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Guest Post: What Lies Ahead for Gold?
Submitted by Jeff Clark via Casey Research,
First, the bad news…
The selling is likely not over. The capitulation process may not be completed. Overall momentum remains down.
How low can gold and silver go? One can view all sorts of chart patterns and technical signals, and while a few will eventually be correct at calling the bottom, we prefer not to base our decisions on this type of strategy, starting with the fact that there are many different interpretations and too much variance in the predictions. What we do know is that given that capitulation is under way, the selling will overshoot to the downside, just like surges can overshoot to the upside. Our response should be to prepare to take advantage of that situation.
Sentiment has shifted to negative. All the headlines and stories about gold are negative and bearish. It will take a while for these investors to reenter the market, especially those who just sold for a loss. This won't be a years-long process in the making, but it likely won't happen in a month, either. The implication here is that patience will be required on the part of committed precious-metals investors.
Now the good news…
We've seen this before. Remember the autumn of 2008, when gold fell 28%? In the spring of 2006, the price dropped 22%. And as we've pointed out before, many proclaimed in 1976 that gold was over when it fell a dramatic 47%.
None of these selloffs dictated the end of the gold bull market. That won't be the case this time around, either. A panicked shakeout is just that.
The fundamental case for gold is growing, not diminishing. In spite of the downtrend in the price, the conditions that support the long-term bull market are increasing in importance. The US and Japan alone will flood the world with almost $2 trillion over the next 12 months. Europe's problems have not been solved, and the Eurozone teeters on the edge of a recession. And did you know that not one G20 country currently has a balanced budget? The current fiscal and monetary path of many major countries remains unsustainable, and no amount of selling by traders and hedge fund managers has changed that.
One might argue that these issues now have a diminished effect on the gold market. Regardless of whether that's true, the effects of these actions have not played out. There is no easy way out of the corner our political leaders have painted themselves into. In other words, the damage has already been done to our fiscal and monetary state. The endgame to our debt situation hasn't changed. When the ramifications begin setting in, it will be imperative that we all have meaningful exposure to gold.
In the end, fundamentals always win. In spite of the selloff, the long-term trend is still intact. Keep your eye on the big picture.
A lifetime buying opportunity is shaping up. We're not exaggerating by stating that. Given the waterfall decline in both precious metals and equities, investors with the courage to act and the cash to deploy will not just be rewarded, but could very well change their financial futures. The chance for enormous gains will be remarkable.
As a result, some of you reading this will, frankly, get rich, especially those who have exposure to the best junior gold stocks. Sadly, not all will realize this level of profit; while there are a lot of reasons for that, the biggest is because they won't have the two Cs – cash and courage. I hope you will be among those in the first camp.
I'll leave you with a quote from one of the most successful fund managers in the US, which was made while gold was in the midst of its dramatic selloff. It captures exactly how we feel about the current situation – and I hope yours:
"You should love this if you're a long-term holder of gold, or a believer in gold as a currency – you can buy your insurance cheaper," said Mark Fisher, CEO of MBF Clearing Corp. "A long-term buying opportunity is near."
Recent market actions have left many staunch gold advocates uncertain about what's ahead... not to mention how to invest wisely for both the short and long term. What gold assets are the best to buy? Should investors be buying today or holding for further drops?
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They succeeded in creating a deflationairy environment feeling. Tomorrow it will be cheaper. So again, it's about timing. This will not last long.
Disagree, wholeheartedly. If you're old enough, you may recall the 70s, and parts of the 80s and 90s and 2000s when inflation was a problem and the Fed fought it. Half-heartedly, of course, but inflation was evident everywhere. A deflationary cycle is difficult to stop, which is why the Bernanke and CB blow-buddies have to keep blowing (bubbles and each other).
Deflation has been evident since 2008, when they system nearly (and should have) imploded. Certainly there are price aberrations and dislocations (RE, stawks, PMs), but a can of peas is still a can of peas and the local Wegmans had them on sale for 59 cents recently (usually .79-.99) Food is your most basic staple and the dollar menus are top sellers at the fast-food-inducing-faster-shits outlets. If inflation was serious, those dollar menus would have become $1.50 menus or "bargain" menus a long time ago. Same with the dollar stores which have popped up everywhere. You can buy just about everything you need for a semi-balanced diet at dollar stores, even some meats, cheeses and plenty of canned vegetables.
Fluctuations will exist due to supply-demand, but food is still very cheap. And, as for fuel, gas is still in the $3.50-4.00 range, despite being highly controlled by the big five oil company cartel.
Deflation deflates everything. Gold, silver and stocks were just the latest casualties, reverting back to the mean, or lower.
This can last a long time. Take a look at Japan. However, if one has the proper perspective, stable prices or even outright deflation can be a frugal dream-come-true. I've been loving it for five years, even though I bought some silver at or near $30/ounce, most of it was purchased under $17, and that's where I see a bottom, so we're close, but still, maybe 3 years out.
Hyperinflation ain't gonna happen any time soon, so, get used to being a cheapskate, living a fuller life (like by growing your own, building your own, owning your own) and you'll be better off.
The trend in ounces, therefore, is up...
Right, because when I walk into a coin store, I literally see tons and tons of PMs on the shelves.
Price controls and manipulations cause shortages, not surpluses.
short answer - maintain your assets ratios that is when an asset goes down in price that means its ratio drops (unless all other assets also went down) so adjust it accordingly
Looking at the charts i think gold has just capitulated and will go up from here. JMHO.
geez...capitulation...what a joke.
bottomline, Jamie just sold the Chinese whatever few ounces are left in any of the accounts he can access.....and then promised them a whole lot more.
Great. He fucked us over......we will be damn lucky if this doesn't start some kind of war.
Not that he cares. He bought an island in Micronesia late last year.....and will be long gone before the shit really hits the fan.
Everyone involved in this should be jailed for life.
Gold short??? Looking at the metal markets in general they appear to be suprisingly stabile. Generally they always know something.
Everyone thinks they can escape to an island. I worked for years in the Pacific and Micronesia. In Micronesia if the locals don't waste him a typhoon certainly will. There is no escape from planet earth and human societies yet.
I agree the current trend is still down. The momentum clasing hedge funds are record short. JPM will take the other side of that trade, even if they show large losses. You can do this if you are backstopped by the FED losses mean nothing to them. Remember JPM was record short, when Silver was at $50. Can you imagine the paper losses they were carrying.
It"s a cat and mouse game. When all the hedge funds are short and JPM can't take the other side. The POUNCE, JPM gets it all back in spades.
Until the whole smoking tower of shit collapses, gold remains part of the economic system and a market that is easily manipulated. It will therefore trade down with everything else.
Many of us trade gold. They should have closed their losing trades. Others stack as insurance and nothing has changed. You don't cancel your house insurance when you see smoke issuing from the attic.
You can trade for returns, or you can stack for insurance and stop looking at trading data. It's that simple. Anyone confusing the two goals is going to lose everything.
I agree the current trend is still down. The momentum clasing hedge funds are record short. JPM will take the other side of that trade, even if they show large losses. You can do this if you are backstopped by the FED losses mean nothing to them. Remember JPM was record short, when Silver was at $50. Can you imagine the paper losses they were carrying.
It"s a cat and mouse game. When all the hedge funds are short and JPM can't take the other side. The POUNCE, JPM gets it all back in spades.
"sentiment has turned to negative"
Bull shit.
He was referring to the market player sentiment... not those who have unshakeable faith in gold as a store of value, not a trading vehicle.
In the western world, that would be the minority.
So, what's is happening with hedge funds such as John Paulson. Do they get margin calls? Do they sell other assets to cover it. Is this a vicious loop?
Sorry for the double post.
You can say that again
GOLD Chart says $1200. SILV Chart...don't ask.
Longer-term these prices would represent great buying opportunites. Some Equities are almost pricing it in, but would only buy very close to home (you wouldn't buy home insurance from a company on the other side of the world), but SILV will be hairy until then.
Interesting when you consider that a few years ago India central banks bought a significant amount from IMF at $1200.
Interesting when you consider that a few years ago India central banks bought a significant amount from IMF at $1200.
Corrrection, they paid $1045.00 per ounce.
Iamadouche, Iamadouche, Iamadouche. Hopefully three times will suffice.
I stand corrected as their purchases were "...at an average of 1045 per ounce in 2009" per Bloomberg. I am a douche. It's not the first time I have been wrong nor will it be the last.
If you draw a simple trend line from the start of the Silver bull market connecting the lows including the financial crisis, you find we are at support right now 19.57. I am very interested to see if this support holds.
What lies ahead for those who bought gold?
Wrong question.
The question should be, what lies ahead for those that didn't?
More gold?
What is the headshot 'price' for Comex fail? $1050? Silver $17? I'm a survivor, so i accumulate. The two G's: guts & glory.
Ah Ha! That explains why you are using the Wolf Man Jack picture
It's Beppe Grillo's face covering the famous Che pic.
Tough to square gold bugs vs Che the commie fag so I'll stick with the Wolf man since he and Beppe were related
How are your bonds doing, cocksucker?
Believers is what we need. Fighters, hero's, wikileaks, Grillo's, NSA whistleblowers. You just keep howling to the moon boy.
Seems to me people are pulling out of emerging markets...muni´s...treasuries...stocks....and gold and silver.....but the world keeps ticking down with Greece....Brazil...Japan...and China slowing....Countries are still printing a huge amount of paper....its not moving to much..just putting out fires...but when it does finally move..watch out...fundimentals are still good for PM¨S as an insurance....day traders/ hedges can go screw themselves
all i know is there is 3 oz. of shiny Au and 100oz. of shiny Ag headed my way in the next couple weeks.
"Your way" is down south.
i'm not worried in the slightest.
Neither am I. It's your money.
Money is not real. Gold is real.
If it continues to go south I will buy even more.
Money is whatever two parties agree is a fair exchange of value. It is a belief, nothing more, and in fact it only takes one party to believe in it for it to work. Ask Peter Minuit. You believe that since people who are now dead believed very strongly in gold, people alive today and tomorrow will do the same. Maybe you are correct, but that is a bet every bit as much as the bet of the 7 billion who currently use the 180 existing forms of fiat that they will not outlive the belief in paper. If their paper fails after they are dead, it is unlikely to concern them. Nelson Bunker Hunt believed in silver as money to the tune of $48/ounce. He was convinced exploding government debt and fiat printing would destroy fiat and make his silver soar. A decade and a half later, with debt and printing ballooning the entire time, it only required three George Washingtons to get the same ounce Hunt had bought for much more, and he was bankrupted before he crawled back into the hole his silver came from, so to speak.
If not a single ounce of gold had ever been dug from the ground in all of human history, would you still have been able to access Zerohedge on the internet via a wireless connection today? If the answer is "yes", gold doesn't seem all that essential to the continued march of human progress, which means its "value" is subject to the whims not of the dead, but of the living, and they are a fickle lot.
Very good answer! I was just about to tease the Gold Bugs for buying the modern form of shiny beads and DARN you beat me to it!
Squeeky Fromm, Girl Reporter
Fuck i get tired of reading your shit. Because its not even educated or informed. Gold, unlike fiat, is measued in ounces not price. Its real exchange value is almost constant. You're only right in that its a poor investment (unless you can lease it) - you don't get paid to wait. Its a store of wealth - insurance against a world you kind of hope never comes. Until you understand this, you will continue to look and sound like and idiot.
Squeeky=Asshat.
Answer is "No" gold is used in most of the high end CPUs
As soon as I see Benny Bucks on the periodic table of elements I'll break out in a cold sweet but until then I'm a sure as I have ever been about holding pm's as an insurance policy against human fallibility. I also think that the powers that be try to mask much of the day to day crisis that occurs in the world and that we just see a tiny bit of that iceburg. In the last few weeks I think we are seeing more of the iceburg and it seems very large indeed.
Peg whatever you what to my gold. You can peg it to $2000 an ounce or $20,000 an ounce, I do not put a fiat monetary value to my gold.
In my mind it ought to be the other way around.
Still, as we like to say here BTFD, and I am buying TFD with both hands
Being under water sucks, but this is no time to bail.
Scandinavian people and Finns sell gold to get money and then they buy cars, larger houses and even stocks. Indians and chinese people buy gold from us. Why? I think whole Finland is now cleaned from gold. People never had it much and now they have paper, some chinese toys and large houses. Maybe good, maybe these countries are most developed countries in whole planet.
Poor people have expenses, middle class people buy liabilities that they think are assets (Cars, T.V's, holidays) and the rich just buy assets.
Most people I speak too could not tell the difference between a Liability and an asset.
The world has been fucked by fiat to the point that the manipulated market wants more of it, just like a junkie that craves another hit even though it will eventually kill him.
Gold is just as much at risk as stocks or bonds are (gold and silver may not be the big SAVE that many goldbugs think it wii be). We've got cronyism, fascism, totalitarianism (or whatever you want to call it) slowly settling upon the developed countries. Insurmountable debt will tear everything to shreds. No one can predict what governments will do. Governments are big, corrupt, stupid and self-interested. They are inverted in their purpose (and their primary purpose is to retain power, at the expense of everything, including the citizenry). When they get desperate it is tantamount to your being in a windowless and doorless room with a wounded tiger (you will most likely wind up as collateral damage). Everyone has to determine the following for themselves... what is wealth for me? what will sustain me? what is true preparation? what will happen in the area that I live? do I need to move (and if so, where)? how can I survive the all the possible end scenarios that could manifest as a result of our FUBAR systems? etc?
Buying physical as a short-term play is a bad strategy.
Short-term plays are best accomplished within the paper market.
If this is understood, then stackers have nothing to worry about and should sleep well.
Soon there will come a day of when gold will soar past the 1900 high, and likely much further.
On that day, the troll factor on ZH will drop lower than the overnight lending rate.
I agree with Casey Research. Momentum is down and:
Yesterday (June 20), the primary bear market was reconfirmed for GDX and SIL (the gold and silver miners ETFs):
http://www.dowtheoryinvestment.com/2013/06/dow-theory-update-for-june-20...
The day before yesterday (June 19), the primary bear market was reconfirmed for paper gold and silver.
http://www.dowtheoryinvestment.com/2013/06/dow-theory-update-for-june-19...
So weakness is pervasive across all the spectrum of paper gold and silver.
Im sure the people who bought phys at 1300/1400/1500/1600/1700/1800/1900 are sleeping good tonight. . . yeah. my ass.
No they wouldn't but if they bought at those prices then they were awfully late to gold and would assume they have already been washed out. The same could be said for those that bought Apple at $600 or held GM, GE, F, C, BAC, WF, MSFT, CSCO, QCOM, AOL, NYT, along with many other so called Blue Chip stocks. Though there is one thing that gives stocks an edge over gold is the consistent bailouts and stick saves the government continues to give in order to prop stocks up. Gold is at a definite disadvantage when it comes to artificial propping up.
OH, I just bet they are too, because you know, "Gold is a store of value!" It's only PAPER money that fluctuates! ROTFLMAO!
Squeeky Fromm, Girl Reporter
Anything with a price attached to it fluctuates and gold would be no different. Why would you think anyone believes gold prices never fluctuate? Laugh all you want at things you, at least on the surface don't understand. Gold doesn't fluctuate in a vaccuum. It moves against currencies. If currency value never fluctated then you would be able to see what the investment flow of gold truly was but the price moves based on currency fluctations and to a lesser extent investment activity. But don't let knowledge get in the way of you rolling on the floor and laughing your ass off though. Sounds like yor having a blast at something your obviously not the least bit affected by. I believe schaudenfreude would be the term. You go girl reporter, you go!
notad:
OMG, GOLD is not going down because currency is fluctuating, but because people are beginning to doubt their ability to pass it off to a Greater Fool. People are beginning to ask themselves what they are doing sitting there with a big hunk of useless metal. The smarter Gold Bugs are bailing out now before it gets even worse. It is the same anxiety that occurs when people play musical chairs and the number of chairs began to get kinda low. Which is what I told everybody here when JPM got rid of a bunch of GOLD.
Squeeky Fromm, Girl Reporter
Not the goldbugs you so openly mock. Maybe some short term traders. Goldbugs don't ever believe they are sitting on a big hunk of useless metal. Again you don't understand the mentality or realize the very small amount of goldbugs in existence. You aren't a goldbug if you bought at 1400 and shit the bed and sold. A goldbug would just methodically buy a litte more much like you would with a 401k. You are confusing a gold trader and a goldbug as being one in the same. Semantics? I don't think so.
Furthermore I never once stated the sole reason of gold movement is currency fluctuation. I stated it was a factor and in fact on a normal basis the most pertinent factor. Dollar moves up gold will move down even if there is a net inflow in gold purchase. I'm sorry I don't know how I could've put it much clearer but you chose to parse my words. I hope your not claiming gold price isn't affected by dollar fluctuation. Please don't tell me that. I assume you can't believe that. If so then the discussion has to end.
FYI I don't down arrow so that isn't me. Not that anyone should care about down arrows.
notad:
OH, I don't mind if people down arrow me. The Turks have a saying, "A Girl Reporter who tells the truth will be run from nine villages!" But thank you for telling me anyway!
Squeeky Fromm, Girl Reporter
FYI Girl Reporter, according to Kitco as of a few minutes ago the price of gold was up $20.80 The price movement breaks down like this:
$-9.30 due to change in USD
$30.10 due predominantly to buyers.
Leaving $20.80 net movement.
Just in case facts were needed. Looks like those buyers of useless hunks of metal overwhelmed the currency fluctuation for today.
They are sleeping better than the people of Cyprus, Syria, Fukushima, Detroit et al, Iraq,Afghanistan, MF Global, Madoff country, Spain, Greece, Portugal, and the list goes on.
OH MY! Gold Bugs should watch this and learn!!!
http://www.youtube.com/watch?v=gMUc-e1zAHs
Squeeky Fromm, Girl Reporter
Momo Chaser's Lament would be a better title. These folks are not normal.
Everyone bought at the top! Yes. And those people deserve a good thrashing.
What's with the pawn shop deal? I guess the whole theme is a foreign concept for me.
RockyR: The Gold Bug hocked his trailer down at the Pawn Shop and used the money to buy gold. Pawn Shops will advance money on trailer titles, vehicle titles, and guns. Probably not dogs, but I have a poetic license that does not expire until April 2014.
Anyway, the borrower may either pay off and redeem the pawned collateral, or make periodic "vig" payments. He took out a payday loan to make the "vig" payment. Then, our Gold Bug paid the "vig" and his payday loan with hot checks, rather than sell his gold.
PWNED, is a word play on Pawned and the meme which means "totally owned" or "taken advantage of in a big way."
Squeeky Fromm, Girl Reporter
Margin is for morans.
YAWWWWN
I am long gold and I don't give a flying flaming fuck.
The only question is will the collapse be inflationary or deflationary?
I hear everybody saying gold is a hedge against inflation. Bullshit. They, along with every Chinese and Indian man woman and child will shit the bed and shake loose from the deflation, which will come first. Don't believe me? Well, you haven't been buying gold in Japan at 10-25% below spot for the past three years. the Japanese came to see the bubble-era gold as a quick cash injection for silliness like shoes and beach vacations. Most of you will shake loose.
You'll have to watch it go to near zero first, and still be able to sleep at night, still be able to eat and clothe your family, before you'll see that inflation you'll be waiting for and even then, it'll be a long road of inflation to get you back to your buy-in point.
The smartest man I know, not long for this world, has just put $40,000 into gold. It's for his infant grandchildren. He figures his timing will work out just right.
Hey, Squeaky - does that mean you PWNED your skinny ass to wasting away in Bankster Mediaville ?
I think Jimmy Buffet has a drink with your name on it.
Made with tears, piss, and a generous shot of spooge.
It is called the Fiat Cock - tail.
Load up on those babies - it is the only source of protein you will be able to cop to with all your market paper any minute now.
Me: "Silver goes to $18, stays at or below $20 for a while"
Goldbug on ZH: "Central Bankster's Wet Dream"
One down.
Me: "Gold goes to $900"
Same Goldbug on ZH "It'll never f#####g happen.
One to go
When gold crosses $1000 there will be pandemonium.
Gold goes to $780
The notion that anyone knows where gold will go is ridiculous however your observation of what happens if and when gold breaks $1000 is spot on though $780 might not be low enough.
Two things: (1) if COMEX goes to $780, it will still cost me north of $1300 to buy it physically, and (2) if the real price of gold goes to $780 then the price of all other shit falls too. Either way, no worse off.
How in the WORLD do people on this blog see buying gold as an anti-elitist, revolutionary act?
Can't you hear the laughter? I can hear it all the way from Wall Street - and I can see the Pacific Ocean from where I am. Well, almost.
The price of gold and silver can be manipulated downward until... a mass inability to deliver physical. Given that JMP stockpiles are down to a couple months of supply, this is likely to happen within 2013, and perhaps even make 2013 yet another up year (which looks virtually impossible at this point).
PS: One truly revolting thought. The predators-that-be massively, royally, insanely hate precious metal lovers. If you assume the predators-that-be in the USSA are planning to steal all physical gold again from "citizens", they would absolutely LOVE to trash the price first, so they get to royally screw everyone who turns over their physical gold in exchange for fiat paper. This is a very ugly possibility, and absolutely, positively, precisely how these predators think.
It won't happen just yet becuse they will ransack other nations and their own remaining stash before they acknowledge defeat.
.
Maguire: “Just off wholesaler calls. Most are too busy to talk at this time, but today (Thursday) will be the largest volume day this year and possibly 2 years. Central bank purchases are almost certainly far in excess of paper sales. We are so close to the marginal cost of production that my contacts are saying the gates are wide open here to purchase all physical that is available....
“Continued paper market supply saw another + 45 tons sold into the rise ahead of Thursday’s fix and then in size directly post the fix. These were immense amounts of paper gold hitting the market, yet there is absolutely zero physical gold for sale and nothing but buy orders in the wholesale market.
“This is 2001 type of spike bottoming action with hot money bearish sentiment off the scale. I still expect that Thursday marked a historic bottom. We are below the true costs of production for both gold and silver and it makes a good deal of sense for the central banks to be taking all that is offered. Fundamentally this will have a significant catch-up impact.
“Needless to say we are getting reports of extremely large allocations of gold, but also far larger direct producer deals being struck outside the paper markets. The one question is, just how long this paper market selling can continue to drive price when such a massive transfer of physical is underway?
“It is also important to understand why this divergence has been able to extend to such extremes given the hundreds of tons of reported bullion transfers, and how this recent capitulated move has enabled an irreversible global balance shift in physical gold.
“I still maintain we marked a historic bottom on Thursday and aside from some misplaced margin gaming, the risk now is actually to the shorts. The power (to move prices higher) is all in the bullion banks’ hands and will be exercised at a time of their choosing, which, given the structural shifts and global imbalances, I believe is imminent.”
-- KWN
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The gap between the 200DMA and the spot price is at an extreme. Everyone is bearish. The time to buy is very, very close.
Anyone who knows PM's knows that pricing it in fiat is meaningless, and they will be the only currency left standing.
Its the FIAT that is going....not Gold.
The worlds people (for sure those in USA) are uncertain about .gov. and our financial leaders. Those with equity are very uncertain and recently (this year) the propaganda may have worked.
And stocks and bonds have benefitted, while PM’s have not. PM’s are a mirror in the confidence in our economies. Today they signal that some have lost fear in the markets.
The biggest economies USA, EU, China, Japan..are still afloat after years of fear that they might fail. The risks are still there and this confidence may evaporate overnight. Nothing seems fixed, debt is still there, unemployment is growing, corruption everywhere. Fascism, crony controlled .gov and markets.
For those with equity the potential of a super spike in PM’s is now closer then ever. Confidence is the key, if the Fed, .gov scandals a day, lose the people’s confidence..PM’s to the moon. Ask yourself How confident are you our economies and governments are functional? That is the only question you need ask.
My favorite zero hedge lie is the one where all the bugs average out to $300 or $500. Like any bug in the world could resist dipping into gold when it went from $1000 to $1500 and showed no signs of stopping. I personally know at least half a dozen who loaded up at $1600 and were getting ready for $2500 in 12 more months.
$1000 is coming fast, particularly if rates rise. Ya it will absolutely get back to $2000 one day. And the time it takes to get there you could have done so much more with your money.
If the Zombie apocalypse never comes, nobody is going to feel dumber than a smug gold bug...