Gold Price - Where is it heading?

[MRC & Co]

So, did a certain fellow who studied the waves. He got pretty aggressive and abusive with anyone who disagreed with him when Au was around $850. Look forward to reading his humble apology which will be graciously accepted.

lol, I think Kennas comment was said tongue in cheek. At least that was my take.

One thing on the EW analysis which always got me, was in this market environment, one would logically, from a global macro perspective, expect if the markets take a hit, the POG will rise, or vice-versa, right? As one is used to hedge the other. Whilst POG moves in correlation with POO, the other (broader indices) is inversely correlated. At least that is the current link, for obvious reasons.

So why was EW pointing down for BOTH the POG and the broader indices?

Though with this volatility, POG could be back sub 900 before we know it, so the "I told you so" statements are definately always very risky.

 

[barrett]

Sure has been a happy week for gold bugs... perhaps not so happy for Elliott Wave International (Bob Prechter) subscribers, who were holding short for a drop into the $700s.. I guess they'll be parting with a little more than the $60/mo subscription fee!!

In the short term there are a few signals that gold could be due for a breather, maybe down to mid 900's?.. On the hourly gold chart below, a support channel was broken last night, as oil sold off on high volume. On the oil daily chart below, a strong channel formed over several months. Oil tried but failed to hit the top of the channel and is now close to support after last night's selloff. Quality oil stocks like XOM (Exxon) and COP (Conoco Ph) have been falling steadily in recent weeks as oil rallied, but they really tanked hard last night. That often suggests trouble to come in oil.

Of course the selloff in oil stocks could just be collateral damage from the sharemarket. Anyway the oil channel support has my attention... a bounce on high volume could actually be a buying opportunity. But a break of that support would probably bring in some serious technical selling.

Gold really outperformed oil over the past week. I suspect the reason is that predictions of 100+ small/medium US bank failures over the next 12 months have now moved into mainstream commentary as the Indymac bank collapsed. If I was an American with $100K+ cash savings, I would be very afraid of holding my money in the bank. I still believe the longer term move into gold is driven by people's savings losing purchasing power at a greater rate each year - but this week - and maybe for months to come - it may not be about that, but something more serious.. fear of complete loss of savings capital. This factor is not directly linked to oil, and maybe this will be the 'catch-up' factor for gold.

 

[MRC & Co]

Sure If I was an American with $100K+ cash savings, I would be very afraid of holding my money in the bank. I still believe the longer term move into gold is driven by people's savings losing purchasing power at a greater rate each year - but this week - and maybe for months to come - it may not be about that, but something more serious.. fear of complete loss of savings capital. This factor is not directly linked to oil, and maybe this will be the 'catch-up' factor for gold.

Good to see you back mate.

Yeh, this is the decoupling theory of a few in the thread. While I don't see it happening anytime over the short-term, it is one possibility further out.

Until I see images in the Western world similar to those I remember coming out of Argentina quiet some years back (a very real run on the banks), then I can't imagine decoupling taking place. If it does, I am sure the charts will show that up. I still think the POO will play a large role in the POG, though of course, gold does have room to move within the traditional ratio, but still nothing to suggest complete decoupling and a shift towards a replacement of fiat currencies.

 

[josjes]

Ok, have to admit being bullish on Gold is a bet against US Dollar, stocks, even AUS dollar, and the banks.

If you buy Apple or Google, people will not hesitate to brag about it, why do I have the feeling if gold surge to $3000, $4000 it would be a different story ?

I am merely trying to protect my asset, my hard-earned money contrary to the main stream investment. I see that few people on this gold forum have seen the writing on the walls and taken steps to protect their assets. Everyone has the same opportunities to do so for the last 2 months or year.

 

[barrett]

Good to see you back mate.

Yeh, this is the decoupling theory of a few in the thread. While I don't see it happening anytime over the short-term, it is one possibility further out.

Until I see images in the Western world similar to those I remember coming out of Argentina quiet some years back (a very real run on the banks), then I can't imagine decoupling taking place. If it does, I am sure the charts will show that up. I still think the POO will play a large role in the POG, though of course, gold does have room to move within the traditional ratio, but still nothing to suggest complete decoupling and a shift towards a replacement of fiat currencies.

Hi mate,
I agree replacement of fiat currencies is not on the cards anytime soon, governments won't give up their power so easily!

Before yesterday I hadn't thought much about the possible failure of multiple US 'savings and loan' type banks (as opposed to highly leveraged investment banks). The news reports of the Indymac bank failure got me thinking about this.. someone they interviewed had $150K in the bank and lost $50K of it in the bank collapse. The guy was devastated, I'd say the interview would have been run by all the US newswires. At this point Americans may dismiss it as a relatively small bank like Australians did with Pyramid Building Society... but Marc Faber has in recent months predicted the collapse of 100 small/medium US banks over the next year.

Faber tends to exaggerate but he's often right.. even if only 5 or 10 savings banks were to go down, I think there's a real possibility that Americans would start to question the safety of banks as a place to store liquid wealth, and seeking out other places to store it. Meanwhile negative sentiment is building in real estate, stocks and municipal bonds. It doesn't leave too many options for the average saver, especially HNW savers given that bank balances over $100K are not government guaranteed. If most assets are going down and gold is going up, as additional banks fail, I am considering whether this could be a big tailwind for gold (if not exactly establish it as the new world currency right away!) I'm interested to discuss this though... hadn't given it much thought until recently as my focus has been on the inflation-related drivers for gold.

 

[barrett]

Ok, have to admit being bullish on Gold is a bet against US Dollar, stocks, even AUS dollar, and the banks.

If you buy Apple or Google, people will not hesitate to brag about it, why do I have the feeling if gold surge to $3000, $4000 it would be a different story ?

I am merely trying to protect my asset, my hard-earned money contrary to the main stream investment. I see that few people on this gold forum have seen the writing on the walls and taken steps to protect their assets. Everyone has the same opportunities to do so for the last 2 months or year.

Your recent buys are going well aren't they! I think most here are invested to some extent at least.. I haven't made many new buys lately.. then again I was already leveraged into gold stock majors heavily enough to break me if it doesn't work out! fingers crossed

 

[josjes]

Good sum up on the whole picture, Barret that fits in with the rising gold-oil ratio, which is what I was trying to convey with the long term chart. The market is slowly viewing Gold not as a commodity but as a currency of true store of value as people are running scared stiff from the banks.

Also, news just came out:

Consumer prices surge in June at fastest pace in 26 years, reflecting soaring energy costs

WASHINGTON (AP) -- Consumer prices shot up in June at the fastest pace in 26 years with two-thirds of the surge blamed on soaring energy prices.

Grim numbers: Monthly jump in U.S. consumer prices is the biggest since 1982, and the year-over-year rate of 5% works out to the strongest increase since 1991. June's core CPI rate was up 0.3%, the largest increase since January.

The big rise in prices cut deeply into consumers' earning power with average weekly wages, after adjusting for inflation, dropping by 0.9 percent in June, the biggest monthly decline since 1984.

And gold is up on the news, now there's divergence. In the past, this would be gold bearish as it would mean there's was less chance of a rate cut, more likely a better chance of a rate increase. I think the market is now saying, that even with rising consumer prices, the FED can't raise rates due to the woes of the financial sector?

The Feds in a box and the SEC is relegated to chasing down naked short sellers (but only where it suits them) to slow the bleeding in the financials.

Slowly slowly inch by inch.

 

[Sean K]

Sorry Kennas, disagree about being more dogmatic with language. While no-one here is God and knows the future, I have a fair bit of my net worth on the fact that gold (and silver) are going up. It's not a gamble, it has a lot of research, study and knowledge behind it, and while I'm not predicting the next hour, next day, or even next week, I will say gold will be higher next year, the same as it has every year since 2001, and I have no trouble saying it with a lot of conviction either. There is a long way to go.

The reason why you don't say these things is because gold is now $965.

Previous resistance of 952/3 will turn as strong support. Why the support is so strong? Because it was passed with ease. IMO, last night/today was the last buy at US$960-970 before it reaches 1000.

Egg thrown.

Case rested.

PS, you might even get it in the $950s....

PSS, actually you could have got it in the $950s.

Case closed.

 

[Temjin]

Oil is down by a lot, still got a bit to go with its way overdued correction.

It will be interesting to see how POG will held up over the next few days. Though it held up pretty well last night with oil falling down by a few dollars and the US market up by like 2.5%.

 

[Uncle Festivus]

Yeh, this is the decoupling theory of a few in the thread. While I don't see it happening anytime over the short-term, it is one possibility further out.

Until I see images in the Western world similar to those I remember coming out of Argentina quiet some years back (a very real run on the banks), then I can't imagine decoupling taking place. If it does, I am sure the charts will show that up. I still think the POO will play a large role in the POG, though of course, gold does have room to move within the traditional ratio, but still nothing to suggest complete decoupling and a shift towards a replacement of fiat currencies.

Both are happening now - gold (currency) is decoupling from oil (commodity) back to the ratio (see previous charts) & there is a real threat to the return of ones capital held in the 'safety' of a bank, even here in Australia. Don't think it can't happen, this is global now. It is human nature to dismiss the bad alternatives when faced with data suggesting the improbable cannot happen.

Those that were once dismissed as the lunatic fringe doomsters are now viewed as not so loony, perhaps even correct in their extrapolations of the future of fiat currencies. I can't even find the right words to emphasise the magnitude with what's happening to the world at the moment. These are not normal economic cycles going on, these are generational shifts in wealth & living standards and no one on the planet is immune.

We will be in recession in 2009
Leverage into gold & cash & food supply
Short the Aussie dollar
Commodities will correct

Why? Find out where money comes from, you then know where it's going!

PS - POG/POO 'coupling' theories - please post?

 

[explod]

Gold really outperformed oil over the past week. I suspect the reason is that predictions of 100+ small/medium US bank failures over the next 12 months have now moved into mainstream commentary as the Indymac bank collapsed. If I was an American with $100K+ cash savings, I would be very afraid of holding my money in the bank. I still believe the longer term move into gold is driven by people's savings losing purchasing power at a greater rate each year - but this week - and maybe for months to come - it may not be about that, but something more serious.. fear of complete loss of savings capital. This factor is not directly linked to oil, and maybe this will be the 'catch-up' factor for gold.

And that is the truth of it. Gold is the only alternative of substance to the failure of currencies. They print it so it dilutres. Same as when a company issues more shares, it dilutes the value of those held.

Temjin Re: Gold Price - Where is it heading?

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Oil is down by a lot, still got a bit to go with its way overdued correction.

It will be interesting to see how POG will held up over the next few days. Though it held up pretty well last night with oil falling down by a few dollars and the US market up by like 2.5%.

Oil is a commodity, gold is not. However the fears of war, rising oil and food have thier effect. They cost more, takes more dollars and the dollars are losing buying power as a result. Gold is the ultimate hedge.

All the looking under mats for golds steady and strong rise since 2002 is futile. The savvy are onto it as a hedge. Among my friinds we call it our insurance.

 

[Trembling Hand]

It is human nature to dismiss the bad alternatives when faced with data suggesting the improbable cannot happen.

The trouble with this as an argument before the fact is that it cuts both ways. Its only in hindsight that one side can truly claim victory.

 

[Uncle Festivus]

The trouble with this as an argument before the fact is that it cuts both ways. Its only in hindsight that one side can truly claim victory.

Not quit sure what you mean, but what I am implying is that say 12 months ago the possibility of a major American company going bankrupt would have been treated as impossible by the general investing community, let alone the general public, yet here we are and it's a real possibility (Any bank, Fannie, Freddie, General Motors, Boeing, after the order cancellations start to increase?).

Some of us said this back then (check the postings) so not sure it's hindsite? Basically, just hoping to get some thinking outside the square to be prepared for the 'unexpected' - don't be part of the 'mob' & we shall outperform? (you already do this so not that this applies to you TH)

 

[professor_frink]

Not quit sure what you mean, but what I am implying is that say 12 months ago the possibility of a major American company going bankrupt would have been treated as impossible by the general investing community, let alone the general public, yet here we are and it's a real possibility (Any bank, Fannie, Freddie, General Motors, Boeing, after the order cancellations start to increase?).

Some of us said this back then (check the postings) so not sure it's hindsite? Basically, just hoping to get some thinking outside the square to be prepared for the 'unexpected' - don't be part of the 'mob' & we shall outperform? (you already do this so not that this applies to you TH)

the thing that I find a little weird about all of this is that you've been calling for doomsday since the start of 2006. The person that didn't pay attention to the bearish case is still doing fine if they bought the index back when the bears first started talking about what is happening now. Sorry to single you out in this instance, but being years early to the bears party isn't really worth bragging about IMHO. The 'mob' that has been fully invested has still done just fine.

 

[refined silver]

The reason why you don't say these things is because gold is now $965.

Sorry Kennas, with all due respect, thats a load of rubbish. On March 23rd (page 187) of this thread I wrote when gold was in low $900s:

Good question. My expected bottom is either $900-905 (in that case already in. Next strong support is $880-890, with very strong support from $850-875.

When gold hit $850, and on TA gold looked terrible, had just broken down a massive H&S with a 600-700s target, I wrote that the best times to buy gold in the last 7-8 years had been the worst looking TA times, and that FA would trump TA where gold is concerned. I got into a big argument with wavepicker and a few others, (see p203, 205, 208,) I said Gold was going back to $1000, wavepicker and others said $600-700. Instead of arguing forever, I said we'll wait and see and I didn't really post on this thread for a couple of months while gold was range bound, now with the touch of $990. I think the direction has been shown. As for the fall back the last couple of days, you'll note I said yesterday $1000 would provide a bit of short-term resistance.

So actually I usually tend to post nearer gold bottoms as thats when the doomsayers come in saying the gold run is over.

And as for banks going broke this I posted this March 14th - page 178 on this thread

The problem is not ILLIQUID banks, but INSOLVENT banks.

The Fed solution is said to be aimed at liquidity, but really is just monetizing bankrupcy. The resulting tsunami of inflation will catapult gold way higher.

 

[Sean K]

Sorry Kennas, with all due respect, thats a load of rubbish. On March 23rd (page 187) of this thread I wrote when gold was in low $900s:

RF, I'm sorry you thought I was referring to any of your calls.

It was not in reference to you.

Please review the thread.

 

[Sean K]

Here is a hint:

These 'will do this' and 'will do that' statements are fraught with danger, and are bound to end in egg on one's face. In one sence I hope you get splattered with ovum and membranes, but I'm holding too much LGL and NCM to be completely happy about that.

With all due respect.

 

[Uncle Festivus]

the thing that I find a little weird about all of this is that you've been calling for doomsday since the start of 2006. The person that didn't pay attention to the bearish case is still doing fine if they bought the index back when the bears first started talking about what is happening now. Sorry to single you out in this instance, but being years early to the bears party isn't really worth bragging about IMHO. The 'mob' that has been fully invested has still done just fine.

Not sure how all that precludes me from being long or partaking in a bull market though - you have assumed too much. Who's to say the whole thing hasn't been one big reactionary bear market rally from the tech wreck based on exuberant money supply, which then leads us back to gold.

Doing fine??? The 'mob' will show a negative return on their superannuation funds for the last year. The other 'mob' have been buying all the way down?? because 'the market always comes back/rises', just like Shane Oliver is currently advertising. The rot started in earnest in Feb 07. At least I gave you 12 months warning . And I give you another for free - Australian recession in 2009 I've got a plan at least, so far so good.....then a property bull?

 

[refined silver]

RF, I'm sorry you thought I was referring to any of your calls.

It was not in reference to you.

Please review the thread.

Fair enough. Although if it had have been I'd have been guilty as charged

 

[Shamus]

Before yesterday I hadn't thought much about the possible failure of multiple US 'savings and loan' type banks (as opposed to highly leveraged investment banks).

Bear in mind that IndyMac specialises in low-doc mortgages, rendering it very exposed to the subprime fallout.

I'm no expert on the US banking system, but I'm sure the larger, better-managed banks have large deposit bases to fall back on.

If most assets are going down and gold is going up, as additional banks fail, I am considering whether this could be a big tailwind for gold (if not exactly establish it as the new world currency right away!) I'm interested to discuss this though... hadn't given it much thought until recently as my focus has been on the inflation-related drivers for gold.

Very good point, though I'm sceptical of just how many banks might topple. Anybody with any knowledge of the subject, feel free to chime in?