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."

Gold gains more than 1% but will it continue?

The gold price gained more than 1% this morning. It's a bit unnerving for someone waiting on the sidelines hoping the gold price will fall far enough to justify selling in December.

But here's what seems to be happening today: the euro rose against the dollar but commentators tell Reuters it's not a longterm trend and Indians started buying gold again (Reuters again).  I try to get my head around both of these issues below  - the Indian buying story may not be a longterm one yet either.

But it seems no one really expects much real movement on Europe until the results of Spanish and Italian bond auctions on Thursday and Friday. Is there any reason to buy gold before then?

Well the gold price shot up today:

The gold ETFs I do not own gained too -

As the falling dollar played a big part in the gain any changes in the pound sterling denominated PHGP looks a bit less impressive/painful and these are the changes you'd get if you owned PHAU, the dollar version anyway - which is what I'd buy. The Bloomberg dollar index chart shows the dollar moving lower. (Reuters said this was due to short covering on the euro:"Traders said there was no fundamental reasons for the short squeeze in the euro with news out of Europe continuing to paint a dreary picture.")

The pound moving in the same direction as the euro - up today (the green figures above the chart) but moving downwards over the last month (the chart). It's opposite relationship to the dollar is likely to get stronger? (Reuters story: )




Adding to a list of gold watchers who think the price of gold is more likely to fall than rise in the short term appears to be Perth Mint's Bron Suchecki (also Gold Chat) whose negative views included the effect of MF Global: "This is not necessarily negative in the long run, as these investors may instead opt for direct physical investment, but in the meantime any contraction in leveraged paper positions puts pressure on the gold price."

The other key factor he cites is Indian gold demand: "Physical Indian ounce demand will return eventually but in the short run the situation  continues to be negative, with Reuters reporting Prithviraj Kothari as saying "Still prices  are high. Interest rates are high. Liquidity is tight. I think imports in the first quarter of  2012 will be 50 percent lower than last year."

Although he adds that there is some pick-up of bar demand and that a change, when it comes, will be very fast.

Just this morning Reuters said dealers in Mumbai said a drop in local prices to a one-week low was used to stock up ahead of wedding season beginning later this month. Harshad Ajmera, proprietor of JJ Gold House in Kolkata said: "Buying will continue until March."

It also said India's central bank has allowed four more banks to import precious metals which would boost competition and help reduce premiums.

In the same report Reuters quotes Macquarie analyst Hayden Atkins who said "A big part of the weakness into the end of the year was people taking profits and liquidity being a bit lower."

He said that the end of this process might explain why an inverse correlation between the dollar and the euro/gold.

"I would expect that to unwind, and maybe that's why we're seeing stronger gold even when the euro is tending to weaken. You don't have that length there any more." He told Reuters he expected gold's inverse link to the dollar to drive prices in this year.