Gold Price - Where is it heading?

[CanOz]

I think the USD rally has just ended. Technicals and fundementals are now alighned quite well at this point. Now for a good entry point.

Cheers,


CanOz

 

[refined silver]

Gold's two recent tops where it was hammered were $1030 on the day of the Bear Sterns rescue, and $840ish at the time of the Fannie and Freddie rescue.

In both cases, the Wall St and media spin was everything is ok now, the worst is over, the Fed has provided liquidity and its all good now.

This weekend, we've got Lehman Bros, the 4th biggest US investment bank about to or already failed. Merryl Lynch is being bought out by BoA (where will they get the $40b????), AIG the world's biggest insurance co is asking for a $40b loan or saying they will be dead in 48hrs. http://dealbook.blogs.nytimes.com/2008/09/14/aig-seeks-fed-aid-to-survive/index.html?hp
The US Fed are saying we'll now take basically anything as collateral. http://news.goldseek.com/GoldSeek/1221454799.php


Were the premises under which gold was hammered right or wrong? Looks like they were so wrong it wasn't funny, and the spin was pure lies and BS.

If Lehman fails it triggers CDSs wherever it is a counterparty. If AIG goes, or is downgraded they are the major underwriter of CDSs and other OTC derivatives. Ready for a $60 trillion unwind? Got gold or silver?

 

[barrett]

Gold's two recent tops where it was hammered were $1030 on the day of the Bear Sterns rescue, and $840ish at the time of the Fannie and Freddie rescue.

In both cases, the Wall St and media spin was everything is ok now, the worst is over, the Fed has provided liquidity and its all good now.

This weekend, we've got Lehman Bros, the 4th biggest US investment bank about to or already failed. Merryl Lynch is being bought out by BoA (where will they get the $40b????), AIG the world's biggest insurance co is asking for a $40b loan or saying they will be dead in 48hrs. http://dealbook.blogs.nytimes.com/2008/09/14/aig-seeks-fed-aid-to-survive/index.html?hp
The US Fed are saying we'll now take basically anything as collateral. http://news.goldseek.com/GoldSeek/1221454799.php


Were the premises under which gold was hammered right or wrong? Looks like they were so wrong it wasn't funny, and the spin was pure lies and BS.

If Lehman fails it triggers CDSs wherever it is a counterparty. If AIG goes, or is downgraded they are the major underwriter of CDSs and other OTC derivatives. Ready for a $60 trillion unwind? Got gold or silver?

Well I agree with you as usual.. and then there is this chart, completely out of line with the fundamentals, a bit like the past few months of market action.
Personally I'd like to see how this technical situation resolves, and convincing bottoms in gold and oil before adding.. wouldn't want to discourage anyone else from buying though.

EURUSD daily 2005-2008 - made a few hours ago.. down a couple of percent since then on very high volume..

 

[BentRod]

Zoom out on your chart and start the TL from 2002.

 

[refined silver]

The idiot Central Bankers who caused all this mess in the first place by 1% rates which encouraged the housing bubble and refusing to regulate the OTC derivative market now over a quadrillion dollars (1,000 trillion), think by jamming the USD from when London opens, will show that all is well!

The Fed meets Tuesday, if they cut rates, here is what happened after previous rate cuts. (This is from another site.)

WHAT THE FED DID on August 17, 2007

For immediate release
To promote the restoration of orderly conditions in financial markets, the Federal Reserve Board approved temporary changes to its primary credit discount window facility. The Board approved a 50 basis point reduction in the primary credit rate to 5-3/4 percent, to narrow the spread between the primary credit rate and the Federal Open Market Committee's target federal funds rate to 50 basis points.

----------------------Fast Forward

So what was the immediate result of the Fed cut on August 17, 2007? Here it is in a nut shell (which is a preview of what will occur subsequent to the Fed's 75 basis points cut on January 22, 2008):

- QQQQ soared 22% in the next 10 weeks
http://stockcharts.com/h-sc/ui?s=QQQQ&p=D&yr=1&mn=0&dy=0&id=p48287022494

- DOW rose 13% in the next 8 weeks
http://stockcharts.com/h-sc/ui?s=$indu&p=D&yr=1&mn=0&dy=0&id=p48287022494

- Gold sky-rocketed 31% in 11 weeks
http://stockcharts.com/h-sc/ui?s=$gold&p=D&yr=1&mn=0&dy=0&id=p48287022494

- Silver went ballistic 48% in next 11 weeks
http://stockcharts.com/h-sc/ui?s=$silver&p=D&yr=1&mn=0&dy=0&id=p48287022494

- HUI went parabolic 63% in next 10 weeks
http://stockcharts.com/h-sc/ui?s=$hui&p=D&yr=1&mn=0&dy=0&id=p48287022494

- GDX went V-E-R-T-I-C-A-L 66% in next 11 weeks
http://stockcharts.com/h-sc/ui?s=gdx&p=D&yr=1&mn=0&dy=0&id=p48287022494


Indeed Dr Bernanke met the challenge head on...stopping the bears in their tracks.

P.S.
Results of the Canadian PM index subsequent to the August2007 rate cut was similar. The XGD soared 38% in the next 10 weeks'

http://stockcharts.com/h-sc/ui?s=xgd.to&p=D&yr=1&mn=0&dy=0&id=p48287022494

I believe current LOW prices of select gold and silver stocks are godsends for those with liquidity and the well reasoned conviction the secular gold and silver bull markets are alive and well.

_______________________

The FOMC cut again 50 basis points (Fed Funds and the Discount Window) on January 30, 2008. How did this dramatic cut affect the markets short-term?


- DOW stabilized for the next 12 weeks
http://stockcharts.com/h-sc/ui?s=$indu&p=D&yr=1&mn=0&dy=0&id=p48287022494


Gold roared up 21% to an all-time record high ($1025) in 8 weeks
http://stockcharts.com/h-sc/ui?s=$gold&p=D&yr=1&mn=0&dy=0&id=p48287022494

Silver went ballistic 43% in next 8 weeks
http://stockcharts.com/h-sc/ui?s=$silver&p=D&yr=1&mn=0&dy=0&id=p48287022494

HUI rose 24% in next 10 weeks
http://stockcharts.com/h-sc/ui?s=$hui&p=D&yr=1&mn=0&dy=0&id=p48287022494


AND BERNANKE IS AGAIN UP TO BAT -- As there is another FOMC meeting Tuesday (Sept 16, 2008). Based upon the extreme precarious situation of the US Financial (Lehman and others teetering on the brink of disaster), I can foresee the Fed slashing rates by another 50 bps. Consequently, the impact on gold and silver and PM equities should be electric. It is reasonable to expect HUI to rise 30% to 40% and gold and silver to soar.

HOWEVER: there is also an outside chance of a draconian slash by the Fed:

Consider:

For some time the Fed has been periodically cutting rates with a view to resolve the real estate crisis, provide the financial lifeblood liquidity to floundering banks, and to stave off a looming DEPRESSION. But as we all know the “Fed cut medicine” was ALWAYS too little too late (a day late and a dollar short...if you will). Hopefully Dr Bernanke has learned a lesson (after so many failures), and will administer a much stronger doses this time …ie slash interest rates by 100 bps on Tuesday. In this event, the US dollar will plunge to retest multi-year low to 71 (basis US Dollar Index). This will fuel gold, silver and PM equities to launch toward recent all-time record highs of March 2008.

US$
http://stockcharts.com/h-sc/ui?s=$usd&p=D&yr=1&mn=0&dy=0&id=p48287022494

Tuesday, 16 September 2008 is Dr Bernanke’s moment of truth. He will either rise to the challenge, or be clawed to death by the Wall Street bears…as the US financial system disintegrates before his eyes.

I can see the USD tanking and gold going up, but even with a big rate cut, I can't the see the general mkts still being able to pretend all is well and rally.

 

[barrett]

Zoom out on your chart and start the TL from 2002.

OK just done it.. that's a different trendline providing support from below at 1.383 atm.
but I am using linear... you seeing something different on a log chart?

 

[BentRod]

I see a perfect bounce on that TL from 2002.

 

[Uncle Festivus]

Throw away the charts, entering uncharted territory dictated by fear, greed and dare I say it, official intervention (in all markets) where necessary?

A period of $50 daily swings in POG, lot's of money to be made (or lost) on the swings ie nice $20 spike down to $764 just then then bounce up again. DXY up/down 2 pts!

This is going to be a wild ride! Decoupling time?

 

[Whiskers]

Throw away the charts

Oh no... I was just starting to get the hang of those EW things.

 

[wayneL]

Oh no... I was just starting to get the hang of those EW things.

You were?!?!?!?!?!

 

[Uncle Festivus]

You were?!?!?!?!?!

LOL Wayne - 10/10 for Whiskers having a go eh

 

[barrett]

I see a perfect bounce on that TL from 2002.

Okay agreed.. but the breakdown below the 3yr trendline was strong, while the buying off the 6yr was pretty weak so far.
The 6yr line could still hold, I bloody hope so!

 

[BentRod]

The 6yr line could still hold, I bloody hope so!

I don't

 

[Whiskers]

You were?!?!?!?!?!

grrr

LOL Wayne - 10/10 for Whiskers having a go eh

Thanks unc... but that wasn't a back-handed pat on the back though, was it! :

The 6yr line could still hold, I bloody hope so!

I can't see it holding. Part of the reason I think gold is a bit volatile but should generally hold around the low 800's in the medium term.

I don't

Ok happy, what do you know that we dont?

 

[BentRod]

Ok happy, what do you know that we dont?

Bugger all.

Barrett mentioned that he hopes Fiber holds above that TL, I hope it doesn't.

 

[barrett]

I can't see it holding. Part of the reason I think gold is a bit volatile but should generally hold around the low 800's in the medium term.

We were talking about EURUSD cross. A break below 6yr trendline would almost certainly bring gold down another level. But would seem kind of weird from a fundamental/USDCOT perspective..

While on that topic was just glancing at gold COT.. commercials have covered 2/3 of their net short position since July, and interestingly the small players' net position is the lowest in 5yrs.. nice!

 

[Kauri]

Throw away the charts, entering uncharted territory dictated by fear, greed and dare I say it, official intervention (in all markets) where necessary?

A period of $50 daily swings in POG, lot's of money to be made (or lost) on the swings ie nice $20 spike down to $764 just then then bounce up again. DXY up/down 2 pts!

This is going to be a wild ride! Decoupling time?

Decoupling.... what/who is decoupling now.... not the old "the world economy from the US economy " chestnut, that decoupling theory actually derailed... so who is decoupling from who... now ???
Cheers
...........Kauri

 

[Whiskers]

We were talking about EURUSD cross.

Yeah, I know... so was I.

I'm thinking the US economy/markets is probably going to improve a little before it gets worse, while the EU lags a bit behind. If the USD index is to go higher, as I' suspect, because of the weighting of the euro the EUR/USD has to break below.

A break below 6yr trendline would almost certainly bring gold down another level.

I know it sounds a bit contradictory, but if we get this (above) situation, then euro buying of gold and longer term US holders may help support the price until a lack of new supply starts to bite.

 

[explod]

:
I can't see it holding. Part of the reason I think gold is a bit volatile but should generally hold around the low 800's in the medium term.

Why do you think gold will hold around these levels.

The US dollar has been rising against weakeness elsewhere, particularly caused by the Euro. The Euro has a problem in that it is made up of many economies that are all very differrent. It is more of a controlled instrument than a currency with a value that can be properly measured.

The recent US dollar strength has not changed any of the underlying financial problems which are being more clearly realised. Late last week Wall Street were starting to talk about "flights to safety" (wow) they were referring to the US dollar but they recognise what's on. The only flight to safety in the shorter term will be gold, the fact that it is going up when Lehman is going down will not be lost on a lot of the sheeple. And of course we have good old greed; Everyone can smell a bargain.

 

[refined silver]

Merryl Lynch is being bought out by BoA (where will they get the $40b????),............. The US Fed are saying we'll now take basically anything as collateral. http://news.goldseek.com/GoldSeek/1221454799.php

Looks like a big part of the reason Merryl was valued at $29/share for the takeover when they were trading at $17 before the weekends carnage is the second bit of news, that the Fed will now take equity as collateral!

Hence BoA put a silly valuation on Merryl, then get to exchange that amt for US Treasuries at the Fed!