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2011 Year End Gold At $1,630...Sub $1,000... Or Entering A Diamond Top?
With gold poised to close 2010 a hair's breath away from its all time nominal high price, all those who had been calling for a major correction in the gold metal "just around the corner", have been completely discredited. In fact, what may come as a surprise to many, gold is Reuters' best performing asset class of the year, well above the Nasdaq, and nearly doubling the S&P performance YTD. Yet the fact that gold continues to be a risk hedge as we suggested first about 6 months ago, has not deterred the empty chatterboxes from providing empty predictions: ten days ago we provided Doug Kass' prediction that gold is about to tumble. Granted our read of his "analysis" was one that suggest a jump in the price of gold was imminent. Sure enough, gold since then surged by nearly $50. And with global central banks having to beat their heads over the issue so well encapsulated by John Taylor, namely that global assets barely generate enough cash to service global debt, lat alone retire it, the only long-term outcome will be one of continued fiat devaluation and appreciation in hard currencies such as gold and silver (naturally with bouts of marked volatility, where one will be able to BTFD). So where will gold end 2011? Here are some more respected pundits' views on what may happen to gold in the coming year.
First, we present the YTD performance of various asset classes as compiled by Reuters:
In terms of gold upside, Tom Kendall of Credit Suisse, who has been the most accurate forecaster of gold in 2010, sees gold closing 2011 at $1,630: a return which should leave relative stock performance in the cold:
Gold may climb as high as $1,630 an ounce next year as investors seek protection from financial turmoil in Europe and the U.S. and as Chinese demand rises, according to Tom Kendall, the most accurate forecaster for 2010.
The CHART OF THE DAY shows gold’s 26 percent gain this year and the Dec. 7 record of $1,431.25 an ounce. The metal may climb as much as 18 percent in 2011, said Kendall, an analyst at Credit Suisse Group AG in London. In this year’s London Bullion Market Association survey, Kendall predicted this year’s high within 0.1 percent. The red line shows the median forecast of 20 analysts surveyed by Bloomberg for next year’s average price, currently $1,400.
“We’re still in an era of unusual financial market instability and stress,” said Kendall, who was at Mitsubishi Corp. (U.K.) Plc when he made his gold forecast for the LBMA. “We’re going to stay with very low to negative interest rates in real terms and that’s also very supportive for gold.”
In China “there’s increasing imports of gold and a real boom in retail investment in physical gold there,” Kendall said. “Inflation is definitely playing into the market” in China, he said.
Elsewhere, Laura Gross of the Best Bullion Blog does her own summary of where some of the more prominent names in the gold space see the shiny metal closing next year:
Jim Sinclair also believes that gold will trade close to $1650. James Turk remains slightly more bullish and predicts gold to move as high as $1800 during the first quarter of 2011. This is certainly possible if interest rates remain low and if the dollar continues to weaken. Turk has also noted that the physical market remains extremely tight, so it will be more difficult for short sellers to maintain as much control as they’ve had in the past. It is important to remember, however, that there are enormous deflationary forces weighing on the economy. As esteemed bank analyst Chris Whalen has cautioned, the banks have only foreclosed on 25% of their distressed assets. The mortgage resets that come due over the next two years will continue to put downward pressure on the real estate market and the US economy.
This means a tug of war between deflation and inflation over the next couple of years is possible. We should also expect the Federal Reserve to respond to any deflation with additional money printing. While the Fed would like the public to believe its role is to maintain a stable currency, it has demonstrated instead that it will sacrifice the dollar to protect the banks. Currently, the Fed is flooding the financial system with $75 million a month as part of its quantitative easing program. The inflation the Fed wants to create is meant to help the banks; the fed does not want deflation because this increases the real value of debts. This increases the likelihood of defaults, which shifts wealth from the creditors to the debtors. Since the Fed wants to transfer wealth to the banks, it will continue its inflationary policies that will further weaken the dollar.
While deflationary forces and rising interest rates may hold gold and silver back over the next couple of years, the long-term trend for both metals is bullish, and it is likely that inflation will drive both metals much higher since the Fed has given no indication that it will end its money printing policies.
Yet not all is smooth sailing for the chartists. We present the view of Abigail Doolittle from Peaks Research who notes that gold may be undergoing what she calls "a Diamond Top – if it is, in fact, such a pattern – and it is both relatively uncommon and most often a bearish pattern that signals a reversal to a downtrend."
Then again, all technicals and fundamentals go out of the window when one is dealing with a room of 10 people, making all the financial and economic decisions for the entire "free" world. Which is why we tend to not engage in long-term prophecies. As long as the voice of the market is subdued by those who can ravage the purchasing power of the middle class unchecked, and print their way out of any incremental mistake their actions lead them to, the likely outcome will probably be the opposite of what actually transpires. As such, until the USSR moment arrives for our own little Eccles politbureau, gold will do whatever it has to do, as the only alternative to central banker lunacy. See you in one year when gold is much higher once again.
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Whenever I discuss with my clients the idea of purchasing physical Gold and Silver I always re-frame the "money" discussion. Rather than talking about PMs becoming more expensive, I always say their money is becoming worth less and less with each move up in Gold and Silver. After they hear me say this again and again it begins to seep in. Then of course they reenter the fantasy world of the MSM and the reprogramming begins by endlessly repeating how Gold and Silver is getting "expensive".
I also explain inflation with visual aids. I always make sure I have a half cup of coffee or tea on my desk. When we begin to discuss inflation all I do is show them the cup and ask them what they see. They say coffee or tea and I explain that this is the dollar. Then I fill the cup to the top with plain water. I then ask them what they see now. They never say coffee or tea but rather they say they see a watered down coffee or tea. It drives the point home that their dollars are being diluted, though I use the term debased or destroyed.
The objective of the Fed induced fantasy is to convince people that their FRNs are static in "value" and that everything else is moving up or down in relation to the bedrock stability of the Federal Reserve Note. Of course we understand that it's the other way around.
The greatest trick of the Fed is convincing people their toilet paper never loses value.
Nice explanation. It is astonishing how many sleep-walkers there still are.
The other thought I can't get out of my head is how much energy (or money) gets expended distorting prices. Propping up stocks and houses, and as I said before, totally inexplicable low interest rates, while suppressing PMs. How does one even begin to calculate the impact of all that?
The only measurement of the impact that seems to be correct is the exponential increase needed to maintain "control" from day to day. Which means that the "control" is illusionary and will soon turn to "out of control".
Gold will get CRUSHED
And the strong hands with cash reserves will buy out the weak hands as they wet their Depends. That is what is supposed to happen.
I haven't stocked any Depends yet, but I hear the Marines like them too for times of battle.
Another theory says average gold price will rise dramatically (along with other commodity prices) and the strong hands will buy into the market as many metal holders sell into the inflation. Transferring the real wealth into the pockets of bigger players. Of course after a major consolidation later, the price of gold doubles again.
Here is my forecast for gold before the end of 2011: $4200
Can anyone prove me wrong? (The USD could fall that much)
Irregardless, there is going to be volatility with every missile that gets shot, every major riot in Europe, every US Municipal Bond that defaults, and every 12 digit stack of FRNs the privately held Fed gens up. In the end, I have to be with Rogers on commodities and agriculture, so I guess it might be time to loosen up the trailing % stops a bit. Best not to watch daily price swings, unless your a trader.
Who the fuck knows what unforeseen events are going to transpire? The entire global market is so manipulated and corrupted by politics and world events, even a Tom Clancey couldn't spin all the possibilities. (War, natural events, politics, new science, etc..) One thing I am pretty much convinced of myself, is things are going to be very different 10 years from now. Gold is certainly a proven historic hedge that I would not want to be without for my family (your percentages will vary).
Anyone not hedging with at least some % of metal should read Shane McGuire's book called "Buy Gold Now". Aren't hedge fund managers notoriously conservative in their investments? See his LMBA preso and watch the FT interview with McGuire.
http://aucanary.blogspot.com/2010/10/pension-funds-and-flight-to-quality...
Update: Newsweek article by McGuire http://www.newsweek.com/2010/12/29/everything-gold-is-new-again.html
By ink on paper? You really think so?
Gold is infinitely malleable. It won't crush. You can hammer it into thread though if you feel like it and sew a blindfold for yourself.
I agree goldmiddle, gold will be crushed back to 250, for my past, prescient predictions, see above
Petrodollar Recycling and The International Markets||1999
http://books.google.com/books?id=I3vWgRS_itIC&lpg=PP1&ots=i6-mWIVWqf&dq=The%20Petrodollar%20%2B%20Kissinger&pg=PP1#v=onepage&q=The%20Petrodollar%20+%20Kissinger&f=false
IDP CONSULTING GROUP, INC. SPECIAL REPORT
http://www.scribd.com/doc/34487410/Petrodollar-Warfare
This is how three shells and a bean under one of the shells is played. The banker magicians are hard at work by creating an illusion of stability. Bernanke is printing money to fund new global expansions at the expense of US taxpayer. Media tells the Serfs to watch Ben's left hand. Meanwhile, Ben is laundering money from the US serfs by means of his right hand.
It's all a trick. So far, 80% of the audience hasn't caught on.
..
If Silver closes above 30.30 the rally should continue. If not, it is a Reversal Day and the end of the road.
Didn't I see you out on Greenwich Avenue digging through the blue garbage bags, looking for recyclables that have a nickel deposit? Keep up the good work. And pull up your pants, for god's sake. Crack kills.
No that wasn't me. Maybe if I just blindly said sell Silver for no reason than to be a troll I could see your point. Since that is not what I did, I can't see your point. Also, Silver is now 20 cents lower than when I posted my comment. Save it for a real troll and respond to me with a Technical agrument. At least the guy who is RoboTradersMom has a good sense of humor. you suck.
I guess I was confused by your little drama queen "end of the road" statement. Perhaps it was just too technical for me.
Silver is down a whole 20 cents since your comment. That is earth shaking. That means it is only up 51% in the past 3 or 4 months. The only "end of the road" I can see is for the dollar and the disciples of the dollar.
Your weekly top calls are the shits.
Yeah, just two weeks ago he stated that if $29.60 didn't hold we would see $26. His record is almost as sparkling as Cramers.
End of the road? You should spend $5 on Netflix membership and rent the movie "The Road"....and then 2nd guess if $30.30 silver is the end of the road.
If you scroll out to the weekly, gold is just in a flag formation. Flags fly at half mast. It is consolidating in the middle of a run.
Scroll out to the three month or year view and Gold remains solidly within it's long term upward sloping channel.
Greek 10 year bonds FOR THE WIN!!
Aren't you glad greece emailed you guys zerohedge and set you straight?
I hope the Greek bonds arent stored in THESE buildings!
YouTube - Shattered windows, blasted cars as bomb explodes outside court in Greece.flv
Awe their poor servants worked really hard building that and would have been paid well if government were able to keep it's promises. But that's how you catch the most fish. Big promises and an army of servants trying to subdue an eve bigger army of people refusing to serve the bullshit.
Looks like a top to me. I'm calling it.
Silver wasn't exactly flirting with $31 last night, but it was it was staring at her ass from across the room when it thought she wasn't looking.
30.93 (SIH11). Across the room? I'd say it's hand was close enough to that ass to feel the heat! Soon it will have Blythe "on pointe."
And still the Karl Douchinger verbal assault continues.
http://market-ticker.org/akcs-www?post=169272
this guy will be bad mouthing gold when it is at 2000 and beyond.
He did his full on Toth thing. He encanted over the chart said just the right words in just the right way. Too bad gold is going to make a fucking fool out of him.
He tries to explain PM in terms of buying stocks. Oh my look at that, it looks parabolic to me. Oh no. Stay away its dangerous. Then several hundred dollars higher he will again make up some excuse. The man just hates gold.
Denninger is as frothing-at-the-mouth, hydrophobically insane when it comes to gold as Jon "Gold is not in a bull market, but it IS in a bubble!" Nadler. I gave up reading his rant-filled MarketTicker blog once that point had become crystal clear after having waded through the dank cesspool of his repeated irrational and disingenuous attacks on gold.
I don't care how much PM has gone up for the day, Nadler always tries to spin it as not all that special and not all that good. They even invite this tool to speak at PM conferences. Why they do this, I will never know. When PM started making some moves, Douchinger removed the PM part of his blog. I guess he did not want to hear the "gold bugs" ask him some questions on it. The man is a one hundred percent control freak. My way or the highway.
well, if I keep saying gold is in a bubble I will be right one day right? And then I can claim I was right all along! I said it was in a bubble 20 years before it happened
I love the barter analogy in regards to taxes - comparing gold to a stolen gun, classic dipstick IMHO. Let him play with his paper and digits. Maybe later you can give him a silver coin out of pity, with the stipulation that he has to to use part of the proceeds to PLEASE fix his hair cut.
He looks like someone put a bowl on his head and cut his hair. Ha ha
Yeah,
Kinda like Meg Whitman in California.
Supposedly spent 140+ million of her reputed billions losing the governor's race and could only get a hairdo worthy of a nun? How much does a makeover cost these days?
How much does a makeover cost these days?
As Matt Taibbi pointed out, Sarah Palin only paid $19.95 for her Chief Flight Attendant of Piedmont Airlines costume. She appears to have several dozen of them, and I tell you what - they are perfect replicas.
I stopped reading his site about a year ago. He is another one that does not see the paradigm shift...believing that all will revert to 'the old normal'...
Karl's resume...from computer geek to day trader to blogger...Now he thinks he is an economist. Why doesn't someone tell him that being an economist is not a hot idea when the world economy has been totally FUed by economists?
Dear Smartest guys in the room including my friend Chris Whalen, RE gold price forecasts.
How can you predict price when delivery capabilitied are unquantified due to the opaque nature of unlisted , un collateralized , unregulated OTC derivatives that have no mark to market mechanism or clearing house ????
Just for grins & giggles, cross arbitrage gold swaps with Sovreign U.S. debt CDS .
Rotsa ruck if you don't hold warehouse reciepts from listed futures exchanges at the minimum or the physical metal in your own possession at best.
This , according to Tavakoli could cause a delivery squeeze that will put gold to $5,000 an ounce. What will the streets of America look like at $5,000 an ounce for gold ?
Janet Tavakoli: Washington Must Ban U.S. Credit Derivatives as Traders Demand Gold
http://www.huffingtonpost.com/janet-tavakoli/washington-must-ban-us-cr_b_489778.html
http://www.huffingtonpost.com/janet-tavakoli/washington-must-ban-us-cr_b_496940.html
5000 dollar gold? The streets will be a very unsafe place to be similar to Argentina in 1999.
http://video.google.com/videoplay?docid=4353655982817317115#
From Yahoo Finance...
Cafferty Faucher LLP Files Class Action Lawsuit against JPMorgan and HSBC Alleging Manipulation of Silver Bar Financial ProductsArticle here...
http://finance.yahoo.com/news/Cafferty-Faucher-LLP-Files-bw-269549129.ht...
Monthly chart looks parabolic ...
Here:
http://stockmarket618.wordpress.com
am completely dicredited now
I think you just have a very 'dry' sense of humor.
Whatever that means.
The diamond formation is a flawed technical analysis. The second low needs to be lower than first low within the diamond (needs to show expansion on highs and lows forst then contraction according to classical TA text from Mcgee), this is a force fitted curve to match a pre-determined conclusion and incorrect. I have no interest in gold going up, I look at it only as a hedge against disaster; if it did go down I don't think this chart formation explains it