bitcoin has suppressed the Gold price a bit, a lump of metal is not sexy/techy/relevant to the youth, despite the metals being used in all the tech they love, but it's enough degrees of separation away that they don't realise or think through the effort that goes into extracting essential materials for goods (silver if you go back far enough was also often money and that was way before it's reflective/electronic/medical properties were fully realised)
asfault said:
g4ry13 said:
asfault said:
Buy iron ore miners they are all down at relative lows, oils proabably in the middle and bitcoin replaced gold otherwise gold should have been much much higher.
Do you really think the type of people who traditionally invested in Gold (a fairly dull and low risk investment) have now moved their money towards Bitcoin? Back to commodities; does anyone know off the top of their head why lean hogs gapped up 25% one day at the beginning of February?
Simpo Two said:
OoopsVoss said:
He means that the CBs (Central Banks), will keep printing money (or engage in other QE / monetary stimulus) to stop asset price collapses in the event of recession.
QE, ah gotcha, thanks.Scootersp said:
Simpo Two said:
I thought gold went up when everything else was going down...
I think it can go up when there is 'fear' of everything going down? or just general fear/uncertainty feelings.As for gold being like Bitcoin, that makes even less sense!
Given the long term prognosis for US debt, it seems a logical move - but is a long term hedge. Not enough of an expert in Gold to know if that has enough of an impact on normal market price, but it's a large bid....
Curious on the comment that gold is a tier 1 capital asset for Banks. It might be (again don't look at commodities much), but it exhibits a lot of market vol, so I'm surprised (although I do agree it's negatively correlated to normal dematerilaised assets). I think it would be significantly haircut for market risk over near cash instrument's (Givt debt) that the regs incentives as holdings. When I was in banking (moons ago), I know we held shares in smelting plants, but don't think physical was much (tricky to store given all the stolen paintings and wine)....
Simpo Two said:
Which is why gold going up with everything else makes no sense - unless it's hedging. But if that were the case, it would always have been like that and then it wouldn't be a hedge...
As for gold being like Bitcoin, that makes even less sense!
Well with inflation everything does pretty much go up over a long enough time, it's the relative swings, ebbs and flows that see the over/under performers and if there were strict hard and fast rules for all price movements/valuations of an asset we'd all know them and they'd just all be at stable levels?As for gold being like Bitcoin, that makes even less sense!
Perhaps it's just rotation, a huge amount of money trying to find a home, haven't some of the big money names started to drift out of the growth stocks (become twitchy about multiples etc etc) to value ones, they know there are cycles and are just making provision and moving to a solid but unfavoured sector/asset?
I don't know! but nothing tracks to an exact formula, but long term trends can be seen and perhaps relied upon?
What has Gold done from the 1970's bumbled along, then monetary/inflation woes in the 70's and it popped up, drew back and bumbled along, then on the run up and past the great financial crisis it had a huge run, then pulled back and bumbled along, now who knows, but the debt situation is worse than 2008? The debts are in the Trillions not Billions, the US budget deficit in 2023 alone was over $1 Trillion, so each similar year now adds this to the already substantial debt, which marches on higher and higher above the whole GDP ie the debt to GDP ratio is > 1:1 or 100% and it's hard to see a way to decrease it?
So perhaps a overarching summary is that Gold does relatively well/retains your purchasing power if things get ugly, and just like any other major market move when it happens it over shoots through plain old human nature/because that's what always happens?
It's also perhaps noteworthy that it's got to its current level when rates are still pretty high for recent times, and it's done it relatively unnoticed with still pretty much zero interest/excitement/hype anywhere, certainly no one's postie/cabbie is chatting about the Gold price! With the level of indifference to borderline distain there could be room for more rises if it becomes more favoured (and if the generally responses I get here represent the general investors views then it will struggle to becomes less favoured!!).
OoopsVoss said:
In another thread someone posted an interesting article about who was buying up gold. A number of Central Banks who oppose $ hegemony have been hoovering up a lot of it.
Given the long term prognosis for US debt, it seems a logical move - but is a long term hedge. Not enough of an expert in Gold to know if that has enough of an impact on normal market price, but it's a large bid....
Curious on the comment that gold is a tier 1 capital asset for Banks. It might be (again don't look at commodities much), but it exhibits a lot of market vol, so I'm surprised (although I do agree it's negatively correlated to normal dematerilaised assets). I think it would be significantly haircut for market risk over near cash instrument's (Givt debt) that the regs incentives as holdings. When I was in banking (moons ago), I know we held shares in smelting plants, but don't think physical was much (tricky to store given all the stolen paintings and wine)....
That's the thing isn't it, someone is buying it and it isn't 'us' or the aggregate of the few hundred Gold bugs here and there?Given the long term prognosis for US debt, it seems a logical move - but is a long term hedge. Not enough of an expert in Gold to know if that has enough of an impact on normal market price, but it's a large bid....
Curious on the comment that gold is a tier 1 capital asset for Banks. It might be (again don't look at commodities much), but it exhibits a lot of market vol, so I'm surprised (although I do agree it's negatively correlated to normal dematerilaised assets). I think it would be significantly haircut for market risk over near cash instrument's (Givt debt) that the regs incentives as holdings. When I was in banking (moons ago), I know we held shares in smelting plants, but don't think physical was much (tricky to store given all the stolen paintings and wine)....
I have read a bit, no expert at all, about "Basel 3" banking regulations that were draw up post GFC but not all implemented still.
For gold specifically it made mention of the new different treatment of physical Gold as opposed to paper/unallocated (fractional if you like) versions.
" Thus, the regulation reclassifies physical, allocated gold as a Tier 1 asset (the safest tier), comparable to cash, while it continues to categorise paper gold, or unallocated gold, as Tier 3 (the riskiest tier). In addition, it obliges financial institutions to hold capital buffers of 85%, previously 0%, to secure precious metals financing and clearing transactions."
It's quite interesting to me purely in the contradictory sense that, Gold is significant enough for its treatment to still be considered and written into banking regulations and revisions thereof, yet at the same time is regarded so inconsequentially by the users of these banks and for which these regulations are at least in part drawn up to protect?
Edited by Scootersp on Thursday 4th April 19:01
I don't deny that people are buying it, particularly CBs. And I wouldn't call them "Gold bugs". I think it's motivated because of the US debt problems, but a buyer is a buyer.
Be careful on BASLE3, it's now end game for that. A lot is implemented (rightly or wrongly). Anything that displays high levels of price volatility is a struggle (to me) as a tier 1 asset - but everyone has their own view on risk. Credit Suisse is a good example of what the regs says is safe, maybe isn't.
B3 doesn't eliminate risk, but should reduce exposure to losses. I can see why gold IS a good hedge and why it should be allowed as a capital asset, but think its more a reaction to conkers US debt.
If that blows up, anyone holding gold is going to look pretty smart (assuming the US debt blow up doesn't turn all the lights off - which I think is very likely).
Be careful on BASLE3, it's now end game for that. A lot is implemented (rightly or wrongly). Anything that displays high levels of price volatility is a struggle (to me) as a tier 1 asset - but everyone has their own view on risk. Credit Suisse is a good example of what the regs says is safe, maybe isn't.
B3 doesn't eliminate risk, but should reduce exposure to losses. I can see why gold IS a good hedge and why it should be allowed as a capital asset, but think its more a reaction to conkers US debt.
If that blows up, anyone holding gold is going to look pretty smart (assuming the US debt blow up doesn't turn all the lights off - which I think is very likely).
I don't place too much faith in anything regulatory, but I like to read bits and bobs about the monetary system.
The reasons, these non gold bugs are still interested in gold, that people/governments still go to all the effort to store it, why we won't give Venezuela theirs back, the reason even when we got to the point that someone thought it necessary to let us know £85K in the bank is safe (when before we thought it all was) we'd never be advised to do something as left field as buy some Gold or Silver, like they do.
If those in control of currency, that pull the monetary levers, QE etc have it perhaps we all should. Hope for the best, prepare for the worst?
I think that's the time for Gold, when enough people feel things are a bit out of whack and turmoil 'might' be around the corner and might linger, as per the historic periods of turmoil were and whilst things have been sorted and smoothed out each time, Gold has hiked up each time also. One equivalence with Bitcoin there might be is that Gold holders are pretty sticky/stubborn/committed as there is little they see as an alternative safety outlet and so this goes a way towards reducing it's volatility?
The reasons, these non gold bugs are still interested in gold, that people/governments still go to all the effort to store it, why we won't give Venezuela theirs back, the reason even when we got to the point that someone thought it necessary to let us know £85K in the bank is safe (when before we thought it all was) we'd never be advised to do something as left field as buy some Gold or Silver, like they do.
If those in control of currency, that pull the monetary levers, QE etc have it perhaps we all should. Hope for the best, prepare for the worst?
I think that's the time for Gold, when enough people feel things are a bit out of whack and turmoil 'might' be around the corner and might linger, as per the historic periods of turmoil were and whilst things have been sorted and smoothed out each time, Gold has hiked up each time also. One equivalence with Bitcoin there might be is that Gold holders are pretty sticky/stubborn/committed as there is little they see as an alternative safety outlet and so this goes a way towards reducing it's volatility?
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