Gold Price - Where is it heading?

[IFocus]

Good to be pickled and the crapola is tangible. And human too, lost yer patience mon ami.

Anyway, my rough take

Weekly gold chart forming a large pennant, top is March 08 at US$1,000 and bottom Aug 06 at $640. Will have to break out within 20 weeks from here which is just about the time the new US admin takes the helm and causes one hell of a problem, or at lest the blame for it.

Dont' see much PPT or conspiracy in the possibilities here.

Explode I don't understand the FA drivers of the gold price but have long read gold bugs talk about its ascendancy given the right conditions which correct me if I am wrong appear to be now.


Main St is fairly aware some thing is amiss, the market knows that the bail out really isn't going to change anything and the risks are frigging massive world wide, this information will arrive at main st any week / month now.

But gold is not at $2000 plus its plugging $800 odd.

I know its had a nice run up from $250 ish and the current up side to me looks stronger when viewing the chart but that is still to be confirmed and not a given.

Do you or Refined Sliver / Uncle have a view as to its current position and why, not looking for an argument just wondering why.

One thought I had is the wealth around the place is tied up in credit and cannot be transferred to gold easily, but the total gold market is very small in world terms..........

 

[MRC & Co]

^^^

Potential deflation----------> flight to cash? Perhaps.....but longer term bond yields wouldn't justify this yet. I always said I think we need to see a run on the banks before gold will really take off to this 2000+ level. At which point I am sure it would go limit up along the way, so there will always be chances to get in if it does start really gaining upside momentum quickly. Are we going to see that anytime soon?

 

[chops_a_must]

Do you or Refined Sliver / Uncle have a view as to its current position and why, not looking for an argument just wondering why.

The US has said they will be selling gold reserves to pay for a lot of this.

It's certainly one explanation.

 

[MRC & Co]

The US has said they will be selling gold reserves to pay for a lot of this.

It's certainly one explanation.

Yep, definately. Not just their sales, but other traders perceptions of the impact of this upon the POG. Anyways, I'm off to the lake for a feed. See you in a tick bud.

 

[explod]

Explode I don't understand the FA drivers of the gold price but have long read gold bugs talk about its ascendancy given the right conditions which correct me if I am wrong appear to be now.


Main St is fairly aware some thing is amiss, the market knows that the bail out really isn't going to change anything and the risks are frigging massive world wide, this information will arrive at main st any week / month now.

But gold is not at $2000 plus its plugging $800 odd.

I know its had a nice run up from $250 ish and the current up side to me looks stronger when viewing the chart but that is still to be confirmed and not a given.

Do you or Refined Sliver / Uncle have a view as to its current position and why, not looking for an argument just wondering why.

One thought I had is the wealth around the place is tied up in credit and cannot be transferred to gold easily, but the total gold market is very small in world terms..........

My rough take is that the jump of about US$100 about three weeks ago brought out some punters. It fast became a false break and magins drove them to sell and the HUI dropped near to 20% on Thursday.

Another is a realisation that not only the US but many other nations, particularly those attached to the Euro are in just as big a strife as the US in financials has helped to give strength to the US dollar and the cry on Wall Street is that here is the safe haven for the moment, the mighty US reserve currency.

Another is that the gold bugs are all in, some of it is buy dips sell tops, but in just the same. The new money got burnt during the US$1,000 blow off in March this year and they have just had another taste.

It is often repeated that a good bull market is a bucking bull which throws off many riders (the weak hands). A wild bull (as this one is) is hard to predict and it will take awhile for the general market to have the confidence required to take the price up the next few steps.

I have learnt to be conservative towards gold but maintain my long term faith that it is the best safe investment for the forseeable future for me.

Some have rediculed the idea that gold is politically motivated but I feel strongly that the powers (whoever they may be) are determined to hold the US dollar up as the reserve currency for as long as they can. Financially it is the last vestige of power they have left. A strengtheing gold price threatens that. If you look back at the gold and US dallar charts from about 2002 you will notice that they move very counter to each other. There is no clearer sign. IM very HO of course.

 

[chops_a_must]

Yep, definately. Not just their sales, but other traders perceptions of the impact of this upon the POG. Anyways, I'm off to the lake for a feed. See you in a tick bud.

Lol.

No wonder you were late...

 

[refined silver]

But gold is not at $2000 plus its plugging $800 odd.

Do you or Refined Sliver / Uncle have a view as to its current position and why, not looking for an argument just wondering why.

Its the perrenial case of when does FA take over.

Look at the price of Fannie and Freddie and everyone else a year ago. Many writers were saying they were insolvent then, but the s.p. didn't show it at all. Same situation with gold now but reverse.

You either get out of Fannie and Freddie cos there're insolvent, or, you wait for TA to tell you its going down and move accordingly. The only problem with the second option is that a few of the financials didn't so much as trend down, but drop in massive chunks overnight. The $100 move in gold a week or two ago showed that the same is possible with gold but in reverse.

Its up to each person to trade/invest according to their own preferred strategy.

 

[chops_a_must]

Its up to each person to trade/invest according to their own preferred strategy.

For me, the risks of not being in gold, and it making a big move, are potentially far more catastrophic than precious metals and related going to zero.

 

[refined silver]

For me, the risks of not being in gold, and it making a big move, are potentially far more catastrophic than precious metals and related going to zero.

The fundamentals are just so absurd, I personally can't see a nice trending move happening, but rather a violent readjustment.

From the Daily Reckoning...

“The Federal Reserve has just expanded its balance sheet more in one month than it has in almost all of its first 86 years of existence. I am not kidding. Its assets, which represent the cumulative reserves the Fed has ‘created,’ totaled less than $700 billion at the turn of the millennium, and continued to expand by about $50 billion per year after that, up until this month.

“In September alone, reserve bank credit inflated by almost $600 billion. It is a record, and has already affected the monetary base.

“Up until September, the Fed has been careful to sterilize its liquidity provisions by selling Treasuries or reverse repos or simply by lending its securities off balance sheet. So while it has extended credit since August 2007, it has not monetized much of the liquidity. But the NET factor of increase to reserve bank credit for the month of September was about $170 billion. That is money created out of thin air… unsterilized.

“This number is unprecedented. It is difficult to predict gold’s short-term response to this shock, but the market cannot ignore the fundamental effect of this crackup for long. With interventions like this, we should get a few more $100-up days soon enough.”

 

[chops_a_must]

The fundamentals are just so absurd, I personally can't see a nice trending move happening, but rather a violent readjustment.

Neither can I.

It will be violent either way.

But like I say, being out of gold, or the events that would lead to a massive upward move, would be far more catastrophic for me than being in a large downward move.

 

[cuttlefish]

Yeah I agree with this as well.

 

[IFocus]

Neither can I.

It will be violent either way.

But like I say, being out of gold, or the events that would lead to a massive upward move, would be far more catastrophic for me than being in a large downward move.

Yes of course good point Chops using risk to measure the out comes makes it clear, some thing lost on those that keep buying equities in a bear market in a down trend.

Thanks guys good discussion

 

[cuttlefish]

Dow up minus 34 points right now ... wee iz all saved. Clearly the market is embracing current conditions My suggestion ... buy bank stocks

I certainly hope nobody missed the sarcasm of this comment and mistakenly thinks I was actually recommending buying bank stocks right now. I wouldn't be buying bank stocks and the only positions I've been taking on banks have been short positions. (I don't deny the possibility of short term rallies but my long term view is the Aussie banks have a lot more pain to come yet).

 

[bean]

Fundamental are out the door

There is a large disconnect between the physical and the paper.
And its not just Gold
I was listening to Jim Pupavla on financial sense (us)
He mentioned he bought a ton of silver a few months ago from 3 dealers took ten weeks to deliver. This time had to go to biggest mint for his ton delivery time is 14 weeks.
Also Gasoline inventories in the US are at there lowest levels since 2000
And one State also at the moment has rationing.


Hopefully
DOW down big Monday. Then a conjoined effort between the worlds central banks and a .50 interest rate cut?

 

[Uncle Festivus]

Do you or Refined Sliver / Uncle have a view as to its current position and why, not looking for an argument just wondering why.

Simply, the velocity of paper money is now a big fat zero! Meaning that the longer and deeper the credit contraction or miss-trust between the worlds fractional reserve administrators is, the longer & deeper the negative contagion will continue for the global economy, and it's inherent wealth destruction and/or transfer.

So in the meantime it's not why gold is a good investment or trade but rather what is a better investment or trade to gold - US dollars/bonds or equities. I think we are at a point of flux while the world holds it's collective breath waiting to see if 'the bailout' works. It won't because it does not address the cause(s) of the problem, rather it attempts to lessen the impacts of the inevitable?

Gold is useless in the sweet spot of inflationary economics ie the period we have just experienced over the last 20 years or so, but the ending has been accompanied by stagflationary forces. Gold has risen on the inflationary part of this? The transition to a deflationary environment is being heralded by massive repositioning, into and out of the latest asset flavour of the month, with massive daily price fluctuations as witnessed, but for gold at least still relatively at a higher level now when compared to the US DX over the period from the low.

In the final analysis, gold does well in inflationary times as the CB's try to re inflate their way out of the mess (as per usual custom), but in the deflationary spiral we are about to enter gold does/will do spectacularly well simply because nothing else is going up in 'value' ie deflating. Simplistic but logical to me at least? The final nail will be if the US DX does finally capitulate inferring one super stagflationary final blow off top for commodities, in a world that can't afford them anyway. And maybe why there is concerted intervention by the worlds central banks to prop the collar up because the alternative is much worse than what we have now?

Double top for the US DX, both gold & the Dow in 4 figures (Dow will finally price in a real economy recession that is well under way!) before the year is over?

 

[CanOz]

I'm going to give this trade a go tomorrow night. GLD ETF - Bullish wedge.

Box of ale says it jumps over my limit order.

Cheers,


CanOz

 

[IFocus]

Simply, the velocity of paper money is now a big fat zero! Meaning that the longer and deeper the credit contraction or miss-trust between the worlds fractional reserve administrators is, the longer & deeper the negative contagion will continue for the global economy, and it's inherent wealth destruction and/or transfer.

So in the meantime it's not why gold is a good investment or trade but rather what is a better investment or trade to gold - US dollars/bonds or equities. I think we are at a point of flux while the world holds it's collective breath waiting to see if 'the bailout' works. It won't because it does not address the cause(s) of the problem, rather it attempts to lessen the impacts of the inevitable?

Gold is useless in the sweet spot of inflationary economics ie the period we have just experienced over the last 20 years or so, but the ending has been accompanied by stagflationary forces. Gold has risen on the inflationary part of this? The transition to a deflationary environment is being heralded by massive repositioning, into and out of the latest asset flavour of the month, with massive daily price fluctuations as witnessed, but for gold at least still relatively at a higher level now when compared to the US DX over the period from the low.

In the final analysis, gold does well in inflationary times as the CB's try to re inflate their way out of the mess (as per usual custom), but in the deflationary spiral we are about to enter gold does/will do spectacularly well simply because nothing else is going up in 'value' ie deflating. Simplistic but logical to me at least? The final nail will be if the US DX does finally capitulate inferring one super stagflationary final blow off top for commodities, in a world that can't afford them anyway. And maybe why there is concerted intervention by the worlds central banks to prop the collar up because the alternative is much worse than what we have now?

Double top for the US DX, both gold & the Dow in 4 figures (Dow will finally price in a real economy recession that is well under way!) before the year is over?

Thanks appreciate your comments Uncle

 

[IFocus]

I'm going to give this trade a go tomorrow night. GLD ETF - Bullish wedge.

Box of ale says it jumps over my limit order.

Cheers,


CanOz

Can thinking similar haven't decided the entry point yet may work on a couple of steps

 

[CanOz]

Can thinking similar haven't decided the entry point yet may work on a couple of steps

Focus, its not the greatest entry really is it? With the ETF trading well after GOLD opens for trading it could well be too late and i'll have to watch for another entry point.

Good luck mate.

Cheers,


CanOz

 

[Nick Radge]

I'll post some ongoing thoughts in Gold using EW and VSA as time permits. Hopefully this may offer some insights on how to correctly use EW. The missed point with EW is that its simply pattern recognition that offers right/wrong attributes - no different to any other type of pattern. By knowing what can possibly happen and at what point we're proven right or wrong, we can better position ourselves to take advantage of the next pattern. The following chart is a zoom in of the chart I posted at #5355.



The most important information on this chart is the move from the Sep 11 lows to the Sep 18 highs. This move is very strong, very clean and swift. In other words its an 'impulse' or some kind of a trend move. Impulse moves are located at waves-1, -3, -5, -A and -C. In this case it can't be a -3, or a -5 or a -C because there are no preceding waves. It can only be a -1 or an -A.

Its right at this point that we know when this wave will NOT be a -1 or an -A, and thats if prices fall back below the lows set on Sep 11. I have noted those lows with 'wrong below'. However, if the current decline travels too deep, usually beyond a 75.0% retracement we can start to think that perhaps we are wrong, albeit confirmation is yet to be sought. Knowing now when we'll be wrong we can start to look for confirmation signs of being right.

After a wave-1 or -A, the following wave will tend to retrace 50.0% to 61.8% which is deemed 'typical' and is why I said that of it goes 75.0% then something is probably wrong.

Secondly a wave-2 or -B will not only retrace 50.0% to 61.8% but it will do so in a 3-wave movement. On this chart I have placed a 5% zig zag indicator which measured the lengths of waves in percentage terms. In other words I'm not using discretion here. The wave is either > 5% in length or its not. You can see that off the Sep 19 highs we can see a swing down, a swing back up and we're now seeing another swing down. In other words we are seeing (at the moment) 3-waves.

In summary so far,

1. we have an impulse from the Sep 11 to Sep 19 highs,
2. we have a 3-wave counter trend move that so far has retraced into the 'typical' zone between 50.0% and 61.8%
3. we know exactly at what point we'll be proven wrong, but we also have a fair idea on when doubt creeps in

In theory if our analysis is correct we should expect to see prices start to reverse higher any day, but where will they go?

This depends on where the larger wave pattern stands, but if we assume that the Sept 19 high is a wave-1 or -A then we should at least expect a follow through move the same length as that Sep 11 to Sep 19 advance as a minimum. I say as a minimum because we're not yet sure whether the next move higher will be a wave-3 or -C but either way we have a trading opportunity. If/when we see that advance we can do the exact same procedure and build the same right/wrong equation around it.

Lets see what transpires, but remember, we're not predicting the future here. We're assessing the probabilities of the pattern unfolding in the desired direction based on past examples of the same pattern. We know exactly when we'll be proven wrong ahead of time.

Nick

This post may contain advice that has been prepared by Reef Capital Coaching ABN 24 092 309 978 (“RCC”) and is general advice and does not take account of your objectives, financial situation or needs. Before acting on this general advice you should therefore consider the appropriateness of the advice having regard to your situation. We recommend you obtain financial, legal and taxation advice before making any financial investment decision.