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Is Gold Crash Proof This Time Around?
I’ve been
receiving quite a few emails regarding the topic of Gold and how it will
perform if another Crash hits. The following are my thoughts on this matter.
The first
thing that needs to be said is that IF we have another systemic meltdown like
that of Autumn 2008, Gold will likely go down along with everything else. There
are simply too many big players (hedge funds, investment banks, etc) with heavy
exposure to Gold who would be forced to liquidate their positions during a
systemic collapse.
I know this
is not what the Gold bugs want to hear, but during systemic Crises, just about
every investment on the planet plunges while the US Dollar and Treasuries
rally. Of course, this time around if another 2008-type event hits, it will
undoubtedly involve or be focused on sovereign debt. So this raises the
potential that Treasuries, particularly those on the long-end of the yield
curve, could be hammered as well as all other assets outside the Dollar. This
is worth keeping in mind for those who view Treasuries as a safe haven.
So if we go
into a 2008-type event, Gold will fall.
It will likely fall much less than other assets (stocks and industrial
commodities), but it will still go
down at least at first. This forecast is confirmed by the market action in 2008
as well as the market collapse from April 2010-July 2010. Both times Gold took
a hit, but both times it came back quickly.
So if you’re
heavily exposed to Gold, you’re going to need to think “big picture” or have a very
strong stomach when the market Crashes.
Now, let’s
take a look at the charts.
For
starters, the number one metric you need to focus on in terms of determining
Gold’s market action is the 34-week exponential moving average. Since the Gold
bull market began in 2001, this has been THE support line for Gold.
As you can
see, Gold has only broken below this line ONCE in the last ten years and that
was during the 2008 systemic collapse. So take a note of this line and always
watch where Gold trades relative to it.
Indeed, a
significant break below this line that DOESN’T occur during a system Crash
would be a MAJOR warning that the Gold bull market is in trouble. Remember, the
ONLY time we took this line out before was during the systemic collapse in 2008.
So a break below it WITHOUT a Crisis would be VERY bearish.
And if Gold
breaks below this line on its own (without a Crisis) and then fails to reclaim
it… well, then it would be SERIOUS time
to reevaluate the Gold bull market story.
Because of
its significance as THE support line for the Gold bull market, the 34-week
exponential moving average also serves as an excellent gauge for determining
when Gold needs to take a breather or correct.
Indeed,
anytime Gold has stretched too far away from this line to the upside, it has
usually staged a pretty sharp reversal to re-test this line. I’ve circled the
most significant episodes of this from the last seven years in red on the chart
below.
These are the BIG picture gauges and items
to take note of: the points to remember in terms of determining where Gold is
in its bull market and whether it’s an asset class you want to “buy and hold.”
Good
Investing!
Graham
Summers
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take steps to prepare for the Second Round of the Financial Crisis… I highly
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I've been watching Graham Summers get all his market calls wrong for many months now but getting this one wrong too it's the straw that broke the camel's back for me.
Phoenix Capital Research posted articles are now on auto-skip.
100% He's an empty headed windbag; just another newsletter writer.
Didn't some financial recently state that they'd accept gold? If that's the case, then perhaps they won't be dumping gold. Again, this is all predicated on the belief that the USD and UST are worth something; I'm thinking that the curtain is being pulled back on that hoax.
What happens when there's no other "other?" I'm thinking that gold's the end of the line this time. The train gets reluctanly jumped on or else it's straight over the cliff.
Given what we have seen recently, increased buying on lower pricing and increasing prices on raised margin requirements, I wouldn't be too worried about falling pm pricing in a financial collapse. No doubt the paper market will crash, at which point the physical market will take over and go parabolic...
When the dollar crashes the stock market and the Treasuries will crash with it.
Silver and gold will soar.
Get off the dollar kick, it's a piece of shit just like the government that backs it.
No stocks, bonds, dollars, or government will save you in the currency failure catastrophe that's coming to the United States in 2011.
Land, food, guns, gold, and silver will be your families' only refuge from disaster.
Indeed, I STRONGLY suspect that those calling for a repeat of late 2008 are just like the French generals in their Maginot Line strongholds in early 1940, expecting a repeat of the static trench warfare and cavalry charges of World War I. Hitler's Wehrmacht taught them a thing or two about "fighting the last war".
Well folks, the tanks are rolling again, and are about to cross over the JPMaginot Line once more while feeling nary a dip, and this time they have silver armor and golden treads.
After a sharp but short-lived head fake, of course!
Until the Govts of the World rein in spending and their Central Banking printing presses, those holding Gold and Silver had better hang onto them! PMs are wealth insurance -- claims cannot be sent in until grass is growing in the bomb craters...
"PMs are wealth insurance" - I agree, but I can't decide up to what amount to be in PM. And I'm not asking as a percentage, which usually is from 10% to 25%, but as quantity. I mean, would 100oz, 1000oz or 100,000oz of silver be enough? Would 10oz, 100oz or 1000oz of gold be enough? Maybe the best way to answer this is to find out how much gold&silver would define a person as wealthy 2 centuries ago? Does anyone have any statistics regarding this?
Now I see people with 3oz of gold considering themselves on the safe side in case of a massive currency depreciation. I don't think this is true, though.
Easy question, easy answer: 100%
There is absolutely no way to answer your question without knowing what your goals are, and what are your priorities.
And after that, it's probably a long discussion.
My goal is to sleep good at night. It looks like it took 130 million ounces of silver to make Warren Buffett sleep well at night. At this time, I think that an average income person should be on the safe side with 500oz of silver and maybe 25oz of gold. Just saying...
If FED has 286 million ounces of gold, this means ~1oz for each citizen. Knowing that I might have the wealth of an average 25 citizens should be enough to make me sleep well I think.
If you want to sleep well at night, I'd invest in an excellent pillow and mattress. Ones without the toxic flame resistant foam. :)
I'd also look at keeping one year of food around. Along with enough currency to pay one year of normal expenses, well diversified and in multiple places. I wouldn't put all of my eggs in one basket, whether it's PMs, or under my new mattress.
Yes, everyone who holds PM should be mentally prepped for that short time
Exactly, so we are ready to convert our last few pieces of fiat scraps to PM while we can get a great price.
Then we can sit back and celebrate parabolas with big fat smiles on our faces. :-)
I dont think anyone can deny the possibility for a gold pullback; but citing the 2008 collapse may be an inaccurate model. There were many unknows and no backstops, no cohesion with the banker takeover; everything was still a gambit. Now, the regulatory capture is complete; the political process under direct control..... we are clear throughout 2011 for the rally; BUT if there appears to be a regime change out of the Obama admin, or a change in FED policy, then we will get the market collapse.. but not until a change at the administrative levels, or the threat of a change.
Are you implying that the federal government and the state governments and the local governments will decide to pull a Volker... and willingly pay 15% to 25% on money they borrow? Yeah, right.
Its a much bigger house of cards now. There will be no props for the props...