(Correction) £8 million PHAU gold ETF sale at 9.44 am

It may not compare to the 31 tonnes of gold futures sold on 29 February after Ben Bernanke's speech -  but this morning someone sold an £8m lump of PHAU shares on the London Stock Exchange.

I bought gold before it dropped below $1,690

On Monday morning I bought 10 gold shares -  the ETF Securities Physical Gold exchange traded fund shares with the London Stock Exchange symbol of PHAU. (LSE shows there were two £8m PHAU sales today at around 9.44am)

Gold: tell me why I don't like manic mondays

As gold  markets open for Monday I'm about to go to bed...

Rebound... sort of

This morning Reuters said: "Asia's physical gold market witnessed a buying frenzy as jewellers, traders and investors rushed to take advantage of the nearly $100 drop in prices overnight, helping to boost prices."

Will gold stay in the $1,700 no man's land?

What Ben Bernanke (didn't) say today - did it change the landscape for gold significantly? Or was the exit - triggering the biggest one-day fall in three years - just a short term technical blip (the link quotes Jon Nadler from Kitco who said the fall was spurred by an early 1 million ounce sell order - no doubt that will fuel conspiracy talk). Reuters had the same quoting Jeffrey Sherman, commodities portfolio manager of DoubleLine Capital, a Los Angeles-based investment manager with $28 billion in assets: "It's just a pullback, it doesn't feel like it would be the start of a bear market".

I still believe gold is still worth owning - although I don't actually own any! Should I wait to see if it will fall further before buying again?

Some chartists have pointed out that the gold price doesn't tend to hang around $1,700 for long - if it's there it's usually moving up or down at speed.

Tonight it was hovering in that former no man's land.

In sterling that's around £1,066 per ounce which is what I'd be paying as a UK gold ETF investor.

I don't know exactly how much that would be translated into a gold ETF.

When the London Stock Exchange closed at 4.30pm the sterling denominated PHGP physical gold ETF was selling for £105.99 (This ETF is a good indicator for PHAU which is dollar denominated although it is bought and sold in sterling, however it tends to have wider spreads than PHAU and I don't know what the spot price of gold was at that time. 

If I had bought at close today, how would it have compared to past buying and selling?

My boldest and most recent move was selling all of my 28 physical gold ETF shares on 16 December 2011. Back then I got £100.77 per share before fees (fees were £11.95).  If I had bought 10 shares as markets closed today I would have paid £105.90,  more than 5% above what I sold at.

At the time, according to BullionVault's spot chart, the price of gold in sterling was around £1,079 per ounce.

The gold price has fallen a bit further since then but it is now rising again. The question is where it will be when markets open tomorrow morning - and whether I will buy?

Buying at £106 may be a 5% loss compared to the price at which I sold but it is better than my first two purchases at £111 per share on 22 September 2011 and £108 per share on 4 November 2011.

I'm not sure if that is a useful way to judge this - it sounds like an attempt to justify what I do now by comparing it to earlier mistakes. The question is whether I still believe gold is a good longterm investment, whether the US economy is really improving, whether the value of currencies have really been undermined by QE.

Gold drops $10 in 10 minutes

I'm in the process of rethinking my gold investment ideas. Just noticed that the gold price dropped $10 dollars and still wondering why.

I need to take a proper look at whether to get back in or if I have to wait for another significant drop in prices - which may not happen for a while.

Gold on 13 feb 2012

I started this at 11.45am with no particular aim. One thing I'd like to know is whether the gold price will fall a long way if something goes wrong in the eurozone - although that's what everyone is probably wondering.

This morning the price of gold was $1,729 (£1,094) after falling to $1,721  (£1,091) per ounce in early trading (which I saw late last night before I went to bed just as the price starting rising as news of the Greek parliament passing its austerity measures came through - at least that's what I think was going on.)

If I had wanted to buy this morning I would have got 10 PHAU shares for £1,084.85 after fees *(£1,072.9 before fees)

In comparison, on 29 January 2012 10 PHAU shares for $1,086.79 after adding £11.95 trading costs

On 12 December 2011 I bought 10 shares for £104.58 each - £1,057.74 in total (after fees).

On 4 November 2012 I bought 10 shares for £108.01 each - £1,092.10 in total (after fees).


On September 22 I bought 8 sharesfor £111.98 each - £907.78 in total (after fees).


On 13 January I was thinking about buying10 gold shares for £1,062.52 in total (after fees) which wouldn't have been much worse than my best buy rate on 12 December:

This morning my account at Hargreaves  Lansdown shows just  BlackRock Gold and General because that's all I have at the moment and its down a little.

The dollar index against GLD from this Bloomberg chart: http://www.bloomberg.com/quote/DXY:IND/chart

 And here's PHGP (sterling physical gold ETF) vs PHAU (dollar version)

Some of the stories I should look at today: BullionVault covers Peter Grandich - who is Peter Grandich? 

I scanned this from Wall Street Window which said trading margins in gold had been lowered last week which made it cheaper to speculate on futures markets. 

The piece quotes Bart Melek, head of commodity strategy at TD Securities, who said, "In a situation where the financial system may be at risk, people may need a lot of cash to buffer themselves against a potential shock such as a Greek default. They may swap out gold along with other assets for cash.” This is the thing that I am hoping will provide me with another good buying moment. But I am aware that this depends on how bad things get.

Jim Rogers says that gold will not go above $2,000 this year - but that's all he's said - no elaboration apparently.

Michael Hewson of CMC Markets gives his view on Greek deal today and the ongoing risks to its success. 

Do you have to be a terrorist to understand gold?

Britain's "best selling financial magazine" MoneyWeek has a piece on the back page called "The Magic of Gold" (10 February issue but I've only just noticed it was available online sooner) by Bill Bonner.

Bill writes for the Daily Reckoning. In a recent piece for the site he covered the gold standard and US politics.

Near the end of it he highlighted a Reuters story  about Sovereign Citizens and the Redemption movement and was unconvinced by FBI fears that there were some extreme criminal terrorist elements to this 'movement'.

Bonner said: "The FBI says these people are “extremists” who believe they have a right to protect themselves from what they see as an overbearing government. The G-men tell us that these extremists can turn violent “at the drop of a hat.”

"How long before they’re rounded up? And maybe they’ll round up “potential domestic terrorists” too, even those who have never committed any crime? And what about gold bugs? They may look harmless, but they give aid and comfort to dangerous elements, don’t they?"

Even so the FBI seem to take the problem pretty seriously: http://www.fbi.gov/stats-services/publications/law-enforcement-bulletin/september-2011/sovereign-citizens.

There is a habit of calling gold bugs terrorists like this spat between analysts at GFMS and GATA (the Gold Anti Trust Action Committee)

It is hard to tell how relevant this stuff is to the UK investor. There's not much evidence of it in the MoneyWeek piece. Instead we get an encouraging sales pitch for gold - which I should probably listen to (more below).

But the question for newbies to gold investing like me is whether there's really some kind of ideology driving the gold ownership of a lot of these gold commentators - not straight forward investment judgement.

There may not be anything wrong with that ideology but it could add a layer of complexity to the gold stories we are told - which is why it is interesting. Anyway, that sort of discussion is beyond me at the moment.

In MoneyWeek Bonner says: "We associate a rise in the price of gold with inflation. But gold is much more versatile than we think. It protects your wealth when paper money loses its value. It also protects our wealth when paper money gains in value. It protects you when you are right and when you are wrong."

When the value of money diminishes you get inflation. Bonner says that inflation will see the price of gold soar. He thinks Bernanke's aim at moderate inflation will help but suspects he'll overshoot.

The opposite scenario is deflation when money increases in value. Bonner points to the great depression when "the price of gold rose against dollars, even though the prices of food, clothes and other consumer items (as well as the prices of investment assets) were falling in dollar terms."

It sounds like a free lunch and I've always wanted one of those.

So, obviously I should be buying. Why not now? Gold is down a bit today and as the chart shows - and as chart-loving commentators have pointed out -  the price of gold tends to jolt from the $1,600s to the $1,700s - there's no smooth moves here. And its nearing that area now - around $1,715 - because of Greece and the euro... (Reuters)

So although the gold ETFs I do not own are down I'm still hanging on for worse.

Lunch of unnecessary pain

This is not a cash cow or a gold bull, it is a milk jug on the window sill next to where I ate toast and tomatos in a freezing kitchen in Hackney. As I ate the radio told me that the Bank of England had decided to inject another £50bn into the UK economy and that Greece had agreed to austerity measures. (Here's the FT on both: euro climbs on hopes of Athens deal).

I thought both of these would make buying gold an unlikely event today. I was imagining that the pound would have fallen in value as more QE would undermine the currency and I thought the gold price would rise - everything would rise - on good news about Greece.

It looks like I was wrong on both counts. The pound actually gained against the dollar and gold was looking cheaper for UK investors for a moment. Alice Ross in the FT said: "Analysts said that markets had already priced in a fresh £50bn of liquidity, with the rise in sterling suggesting fears that the BoE could have announced a higher level of £75bn had it not been for recent signs of improvement within the UK economy."

The chart shows ETF Securities' PHAU (US $ denominated physical gold ETF) vs PHGP (pound sterling denominated physical gold ETF).

Although since writing the above the price of gold may now be on its way up a bit ($1,740ish):

So it's back to waiting for the price of gold to fall. I think it will happen but I've generally been wrong in most of my thinking so far.

Gold - preparing for fresh buying opportunities?

I have not properly contemplated making any investment decisions since gold was a lot closer to $1,600. On Friday 13th of January 2012 I was waiting for further falls on Monday 16 January - hoping it would drop down to $1,605 or below.

It never happened. Gold may be down a bit over the last couple of days but it's still around $1,731.

Here's what's happened over the last week:

Meanwhile I still have about 75% of my portfolio in cash, the rest is in in Black Rock Gold and General fund. So despite the name of this blog I don't actually own any gold ETFs (PHAU) after selling them all in December.

Does this cash heavy situation mean I should fear something devaluing my pounds sterling before I get to buy any gold?

Greece could default with or without a bailout (Wall Street Journal: Greece could take the bailout money and run) and even if Greece goes smoothly attention will still turn to other eurozone problems.

 Generally, if something happens to the euro the pound gets hit too - at least it does in relation to the dollar. So while a falling euro would probably mean falling gold, it would also mean that the purchasing power of my pounds will be less, undermining the opportunity to buy US$ denominated gold. I need to work out if that's something I really need to worry about and if I can do anything about it.

(Although S&P is now threatening a further downgrade to the US as well - it also downgraded CME Group which runs commodities futures markets including gold but I've got no idea what the consequences of that might be).

Meanwhile some commentators say that stock markets have been over bought (Market watch: http://www.marketwatch.com/story/overbought-market-due-for-a-correction-2012-02-07?link=home_carousel). If something in europe or anywhere else upsets investors gold could go down too as it is still behaving like a risk asset.

For that reason I'm still not buying but I'm going to start watching a bit more closely now. Although judging by my past record that's good reason to expect gold prices to carry onwards and upwards!


Will Rhind, MD of ETF Securities in the US talks to Alix Steel on The Street. ETF Securities is still for sale but, like me, buyers may be waiting for a fall in the gold price before making an offer. Other commentators mentioned in her piece offered conflicting forecasts.

Bespoke said the U.S. dollar index was "in danger of breaking its six month uptrend" and a falling dollar could add support higher gold prices.

Meanwhile David Banister, chief investment strategist at TheMarketTrendForecast.com told The Street that gold is entering the last and final stage of its bull market. "I believe that it is a 13 year cycle and we are in the fifth and final wave pattern up," he says, which could last for 12-18 months."

Gold up $200 in 1 month, will China support it?

On 29 December 29 gold was selling for $1,523 today its around $1,723.

On December the 28th I nearly bought back all my gold shares but thought the price would fall further. I was right (and therefore thought I'd always be right), it did fall, but only for one day and I didn't buy it on that day either - then it started it's most recent rally.

I'm deciding what to do next. Should I bite the bullet and get back on again? This guy (Nigam Arora) thinks that investors were making a mistake in seeing the Federal Reserve statement as a buy signal. But that's a lot of wrong people! Bloomberg reports 9 out of 15 gold traders expect gold prices to rise next week - which starts with a summit of 27 countries of the EU about growth and jobs buy 17 eurozone countries could break off to discuss Greece.

Another indicator of how this rally will go will come from China after its New Year holiday according to a report from UBS analysts reported by Mineweb. UBS said: "It will be interesting to observe China's appetite when markets there reopen after the one-week Lunar New Year break. For although physical markets naturally prefer cheaper prices, Chinese buyers by and large prefer to buy into rising momentum, while taking advantage of hefty pullbacks. That has been the pattern in recent years, but it was always grounded in expectations of higher prices ahead. So the returning Chinese participants need to believe that this is the start of something larger, otherwise they'll sell the rally."

At 2pm 10 PHAU shares would cost have me £1,088.60. My BlackRock Gold and General units are about level. 

My issue is whether gold will behave as an insurance for my cash. Is that likely if the price of all assets is rising? Although I'm sure it's not a valid argument the chart below shows everything moving in the same direction at the moment and the Bloomberg article linked above lists all asset classes rising except sovereign debt.

Some reading on gold, Iran and the petrodollar - stuff I didn't know but may be should have via Plan B economics.

Pain and confusion for gold doubters like me

As far as I can tell there are two ways of dealing with confusion. One is to do nothing except wait and watch and hope that some kind of decision or useful act emerges from my brain. The other is to do something, anything, and hope it provokes some similar kind of clarity.

I tried the latter one - the acting - back in December and sold everything. Then I decided to switch back into the second one - the waiting - and do nothing. Unfortunately I think I made that switch when the opportunities presented by having cash had just appeared (gold around $1,550 per ounce)... but I didn't take the opportunity, not because I was unsure, but because I switched back into a waiting.

If I've interpreted my mental state right, the switch from acting to waiting took place subconsciously.

Now I'm aware that I'm in waiting mode I think I better learn from my earlier mistake and not move back into acting without properly examining the whys and, more importantly the whens.

As discussed in previous posts I still don't know what I'm doing - or what my motivations have been for doing what I've done so far. That uncertainty exists in equal measure in my personal financial situation (I don't know if I can afford to do this) as well as the gold market itself (I don't understand how it works).

So what is the motivation then? Well, rather than writing it off as some stupid ill-thought-out exercise that has cost me £250 I need to think of the positives. Like for example I am reading Marx and I understand better how currencies work on investments and I think I am working out how to make decisions.

However, all of this is clouded when things happen like they did today - the investment that I don't own, PHAU (ETF Securities Physical Gold exchange traded fund), gained more than 3% after the Federal Open Markets Committee (FOMC) statement said that US interest rates would stay low til the end of 2014.

But does that really explain this move? Michael Hewson at CMC markets said the tone was only slightly more dovish than had been expected. So was it a flash in the pan? Well not according to Scott Redler, chief strategic office at T3Live.com, who told the Street that the rally happened on strong volume, which is bullish for gold despite the fact that much of it came from short covering. "A big move on heavy volume through a downtrend is bullish." Redler is now looking for higher prices in gold (but over what period - he was one of the guys talking about gold at $1,400 when gold fell sharply in December. I need to get my head around how views like his - and mine - have to change as the market changes).

Low interest rates means that the cost of owning gold falls (in comparison to holding cash). And some commentators* say that, low interest rates are naturally inflationary (I'm thinking because more money is floating about the system pushing up prices - which encourages people to exchange stuff and boost the economy).

*Phil Streible, senior commodities broker at RJO Futures told The Street: "Inflation will be created ... [the Fed is] artificially creating inflation for the next couple of years."

Low interest rates, higher inflation, are both good for gold, not so good for someone who doesn't own gold.

But I'm in waiting mode. Everyone expects gold to be volatile in the first half of 2012, may be that means it wont be. However I'm holding out for lower prices at some point and hopefully working out more about gold during that wait.

If I bought today I'd get 10 PHAU shares for $1,086.79 after adding £11.95 trading costs

How does that compare to previous buying and selling? Between 22 September 2011 and 16 December I paid £3,058 for 28 PHAU shares with purchases on three different occasions:

On 12 December 2011 I bought 10 shares for £104.58 each - £1,057.74 in total (after fees).

On 4 November 2012 I bought 10 shares for £108.01 each - £1,092.10 in total (after fees).

On  September 22 I bought 8 shares for £111.98 each -  £907.78 in total (after fees).


On 13 January I was thinking about buying 10 gold shares for £1,062.52 in total (after fees) which is not much worse than my current best buying rate on 12 December. 

But I'm hanging on. If I'm making a mistake at least I'll know it at some point.

Wait for a real gold volatility shake out?

I only ask because before the weekend Bloomberg interviewed currency fund manager and gold bull Axel Merk.

He said: "When gold is volatile, we like it. I don’t like that the volatility is so low now. When volatility is high you have only folks who want to own gold for the long term. The momentum traders get out because they can’t handle the volatility.

"When volatility increases, we tend to go into gold. Last summer we took some profits as gold was going up, and we came back into gold a tad too early."

In this piece back in September 2011 Ben Traynor at BullionVault said: "Back then (2008) you had daily price swings – taken as the difference between the PM London Fix price one day to the next – coming in above 4%...above 5%...and, on two occasions (18 Sep. and 24 Nov.) even over 6%. In a single day."

This chart takes the LBMA gold fix daily percentage changes in 2011 (black dotted line) versus 2008 (red line). When I get a chance I'll try and work out how to calculate z scores and how to interpret them.

In the meantime I'm still waiting for a buying opportunity....

Here's what happened to PHAU and PHGP last week: 

BBC discussion on return of gold standard with Angela Knight, Detlev Schlichter, Philip Coggan, Lord Glasman

While waiting for the price of gold to fall I was listening on-and-off to Andrew Marr on Start the Week.

I missed the start so here's how the BBC described it: "Detlev Schlichter dismisses the practice of printing more money in times of recession, arguing that in the next decade our reliance on paper money will collapse, and he proposes a return to hard commodities, like gold. The historian Philip Coggan pits creditors against debtors, tax payers against public sector workers, and believes it's time for a new monetary system to emerge. The Labour peer, Lord Glasman thinks we need to change the relationship between parliament and the market. And Angela Knight sticks up for the bankers, insisting they hold the key to the crisis, so deserve both a bonus and a bit of respect."

http://www.bbc.co.uk/programmes/b019f8b5

Hopefully no one will read this far - but also to help pass the time I've been reading Karl Marx's Capital. His description of how commodities work is sort of sinking in. A lot of it is about gold. I'm not sure it's a great help in terms of investment advice or how widely accepted his description of commodities exchange process would be any more, but its the most fundamental description of where value comes from I've seen. But then I haven't looked very hard.

More navel gazing at Gold ETF Investor: saver, trader, investor?

Comments in the last post suggested that I only buy on 'red' days... like today.

But I'm still not ready yet.


Part of this is because I still believe the price could fall further but this isn't really an excuse anymore, I should have a longer term view. So I'm doing nothing while I work out what I should be doing, for how long and with how much money. (Although, if I'm honest, I know I'm also delaying in the hope the gold price will fall and make a decision to buy easier - and I can't quite accept that this may not be a good idea.)

So for now I'm just gathering up what people claim is going on and views on how and when to buy gold.

What's happening today?


Why is the price going down today? Here's Reuters view  with comments from Michael Lewis, analyst at Deutsche Bank saying current price moves don't have much to do with fundamentals and a note from UBS analysts which expects Chinese demand to fall.

But recent figures on Chinese gold imports have turned most gold traders positive according to Bloomberg.

Gold ETFs seem to be have been down all day in various forms

With the US dollar version looking a little worse as the dollar index rose.

What would I get if I bought now and how would it compare to previous buying and selling?



Between 22 September 2011 and 16 December I paid £3,058 for 28 PHAU shares with purchases on three different occasions:

On 12 December 2011 I bought 10 shares for £104.58 each - £1,057.74 in total (after fees).

On 4 November 2012 I bought 10 shares for £108.01 each - £1,092.10 in total (after fees).

On  September 22 I bought 8 shares for £111.98 each -  £907.78 in total (after fees).


If I bought today I would get 10 gold shares for £1,062.52 in total (after fees) which is not much worse than my current best buying rate on 12 December. 

But I think I'm going to hang on for now for academic reasons.




My BlackRock Gold and General fund is back to where it was before the price gyrations although...

I did buy a bit more back on November 24 and 25 which didn't match December lows but wasn't such a bad move as my ETF sale may prove to be 

Food for thought on when and why to buy gold

Bill Bonner, writing in Money Week on 6 January said: "And how about gold? Buy it when people predict it will go lower, not when they expect it to rise. Of course, you don’t know where it will go. But when people think it is going down, odds are… it is cheap."

He also said: "We explained yesterday, we don’t think gold is going to go up this year... even so, we should probably expect it to go up again. Because the danger of thinking it will go up is far lower than the benefit of thinking it will down. We don’t know where gold is going in 2012 but the rest of the monetary system could slip into chaos and calamity at any moment. Gold is the only thing we can depend on."

He gave more on prices in an earlier Forbes article where he thought gold could still fall back to £1,200 but I'm not sure if these are still relevant post the December lows.

"Gold is not too cheap at $1,500. At $1,900 it was too expensive.... In the meantime, we’ll probably see a further correction in the gold price…perhaps down to $1,200. Or, perhaps it will stop at $1,400. We don’t know. And it doesn’t matter. Buy gold on dips; sell stocks on rallies."

When Jeff Lewis interviewed Grant Williams (pointed out in a piece by Bron at Gold Chat), he also mentioned the threat of a $1,200 low but I don't know if it still stands since the pre- New-Year lows.

He said: "I suspect going into 2012, the set up for both precious metals is bullish providing they can hold these levels and I think that is important to know. A lot of very good and well-respected chartists worry that gold could correct to 1,200 to 1,400 bucks. And certainly, if you look at the technical pictures, that could happen. Silver could correct down to the low-20s; it absolutely could happen. But it’s important to decide whether you’re a trader or whether you’re an investor. If you’re investing in silver and you’re investing in gold, based on the fundamental reasons to do so, then falls to the price aren’t that much of a problem for you because they give an opportunity to buy more metal at cheaper prices. If you’re a trader, it’s a whole different world and you have to be very agile and you have to be very attuned to moves like this that could go significantly lower.

But then on 3 January 2012  John Embury at Sprott Asset Management told King World News: "When gold broke through $1,000, I said it would never trade below $1,000 again and it hasn’t. I now think that, unless we have a complete and total financial collapse in the world, I would be surprised if gold ever traded below $1,500 ever again."