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Gold is Now At the Deep End of the Pool.
For me, the best case scenario which I have been predicting for nearly two years has arrived. But as much as I love gold for the long term, I have to take note when a number of short term technical and momentum models start flashing red lights that it is entering extremely overbought levels. The yellow metal has now risen for 12 out of the past 14 days.
Aaron Regent, Barrack Gold’s (ABX) CEO, the world’s largest gold producer, says he can’t imagine ever needing to hedge the company’s output again. Not a day goes by without an emerging market central banks making new purchases, with announcements this week coming from India and Sri Lanka. Gluskin Sheff’s permabear David Rosenberg, trotted out his own target for the barbarous relic of $3,000/ounce.
Look at the chart below of the S&P 500 priced in gold, and you can only conclude that gold has to reach $10,000/ounce for the ratio to reach the last trough we saw in 1979. Higher predictions are more common that National Rifle Association bumper stickers at a Sarah Palin rally.
I remember all too well when gold last traded like this in that earth shaking year. Just as I boarded a flight in Hong Kong, my long futures position ticked $750. By the time I landed in Johannesburg 20 hours later, it was trading at $900. I bailed. The fat lady then sang, and gold then bled for 20 years. Investors married to their positions got wiped out.
Traders who stay involved here should do so only against buying cheap out of the money puts for insurance. Remember, this is the commodity that takes the elevator up and the elevator down, and year end book closings are not far off.
To see the data, charts, and graphs that support this research piece, as well as more iconoclastic and out-of-consensus analysis, please visit me at www.madhedgefundtrader.com . There, you will find the conventional wisdom mercilessly flailed and tortured daily, and my last two years of research reports available for free. You can also listen to me on Hedge Fund Radio by clicking on “This Week on Hedge Fund Radio” in the upper right corner of my home page.
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Shalom Patrick Hamou
i looked at your bio once and the first question that came to mind was, what does a spook wear on halloween night?
Gold up seven (7) so far at 6:15 EDT
Gold has barely moved over the past 12 days. The USD went down. See, as evidence the EURO-Gold, AUD-Gold, CHF-Gold. Gold is reflecting dollar weakness. If USD is going to turn around then yes gold will drop a bit but that does not look likely.
One fiat to rule them all and in the darkness bind them.......Dollar Propaganda Bitchez!
Glad to see the MHFT Contrarian indicator has spoken. Given the TBT call in January 2010, see below:
“Shorting the world’s most overvalued asset has got to be the big trade for 2010. I’m talking about 30 year US Treasury bonds.”
“I am a worshipper of the TBT, a 200% leveraged bet that long bonds are going down. It has clawed its way back up from $43 to $51, and $60 looks like a chip shot for the first half.”
TBT closed at $31.70 on Friday, 10/8/2010.
I would estimate we have at least another 9 to 10 months to go on this leg up on gold…….Big Mac
A reader asked me if I was still positive about agricultural commodities. Yes, but obviously like precious metals and other commodities they are also vulnerable to a correction. Longer-term they still look attractive and they remain in real terms extremely depressed
Yeah, but you can't eat agri comms, oops, sorry.
The above is a recent quote from Marc Faber.
oppsss....not seen yet the Gartman letter...he keeps saying sell...selll...selll...the problem none listening....oppssss
So is he saying Ronald Reagan is going to get elected this year? Yay!!
(otherwise I'm holding on to my stack)
So did you actually have lunch with Aaron Regent?
Dear MadHedgeFundGuy-
Suggest you read, http://www.24hgold.com/english/news-gold-silver-how-realistic-is-5-000-gold-.aspx?article=3144047526G10020&redirect=false&contributor=Chris+Mack
Holy crap - madhedgefundtrader is Jon Nadler! Oh, the humanity!
I, for one, simply do not see any "chartist" ideas that gold is particularly "overbought" at this particular moment. What is he referring to? I have been trading gold since 2000.
I feel that EVENTUALLY there will be a bubble in gold (once the common man starts buying). But that time is still a few years away, there is not a whiff of that yet.
Gold is currently increasing smoothly at about $100 to $110 per annum, and has been doing so for about 12 years. When the bubble begins it will increase at ten or twenty times that slope for a few years, and then pop.
During the last ten+ years it is completely normal that gold experiences 30% retreats -- simply look at the 10 year chart. (You don't need to be a "technical analyst" to see this.)
So, sure, there could be a 20-30% retreat. It would recover from that in a year - just like the previous two retreats. (It would still remain well above the long term line-of-lows - just glance at the 10 yr chart.)
But I don't see any "chartist" reasons that there is particularly a retreat coming -- can this article writer be more specific?
"a number of short term technical and momentum models start flashing red lights" .. what? What is he/she referring to specifically? Can't see any.
Put the technical tea leaves away. Look up and see the tidal wave of fiat breaking over your head, MadHedgefundDweebster
These last 3 years haven't been a technical market. Gold still has a very long way to go.
Wow! You are way off on this article. Stick to trading and leave the investing to professionals! Also by the way, gold is a currency, not a commodity.
Good luck making Gold ownership a crime. Worked well with Booze. Price would go to the moon and back. Besides, that's why we have the right the bear arms.
Umm, don't you think everything is a little too overbought right now.....let's say such as bonds and stocks.... Everything is rising in tandem, therefore, no it is not overbought
MHFT is in "the deep end of the pool" with commentary like this. By what authority do you write with such surety? I have been long bullion since under $300 and read these words doubled over. Bring on the "top-callers". They will still be chortling in 2012...
ABSOLUTELY. +1000. The CBs and their retail/investment banker shills around the world may not be in the deep end yet, but they are clearly becoming the only people in the pool. The confidence game is up and the hard working middle class have seen the game for what it really is - a game of chance where the house always wins.
If you gamble at a casino and win, they stroke your ego with an expensive suite, fine dinners and large doses of attention and praise. You either keep playing (only to finally lose) or leave to come back for another ego boost later. In the meanwhile, the casino mints out 1 million more chits (money from nothing) waiting for your return. You are the mark and are eventually going to loose. The only way you win is to recognize the game for what it is and refuse to play and go do something with a legitimate chance to win over the intermediate term (as we all know, over the long term, we are all dead).
I look at the current financial system like this:
The Casino = central banks
The Shills = retail & investment banks PLUS the bought and sold politicians at the federal and state levels
The Mark = us, middle class
MHFT is in "the deep end of the pool" with commentary like this. By what authority do you write with such surety? I have been long bullion since under $300 and read these words doubled over. Bring on the "top-callers". They will still be chortling in 2012...
With one quick stroke of the pen ownership of gold can be made a crime. What do you do with the pretty stuff then? If you are caught with it, not only will you lose all of your gold, you will be thrown into a shiny new prison. If you want to discuss impending moves in gold, let’s talk about that one.
Another issue; we all need to buy groceries, fuel, electricity, etc… Without some fiat currency we simply won’t pull that off.
“I’ll pay for it in gold and silver” you say. It would take some sort of system to cut weigh and value gold against goods. Having a system with those requirements makes it hard to hide from the Gestapo.
It would take a Mad Max style breakdown for a commodity to replace fiat. In that event bullets have more value as currency.
Just sayin’.
http://www.stungunstopepperspray.com/
With the stroke of a pen, if gold is made illegal, say goodbye to the good ole U.S.A. Try making gold illegal in the U.S. but it will still be legal everywhere else in the world. Your view is myopic to put it kindly. I guess gold only trades in the U.S. and everywhere else is irrelevant. You should go long real estate since the U.S. is the only place that has any and it only goes up.
So you don't live in the US, or you are going to fly to France to buy your groceries?
Dip shit...
With one quick stroke of the pen ownership of gold can be made a crime."
No, not even necessary. The government can just raise the capital gains tax on gold to 80% in the name of "obscene profitering by *speculators*.
+10
Dollars can be made illegal. With the stroke of a pen they can be made illegal in any country or removed from existance here. Or they can just be inflated away. All with the stroke of a pen. Yet, gold will still have value no matter what a pen does.
Think about that, dipshit.
Gold is just another commodity. Dollars are wood pulp blessed by fairy farts.
In 1979, we had Volker. In 2010, we have Bernanke. Enough said.
I like how every "bull" has traded out already and will miss the majority of the move. I like how they always try to explain gold's move down in the 80's with zero frame of reference, or in such a way as to ignore it went up 10 fold and stayed there. Reality is is moved to a point where it could back the money supply in a time where only gold was a credible backing of the money supply. And there there is the elevator reference cliche. Gold has been the least volatile asset class since the 80's. Please spare the world your microscosmic view that a $10-$50 move is somehow a massive elevator ride. If you can't hang on through a 5% bear raid then you are using leverage and you are dumb.
That being said, learn to read a chart. Your TA is weak. You see what you want to see, not what is there.
Forgive me, but I have had as much as I can take from sheeple microtrend traders.
The problem with "Madhedgefundtrader" is that all he sees is what is on the charts. We are experiencing something that is outside of that.
Throw away all those charts and analysis - this is bigger than that.
Johnny Bravo was a chartist as well. Swore by technical analysis.
And he's now a bazilliongillionaire!
Chart: GC
Near-term correction; longer-term momentum.
http://99ercharts.blogspot.com/2010/10/gold_10.html
Gold has been artificially suppressed for so long that it's growth potential as money is probably only limited by the prices of unleveraged commodities.
I for one would like to see a pullback in order to purchase additional PM's, as the inevitable continuation of sovereign fiat grows daily.
Trade wars? Currency wars? I say bring it on and rebalance global economics.
The United States doesn't control the price of commodities any more. Commodities are controlled by the new giants of the economic world and they are thirsting for everything. The United States is a a failing state run by a corrupt and foul government. Until that changes the price of gold will continue to marh upward - when priced in dollars.
Change your name to "Stuck on Truth".
Hang on, cowboys, this is the real golden calf, dont get shaken off!!
Yes, this is a new ball game with currency wars, QE to infinity and the big boys trying to scare you away from the only real money.
I would say that surly people need a correction - right between the eyes.
Last Thursday was a correction in Gold & Silver, lasted about 12 hours.
Just about everything is overbought expecially the grains, Going short or some put type insurance sounds fair comment, I have been considering a short leveraged silver just to hedge my longs for a few weeks or taking some cash, Nothing is safe, I dont know how things will pan out but surly gold needs a correction at least.
Less than 2% of John Q. Public owns physical gold at the moment, the other 98% are thinking about it. As real estate has to go through an extended downside, with no foreseeable timeline to divest the foreclosure chain-of-title issues, savings paying a negative rate (post taxes), the potential tsunami of new physical gold buyers is just now taking place. "Flashing RED?" MHFT, you are a tool.
Of course GLD is a ruse, they have been buying more gold than what was available. Anyone with an ounce of common sense can see it. You don't need a "mad" (angry or crazy?) trader to tell you what color is on their screen. It's not their info and not their screen. Go away.
The author is not bashing gold, simply advising a reasonable and prudent hedging strategy yet he is roundly criticised and derided for having such a "heretical" view. I have no problem with those who are unconcerned about the prospect of a price drop within the context of a bull market that could run for years and whose holdings were acquired long ago when no one gave a shit about gold. However I think there are fairly clear signals developing that a correction is probably coming. Look at the volume and price action in DZZ two days ago or listen to Bob Hoye (who has been bullish on gold for the past couple of years). Gold could sell down to the high 900s and still be in a bull market. Why not take some profits (or protection)? Encouraging people to buy at these levels (let alone never sell) borders on unconscionable but that's just me. You are now free to junk at will.
I thought the name of this site is ZEROhedge. My hedge is brass and lead.
Of course the author s not bashing gold buy many of us apparently believe that TA just doesnt apply. How much would you bet that gold will sell down into the 900? Why take profits unless you have something better in which to store them? Paper?
Before you sell your gold, check interest rates. If they are below 20%, then don't sell.
A gold standard is returning. Unless heroic action is taken to defend the dollar (ie 20% interest rates), it is inevitable. Remember that a transition from a fiat currency back to a gold standard will ALWAYS look like a bubble. The difference is that in a bubble, fear is negated while greed rules the day. When greed becomes overextended, fear retrns and bursts the bubble. With gold, fear and greed both point the same way. The fear is not that the gold isn't worth X number of dollars, it's that Dollars won't be worth anything in the future.
The only way to stop the return to a gold standard is to short circuit the greed driving the initial upward phase of gold by producing a return in dollars. TPTB have made it clear that they are not willing to allow that. As such, to hold ANY paper in this environment is folly bordering on madness and mass delusion.
well put Mr t
Oscillators like RSI are great for trading ranges but lose much predictive power during breakouts in bull markets such as we're experiencing now. These type of markets can remain overbought for months and still rise.