Gold Price - Where is it heading?

[Kauri]

as the long-term fundementalists point out there is every reason for Gold to just keep on going one way... up... which, if you pick your timeframe, is almost guaranteed in any assett class,... however, in the present where I dwell, I see the possibility of the shiny metal heading down to the mid-low 800's, and am/have been positioned that way since Maxwells hammer.. with the psychological and tech level of 900 being the main stumbling block...
not a prediction, just a (now risk-free) tradable possibility..
Cheers
..........Kauri

 

[cuttlefish]

Be very careful of this.

Telling someone invested through a large period of the 1900s of the bullish bias of the stockmarket and average compounded returns would not have helped, considering over numerous decades it barely moved (non-inclusive of dividends).

Your investment life will be very short in comparison to historical trends and you could get caught in a rut period (perhaps now for those in stocks "waiting" for them to climb back up).

Yeah fair enough, I agree that having a 2000 year bullish view may be nice in theory but not particularly useful for making money over a lifetime.

I'm working on a one to two year view that is bullish on gold. I'd certainly re-examine that if I felt it was pretty clear all the subprime land mines had been uncovered - that would be when all banks and institutions holding questionable debt had written it down properly and the credit markets started to show signs of life again. I think we're a way off from that.

In the short term the liquidity crisis is likely to cause a flight to cash and maybe we're heading into the cash stage of the cycle - which true to form is following the commodity stage just as the economic clock tells us it should.

This could cause say 6 months of churning in relation to gold as there are competing money flows (strong money flows out of gold as a commodity, a start of money flows into gold as a currency). Normally after the flight to cash and the final capitulation stage of other markets including the associated bankruptcies etc. there would be the slow return of investment out of cash and a slow return of confidence and the whole cycle would kick off again.

The only issue I have is that this time and with this cycle, it is cash itself, and the creation of it, that has caused the problem. In the past the 'malinvestment' was in a particular market sector (dot com, housing construction, etc.) but this time the mal investment seems to have been the actual creation of credit itself. That means the 'safety' of cash in past times of the final stage of the economic cycle is in question imo. Similarly the safety of the institutions responsible for protecting the cash is also in question (i.e. the banks).

This is why I'm still bulllish for gold over a 1 to 2 year timeframe. In the short term we might see a flight to cash out of commodities (gold being treated as a commodity), but then a little further, a flight out of cash and particular the USD into gold, which will happen very quickly if a couple of major banks blow up or instead of blowing up they are saved by massive cash creation exercises by central banks.

I see value in some of the new gold producers even if gold comes off another 5 %to 10%. I also saw/see the opportunity for even greater value appearing in the short term if there is continued sell down of some of these stocks as a result of a liquidity squeeze. (margin calls, opes debarcles, property lvrs deteriorating causing equity loan recalls, rate rises causing people and institutions to sell up stocks, commodities to reduce other debts etc.).

I debated a few months ago trying to trade down a significant portion of my position to capitalise on this but didn't do it. Instead I've been reallocating to greater value where I see it and also into less risky profile stocks (no debt producers with proven reserves or high quality near producers with good cash positions). I wouldn't risk trading significantly out of the bullish gold position even for a short period, because I see a risk at any time of a series of big credit blowups out of the blue that could kill the value of the USD very quickly.

 

[Uncle Festivus]

I debated a few months ago trying to trade down a significant portion of my position to capitalise on this but didn't do it. Instead I've been reallocating to greater value where I see it and also into less risky profile stocks (no debt producers with proven reserves or high quality near producers with good cash positions). I wouldn't risk trading significantly out of the bullish gold position even for a short period, because I see a risk at any time of a series of big credit blowups out of the blue that could kill the value of the USD very quickly.

Excellent post there seafood , I have to concur. I'm used to the 2 steps forward, one step back cycle of gold, & always debating whether to sell at the peaks & wait for the next bottom to re-enter. Waiting again, but will the next black swan take gold with it too initially?

 

[Young Gun]

I appreciate everyones anlaysis and views on the short - medium - long term view on gold however at times I feel that everyone is way too short term minded.

For example - Gold has lost about $25 over the past day people are jumping to the conclusion the gold price is going to head south of $800. Yes its true that gold has weakend from the hights of $955 prior to the recent all time highs, but in essence you have to remeber that American markets were stable last night and the price of oil fell almost 4%.

This has nothing to do with golds fundamentals but other contributing factors that peg to the price of gold and influence. At the moment we have only really seen falls of aprox 3% from the rebound of $950. Why is it because we have fluctuations like this people predict the end of the run or even the short to medium term run? Do you really expect gold to bounce right back to all time highs after falling 10% ?

 

[explod]

I appreciate everyones anlaysis and views on the short - medium - long term view on gold however at times I feel that everyone is way too short term minded.

Aaaarrrh, Young Gun, insightful and refreshing



And it gives one a great opportunity to have some time away from the screen.

cheers.

 

[Kauri]

I appreciate everyones anlaysis and views on the short - medium - long term view on gold however at times I feel that everyone is way too short term minded.

For example - Gold has lost about $25 over the past day people are jumping to the conclusion the gold price is going to head south of $800. Yes its true that gold has weakend from the hights of $955 prior to the recent all time highs, but in essence you have to remeber that American markets were stable last night and the price of oil fell almost 4%.

This has nothing to do with golds fundamentals but other contributing factors that peg to the price of gold and influence. At the moment we have only really seen falls of aprox 3% from the rebound of $950. Why is it because we have fluctuations like this people predict the end of the run or even the short to medium term run? Do you really expect gold to bounce right back to all time highs after falling 10% ?

Rather than jumping to conclusions over the recent$25 fall, some people actually saw the possibility around 2 weeks back when a hammer formed at $1000 plus, (and posted it), and went short.. now gold has fallen over $100 (on current price), for mine I don't care particularly if it was fundementals, technicals, or the phase of the moon that caused the recent set-back, it happened, and was tradable... as has been the recent drop from the $950's.(also posted).
As I trade spot via CFD's I find it best to have short-term trades, as going for the long-term can prove to be expensive due to the interest charges incurred, and the pain is increased when the position goes against you and you are servicing a losing position.
Just my idle ramblings...
Cheers
..........Kauri

 

[Young Gun]

Someone 2 weeks ago posted about the possiblity of a pull back from record all time highs, supported by a candle? Wow he must be physic lol

I am not having a go at anyone , but just take into consideration the broader context. Its pretty hard for gold to rally when oil and base metals are going against it in the short term.

I trade CFDs also and i know where you are comming from with this. I appreciate all the analysis just asking for a bit of perspective. In reality i dont mind short to medium term predictions, i just hate and cant stand people using short term or daily prices of gold dictate long term trends. Long term trends and fundamentals dont build overnight but take time, in saying this these dont change overnight (generally).

 

[MRC & Co]

Just on Kauris point, hammers and shooting stars have been terriffic lately in changing short-term trends.

Kauri, however, your hammer did not close lower, or at least I cannot spot a black body on it. More of a doji perhaps than a hammer?

Cheers

 

[Kauri]

Just on Kauris point, hammers and shooting stars have been terriffic lately in changing short-term trends.

Kauri, however, your hammer did not close lower, or at least I cannot spot a black body on it. More of a doji perhaps than a hammer?

Cheers

Agreed, the confusion is that when I posted it the day was not complete and at that stage it was a hammer, but for me the size of the days range and the close position was ultimately more important.

Someone 2 weeks ago posted about the possiblity of a pull back from record all time highs, supported by a candle? Wow he must be physic lol

I am not having a go at anyone , but just take into consideration the broader context. Its pretty hard for gold to rally when oil and base metals are going against it in the short term.

I trade CFDs also and i know where you are comming from with this. I appreciate all the analysis just asking for a bit of perspective. In reality i dont mind short to medium term predictions, i just hate and cant stand people using short term or daily prices of gold dictate long term trends. Long term trends and fundamentals dont build overnight but take time, in saying this these dont change overnight (generally).

The candle, supported by my basic take of E/W, supported by an oscillator, supported by a MTF trend identification, supported by another trend change indicator plotted on the chart, supported by Fibs, supported by a contrarian view of "everyone and thier dog is saying Gold has broken $1000, next stop $1500)... hey possibly psychotic as opposed to psychic??
You are obviously long gold, for the long term. What did you use to determine an entry... in the current short-term downtrend.. a bottom maybe??? On what timeframe..??
If the position goes against you but doesn't take your stop how long are you prepared (seeing as you have a longterm view), to hold and finance the position, allowing that the interest charges can over 6 months actually double your max loss??
My trades are not calling the longer trend, I use (with Gold),the dailies to establish a likely direction and then use the hourlies to trade in, when you get it right the RR seems to be better, for me. Longer term, via CFD's, I'm not brave enough for that. (In FX I use the dailies and hourlies to establish direction and trade 5min charts)..

Cheers
...........Kauri

 

[Whiskers]

Just on Kauris point, hammers and shooting stars have been terriffic lately in changing short-term trends.

Kauri, however, your hammer did not close lower, or at least I cannot spot a black body on it. More of a doji perhaps than a hammer?

Cheers

MRC I reckon the colour of the hammer is not important. For me it was a marginal hammer, but certainly a spinning top and an evening star... a more definite top signal.

Someone 2 weeks ago posted about the possiblity of a pull back from record all time highs, supported by a candle? Wow he must be physic lol

Don't you believe in candle formations Young Gun?

Candlestick's physic?... no. But I could talk to you about something involving the cycles and phases of the moon etc... a bit like what Trader Paul uses.

For me and as kauri pointed out, they are pretty good indicators when you interpret everything correctly. Although I mostly work off fundamentals, along with other not psychic, but more intuitive skills, they have signaled me to get out of trades before a predictable rout set in.

Speaking of fundamentals, I have been less bearish than most re the stocks of late, even slightly bullish. My basis for that is I don't think the carnage from the 'credit crunch' is going to be as bad as many fear, this time around.

Consequently, I have advocated for awhile that the USD will strengthen a bit in the near future and that equates to some easing in demand for gold.

 

[cuttlefish]

Waiting again, but will the next black swan take gold with it too initially?

Cheers, I guess it depends on what kind of swan it is lol. I guess its likely that short term credit squeeze events will reflect in a continuing exit to cash from physical gold and gold stocks. But an event that rattles global faith in the US dollar might be different. We don't know whats still out there, or if anything is. If we go another 6 months without a major US fund or bank collapsing or needing bailout then maybe we're out of the woods on the black swan stuff and the calamity event has been avoided. (My gut say's its unlikely to be that simple but I've no facts to back this up).

But even if things run relatively smoothly I don't see it saving the medium downtrend in the USD because until there is a turnaround in the US economy they will continue to inject money into the system to try to stimulate it.

I'm hoping for a return in the form of yield within the reasonably near future on some of my gold stock investments and if that comes through price won't really matter anyway, but obviously bullish sentiment coming into the sector would be nice.

 

[explod]

Consequently, I have advocated for awhile that the USD will strengthen a bit in the near future and that equates to some easing in demand for gold.

Interesting you say that, Wavepicker is of the same opinion but there dose not seem to be a reason put forward as to why?

Can you give a take on this rationale?

 

[Young Gun]

I do use candlesticks, I wasnt having a pot shot at anyone. I guess I am primarily just venting my frustation at people posting negative sentitment because of 1 or 2 negative days. This is worse in the media. Every second day you read a differing view based on 1 days price action.

 

[Kauri]

Waiting again, but will the next black swan take gold with it too initially?

UBS will be hitting the press soon with a Qtr1 loss of something like CHR 12 Bln hit, and a possible raising of CHF 15Bln.. a little black swannette?

I do use candlesticks, I wasnt having a pot shot at anyone. I guess I am primarily just venting my frustation at people posting negative sentitment because of 1 or 2 negative days. This is worse in the media. Every second day you read a differing view based on 1 days price action.

Read the thread, the fundemental bulls have run with it for weeks, a rare contrary view backed by analysis and... ah well.. must learn to conform and trot with the shheeepp.. :sheep: ..
Cheers
...........Kauri

 

[ithatheekret]

Better plunge than the 21st of March happening right now . A clean up of positions left over from the Japanese EOFY perhaps , but a dip is on once more . 913's so far , if pre 900 support is there it should be showing up by now , I had 912 at the higher end of my range , been out a buck before .

PS ..... thinking that it would retest the 912 for a DB . Had possibilities all the way to 887 if I remember rightly , don't have the calculation sheet I used in front of me at present .

 

[barrett]

Someone 2 weeks ago posted about the possiblity of a pull back from record all time highs, supported by a candle? Wow he must be physic lol

Make sure you tell us all the next time gold makes a major interim top or bottom:

 

[barrett]

I don't short gold, but I'm still not buying. My technicals are stuck in remedial class.. price patterns and volume. I take it minute by minute. The sellers are still in control. Looking back at this bull, a 50% retracement of the recent 9-month move as Kauri suggested would not be unusual, even with the long-term fundamentals in tact. One could argue the CRB looks to be part way through a similar 50-62% retracement.

For those following the performance of the juniors here and abroad.. Here is something I found on Kitco, the ratio of an index of US-listed junior gold and silver stocks to the HUI, graphed along with the S&P500. Most interestingly, the periods of serious outperformance of the juniors relative to majors (shaded rectangles) only seem to occur when the broader equity market is rising. The analyst puts this down to the fact that small emotion-driven retail investors make up a much bigger proportion of the potential buyers in these small companies - and we all know, and can see below, that those retail investors like getting sucked in at sharemarket tops.

An exception was in mid 2002, when majors and juniors were both falling substantially but the juniors fell by less.

Another point from the graph is how suddenly the periods of junior outperformance tend to happen, meaning research and decisions must be well prepared in advance.

The analysis was done by Przemyslaw Radomski. I didn't find the rest of his article very interesting but it's here if anyone wants to refer to it,
http://www.kitco.com/ind/Radomski/mar312008.html

 

[cuttlefish]

interesting chart barret. I've marked a few other spots on it where it looks like for some shorter periods the HUI juniors have risen significantly counter to a decline in the S&P. Also as you mentioned as well its interesting to observe the spiky/volatile nature of the HUI junior runs. It would be interesting to see this sort of comparison over a longer time frame to include multiple macro bull/bear cycles - particularly to see if there are consistent patterns of behaviour entering and leaving the bear phases.

 

[ithatheekret]

Looking at the Junior HUI , would it not suggest that the next run up had better well breach the last peaks and continue , unless it was to start looking like a HS pattern formation , by say mid 2009/maybe 2010 ?

Just a glance ob.

 

[cuttlefish]

Read the thread, the fundemental bulls have run with it for weeks, a rare contrary view backed by analysis and... ah well.. must learn to conform and trot with the shheeepp.. :sheep: ..
Cheers
...........Kauri

Kauri - its been interesting to observe your trading and you're clearly doing a good job of trading what you see without bias, which is the skill of someone operating in the shorter timeframes. I also find it informative to observe your approach. When the technical view appears to give signals which you seem to be good at picking, it also gives food for thought for those with a fundamental view to re-examine the factors that influence that.

I'm happy for the two different approaches to co-exist. There are some on here that clearly have goals of wealth protection and/or wealth creation through investment, and others with the goal of income generation through trading. (and probably some that are generating income through trading that they are then investing, and also some that are possibly trading amounts of capital that others would consider 'wealth' and wouldn't feel comfortable risking allocating to trading positions).

But if you have a view that gold and gold related assets provide an element of wealth protection (and/or opportunity for wealth creation) then you won't risk trading out of those assets back into cash as part of shorter term position taking, as this creates a perceived risk exposure that defeats the goal of wealth protection. (Thats not to say there might not be some proportionate allocation/deallocation around asset classes based on shorter or medium term views.)

Similarly a trader that doesn't take profits on the short term movements by swapping out of positions back to cash when the direction changes are defeating their primary goal which is cash income generation.