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Late Night Gold Breakout
With the dollar preparing for another day of Uncle Ben inspired self-flagellation, gold is already enjoying a flying start at north of $1,100. The complete multiasset melt up appears to be at most days away.
In the meantime, the dollar is back to 12 day lows: so much for that economic improvement.
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Hmmm....and Roubini just recently opined that Gold might get to $1,100...might.
Roubini is an IDIOT.
Yes, he has become a silly little man.
gone Hollywood. chillin with Oliver Stone.
+1
Who cares... have you seen the pics of the infamous parties?
He's doing something right... listening to "an idiot" would be a small price to pay to "tag along" for a bit... especially while counting returns on recent Gold Jr. investments!
You are an idiot.
I am Chumbawamba.
he lost his credibility when he said he was for the bailout....heck, if he was a austrian school economist, he would not be working in new york city
hahahahaha - you know? ever since that Roubini-Rogers thread I've been thinking of him, and wondering off & on the last couple of days, How Stupid Must He Feel RIGHT NOW!! Somehow makes trudging to my so-called job less unattractive...
Robo,
I think you caught a bad tick or worse in your chart.
That move does not show in the spot gold price
http://live.bullionvault.com/gold-price-chart.do
at all. Moreover, the London AM fix was 1108.50, a new nominal high.
That was me, selling 1 oz [bought for $ 260 a while back]. Small market eeehhh...
Now if only silver could crack that $18 nut...
The periodic table notwithstanding, silver and gold are different animals.
With the different uses (industrial vs store of value) taken into consideration, I believe the old ratios of value have/will diverge considerably. Why else would the short positions of the bullion banks be so massive in silver as it relates to gold. It has been said by those much smarter than I that the amount of silver above ground lags the physical quantity of gold.
The potential for silver to explode could very well dwarf that of gold.
That is why Silver Is King
Buy both. An ounce of silver is currently a rounding error in a gold price.
Rocky,
Gideon's Bible was trimmed in gold (not silver) my friend... and (you'll) be better, as soon as (you're) able.
Gideon checked out, and left it no doubt, to aid in good Rocky's revival.
And, yes, I know that Raccoon had two "c"'s. Just side-stepping any potential complications with lawyers.
Tomorrow! Tomorrow! There is always tomorrow, its only a day away. I think 18 and then some very soon.
Frankly, I think the Treasury/Fed have lost what little control they thought they had.
The asset meltup will just have to happen without me.
There's still time. But buy Gold only and nothing else at this point.
Gordon, I'd be interested in your views on silver as well. As I stated above, the blow-out in silver could be impressive! Is there any way to get silver back to some normal levels of trading? On second thought, is there a real world definition of "normal" any more? (Other than a setting on the washing-machine....)
I haven't done as much in-depth research on Silver as Gold, but I definitely believe that - primarily due to MASSIVE suppression in the Silver market - the Silver market is sitting on many metric tons on gasoline. A little bit of a spark (which might even implode the futures market, in which case you'll need to have the physical) will send the price of Silver into the stratosphere. That said, I think the pendulum will keep swinging from one extreme to another throughout this PM bull market - sometimes Gold will be highly overvalued, sometimes Silver. Although I can't really say whether Gold:Silver ratio will be in a bullish or bearish trend throughout this PM bull, I do think that Gold has the potential to reach a massive amount of overvaluation w.r.t. silver sometime during this bull market (even more than we saw in 2008) as Gold (begins to) regains its status as world reserve currency.
Seems like one could learn just about all the goings on with silver by following Ted Butler's postings. And add Ed Steer to the mix.
A recent excerpt by Butler: "...there is no obvious concern with the level of position limits in most commodities, just the level of silver position limits. That, and the phony exemptions to position limits. While the phony exemptions to position limits are a problem in all markets, in silver they also take the award, where one US bank, JPMorgan, holds the largest concentrated short position ever. "
"...The clearest proof that the concentrated COMEX short position is manipulative to the price of silver is that it can’t be dissolved without a major silver price event."
Butler seems to be a reasonable enough fellow, not like a lot of the tin-foil hat brigade.
He seems to be have been ambivalent, and always hoping for the best, about the performance of CFTC Commissioner Bart Chilton/Gary Gensler. Lots of nuance in his comments about both, but Chilton never met Butler's expectations. It is entirely possible that silver will be kept leashed, never to break out to its potential in this current bull run.
SILVER WILL LIFT OFF WHEN THE GDP(GENERALLY DUMB PUBLIC) REALIZES THE GOLD TRAIN HAS LEFT THE STATION, AND THEY CAN'T CHASE AFTER IT. THE NEARER TO ZERO THAT YOU CAN BUY, THE BETTER THE CHANCE TO SEE AN INCREASE IN YOUR INVESTMENT.THEY DON'T CALL IT THE POOR MAN'S GOLD FOR NAUGHT. BRAVO 7
"MONEY IS THE GOD OF THIS WORLD AND ROTHSCHILD IS HIS PROPHET"
BENJAMIN DISRAELI
GG, another of your personal favorites, Willem Buiter is out with his most recent effort to create a warm place in every heart for gold. Most instructive is that the use of this particular voice, venue & moment to put this out Enjoy.
http://blogs.ft.com/maverecon/2009/11/gold-a-six-thousand-year-old-bubble/
Thanks for the link Miles.
Good stuff from Willem Buiter. Thanks for the link. It's always good to keep things in perspective. The only drawback I can see from the Buiter post is that the "gold has no intrinsic value" crowd will pick out that kernel and run with it. The "I can't eat gold" segment has one view, and the Buiter piece will serve to feed their cognitive bias.
I see 1103 now, ought to cause a stir tomorrow, and yes silver gets no respect.
Ahhhhh, early Christy Canyon. Wath were we talking about?
Mmmmmm, Christy Canyon - now that's gold!
Yew ain't seen nuthin yet baby doll. US$1110, meh! Pushin $1200 AUD. Not exactly parabolic here yet (it went to $1550 earlier this year), but a nice, steady if slow, upward trend.
Laid-back but steady, taking it easy in keeping with our national style... :-P
Gotta love open-'n'-honest Aussie currency inflation. Keepin' it real for the deflationists out there.
We're getting ready for an upside lock-limit day in the Gold market (in the near future). Many Gold shorts will be bankrupted. NEVER EVER hold overnight short positions in the Gold market nowadays. It is about to go parabolic.
Certainly looks so. And it's amazing that NOBODY in the MSM seems to give a shi*.
GG never hold overnights in anything. too risky.
Except long Gold positions :-)
$1103.60. Why would countries, with piles and piles of FRN$ already in their coffers, want to "double-down" on their FRN$ by accumulating more? This is why gold is going up. Asian countries are trying to diversify their forex and sovereign funds, which are heavily weighted in FRN$. They fear competitive devaluations of all currencies as exporting nations (like China) rush to debase their currencies at the same rate as the US is debasing theirs. Exporting nations feel they need to make their currencies as weak as the dollar to continue exporting. Where, then, is the reserve currency? There is no reserve currency anymore. Hedge funds & Asian sovereign funds are reluctantly looking to gold as their only option to preserve their purchasing power in a world of competitive currency debasement.
Sorry for the double post....
The edited version posted along with the original.
No argument from me on your views. Also, India's "purchase" of about half of the IMF gold... Ha! There is a hanging question out there as to why China didn't get into the scramble to acquire that gold. Answer: There was no gold. It was paid for with SDR's. Did anyone hear of a massive shipment of gold going into India? Of course not. There was no gold trading going on. Conspiracy theory? Yes, until proven otherwise.
No argument from me on your views. Also, India's "purchase" of about half of the IMF gold... Ha! There is a hanging question out there as to why China didn't get into the scramble to acquire that gold. Answer: There was no gold. China wanted to see the shiny metal, but there was none in this deal. Just paper. It was paid for with recently acquired SDR's. Did anyone hear of a massive shipment of gold going into India? Of course not. There was no gold trading going on. Conspiracy theory? Yes, until proven otherwise.
India is a custodian for some of the IMF gold. Coincidence?
I have faith in the 4G's: G(* Religious edit for those atheist and or agnostic readers)d, Gold, Guns and the Government will fuck it up trying to make it better.
Nancy Pelosi and the merry band of morons ruining the dollar - thanks for not letting me down.
The question is what happens tomorrow and the next few days when the treasury auctions take place? Do they artificially pump the dollar and hammer metals like they did two weeks ago? Late Monday morning is when the sell of in metals began two weeks ago.
David Morgan was on FSN this past weekend and mentioned that he had a guest talking about the Weimar debacle. He said that his guest pointed out that for every trillion they print vis a vis Quantitative Easing that gold reflects it with a $4,000 move north. The US has eased 2 trillion of counterfeit in and the foreign CB's and the US 5 trillion.
My math says we will see reflection of 8k-20k.
Gold going up is a huge problem for the treasury, as the stock market tanking was a huge problem for the fed.
We all know how the latter was manipulated, and I expect the same for Gold. It will go up, but parabolic????
Sure feels like a dollar bottom here. Everyone is freaking out and gold is in the spot light.
I know the dollar has big problems but it seems that everyone is on one side of the trade at this point.
One big point that everyone seems to miss is the economy. If there is a whiff of holiday sales coming in below expectations, that would most likely set off the title wave of short covering on the dollar. The world still depends on the US consumer...if the US consumer doesn't go, the global economy doesn't go.
Maybe the dollar will drop more, but I think the Fed will have to do something if they plan on extending their maturities on their debt without creating a catastrophe...and if they don't, spiking yields will result, and that in itself will cause dollar short covering as the recovery would be finished.
If there are not enough dollars around, the Fed will just make more, and exchange them via currency swaps for freshly created foreign currency. Saying that, what about a USD/Gold swap. Hey, you can't print gold so I guess there will be no gold inflation, only gold deflation.
Actually, it is possible to create gold from more unbiquitous elements such as lead, but for that you need use of a particle accelerator, and the lease price per hour for those bad boys tends to be quite high. None the less, maybe the pricing structure on using a PA to make gold from lead can give us an idea as to when the price of gold is getting a bit toppy.
I see your point of view. I also wonder if there were folks who thought it would be better to stay on the Titanic. In the short run, it probably worked out...
Be careful with that pixel/paper stuff.
Good point MsCreant. Although I doubt a significant majority of people are dollar bearish - after all a majority of world savings are still in dollars, aren't they? - even if that was the case, it still doesn't make sense to stick with the dollar. When leaving the Titanic became a majority opinion among the passengers, I'm not sure making the "contrarian" choice [of staying on it] would have worked out so well for the "contrarians". BTW, I think we have too many "contrarians" out there right now, especially Prechterites.
Well, getting off the Titanic was only a good strategy if you had a lifeboat. To that end, gold is your lifeboat.
Get off the Titanic and into Gold.
I am Chumbawamba.
The hits just keep on rolling folks. GG is doing his very best Calvin dance with his Hobbs sitting on a pile. My all your stacks double GG.
I second the pro silver hypothesis. Time to finish setting the tables folks. In that effort thanks again Robo. The fourth wave I think is nearly ready to start doing its very best imitation of a multi wave tsunami.
Haha...thx Miles.
Thanx for being you GG and being real. I know you will keep on calling even while you dance.. Every ear that hears is one more potential devastation avoided. Too bad I am reliant on my government defined benefit pension. I have had to live in my car and in National Forests & campgrounds before. I suspect that I may well again when the full faith and credit backing my pension gets me nothing more than a pat on the back or a hearty laugh.
Gekko: "I look at a hundred deals a day. I pick one."
I dunno. Somehow I just thought the quote applied here.
The fed is watching. What is to stop it upping the ante by asking their banker pals to really get shorting. Annual production is 2000 tonnes, that only $70 billion. Of course we'd have to wrk out a mechanism to compensate the banks... oh, wait, we already did that.
They risk losing their pricing ability in the Gold market if they go overboard with their naked shorting shenanigans. The physical market - which is what matters in the end - will decouple from Comex futures price, in which case the Comex price might as well be zero. Also, in such a case futures price in countries whose exchanges enforce physical delivery may decouple from th Comex price. The physical delivery part is what will be (and is) restraining them.
Here is a pictorial representation of what we are about to experience in the Gold market:
Here is a video one.
http://www.youtube.com/watch?v=FfoQsZa8F1c&feature=related
Not only that, but he says "vagina" at 00:10 in the video.
That's one mushroomcloud laying motherf*cker, motherf*cker...
Mr. Gecko,
Would you consider a short position in JPM, DB, GS and UBS to be the same thing as long GLD?
No, because it is easier to manipulate nominal prices of these artificial bits of paper than, say, creating real physical Gold out of thin air. Actually, IMHO, the opposite is true, i.e., being long Gold is a very nice way to be short these stocks (and the stock market in general), since even if they rise, Gold will rise much more than them.
what is it about permanent and severe gold backwardation that people don't understand?
lbma defaulted on a major delivery in september....comex is doing its death dance now....the alert traders / investors have realized that they can treble the value of their gold by taking physical delivery....
the fed and central banks are in the process of losing control over gold although it is not finished....they won't panic until gold gets to 2350usd or so....
paul tudor is on the verge of the biggest bitch slap in financial history with all of that stupid gld etf he bought....
This was sent to me by a friend in Germany (:
Some sharp poster--off a German web-site has discovered--
How Sincairs magical gold price formula came to be--
"Sinclair wrote Sept 4/09"
"Giving you gold price objectives has not proved in the past to be in your best interest as we are read by both sides of the gold market spectrum."
"However, one time ONLY, here they are"
- $1000. Three tries and success. This is the third try.
- $1024
- $1089
- $1156
- $1225
- $1296
- $1369
- $1444
- $1521
- $1600
- $1681
"Then on to Alf?’s numbers.
Alf refuses to give his levels as he is too concerned that those who know them will attempt to trade them, resulting in their being out of position as an upward explosion takes place."
Blogger sez--
"This is the mystery of his numerical order => take each second addend and add "2"
- $1024 +65 = 1089
- $1089 +67 = 1156
- $1156 +69 = 1225
- $1225 +71 = 1296
- $1296 +73 = 1369
- $1369 +75 = 1444
- $1444 +77 = 1521
- $1521 +79 = 1600
- $1600 +81 = 1681
- $1681 +83 = 1764
Blogger sez--
"So Sinclair is in my view a charlatan"
http://jsmineset.com/2009/09/04/in-the-news-today-301/
jimmyjames, I started reading Sinclair's site in the latter part of '07, and though I thought he wrote like a crank, he nevertheless convinced me to convert all my long stock positions into short ones, and increase my long PM holdings, all of which I did in Dec07.
I'm in my 60s retired, with many friends the same age. They lost 40-50% of their LIFE savings, while I have more money now than when I retired in '04.
If what he writes about is charlatanism, I'll subscribe to it any day.
we've been using more silver than has been mined for 65 years. the quantity of physical silver available for possesion has been decreasing steadily. and the credit collapse has further diminished production.
What does the reality of 70% capacity utilization do to your thesis?
I own crb not gold, are futures ok ? will the etf develop a premium to nav you think
the hunt brothers had nowhere near the financial clout of a jpm and yet they held enough positions to disrupt pricing worldwide. theres just not that much physical out there. and a lot of it is not for sale. I don't think the hunts were trying to corner the market intentionally. but they were definitely trying to hedge their petro holdings.
This is a pretty accurate account of what happened with the Hunt Bros for those of you who may not have seen it. The players and amounts have changed, but the tatics and methodology haven't. Note the board of governors at the CBOT made out like bandits when they went to "liquidation only" and no new positions. I wish I knew a little more about the COMEX and it's partnerships now, as they have been merging and delegating responsibility for the warehouse supplies and receipts. I'm smelling a Dec delivery "event," just to shake things up a bit. I "think" so they can pump their gold stocks as they hold the price of the metal back after a big pop with the delivery event I'm expecting.
http://goldismoney.info/forums/showthread.php?t=4823
$1107.50
Damn I see why Gordon and Chumba getz so cocky!
This is unreal. Scary. Can't say I've done this before.
I'm long gold and silver, but for all this excitement for where it's going, we still haven't seen volatility truly launch on these PM's. For example, on 9/18/08-9/19/08, the low to high was about 150 points. I personally like this slow grind higher with few, if any corrections than a straight moonshot up - it just shows that not many people out there believe this move. It's definitely reflected in the analysts and the MSM as they continuously look for corrections or the Elliot-tards' wave move down to 500 or whatever.
We ain't seen nothin' yet MsCreant. Hold on tight for the ride of a lifetime!
If we can close the floor trading session around these levels it will also scare the channel traders out of their shorts, adding more fuel to the fire.
I'll close the night with this rap video about gold.
http://www.youtube.com/watch?v=bZfyrIPw3wY
This is a pretty accurate account of what happened with the Hunt Bros. Those paying close attention will see how the board of governors at the CBOT made out like bandits. We have new players and new amounts, but I think the game is on again. I wish I new a little bit more about the exchanges' interrelationships and delivery processes. They have all been changing hands, I think to get ready for this move.
http://goldismoney.info/forums/showthread.php?t=4823
So, if one is long gold and gold takes off, does one sell one's gold? And, if one does sell, what does one then do with the cash?
Hey Fugsy
I think the idea is to hang onto the metals until they are properly represented in the currency again. IOW, until the bloody fiat is history.
Then, of course, one deposits one's metals for a Genuine Fair Value in representative notes, savours the taste of realistically measured wealth, and parties like it's 2099 (or wisely invests the proceeds of prudent thrift, depending on one's inclination).
I'm sure there will be heaps of chime-ins if I'm mistaken. :-)
by that point Treasury yields would be sky high so bonds would could work
or stocks when $INDU:$GOLD gets to 2:1 or 1:1.
What does "one" do, with stocks, when stocks take off, does "one" sell them, and if so, what does "one" then do with the cash ?
Asking a question like this means you should probably not be making those decisions yourself......
Court appointed guardians can help.....
Gold is money.
Figure out the rest.
I am Chumbawamba.
Question for the Gold/Silver People:
Maybe I'm wearing my tinfoil hat for this, but is it possible if the PMs take off so quick that most people can't afford the fiat price for them, and all the big players take delivery and sock it away in the vaults, and then the market just...freezes?
And then we're reduced to fiat again b/c the PMs aren't for sale at any price? And all the big wheels have their vaults full so we just have to take their fuckin fiat on trust again b/c the metals just aren't out there in the open markets?
Don't know if I'm having a paranoid day (obviously not enough caffeine) but this is something that's been in the back of my mind for awhile...seeing as most of the peasantry still deal in fiat, could this happen before we get a 'currency reset' to some sane asset-backed currency again? I guess I'm asking if the CBs and JPig CEOs could potentially 'corner' the PM markets so that the 'rest of us' are left with selling our soul to the company store.
The Chinese promised their peasants gold, and they've been controlling the rise it seems to me, to keep it nice and slow and easy, but could it rise a lot faster than they bargain for? In which case, peasants be damned?
Educate me at will...don't even need to be kind, I have a nice little stash and am feeling pleasantly flush just now.
take off too fast? only in spurts followed by shake-outs wherein .govsachs picks up your ounces cheap if you get scared out. in theory this bull will run to 2014. El Diablo MkII
G'day Bangkok:
No worries, believe me the only thing that terrifies me more than holding gold during a shake-out, is resorting to the damn fiat. YES, I'm that terrified of paper now!!!!
Why $2,014? (USD?) Is that the 1980-adjusted USD high? (I thought it was higher than that...US$2080?)
GoldmanSuchs, JPig, Macpiggie in Aus and NoCredit Suisse can go fist themselves as far as I'm concerned....
Good day to you Khun R. How things the Land of the Free today?
Historical data on gold is a bit thin but you have Homestake 1924-1939 going from $50 to $550, then 1966/1968 to 1980 BGMI Barron's Gold Mining Index where the miners climbed well ahead of gold's 1972 t/o. 1972-1975 was gold's first leg rel 2000-2008. Assoc yield curve data I rate highly, K-Waveology, Martin Armstrong, David Bensimon etc. You really need a collection of charts going back to 1900 & spend some time on them. Basically a 14 yr cycle 2000-2014. theoretically. Bob Hoye I like is betting on juniors ... by early 2010 says it'll be party time ... Rob McEwen of GG fame, Rubicon, Guyana, UXG, ... Quartermain's SSRI, SLW, FVI.V, R.V for a punt, a few NGD warrants, HL, SA, OSK.TO, OK.V, West Timmins... nothing too hairbrained.
$ adjusted $850 is close to $3000
Freddy in Bangkok, the land of the free is about 7500 miles thataway. You're talking to Renfield in Sydney, the Land of the Convict (and never more so than now!).
I take it your $2014 price is extrapolating from history; and I gather, a Kondratieff thing. I have heard mixed reviews of Kondratieff but will lose no time looking up these names you mentioned...thank you!!
I am a mere peasant who has been educating myself for the past three years, but still thirsty for knowledge. If you have a link to some charts that could save me some trouble, I would be grateful! If not, I will google the names you gave and see what I can learn that way. Thanks again.
Year 2014 on a 14 yr cycle basis. price should go higher than $2014
mixed reviews, know what you mean here's something to look at
http://www.thelongwaveanalyst.ca/
http://www.chartsrus.com/
http://www.sharelynx.com/chartstemp/free/fchart-BGMI.php
More than 50% of the Gold on this planet is in the form of jewelry. Even in your scenario, there will be plenty available to trade, however it would be extremely (astronomically) expensive priced in $US. However, less debased currencies could be used. Gold hasn't hit a record against the Aussie Dollar and many other major currencies.
Yes - go trawl through some of Antal Fekete's writings on gold backwardation.
His point is essentially that there is a window of opportunity to remobilize gold and silver, properly, while the market remains in contango. If the window closes, with gold and silver in permanent backwardation, it will retreat into private hoards and will not see the light of day - 'not for sale at any price'.
At this point, things aren't so good.
It remains to be seen whether this will really happen, but he's been pretty accurate so far, and the metals are dancing with backwardation even now.
If it does turn ugly, at least the ounces you hold can be kept until things settle down, even if it isn't soon. The ounces you placed in trust will be, most likely, gone.
I generally prefer to be more optimistic, and that crisis is a crucible for new solutions. But as things stand I'm still with Antal on this one, at least until something changes in a big way.
My biggest concern is that they go all out on necessities inflation so that the middle class must sell their assets (houses, land, gold, silver) back to the bankers. If they can bankrupt the middle class they can own all assets including gold as it is sold back to pay for a $100 tomato so that you can live. This quote is salient:
Gold 20 mexican peso aztec coins especially pre-30's, Gold Swiss franc pre 1933 coins, Canadian maple leaf coins, krugerands, silver eagle coins, and A-mark silver bars (in plastic so they don't tarnish) are my favorite physicals. GTU or CEF for honest certificate on physical in Canada (GLD & SLV are highly suspect).
As for stocks on miners, I like GG, AUY, and GDX for the index. I am not as sure on the silver stocks right now but am watching SSRI and PAAS. As soon as the junior mining ETF comes out, I will be all over it - frankly I am starting little positions on the largest % positions in this ETF now before launch (positioning before the pop), see the list for the components before it's launched:
http://goldversuspaper.blogspot.com/2009/10/gdxj-constituents-now-availa...
A speculative play I am looking at as soon as we see weakness in the market (fed liquidity pulled) is cheap out of the money put options on well performing ultra leveraged 2X-3X long bull ETFs - because of the decay - a few are near their 52 week highs.
A great site I have come to love is Ibankcoin.com - they have a great stock screener that considers fundamentals and technicals. The screener allows me to look at dividend yields (important and shows discipline), P/E to growth rates, institutional buys and sales for the previous week (shows accumulation or selling), debt to equity ratio, cash, and their hybrid score (fundamentals + technical score). The "Fly" seems to have an uncanny view of the market - he is currently stating that the market will rally into Thanksgiving - because Wall Street loves turkey day!
Convertibles are another investment I'm looking at (income with upside potential is where it's at - balanced with 3rd party risk) along with higher dividend stable stocks (sell covered calls as well). If you bought high yield bonds but also bought CDS to insure counter party risk and then bought an interest rate swap I guess your risks would be covered, your return would be the yield less the CDS and interest rate swap cost (especially if those derivatives are backstopped by the govmt).
My concern with the exchanges and therefore securities as you know is that the structural integrity is not there because the SEC is clueless - the ability to naked short (like TBTF's short positions on gold & silver without collateral) and buy securities without collateral or questionable collateral just allows massive manipulation of stock prices increasing volatility (this makes short term options much too expensive - better to sell than buy) and creates difficulty when you want to protect the downside with a stop limit.
I thought I would share my thinking, although this is not investment advice and that is not the purpose of this site (fine print for all those rabid long market ben bernanke disciples that seem to take credit for knowing how much liquidity BB was going to and will continue to throw into the market). A few smart minds on this site, looking for some feedback 1/3 in cash, 1/2 in pm, 1/6th in high quality depression insulated dividend stocks with international exposure. The US dollar might have a slight pop back in the short term and especially before treasury auctions - but unless jobs come back (doubtful) and our tax system is reformed to stimulate job creation, the dollar will continue to sink long term.
Hey Mayhem:
"My biggest concern is that they go all out on necessities inflation so that the middle class must sell their assets (houses, land, gold, silver) back to the bankers. If they can bankrupt the middle class they can own all assets including gold as it is sold back to pay for a $100 tomato so that you can live."
You said it heaps better than I did, but this is what I was trying to get at in my question above. They drive metals up, so that we can't acquire them (or any other real assets) and are left with the sordid nightmare of a lifetime spent going to work to pay off debt. No more middle class, just the rich (trading gold back & forth in real deals) and the peasantry (trading debt/paper back & forth, going nowhere).
This is nowhere more 'real' than in Aus, where they don't even try to disguise price inflation anymore, where our food prices are the highest in the world and our housing prices the highest (median >$600,000 in Sydney) with the possible exception of Vancouver Canada (median >$900,000, can't remember the exact figures off the top of my head).
Our government is not even making a pretense of deflation. The only thing going down or staying static, is wages. Prices, and unemployment, all on the way up.
Do you really think there is a broad-based conspiracy to run up the price of necessities in order to create some kind of neo-serfdom? The only value that real estate has is if people can afford to buy it--if you make it impossible to own property, you don't get rich, quite the opposite. We just saw this massive housing bubble detonate in the US in which the last marginal buyers were squeezed and then the whole thing caved right in. Now banks are holding onto property because they fear it is so worthless that it would put them out of business if a true street price were ascertained. That does not sound to me like some grand plot by oligarchs to rule the world.
I cannot speak to Australian real estate prices, but it could be that you are just behind the curve or that the Oz government has managed to kick the can a bit longer with respect to the bubble deflating. At some point, people will balk--they can't service infinite debt.
Two words: Peasant Revolt.
Go enjoy your day.
I am Chumbawamba.
ELLIOTT WAVE GOLD UPDATE 23
25 November 2008
Alf Field
As this is going to be the last of these Updates, it is appropriate to review the reasons for writing this series of articles on Elliott Wave and the gold price. This will involve revealing a lot of personal detail and also unveiling an extremely high forecast for future gold prices.
In August 2003 the gold price was in the region of $350 and there were a number of conflicting views about the future direction of the gold price. Robert Prechter, for example, was predicting a move to below $253 and possibly below $200. For a number of reasons I was of the opinion that gold was in the very early stages of a major bull market. My views were thus the opposite of Prechter's and I eventually plucked up the courage to say so.
I count Robert Prechter as a friend, so my purpose was not to disparage his views. I was more interested in setting up some parameters or guidelines that would help determine the likely outcome if the gold price exceeded those levels. I concluded that if the gold price dropped below $309, the odds would favour Prechter's view. If it pushed above $382, then my bullish view would probably be favoured.
This was more than just an academic exercise because in 2002 I had made a major change to our family investments, moving some 40% of the capital into gold and silver bullion plus a selection of gold and silver mining shares. If Prechter's view prevailed, our family finances would have taken a serious drubbing.
Another reason for publishing the Updates was to illustrate a major advantage of the EWP, which is the ability to prepare a template forecast (or "road map") of how the market is likely to unfold in both the long and short term, including the possible terminal prices. The original article produced a template based on the rhythms that had been observed in the early stages of the bull market, based naturally on the assumption that my bullish views would prevail.
The early stages of the bull market revealed corrections of 4%, 8% and 16% at increasing orders of wave magnitude. Those numbers were used in the original template published in that 2003 article, a template that forecast that the first major move upwards could reach $630 after which a correction of the order of 25% to 33% would probably follow. In fact, if the sequence had been extended logically, the larger correction should be double 16%, or 32%, but this was shaved to 25-33%.
I thought that the $630 forecast was conservative and that this number would probably have to be adjusted upwards later once the minor waves unfolded. In 2003, with gold in the mid $300's, a forecast of $630 was both courageous and extremely daring. There was no purpose served in taking the exercise beyond that point until after the $630 target had been achieved.
In addition, the 2003 article concluded that if $382 was surpassed, then the gold price would move rapidly to $424 without a serious correction. That did indeed happen, with gold reaching $425 before the anticipated correction occurred. That success encouraged me to write an article updating the original forecast. I did not anticipate that the consequence of that first update would be the production of this Update 23 some five years later.
There was a further undisclosed reason for writing these articles and that was to eventually highlight the massive potential of the gold bull market. I was reluctant to reveal what I really believed in 2003 as it was so bullish that it would have invited the arrival of the guys with straight jackets and padded cells.
As this will be the last of these Updates, I will reveal my previously unpublished "back of the envelope" calculations in 2003. They were as follows.
Major ONE up from $256 to approximately $750 (a Fibonacci 3 times the $255 low);
Major TWO down from $750 to $500 (a serious decline of 33%);
Major THREE up from $500 to $2,500 (a Fibonacci 5 times the $500 low);
Major FOUR down from $2,500 to $2,000 (another serious decline);
Major FIVE up from $2,000 to $6,000 (also a 3 fold increase, same as ONE)
A case can be made for an 8 fold increase in Major FIVE, which would continue the Fibonacci sequence 3, 5, 8. You can do the maths if you like, but the fact is you can pick your own number for the gain in Major FIVE. Three times the low of $2,000 was actually the conservative expectation, producing a bull market peak target of $6,000.
I would not have invested 40% of the family capital into gold, silver and the corresponding mining shares based solely on my bullish EWP expectations. The following is a quote extracted from "Elliott Wave and the Gold Price" written in 2003 and referenced above:
"I am not a gung-ho advocate of the EWP. I discovered not only its strengths but also its weaknesses. I prefer to have fundamentals, technicals and the EWP all in place (if possible) before committing myself to an investment."
As mentioned in this quotation, I prefer to have fundamental and technical analyses in line with the EWP before committing to a position. Obviously I was satisfied with the fundamental and technical out look for gold when I made the dramatic change in our investment portfolio in 2002.
The technical analysis included the following:
* The 21-year bear market in precious metals had ended with the multi-decade down trend line being broken on the upside.
* The precious metal markets were oversold with sentiment and emotional indicators sporting extreme negative readings with bullish connotations.
* In the 1970's bull market, gold increased from a low of $35 to a peak of $850, a massive 24.3 times the low price. If the current bull market was to be of the same order, then one could project an ultimate peak of over $6,221 ($256 x 24.3). This matched the $6,000 target determined under the EWP.
The fundamental analysis was the real clincher. I had become convinced that the world, and especially the USA, was heading for a major financial crisis that would be so powerful that it would overwhelm all other factors. It would become the single most important criteria impacting on investment decisions. Privately I referred to this as the "Big Kahuna" crisis.
I anticipated that the Big Kahuna would give rise to the risk of a systemic meltdown, which would result in the authorities "throwing money at problems", bailing out all the banks and large corporations that got into trouble. This would lead to the destruction of the currency. I wrote about this in more detail in "Seven D's of the developing Disaster" in April, 2005, an article that can be found at: www.gold-eagle.com/editorials_05/field042805.html
The consequence of the systemic meltdown would be a vast increase in newly created money which would result in a massive rise in the gold price of the order that I was anticipating. A further consequence would be the introduction of new national and international monetary systems. Several articles followed in the next few years, culminating in "Crisis Cogitations" which was published just 2 weeks ago at: www.gold-eagle.com/editorials_08/field111208.html
If you haven't read "Crisis Cogitations", I would urge you to do so in order to better understand the current crisis. Obviously the current financial crisis is the Big Kahuna that I had been anticipating, although I didn't expect it to take five years to emerge.
Reverting back to the situation in 2003, both the technical and fundamental underpinnings for gold seemed to be pretty solid. Consequently I felt confident that the bullish EWP forecasts, both the shorter term and the undisclosed longer term expectation, would work out. There was no purpose served in revealing the potential for the market to reach $6,000. To get there, gold had to get to the $630 target first, which was a sufficiently daring forecast in 2003.
The current situation
The chart below depicts the COMEX Gold price on a weekly basis. In February 2006, in Update IV, the $630 target was increased to $768 as a result of intervening market action. A couple of months later the gold price exceeded $630 and moved to $733 in May 2006. From that point a 23% correction to $563 occurred.
Confusion reigned because a relatively minor correction had been anticipated, to be followed by a rise to $768. Thereafter the long awaited 25% to 33% correction was scheduled to occur. Instead, the decline measured 23% and the obvious conclusion was that this was the long awaited 25% to 33% correction, albeit slightly stunted. Quite possibly I was overly influenced by my previously unpublished rough target of $750 followed by a decline to $500. The actual outcome of a peak of $733 and a correction to $563 was remarkably close to my rough estimate and seemed to adequately fit the requirement for the end of Major ONE and the corrective wave Major TWO. In coming to this conclusion I glossed over the fact that the correction to $563 was an obvious triangle, and triangles are almost always 4th waves, yet I was calling it a 2nd wave, Major TWO. I also glossed over the fact that the correction was below the 25% to 33% magnitude required.
I mentioned previously that the early corrections were 4%, 8% and 16% at increasing orders of magnitude. If one were to be pedantic, one would say that the next level of correction should be 32%. Looking at the chart below, the correction from $1015 to $699 is 31%! It sticks out like a sore thumb. Surely this is exactly the 32% correction that we should have been anticipating for Major TWO?
Assuming that the $699 low on 23 October 2008 turns out to be the actual low point of the correction, and that remains to be proven, then we can conclude that we have seen the low point for Major TWO. That will allow us to update my original "back of the envelope" template to much higher levels, as follows:
Major ONE up from $256 to $1,015 (actually 4 times the $255 low);
Major TWO down from $1015 to $699, say $700 (a decline of 31%);
Major THREE up from $700 to $3,500 (a Fibonacci 5 times the $500 low);
Major FOUR down from $3,500 to $2,500 (a 29% decline);
Major FIVE up from $2,500 to $10,000 (also a 4 fold increase, same as ONE)
Once again, you can pick your number for the gain in FIVE and multiply it by $2,500. The numbers become astronomical and can really only be possible in a runaway inflationary environment, something which many thinking people are suggesting has become a possibility as a result of the actions taken during the current crisis.
Concentrating on the $3,500 target for Major THREE, which is a five fold increase from the low point of about $700, there is a case advanced in "Crisis Cogitations" for a five fold increase in money and prices in order to arrive at a "Less Hard" economic landing. In the USA, total debt recently exceeded $50 trillion and this is unsustainable given an economy with a GDP of only $14 trillion. The suggestion is that the debt level will reduce through bankruptcies to say $35 trillion while the new money created to save the situation will push up the nominal GDP to $70 trillion. A $35 trillion debt level is manageable with a GDP of $70 trillion.
It requires a five fold increase in prices to achieve the above result. Gold has retained its purchasing power over the centuries and will no doubt continue to do so in the current environment. Consequently gold will almost certainly increase five fold (or more) if the level of prices in the USA increases five fold.
In "Crisis Cogitations" it is acknowledged that the current credit/debt deflation could get out of hand and result in a serious deflationary depression. There is debate as to how gold will react in a deflationary environment, but the fact is that in a serious depression bankruptcies will be rife and price levels will decline. This may result in cash and Government bonds performing better than gold, but this is not certain. Gold cannot go bankrupt and is thus an asset that people can hold with confidence in a deflationary depression. It is possible that demand for a "safe haven" investment may be large enough to cause the metal to perform better than cash or Government Bonds.
The odds, however, strongly favour an inflationary outcome. Given a strong will and the ability to create any amount of new money via the electronic money machine, it seems a foregone conclusion that runaway inflation will be the end result. If Mugabe could do it in Zimbabwe, there seems little doubt that Ben Bernanke and his associates in other countries will have no trouble in doing it too.
Why quit writing these reports?
I have noticed from the emails that I receive that many people are using these reports to guide their trading activities in gold. I have had no objection to this in the past, but feel that it would be foolish to trade gold in the circumstances of the Big Kahuna crisis that we are living though at the moment. It has become a question of individual financial survival in an environment where things are happening more rapidly and with increasing violence. I feel very strongly that it is time to quietly hold onto one's gold insurance and not attempt to trade it. I do not wish to provide interim levels that may cause people to be encouraged to trade their gold to skim a few extra fiat dollars or other currencies, but lose their gold as a result.
So it is Good Bye, Good Luck and God Bless,
Alf Field
25 November 2008
Disclosure and Disclaimer Statement: The author is not a disinterested party. He has personal investments in gold and silver bullion, as well as in gold, silver, uranium and base metal mining shares. The author’s objective in writing this article is to interest potential investors in this subject to the point where they are encouraged to conduct their own further diligent research. Neither the information nor the opinions expressed should be construed as a solicitation to buy or sell any stock, currency or commodity. Investors are recommended to obtain the advice of a qualified investment advisor before entering into any transactions. The author has neither been paid nor received any other inducement to write this article.
http://economictimes.indiatimes.com/news/economy/finance/RBI-mayve-sold-...
My wife keeps telling me to buy gold contracts and I keep telling her "gold is over valued"....guess who has had to eat his words.....:-p