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A Stealth Bull Market Developing in Gold

Freaking Heck's picture




 

By Brad at www.CapitalistExploits.at

There is a bull market developing in gold and few are aware of it. Given the seemingly endless urge to "stimulate" economies by central banks through quantitative easing (money printing), such as the ECB, BOE, & BOJ, it isn't difficult to imagine that gold's rally in multi-currency terms is still in its infancy.

Ask any investment professional "what is the price of gold" and they should be able to tell you what it is within $100 of its last trade. However, ask them what it is in their home currency terms and few if any would be able to give you a reasonable approximation! This is odd because if anyone in Australia wants to buy or sell gold then it will be exchanged in AUDs or euros if anyone lives within the Eurozone.

It is said that a true bull market creeps up on people when they least expect. Perhaps because everyone is still talking about the bashing that gold took since 2011, they are overlooking the fact that gold has remained more or less unchanged in USD terms for the last 18 months and it has begun to trend higher against every other currency!

Before I take a look at the behaivor of gold in multi-currency terms you might like to listen to a brilliant interview with Felix Zulauf. This interview gives a well thought out overview of the world economy and how gold fits into the situation.

Let's now look at the behavior of gold against a basket of paper currencies.

Gold in USD terms - a bear trend since 2011 perhaps but it hasn't been able to make a new low over the last 18 months - no mean feat given the strength of the USD during this time!

XAUUSD

Gold in AUD terms - since the start of this year it has moved higher in dramatic fashion and broken out of an 18 months old trading range.

XAUAUD

The behavior of gold in AUD terms is more or less echoing what is happening to it in CAD terms:

XAUCAD

While the 18 months old trading range of gold in AUD and CAD terms is a little "ragged" there is no missing the trading range in euros. Since the start of the year it is up by some 11%! It's interesting to note that this move higher happened before the ECB stated its quantitative easing program.

XAUEUR

Is the next "trading range" about to be broken? Take a look at gold in renminbi terms. One can debate whether or not the behavior over the last 18 months constitutes a trading range but one thing is for sure - a little more upside and we will have a multi-month high! In my eyes this is good enough to constitute the start of a bull trend.

XAUCNH

Finally - gold in Swiss franc terms. Make of it what you will but it seems to me that the SNB unpegging drama is just a short term thing - it should trade at a multi-month high within the coming weeks.

XAUCHF

Has gold registered a long-term bottom? From a technical perspective it appears so. From a more "fundamental" perspective, given that gold has been unable to trade below the $1200 level for more than a few weeks since June 2013 and most gold miners have been losing money over the last 12 months or just barely breaking even, it would appear that the $1200 level is the cost of production. So on a cost basis alone below $1200 there will be no additional capacity bought on-line at best, more likely significant supply shut downs (which have already occurred). This makes economic sense because miners cannot continue to lose money.

It is a very different situation with the "supply of money". As far as central bankers are concerned there is absolutely no negative consequences to printing money. There appears to be this inherent belief that the weaker ones currency becomes the better off the economy will be. This is because there have been no inflationary consequences to monetary stimulus/money printing - at least not yet! Perhaps what they have overlooked is the delayed consequences to their actions!

OK, so we could get involved in a deflationary vs. inflationary argument. However, this goes beyond the scope of this article. What I am trying to get across is the perceived limitless ability of central bankers to increase the supply of money vs. mining house CEOs ability to increase the supply of gold!

At the end of the day the price of anything is determined by the interaction of supply and demand. Increase or decrease either supply or demand and the price of money/gold will change.

I'm saying that, over the coming months, the supply of money will increase dramatically, whereas the supply of gold won't - so the next big move for gold (in multi-currency terms) is to the upside. The record prices set for gold in multi-currency terms back in 2011 will be broken! Count on it.

- Brad

 

"O Gold! I still prefer thee unto paper, which makes bank credit like a bark of vapour." - Lord Byron, Don Juan

 

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Fri, 02/06/2015 - 12:11 | 5751993 Puncher75
Puncher75's picture

Someone shoul tell the BLS.  According to them, all is well and peachy. 

Fri, 02/06/2015 - 11:39 | 5751869 thinkmoretalkless
thinkmoretalkless's picture

And fancy paper , or should I say keystrokes, which a small group of suits (pant suits included) can produce and multiply without breaking a sweat is better? Yeah I would like a warehouse full of shovels, ( or better yet bullets and booze a volatile mix but in demand if the SHTF) but then there is the maintenance and security problems and my warehouse would be an easy target before and after a collapse. So I guess I will imvest my rainy day fund in in PM the choice of many generations before me. Naturally along with a case of Spam and a Biden shotgun in the basement, the first twenty four hours can be a bitch.

Fri, 02/06/2015 - 11:37 | 5751859 Bastiat
Bastiat's picture

A not-so-stealth bombing of the stealth bull this morning.

Fri, 02/06/2015 - 11:33 | 5751843 runnymede
runnymede's picture

Of course there's a shadow market for gold. The PTB don't like gold b/c it's hard to skim their take with gold. So they poo-poo it as the realm of crazies and doomsdayers. Just part of the narrative. The narrative that anyone who goes against authority is an extremist.  Plus, what happens when the private ownership of gold is made illegal? You're now a criminal.  Nah---they'd never do that. Just wish I had the wherewithal to buy some.  

Fri, 02/06/2015 - 10:51 | 5751625 YouSerious
YouSerious's picture

Gold has not intrinsic value, its absurd that anyone collects it, one day it will be worth next to nothing

Fri, 02/06/2015 - 11:36 | 5751853 Creepy A. Cracker
Creepy A. Cracker's picture

You have no intrinsic value either.  The chemicals in your body (unless you're currently stoned on expensive designer drugs) are worth a few dollars if that.

Fri, 02/06/2015 - 11:52 | 5751886 American Liberal
American Liberal's picture

Gold only has value because people say it has value. It is what happens to work (for now) in this particular system because a few people decided a long time ago that it's what they wanted to use.

In a different system, some people used seashells. Or wooden sticks (see Tally Sticks). The function is identical. Money is simply what people choose.

You will see, over time people will stop choosing gold. It's just a rock, albeit a pretty one. But for money it is wanting. It's difficult to store and transport, and forget using it halfway around the world.

We live in a global economy. Gold was a logical choice when people typically lived their entire life within a days journey of their home. Today? Not so much.

Fri, 02/06/2015 - 12:07 | 5751980 neuronius
neuronius's picture

Don't confuse currency with money.  A gold rock is not money because it lacks one of the properties of money (fungibility).  However, a minted gold coin with a specific weight of a specific purity, is money.  A tally stick was only money because King Henry decided that folks could pay taxes with it, and like U.S. Federal Reserve Notes- it was fiat.  Once the Bank of England started running things, the use of the tally stick was phased out and no longer used as currency.

Money has all of the characteristics of currency, plus it has a store of value.  Federal Reserve Note isn't money because it doesn't have a store of value (as can be seen by the FRN's devaluation over >98% in the past 100 years).  

Here's an excellent chart: http://goldsilver.com/getting-started-guide/chapter-one/ 

 

Fri, 02/06/2015 - 11:08 | 5751721 bardot63
bardot63's picture

then why did you bother with this article? 

Fri, 02/06/2015 - 10:48 | 5751618 LawsofPhysics
LawsofPhysics's picture

The price of paper gold will be whatever the fuck those with the ability to create as much "money" as they want, want the "price" to be, period.

When fraud is the status quo, possession is 100% of the fucking law.  Applies to any physical asset of real value.  Fuck, under the right conditions, a fucking physical can of beans and a gallon of clean water can have tremendous value.  Just ask anyone who lived through the collapse of the soviet union.

 

same as it ever was.

Fri, 02/06/2015 - 11:51 | 5751901 American Liberal
American Liberal's picture

Not sure about your experience, but in my experience "paper" gold and "physical" gold have the same price.

The other part of your comment makes sense. Just ask a man in the middle of the Sahara what he'll pay for a cool, clear glass of water. My guess is that he would pay a lot more than the man standing next to a mountain stream.

Fri, 02/06/2015 - 12:22 | 5752032 neuronius
neuronius's picture

Supply vs. Demand in free markets, rule.  

You can print up gold certificates while never creating the gold associated with those certificates, and therein lies your disparity between the paper price and the physical price.  Supply of paper gold >>>> physical gold therefore value of paper gold <<<< physical gold.

The same idea of supply vs. demand rules applies with your glass of water example.  What is the difference in supply of a clear glass of water in the Sahara vs. one next to a clear mountain stream?  

This rarity of something is what gives gold it's value, along with the human labor and capital required to pull it out of the ground.  I would wager the price of gold would be closer to the price of copper, were it as easily and readily acquired.

 

Fri, 02/06/2015 - 09:17 | 5751168 FranSix
FranSix's picture

Look up up any interview with Ian Telfer on BNN.ca. He'll tell you that all-in cost is~$900/oz.

Fri, 02/06/2015 - 09:34 | 5751218 bardot63
bardot63's picture

http://www.naturalnews.com/033740_gold_journalism.html

 

Anyone who is interested in gold and the journalism surrounding gold should see this clip of about 45 seconds.

Fri, 02/06/2015 - 09:33 | 5751196 bardot63
bardot63's picture

BNN is a known gold hater.  Not a good source for anything about gold.

Fri, 02/06/2015 - 11:53 | 5751931 American Liberal
American Liberal's picture

And KWN is? Ha!

Fri, 02/06/2015 - 08:41 | 5751113 lakecity55
lakecity55's picture

Great quote by 'Don Juan.'

Bernanke had no real response a few years ago to Ron Paul in Committee when he pulled the silver dollar on him.

PMs are bashed in the MSM.

Gold is what keeps Banksters straight.

Someone correct me if I am wrong, but I think serious trade imbalances between nations is still settled in Bullion.

The western media tens to overwhelm other media.

It has to be suppressed if Banksters wish to continue weakening fiat currency.

Therefore, Stack, Bit-Chez!

Fri, 02/06/2015 - 08:30 | 5751106 sessinpo
sessinpo's picture

I'll stick to my position instead of constantly switching around when the wind changes direction. If You don't know my view, just ask.

Fri, 02/06/2015 - 07:32 | 5751054 ratpack1968
ratpack1968's picture

If we experience the epic collapse that everyone here expects, the fiat money price equivalent of gold is less relevant than how many ounces, or how many bars one has managed to stack as this slow motion train wreck continues to play out.

Fri, 02/06/2015 - 10:45 | 5751599 RadioactiveRant
RadioactiveRant's picture

I'm more interested in how many loaves of bread or acres of land I can buy with my gold. Prices will either be hyperflationary or hyperdeflationary if shit hits the fan and if you have something stable to trade with you could end up owning something worthwhile 10 years later.

We'll probably revert to some kind of gold standard whereby oil, wheat, etc.. are all traded in gold. Eventually someone will decide thats stupid and we'll all buy into "new" dollars/yuan/rubles/euros and the cycle will start again. We should all be dead by the collapse after next.

Fri, 02/06/2015 - 04:19 | 5750911 CHX
CHX's picture

"Gold in USD terms - a bear trend since 2011 perhaps but it hasn't been able to make a new low over the last 18 months"

- what utter BS, it made a new low just this past November. Anyway, for the rest of the article, I agree, gold seems to have bottomed, possibly in all fiat currencies. As for the notion of a new stealth bull, I think this was a fabricated correction. From a purely physical demand side, we never left the bull market. The pull-back was needed to shake out the weak hands, after a move from 250 to 1000 to 700 to 1900 in 10 years. My take is, the PTB are working hard behing the scenes so that enough physical metal gets to be where it needs to be before the whole fiat system collapses, and gold will be revalued many multiples higher. Till then, "fiat price" is more or less irrelevant (especially if you hold it as longterm hedge against a guarenteed fiat system failure), and they take it to wherever they wish. If they drive it below 1000$, they will kill off most of the remaining mining industry which is already bashed to mash at current prices. They'll do even that if they think it would serve their purpose... They own the gold chart through their paper gold fraud, but one has to think outside their box to grasp what that means (many around here do though). But their game is getting old, and the more bullion they bleed, the more wounded they are, the more dangerous they become. Before this is all over some outrageous actions and happenings are still ahead of us. Good luck to all, we'll all need it.

Fri, 02/06/2015 - 12:14 | 5752003 collon88
collon88's picture

James Rickards makes the case that after the collapse of the current fiat system, there will be a return to gold backed currencies, which historically have had gold backing from 10-40%.  He thinks a realistic minimum revaluation would be $9000/oz.   In such a scenario, are the financial overlords going to allow gold "hoarders" to benefit from "windfall profits" or instead do again as was done in 1932, prior to the revaluation of gold by Roosevelt,  make it illegal to own gold that is not numesmatic?  I would not put it past them.

To prepare for this contingency, I am allocating 50% of my PM position to silver.   

Fri, 02/06/2015 - 09:55 | 5751317 SnatchnGrab
SnatchnGrab's picture

Just once I'd like the MSM to address the 800 pound gold Gorilla that CHX talks about (tangentially). Specifically:

 

There is more PAPER gold (by a X-fold factor) than physical gold mined - EVER. Somebody, or multiple somebodies are FEKKED if TSHTF.

Fri, 02/06/2015 - 10:40 | 5751572 RadioactiveRant
RadioactiveRant's picture

If TSHTF then they'll fly out in their private jet to their farm in NZ with a suitcase full of physical. The people that create these stupid instruments don't buy them.

Fri, 02/06/2015 - 18:08 | 5753413 neuronius
neuronius's picture

+1

Fri, 02/06/2015 - 05:18 | 5750953 Gold Dog
Gold Dog's picture

What he said.

Fri, 02/06/2015 - 05:52 | 5750977 CHX
CHX's picture

 He concludes with "...the next big move for gold (in multi-currency terms) is to the upside". I say, ultimately very much so, but the next move could also be down to retesting the previous lows or even lower (1000 or less as a final assault), and then they might settle out all CONeX paper contracts in cash. If the recent past is any guide then anytime people started to be hopeful for a renewed run to 1350 or higher, the opposite happened. Time will tell how this pans out.

Fri, 02/06/2015 - 08:53 | 5751131 theliberalliberal
theliberalliberal's picture

What he said. Drive it to zero then cash settle.

Fri, 02/06/2015 - 10:50 | 5751623 LawsofPhysics
LawsofPhysics's picture

What about the people/corporations that demand physical, regardless of cash "price"?

 

In many instances, not just PMs, "low prices" hve turned into shortages in a fucking hurry.

Fri, 02/06/2015 - 02:18 | 5750803 Latitude25
Latitude25's picture

Gold NEVER entered a bear market in Asian physical markets.  This is the driver no matter what any Western quack tells you.

Fri, 02/06/2015 - 06:49 | 5751016 Squid-puppets a...
Squid-puppets a-go-go's picture

v. salient point i havent heard anyone else raise. It implies that private investment, not just asian govt. will continue to suck the phyzzy gold out of the wests vaults

Fri, 02/06/2015 - 01:07 | 5750698 celticgold
celticgold's picture

Hallejullia !!

 

Fri, 02/06/2015 - 01:53 | 5750767 El Oregonian
El Oregonian's picture

Just keep stack'in and fergeddaboudit... Especially at these "on sale" prices.

Fri, 02/06/2015 - 03:24 | 5750883 Self-enslavement
Self-enslavement's picture

The price of Gold will be whatever they want it to be. Same as it ever was.

Fri, 02/06/2015 - 06:50 | 5751019 Squid-puppets a...
Squid-puppets a-go-go's picture

~paper gold~

there, fixed it for ya

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