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That is true. If gold broke past $1200 that would make a good entry point to sell, your stop isn't far away then. However it is so volatile your stop needs to be wide and gold is difficult to trade at the best of times. One must know this market inside out - I do not.

 

$1202 right now - we are coming up to a potential pivotal point.... I won't be taking the trade this time. But good luck to anyone shorting it, you'll need it.

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Welcome to the new Posters.

 

It's good to have you here

======================

 

A Fibonacci calculation

 

$1,920 x 61.8% : $1.186 ($1920 was the high I noted)

 

Latest low : $1,182

 

gold.gif

==

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Further up this thread, I posted a DOW/Gold ratio graphic, where in about 1975 we saw a horrible correction in gold (the eventual top wasn't until 1979 where got it to $850+

 

I was searching for old Jesse Livermore books, and another one that was written by C M Flumiani was this in 1976

 

The collapse of gold

 

http://www.amazon.co... Maria Flumiani

 

 

---

Perhaps the low will be marked by a book publication!!!

 

115yeardowgoldratio.gif

^ The DOW/GOLD hit 1-1 in 1979/1980

From http://www.sharelynx...owgoldratio.gif

 

Gold price 1920 - 2002 http://chartsrus.com...ixed/GC1900.gif

Gold price 1972 - 1979 http://chartsrus.com...d/GC1976btm.gif

 

DOW http://chartsrus.com...ixed/30DJIA.gif - crashed by 50% in 1975?

 

GOLD+CORRECTION.JPG

Could it be that history is repeating and all we need to do is just add a ZERO?

 

Are we going through 1975-1976 right now?

 

So the top in this gold in 1980 was $850.

 

SO CAN GOLD BE $8500 THIS TIME ROUND? BY about 2017-2018?

 

I have done the same graphic with SILVER - look how it topped out sooner even in the past too.

SILVER+CORRECTION.JPG

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SO CAN GOLD BE $8500 THIS TIME ROUND? BY about 2017-2018?

 

Gold $8,500, silver $180 by 2017/18?

 

IMHO: No problem at all.

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Gold $8,500, silver $180 by 2017/18?

 

IMHO: No problem at all.

 

So that would be 19oz for an av UK home (assuming nominal prices stay same) and a GS ratio of 16:1.

 

Are you ?

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Silver $180? A 1000% return in 5 years is, quote, "no problem" ???

 

LOL with those sort of expectations I can't take chumps like GF seriously.

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Silver $180? A 1000% return in 5 years is, quote, "no problem" ???

 

LOL with those sort of expectations I can't take chumps like GF seriously.

 

As if it had not happened before... :) ...and that within one(!) year in less dire (regarding systemic risk) economic circumstances.

 

Yes, "no problem" at all (of course not for people who ignore everything that happened more than two years ago...). But obviously it all depends - on politics and on market psychology, which are both very resilient when it comes to accepting laws of nature. And - yes - you can ignore them for a while (see second "chart").

 

http://gold.approxim...Silver_USD.html

Silver_USD.png

http://www.northwesternflipside.com/wp-content/uploads/2013/01/wile-e-coyote.jpg

wile-e-coyote.jpg

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SILVER+CORRECTION.JPG

 

I have been talking about trading from new highs in the last few weeks, and this is how one could play it.

 

Well $180 is a good target. Going back in time I would wait for technical confirmation - after a new all time high in 1979 at $7 to go long. Not a day, or a week before! Think of the opportunity cost!

 

If you look carefully at 1973, the same pattern occurred - a all time high was made at $3. Look for the mandelbrot fractal patterns!!

 

In today's future run. I would wait until $50, maybe scale in at $60, and $70.

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Silver $180? A 1000% return in 5 years is, quote, "no problem" ???

 

LOL with those sort of expectations I can't take chumps like GF seriously.

 

Van, History as 'chump'...

 

''By the final quarter of 1979, silver prices had risen to levels between $15.00 and $25.00 per ounce. At these levels several physical market forces combined to act against higher prices. Additionally, the two major U.S. futures exchanges that traded silver at the time took steps to force those with margined long positions to liquidate their positions. During the Hunt brothers’ accumulation of the silver, prices of silver bullion rose from $11 an ounce in September 1979 to $49.45 an ounce in January 1980 based on London PM Fix. Silver prices ultimately fell to below $11 an ounce two months later.''

 

The question is, Are you prepared if it happens again? What conditions, if any, could send silver on a spike like that again?

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What conditions, if any, could send silver on a spike like that again?

Maybe some oil baron billionaires come across some tin foil hat website, and start reading about the end of fiat currency as we know it. Of course we know they will buy up all the silver and lose the lot.

 

 

AS A SIDE NOTE; It is harder today though, as the exchanges stop people having such large positions.

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As if it had not happened before... :) ...and that within one(!) year in less dire (regarding systemic risk) economic circumstances.

 

 

Thanks for your help. I was definitely incapable of pulling up a long term silver chart on my own.

-_-

 

Silver may go to $180, anything is possible, but if you expect to convince me by pulling the bubble chart that happened several decades ago and say "this will definitely happen again" within 5 years then you are in la-la land.

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I have no problem imagining that this could happen. I would not be surprised, in fact, it should possibly go much higher. I did not say that I guarantee it by 2017/18 cgnao style.

 

One thing I have learned since 2007: the sheeple are stubbornly deluded and prefer to be so as long as possible. So, maybe we'll have to wait longer? But it has been a while already...

 

Gravity will win this one too.

 

Thanks for your help. I was definitely incapable of pulling up a long term silver chart on my own.

-_-

 

Silver may go to $180, anything is possible, but if you expect to convince me by pulling the bubble chart that happened several decades ago and say "this will definitely happen again" within 5 years then you are in la-la land.

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Some interesting thoughts via John Mauldin's 'Outside the Box': How Gold Lost Its Luster

 

 

I have recently started to read the work of Ben Hunt at Epsilon Theory. His ideas are interesting in that he examines markets from a behavioral economics perspective, with ample doses of game theory and history, a combination that few people can bring to the table.

 

 

Pure gold bugs will be annoyed, but since I am neither gold bug nor pure, I find this a very useful essay. A small taste –

 

The source of gold’s meaning, whether you are a market participant in 1895 or 2013, comes from the Common Knowledge regarding gold. J.P. Morgan said that gold is money, and he was right, but only because at the time he said it everyone believed that everyone believed that gold is money. Today that same statement is wrong, but only because no one believes that everyone believes that gold is money….

 

To market participants in 2013 gold means lack of confidence in money, and their behavior in buying and selling gold similarly reflects this meaning. Buying gold today is a statement that you believe that global economic events may spiral out of the control of Central Bankers. It is insurance against some sort of massive monetary policy mistake that cannot be fixed without re-conceptualizing the global economic regime – hyperinflation in a developed nation, the collapse of the Euro, something like that – not an expression of a commonly shared belief in some inherent value of gold.

 

Thus the Narrative of Gold is still significant, but mostly in contrast to the narrative that has assumed primacy today: the Narrative of Central Banker Omnipotence. Like all effective narratives, says Ben, this one is simple: central bank policy will determine market outcomes.

 

Then Ben makes a crucial point:

 

You may privately believe that J.P. Morgan is still right, that gold has meaning as a store of value. But if you participate in the market on the basis of that belief, then you will buy and sell gold in an incredibly inefficient manner. You would be a smart gold investor in 1895, but a poor gold investor today.

 

This is some of the best, most fundamental thinking about gold that I have seen. But Ben's thesis is larger than that. He wants to understand the manner in which historical correlations and correlation-based investment strategies come under tremendous stress in markets undergoing structural change. "I get VERY nervous," he says,

 

when I am told that … a socially constructed behavior such as the assignment of value to highly symbolic securities is "timeless and universal", particularly when the composition and preference functions of major market participants are clearly shifting, particularly when monetary policy is both massively sized and highly experimental, particularly when political fragmentation is rampant within and between every nation on earth.

 

 

 

[The full article 'How Gold Lost Its Luster, How the All-Weather Fund Got Wet, and Other Just-So Stories' is attached following Mauldin's introduction / overview]

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Is The Low In For Gold?

 

via ZeroHedge:

 

Citi's FX Technicals group is biased to believe that the low in this correction may have been posted for Gold. Here's why...

Two years ago gold bugs ran wild as the price of gold rose nearly six times. But since cresting two years ago it has steadily declined, almost by half, putting the gold bugs in flight. The most recent advisory from a leading Wall Street firm suggests that the price will continue to drift downward, and may ultimately settle 40% below current levels.

 

The rout says a lot about consumer confidence in the worldwide recovery. The sharply reduced rates of inflation combined with resurgence of other, more economically productive investments, such as stocks, real estate, and bank savings have combined to eliminate gold's allure.

 

Although the American economy has reduced its rapid rate of recovery, it is still on a firm expansionary course. The fear that dominated two years ago has largely vanished, replaced by a recovery that has turned the gold speculators' dreams into a nightmare.

 

The above note is probably a close representation of consensus market view at the moment, except that it is taken from an article in the… New York Times, 29 August 1976 (3 days after the corrective low had been posted in 1975-1976 before Gold started a 3 year rally into late 1979/early 1980)

 

20130705_gold1.jpg

 

Between 1973 and 1974 the DJIA fell 45%. As the Equity market then recovered Gold went into a corrective phase within 3 months that saw it fall 445 as the Equity market rallied.

 

This time around gold has in fact been much more resilient.

– It did not peak until Sept 2011 ( 2 ½ years after the Equity market bottomed out)

– It has so far corrected 39% with an Equity market that has rallied 140% off the March 2009 low (DJIA). In 1975-1976 it corrected 44% as the equity market rallied 76%

 

In 1976 the Gold correction ended in August and the Equity market began a deep correction in September (27% over 18 months). During that period Gold rallied by about 78% and over the 1976-1980 period it multiplied in value by a factor of 8 from just over $100 to over $800. The final part of that rally saw Gold rise from about $470 to $850 over about 4 weeks on the back of the USSR invasion of Afghanistan. Even without that move it still multiplied by about 4.5 times in just over 3 years.

 

So what are we looking at to increase the likelihood of the “low being in”?

 

20130705_gold2.jpg

 

In addition daily momentum is turning up from more oversold levels than those seen before the $270 bounce in 2012. On a daily chart this is the most oversold we have seen since the turn higher in Gold in 2001.

 

In addition it has become very stretched to the 55 and 200 day moving averages which now have a big gap between them

 

An important thing to note is that Gold broke its support level the same week as the S&P broke above its 2007 high. As long as the equity market stays resilient (As we saw in 1975-1976) it may be a drag on Gold’s ability to rally substantially. In the 1980-2000 period when financial assets were aggressively rallying, Gold took a back seat. We may need the market to be more concerned about the financial/economic backdrop before Gold can get any real traction again.

 

The pattern into the low on Gold also reminds us of how the S&P set its low in March 2009

 

20130705_gold3.jpg

 

Once the first impulsive low at 741 was regained by the S&P it never revisited it.

 

A close above $1,322 on Gold, if seen, would look similar

 

In 1976 the move lower in Gold overshot the 55 month moving average by about 14%

 

20130705_gold4.jpg

 

A similar move this time would equate to about $1,185 compared to a low so far of $1,181

 

The 55 month moving average stands at $1,379

The 200 week moving average stands at $1,459

 

IF and when we start to overcome these levels from $1,322 to $1,459 our conviction of a bottom being in place will grow. While we remain below these levels (especially if the Equity market continues to remain robust) we cannot rule out the danger that we could get another move lower.

 

In that respect we would remain focused on the 1975-1976 correction which if replicated could suggest as low as $1,075

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Nice charts, Happy ... ... ... This one seems to have a clear "breakpoint" ... ... ... 5txi.jpg

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GOFO has turned negative. First time since Lehman/AIG.

http://www.lbma.org....wards&show=2013

 

http://www.zerohedge...rst-time-lehman

 

 

So, I am trying to imagine (once again!) the funding/lending scenarios which "LIBOR minus GOFO" sets up.

Who makes what when, and what happens to physical demand when GOFO is negative?

Does it discurage swaps and encourage physical hoarding?

Does it encourage holders of physical to supply high-paying demanders of spot metal?

 

EDIT: I think it just means the "derived lease rate" is higher, because LIBOR minus GOFO when GOFO is -ve is a bigger positive number.

e.g. LIBOR minus (-ve number) = bigger positive number..

Which means lease rates are going up now due to physical supply issues, I think.

 

 

I remember CGNAO commenting on this, and I saved the post from ages ago (I'm weird, I know!):

 

 

Cgnao 7nov 2008-11-08

"inside-baseball" indicators are in fact finally beginning to reflect the tight physical market. Gold lease rates spiked back in September and October, but part of that move was in LIBOR (Lease rates are calculated by subtracting the 3M Gold Forward Offerred Rate (GOFO) from LIBOR).

 

However, the move in lease rates wasn't all the pop in LIBOR. As we can see in the chart of 3-month lease rates, lease rates remain elevated and near an 8-year high, even as 3-month LIBOR has collapsed back to below where it was in June, thanks to the Fed's print-a-thon.

 

That's because the GOFO continues to collapse. As GOFO moves closer to going negative, we get closer to seeing gold move into backwardation, which is fairly rare and uber bullish. Is the physical market tightening simply due to the continued high rate of physical demand and European central banks pulling in their leased gold/not rolling over leases? Is it related to the market sniffing out what you are implying might happen on the COMEX? Or is this related to the gold market sniffing out a potential dollar negative at the coming G20? Or is it all of the above?

 

I have no idea, but the last time we saw GOFO collapse like this (see the chart below), it was in the days leading up the Washington Agreement (and gold's ensuing 40% upside explosion on the news).

 

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I have no problem imagining that this could happen. I would not be surprised, in fact, it should possibly go much higher. I did not say that I guarantee it by 2017/18 cgnao style.

 

One thing I have learned since 2007: the sheeple are stubbornly deluded and prefer to be so as long as possible. So, maybe we'll have to wait longer? But it has been a while already...

 

Gravity will win this one too.

 

Well I will definitely agree with this sentiment. When you have market manipulation on the scale of modern central banking then it is possible that the inevitable can be delay for a very long time indeed.. who can say when it will unravel - decades..?

 

Japan has had ZIRP for 25 years and 300% debt to GDP.

 

Gravity will win, but it may be a pyrrhic victory.

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GOFO has turned negative. First time since Lehman/AIG.

http://www.lbma.org....wards&show=2013

 

http://www.zerohedge...rst-time-lehman

 

So, I am trying to imagine (once again!) the funding/lending scenarios which "LIBOR minus GOFO" sets up.

Who makes what when, and what happens to physical demand when GOFO is negative?

Does it discurage swaps and encourage physical hoarding?

Does it encourage holders of physical to supply high-paying demanders of spot metal?

 

EDIT: I think it just means the "derived lease rate" is higher, because LIBOR minus GOFO when GOFO is -ve is a bigger positive number.

e.g. LIBOR minus (-ve number) = bigger positive number..

Which means lease rates are going up now due to physical supply issues, I think.

 

I remember CGNAO commenting on this, and I saved the post from ages ago (I'm weird, I know!):

 

Short squeeze on Spot gold.

ie Spot Gold is more heavily demanded than forward Gold

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chris_ct: Here are some thoughts on it (also for others, since you're most likely aware of most of them).

 

GOFO below zero means backwardation, i.e. some forward price (of that same maturity) is lower than spot. I know that this may not be entirely obvious from the LBMA's swap definition of GOFO, but a simple no-arbitrage consideration (that we omit here) would show this. Generally (again by a no-arbitrage argument):

 

GOFO + GLR = LIBOR ,

 

where GLR = Gold lease rate.

 

Now we look at what the gold bug interpretation of GOFO < 0 is (e.g. James Turk in http://kingworldnews...old_Market.html).

 

The gold bugs think that everyone likes to own gold forever. So, if tomorrow's gold is cheaper than todays, a gold bug could go long a forward, sell her bullion (gold bugs, of course, actually own some) today, earn LIBOR during the wait, and then buy back at a lower price. So, she will make LIBOR - GOFO = GLR > LIBOR on her net worth today, and she will still have the same amount of bullion in the end! (Obviously, she could achieve the same by simply leasing the gold out at GLR.)

 

If all gold bugs did that, the "arbitrage" (in their minds, because they will have the same amount of bullion plus some extra cash) should close, i.e. negative GOFO/gold backwardation should disappear.

 

But it's there!

 

Gold bug conclusion: no one does it, because what we forgot about is that the forward might not deliver (COMEX meltdown yaddayadda...), so what looks like a gold bug arbitrage is none as there is massive counter-party risk. Hence, GOFO negative means to gold bugs we are close to a meltdown (i.e. meltup in the physical spot price, i.e. soon +$10,000 = no problemo).

 

Now, the other explanation why that "arbitrage" does not close would simply be that someone who is not a gold bug and does not care about ounces but fiat money, simply sees no point in that "arbitrage" as they expect the gold price to fall. So, the same amount of ounces plus some extra cash (as in the gold-bug-arbitrage) might still be worth less fiat money than their bullion is worth today. So why do it? Now, this would explain why the paper bugs don't sell their bullion now, so the negative GOFO persists.

HOWEVER, if the paper bugs really expected gold being worth less tomorrow, they would sell it today, hence driving down the price, hence driving GOFO up again. But apparently they don't!

 

So, what's going on?

 

Well, maybe the gold bugs are right, and something bad in the paper markets is afoot. Or, only gold bugs are holding bullion right now, i.e. the gold market is indeed bombed out. In that scenario, they don't want to do the "arbitrage", but it also does not have to mean failure to deliver in the future. Prices could still go down if the gold bugs or someone else were not willing to buy future supply at higher prices.

 

So, in summary, the two big scenarios that would spring to mind are:

 

(1) meltdown near, or

(2) all gold is now in "strong" hands.

 

Both of these are in line with chris_ct's conclusion that "lease rates are going up now due to physical supply issues". This is also in line with Bubb's short squeeze in (near) spot gold. That would explain why people have to borrow gold to deliver in their shorts, hence driving up GLR which in turn (with LIBOR constant) would mean to drive down GOFO. People being less willing to lend their gold, would be another possibility.

 

Generally, I guess, we could agree with cgnao that this could be interpreted as a bullish sign for gold going forward. And it does not occur very often. Last time was apparently during the Lehman collapse. It was QE to infinity from then on.

 

GOFO has turned negative. First time since Lehman/AIG.

http://www.lbma.org....wards&show=2013

 

http://www.zerohedge...rst-time-lehman

 

 

So, I am trying to imagine (once again!) the funding/lending scenarios which "LIBOR minus GOFO" sets up.

Who makes what when, and what happens to physical demand when GOFO is negative?

Does it discurage swaps and encourage physical hoarding?

Does it encourage holders of physical to supply high-paying demanders of spot metal?

 

EDIT: I think it just means the "derived lease rate" is higher, because LIBOR minus GOFO when GOFO is -ve is a

 

bigger positive number.

e.g. LIBOR minus (-ve number) = bigger positive number..

Which means lease rates are going up now due to physical supply issues, I think.

 

 

I remember CGNAO commenting on this, and I saved the post from ages ago (I'm weird, I know!):

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