Gold Price - Where is it heading?

barrett · 22 October 2008

I have been looking at the disconnect between the 'paper' and 'physical' markets for gold. While big bars of gold and silver are apparently plentiful - and selling at the same price as Comex gold plus commission - small denominations of gold and silver are selling at massive premiums. For instance, Silver Eagles - which contain US$9 of metal at current prices - have reportedly been selling for up to $19 apiece on Ebay.

Big bars going for market price, tiny pieces going for huge premiums - what does that tell us? That tiny retail buyers - the least informed market participants - are falling over each other to buy gold and silver at any price. I don't consider that bullish - in fact it's more the sort of thing that routinely happens at the end of bull markets - the small guys keep buying all the way down. I'm not suggesting that's the case for gold - but of all the things going on at the moment I don't find that one particularly re-assuring.

chops_a_must · 22 October 2008

We are witnessing the death of gold IMO.

Inflation goes nuts in Australia, and gold equities get killed.

Interesting times, but I think gold is completely stuffed.

Everything went right for gold... and what has it done?

cuttlefish · 22 October 2008

barrett said:
For instance, Silver Eagles - which contain US$9 of metal at current prices - have reportedly been selling for up to $19 apiece on Ebay.

My view is that these are coins not bars - they have a collectable's premium built into the price. The same applies to most minted coins and also some minted bars. e.g. a Kruggerrand contains exactly 1oz of gold but you won't get one for the spot price of gold - there's a hefty premium.

Uncle Festivus · 22 October 2008

chops_a_must said:
We are witnessing the death of gold IMO.

Inflation goes nuts in Australia, and gold equities get killed.

Interesting times, but I think gold is completely stuffed.

Everything went right for gold... and what has it done?

The reports of my death have been greatly exaggerated - Mark Twain

The US export competitiveness indicator, otherwise known as the US DX, is approaching an interesting juncture, yet to reinforce the current financial conjucture?

It just wouldn't be a recession without a slump in exports as well?

Patience while the eye of the storm passes over.

While ever Aussie golds are averaging $1100/oz or better this qtr expect to see guidance to the upside for the sector. Entered NCM again today.

cuttlefish · 22 October 2008

chops_a_must said:
We are witnessing the death of gold IMO.

Inflation goes nuts in Australia, and gold equities get killed.

Interesting times, but I think gold is completely stuffed.

Everything went right for gold... and what has it done?

I think gold equities work this way at the moment:

Overnight Dow up, Gold price up - gold equities go down because an up Dow signals an end to the panic so safe haven status loses its appeal.

Overnight Dow down, Gold price up - gold equities go down along with all other equities.

Overnight Dow up, Gold down - gold equities plummet because gold price is down and equities going up signals end to safe haven status as well.

Overnight Dow down, Gold down - gold equities fall harder than the general market due to gold price being down as well as equities.

Overnight gold sky rockets - gold equities manage small gains on the back of gold price rise.

refined silver · 22 October 2008

cuttlefish said:
My view is that these are coins not bars - they have a collectable's premium built into the price. The same applies to most minted coins and also some minted bars. e.g. a Kruggerrand contains exactly 1oz of gold but you won't get one for the spot price of gold - there's a hefty premium.

These are bullion coins, not numismatic or collectable coins. They have always sold for a very small percentage of spot previously.

chops_a_must · 22 October 2008

Uncle Festivus said:
The US export competitiveness indicator, otherwise known as the US DX, is approaching an interesting juncture, yet to reinforce the current financial conjucture?

It just wouldn't be a recession without a slump in exports as well?

Patience while the eye of the storm passes over.

While ever Aussie golds are averaging $1100/oz or better this qtr expect to see guidance to the upside for the sector. Entered NCM again today.

You are flogging a dead horse for now...

kransky · 22 October 2008

I gather that the arguement is that gold is being held down on purpose artificially and will eventually burst its banks either due to a change in politics or by sheer weight of numbers..

i assume its being held down to stop a chain reaction of panic buying of gold as it starts to rise and thus to maintain confidence in the $US.

to say gold is dead because its falling in the current environment where it should be rising is to ignore the real question (or assume its not being held down). Is it being held down?

arco · 22 October 2008

Hi All

I'm day trading gold, but looking at the daily chart there seems to be the possibility the next area to target could be the grey box in the bottom right corner.

rgds - arco

Uncle Festivus · 22 October 2008

chops_a_must said:
You are flogging a dead horse for now...

The anomaly is that most investors focus on the $US gold price. AU gold is making AU companies windfall profits, irrespective.

kransky said:
I gather that the arguement is that gold is being held down on purpose artificially and will eventually burst its banks either due to a change in politics or by sheer weight of numbers..

i assume its being held down to stop a chain reaction of panic buying of gold as it starts to rise and thus to maintain confidence in the $US.

to say gold is dead because its falling in the current environment where it should be rising is to ignore the real question (or assume its not being held down). Is it being held down?

Or, more likely, the USD is artificially high? The 'credit crisis' measures will fail, the US dollar will tank.

chops_a_must · 22 October 2008

Uncle Festivus said:
Or, more likely, the USD is artificially high? The 'credit crisis' measures will fail, the US dollar will tank.

The ironic thing,

the thing that people had assumed would bring down the US economy, is actually worse everywhere else than the US.

But agree to some extent about the USD, as capital repatriation takes place. But can't see that changing in the medium term either...

bankit · 22 October 2008

While this is about currencies it is relevant to this thread.

Getting Ready for "The Turn" in the Dollar
http://www.financialsense.com/Market/wrapup.htm

If you are reading this after tonight you will need to go to MON wrapup to get the link as it changes daily

Bankit

barrett · 22 October 2008

arco said:
Hi All

I'm day trading gold, but looking at the daily chart there seems to be the possibility the next area to target could be the grey box in the bottom right corner.

rgds - arco

Hi Arco, a 3-year trendline support close below atm, I have it at 745 for today..

Still, most of the long term trendlines haven't counted for much so far in this dip..

GC daily, linear

Nick Radge · 22 October 2008

I posted a chart some time ago early in this thread about the correlation of the USD and the Presidential Cycle. Since the 70's (as far as my data goes) there is an extremely high correlation between the USD and the political party in power. The Republicans have always been a bearish influence on the USD whilst the Democrats are positive. Indeed history shows that the last time we were at these major lows was in the Bush Snr era and we then posted massive gains when Clinton came into office. Since Bush Jnr came into power its been one way traffic back down again. So, the USD has been strengthening over the last few months and it certainly seems to me that Obama is the favored son. The markets price information in advance so my suggestion is that the multi-decade trend of USD correlation is taking shape once again.

I'd also suggest the 'fools' trade, that is the majority are usually wrong. From my impressions the 'easy' trade is long Gold, short USD. Somehow I think history will prove the majority will be wrong again.

I would also reiterate what I have said before. If Gold is such a store or wealth, such a safe haven, why the heck is it still below its major lows and trading lower...

Don't take my work for it. Take a look at the correlation between presidential parties in power and the USD.

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.

Reealjrd · 22 October 2008

Hello Friends,

Seeing the current scenario of the market any predictions is not ok. We cannot say where the gold going to head. But here what we can suspect that gold might become stable for now. But not that much stable as it was before. Elections are near in the US as well as in india. The indian economy too is unstable. Inflation rates have reached the skys and i dont know when we can see a new bottom in it. Because of Inflation most of the countries are suffering,

barrett · 22 October 2008

Hi Nick, I had a look back through the archives.. is this the post you refer to? It's from 14th August 2007. There was no chart attached with this post though - and it's the only one I can find in this thread on the subject. If you still have a copy of that chart somewhere that would be very interesting, I haven't come across it before.
Cheers

Nick Radge said:
Another factor to look at is the correlation of the US$ to the Democrats and Republicans when in power. You will note, with extraordinary precision, that the US$ has fallen under Republicans (in fact was at these exact same levels under Reagan and Bush Snr) and risen with Democrats.

The world is bearish US$. There is a high chance that the Democrats will romp home next year. We're sitting at a multi decade support level.

Another point to ponder. If its so damn obvious that the US$ will fall, why hasn't it? Could it be possible, seeing it's so obvious to all, that all that bad news is actually priced in already? The market prices in the future expectations and will change when those expectations change.

Just take a look at RIO at its absolute high. What happened? They announced their takeover of Alcan. All analysts upgraded their valuations to $120. Those that new that the Alcan deal was in the air had already bought. They had priced it in already. The suckers were the one's that acted on the news. Buy the rumour, sell the fact.

I must concur 100% with Wavepicker on the plight of the US$

barrett · 22 October 2008

Reealjrd said:
Hello Friends,

Seeing the current scenario of the market any predictions is not ok. We cannot say where the gold going to head. But here what we can suspect that gold might become stable for now. But not that much stable as it was before. Elections are near in the US as well as in india. The indian economy too is unstable. Inflation rates have reached the skys and i dont know when we can see a new bottom in it. Because of Inflation most of the countries are suffering,

Do you live in India? I have been curious about the inflation situation there. I know it reached double digits, and that the central bank has been raising interest rates over the past year to try and deal with that.. I am just wondering whether they will be willing to continue raising rates in the face of a slowdown in demand for exports.

chops_a_must · 22 October 2008

Nick Radge said:
I would also reiterate what I have said before. If Gold is such a store or wealth, such a safe haven, why the heck is it still below its major lows and trading lower...

Yep.

I said elsewhere today that it is dead at this stage. All its ducks lined up... and it failed.

IFocus · 22 October 2008

chops_a_must said:
The ironic thing,

the thing that people had assumed would bring down the US economy, is actually worse everywhere else than the US.

But agree to some extent about the USD, as capital repatriation takes place. But can't see that changing in the medium term either...

This is a key point the US economy is still the power house of the world in size as Europe / Japan are in as bad a shape and others just don't have the size to count.

barrett · 22 October 2008

chops_a_must said:
We are witnessing the death of gold IMO.

Inflation goes nuts in Australia, and gold equities get killed.

Interesting times, but I think gold is completely stuffed.

Everything went right for gold... and what has it done?

The death of gold... that's...the same gold that hit an all time high of A$1400/oz about 10 days ago, right?

An investment in gold bullion one year ago at $840 would have given a return of 66% peak to peak - it's the best long side investment an Australian person could have made over the past year by a mile!

The paradox is that the value of equity in Aussie gold mines is so low. As we've been seeing, the equities usually point the way first.. but the gold market leaders will be the first to move at a turning point.. and that doesn't include anything listed on the ASX!

Gold Price - Where is it heading?

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