Debugging Gold for the Gold Bugs

Fibozachi's picture

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Anonymous's picture

Well 1100 certainly wasn't the top. LOL

Prechter was on goldseek last week saying that US sovereign debt default would lead to deflation (i.e. uber-strong US$). WTF?

maggitkd's picture


to my knowledge inverse head and shoulders is more of a bottom pattern, and less of a continuation pattern.

maggitkd's picture

Good article, thanks for it. Interesting to see someone daring to write something other than buy gold buy gold.

FreddyInBangkok's picture

Fibozachi, being you're a chart man do a $UST10Y:$UST2Y yield curve overlay on the HUI & look at the action in 2003 when the yield curve rose, peaked & fell. The current 10-2 YC is at a new high of 3.97 & may have more to go. In 2003 gold & HUI rose before, through and after 10-2 peak. Gold even rose ($327-$414) post 1992 10-2 peak in a bear mkt.

Homestake took off in 1924 as the yield curve rose from its 1929 low. The YC peaked in 1932 & stayed high for 3 full years till 1935 w/ a sharp downspike in 1931 (similar to 2008) then another sharper downspike in 1933. Homestake dropped slightly with the SM in 1929 (2008?), other than that HS went hyperbolic from 1924 to 1935 & stayed up there till 1939. Homestake rose before during & post YC peak 1929-1935. The 2008-201? YC pattern is showing almost identical signs as it unfolds. 

Seems the yield curve has great influence over PMs. Today's yield curve has been rising for 2 1/2 years w/ no sign of stopping. If it repeats the 1929-1935 pattern this time around indications are gold has a further 3-4 years to run (2013-2014) without serious setback. Guess is we're about at the 1931 equivalent stage (sharp YC spikedown occurred) & the 1975 stage.


In Kondratieff terms (valid theory or not I do not know) the K-Winter started in 2000 [depression] putting us about midpoint  K-Winter also started in 1929 & ran for 20 years till 1949. However,, the 1972-1980 bull ran from mid to end of K-Summer. 1970s a different animal to GD & 00s.

PS got a better Homestake chart & shows roughly 15% drop in 1929, 20% in 1931 & 20% in 1933. The 1931 & 1933 drops were both matched by ST yield curve declines. 1931 to a few months to drop & bounce back & 1933 was a flash event.


FreddyInBangkok's picture

Anon #121681 said

"I think, in retrospect, you will find that you were penny-wise and pound foolish with that investment portfolio allocation, my friend.

Silly question, but is it really worth the unlimited risk of holding paper and not being able to transfer it to the real McCoy? You think you are smart enough to time it ahead of ALL the other Paper gold holders out there".


would you bunch in share certificates of say Goldcorp, Anglo Ashanti, Kinross, NGD warrants etc with that paper or are you talking Comex & ETFs? Agree, the latter two are risky items. What about mining shares?

Anonymous's picture

My portfolio allocation is 95% physical PM's (the real, roll-around on in the bed naked kind).

5% is in PM Miners, rare earths, uranium miners.

Does that answer your question?

FreddyInBangkok's picture

Pretty much. Just an observation here ... say (very) large numbers of people decide to hold gold & gold continues to rise, people would be reluctant to spend their appreciating asset & in time  a depression would set in as money velocity tanked.

Anonymous's picture

Gold money velocity will go to ZERO (as you seem aware) but PAPER money velocity will be a figure 8 laying sideways if you catch my drift.

It's not that gold will become money, it IS that physical gold will become the only way to preserve wealth. (THERE IS A BIG DIFFERENCE!)

P.S. Make sure you are aware of this difference, okay?

Peace, and act accordingly. (e.g. make sure you take care of yourself, you are asking the right questions, just make sure you take your OWN advice, okay dude?)

Anonymous's picture

IMF must regret very much now to set the gold floor price at

Lionhead's picture

Fibozachi, I agree with your analysis for the short term target you've put forward. However, you've picked a smaller pattern & ignored the larger inverted head & shoulder pattern for gold from which the neckline has been broken. Target is $1330+/-. I think you do readers a dis-service to pick out the smaller & ignore the larger more significant pattern. I do expect retracements and correctives; that said as long as that neckline holds, gold is bullish for the intermediate, longer term. Readers here can draw the neckline easily on any gold chart if they are familiar with Edwards & Magee. Your analysis should present short, intermediate, and long term targets if you please. Position: long gold; adding on correctives/pullbacks.

Anonymous's picture

In terms of physical buying the best choices are probably one ounce gold bullion coins: specifically the American Gold Eagle, the Canadian Maple, or the South African Krugerrand. You will probably pay 2%-4% about spot--and when you sell receive spot or 1%-2% above spot (a buy-sell spread of 2%-3%--plus shipping charges). has a lot of discussion about the subject--and other related subjects like guns and ammo.

You can also buy paper gold, the most popular of which is GLD. If you are going to do short-term trading this is a lot cheaper. But if you believe the economy is going to hell then you want to go to physical gold. My feeling is the paper gold will be safe enough for the next few years--but that after that the economy is going to fall apart, so I need to gradually switch to physical gold.

Anonymous's picture

"My feeling is the paper gold will be safe enough for the next few years--but that after that the economy is going to fall apart, so I need to gradually switch to physical gold."

You might just want to accelerate your time table there dude.

I think, in retrospect, you will find that you were penny-wise and pound foolish with that investment portfolio allocation, my friend.

Silly question, but is it really worth the unlimited risk of holding paper and not being able to transfer it to the real McCoy? You think you are smart enough to time it ahead of ALL the other Paper gold holders out there.

Do you really think that when billions or trillions are trying to squeeze through the paper exits, you are going to be successful when others are not?

We'll good luck. I think you are either a FOOL of monumental proportions or you are monumentally fooling yourself.

I am sorry for you and will say this in advance.


Don't be that guy, man. Okay, Dude?

Anonymous's picture

Mish ripped into Nadler the other day with some good points:
Nadler has a mighty peculiar definition of a gold bull market with four stringent conditions.

1) "Demand has to exceed supply"

The plain fact of the matter is the intersection of supply and demand determines price. Supply and demand will always find equilibrium. Right off the bat one can determine Nadler's definition is complete silliness.

2) "To have a bull market in gold the stock market has to fall"

That is like saying to have a bull market in soybeans the price of paper clips must fall.

3) "You'd have to have an actual, tangible inflation level, and the threat of much higher inflation on the horizon as well"

Nadler does not say why we have to have inflation for gold to be in a bull market; we just have to take his word for it. It would make about as much sense to suggest that to have a bull market in gold, sea turtles must lay a record amount of eggs.

Historically speaking, gold does well in times of credit stress, not in times of inflation. There was inflation every step of the way from 1980 to 2000 and gold fell every step of the way.

However, take a look at periods of credit stress. Nixon closing the gold window was arguably a period of credit stress, and gold certainly did well. We are clearly in a period of global credit stress right now, not just in the US, and gold is doing well.

The great depression was a period of credit stress and a period of deflation as well, and gold did well. This point alone disproves Nadler's contention that gold needs inflation to rise.

4) "You'd need an increase in the price of gold across all major currencies—no exceptions. You can't have Aussie dollars and the South African rand going one way, while the euro and U.S. dollar is going the other."

While there is some merit to suggest the price of gold needs to rise in other than dollar terms, it is another to say it has to be rising against every currency, and still another to define the South African Rand a "major currency".

Full article:

- Frank Owen

Anonymous's picture

I believe that a good reason for the rise in $ price of gold is explained very well by Rothbard via this post at Mish's site. In addition, I would like to add that gold is in the enviable position of being a commodity, money, and insurance against the debasement of fiat currencies. IOWs, gold is in the cat bird seat.

'Money is a commodity used as a medium of exchange.

Like all commodities, it has an existing stock, it faces demands by people to buy and hold it. Like all commodities, its “price” in terms of other goods is determined by the interaction of its total supply, or stock, and the total demand by people to buy and hold it. People “buy” money by selling their goods and services for it, just as they “sell” money when they buy goods and services.

Money is not an abstract unit of account. It is not a useless token only good for exchanging. It is not a “claim on society”. It is not a guarantee of a fixed price level. It is simply a commodity.'

and the money line

'But money differs from other commodities in one essential fact. And grasping this difference furnishes a key to understanding monetary matters.

When the supply of any other good increases, this increase confers a social benefit; it is a matter for general rejoicing. More consumer goods mean a higher standard of living for the public; more capital goods mean sustained and increased living standards in the future.

[Yet] an increase in money supply, unlike other goods, [does not] confer a social benefit. The public at large is not made richer. Whereas new consumer or capital goods add to standards of living, new money only raises prices—i.e., dilutes its own purchasing power. The reason for this puzzle is that money is only useful for its exchange value.

[Thus] we come to the startling truth that it doesn’t matter what the supply of money is. Any supply will do as well as any other supply. The free market will simply adjust by changing the purchasing power, or effectiveness of the gold-unit [monetary-unit].'

So much for technical analysis in times when the very foundations of America's economy, the dollar and it's future, are in question. This 'technical analysis' is akin to Gen Patton attempting to write an an analysis of an enormous battle while the battle still rages all around.

Anonymous's picture

Is it just me or does it seem like the author was kissing ZH's ass and kicking it in the nuts at the same time.

Anonymous's picture

You guys (particularly GG) are too emotional about Gold. Fibozachi is pointing out some key points: (1) In the short to near term (months, not years), deleveraging caused by falling asset prices will lead to a strengthening of the dollar. How can you disagree with that unless you think the dollar will collapse in this period i.e. through something similar to a sudden stop? ... give me a break! (2) In the longer term (years), Fib sees gold going to $3500+ ... those levels are exciting!

I agree with Fib's path to a very high price for Gold. I have a large physical position in gold and silver hedged by rolling puts on GLD and SLV ... I have been taking a bath on the puts, but I'll be damned if I close them out.

Just my two cents.

Anonymous's picture

As long as the USA continues to bankroll two expensive foreign wars, plus try to police the entire planet, the value of the USA dollar will continue to drop. It's so simple.

Anonymous's picture

"How can you disagree with that unless you think the dollar will collapse in this period i.e. through something similar to a sudden stop?"

Duh, if you are aware of this dynamic (which you are, since you included it in your post), then you are also aware that THAT'S EXACTLY HOW THE DOLLAR IS GOING TO COLLAPSE IN THE SHORT TERM.


Anonymous's picture

Is "IDIOT FUCKTARD" your offical signature name? - that is an unusual name. Which "cunt"ry?

Anonymous's picture

How Dare you address me that way! I am the Chairman of the Federal Reserve Board!

Anonymous's picture

"I have a large physical position in gold and silver hedged by rolling puts on GLD and SLV ... I have been taking a bath on the puts, but I'll be damned if I close them out."

Pure genius! (Let me know how it turns out when you have to liquidate your physical stash to cover the bill for your shorts, M'Kay?)

Anonymous's picture

I don't have to cover anything - I BOUGHT puts. Only folks educated in Finance 101 should be allowed on this site.

Anonymous's picture

Forgot to add: If you want to save some money I will offer to kick you in the balls anytime you like for a price less than those put options you purchase.

It's a win win. You get to save money and still get to feel some pain while being cheaper than put options.

And I, hopefully after enough kicks to your groin, will be able to prevent you from polluting the world through procreation.

See, Win-Win. What's not to like?


Anonymous's picture

Oooh, sorry!

How's that loosing an assload of money treating ya, Your ass hurt yet? ;)

bb5's picture

The gold and silver markets are heavily manipulated by the government (reasons for this explained by Alan Greenspan many years ago), so technical analysis is going to be rather useless for predicting how high gold will go. If and when the price slips away from the grip of the commercials ---the sky is the limit. We don't need rising prices either---Zimbabwe Ben can do it all with the printing press. If you don't believe the manipulation bit, I suggest that you go to the Casey Research site and grab a free subscription to Ed Steer's daily gold report.

Anonymous's picture

Jesse knows how to tell when gold is in a bubble. Word:

drwells's picture

A gold bubble? That would be terrific, thank you. Please let me know when we have the following in place:

A $250K/$500K capital gains tax exemption on gold (as opposed to taxing all capital gains in gold at the higher short-term tax rate, regardless of how long it's been held).

A "President's Working Group on Gold Markets" to support the gold market in the event of sudden sell-offs.

A tax deduction for interest on margin debt used to buy gold.

A "Federal National Gold Association" and "Government National Gold Association" who use taxpayer money to purchase margin debt used to buy gold.

Thousands of government boondoggles at the federal, state, county, and city level to promote "The American Dream of Gold Ownership".

It should be possible to buy physical gold, or to go long on gold futures, on 0% margin. There should be thousands more government programs to "help people keep their gold" and prevent repossession of physical gold when buyers default on their payments.

A "National Association of Goldsters" whose sole purpose in life is to chant "They're not making any more gold", "Gold never goes down", and "Buy gold now or be priced out forever". This NAG should be one of the most powerful lobbies in America, and their members should be quoted by the media as though they (1) are disinterested parties and (2) know a fucking thing about economics, or, for that matter, anything else.

Individual retirement plans and pensions invested wholly in gold, so that supporting the price of gold becomes a matter of national security. Any hint of a gold price crash should lead to congressional hearings and SEC investigations.

Anonymous's picture

So, assuming one wants to make a substantial additional investment in gold what would be the best strategy for doing it? For example, invest it all today? Split into a dozen portions and invest one portion every month for the next year? What?


Anonymous's picture

All assets into physical bullion (Coins, ideally). As for timing? You gotta be shitting me, right? Like, last decade, last year, yesterday, MAN!

If you got NONE, you better get all you can while you CAN still get it.

P.S. (Yeah, I no fucking kidding cashed in and went all in physical Au/Ag like 8 years ago)

P.P.S. Late, is always better than never, dude. Don't kid yourself, too late will be when you can't get any. Don't be that guy, okay? :(

Anonymous's picture

"For me, it's simple: how do I use gold to pay my taxes? Buy groceries? Fill up the gas tank? Well, you get my drift."

Actually, one of the benefits of gold is you can buy and sell it in the black market, unlike stocks. Do you think I'm going to even pay my taxes on the profits I make off gold/silver? Not a chance. You can't use your stock in General Electric to buy food or pay taxes either. The real question you should be asking is, why do you even want to pay taxes in the first place?

BloodyHell's picture

What to do when Nadler says "Buy!"?

Anonymous's picture

Can someone enlighten me as to what form of gold they are buying (or does it matter)? Also - how to go about finding a reputable dealer?


Anonymous's picture

1 ounce maple coins

8 years, no problems, lowest premium over spot you'll likely find, $500K in transactions, good folks. (And No, I don't get a damn thing from them for telling you any of this).

Anonymous's picture

Regarding Nadler, I think I can reasonably be described as a gold bug and yet I actually enjoy his contrarian arguments.

Some of the articles and forum postings on the Kitco and Gold-Eagle sites are just plain silly with every dollar higher meaning that $2000 gold is merely days away and every dollar lower meaning that there's a ghastly conspiracy out there to smash gold back down to $250. I think he does a good job of keeping everyone's feet on the ground.

You also need to understand his background. He fled a communist country (can't remember which one offhand) with his family and all they could take with them is some gold coins...and that's what they started their new life with in the West. He more than anyone knows how gold is a store of value.

As for me, I bought a lot of physical gold & silver in 2002 at about $350 & $5 respectively. Every day I question whether my reasons for buying it are still valid and whether 'the story' is still in place. At this point, nothing has changed my opinion that there will be a substantive move to physical rather than paper assets and the only question is what will determine my exit.

I will keep a close eye on sentiment and hope to time it right!

Anonymous's picture

Hah! Fibozachi's right!

At 1700 Zulu, gold just dipped below %1,090/oz.

Sell! Sell! Sell!

Anonymous's picture

But who's going to buy buy buy, with the dollar on the decline and the cost of gold rising?

Lux Fiat's picture

"The U.S. dollar cannot be devalued because it’s not linked, backed or convertible into anything, which would allow it to be devalued. Such was not the case back in the 1930s, when President Roosevelt devalued the dollar by raising the price of gold from $20.67 to $35.00. But back in 1934, one could, by law, convert their dollars into a set amount of gold. No such linkage exists today, making devaluation impossible.”

I disagree.  The yuan is pegged to the dollar.  Many Middle East currencies are pegged to the dollar.  If and when these countries decide to abandon or reset these pegs, it will result in a de facto devaluation of the $.  Like many aspects of current government social programs, our trade imbalances are not sustainable over the long run.

Think that a dollar reset against the yuan won't be inflationary when we still import so much from that country?  Think that a reset against the Saudi riyal won't be inflationary given the amount of ME oil we import?

I like to see contrary arguments - it hopefully keeps me on my toes and out of the quagmire of complacency.  But I see this as a critical flaw in the argument that gold is overpriced.  I'm not saying that it is going to go up in a straight line, and all commodities are prone to large cyclical corrections, but as long as other countries (and the US) are still intent on working towards marginalizing the dollar over time, the price of gold in $ will respond accordingly.  The wild card factor seems to be that more people are starting to recognize this.

George the baby crusher's picture

I want Lux Fiat in my lifeboat!

Gunther's picture


if you need price data for gold, go to and look them up. The data are available back to 1968. Your excuse is weak to say the least.

Since when is a one-day move of 0.009% considered to be a bearish event?
Moreover, why are you providing long-term charts in major currencies without timescale and no short-term view? That might lead you to the conclusion that gold started to move in Yen (past 3000 Y/g) and Euro (past 700 Eu/oz.)$gold:$xeu$gold:$xjy

If the HUI does not move faster the gold, the reason might be that now the reason for gold bullion is safety; it is the anti-risk trade while stocks, including gold stocks are risky.

To conclude, better arguments and less hot air please.

Anonymous's picture

For me, it's simple: how do I use gold to pay my taxes? Buy groceries? Fill up the gas tank? Well, you get my drift.

I understand and accept both the inflation and deflation argument. I was there in 1980, but I want to know, please, I'm NOT being facetious, how gold (and silver) are going to replace the dollar as a medium of exchange?

Do we search out bullion dealers somewhere and exchange our metals for dollars? I live in a Chicago suburb, am a coin collector, but I don't know where to go for that type of an exchange.

Even, though, if I did, how can the rest of the millions of us who live here manage this? Is there the "First US Bank of Gold & Silver" with a branch near by?

I am honestly asking because I just can't visualize how this sort of forecasted future plays out. Thanks.

Gunther's picture

"how do I use gold to pay my taxes?" Same way you use stocks, bonds or a forest; invest in what is going up, if you need cash you sell some of the investment.

Apparently a bullion dealer will buy and sell coins and bars. That can be a local goldsmith, Kitco or Who will be the right one for you I do not know.

"I am honestly asking because I just can't visualize how this sort of forecasted future plays out. Thanks."

How that might play out I do not know. Imagine Argentinia as one possible example. There the currency lost some 75% of the external value in a short period of time.

A while ago there was a video on youtube showing what happened to average people during that time, scary stuff to say  the least. Then imagine your gold is still the same as before. That should illustrate the point. 

I hope that answers your question.

Anonymous's picture

Of course, keep enough paper dollars on hand to pay for gasoline and groceries. But a silver dollar is already worth almost twenty paper dollars, so why keep more paper dollars than you have to?

Anonymous's picture

"I just can't visualize how this sort of forecasted future plays out"

Agree 100%. Can't see how plays out at all. Only people with gold and silver or food stamps will be able to buy food? Thats nonsense.

We are all just along for the ride to ????

Anonymous's picture

Anon #120853

Don't Think, dude. You though process is killing me. I didn't think there could be a "Dumbest Post EVER" on ZH. I was wrong. Congrats, dude.

Anonymous's picture

Do I at least win an award for your giving me "Dumbest Post Ever"?

In the meantime, I noticed that you didn't answer ANY of my questions - just called me names.

Alright, let's say that you are 100% correct about my being the dumbest person (and post) that you've ever seen: could you then, please, use your intellectual superiority to help me understand?

BTW, I've been called a lot worse than "dumb" and so I'm not bothered by the ridicule - I only want "light" - not "heat."

Burnbright's picture

Why would you even hypothesize that you would trade in the gold or silver you have for money to buy food. Gold and silver are money, is it that hard to imagine using your silver or gold to buy stuff?

If you want to buy small items just buy junk silver or search through rolls of dimes, quarters, and half dollars for the pre-dated coins with silver in them.

And if you really wanted to you could try trading your silver and gold for stuff right now...

Anonymous's picture

Anon #121200,

Umm, no. You do not want me to correct you errors, or even answer your "purported" questions. Your purpose is to mislead people here. SO even if you were as dumb and innocent as you pretended to be in your previous post, you would still have the intelligence to find the answers to your questions. (and would have noticed for instance, that the answers are in fact, already posted in the comments section of this page, if you are so EAGER TO LEARN).

"Cast not pearls before swine"

Everybody wave and say Hi to the PIGMAN! (Anon #121200)

Pigman are you GS, JPM or just an administration flunky? Just curious.

Anonymous's picture

I seek light and you provide nothing but heat.

I am honestly "so EAGER TO LEARN" and if you weren't personally so ignorant as to my genuine query, well, no, you'd rather just insult and make incorrect inferences.

BTW, I checked everything in this post/comments and I did not find the answers to my initial questions. Heck, I just finished reading Peter Schiff's "Crash Proof 2.0" and I didn't see this question addressed, either.

What more homework am I supposed to be doing?

Can you, Mr Anon #121335 adjust your attitude, leave emotion behind, and address my questions?

I'd also accept ANYONE's reply, too!

I'm not a troll - just a regular very conservative American.

Anonymous's picture

It's all here dude, read it, all of it, and read well.

(Hey, if you really want the truth, it's free for you to have my friend, just make sure you can stomach what you seek.)

Right here: