Gold Price - Where is it heading?

[barrett]

... If we go back over the history of money, some 5000 years now, its debasement, by printing more to overcome inflation has always sent gold up.

agreed

The real question is, what drives interest rates? The money supply/ its value.

Other way round I think. Central banks set short term interest rates. When they keep them low relative to inflation so that real interest rates are negative, no-one has an incentive to save cash in the bank, everyone has an incentive to borrow and speculate. The extra borrowing causes the money supply to expand via the fractional reserve banking system. This debases the purchasing power of existing money relative to various useful things, food, shelter.. gold..

So it's the Fed setting the real interest rate too low that causes the money supply to expand, that causes gold to go up.

Another source of money supply is 'printing money' - that is, the Fed creating money out of thin air and buying government bonds. To my knowledge, the Fed and other central banks outside of Africa aren't actually doing that yet. But as you said above, they always have resorted to some form of it eventually and this time they will too in one form or another. Ben Bernanke basically admitted it in his papers on "Extraordinary Measures" to prevent deflation.

Hey thanks for the tip on that book. Another good one is The Economics of Inflation by Costantino Bresciani-Turroni (1937), an Italian economist who experienced the Weimar inflation first hand. Another good one is supposed to be 'Dying of Money' by Jens Parssons, any gold bugs on here read that yet?
Cheerio

 

[explod]

A number of gold stocks moved up today on the close. One I watch, SBM LGL RSG and NCM. Gold and silver upticked and the US dollar moved down all in the last half hour.

Only thing I can pick up at the moment is on BBC, "MBIA US bond insurer shocks investors with scale of guarantees for risky investements linked to home loans"

 

[barrett]

Gartman, Faber on gold

The short term bearish view has some high profile followers .. Dennis Gartman probably the most successful gold market timer around atm, IMO. Most recently long at around the $643 low in Aug, he held his position until into the $800's.. still long but with a pared back position. His short term view, taken from an article on Moneymorning.com, Dec 19th..

"Too Many Gold Fans Could Cool the Hot Metal

In early December, a telling story came out of India, the world’s largest consumer of gold.

Gold imports to India significantly plummeted for two consecutive months. November purchases fell drastically from 59 metric tons in 2006 to 12 tons during the same month this year. Likewise, year-over-year purchases for October fell from 68 tons in 2006 to 14 tons this year.

Some of that occurred during India’s prime wedding season, as well as the Diwali festival holiday - which combine to mark the peak gold-buying season for that country.

Why the slump? Gold became too pricey. Not just too pricey, but too pricey for a country in which gold ownership is embedded as a cultural norm.

Gartman said investors would be wise to heed India’s counsel, and wait for prices to fall before investing. In doing so, investors are more likely to get in at a better price. "


Marc Faber's view,from his monthly column at AMEinfo.com, 11 Dec 07:

"I am cautious about industrial commodity prices, which could come under pressure as global liquidity growth and the global economy slows down. And while I still think that gold will outperform equities in the years to come I believe that a more meaningful correction in the price of gold is now underway."

 

[explod]

Barret. Fluctuations in consumption by India is now only a small part of the equation. I could sift up heaps of data but the following is just a part:--

"China's Gold Consumption Tops World Third
Demands in world gold market last year have amounted to 3278.4 tons, up 21% over the previous year and China has leaped to the third place among the eight biggest gold consumption powers, according to reports by World Gold Association.

Economic recovery in Asia has been reported to contribute the steep rise of demand in world gold market and countries like Indonesia and ROK have taken an especial momentum of increase. While the Y2K problem last year also resulted in enthusiastic gold investment in the United States.

In 1999, there are as many as 2799.2 tons of gold that have been demanded as jewelry, a 23% increase on the previous year and the investment demand has obtained an 8% increase to 479.2 tons, it has been reported.

Consumption in gold markets of India, the United States, China, Saudi Arabia, Gulf countries, Turkey, Indonesia and Egypt has respectively taken the foremost eight places and a total amount of 201 tons of gold has been consumed in China, up 6.9% over 1998 and approaching its GDP increase. "

 

[chops_a_must]

Gold seems to have slipped my guard tonight. Looks to have broken out I would say. Not convincingly though...

 

[explod]

Yep, a pennant has been formed. Uncle Festivus pointed out same a few days ago. The hard support line of the lows suggest the breakout may be to the upside but that is not very conclusive.

Will be interesting to see what pans out. Could stay in this for a week yet.

The break to the upside starting to happen on the gold chart. Silver, the HUI and oil confirming. Of course it always seems to go with rises in the Dow of late but manages to hold most of its gains when the dow falls.

 

[Whiskers]

Gold seems to have slipped my guard tonight. Looks to have broken out I would say. Not convincingly though...

The break to the upside starting to happen on the gold chart. Silver, the HUI and oil confirming. Of course it always seems to go with rises in the Dow of late but manages to hold most of its gains when the dow falls.

I'm not at all convinced it is a breakout. It hasn't broke above the bottom of the daily range let alone the open close range of my earlier Bear Flag. If it had got to 820 I would be more inclined to be thinking breakout of the larger wedge.

It also seems to be having trouble staying above $812 again.

I also did a check back as far as I could and found that every reasonable to significant move up retraced at least to 38.2, but most from 50, to 61.8.

As I have said before, I am no expert, although trying to learn fast and would appreciate any critique.

 

[ithatheekret]

Top chart there , crystal clear vision .

It will be back to odd looks soon , USD strength with POG strength at the same time .

Patience is the key , diligence makes the money .

 

[Uncle Festivus]

Things about to happen maybe, 1-2 weeks time left for gold, $USD running out of steam and gold completing the pennant one way or another? MACD trying to break up for gold, down for USD?

 

[wavepicker]

Things about to happen maybe, 1-2 weeks time left for gold, $USD running out of steam and gold completing the pennant one way or another? MACD trying to break up for gold, down for USD?

Looks like a classic 4th wave of some degree in Gold(EW parlance). What's interesting is the type of pattern(Contracting Triangle) and it's significance. These types of patterns always precede the last move up.

This could be a brief(as in time) thrust up(if it does in fact move that way) for long players. This might be a very nice shorting opportunity when it completes and will monitor closely. This market is churning, the biggest winner will be cash next year.

Cheers

 

[explod]

Looks like a classic 4th wave of some degree in Gold(EW parlance). What's interesting is the type of pattern(Contracting Triangle) and it's significance. These types of patterns always precede the last move up.

This could be a brief(as in time) thrust up(if it does in fact move that way) for long players. This might be a very nice shorting opportunity when it completes and will monitor closely. This market is churning, the biggest winner will be cash next year.

Cheers

Nope, just part of the consolidation of the classis bull run for gold. Even in the holiday low trade the PPP are unable to hold it back, just watch from mid January.

Cash is burning and has lost the fight. Ask a US banker.

From my t/a, the uptick out of the pennant has not happened yet but looks like the upside will happen anytime soon.

 

[Real1ty]

Nope, just part of the consolidation of the classis bull run for gold. Even in the holiday low trade the PPP are unable to hold it back, just watch from mid January.

Cash is burning and has lost the fight. Ask a US banker.

From my t/a, the uptick out of the pennant has not happened yet but looks like the upside will happen anytime soon.

I have a question that i hope isn't stupid to you guys that do this technical analysis.

With all these signals you find on your charts to suggest that Gold is about to move up, how does a fundamental occurance, say like Oil unexpectedly starting to retreat affect that?

For example i would say that Gold would pull back if Oil dropped and the US$ held firm for awhile.

Sorry if this is a stupid question.

 

[explod]

I have a question that i hope isn't stupid to you guys that do this technical analysis.

With all these signals you find on your charts to suggest that Gold is about to move up, how does a fundamental occurance, say like Oil unexpectedly starting to retreat affect that?

For example i would say that Gold would pull back if Oil dropped and the US$ held firm for awhile.

Sorry if this is a stupid question.

Not silly, a very good question which has far ranging answers deserving of its own thread, but I would be surprised if it has not been covered already.

Tech analysis is just that, charts based on past behaviour/experience and has no regard for what is happening in the real world. Just where the chart is going. Some would say this is reflecting and part of the real world.

Now looking at the oil situation, yes if that drops in price of late the gold price has gone with it. Looking at events affecting share prices is part of (but only a part) fundamental analysis. Some years ago I traded only from technical charting but found for my own type of trading I prefer to blend both together. I find technical handy to confirm entry and exit points to my trades and I always sell a stock that drops 5% without reason (my strictest rule in fact)

Others more competent than I will add to this. But as it is a gold thread you may wish to find previous discussion and get it going again.

 

[barrett]

Barret. Fluctuations in consumption by India is now only a small part of the equation. I could sift up heaps of data but the following is just a part:--

What Gartman was getting at was that Indians are some of the savviest timers in the gold market - within the constraints of their festival season.

Another of the savviest groups - gold mining company treasurers - remain heavily short gold as of last Friday.

Insider buying at the North American-listed gold miners - a feature of every major interim bottom in this gold bull market - has been non-existent for the past two weeks - and there have been more sales than buys in the past 4 months.

All of these factors are short-term bearish for gold.

You may still be right regardless of this and the EW analysis but I wouldn't be so sure.

 

[explod]

What Gartman was getting at was that Indians are some of the savviest timers in the gold market - within the constraints of their festival season.

Another of the savviest groups - gold mining company treasurers - remain heavily short gold as of last Friday.

Insider buying at the North American-listed gold miners - a feature of every major interim bottom in this gold bull market - has been non-existent for the past two weeks - and there have been more sales than buys in the past 4 months.

All of these factors are short-term bearish for gold.

You may still be right regardless of this and the EW analysis but I wouldn't be so sure.

Agree, I get a bit carried away as my horizon is the longer term only. I do short term trade some stocks but I remain long term in what I consider the better sector for my overall objectives. This clashes with the outlook of most and I will take more note of this in future. I do become clouded by that extra slug of whiskey sometimes also.

On another note, if the gold price closes at or above its current US$812 we would have a tech break to the upside of the pennant.


A happy festive to you

 

[wavepicker]

Nope, just part of the consolidation of the classis bull run for gold. Even in the holiday low trade the PPP are unable to hold it back, just watch from mid January.

Explod,

You are sounding way too sure of yourself for your own good. Eventually that sort of attitude will make you your own worst enemy.

Just remember there are no certainties in the market or possibilities and probabilities from which to trade from. I just mentioned a possibility which has a fair chance of playing out, but anything is possible in the market at anytime.

Happy festive season and good luck with your Gold position in 2008

 

[explod]

Explod,

You are sounding way too sure of yourself for your own good. Eventually that sort of attitude will make you your own worst enemy.

Just remember there are no certainties in the market or possibilities and probabilities from which to trade from. I just mentioned a possibility which has a fair chance of playing out, but anything is possible in the market at anytime.

Happy festive season and good luck with your Gold position in 2008

You are correct

I have to believe there are certainties. eg. WOW (a monopoly)for the next few years, food is absolutely essential and it will take some years for Westfarmers to get Coles back on track. With a trailing stop loss of course. TCL Transurban, cars will not stop going through the tunnel and I watch for leaks on my way to the casino.

On gold, it is based only on the learning taken from others more competent than I. Again always a stop loss.

My arguments are simplistic, my approach to investing is also and newcomers to the forum need to be able to see the wood for the trees. In this we all form a part by our arguments and counter arguments. And being agreeable all the time is monotonous. A part of this is also entertainment preferable to the idiot box.

Luck I do not believe in, ( but appreciate your wish) absolute persistance gets there. Lost 75% of my wealth about four years ago on a dreadful real estate investment. The task of getting it back has (been my counsellor) and stopped me from sinking in my depression. Proved the strength of my marriage, caused my wife to become very ill. She is well again now. And on reflection from your words realise my objective is an obsession on the edge of a clouded perspective. Unfortunately we can only fight with the tools and ammunition available to us.

Sometimes that extra slug of Johnny Walker clouds my judgement too, enemy or friend I prefer it to valium.

And a happy festive to you and your family also. regards explod

 

[ithatheekret]

I was happy with $810 , but .... the selling pressure holding it under that , well , it looks suffice to say it is significant in the short term .

So I remain unconvinced on POG , until the $810 area is closed above and held for another move higher .

Whilst we can blame the fact that in tight liquidity in the markets has allowed cash raisings , we should also note that CFOs are active in the market at present and are short to an extent , they are in sync and usually at the forefront . Their coverings can bring the price back swiftly too .

 

[explod]

Explod,

You are sounding way too sure of yourself for your own good. Eventually that sort of attitude will make you your own worst enemy.

Just remember there are no certainties in the market or possibilities and probabilities from which to trade from. I just mentioned a possibility which has a fair chance of playing out, but anything is possible in the market at anytime.

Happy festive season and good luck with your Gold position in 2008

Have been further mulling over your comment and think it a bit unfair. Gold had been showing considerable strength within the overall volatility of the last six weeks and the feelings I had when making that comment to which you refer is gradually being confirmed in my humble view. I am never sure but can see present direction clear enough.

 

[explod]

Things about to happen maybe, 1-2 weeks time left for gold, $USD running out of steam and gold completing the pennant one way or another? MACD trying to break up for gold, down for USD?

It has done that now and it has been so constrained that the first move out has been pretty convincing too. A close in this area may see an attack on the ATH high soon.