Gold Price - Where is it heading?

[Ageo]

Gold price looks good, just picked up some krugers for below spot? :headshake

Refiners spread still seem tame which means they havent factored a major move in just yet.

We shall wait and see........

 

[Uncle Festivus]

You either get it or you don't -

China wants out of the 'failed' world currency?

http://blogs.telegraph.co.uk/financ...0000821/china-bernanke-and-the-price-of-gold/

What he said about US monetary policy and gold – this bit on the record – would appear to validate the long-held belief of gold bugs that China has fundamentally lost confidence in the US dollar and is going to shift to a partial gold standard through reserve accumulation.

He played down other metals such as copper, saying that they could not double as a proxy currency or store of wealth.

“Gold is definitely an alternative, but when we buy, the price goes up. We have to do it carefully so as not stimulate the market,” he said.
In other words, China is buying the dips, and will continue to do so as a systematic policy. His comment captures exactly what observation of gold price action suggests is happening. Every time it looks as if the bullion market is going to buckle, some big force steps in from the unknown.
Investors long-suspected that it was China. We later discovered that Beijing had in fact doubled its gold reserves to 1054 tonnes. Fait accompli first. Announcement long after.

Standing back, you can see that the steady rise in gold over the last eight years to $994 an ounce last week – outperforming US equities fourfold, even with reinvested dividends – has roughly tracked the emergence of China as a superpower in foreign reserve holdings (now $2 trillion).

The emperor is naked but nobody wants to admit it, out loud at least, for fear of the whole charade falling apart. The problem is that anything priced in USD's is going to rise regardless of the intrinsic supply demand fundamentals, due to USD debasement. The evidence is in - the Fed 'loans' foreign CB's USD's for the purchase of US bonds, the insiders club that makes bond auctions appear better than they are?

The Ponzi scheme is supposed to end in October, later than originally scheduled, but no doubt there will continue to be 'other' methods of backdooring funds into banks, bonds and GSE's as well as the usual 'orderly market operations' from the Presidents Working Party or PPT or the Fed manipulation proxy - Goldman Sachs.

Maybe gold will be the instrument on the battlefield of ideologies between China & the US?

 

[Tradesurfer]

two potential trades here- buy gold if it tops $1040 and put stop a bit under $1000.

Short Gold and put a buy stop above $1040

nice thing about where price is-not too much distance between entry/exit-

 

[explod]

Just been doing a bit of a size up. On current market behaviour, oil,.dollar and chart, we could most likely see a correction down to the 965/70 area before we get going again. The top and bottom line of the old pennant looks like support in that area and it lines up with general trend from about April

Just my thoughts

 

[explod]

Posted: Sep 10 2009 By: Dan Norcini Post Edited: September 10, 2009 at 2:30 pm

Filed under: Trader Dan Norcini

Dear CIGAs,

Judging from some of the emails I have been receiving, the feds and their gold capping efforts have already unsettled many of gold’s friends. Please note – the bullion banks can attempt to stuff the price of gold back below $1,000 but without a strong rally in the US Dollar, they are spitting in the wind as the fundamentals are arrayed against them.

I am reminded of an old movie named Beau Geste, in which the defenders of a fort are reduced to stuffing the bodies of their fallen soldiers into the ports in order to convince their enemies that the fort is still well manned and ably defended, where the truth was that their situation was dire indeed. Bluff and bravado are what the bullion banks rely on. If longs will not run all their efforts will go for naught.

Gold is not going to be held down by these crafty schemers indefinitely due to the simple fact that the Forex markets are far too large for any one entity to give a sustained push to a currency in a direction that is contrary to the supply/demand factors affecting that particular currency. Economics 101 has not been suspended just because the feds and their crony pals at Goldman and Morgan would wish it otherwise. The world is awash in Dollars and the supply is only going to continue to increase. Even if demand were to remain constant (which it will not), that is insufficient to absorb the excess supply meaning that price must fall. As the Dollar falls, gold will continue higher, capping efforts of the feds notwithstanding. Honest money is yet going to rule the day unless one can change human nature with a mere sweep of the hand. Investors worldwide, and governments worldwide, are slowly but surely coming to grips with what US spending profligacy is doing to its currency and are voting with their feet.

Technically, gold has been able to attract buyers above $980. The longer it can hold near that level, the better the chances become that $1,000 will give way.

Also, the strong rally in the HUI is very encouraging as it has fought avid buying above the 400 level, which was the former high and now seems to be serving as strong technical support. That is promising for the bullish cause and is no doubt serving to unnerve some of the weaker shorts.

From J sinclair's Mineset. Trader Dan tells it how it happens from the Comex pits. I was a bit off in the last post, bulls are hanging in there a lot stronger than I have seen for a long time.

I feel now that when it does break up it will be very powerful indeed. Yesterdays Age here in Melbourne quoted Allan Greenspan as now bullish gold. Never thought I would ever read that.

 

[Whiskers]

Well, I'm sticking to my earlier estimate of $1,200 to $1,300 area before any significant correction... and probable profit taking.

Interesting to see Aus gold stocks finish on the up with gold rebounding back toward $1,000 on the close and going quite strong to $1,010ish into the US weekend.

 

[So_Cynical]

What is interesting IMO is that i think this is the first time POG has held at this level for so long...5 days if we close above 990 this morning....5 days of consolidation at around the 1K mark is pretty impressive.

Ive been watching gold for prob 3 years...and ive never seen it told like it is now...DOW and POG running together...Blue sky's ahead?

 

[explod]

What is interesting IMO is that i think this is the first time POG has held at this level for so long...5 days if we close above 990 this morning....5 days of consolidation at around the 1K mark is pretty impressive.

Ive been watching gold for prob 3 years...and ive never seen it told like it is now...DOW and POG running together...Blue sky's ahead?

And now gold up dow down, as always unpredictable, in fact oil and dollar down together, and aussie gold up too.

gold is now beginning its new life alone.

 

[Irvinator]

From Dominic Frisby, Moneyweek !

Hong Kong is taking delivery of its gold

The tremors in the gold market began last week when Hong Kong announced it was pulling all its physical gold holdings from depositories in the UK and moving them home to newly-built vaults near the city’s airport. We’ve said it before: wealth is moving east. Yes, Hong Kong has ambitions to be the bullion trading hub of the Orient, but there could be more to it than that.

It’s estimated that they own some $63m worth of gold. In the international scheme of things, that isn’t much. There might even be a banker somewhere who takes that home this year as his bonus. What is noteworthy is that Hong Kong is taking delivery of its metal.

Many gold followers have argued that if everyone who owned futures, exchange traded funds (ETFs), warrants, options, CFDs and any other gold derivative you care to mention decided to take delivery of the gold against which their contract is written, there wouldn’t be enough physical metal to go around, and the price would rocket.

Indeed it was the French government’s insistence in the late ‘60s and early ‘70s on taking delivery of the metal in lieu of US dollars that eventually forced the US off the gold standard in 1971. The US didn’t have the physical metal to back the quantity of dollars it had put out. Gold quickly went up tenfold. Perhaps Hong Kong is taking delivery while it still can.

Just a few days later, Barrick, the world’s largest gold producer, announced plans to eliminate its gold hedges. (Hedging is when a miner sells its metal before it has actually been mined in order to lock in a price. This can work well in a falling market, as you have sold your metal for a higher price than it is when you actually mine it; but it can be a disaster in a rising market because you miss out on the higher prices). Barrick’s hedging strategy has rightly attracted a great deal of criticism. The company failed to recognise a bull market and sold its gold too cheap.

So costly has been Barrick’s hedging strategy, a contrarian might argue that their now eliminating their hedges could mark the top of the market.

But what’s interesting is that rather than deliver the gold it has sold forward, Barrick has chosen to raise cash by issuing shares and using the money – some $3.5bn – to pay off its obligations. In other words, the largest gold miner in the world thinks that it’s worth buying its way out of the hedges with cash now, because it’ll get a better price for its gold in the future.

Why the Chinese government is telling its people to buy gold

Meanwhile we hear that China has doubled its reserves to 1,054 tonnes. They are buying gold, ‘carefully so as not to stimulate the market’ says Chinese economic ambassador Cheng Siwei, reports Ambrose Evans-Pritchard in The Telegraph. Siwei continues: “Credit in China is too loose. We have a bubble in the housing market and in stocks so we have to be very careful, because this could fall down.”

Is the risk that ‘this could fall down’ the reason that the Chinese authorities are pushing their citizens so hard to buy gold – so that they have some protection from any credit bubble collapse? Analyst Paul Mylchreest notes in his Thunder Road Report that the main, state-owned television company is promoting gold and silver as an investment. The government is telling its people to buy gold. What’s more, every bank will sell gold and silver bullion bars in four different sizes to individuals, and China’s largest bank, the ICBC, is setting up a precious metals department to handle growing investor demand.

Where is all this gold going to come from? Well, if 1.3 billion people start buying one-ounce coins, heaven only knows. China is already the biggest gold producer, last year superseding South Africa. Pretty soon it will replace India as the largest consumer.

And if the Chinese authorities are pushing gold as an investment to their citizens, it obliges them to ‘protect’ the gold price, as Lawrence Williams of Mineweb notes. It would be tantamount to a betrayal if it fell, never mind the loss of all-important face that would result. Just as the US and the UK stepped in to bail out their banks, so China will be duty bound to prop up gold.

But the surprising strength we have seen in gold over the summer – we never really got the summer low I was looking for – suggests that somebody is already ‘buying the dips’ anyway. Indeed the gold price has this week repeatedly gone through $1,000 during overnight trading, only to fall back when the US markets open. That indicates that the buyers are out east somewhere. I have written about this before: Gold is shifting from West to East – along with the balance of power.

$1,000 an ounce is just the start

There are some who argue convincingly that the $1,000 will mark a double top in gold and then we’ll go down from here. There are other technical indicators that suggest a top.

But there is too much impetus to force the price higher. We may hover around here for a while - in spring 2008 oil spent almost six weeks bouncing between $95 and $100 before bursting through – and $100 oil is like $1,000 gold. Indeed there is a little bit too much bullishness about the place at the moment, so a pullback would be healthy. But once we have a break above $1,000 and a weekly close above the old high at $1,032, the news on gold will be splashed everywhere. It all points to much higher prices in time.

 

[Ageo]

Interesting news, it will be very interesting to see if china becomes a major consumer of gold where it will take the true physical price to.

 

[explod]

Had not been watching gold much for awhile but was just ruminating on the five year gold chart. We could break out to about 1030 ish and then when attention is high a correction down could be high impact down to the 800 area which is the bottom of the long term bottom uptrend line which dates from about July of 05.

Just a rumination/feeling mind you, but having watched the behaviour of gold over the last seven years some anticipation starts to knock.

Of course if it was to break clear of the 1030 area, where I think there will be considerable resistance then that would be very bullish. A pointer towards that maybe the continuation, which looks likely, of the US$ index.

Any other thoughts around

 

[Ageo]

Any other thoughts around

Yeh wait for these next 2 months to pass and that will tell us what gold is going to do. At least thats what 2 refiners told me.

 

[Uncle Festivus]

Hi Explod,
Rambling man moment . It looks as though the Goldman Sachs Index, otherwise known as the Dow Jones Industrial Average, is doing it a bit tougher on this thrust up, only managing to get to the previous highs in the same timeframe, instead of several percent above. So there could be a rotation back to 'safe' haven US treasuries/bonds etc??

We really need a clean break from the negative correlation to DXY, but that willl only happen when the Fed has spent all their bazooka's, so ???? Aussie gold still can't break $1200! The ETF's are a worry though if a concerted push from 'the firm' can break the pog down enough to start an exodus, although if it holds it could show gold is playing global currency of last resort, finally?

It's a tough call right now....

 

[explod]

Thanks for the comments above Ageo and Uncle. Yes I am a bit non-plussed, the suspicion and doubt we have is, I suppose, that wall of worry, not helped of course by a very negative business press in realation to the value of gold as an investment alternative. A thought that has occurred is the vehemence against gold two days running in our Melbourne Age newspaper. Maybe they are the ones feeling insecure. Again, "the wall of worry"

The rest of the week promises to be intersting as the last five have had consistent up consolidations then up again, on the steps so far, this week is due for the next 10 to 15$ up.

Time will tell

 

[GumbyLearner]

Thanks for the comments above Ageo and Uncle. Yes I am a bit non-plussed, the suspicion and doubt we have is, I suppose, that wall of worry, not helped of course by a very negative business press in realation to the value of gold as an investment alternative. A thought that has occurred is the vehemence against gold two days running in our Melbourne Age newspaper. Maybe they are the ones feeling insecure. Again, "the wall of worry"

The rest of the week promises to be intersting as the last five have had consistent up consolidations then up again, on the steps so far, this week is due for the next 10 to 15$ up.

Time will tell

Did you read the piece on RNG explod?

That read like a ramp and yet Michael Pascoe gave gold a pasting in his piece.

Only time will tell. Haven't heard anything to change the fact that gold is in diminishing supply. Haven't heard anything either about people spending less on daily consumables or decreases in Un or Underemployment in developed G8 economies

What's next for the deflationists? I suppose it will be to argue that Engel's Coefficient doesn't really exist and now that developing nations have more purchasing power and production they will buy less commodities due to rising incomes and prosperity. Who needs a healthy diet when you're a rapidly growing developing country opening up to the free market for the first time and have infrastructure pipeline projects to build for the next couple of decades? It does require an abstract view of things and the future to really get why gold is now trading with 3 zero's. Oh and not to mention, that a portion of that new found wealth in these places will not consider gold as an investment India No.1 and China No.2.

So as a result a bear market in commodities will trounce gold! As if... IMHO


Happy days!

 

[explod]

Did you read the piece on RNG explod?

That read like a ramp and yet Michael Pascoe gave gold a pasting in his piece.

Yes Gumby, and some on the Board were the same as presided over the Oxiana fiascoe, so would be most skeptical also. And the press, only writing what they are told by bigger players IMHO

And agree with the rest of your post

 

[explod]

Every night at this time (the last four days), the US$ index rises fairly steeply and by 11 am US time it falls. However the gold price is not falling for it anymore and is staying firm. But having said that gold is at the same level now as it was this time last night but the dollar on the same frame is down about a half a percent.

A drop in the US Dow could change that as it brings with it a move to the US dollar. All is very delicately poised for what ?? I cannot see. But maybe we will not break the 1032 this week

 

[lukeaye]

And now gold up dow down, as always unpredictable, in fact oil and dollar down together, and aussie gold up too.

gold is now beginning its new life alone.

Its not really that unpredictable, it has consildated at 1000, this will become new support. i dont see it faltering form here, if you look historically, there is always a very quick rejection from these higher levels, which force it to fail.

I have noticed GOLD moves with the dow and the dollar, but there are also inflationary concerns that drive it, so if you look closely there are always reasons for its price action.

im not fundamentalist though.

 

[lukeaye]

Just for my 2 cents, my little predication, i see a pullback to around 1005 - 1007, before an explosion to the upside around the 1040 level by late next week.

I could howver be very wrong, but i think 1,100 is a conservative target at the moment.

It does present as a low risk trade when you can set stops just below 1,000 and have a long term target of 1,100.

If you have the stomach to stick around til then anway

 

[vincent191]

Besides Gold is there any other commodity that safeguards against inflation & a depreciating US$??

I use to think platinium might be one such commodity but given the collapse of the price of platinum and it's failure to match the recent increase in the gold price I am no that keen.

Any thoughts on base metals & oil?? I am too chicken to punt on gold to keep going up. I am trying to find something that hasn't gone up yet and I keep coming back to platinum.

Any thoughts??