Gold Price - Where is it heading?

[Temjin]

Ahhhh, a power supply for the mines in South Africa increased from 90% to 95% did the trick and caused another sell off for every precious metals.

Only 5% of power...everything is so news related right now. Still some $25 away from the $1000/oz mark though.

 

[ithatheekret]

What about all the margin calls , that are forcing liquidations . Even Carlyle units got smashed , profit taking from the last dip adds to it and we must not forget the immediate rush for cash that would have hit the Northern hemisphere . All hail the King .

The treasuries had me stumped , bonds got it wrong again ???

Wouldn't be the first time , but I don't see how treasuries will be safe haven stuff in a high inflationary period . They've got use to saying stagflation now , that's a worry .

 

[barrett]

What about all the margin calls , that are forcing liquidations . Even Carlyle units got smashed , profit taking from the last dip adds to it and we must not forget the immediate rush for cash that would have hit the Northern hemisphere . All hail the King .

The treasuries had me stumped , bonds got it wrong again ???

Wouldn't be the first time , but I don't see how treasuries will be safe haven stuff in a high inflationary period . They've got use to saying stagflation now , that's a worry .

Hi Itha, that's an interesting conundrum isn't it... either gold investors or bond investors are very, very wrong at the moment.

To the bond investors I say, look at who's in government. If we had a pack of Volkers or Trichets running the Fed I'd be 100% in cash right now... but a Bernanke, and it's gold. With the US dollar plummeting, it defies belief that treasuries would rally like this. I'm interested in shorting the 10 year bond, I just have to work out the best way of doing it....and wait until it breaks its uptrend. Short government money, long real money.. I'm liking that trade

 

[explod]

Hi Itha, that's an interesting conundrum isn't it... either gold investors or bond investors are very, very wrong at the moment.

To the bond investors I say, look at who's in government. If we had a pack of Volkers or Trichets running the Fed I'd be 100% in cash right now... but a Bernanke, and it's gold. With the US dollar plummeting, it defies belief that treasuries would rally like this. I'm interested in shorting the 10 year bond, I just have to work out the best way of doing it....and wait until it breaks its uptrend. Short government money, long real money.. I'm liking that trade

We are creatures of habit. There has for a long time been a perception (and to some degree a fact) that Governement (or large blue chip Co.) backed bonds (like property) are safe.

They are not and people did their shirts on bonds in the crash of 1930's and will again.

Unfortunately people do not learn untill they have lost thier shirts: period. So it could be awhile yet before what we know to be common sense kicks in.

Property is a good analogy because everyone has a leg in it. It has been a fully loaded goods train at full steam and even though the brakes are probably full on, the wheels will skids for miles down the track before it stops

 

[barrett]

We are creatures of habit. There has for a long time been a perception (and to some degree a fact) that Governement (or large blue chip Co.) backed bonds (like property) are safe.

They are not and people did their shirts on bonds in the crash of 1930's and will again.

Unfortunately people do not learn untill they have lost thier shirts: period. So it could be awhile yet before what we know to be common sense kicks in.

Property is a good analogy because everyone has a leg in it. It has been a fully loaded goods train at full steam and even though the brakes are probably full on, the wheels will skids for miles down the track before it stops

Yeah that's a good analogy.. that's what I find most annoying about investing... the time it takes people to realise what's going on.. I avoided financial institutions altogether the past 3 years and missed out as people bid up the Commonwealth bank to 60 bucks.. but now people are down 40% at best, 100% at worst.. A bloke at my work loaded up big on the Rubicon trusts at Christmas, all on margin.. ouch - they went down 70-80%. My dad was the only one who listened about gold. Other ppl I know are still at 'disbelief' stage. As Puplava says, bull market goes from skepticism -> disbelief -> optimism -> euphoria. The gold shares are not going nuts yet but at least we're making money not losing it!

If anyone else is interested in preparing to short US govt 10yr bonds let me know how you're doing it, cheers

 

[cuttlefish]

cash is paper.
houses aren't paper.
gold isn't paper.
productivity isn't paper.

I'll get gold in exchange for letting or selling a house.
I'll rent or buy a house in exchange for gold.
I'll get gold in exchange for productivity.
I'll let or sell a house in exchange for productivity.

paper, when its just paper, isn't worth much.

cash is just paper if the government backing the paper creates too much of it and/or backs it with junk productivity (i.e. when the govt takes on NINJA paper and gives out AAA rated (cash) paper in exchange for it then the AAA paper (cash) isn't worth much). Paper/cash is ONLY backed by productivity - there is no asset backing it any more - there once was when there was a gold standard. There's a lot of producers (people) in the world. There isn't much gold.

 

[Miner]

Since there is no thread for Palladium so I am posting this here.

I noticed that in last one month Palladium has gone up by more than $100 per ounce when Gold has gone up by about $78.
To be more precise Gold on 4 Feb was US$ 915.2 , silver $17.08, Platinum $1798.9, Palladium $432.60 ; On 7 March at 11.41 AM Perth Mint quoted Gold US$988.46, Silver $20.53, Platinum $2189.97 and Palladium hopping $529.61. ABout 25% jump in one month !!
Due to Australian dollar strengthening the value is slightly lower extent after conversion.

Has any one followed Palladium and what are the comments from precious metal whiz kids ?

 

[cuttlefish]

gold.

'cos. "thats gold".

Thats gold.

gold medals from Roman times. Not palladium.

Jeruselum. The Geat Pyramids. Spanish Gallions. The Incas. Kiing Solomon.

.... G.W. ....

Oil. Purchased in .... ??!!??

 

[Kauri]

a coily developing on the 4Hr chart??
Cheers
..........Kauri

 

[Uncle Festivus]

I'll get gold in exchange for letting or selling a house.
I'll rent or buy a house in exchange for gold.
I'll get gold in exchange for productivity.
I'll let or sell a house in exchange for productivity.

paper, when its just paper, isn't worth much.

There isn't much gold.

So how far off are we to stipulating in our everyday financial interactions that we would like the trade to be settled in oz's of gold or silver? There appears to be murmurings of doubt about all things of fiat currency, and how vulnerable our bastions of money shuffling have become, or will be.

I am thinking of this in the light of the relatively disappointing leverage gold equities have been giving, although, a return of 16% since the start of the year compared to the general markets negative return highlights the gold paradigm of a store of value (who says gold doesn't pay interest?). The juniors have faired even worse. Or am I too greedy?

I say relative because gold equities are generally off their historical highs while the POG has made record highs with regularity.

How do people feel about the proportion of their 'wealth' devoted to physical gold/silver. Is it a time to increase, or shall we wait for a big pullback, if it materialises at all?

What is the 'tipping' point to convert a greater proportion of cash to bullion?

How do we best leverage into gold/silver at this point in time?

 

[MRC & Co]

There appears to be murmurings of doubt about all things of fiat currency.

I say relative because gold equities are generally off their historical highs while the POG has made record highs with regularity.

Is it a time to increase, or shall we wait for a big pullback, if it materialises at all?

How do we best leverage into gold/silver at this point in time?

All 4 place good questions.

Firstly, definately huge doubts are creeping up about fiat currency, another thing which is simply going to push precious metals higher and higher.

As you say, the market has been SMASHED, so while gold has made record highs, I dont think you can expect equities to make the same highs. Complete fear in the market in general at the moment.

Is it time to increase or wait for a big pullback? This is my main question. Will it even materialise at all? I have jumped aboard and loaded up. Who wants regular stocks? Who wants wants cash? Who wants property? Where is the money going to go? Has to go somewhere, commodities are the only place I see, and soaring inflation will back up the arguement for precious metals.

How do we best leaverage into gold and silver at this point in time? Dont know. Seems everyone has their own methods. At the moment, I am just holding equities, some already in production, others coming online soon. Just steering clear of anything spec (exploration). I like the ability to be able to sell at the click of a mouse button should the market come crashing down and the possible upside equities produce should the market bounce.

Now what was this recent rise in banks on Friday and fall in commodities, PPT? Who would want to seriously own banks in comparison to precious metals at this time?

Big thing for me, is I want to see a fall in the AUD. I think economic indicators and property markets will start to get hit as time catches up with them. We know they lag the stockmarket, especially property. RBA rate hikes are starting to hit over the next year or so also. Should see them leave rates on hold or even cut into the future, bringing some IRP (interest rate parity) back to our dollar. Inflation is high here, not just in the US, so PPP should kick in over the medium-term and bring all things back in line. I.e. fall in the AUD an rise in POG in AUD.

Just a few thoughts.

Cheers

 

[MRC & Co]

Now what was this recent rise in banks on Friday and fall in commodities, PPT?

Note: I am talking about the US Friday night our time.

 

[cuttlefish]

So how far off are we to stipulating in our everyday financial interactions that we would like the trade to be settled in oz's of gold or silver? There appears to be murmurings of doubt about all things of fiat currency, and how vulnerable our bastions of money shuffling have become, or will be.

I am thinking of this in the light of the relatively disappointing leverage gold equities have been giving, although, a return of 16% since the start of the year compared to the general markets negative return highlights the gold paradigm of a store of value (who says gold doesn't pay interest?). The juniors have faired even worse. Or am I too greedy?

I say relative because gold equities are generally off their historical highs while the POG has made record highs with regularity.

Good questions and only the passage of time will deliver the correct answers but here's my thoughts anyway.

I think to some extent we are seeing the start of the move away from USD pricing in regular speculation about OPEC moving away from USD pricing. Personally given that the Euro has its own share of issues I would think a move to gold based pricing for oil wouldn't be silly from an OPEC standpoint and I think if that occurred it would directly underpin the value of gold. I also think there would be extremely powerful undercurrents of opposition to a move like this by the backers of currencies and holders of currency backed assets. Recent moves by sovereign wealth funds to 'bail out' some of the bigger US banking situations recently I view not necessarily as a move to protect the currency/US economic system over the long term, but more as a short to medium term measure to provide stability whilst allowing possible shifts of assets out of USD backed classes into other classes.

The collapse of a significant bank or two in the US would also begin an impact as will a continuing slide in the USD. I guess it does depend a bit on how big the sub-prime iceberg really is and the extent of undiscovered counterparty risk floating through the system.

What I do know is that it always takes time for a countercylical move to catch alight, but when it does it always runs further than expected as well.

I do still think its relatively early days for the gold bull run (and to a fair extent the commodities bull run as well) - because we've only just touched on 25 year historic highs so we're still bouncing along the bottom imo compared to where things could go. But if it gets to the point that people really do start to doubt currency and doubt the safety of money in the bank (conceptually the vast majority of the population has no awareness of the level of risk the banks carry and the level of debt vs the level of cash held) then the magnitude of the move would be large because the vast majority of the population does not own significant quantities of gold and doesn't really see gold as an investment class.

On a volume basis there really is only a very small quantity of gold per capita in the world vs other goods and commodities.

In relation to the junior gold stocks - some of the quality ones have already done quite well, but that is largely based on progressive results rather than reflecting the gold price movement - though some are reflecting a combination. I think it would be interesting to see what effect a proper breach of the $US 1000 mark would bring. Also a collapse in a bank or two or some bonanza production results and the commencement of dividend distribution by one of the near producers cum producer would be a positive as well. The VRE debarcle put a bit of a damper on things in this sector as well it seems. But this also highlights how difficult it is to find and produce gold - the supply really is quite limited at current prices and it will take significant price rises to change this situation - particularly if wage and general inflation bring up the cost side as well.

 

[Whiskers]

Big thing for me, is I want to see a fall in the AUD. I think economic indicators and property markets will start to get hit as time catches up with them. We know they lag the stockmarket, especially property. RBA rate hikes are starting to hit over the next year or so also. Should see them leave rates on hold or even cut into the future, bringing some IRP (interest rate parity) back to our dollar. Inflation is high here, not just in the US, so PPP should kick in over the medium-term and bring all things back in line. I.e. fall in the AUD an rise in POG in AUD.

Just a few thoughts.

Cheers

I tend to agree MRC & CO... or rather conversely a firming of the USD for awhile. I think that will settle some nerves for awhile. For that reason I think (at least hope) the FED will not cut heavy this time.

 

[explod]

I tend to agree MRC & CO... or rather conversely a firming of the USD for awhile. I think that will settle some nerves for awhile. For that reason I think (at least hope) the FED will not cut heavy this time.

What is being missed by some is the FIAT currency situation. As Kyosaki so well spelt out in the U tube presentation of the "Silver" thread time and again "cash is trash" The sub-prime, credit cards, you name it debt is rife and production (earning by the sweat from the brow) is out the window. Money is backed by nothing but government/fed promise, IT IS TRASH. Inflation is the devaluation of money to nothing, repeat "cash is trash"

In Australia the same thing, trying to rationalise some sensibility to what governments and central banks can or cannot do is long gone. The doomsayers have been correct over the last few years. Glad I listened to some of them.

Gold has value, it is a proven store of wealth going back 4000 years and survived all the crashes of the past. It will now. If you are fair dinkum about financial survival the only thing at the moment is gold, silver and the good gold stocks, when it goes through the roof and property goes down then a transfer from one to the other will be the way.

I recommend those who have not seen it to go to the Silver thread and play the U tube video, was posted up about 4 or 5 days ago.

Cheers on this wonderful holiday for the workers, who will be the ones to bring back the real wealth (work). Proud that I was a AWU member when a shearer in my youth. explod

Have a beer

 

[MRC & Co]

What is being missed by some is the FIAT currency situation. Have a beer

This was mentioned above by myself and Uncle. Definately fear creeping in, just need it to really drive home now!

Having a beer as we speak!

Cheers :alcohol:

 

[Uncle Festivus]

But this also highlights how difficult it is to find and produce gold - the supply really is quite limited at current prices and it will take significant price rises to change this situation - particularly if wage and general inflation bring up the cost side as well.

What it also highlights is that the 'traditional' gold countries are basically explored out eg South Africa and Oz. I was lamenting the poor performance of one of my juniors with the companies MD, via email, and he indicated that the real 'company making' gold discoveries will be in countries that have been under explored and/or have sovereign risk, and that they may be focusing on these areas outside of Oz in the future.

This is what makes me inclined to alter the equities/physical gold allocation in favour of physical, as I think the Oz co's will face mounting & continuing pressures on costs/profit margins unless there is a commensurate/compensating rise in the $AU POG . Getting more direct exposure to the gold price will be my focus for now I think, probably trading via CFD's and investing physical on the dips.

 

[Whiskers]

What is being missed by some is the FIAT currency situation.

Not missed on me mate. Just looking to profit from the trade in the nominal value of paper money and trade/convert some of my gold equities into more tangible assets and benifits... like a nice cold beer.

You won't find much cash sitting around doing nothing at my place.

After all 'paper' money is only a contract to supply goods or services to it's face value. I agree with your point that saving 'the paper' is not profitable... so I continue to see it as a 'contract' which is constantly being traded for profit... such as a boost in Aus gold shares with some appreciation of the USD.

 

[barrett]

Looking at the short term.. the gold price is mainly being set by a see-saw with the downward forces of the deflating asset markets at one end and the upward force from the Fed's speech and actions at the other.. eg in mid Jan as the Fed played tough on inflation, gold plunged from 914 to 850 alongside equities.. then the Fed slashed rates unexpectedly and it was back at 936 within a few days.

The Fed isn't due to act until Tuesday week, and gold and the ag commodities have been faltering along with the equity markets as another wave of deflation-fear takes hold..

Given the amount of hot money in commodities it wouldn't be too surprising to see a further fall there as well as in equities in the short term until the Fed steps in with what the futures market is right now saying will be either a 75bp cut (94% chance), or a 100bp cut! (6% chance). As usual the markets won't believe the rate cut until it's delivered.

Gold is sitting just above a critical support line (in purple) and IF we get an hourly close below say 970, that could well bring in selling down to support at 940-945. 944 would be 50% retracement of the recent run.. it's also the target level if the current formation is interpreted as a head and shoulders and the shoulderline breaks in the next day. The red trendline is also potential support around that mid 940's area.

On the other hand a strong rally on high volume right now could establish 970 as a base for a move through 1000 - but at this point I am expecting the correction.. I may be wrong, just how I see it right now, other viewpoints welcome..

 

[MRC & Co]

Barrett, I completely agree with your short-term analysis and if it does break below support I will be stoped out of pretty much all my gold positions (if not all).