A questions was recently asked: How do I know when to sell my gold?

The DOW/Gold ratio has historically proven to be a pretty accurate indicator of when gold has topped.

This does of course require a “functioning” market. Stable and functioning are not the same thing. It could be argued that the last few tops in gold didnt necessarily occur during a “stable” market.

DOW/Gold ratio aside however, there are a few other indicators that we can use to gage if it has topped.

My favorite by far is the “everyman” indicator. When everyman is singing the praises of gold and silver, and that it is THE investment, then you will know that its time to sell.

Examples:

* The shoe shine guy in the airport is giving you gold and silver tips
* The cab driver is giving you gold and silver tips
* You see gold all over the cover of time magazine
* There are more gold websites and advertisements than there are forex websites and advertisements
* Grandma who knows absolutely nothing about financial wealth building is giving you gold tips
* There is an entire industry that grows up around selling gold (like the lead up in real estate agents, mortgage brokers, and everything to do with real estate leading up to the popping of that bubble)

Etc.

In the event of a hyper-inflationary environment, I wouldn’t sell gold AT ALL unless it was in exchange for property such as during Wiemar. I have read you could buy an entire City block in Germany with all the commercial buildings on it for 20 ounces of gold at the height of the German hyperinflation.

Aside from something like that, why would you redeem gold into a hyper-inflating currency? Makes more sense to just sit on it, and redeem some of it when great opportunities arise to invest in real tangible wealth growing assets.

This little bit of info is pretty staggering if taken in context.

India is the largest consumer of gold in the world, in 2007 importing 759 tonnes of gold. In 2008 that number dropped to 402 tonnes.

Considering that gold closed up for the year, it means that the difference in demand was made up in investment buyers of gold.

That is a staggering thought!

Well, one of the more significant final tallies of 2008 is in, and it confirms that which we have been cautioning for the better part of the year that passed. Gold imports by India, traditionally the single largest global buyer of the metal, fell by 47 percent in 2008. Only 402 tonnes were demanded by the country, as high gold prices and a slowing Indian economy ended up nearly halving demand, according to the The Bombay Bullion Association.

The Mumbai-based trade body said that India’s gold imports in last month dropped by 81 percent to total only 3 tonnes (just over 96,000 ozs.), as compared to 16 tonnes being imported in the same month of 2007. The deadly bombings in the centre of Mumbai were also seen as having affected demand in December. Unless gold can bank on investment demand to more than offset the slump in Indian purchase tonnages, we must remain on alert and exercise caution. Demand destruction of this type is not health-beneficial for our market.

One ought not take one of the pillars of gold demand and treat it as if it mattered little. The President of the BBA, Mr. Suresh Hundia made it quite clear: “Imports were down because prices rose. There were not many marriages or festivals either,” In 2007, India imported 759 tonnes of gold (in other words, almost as much as the gold ETF has amassed in four years’ time).

Just ran across an great entry at Jim Sinclairs site.

Funny stuff!

Forrest Gump Explains Mortgage Backed Securities

Mortgage Backed Securities are like boxes of chocolates.
- Criminals on Wall Street stole a few chocolates from the boxes and replaced them with turds.
- Their criminal buddies at Standard & Poor rated these boxes AAA Investment Grade chocolates.
- These boxes were then sold all over the world to investors.
- Eventually somebody bites into a turd and discovers the crime.
- Suddenly nobody trusts American chocolates anymore worldwide.
- Hank Paulson now wants the American taxpayers to buy up and hold all these boxes of turd-infested chocolates for $700 billion dollars until the market for turds returns to normal.
- Mama always said: “Sniff the chocolates first Forrest”.

Great article by Trace Mayer.

Excerpt below:

At all times and in all circumstances gold remains money. It is the most powerful currency in the world. Oil is the world’s primary energy source which is why the gold to oil ratio is important. Gold is the most effective tool humans have to perform mental calculations of value. By analogy it is the tool used to determine how many calories an apple provides and how many calories it takes to collect and process the apple so it can be eaten.

Producing gold is essentially converting energy into bullion. How many calories go into producing a one ounce gold coin? In some cases to produce a single ounce hundreds of tons of rock are moved. Ultimately, money is about energy. To make it personal, how much value should you put on that nice steak dinner, bottle of water from Fiji or 3,000 mile Ceaser salad? Well, think through the supply chain and how much energy the good or service represents.

Full article here: http://seekingalpha.com/article/112653-the-gold-to-oil-ratio-does-matter?source=email

New GCC single currency agreed, will it include gold?

Filed under: Gold & Silver, Inflation, Oil Prices, UAE Revaluation, UAE Stocks, US Bonds, US Dollar — peterjcooper @ 8:56 am

Gulf Cooperation Council leaders yesterday concluded their 29th annual summit meeting in Muscat, Oman with a final approval for the creation of a single currency for the six-nation economic bloc, still targeted for 2010.

Saudi Arabia is the largest economy in the GCC and boasts substantial gold reserves. But whether gold will be included in the currency basket has not yet been decided.
Golden opportunity

GCC assistant secretary-general Mohammad Al Mazroui told Gulf News: ‘We first have to decide on the location of the Central Bank, then the Central Bank and Monetary Council will have to decide on the gold reserves for the Central Bank’.

The creation of the GCC single currency - likely to be known as the Khaleeji which means Gulf in Arabic - is a major gold event for two reasons.

First, the breaking of their dollar pegs by the Gulf Arab nations is clearly dollar negative. Secondly, any inclusion of gold either as a part of the monetary basket, or in the reserves of the new GCC Central Bank will create additional demand for the precious metal.
2009 deadline

The project is gathering pace, and no lesser figure than Saudi Arabia’s King Abdullah has directed that GCC economic integration committees speed up their work and complete the whole exercise by September 2009.

It is only a couple of months since a group of Saudi businessmen allegedly bought $3.5 billion worth of gold, believed to be the largest ever single transaction for the precious metal. Perhaps in 2009 it will be gold rather than local currencies which become of interest to speculators about monetary reform in the GCC.

Gulf countries are keen to break away from the link with the US dollar because it ties them to inappropriate monetary policies that exaggerate the boom-to-bust cycle in their economies.

This article is from Peter J Cooper’s excellent blog, Arabianmoney.net