Nouriel

Gold hit a 4 month low today despite deepening worries that the political upheaval in Greece may sink the country into chaos and endanger the euro zone's efforts to end the debt crisis – possibly leading to contagion and or a monetary crisis. Some decent demand from South East Asia has been reported at the $1,600/oz level and there are also reports from Reuters of a “semi-official buyer of gold” emerging “on dip below $1,600/oz”.  Gold’s weakness yesterday may have been again due to dollar strength and oil weakness - oil is now below $97 a barrel (NYMEX). It may also have been due to wholesale liquidation which created a new bout of "risk off" which has seen global equities and commodities all come under pressure. However, gold’s weakness yesterday was also contributed to by more unusual trading activity. As trading in New York got underway, there was an unusually large bout of selling with some 6,000 gold futures contracts sold in minutes and this led to gold's initial $10 fall to the $1,615/oz level. Momentum driven algorithm trading may have then led to follow through selling and the initial sell off may have emboldened tech traders to sell more leading to the falls below $1,600/oz. 

All you need to read and some more.

All you need to read.

While most of the time, it seems, investing in Emerging (or Growth) market countries is entirely focused on just that - the growth - with little thought given to the lower probability but high impact event of a growth shock. Goldman uses a variety of economic and corporate factors to compile a Growth Vulnerability Score including excess credit growth, high levels of short-term and/or external debt, and current account deficits. Comparing growth expectations to this growth shock score indicates the BRICs are now in very different places from a valuation perspective. Brazil remains 'fair' while India looks notably 'expensive' leaving China and Russia 'cheap'. It seems, in Goldman's opinion that markets are discounting large growth risks too much for China and Russia (and not enough for India). Finally, for all the Europeans, Turkey is richest of all, with a significant growth shock potential that is notably underpriced. Goldman's China-is-cheap perspective disagrees with Nouriel Roubini's well-below-consensus view of an initially soft landing leading to a hard landing for China as 2013 approaches as he notes the pain that commodity exporters feel in 2012 is only a taste of the bleeding yet to come in 2013.

Last week, Bernanke's first (of four) lecture at George Washington University was entirely dedicated to attempting to discredit gold and all that sound money stands for. The propaganda machine was so transparent that it hardly merited a response: those away from the MSM know the truth (which, simply said, is the "creation" of over $100 trillion in derivatives in just the first six months of 2011 to a record $707 trillion - how does one spell stability?), while those who rely on mainstream media for the news would never see an alternative perspective - financial firms are not among the top three sources of advertising dollars for legacy media for nothing. Still, for those who feel like the Chairman's word need to be challenged, the following extensive and annotated reply by QBAMCO's Paul Brodsky makes a mockery of the Fed's full on assault on gold, and any attempts by the subservient media to defend it. To wit: "Has anyone asked why so many powerful people are going out of their way to discredit an inert rock? We think it comes down to maintaining power and control over commercial economies. After professionally watching Fed chairmen cajole, threaten, persuade and manage sentiment in the markets since 1982, we argue this latest permutation is understandable, predictable and, for those willing to bet on the Fed’s ultimate success in saving the banking system (as we are), quite exciting.... Gold is no longer being ignored and gold holders are no longer being laughed at. “The Powers That Be” seem to have begun a campaign to discredit gold."

All you need to read.

Firstly, I prefer the label “realist” as a more apropos label than “gloom and doomer”. Most of us that have remained realists for the past six years or so have a very public track record through public blog posts and public interviews

Anyone Who Thinks that War Is Good For the Economy Has One Eye Covered ... And Is Only Looking At Half the Picture ...

Currency debasement of all major currencies is happening today on a scale never before seen in history. Yet there continues to be a complete lack of awareness amongst the majority in the western world as to the risks posed by our currency monetary and financial system. There continues to be a lack of knowledge and indeed often wilful ignorance regarding gold. Indeed, some comments on gold are so ignorant of the historical and academic record that they have all the hallmarks of crude anti-gold propaganda – and will be seen as such in time. Gold is a proven safe haven asset and currency. Despite much recent academic evidence and the historical record showing this and despite voluminous articles, research and evidence, (evidence succinctly summarised in the video 'Gold Bullion or Cash'), there continue to be frequent anti gold outbursts by some of the most respected and trusted people in the western financial and economic world. Such attacks on gold have come from men such as Paul Krugman, Nouriel Roubini and more recently Warren Buffett. Alan Greenspan correctly wrote in 1966 that "an almost hysterical antagonism toward the gold standard is one issue which unites statists of all persuasions”. Today, an almost hysterical antagonism towards gold bullion as a diversification and as a store of wealth alternative to fiat currencies unites beneficiaries of the current status quo – both intellectual beneficiaries and material beneficiaries. That status quo is a massively leveraged and insolvent monetary, financial and economic system. 

Would You Support a War Against Iran If You Knew the True Facts?

He said, “Rising commodity prices, uncertainty in the Middle East, the spreading European debt crisis, increased frequency of “extreme weather events” and U.S. fiscal issues are “persistent” problems that will continue to spur market volatility and sway asset prices in the global economy. This is great news for gold. Goldman Sachs noted in a report on Jan. 13th that futures will advance to $1,940 an ounce in 12 months.  Morgan Stanley forecasts the yellow metal will climb to a record of $2,175 by 2013, said analysts Peter Richardson and Joel Crane in their research report.

All you need to read.

It wasn't a fun week for gold. By the close on Friday, the metal was down 6.7% (based on London PM fix prices), the biggest weekly decline since September. It got downright irritating when the mainstream media seemingly rejoiced at gold's decline. Economist Nouriel Roubini poked fun at gold bugs in a Tweet. Über investor Dennis Gartman said he sold his holdings. CNBC ran an article proclaiming gold was no longer a safe-haven asset (talk about an overreaction). While the worry may have been real, let's focus on facts. Have the reasons for gold's bull market changed in any material way such that we should consider exiting? Instead of me providing an answer, ask yourself some basic questions: Is the current support for the US dollar an honest indication of its health? Are the sovereign debt problems in Europe solved? How will the US repay its $15 trillion debt load without some level of currency dilution? Is there likely to be more money printing in the future, or less? Are real interest rates positive yet? Has gold really lost its safe haven status as a result of one bad week? And one more: What is the mainstream media's record on forecasting precious metals prices?

How much further might gold fall? Market momentum is a powerful force and therefore further weakness is quite possible.  Support is at the 200 day moving average at $1,619/oz. Below that is the psychological level of $1,600 per ounce and the 250 day moving average of $1,571/oz. Price resistance was seen at the $1,570/oz level between late April and July 2011 (see chart) and this level could become support as is often the case in bull markets. It is important to note that gold’s falls have been primarily dollar related and gold has fallen by a lot less in pound and in euro terms. Most analysts of the gold market remain of the view that this is another correction and that the medium and long term uptrend will continue due to significant investment, store of wealth and central bank demand due to geopolitical, macroeconomic, systemic and monetary risk. One analyst who appears to have a very different view regarding gold is world renowned economist Nouriel Roubini.  The Chairman of Roubini Global Economics has again taken to Twitter to engage in some name calling and to appear to question gold’s recent price action and whether gold may reach $2,000/oz.

Hey, at least a handful of Ben's buddies will make a bundle ...