romans holiday

RH, how long are you planning on sitting in AGQ? I've got some cash coming in this week that I fancy betting on a 6-9 month silver up-leg. Haven't decided yet whether to put it in goldmoney, a backed etf, or LISL (similar to AGQ). It's the time decay that bothers me. Obviously if this up-leg plays out similar to the last one then it's a good bet, but I always get anxious with leveraged etfs over more than a few weeks.

Apologies for jumping in with a question on my 2nd post, but I'm a long-term lurker and I've previously found your opinions v helpful

Hello, and thanks for the compliment. I feel relatively confident that silver should be on a decent up leg for the next year or two, and so the 'sit and hold' position in AGQ should be that long [that said, am also hedged against this]. I then plan to sell the lot on some spike as these funds are ear-marked for property. In the past, silver spiked to 20, retraced to 10 then spiked near 50. If that is matched in the next leg up, silver should strengthen from 25 to above 100. Even with the element of time decay taken into account, the instrument should at least perform as well as silver. Take the element of time decay out, and calculate AGQ with silver at 100, and the number is a bit mind-numbing.

Actually, you may well find that the points where you are tempted to sell are the wrong points, it's at the point where you absolutely do not want to part with the position that you need to start thinking about unloading. Here's a quote of mine back when silver peaked in April 2011;

 

I'm not posting this to "big myself up", I'm posting it to point out to you how very difficult it is to unload at precisely the right time since the bullish fervour was unrelenting, people were talking about the move continuing up to $75 and $100 and there were a lot of expectations in the market that this would happen, (together with some absurd predictions of $6,000 etc). I am always very wary indeed when I hear people in the financial markets (escpecially prominent voices) talk in absolute terms.

 

eg

 

 

That was right before the top and he got it 180° wrong, in fact he couldn't have got it more wrong.

 

It's worth bearing these things in mind Romans.

Thanks for the thoughts PD, but I think you haven't understood my over-all strategy. It is a hedging one, in the full sense of the word, so I should not find myself tied up in a psychological knot about whether to sell or not. Your reply is to a post where I was wearing my bullion bull hat. If you look at the following two posts of mine, I am wearing my dollar bull/ trading hat.

To clarify, here are the two aspects that hedge each other:

1] Stay long AGQ. Even with time decay, the double leveraged instrument should do at least as well as silver. Here I am wearing my bullion bull hat.

2] Trade another AGQ position where I am concerned solely in using the volatility in silver to increase US dollars. Here there is not too much concern about the price of silver going higher when I sell as the long position covers that. The point is to identify reasonable/ good enough entry and exit points. I'm thinking at this stage of selling each time on a 70-100% gain. I am wearing my dollar bull hat here.

On the face of it there is a straight hedge here. But over and above this, and with the macro theory of hyper-deflation in mind, the long hold and the short trade of AGQ can also be considered complementary; the expectation being both positions appreciate in value due to the fact that silver will remain volatile to both sides against the dollar.... though appreciating in the aggregate. It will be interesting to see whether the trade will outperform the hold.

PS, I've never followed James Turk, nice enough guy but he has his own wheel-barrow to push being in the bullion business.

Does "take a 50% profit on half" = "Sell 25% of the total" ?

 

No, it means selling half the position, and realizing a gain of 50% on that in US dollars. And then recycling those funds into AGQ at an opportune moment, on a correction, and re-selling on a spike etc. The reason being to reduce risk in an instrument where there is uncertainty about long term performance, ie, time decay.

I do this because I am at the moment very heavily in an instrument which leverages the volatility of silver.

Comparing AGQ to silver, you can see the 'time decay' element in the leveraged ETF. Though excellent for short/ medium term volatility, time decay may make it more problematic for sititng on. To hedge the risk of this, I've decided to trade half the position; take a 50% profit on half, and re-invest after a period of consolidation. Even though this may mean buying at a higher price, the point of the hedge trade is to increase a US dollar position.

I am trying to hold onto my UGL trade

 

I bought 60x Bull Spreads : UGL-$90 / UGL-$100, and just sold 18cts, to pay for the whole trade

 

Just lately, my Overall account has been rising by $20-40,000 per day,

and I feel a need to take some profits here and there

Sure, but a Jesse Livermore quote comes to mind... something along the lines of letting your winning position run. And this from a trader.

It was certainly an eventful today. So, with QE3 announced, how high is this going to go? I see this double-whammy of seemingly infinite QE and the traditional seasonality in PMs to be very, very exciting.

 

I now see us entering a phase of steady appreciation until mid Feb, with the occasional mini-smackdown to keep us on our toes. I've said before I was targeting 70, but this ETF certainly moves quickly - I now think that will be reached within weeks. 80 by the end of year is possible, 90 by mid Feb (end of favourable PM seasonality).

 

Longer term than that, I think the patient will be further rewarded. Eventually I expect some form of regional credit event or restructuring,to contribute to a spike. I don't know what form this will take, but they will be no doubt when it happens.

Perhaps the hardest part of the trade, besides having sat in dollars and waited for the spike to correct, will be holding on to the position, It will be very tempting to sell at 80, or 100, or then again at 200 and then 400.

My exit plan consists of being able to buy an apartment in the capital, and with plenty of capital spare. Could be another year or so in the camper..

After the correction of '08, gold steadily strengthened 50%, over a couple of years, before breaking out of the trend on its spike to 1900.

If gold 'rhymes' here after this correction, it should steadily strengthen to 2700 [1800 + 50%] over the next couple of years.... before breaking out on a new spike. That spike could see the price go briefly to 3400 odd.

http://news.goldseek.com/BullionVault/1347284340.php

Investment bank UBS today raised its one-month gold price forecast from $1700 per ounce to $1850 per ounce, and its silver price forecast to $37 per ounce, up from $32 per ounce.

One Citi analyst meantime says gold could rise to $2500 per ounce in the first quarter of next year, the New York Post reports.

Looking at the 5 year log chart, gold only a smidgen of its high.

It does seem to give a very different perspective on things. That chart looks like we are safely in the breakout and heading back for the range trading where we will reach it again at ~USD50.

 

I am changing from cautious to bull in the space of a log chart - thanks for asking for the log version. Are you reading that in a similar way to me?

Thanks Klogger. That's the chart screaming bullish. Yes, reading in a similiar way; I reckon the next year will see silver push back to 50, and then a year or so after that break out and spike to 100. I heavily bought silver on this dip, and will be putting in sell orders on silver at 90 or 100 once silver strengthens to 50 odd. Because taking the previous pattern into account silver could easily spike to 100 only to consolidate back to 50.

Everything I read about silver is very bullish at the moment, it is hard to find a bear argument anywhere. However it seems to me that silver was range trading at this level from 10/2008 until 10/2010. It is currently back within that area, so there may be significant resistance at the green arrow and this rise is due to the bounce of the 144 MA.

 

Nice chart. Any chance of doing it on a log chart?

The rise in physical seems to be on a low volume (100,000 a day with 5 times that appearing more typical since February according to NetDania), and on the daily chart the RSI is at 78. I am expecting a slight fall back over the next week to 28.50 or 29. Can anyone confirm to a newbie that the rise of 8.5% in a week on low volume is typically a sign that a slight correction is due?

I kind of hope so, but doubt it. An elderly aunt asked me about investing in silver, and I told her to think about it a bit as one has to be careful about financial things with elderly relatives. Anyway sure enough, silver wakes up and heads north a bit; and though it may consolidate, it may equally carry on slowly upwards as it has been in a downward consolidating trend for so long, and now the season is right for it to start strengthening.

Barron gave this forecast for the next 6 to 12 months: “Over the next six to twelve months I expect to see an incredible amount of money printing. I also believe we will see a turnaround from talk of deflation, and it will flip very rapidly and in dramatic fashion towards inflation.

Inflation? Deflation? All this flip-flopping derives from the lack of a unifying clear idea of the big picture. Identifying inflation/ deflation with higher or lower prices was always considered a newbie error. In order to avoid what the economists termed 'money illusion' we have to focus on monetary value, which is at a more fundamental level than the surface of units and prices. I think investors struggle with this today because our thinking tends to confine itself to 'appearances'. There are not many 'metaphysicians' left who see beyond the short term flux.

The way to unify the appearances of both inflation and deflation is to view all things, currencies included, deflating relative to gold, the most powerful symbol of money. The deflation/ depreciation of currency relative to gold + the deflation/ depreciation of assets relative to currency = hyper-deflation.

Early spring for silver?

GSR still relatively low, suggesting a bit more to the downside for the metals:

It may refer to forced liquidation from leveraged traders. Since silver has come down to $26 a couple of times (and more recently quite close to it), there are likely to be a large number of stop orders clustered beneath $26. If those are set off during another downswing it could tigger a mini-cascade lower but I would be surprised if it went down as far as $18 in the short term, maybe $22.

 

Although I don't own any (and haven't for a while) I would prefer to see it hold at $26 since breaking that level wouldn't augur well for the precious metals complex, and I own gold instead of silver these days.

GS ratio is also suggesting a further wash out. A spike above 60 could see the end of this current down swing. Am hoping to convert the few ounces I hold at Goldmoney to silver once the ratio is above 60.

With all due respect RH, I feel that silver is now a "constant busting flush", that is, when it raises it's head, it's gets flushed by the hedge funds. It's no longer below the radar.

Who knows for sure, you could be right. Yet I think there's a strong case for arguing the long term trend for silver is still alive. Premissed on the following:

1] Silver leverages the volatility of gold [not simply a leverage on gold].

2] Gold looks clearly to still be on its long term track of appreciating around 20% annually.

In the short term I think you'll right where silver will bob around in a boring range [remember the drawn out doldrums in silver before it broke out and spiked]. So it may be a good six months or a year or so until silver builds up a bit of excitement. Then its off to the races. Putting in a bet?

And gold IS money; it is the most natural form of money - that of a medium of exchange. Do not make the mistake of confusing Money for Legal Tender.

Anything can 'be' money... or more strictly, used as money [its basis is functional... the abstraction comes later]. Money itself is just an idea, and then the various forms it takes in the real world are currencies.

The fact that it is non-sovereign is one of it's virtues. It means it has been chosen by the people; the trading public, not the dictators.

A currency is an institution, and institutions create order out of chaos. There would be no trading public, no markets without institutions. They are the condtions which make civil life possible [just been reading Vico ]

It's not fiat.

It's a non-sovereign currency. But that could change easily with the re-introduction of a gold standard, where it would be a super-sovereign currency once again. There's no 'natural' money. In a more 'natural' state you just have barter. Money per se is fiat.

After a year's consolidation on a spike, looks ready to run up to 1800. This would also put it on the long term trend line.

If "gold has gone up by 23% per year", that's a purchasing power increase of more like 11% per year.

Not very much during such a turbulent and dangerous economic period.

Methinks there's a lot of catching up to do

Yes.... against your real bread and butter stuff. But against over inflated asset prices it's quite another story... potentially. If/ when property prices come off, gold relative to them could appreciate that 23% yearly. And then if commodities continue to be unstable [and the kiwi dollar with it] then the cost of real stuff could even fall by that much. Over say the next six years, in this deflationary* environment, the purchasing power of gold could easily double against everything.

*'hyper-deflation' where everything, currency included, deflates/ depreciates relative to gold.

Hi Romans

I see you're in the same time zone

 

A few points from me

1. I don't see "gold as an investment". To me, "an investment" is something you go into in order to try and "make money".

I see gold, and to some extent silver, as a way to "not invest", ie to avoid all the speculative investments, whether paper "money", stocks, etc.

Sure, strictly speaking, I don't think it's an investment either. I see it as a 'non-sovereign' form of liquidity. Roughly speaking, I call it an 'investment' though...in so far as it is something that can be held over the medium/ long term.

2. The Gold charts seem to be following the general trend since 2001. It's rather boring. One day that trend will be broken, and the paper currencies will drop much faster than they have been.

Sure, but I reckon people will get excited when it goes through 2000, just like they did when it went through 1000.

3. I don't see gold appreciating at all. I do see the paper currencies continuing to fall.

It's all relative isn't it. If gold is falling/ depreciating against gold, then gold is rising/ appreciatng against 'paper'.

Updates available: http://gold.approximity.com/gold_charts.html'>http://gold.approximity.com/gold_charts.html

 

The gold bulls have been right all the way. It's all falling apart: Europe, UK, US, even China. Even Bubb has given in now and is bullish. Pretty quiet here nowadays without the bulls.

 

Anyway, we had a bounce over the green line! I still think it will mostly hold.

 

 

As for houses, a bounce here too, but the line is holding.

 

http://gold.approximity.com/gold_charts.html

 

Sinclair model update: http://gold.approximity.com/since1970/Gold_Price_to_External_Debt_Equilibrium_Price.html

 

What can I say? Gold is just dirt cheap!

 

 

Until next time...

Hi goldfinger... good to see you post updates on the ratios. Any update on the hyper-inflation model?

Pictures of NZ, tales of a Roman Holiday, and apparently the "Goldbugs" have left?

I haven't been following the charts much recently, I just check occasionally.

Am I the only one who thinks those charts are screaming one thing?

 

If this was Star Trek, Scotty would be screaming "the pressure is too great Capt'n, she's gunna blow" lol

Hi Steve, good to see you post again. 'Goldbugs' left? On the next spike up there's a good chance a few will be back.... thats' volatility for you.

So, what do you think of the long term log chart? Convinced yet about gold appreciating 20% year on year?