GOLD

[narrowescape]

This may lead to further dollar strength with panicked investors and hedge funds flying even faster to "quality" . Absurd isn't it!

 

The decline of the dollar may be left waiting in the wings for a few more months. Then the fun will really begin.

 

For those with dry powder, it could be an excellent buying op.

 

 

What's the betting it's held off until sometime shortly after 4th November? It must be taking every possible scam and spin to keep things going until after the elections. Must be exhausting, which suggests to me it will fall all apart soon after the votes are counted, if they can keep it going until then.

 

 

Edit: Typos

[bitbigt]

Recent PoG developments seem to be making posters on this bb take more distinct stances, and debates are getting more confrontational. So I'd like to put my 2p-worth forward, and being a simple guy its a simple analysis. ...but I think it shows the forest for the trees:

 

Relative currency values, plus a bubble in PoO have simply clouded the data, and so the core trends have generally been overlooked. To bypass this, I have plotted PoG as an average of USD and GBP - essentially treating gold like just another currency valued against a 'basket' of USD and GBP. Then I layer on the key recent events:

 

1. Investors get confident across the board in late 2005, so all market rose (including gold) until it got overstretched and corrected in May 2006

 

2. Credit crunch appears and shocks the world in August 2007, so gold starts a big run up, and overshoots again (not a 'bubble' though)

 

3. Bear Sterns collapses and Fed steps in to save the day, inspiring confidence that the credit crunch is manageable by the Fed and we're past the worst, causing gold to correct from its overbought status

 

4. Oil bubble reaches extreme level and bursts to start a long fall down, causing inflation fears to fade rapidly (unjustifiably) whilst deflation fears emerge (far too extreme), resulting in gold falling % by % with oil

 

Now, some people seem to look at the world and feel convinced that broad and long term deflation is coming - in which case they naturally think the PoG chart will keep coming down from its current level

 

Or, (like me) you feel that at USD 100 oil has basically now corrected (with 0-20% further to fall), you see the current high money supply figures, you realise the increasing large CB baleouts are creating even more money, and you are aware of how much inflationary pressure from abroad is still to be discounted, and you conclude that the current deflation obsession will soon switch back to a pannick about inflation (actually stagflation). In which case, you draw a nice sweeping parabolic curve through the last few years of PoG and buy on these dips!

 

[drbubb]

oil is making a test of $100 now

I reckon we nreded to get this out of the way

[crudeFool]

What's the betting it's held off until sometime shortly after 4th November? It must be taking every possible scam and spin to keep things going until after the elections. Must be exhausting, which suggests to me it will fall all apart soon after the votes are counted, if they can keep it going until then.

 

 

Edit: Typos

 

Hi.

 

Can "they" really manipulate things this easily? If they can, why don't they just do it all the time so the stock market, commodities, the dollar etc fit in with what they want? This will surely cost them a fortune or do you think they can cause market panics and let the poor investor take the hit for minimal outlay?

 

Regards,

Roy.

 

[sossij]

All ok, can now - thanks

[narrowescape]

Hi.

 

Can "they" really manipulate things this easily? If they can, why don't they just do it all the time so the stock market, commodities, the dollar etc fit in with what they want? This will surely cost them a fortune or do you think they can cause market panics and let the poor investor take the hit for minimal outlay?

 

Regards,

Roy.

 

I guess we'll find out in about 2-3 months.

 

 

 

 

[wrongmove]

......

Relative currency values, plus a bubble in PoO have simply clouded the data,......

 

A PoO bubble!

 

Sounds messy - I don't want to be around when that one bursts!

 

 

 

[tl8177]

So we WERE in a "low inflation low interest rate environment", so I have been told countless times. we are now moving into an even lower low inflation low interest rate environment, um I'm confused.

[drbubb]

I think we are getting the TURN here !!

That's the bottom in Gold, Gold shares, Oil, and oil shares

 

Here are THE REASONS:

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

 

= 1/ Gold has hit $736

= 2/ Oil has hit $100-ish

= 3/ HUI has fallen to a OTP level of $260

= 4/ OIH has fallen to ....

 

= 5/ Gold support is indicated at $735 (fibonacci 38.2% retracement of move up from $252),

..... and also at $731, the old Gold high from XXX 2006 - an OTP level

= 6/ Oil support is indicated at $100 (and also $90), as I forecast many weeks ago

= 7/ OTP support for HUI.

..... see the ZG thread on OTP's;

 

= 8/ Capitulation was seen in the 9% fall in HUI on Tuesday, a HUGE drop

= 9/ Several commodity hedge funds have announced closing, their selling pressure hit

...... the market all at the same time

=10/ Valuations are now very cheap

 

=11/ China (and others) may want to do soem strategic buying of commodities, mining and

...... energy companies

 

=12/ OIH has made three lows on consecutive days, all near the same level, and

...... the latest low came on lighter volume. Now OIH is up on the day, dragging Oil higher

=13/ HUI is was up yesterday, and is up again today (so far)

 

I reserve the right to say this was a rubbish call later, when I see the close tomorrow morning.

And, yes, this isnt the first potential turn I have seen. But it is the first support by a strong

Fibo number (38.2% correction)

[wrongmove]

Silver too shows signs of capitulation. Good day today for silver. Only lost about 2.5%. Been running at about -5% DoD.

 

But I have read in many articles that from a TA POV, $11 was "major multiyear support". $11 has gone, so I guess it represents resistance now, rather than support? (not at all sure about this, sometimes support and resistance are the same level, sometimes not. Most posters here only seem to analysis support, rather than resistance)

 

From a TA POV, is it best to wait for a "break through on volume", rather than pile in based on a support level that hasn't yet been properly tested?

 

All a bit mixed up there between Au and Ag, but hopefully you know what I mean.

[TinBrick]

That is why it is called a barbarous relic, rather than just barbarous!

 

Banks hold many assets, of which gold is one. And as you say, they are selling off now. This has to be done slowly, just dumping the lot would trash the price. There is definitely a market for "bling", and probably always will be, although overly high valuations threaten even this. (e.g. Gold is Old)

 

I am not trying to say that gold doesn't have its place in a portfolio (including the banks). If I was as loaded as a bank, I would probably have 5-10%. What proportion of their "wealth" do CBs hold as gold? Are there any reliable figures for this?

 

This seems a bit self-contradictory to me. As I already noted, gold has very limited industrial/commodity use. I can see the logic of CBs divesting themselves slowly so as not to cause huge price falls, although similar logic didn't seem to trouble Gordon Brown when he flogged the UK's gold at rock bottom prices.

 

Paul van Eeden has convincingly argued jewelry demand has only minimal impact on price. (Have a listen to this interview on CWR from last year: http://commoditywatch.podbean.com/2007/10/...chael-hampton.)

 

So why would banks hold 5% to 10% of their assets in gold, if gold is not money or money's equivalent?

 

(EDIT: Incidentally, van Eeden has been spot on in his calls on the PoG this year. In April he said "I would not be surprised to see the gold price drop $150 an ounce, taking it well below $800 again" and in a newsletter from mid-July he gave his estimate of the theoretical "true" price of gold based on the money supply and gold supply growth at $757. I just wish I'd paid more attention! )

[kernull]

I think we are getting the TURN here !!

That's the bottom in Gold, Gold shares, Oil, and oil shares

 

good. I think 1 more thing is needed: a turning point event which has not yet happened

Fannie & Freddie takeover wasn't it, so there must be some another one, and that may be:

- Lehman collapse (and the turnaround may happen just the way like the monday Bear Sterns collapsed, a big short covering)

- FEDs meeting

- Another bank collapse

[hotairmail]

I have to agree with Dr Bubb. There seems to be extraordinary resistance at $100 oil (although Brent trading at c.$98/$99 right now). I think this is the most important support to gold right now.

 

I have to say I think going into the OPEC meeting the Saudis were looking for a settlement at about $80 per barrel as fair value and no explicit cuts in production - but may have come out with an agreement to target $100 alongside the announced cuts.

 

Poss. they are trying to manage an orderly transition to a new price level - one that would optimise revenues by not leading to excessive demand destruction.

[qwerty]

Paul VanEeden latest view here

 

Gold is fairly priced at $760

 

 

 

 

But here's an alternative for people who like alternative investment ideas: Gold is actually trading close to its proper market value; and its previous runup, like that of potash and several other commodities, stemmed from speculative fever that was bound to break.

 

That's the considered view of Paul van Eeden, a long-time gold player, who spent years developing a formula to calculate gold's true worth in the market so that he could become less of a speculator and more of an investor.

 

Gold's current fair-market value stands at about $760 an ounce, says Mr. van Eeden, who is president of Cranberry Capital, a private Canadian holding company. It's a figure derived from looking at U.S. monetary inflation and world gold supply. No other economic or financial issues come into play. It doesn't matter whether the financial system is going to hell in a hand basket or Indians are stocking up on jewellery or central banks are dumping gold in the market.

 

http://www.reportonbusiness.com/servlet/st...ialEvents2/home

 

 

 

I have posted his formula before hoping someone could use it?

 

Consequently, the change in the gold price, in dollars, over time will be in proportion to the inflation of the dollar and inversely proportional to the inflation of gold. We can calculate the theoretical gold price (Aun) as follows: Aun = Aun-1(M3n/M3n-1)(GPn-1/GPn) [Au = gold price; M3 = money supply; GP = gold production]

 

 

Also Stefamo's model over at GIM seems to agree yet no one ever comments on it even though seems to be reliable.

 

http://goldismoney.info/forums/showthread....562#post1284562

[Pixel8r]

 

Like looking at these two charts, Gold/Silver ratio appears to be mirroring the USDX. Converting gold to silver looks like a good idea at the moment. Moving my ratio to 60:40 for the top in the USD bear rally.

 

Live Gold/Silver Ratio

 

 

[Steve Netwriter]

Seems I beat you to it...

 

I bet you are pleased about the Yen.....where is your thread on it? I can't find it with the silly search on the board.

 

In this area:

 

FX, Inflation / Raising Money for Projects

Currencies, Hyperinflation / Sources of Capital

 

Forex Discussions * 1234

Charts, Musings, Predictions

http://www.greenenergyinvestors.com/index.php?showtopic=3239

 

and

 

GBP v JPY * 1234

Any views on where this chart goes?

http://www.greenenergyinvestors.com/index.php?showtopic=3150

 

Somewhere there's an older one called something like "Yen better than gold?"

 

 

 

 

 

 

 

 

 

[qwerty]

"Yen better than gold?"

 

Or the Swiss Franc ?

 

 

 

 

 

[Chubbs]

Having manged to buy in to gold just prior to the two ($) peaks, I've sold out my stake at a loss of 11% (buy high, sell low, I say ). I write this to provide justification, should the price suddenly jump up above $1000 in the next few weeks and I feel myself asking what the hell I've done :-)

 

Five year charts below, in £ and $:

 

 

It's clear that over the last month there a been a huge divergence in PoG between the currencies, as the GBP has fallen in value against the USD from $2 to $1.75. This has meant the dramatic fall in PoG from ~$980 to $740 (25%) has roughly correlated to only £490 to £420 (14%). Reasons for the fall in gold price appear to be the fall in price of oil (from $146 to $100), perceived reduced inflationary pressure from this and oncoming recession, and a stabilisation of the dollar through intervention in the run up to the US general election in the first week of November.

 

Fortunately the corresponding 25% fall in PoG (dollar) has been buffered in sterling by the latter. The near future (<3 months) is thus dictated by two major factors – the decrease in dollar value as it becomes clear the US is entering a deep depression along with the rest of Western Europe; and gold being seen as a store of wealth during these financially unstable times.

 

Looking at the 5 year charts, Gold is rapidly reaching some serious support lines in USD, with both the March 2006 peak, and the 2006-8 base trend line. However, there is still a major discrepancy in GBP, which potentially still has 24% to fall from peak (from £420 to £380) or 30% (to £340)

 

My instinct is that gold will fall further, and remain in the $650-$740 range until November. Dollar trading in the region $1.65-$1.80 in this time will still partially buffer the price in sterling, but I believe the devaluation of the dollar w.r.t. Sterling after the election will be much more rapid than the bounce back in gold. USD/GBP would only have to move by 20 cents to drop PoG by 10% sterling.

 

So, to justify selling out – my short term belief is that PoG has further to fall – around 10% in USD. This will be accompanied in the next 2 months by a fall in value of the dollar, which will cause the - thusfar cushioned – price in sterling down by by 20%. This more than makes up for trading cost losses of a couple of percent. It is my intention to re-evaluate in mid-November to assess the rate at which the two opposing forces – sterling “recovery” and gold recovery – are playing out.

 

While I believe in the long term value of gold as an investment, I don't see the value in holding a falling asset short term, which has a high risk to the downside during that time, worsened by currency fluctuations. Note – My position in gold is an investment rather than a store of wealth - I hold gold in BV rather than physical - because I believe if things get bad enough that people are having to sell gold to dealers to raise cash then there's more things to worry about, with 95% of the people rioting...

[wrongmove]

This seems a bit self-contradictory to me. As I already noted, gold has very limited industrial/commodity use. I can see the logic of CBs divesting themselves slowly so as not to cause huge price falls, although similar logic didn't seem to trouble Gordon Brown when he flogged the UK's gold at rock bottom prices.

 

Paul van Eeden has convincingly argued jewelry demand has only minimal impact on price. (Have a listen to this interview on CWR from last year: http://commoditywatch.podbean.com/2007/10/...chael-hampton.)

 

So why would banks hold 5% to 10% of their assets in gold, if gold is not money or money's equivalent?

 

(EDIT: Incidentally, van Eeden has been spot on in his calls on the PoG this year. In April he said "I would not be surprised to see the gold price drop $150 an ounce, taking it well below $800 again" and in a newsletter from mid-July he gave his estimate of the theoretical "true" price of gold based on the money supply and gold supply growth at $757. I just wish I'd paid more attention! )

 

I haven't listened to the interview, but if it was last year, I agree. Jewelry demand had dried right up on high prices. However I would say at the moment, that jewelry was the main prop. At least they are buying. Investors aren't.

 

 

The banks have inherited this gold from years ago. Now they are slowly getting shot. Not a strong argument for "gold is money", IMHO.

 

 

 

[TinBrick]

I haven't listened to the interview, but if it was last year, I agree. Jewelry demand had dried right up on high prices. However I would say at the moment, that jewelry was the main prop. At least they are buying. Investors aren't.

 

Essentially, van Eeden's thesis is that jewelry demand is an insignificant component of the gold price, whether that demand is high or low. As a proportion of the total supply of gold, jewelry demand is not enough to make any difference either way.

 

The banks have inherited this gold from years ago. Now they are slowly getting shot. Not a strong argument for "gold is money", IMHO.

 

I'm sorry, I can't reconcile the above with this:

 

If I was as loaded as a bank, I would probably have 5-10%.

 

Why would a bank (or anyone) hold 5% to 10% of their assets in a metal which has very limited industrial/commodity uses and is otherwise only used as jewelry, unless that metal was also considered to be money or money's equivalent?

 

(EDIT: I should also have pointed out that not all CBs are selling gold, and some - notably the Russians - are buying.)

[wrongmove]

Why would a bank (or anyone) hold 5% to 10% of their assets in a metal which has very limited industrial/commodity uses and is otherwise only used as jewelry, unless that metal was also considered to be money or money's equivalent?

 

I disagree with you about jewelry. Where do miners sell their wares when speculators are away elsewhere? They have to cover their costs.

 

Jewelry demand should keep gold above the cost of production. When it doesn't, mines close. So gold generally keeps up with oil, but is much easier to store longterm.

 

 

So if you are totally loaded, a few % in gold seem sensible to me. Especially if you are a central bank and are supposed to keep plenty of oil tradable readies handy. If you are not, you generally have more important demands on your money than hedging oil, IMHO.

 

 

Sorry if this doesn't fit the theories, but I enjoy formulating my own, based on what I see and understand. But of course they are just theories, just like everyone's beliefs about the future.

 

 

 

 

 

[notanewmember]

i ve just got in.

 

Anyone know what to make of Saudi Arabia walking out of OPEC and will continue to pump more oil?. Oil looks to head lower on the news.

 

Got to be the darkest hour for PM and energy bulls?

[G0ldfinger]

... Got to be the darkest hour for PM and energy bulls?

I think some suffer more than others, depending on degrees of confidence, leverage, overall commitment, and time horizon.

[HPCsoYESTERDAY]

The spin and bu11shit out there at the moment is incredible.

 

the DOW rallies late in the session on the possibility of a buyer for Lehman, GM and Ford are up on the prospect of bailouts. Surely, if (miraculously) a buyer is found for Lehman over the weekend it will be just like Bear Stearns (i.e. Fed involvement).

 

Once (if) GM gets a bailout, then it will be open season (hence ford share price rises). Welcome to the new capitalism baby!!

 

http://www.reuters.com/article/marketsNews...20080911?rpc=44

[notanewmember]

I think some suffer more than others, depending on degrees of confidence, leverage, overall commitment, and time horizon.

 

Must be pain out there!

 

I m off to Jersey next week, might buy some duty free physical silver, [i m travelling too much] so when i m back, I expect the bull market to resume normal service!