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What’s Next for Gold?
Now that gold has hit my target for the year of $1,340, it is time to pause and reassess. A nice reversal may take place after the November election, especially if the Republicans take the house. While their promises to reduce the deficit are gold negative, the fact is that their tax cutting proposals are more likely to lead to bigger deficits, not smaller ones. With only 18% of the Federal budget discretionary, and the rest tied up in defense spending and entitlements, the amount of spending cuts they are proposing are impossible. Even if we eliminated all discretionary spending, the government would still be hugely in the red.
Another factor that could lean on gold prices would be a rise in capital gains taxes from 15% to 20% passed by Congress during the lame duck session. That would trigger a stampede to take profits in all asset classes before the year end. With gold up 35% this year and at the top of the list of performers, it could get hit with a serious bout of profit taking.
None of this changes the long term fundamental case for gold. The current environment of negative real interest rates is the dream scenario for the yellow metal. The last time this happened was during the seventies, when gold moved from $34/ounce to $900. As long as interest rates and stay low, you can expect gold to continue its rise. Goldcorp (GG) CEO, Charles Jeannes, says he believes we will see a $1,500 print sometime ‘in the next one or two years.” Goldcorp is one of the largest gold producers in the world.
Although not many have noticed, the re-emergence of inflation has already started. Anyone who looks at the blistering prices rises of wheat, corn, soybeans, sugar, iron ore, coal, and other key raw materials can’t look me straight in the eye and say there’s no inflation. Of course the last place you will find it is in government statistics, a deep lagging indicator.
The fall is always the peak demand time of year for the yellow metal, and the Fed’s recent move towards QEII is likely to give the barbarous relic a shot of steroids. The only question here is whether a $100 pull back starts here, at $1,350, $1,400, or even $1,500. When it does, you can expect a ton of buying waiting for it below from central banks, institutional investors, ETF’s, and individuals alike.
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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this is the same guy who trashed Silver last week,I guess that was MHFT covering today.
I am sure gold is going to increase in price over the next x years (and x might be 1, 5, 10 or 20). What is bothering me is this recent, high-paced increase in price. I was not expecting it to move up so quickly and it makes me wonder why. Some might attribute it to dollar weakness, currency intervention and/or the prospect of new QE. But we have had all of those before, alone and in tandem.
I have some ideas regarding this ramp up but they are just hypotheses. Any other ideas as to why the price is moving up so quickly this week?
I don't think gold cares about inflation or budget deficits. Can you explain why you think they do? I would like to understand the reasoning...
I can, Mr. Marx.
A deficit is more money owed and printed by the FED and added to total debt.
Debt is more USD printed = debasement and devaluation of currency already in existence = Socialist government theft from the little people through the pollution of dilution.
GOLD is not getting bigger, the dollar is getting smaller.
Gold is a metal and doesn't have feelings, but people care because they don't want to be holding the shrinking dollars so they convert to gold to save themselves.
I fear it's too late for you, but perhaps others might still benefit from reading Alan Greenspan's 1966 classic essay re: money and gold (written before we lost him to the other side).
*Charley is the also name of the main Character in "Flowers for Algernon"
we didn't loose him to the other side. He is sabotaging the system from within. He is John Galt
No word about India. With India the worlds largest consumer, wouldnt have added value to your atricle you you referenced recent sales volume in India? I realize you are interested in the paper trades happening in New York, but the pulse of the worlds largest market would add some perspective. Any one know how gold sales are doing in India at these prices?
I think gold will continue higher to $1500, before pausing. Because:
1) percentage gains are smaller with higher pricing
2) political uncertainty and stalement likely in USA
3) political uncertainty internationally, increases again once US elections are over
4) increase oil and commodity pricing due to decrease in USD value
5) more people realize gold is the new currency with each new development
I did some calculations on the true value of silver and at this moment, silver should be priced at +-42,8$ per ounce.
I did this by compairing the 2 reichmarks silvercoin (62,5% Au)
vs. the dollar in the 1924 (1$ = 4.2 Rm)
The dollar in those days had a purchasing power that was then about 20 times higher then now
So:
The 2 reichsmarks from the 1924 era now has a silver value of +-9$
so: 1/4.2 x 9 x 20= 42,8$
Imagine what the price will be after the QE2! What if the dollar lost another 30% of it's value because of it! That would make silver go up another 13$!
So after november, we should start to go to 56$ for 1 oz of silver!
For gold that would set the price X2.5 = 3290$ PER OZ!!
The 3 decades of the suppression of Gold are over. Fort Knox is finally depleted of gold. They can not defend the fiat any longer. This is a rerun of the period between the collapse of the Gold Pool and the closing of the gold window. "we are all keynesians now". really!!
Is it a good time to buy gold?
Has Dennis Kneale recommended it, yet?
I find it hard to believe that there is a big group of gold investors that would sell gold before the end of the year motivated by a 5% savings in taxes. You would have to be focused on short-term returns, so let's say you bought your gold at $1,000 per ounce and now have $340 of profit (ignoring trading, shipping storage, and other costs). Your 5% cost savings on taxes would equal $17 per ounce. Would anyone currently invested in gold be making major sales decision based on $17 per ounce? Gold went up by twice that amount yesterday. If you were motivated by saving $17 you would have sold yesterday.
It's a similar situation with my gold mining stock mutual funds. There is a 1% penalty if I sell and haven't held for at least 60 days. The shares move that much on average each day - it would be stupid to give even a second of consideration to the penalty when I am considering selling a portion of my shares based on what appears to be an interim top. Same should be true for any tax differential. But who knows. Sounds like a good false excuse for JPM and others to sell down gold at the end of the year - motivated of course by the same price manipulation motives that have been in place for the past 10 years and not by any year end tax considerations.
Hate to puncture somebody's bubble, but IRS (to help bolster the fiatsco currency) deems gold a collectible when held as coins or bullion and discriminatorily taxes long-term gains on gold at 28%. Short-term gold profits are taxed at ordinary income rates.
I personally don't contemplate selling any until >2000, and then only if and when absolutely required.
Exactly. No one would.
Hold your physical gold until you SPEND it. Capital gains = 0%
I was speaking of the folks that bought it at $260-$300.00..........
The dudes that have hundreds of pounds of it.
Even at that I am not selling. Just anecdotal evidence.
My motivation for selling won't be some fukkin tax rate.
If this is the dream scenario, how come gold is so lackluster measured in euros? In euro terms, gold is still about 10% below the highs reached this summer. So, in other words, this is not about gold strength, but dollar weakness.
In a word, yes.
For right now.That 10% premium is the dollar being crucified.
But, as China,and Asians and the East gain more and more wealth....the prices of everything is gong to go THRU the roof.
We used to be the Main Event.............now we are Pre Main Event.
Fixing to be off the card.
Gold didn't stop in the 80's until it rose to a 100% backing against the dollar. So figure out what 8000 tons of gold has to be priced at to match 13.5 trillion in national debt.
56K an ounce. Next question
Bottom line: Economic and currency wars are on between the West and East (China) and since we have the most gold reserves, the price suppression of the PMs is self-defeating.
Jim Rickards said $5000-$10,000/oz would effectly create de facto gold-back USD again (if the 8000 tons are still there) -- based on debt, gold reserves and simple math. (Range due to fact most gold backed currency are not 100%, but 40% like SUI, as a rule of thumb). He suggested the $5000 was a reasonable minimum.
The point of the discussion (King World News last month) was to point out that a gold standard is doable for the USA with rise of gold pricing relative to the USD (devalue) and should be considered as a strategic option to rebalance fair values and eventual global stability (no option was without pain).
He pointed out that if China and say, Russia, agreed to a joint international gold-backed currency agreement, it would be immediately game over for the West and the USD as the reserve currency.
it was M1 was effectively backed if I recall, not all of the debt..
"A nice reversal may take place after the November election, especially if the Republicans take the house."
"Another factor that could lean on gold prices would be a rise in capital gains taxes from 15% to 20% passed by Congress during the lame duck session."
=============================
Neither event would affect me in the least. The gold market is not only in the US. US residents are not the only buyers and sellers.
How you getting it thru customs, where they take pishahs of yo wee wee?.
Going by boat?...damn pirates will get ya.LOL
The fundamentals are what they are, Republicrats may do some good, on stopping the immediate disasters(Death Care),but the die is already cast, long term.
My Health Care prems(out of pkt, used to be paid by Emp) already went up 15% over last year, and likely so has everone elses here.
The Asians, especially the Chinese, will determine the gold price; not Western investors or traders. If every Asian family owned just one ounce of Gold, it would represent more than has ever been mined.
Both silver and gold are actually finite resources with all the low hanging fruit already mined. Econ 101, people.
Additionally, the pressure is now on the manipulators; when either SLV or GLD implode, the price of PMs will double overnight.
For all who think the FED put themselves in a real tight corner, you do not understand the nature of the FED.
Criticize it all you want but to be ignorant of why the FED exists, what it's REAL genuine function is, is to belittle any comments you make about it.
The FED exists ONLY to protect and enhance, and many times lie, cheat and steal, print, and tap keys for Wealthy.
Trillions of dollars were given outright, no questions asked to a few members of The Tribe in spite of the fact that they should now be in soup kitchens, homeless, living underground in the dark, cold, hungry and disease ridden. Instead they party on mega yachts, all year round without a worry in the world because Hank Paulson, Timmay, Alan, Ben, and a few key players like orszag, summers, rubin, friedman,fuld, frank, thain, dodd, mozillo,o'neal, gensler, cassano, blankfein, shapiro,yellin, fink, kashkari, cohn, dudley, dugan, kagan, lippman, Dimon, Diamond ---all have the back of the elite who live in an entirely different world than we do.
To not know this is ruinously negligent. Those people have been buying gold by the carload.
Not to mention that gold is still lagging Zimbabwe Ben's printing press.
Need to be careful during these "crap rallies". You know the rallies where the worst stocks, the diciest bonds rise the most? The rallies where a currency that may not be long for this world is rising very fast?
Gold has been lagging the Euro!!! Think about that for a moment - the Euro is the biggest piece of crap there is. It is structuraly unsound, and gold has done worse than that!
When crap rallies end , the crap always sinks to the bottom.
"mad hedge fund trader"? Who is this guy? Call yourself mad and expect folks to listen to you. So you dont know when the $100 reversal happens in Gold, nor do you know the upside target. What I dont understand is why has ZH published 100 lines of crap which neither has any valuable content nor any sense of direction.
If you are a trader, then you should have sharp levels defined at which you recommend a certain action.
As long as interest rates and stay low, you can expect gold to continue its rise. Goldcorp (GG) CEO, Charles Jeannes, says he believes we will see a $1,500 print sometime ‘in the next one or two years.” Goldcorp is one of the largest gold producers in the world.
Although not many have noticed, the re-emergence of inflation has already started. Anyone who looks at the blistering prices rises of wheat, corn, soybeans, sugar, iron ore, coal, and other key raw materials can’t look me straight in the eye and say there’s no inflation. Of course the last place you will find it is in government statistics, a deep lagging indicator.
Goldcorp (GG) suggests $1500. He is a bloody miner and you are asking him what the price of commodity will be. Can you ask A HEDGE FUND trader who are the speculative guys buying it on COMEX? I will tell you Gold is rounding up for a flash crash. Just wait.
The fall is always the peak demand time of year for the yellow metal, and the Fed’s recent move towards QEII is likely to give the barbarous relic a shot of steroids. The only question here is whether a $100 pull back starts here, at $1,350, $1,400, or even $1,500. When it does, you can expect a ton of buying waiting for it below from central banks, institutional investors, ETF’s, and individuals alike.
Now even an a complete novice who has never done any investing will tell you that prices go up and down. You suggest $100 reversal. Can you let us know the reason for $100. Why will it happen at $1400 and not $2000. You should read that last para and how completely unqualified it looks.
Im soooo praying for a flash crash. I actually want it to crash all the way down to 600 for a few months. Saving FRNs in my safe for the opportunity to buy more gold. Shit, if it gets bellow 1000FRNs will hold a flea market and sell some of my shit to buy gold.
It's Johnny Bravo magic charting techniques. You see how well it worked for him.
When you accumilate gold now for some years in small amounts
then who the fuck knows or cares about taxes.I don't pay any taxes
on this,already payed for the taxes when I worked for it.Gold it
still easy to hide from their dirty,sticky and slimmy fingers.
Unless your trading with it, you WILL pay taxes on it, if you sell it to a Dealer.( a legit Dealer).
I'm a "legit dealer". How does that make it incumbent on me to cause the seller to pay taxes?
spacemonkey, excellent point. Then again who knows what other rabbits bernanke has under his hat. Personally i think they are out of ammo but as we all know they (PPT) have kept the plates in the air longer than most expected.
What is Bernanke going to do? Raise rates? NO, Print more dollars? YES.
You don't have to fight the Fed. We know that they are going to continue to print FRNs.
People are now frightened of fiat currencies...gold is going UP.
In EUR, gold is cheaper than it was back in may (or just look HUF vs. gold in the past two weeks). It's not gold going up, but USD debased. Now, reverse that at $1,350, $1,400, or even $1,500..
Spacemonkey. You see it, Mad doesn't. Watch the dollar/euro pairing. Everytime the Euro starts moving up vs dollar gold gets another leg up.
Remember that the dollar is the world reserve currency and zillions of them are held around the world. What do the dollar holders do to hedge against the dollar dropping like a stone vs other fiats? Gold!
Because those dollar holders know that their own local fiat is going to be printed to extinction along with the dollar.
Here's a quick answer to every thread you post with fewer replies and even less interest each time:
Just go away. Please. Just stop posting.
But, Howie! Any article with the word "gold" in it will generate some frothy discussion.
Ain't that the goal? Besides, a good mud fight over gold is always fun.
It's a all skate event. One doesn't have to know shit to participate.
Here's a prediction....eff the reversal, if you take profit here, you are an idiot. We just hit an entirely different phase....and the only the beginning stages...A phase that only elmo, pet rocks pets.com and teddy ruxbin can tell you about...welcome to insanity, an insanity which only the masses are capable of.....we are just getting started....gold is not a stock...its a panic buy
Akak, Hendrix, and those who join this thread, knock some sense into my head about the following, please! I embrace the insight of many ZH'rs. In fact, peversely, I learn as much from those who show genius as I do the ones who drip copious amounts mental meconium.
Curious about the proper way to conceptualize...
One of most realistic ways to perceive AU in regards to FRN's is to understand it as a inverse correlation. But the beta on this relationship rarely hovers at a ratio of 1:1 (statistical beta, not stock beta).
Because of this, and assuming that this incongruence is due to manipulation, wouldn't it also be correct to view AU through two different lenses? A store of actual static wealth AND a tool to achieve FRN based capital gain/loss?
Is this just another way of placing a timeline on perspective?
Playing with fire?
Is seeing it in this sybil fashion a zerohedge sin? Should I now shave my head and eat locust?!
Slap me if necessary. Thanks.
Meconium?
Try to forget gold as a store of value and all that strange talk and just consider that gold is in a mo'POMO-induced bubble like everything else.
Soon, the tide will go out and we'll see that gold is not wearing any breeches.
:D
Can you quantify the "soon" remark? I'd like to know when to sell my stash.
Can I visit you if I lose money?
and I can bet your ass you've been saying that since 1999
while we are throwing out the store of value concept lets get ride of all the concept words and acronyms.
what your saying is that i should buy gold not because i value it at $1000. but because someone else will value it at $1350 and i can get it for 1340. but also i better hurry cause i dont want to be holding the gold when it return to $1000 or even less.
quite using all these hard words like bubble and POMO.