The GOLD scream room

[ochotona]

We can't have tariffs now as we did 120+ years ago. Parts and industrial sub-assemblies literally fly back and forth across the Mexican and Canadian borders into and out of the US. The ERP systems operate on a JIT zero-inventory basis (inventory is waste), so if there is a delay in customs, then the assembly lines go dead.

I work for a little eensy-weensy company... we import from Asia, assembly in Monterrey MX, and ship worldwide but mostly back to customers in the USA. The IP is all American.

I'm sure we could reshore the assembly back to the USA, because we did the assembly here before COVID... but our customers are going to pay more. There is no domestic source for the parts at this time. Zero zip zilch nada. No Asian parts, no business, but see below. *

Our customers are US and Global oil and gas companies, so that tiny ennsy-weensy few million extra of cost from us will get spread out over...

ALL OF YOUR GALLONS OF GAS / DIESEL THAT YOU BUY !!!

Everything is connected to everything else these days. If you think otherwise, you're kidding yourself. You're just having conservative nostalgic cocktail hour talk. Tariffs on our tightly integrated co-manufacturing partners would royally screw up lots of things, especially automotive.


* COULD there be a USA source for our high performance computing (HPC) components? Sure maybe. Someday. Reminds me of a story. Two people are lost in the woods, and starving to death. Suddenly one of them, the economist, starts to smile, then laugh, then scream. The other asks, "What?" The economist replies, "I'm so happy because I'm thining of the delicious food my demand is going to create!"

Also, how much would that 100% USA sourced and made smartphone cost you as compared to the $199 Motorola? (Still $199 I got an email this week about a sale). 10x more costly?

[dualstow]

Sure wish I knew what all these initialisms meant.
I know MX = Mexico and that’s about it.

[ochotona]

What is Enterprise Resource Planning (ERP)?

Enterprise Resource Planning (ERP) is a type of software that integrates essential business processes within an organization. It streamlines operations across departments like accounting, procurement, project management, and supply chain. ERP systems support real-time data and analytics, aiding in decision-making and operational efficiency. They can be customized for different industries and are available as on-premise or cloud-based solutions.

What is Just-In-Time (JIT)?

"The success of the JIT production process relies on steady production, high-quality workmanship, no machine breakdowns, and reliable suppliers."

IP - Intellectual Property.

[coasting]

"The success of the JIT production process relies on steady production, high-quality workmanship, no machine breakdowns, and reliable suppliers."

IP - Intellectual Property.

Post-Covid, many US companies (and citizens) have second thoughts about this just-in-time supply chain. For T-shirts and toys, who cares? But certain technology and pharmaceuticals? For important goods, I prefer just-in-case supply chain and can accept less efficiency/more cost in exchange. Being dependent on China or other unreliable partners in a crisis is not where I want to be regarding goods that really matter.

The Intellectual Property theft is a whole other area where the US has been taken advantage of.

[ochotona]

Being dependent on China or other unreliable partners in a crisis is not where I want to be regarding goods that really matter.

I'm not thinking about China, I'm thinking about Canada and Mexico. Tariffs are going to turn those reliable trading partners into unreliable ones; everyone will run away from the drinking water well (of cross-border trade) if the water has been poisoned, or even if one partner threatens to poison it.

The unreliability and therefore breaking of our JIT supply chains would have been entirely self-inflicted. To what good end?

[coasting]

Our customers are US and Global oil and gas companies, so that tiny ennsy-weensy few million extra of cost from us will get spread out over...

ALL OF YOUR GALLONS OF GAS / DIESEL THAT YOU BUY !!!

This is the "pass through" argument. The idea that tariffs will just be passed through to the consumer. That could be, but it won't necessarily be the universal case depending on the product/company. The possible outcomes:
1) First possibility: the foreign manufacturer decides to eat the cost of the tariff. This is a good outcome for US government & US consumer. Bad outcome for investors in the foreign manufacturer: less profit.
2) Second possibility: the importer decides to eat the cost of the tariff. This is a good outcome for US government & US consumer. Bad outcome for investors in the importer: less profit. (Sorry Walmart?)
3) Third possibility: the cost of the tariff is passed through to the consumer. US government get its revenue, but it's a bad outcome for US consumer. However, this only works if the company has the market power to do so. It's a competitive world, so maybe a competitor decides to absorb the cost and now the company loses sales by trying to pass through the cost to the US consumer.

* COULD there be a USA source for our high performance computing (HPC) components? Sure maybe. Someday.

And that is the idea behind tariffs - encourage production in the US. That is the surefire way to avoid tariffs. So two possible outcomes from tariffs:
1) A good is still produced outside the US and a tariff is paid when it is imported. This generates revenue for the federal government which, if you've followed the US deficit situation lately, is sorely needed.
2) Manufacturing is relocated domestically which many in the US believe is needed after being hollowed out from decades of "globalization" as manufacturing left the US and flowed to China and other countries. Yes, this will take time. But it is happening.

Where manufacturers can automate production as much as possible, this reduces the cheap labor advantage that a country like China has compared to US labor. Because robots cost about the same anywhere in the world, goods can be produced domestically and more cost competitively.

[pmbug]

- Highly publicized London delivery delay
- Korea metal shortage
- China banks unable to keep up with retail physical demand
- Chinese insurance companies to start buying ~10% of global gold production
- refinery/mint premiums on physical metal rising
- some mints suspending production of gold bars
- Mainstream media talking about potential gold revaluation (waking up retail investors)
- Elon Musk and Rand Paul talking about auditing Fort Knox (waking up retail investors)
- US retail starting to wake up and buy (they were selling in 2024)

There are big signs of stress in the global physical gold market. If it continues, the paper markets (futures/London spot) are going to display some real fireworks.

[dualstow]

I saw a headline or chyron suggesting that Musk would be able to see his net worth if he visited Fort Knox.

[ochotona]

I would love to see a gold ETF blow up. That would be really amusing. The leveraged inverse ETFs are very prone to blow up, so GDXD, GLL, DGZ, DZZ, DUST really could fall apart if the gold bull continues or even if only volatility increases.

SO PEOPLE... what happens to the gold market if the US revalues the Ft. Knox gold from $42 to something closer to market price? Bullish or bearish?

[ochotona]

BUY THE DIP

[dualstow]

BUY THE DIP

earlier:

I am making another price pronouncement:

If gold corrects back to $2775, buy that dip.

That is all.

I was actually thinking about buying today.
I’ll probably click the button tomorrow.

[Smith1776]

$3000!!!!!

[ochotona]

I follow Jordan Roy-Bryne. I subscribe to his newsletter. He has said that $3000 was the measured upside target based on the log term cup and handle formation, but the measured upside target done on a logarithmic axis is $4000, to come maybe six-twelve months after $3000.

[dualstow]

My Dad is texting me to congratulate me on the 3000.

[yankees60]

Of course, the 3,000 is just an absolute, nominal number. I'm sure someone in two seconds can provide us an inflation adjusted chart of gold prices which will show 3,000 being far below its all-time highs?

[Xan]

Gold was $850/oz in February of 1980, which the Bureau of Labor Statistics says is equivalent to $3,437.51 as of February of 2025.

[ochotona]

Gold was $850/oz in February of 1980, which the Bureau of Labor Statistics says is equivalent to $3,437.51 as of February of 2025.

At least $400 left to run!

[seajay]

My Dad is texting me to congratulate me on the 3000.

Crickey. How old is your dad?

[yankees60]

Gold was $850/oz in February of 1980, which the Bureau of Labor Statistics says is equivalent to $3,437.51 as of February of 2025.

Using this yearly calculator here:

https://www.usinflationcalculator.com/

I get $3,292.

[dualstow]

My Dad is texting me to congratulate me on the 3000.

Crickey. How old is your dad?

80s

[ochotona]

Gold was $850/oz in February of 1980, which the Bureau of Labor Statistics says is equivalent to $3,437.51 as of February of 2025.

Federal Debt to GDP ratio:

Q1 1980 31%

Q4 2024 122%

Back in 1980, the Federal debt crisis was more than a generation away. Today, we're on the threshold. Gold isn't going to stop at $3400-$3500, though I fully expect a pullback, even a cyclical bear market, within the context of a secular bull.

[sophie]

I would love to see a gold ETF blow up. That would be really amusing.

I had been thinking this could happen if the gold market were to have either a big correction or big runup (like we're seeing now).

Going to check my accounts this weekend and will probably find myself having to rebalance. Most excellent, I can get rid of the last of the "paper gold" in one of my tax-advantaged accounts, and buy cheap stocks. Anyone else doing that? I've been getting increasingly itchy about wanting to dump that ETF and here's my chance. I just wish it was in my Roth IRA instead of the Fidelity solo 401K, because I'm very much overweight on tax-deferred....oh well.

I had been buying gold when the price was $2000-$2200, with much trepidation because the price felt high. But, good old PP/GB....it really does work.

Oh and a quick note about buying Treasury bills in a tax-advantaged account especially at Fidelity: I've been getting nastygrams about not enough cash to cover the T bill trade potentially triggering "liquidation", when the autoroll buys a new T bill a few days before selling the maturing one. So probably to be safe it's best to make sure you have enough core or money market cash in the account to cover the maximum size of your T bill autorolls.

[Smith1776]

I would love to see a gold ETF blow up. That would be really amusing.

I had been thinking this could happen if the gold market were to have either a big correction or big runup (like we're seeing now).

Going to check my accounts this weekend and will probably find myself having to rebalance. Most excellent, I can get rid of the last of the "paper gold" in one of my tax-advantaged accounts, and buy cheap stocks. Anyone else doing that? I've been getting increasingly itchy about wanting to dump that ETF and here's my chance. I just wish it was in my Roth IRA instead of the Fidelity solo 401K, because I'm very much overweight on tax-deferred....oh well.

I had been buying gold when the price was $2000-$2200, with much trepidation because the price felt high. But, good old PP/GB....it really does work.

Oh and a quick note about buying Treasury bills in a tax-advantaged account especially at Fidelity: I've been getting nastygrams about not enough cash to cover the T bill trade potentially triggering "liquidation", when the autoroll buys a new T bill a few days before selling the maturing one. So probably to be safe it's best to make sure you have enough core or money market cash in the account to cover the maximum size of your T bill autorolls.

Great to see you around again.

[sophie]

Thanks! I do check in now and then but I haven't posted in a while....

Anyway, no rebalancing yet. Sitting tight. Wondering what everyone else is doing?

[dualstow]

Sitting