Gold Price - Where is it heading?

[bean]

A must read for all Gold and Silver investors
The reason for the current sell off and the possible outcome if it fails

http://news.silverseek.com/TedButler/1200422216.php

 

[Sean K]

A must read for all Gold and Silver investors
The reason for the current sell off and the possible outcome if it fails

http://news.silverseek.com/TedButler/1200422216.php

I'm not sure Bean. Isn't the basis for his argument that gold (and silver) are purely commodities that should be driven on fundamentals. I think general concensus is that gold is still a store of wealth and is a currency of sorts in itself. That's why it goes up and down due to inflation, USD declines and goepolitical tension etc. Gold in itself has very little intrinsic value actually, so if it just ran on fundamentals it'd be worth a few cents. Like diamonds would be if women weren't women. The rest of his article is based on a false premise. Or, perhaps I didn't read it well enough?

 

[Miner]

Yeah that's right.. in a bull market you always want to be either very long, long or rarely, neutral. You don't want to be out of a bull market. You want even less to wade in deeply to an asset class you have just discovered and barely understand, at an interim peak. I did that in late 2004. My investments remained underwater for some 18 months. It's not different this time. The gold sector historically in nearly every year has a move of 30% _in both directions_: whether that year falls in a bull, bear or bust. So it doesn't do to purchase too much at once unless you are sure a bottom is in place - or to overlook the near certainty of a 30% down move in gold stocks during 2008.

IMO the smartest gold investors are not trying to outrun the hordes to buy gold at $1000/oz+. They're buying overlooked quality deposits below ground for $10-$30/oz at the junior developers and if you're just getting into gold now I reckon that would be a great place to start.

IMO today in a falling gold price there is an opportunity to buy some gold or GOLD.

Regards

 

[Temjin]

If you expect the $US gold price to go down and the $A gold price to remain firm, but you want to get the benefit of buying eventually at an anticipated lower $US price, you could hedge by shorting the $US against the $A to the value of the amount of gold you're planning to buy. Should be pretty straightforward with most online currency trading accounts, there are many providers eg oanda.com, cmc markets but as I don't trade currencies I can't recommend one.

You can get around this by buying futures contracts on gold (denominated in $US) instead of gold itself. That way you get to buy at the low $US gold prices, but because you're only buying a contract, only your profits are exposed to currency risk. I prefer to do it this way rather than speculating on currencies as well as on the gold price.

If you prefer to buy actual bullion rather than a futures contract, I reckon you'd have to use something similar to the first approach if you wanted to hedge against a strong $A.

Yep, in theory, you can easily do this via an interactivebroker account.

They do the hedging automatically for you.

As in when you buy USD dominated shares (like GLD for the gold ETF), you will be borrowing USD dollars to buy the shares and pay the interest on that borrowed amount. Your AUD cash will remain in the account and accumulate interest. (over a certain amount anyway) This is essentially the same as buying AUD/USD currency pair.

You will then be hedged against a drop in USD value (or a rise in AUD) with profits being exposed to currency risk.

One future currency contract is a comparatively large hedging position, at least to me anyway. That's $100,000 US dollars.

 

[Temjin]

I'm not sure Bean. Isn't the basis for his argument that gold (and silver) are purely commodities that should be driven on fundamentals. I think general concensus is that gold is still a store of wealth and is a currency of sorts in itself. That's why it goes up and down due to inflation, USD declines and goepolitical tension etc. Gold in itself has very little intrinsic value actually, so if it just ran on fundamentals it'd be worth a few cents. Like diamonds would be if women weren't women. The rest of his article is based on a false premise. Or, perhaps I didn't read it well enough?

No, what he meant is that the prices of gold and silver are being MANIPULATED by very few "commercial" traders. These very few traders are solely responsible for keeping the precious metal prices down right now because if they weren't shorting, everyone else including the miners will be long, and I meant VERY net long. That would probably force the metal prices to shoot up to the moon.

There are really no reasons why these "commercial" traders are shorting such a large position. Most large cap miners have already closed their hedge book so they aren't making the trades.

So who are they?

Of course, Theodore Butler couldn't find out because everytime he request for more investigative actions, he get bounced back by the regulations saying there are no such manipulations, all these large shorters are fine and everything is fine. (and worse, before, he just got ignored totally)

Personally, I think there is a consipracy theory involved in this. Why would anyone make such a big short trade, knowing that they are losing tens of millions per day as gold prices keep advancing? I think the central banks/governments may be involved and are controlling the regulations. They could easily meet the margin call/loses just by keep printing money and feeding the shorts. The purpose is to prevent the public from losing their confidences in their fiat money, and thus, artifically pushing the gold/silver prices down.

The cost of these shorts are FAR LESS than the lost of confidences in their fiat money.

I admire Ted Butler for fighting against the manipulation but then I don't think it will be any good for him if he pushes too far. (and piss "certain" ppls off)

 

[Kauri]

regardless of the E/W count... just on Fibs alone... will be watching the ret areas...
Cheers
.........Kauri

 

[josjes]

No, what he meant is that the prices of gold and silver are being MANIPULATED by very few "commercial" traders. These very few traders are solely responsible for keeping the precious metal prices down right now because if they weren't shorting, everyone else including the miners will be long, and I meant VERY net long. That would probably force the metal prices to shoot up to the moon.

There are really no reasons why these "commercial" traders are shorting such a large position. Most large cap miners have already closed their hedge book so they aren't making the trades.

So who are they?

Of course, Theodore Butler couldn't find out because everytime he request for more investigative actions, he get bounced back by the regulations saying there are no such manipulations, all these large shorters are fine and everything is fine. (and worse, before, he just got ignored totally)

Personally, I think there is a consipracy theory involved in this. Why would anyone make such a big short trade, knowing that they are losing tens of millions per day as gold prices keep advancing? I think the central banks/governments may be involved and are controlling the regulations. They could easily meet the margin call/loses just by keep printing money and feeding the shorts. The purpose is to prevent the public from losing their confidences in their fiat money, and thus, artifically pushing the gold/silver prices down.

The cost of these shorts are FAR LESS than the lost of confidences in their fiat money.

I admire Ted Butler for fighting against the manipulation but then I don't think it will be any good for him if he pushes too far. (and piss "certain" ppls off)

I agree with this 'Conspiracy Theory'. Below please find the net positions of the commercials (the smart money) in the commitment of traders (COT) reports of gold and silver, The thick blue horizontal line is the zero line, the "smartos" have never been long since 2001, but without exception short - while gold has more than tripled and silver even quadrupled. To add insult to injury, particularly in gold you have permanent new short records, So the big "smartos" have been suffering staggering costs for many years, how is that possible ? The government don't want people to lose confidence in Fiat Money. For now I think is the situation similar 2003, late 2004, late 2005 and early 2006 when also new record shorts were set and yet the market partly corrected and partly continued to advance for months. They are trying with their inflated money to suppress POG as much as they can. Imagine when they are running out of the money printing presses ... Dooms Day scenario ??

 

[barrett]

Rounded bottom forming here over the past day..+ breakout. right on the boundary now. I'm trading it

 

[barrett]

I agree with this 'Conspiracy Theory'. Below please find the net positions of the commercials (the smart money) in the commitment of traders (COT) reports of gold and silver, The thick blue horizontal line is the zero line, the "smartos" have never been long since 2001, but without exception short - while gold has more than tripled and silver even quadrupled. To add insult to injury, particularly in gold you have permanent new short records, So the big "smartos" have been suffering staggering costs for many years, how is that possible ? The government don't want people to lose confidence in Fiat Money. For now I think is the situation similar 2003, late 2004, late 2005 and early 2006 when also new record shorts were set and yet the market partly corrected and partly continued to advance for months. They are trying with their inflated money to suppress POG as much as they can. Imagine when they are running out of the money printing presses ... Dooms Day scenario ??

I'm with you on the government manipulation.. it's real alright. And that probably does account for the increasing 'commercial' short position over the years.

The 'smart' reputation, particularly for short term trading, relates to when they are more short and when they are less short (or more long, pre-'01). When their short position is low (eg 60-80k contracts net short) it confirms a buying opportunity.. that should be the main use of the gold COT interpretation. Mid last year I stupidly was waiting for the 60k figure, which it never quite reached.

A detailed comparison of the blue and yellow lines on the chart below provides quite a revelation. If you bought whenever the commercials suddenly decreased their short position (adjusting for the overall downward trend) you would have consistently picked short term bottoms all the way up this gold bull market (geez I wish I'd known at the time!.. good for future reference).
cheers

 

[explod]

I agree with this 'Conspiracy Theory'. Below please find the net positions of the commercials (the smart money) in the commitment of traders (COT) reports of gold and silver, The thick blue horizontal line is the zero line, the "smartos" have never been long since 2001, but without exception short - while gold has more than tripled and silver even quadrupled. To add insult to injury, particularly in gold you have permanent new short records, So the big "smartos" have been suffering staggering costs for many years, how is that possible ? The government don't want people to lose confidence in Fiat Money. For now I think is the situation similar 2003, late 2004, late 2005 and early 2006 when also new record shorts were set and yet the market partly corrected and partly continued to advance for months. They are trying with their inflated money to suppress POG as much as they can. Imagine when they are running out of the money printing presses ... Dooms Day scenario ??

This may be a silly question but I have been troubling over the following since reading these last posts.

1st. In shorting gold does it mean that physical is being dumped onto the market. Or is it against something that is supposed to exist; and

2nd. If the Fed reserve and US Govt get desperate could they enact a law to make physical ownership illegal, fix the price and take it in charge in exchange for thier fiat currency.

I think I read somewhere once where the latter had happened before in the US. Dont' think anything like that would happen in Australia but I think the US collectively have the most physical so could theoretically keep up the manipulation.

 

[cuttlefish]

any attempt to artificially fix prices at a level lower than value/demand will result in a black market.

there's some pretty interesting stuff here (I think it was ithatheekrat that originally led me to this wiki link).

http://en.wikipedia.org/wiki/Bretton_Woods_Agreement

It says that when the US Govt had the gold standard backing the $US in the 60's at $35/oz this caused them problems because gold was outflowing from the US to be sold on the free market for a higher price. I don't quite understand this and will need to read it again. (e.g. why wouldn't the free market buyers just buy from the US govt as well since the govt has a fixed conversion rate?).

As well as productivity, quite clearly fiat currencies can only exist if the rule of law applies and when the rule of law disintegrates/changes (e.g. war, govt takeover of property like occurred in communist takeover, etc.) then gold is the only thing left (or oil, tobacco, food or anything that has an intrinsic value) but gold is the easiest to cart around in terms of value/volume and also indestructable. ( a kilo of gold is pretty small about 10cm*5cm*1cm if my memory serves correctly and there's also not much gold in the world in terms of volume).

 

[barrett]

This may be a silly question but I have been troubling over the following since reading these last posts.

1st. In shorting gold does it mean that physical is being dumped onto the market. Or is it against something that is supposed to exist; and

2nd. If the Fed reserve and US Govt get desperate could they enact a law to make physical ownership illegal, fix the price and take it in charge in exchange for thier fiat currency.

I think I read somewhere once where the latter had happened before in the US. Dont' think anything like that would happen in Australia but I think the US collectively have the most physical so could theoretically keep up the manipulation.

The shorting happens when say a miner due to produce an ounce next month sells the ounce today to lock in a certain price using an IOU one ounce of gold (selling futures contract).. The act of selling impacts the spot price of gold immediately.. but the gold doesn't change hands immediately.. at first only the electronic contracts for delivery . Later the mining company mines the ounce and delivers it at the price date and place on the contract. In the meantime the miner would be said to have sold short gold because they sold it without yet delivering it..
Central banks also issue IOUs for their gold in order to bash the gold price down, but unlike the miner, the central bank probably never intends to deliver the ounce of gold they have sold short.. I don't think anyone knows how they deal with it when the price then rises, but they probably just print fiat money to cover the financial loss they incur from their short position every day that the gold price rises.. in a futures acccount the gains and losses on the positions you bought or sold are accrued to your account daily as a cash balance. With central banks in the end it must be you and me footing the bill for their losing shorts. What makes me really angry is that the RBA shorts gold and has admitted it in writing!

I reckon the US will try and confiscate private gold eventually, Faber advised US citizens should have physical gold stored in two different countries.

I am getting more and more bullish here on the short term with this chart and its 24-hour rounding bottom. I had to adjust the rounding bit as the day wore on but bought at 879 and will buy more if the rounding bottom is touched some more. If the pattern is continued tonight I would say we are in for one hell of an upward rally for at least a couple of days..

For now I think is the situation similar 2003, late 2004, late 2005 and early 2006 when also new record shorts were set and yet the market partly corrected and partly continued to advance for months.

I just noticed this point, it could happen again, the heavy short positions aren't a very reliable indicator of a final top in place. For now I am long and glued to the chart

 

[explod]

The shorting happens when say a miner due to produce an ounce next month sells the ounce today to lock in a certain price using an IOU one ounce of gold (selling futures contract).. The act of selling impacts the spot price of gold immediately.. but the gold doesn't change hands immediately.. at first only the electronic contracts for delivery . Later the mining company mines the ounce and delivers it at the price date and place on the contract. In the meantime the miner would be said to have sold short gold because they sold it without yet delivering it..
Central banks also issue IOUs for their gold in order to bash the gold price down, but unlike the miner, the central bank probably never intends to deliver the ounce of gold they have sold short.. I don't think anyone knows how they deal with it when the price then rises, but they probably just print fiat money to cover the financial loss they incur from their short position every day that the gold price rises.. in a futures acccount the gains and losses on the positions you bought or sold are accrued to your account daily as a cash balance. With central banks in the end it must be you and me footing the bill for their losing shorts. What makes me really angry is that the RBA shorts gold and has admitted it in writing!

I reckon the US will try and confiscate private gold eventually, Faber advised US citizens should have physical gold stored in two different countries.

Thank you very much Barrett and Cuttlefish. I have skirted the edges of the problem but this has shone the light. Michael Panzer (Wall Street)also advises and alerts similar to Faber

Cheers

 

[explod]

The shorting happens when say a miner due to produce an ounce next month sells the ounce today to lock in a certain price using an IOU one ounce of gold (selling futures contract).. The act of selling impacts the spot price of gold immediately.. but the gold doesn't change hands immediately.. at first only the electronic contracts for delivery . Later the mining company mines the ounce and delivers it at the price date and place on the contract. In the meantime the miner would be said to have sold short gold because they sold it without yet delivering it..
Central banks also issue IOUs for their gold in order to bash the gold price down, but unlike the miner, the central bank probably never intends to deliver the ounce of gold they have sold short.. I don't think anyone knows how they deal with it when the price then rises, but they probably just print fiat money to cover the financial loss they incur from their short position every day that the gold price rises.. in a futures acccount the gains and losses on the positions you bought or sold are accrued to your account daily as a cash balance. With central banks in the end it must be you and me footing the bill for their losing shorts. What makes me really angry is that the RBA shorts gold and has admitted it in writing!

I reckon the US will try and confiscate private gold eventually, Faber advised US citizens should have physical gold stored in two different countries.

Thank you very much Barrett and Cuttlefish. I have skirted the edges of the problem but this has shone the light. Michael Panzer (Wall Street)also advises and alerts similar to Faber

Cheers

 

[josjes]

Hi Barrett, keep us uptodate with the bullish/bearish breakout. So you are long for just these few days ? Would be interested to know what's happening in the next few days, I am standing on the sideline for now.

 

[Temjin]

This may be a silly question but I have been troubling over the following since reading these last posts.

1st. In shorting gold does it mean that physical is being dumped onto the market. Or is it against something that is supposed to exist; and

2nd. If the Fed reserve and US Govt get desperate could they enact a law to make physical ownership illegal, fix the price and take it in charge in exchange for thier fiat currency.

I think I read somewhere once where the latter had happened before in the US. Dont' think anything like that would happen in Australia but I think the US collectively have the most physical so could theoretically keep up the manipulation.

Yep, they have done it before and there are more and more signs that the US government are preparing to do the same again if needed be.

Here is an interest article to read on this..

http://news.goldseek.com/GoldSeek/1196605589.php

Remember, all these "regulations" and "actions" happened only for the last 2 years. So something fishy is going on.

I hope it doesn't happen in Australia.

 

[Uncle Festivus]

I am getting more and more bullish here on the short term with this chart and its 24-hour rounding bottom. I had to adjust the rounding bit as the day wore on but bought at 879 and will buy more if the rounding bottom is touched some more. If the pattern is continued tonight I would say we are in for one hell of an upward rally for at least a couple of days..

Yes, something could be happening, not sure how strong it will be, but trying to break from the down channel may be? Bounced off 875 twice, found support @ 880 a few times, now establishing a weak up channel? Waiting....... (end of amateur TA pondering.... If only I had a canary )

 

[barrett]

Hi Barrett, keep us uptodate with the bullish/bearish breakout. So you are long for just these few days ? Would be interested to know what's happening in the next few days, I am standing on the sideline for now.

Will do, but with these rounding bottoms, they usually just run their course and then gradually either take off or fizzle out. It's hard to pinpoint a breakout or breakdown. As Uncle Festivus was saying though, it looks like we may have broken out of the downtrend at least. But I would also be expecting any rally to be short term.

The very steep correction in the HUI these past two trading sessions suggests this isn't just a quick $40 correction and then on its merry way back up for gold. If this rounding bottom does give us a decent relief rally I'll probably try and lighten up a bit on the metal and then start looking for entry points in those undervalued stocks if the correction continues.

Gartman has been pretty confused lately. Out at 891.. then back in at 900 after the little pullback from 917, expecting a run into the 900s as I did.. now holding but kind of wishing he hadn't put all his remaining money in at 900. There seems to be a lot of confusion around at the moment.. that along with the other signals makes me think this week may have been a turning point in gold.. Interestingly, last week Faber predicted that.

 

[Kauri]

nothing is written in stone.. one possibility I see is if she makes her way sedately down to $850 that would be a=c and also a 50% ret of what looks to be W3 (may even be a W1 if the previous tri was an abcde). anyways, $850 would give it a tidy look.
Cheers
.........Kauri

 

[barrett]

The goldfish stayed in the bowl for quite a while.. and then some escaped over the sides.. looks like a $10 rally was all the rounding bottom could muster.

Slim chance here of a double bottom at 875 and rally.. but I won't be trading it if it happens. I'm out of the market (futures), for a few days at least.. I've been getting sloppy and need to take some time out to read Greg Welden's new book "gold trading boot camp" (anyone read it?) and firm up my strategy a bit before the next upleg.
GLTA