Gold Price - Where is it heading?

[explod]

For those fairly new to the gold thread, thought the following explanation of Gold versus fiat paper currency from James Turk's latest item on Kitco may be usefull.

Gold is money, but national currencies are just a money substitute. There is an important difference between them. For an exchange in the marketplace to be “extinguished”, assets have to be exchanged for assets. So if one uses gold to buy a car, for example, an asset (gold) is being exchanged for an asset (the car), and the instant the assets change hands, the exchange is extinguished. There are no lingering obligations. But consider this transaction if one uses a national currency, i.e., a money substitute.

The national currency is not a tangible asset; it is a deposit liability of a bank. Therefore, the buyer in this exchange walks off with the car (an asset) and the seller walks off with a money substitute (a bank’s liability), so the exchange is not extinguished. There is a lingering obligation until the seller successfully exchanges the national-currency money-substitute for a good or service.

Thus, money substitutes introduce a risk into the transaction that does not exist when using gold. It is payment risk, and it exists because the recipient may not be able to purchase a good or service with the money substitute received in a transaction. Payment risk means that the money substitute may lose all or some of its value before it can be exchanged for items of value.

For more than 300 years, we have been using money substitutes in commerce. Their problems are obvious. Paper currencies often become worthless if banks fail, or when central banks pursue reckless policies that erode – and in some cases destroy – the value of the currency.

Should you read the full article on Kitco you will find he is promoting his own Gold exchange programme. I do not necessarily endorse such products. I hold physical gold and silver only with some gold shares on the ASX. DYOR

 

[cuttlefish]

I'm feeling more optimistic about the gold price lately and also the prospects for gold juniors from here. Some have been making good progress on exploration and/or develpment and/or production without that being reflected in the price (and in fact the opposite as most have continued to be heavily sold down in spite of the gold price still being much better than it was even only 8 months ago).

I don't think it will take much strength in the gold price to bring attention to some of them so if we see gold move up into the mid to high 900 range some time in the next few months I'd expect a noticeable turnaround in sentiment towards some of the quality juniors.

In the meantime there could be continued weakness and some capitulation activity in some of these as well (in some we're already seeing this) so there could be good opportunity in the next couple of months to pick up quality at good prices.

 

[wayneL]

Nice pop around the floor open.

wonder if there's any chance of it retracing just as quickly.

Well, you had to wait a couple of days, but that it did, plus a bit.

The rejection of lower prices yesterday should've had a few of us set.

 

[cuttlefish]

Yes I did notice some spring in its step this evening - I can see why you're wearing that big grin! I guess the conspiracy theory would call it a bit of covering after the pre-fed shorting effort.

 

[Trembling Hand]

I was looking for a break down from 860 but nope.

Still got a bit of work to do to get over that last high at 940-960. Oils going nuts as I post so it may tickle that area soon

 

[cuttlefish]

Maybe the world is starting to think this inflation stuff might be real ... and the USD might not be.

 

[Sean K]

Golly, $31 up, but still going sideways. Or do we have a higher low in place now?

HUI still coiling, still respecting resistance line though. That major support line looks pretty good now. Still looking heads and shouldery though.

Still wC down through $845 WP, or revised count?

 

[barrett]

I was looking for a break down from 860 but nope.

You normally look at volume TH, look at the volume Wednesday night from 880-888
and on the upside of a hammer.

F-ing meaningless isn't it! But apparently whatever big useless slimy creatures "that matter" for the gold market seem to attribute some actual meaning to this sort of crap! What a f-ing bad joke they are! You can still make good money out of those useless manipulating filth, whoever they are... and they''ll be strung up one day for our satisfaction along with " 'Sprog and Brown" or whatever they call themselves.

Spadgecock and Brown are just the leaders of a pack of idiots who think they can borrow their way to prosperity... have they not read history? They have not!!! They are idiots who have deserved the complete and utter shafting they get, and those of us who have read history have a good solid laugh at their Darwin award!

I am just playing along with this idiotic self-fulfilling technical game that the market plays until the true fundamentals of gold will re-assert themselves and gold will ascend to its deserved value of many thousands of dollars per ounce. In the meantime look at the steaming pile of daily BS we have to put up with from the market... If I didn't understand the value of gold in this inflationary environment like every useless economic journalist in the world I have written to I would have bailed out long ago.

We are right at wedge resistance, so for christs sake traders don't buy unless it breaks on the daily! For now I'll be closing and fading their idiotic short-term enthusiasm.

Just look at these excited idiots rushing in!!! Traders short these Johnny-come-idiots! In the short term at least .... and short the spadgecocks et al. after that

 

[wayneL]

You normally look at volume TH, look at the volume Wednesday night from 880-888
and on the upside of a hammer.

F-ing meaningless isn't it! But apparently whatever big useless slimy creatures "that matter" for the gold market seem to attribute some actual meaning to this sort of crap! What a f-ing bad joke they are! You can still make good money out of those useless manipulating filth, whoever they are... and they''ll be strung up one day for our satisfaction along with " 'Sprog and Brown" or whatever they call themselves.

Spadgecock and Brown are just the leaders of a pack of idiots who think they can borrow their way to prosperity... have they not read history? They have not!!! They are idiots who have deserved the complete and utter shafting they get, and those of us who have read history have a good solid laugh at their Darwin award!

I am just playing along with this idiotic self-fulfilling technical game that the market plays until the true fundamentals of gold will re-assert themselves and gold will ascend to its deserved value of many thousands of dollars per ounce. In the meantime look at the steaming pile of daily BS we have to put up with from the market... If I didn't understand the value of gold in this inflationary environment like every useless economic journalist in the world I have written to I would have bailed out long ago.

We are right at wedge resistance, so for christs sake traders don't buy unless it breaks on the daily! For now I'll be closing and fading their idiotic short-term enthusiasm.

Just look at these excited idiots rushing in!!! Traders short these Johnny-come-idiots! In the short term at least .... and short the spadgecocks et al. after that

A very nice rant there barrett.

Sizes up things quite nicely I reckon.

 

[refined silver]

Here's another take on yesterday's action by Dan Norcini who is one of the smarter commentators versus Barrett's well described army of moron economic journalists.

Posted On: Thursday, June 26, 2008, 1:48:00 PM EST
Hourly Action In Gold From Trader Dan
Author: Dan Norcini

Dear CIGAs,

Boy howdy did the market waste no time in letting Ben know what it thought about the recent FOMC statement!

Gold began recovering from its yesterday morning beating minutes after the FOMC statement hit the wire yesterday afternoon and then continued moving steadily higher as trading progressed from the far East, into Europe and finally into New York in today's session. Interesting enough, the analysts were attributing gold's rise to the weaker Dollar in lieu of the FOMC but in all honesty, the Euro, while higher for the day is not all that strong compared to what we are accustomed to seeing with gold as strong as it is today. If you will notice, the Canadian, Australian and New Zealand Dollars are all weaker against the Greenback. Crude oil is up sharply higher, completely ignoring yesterday's bearish EIA numbers but the real key to gold is that the entire commodity sector is surging higher. The grains are very strong (Corn put in another all time high) as are all the various metals with the result that the CCI index made another record high this morning. Its move higher is what is helping to keep a very firm bid under the gold market and has attracted the momentum funds in a big way now that overhead resistance at $910 has been shattered. Inflation fears are first and foremost on the minds of players.

My take on this is that while the Forex markets are pushing the European currencies as well as the Yen higher, the market views the Fed's statement from yesterday as a capitulation of any attempt to talk up the Dollar. Bernanke's bluff has been called and the weakness of his hand revealed. Economic data simply will not permit the Fed to hike anywhere near as soon as many had been duped into believing by all the hawkish talk coming out of the Fed prior to the FOMC statement. That has attracted a wall of money back into commodities as an inflation hedge and is the reason why gold is so strong. Further helping gold is the horrific beating the darlings of yesterday’s stock rally, the financials, are receiving in today’s session.

The stock market is being pounded to kingdom come as those same financials get shellacked due to a series of downgrades by Goldman Sachs which issued a sell recommendation on Citi. That prompted a near immediate response from Wachovia which promptly then downgraded Goldman in a tit-for-tat exchange being played by the investment banks. If you listen carefully, you can almost hear them saying to each other as soon as their recommendations are made public, “NA-NA-NA-NA-NA, we downgraded you before you downgraded us!” or, “Take that, you swine!”

It certainly appears that a whole army of gold shorts were taken out in today’s massive upside move judging from the speed and ferocity of the move that occurred. The range trade continues to snare its victims as shorts sell on weakness attempting to hitch a ride on what they are convinced is the beginning of a downtrending move while longs have been snookered into buying near the highs as they too wait for an expected breakout. Today’s move has come the closest to being a legitimate break from the trading range but we want to see gold maintain its footing above the top of the recent range ($910) for a while longer. Volume has definitely been strong which is a plus but so far the mining shares as pictured in the XAU and the HUI have not broken out from their trading bands although both are very close. Ideally we want to see both bullion and the shares climbing out of their range trades together and in convincing fashion, not just edging beyond the upper limit of the recent range. Nevertheless the ability of the bulls to take gold and hold it above $910 is very impressive considering that the selling there has been intense!

I mentioned yesterday that the plunge in gold that occurred early in that session had taken out all the rest of the new longs who had bought in last Thursday and Friday. That turned out to be exactly the case as open interest plunged in yesterday’s session by nearly 5,000 contracts dropping all the way back down to 396,000. That is exactly the level it was at on the end of Wednesday’s trading session of last week. It is amazing to me to see how the bullion banks are so easily able to trip up the hedge funds who continue to live and die by their idiotic black box algorithms. Use your heads guys – that is why God gave them to you and throw away your computerized trading platforms if you want to make any money trading the gold market! You can beat the fire out of the bullion banks if you simply learn how to trade against them. They are NOT CLEVER or SOPHISTICATED in the least. Twenty years ago the traders of that era would have taken them out to the woodshed and beaten their rear ends with a stick and sent them home crying to Mama! Trading is war and the sooner you realize it and adapt your strategies to counter the tactics of your enemies, the sooner you will win it. Sticking with the same battle plan and never altering it allows the enemy to have the advantage. Wise up!

Let’s see how gold fares the rest of its North American trading session and then as it moves into Asia.

 

[Trembling Hand]

You normally look at volume TH, look at the volume Wednesday night from 880-888
and on the upside of a hammer.

F-ing meaningless isn't it!

:freak3: Not sure what you are ranting about . The volume is all pretty much standard except the nasty drop from 905 to 880 4 nights ago.

 

[josjes]

Please do yourself a favour and read this article.
Orlandini is a highly respected analyst. His writing is entertaining more importantly cut straight to the point ! No messing about. Importantly, accurate. This article is written 20June08.

http://www.321gold.com/editorials/orlandini/orlandini062308.html

In spite of all efforts to push the yellow metal down, there was a weak 15% decline, after a very impressive rally, and that is an indication of real strength. Many sold out following that old maxim of "sell in May and go away". Gold has rebounded nicely and now they are caught out of position. That's what a gold bull does best; get you going when you should be coming.

The markets have finally arrived at the breaking point, that point where we must now all pay for our collective sins. The crash has not begun yet. The Dow should fall down to 10,795 and then we'll see the last good rally, a rally designed to suck in the very last dollar from the very last widow or orphan left standing. Only then will the whole steaming ugly pile of manure roll over and take absolutely everything down with it. There is no politician who can change the course of events; that dye has already been cast. Obama or McCain: a slow death or a faster death. The only question left in my mind is whether the final chapter will be written with a deflationary or inflationary pen. Since everybody is looking for inflation, I have to rely on my number one rule and back the deflationary horse. The market always gives you what you don't want and when you can least tolerate it. What we don't want is deflation and we can least tolerate it now.

In conclusion, there are plenty of warning signs out there if one only opens his eyes and looks. Gold has been extremely stubborn and resists downside movements in spite of countless attempts to sell it off. In fact it has formed a series of higher lows and lower highs which compress it into a tighter and tighter trading range.
We have seen this same exact pattern back in August 2007 and it led to a huge upside breakout. This is a bull market and the odds heavily favor the same type of upside breakout, with the only difference being that it could/should occur earlier this year. Maybe a lot earlier! A real key will be the 907.40 resistance in the August contract. Two consecutive closes above this level means that gold has broken out and I don't think anyone or anything will turn that train around once it leaves the station. My best advice is to buy now before it leaves the station.

 

[explod]

why not 100 billion dollars(raises little finger up to mouth Dr evil style)

If gold was to reach $5k an ounce, what would that mean for everything else? $1000 oil. 1 AUD buying 5 USD. World War 3 would surely have to be on the way pretty soon after.

Time to buy shotguns and a patch of land in the middle of nowhere if that happens

Thought it time to complete the content of my view.

In 1970 at the start of the last bull run gold was $US35 an ounce. In 1980 at the end it blew off its top around 900, I think the close was a bit lower. Anyway 35 to 900 is near enough to a ratio of 25 to 1.

This latest bull run began in 2001 at $US260 and ounce, if this run was to repeat, and many fundamentalists will say its worse economically this time, then 25 times $US260 is a price of $US6,500 an ounce.

The other commodities like oil are just that COMMODITIES,. Gold is an alternate to cash/paper money. What everything else is doing is showing that more and more bits of paper money is required each day to buy things.

The simple equation/comparison is no big deal, my purpose is to say that those profferring $US5,000 for gold are not being unrealistic IMVHO

And I think as we speak, we are right on top of a break to the upside for gold, so perhaps on the way.

Interesting times

 

[MRC & Co]

A real key will be the 907.40 resistance in the August contract.

A very simple view and represents my stop placement.

 

[Trembling Hand]

A real key will be the 907.40 resistance in the August contract.

A very simple view and represents my stop placement.

It's already over that.

 

[MRC & Co]

It's already over that.

Yes, bought just over 910, sell stop at that level.

 

[Trembling Hand]

A real key will be the 907.40 resistance

I'm just a newbie at this T/A stuff but if its under the current price isn't that support

 

[explod]

I'm just a newbie at this T/A stuff but if its under the current price isn't that support

907 is the resistance in this case. To break, probably requires another close at or above this mornings.

What we do have, of significance, is the likely break of a pennant which at the top goes back to the peak in early march and a low some months before preceeding that rise. I think a close above $us915 in the morning will confirm that. It was the break of such a pennant about August 06 that lead to the rise to $US1,030 this year. So that is why, at the cross roads so to speak, some get a bit excited.

I will wait and enjoy the unfolding when it comes

 

[Trembling Hand]

907 is the resistance in this case. To break, probably requires another close at or above this mornings.

 

[MRC & Co]

I'm just a newbie at this T/A stuff but if its under the current price isn't that support

I don't quiet get it.

Moved through resistance (which becomes support). Hence, I am long, and this is where my stop is placed...........

?