Gold Price - Where is it heading?

[Uncle Festivus]

I still think gold will be the ultimate winner, but in the meantime there ain't gonna be much money to be made, apart from special situation eg takeovers etc and unless we get another round of GFC, which is highly likely despite all the green shooters prognostications based on ephemeral data changes...

The problem for Oz gold advocates is that at present as a country we have escaped the so called GFC fairly well, which means that in contrast to others who have re-inflated their money supply into financial sponges which soak up the liquidity and doesn't get to the real economy, our liquidity efforts have gone straight into property & shares in search of yield.

The US dollar carry trade is alive and well, and it looks as if some of that is being directed to our high yeilding dollar as well as being needed to purchase our local stocks. You add that to the yeild differential traders and Mr Stevens has more than once indicated the problem and his intention of what he will do about it.

This means rising interest rates, a rising dollar and a static UA gold price, provided of course the USD gold keeps going up as well? The only way we will make any bonanza money from gold stocks is if we get another round of risk aversion similar to the climate which took Oz gold to $1500 ie major panic into the USD at the same time as a panic flight to gold, and depending on whether this time it's the last hurrah for capitalism itself will depend on whether gold will be the last hard currency standing?

Between now & then the odds are against Oz goldies?

 

[GumbyLearner]

UPDATE: China 2008 Net Gold Imports 112 Tons - Minsheng Exec
By James Campbell
DOW JONES NEWSWIRES

HONG KONG (Dow Jones)--China imported 112 metric tons of gold in 2008, an executive at China Minsheng Banking Corp. (600016.SH) said Thursday.

A rise in net imports was driven by 176% growth in investment demand for the yellow metal, which hit 68 tons, and 21% growth in jewelry demand to 326 tons, said Lila Lu, the Beijing-based head of precious metals at China Minsheng Bank.

According to official estimates, China's gold mine production reached 282 tons in 2008, making the country the biggest producer in the world.

But that hasn't been enough to meet rising demand in the country, which is increasingly looking to gold as a means to diversify its large foreign exchange reserves.

"Exploration investment has only picked in the past two years, so mine supply output growth will not keep pace with (rising) demand," Lu said at Gold Outlook 2009, a gathering of industry participants.

"For the next five years, China will still be a net importer," she said.

http://www.fxstreet.com/news/forex-news/article.aspx?StoryId=4f0783ef-cfdd-4598-9ccd-0608b4ec8369

 

[legoman]

According to official estimates, China's gold mine production reached 282 tons in 2008, making the country the biggest producer in the world.

Gee, massive stat

 

[cuttlefish]

What I think is interesting about that stat of 282 tonnes is the dollar value.

282 tonnes = 282 000 000 grams = (31g/oz) = 9,096,774 ounces = ($1050/oz) = $9, 551, 612, 903 = $9.5 billion

Contrast this to the dollar value of new debt/treasuries etc. created by the US in the past year which is in the trillions - i.e. hundreds of times China's annual gold production (and I believe world gold production is of the order of about 80 million ounces so about $80 billion - still tiny compared to the amount of money being 'created' annually).

In fact the US is currently running a budget deficit of 1.42 trillion. At say 3% interest rates, the interest on that budget deficit alone is $40 billion.

Total US national debt is running at $12 Trillion at the moment, with the interest on that being $380 billion (souce wall st journal 12th Oct 09: http://online.wsj.com/article/SB20001424052748704429304574467071019099570.html).

If there was even just a small exodus of holders of US debt assets switching into gold it would create significant pressure on the gold price. The wall street journal article linked to above states that the White House Office of Management and Budget expects the deficit to grow to $9 trillion and discusses the possibility of US national debt increasing to $21 trillion over the coming 10 years - and possibly much higher.

 

[cuttlefish]

The XGD (Aus gold index) chart is at an interesting point as of Friday. Not sure what caused the exceptionally high volume. (possibly heavy volume of KCN traded? or is it related to derivatives expiry given there'd be an increased volume of gold derivatives being traded lately?) Either wayit shows up on the chart as one of the highest volume days ever.

 

[wayneL]

Quote from Nouriel Roubini FWIW

Roubini: I don’t believe in gold. Gold can go up for only two reasons. [One is] inflation, and we are in a world where there are massive amounts of deflation because of a glut of capacity, and demand is weak, and there’s slack in the labor markets with unemployment peeking above 10 percent in all the advanced economies. So there’s no inflation, and there’s not going to be for the time being.

The only other case in which gold can go higher with deflation is if you have Armageddon, if you have another depression. But we’ve avoided that tail risk as well. So all the gold bugs who say gold is going to go to $1,500, $2,000, they’re just speaking nonsense. Without inflation, or without a depression, there’s nowhere for gold to go. Yeah, it can go above $1,000, but it can’t move up 20-30 percent unless we end up in a world of inflation or another depression. I don’t see either of those being likely for the time being. Maybe three or four years from now, yes. But not anytime soon.

 

[GumbyLearner]

Quote from Nouriel Roubini FWIW

Back at Mr Roubini

What about 5-10 years from now?

 

[explod]

Roubini reminds me of Reni Rivkin, (who I followed closely). When he is spruiking sell he himself will be accumulating.

Inflation plays a part but it is the printing of money and its dilution that will drive the gold price. The level of price is not so important it is the maintenance of your equity.

His rhetorical spin gives him away.

 

[GumbyLearner]

Harmony Chief says the gold price above $1000 Us an ounce is unsustainable.

http://www.miningweekly.com/article...-unsustainable-in-long-run-harmony-2009-10-26


By: Chanel Pringle
26th October 2009
Updated 1 hour 16 minutes ago
TEXT SIZE
Text Smaller Disabled Text Bigger


JOHANNESBURG (miningweekly.com) – The recent gold price spike, which had seen gold trading at above $1 000/oz, was unlikely to be sustainable in the long run, as this had largely been driven by short-term factors, Harmony Gold chairperson Patrice Motsepe said in the group’s 2009 annual report, which was released on Monday.

The gold price had reached a record above $1 070/oz in the middle of October.

Harmony CEO Graham Briggs added that the gold price, in rand and in dollar terms, had been on a rollercoaster, with the prices not moving in unison.

He told shareholders that the rand strength had seen the rand gold price decline to R231 000/kg in the past five months of the year ended June 30, 2009, down from R320 000/kg before.

“Observers have commented at length on why the gold price has not continued to rise. I would suggest that the metal – while faring substantially better than other metals during the global economic downturn – has indeed been held back by consumer and investor uncertainty and caution,” stated Briggs.

He added that jewellery demand has also softened and that scrap gold was becoming an important component of gold supply.

Get ready!

http://www.geomancy.net/upload/2010-year-of-tiger.gif

 

[lasty]

Roubini misses out on point three.
He speaks of inflation and deflation (depression) but what about getting out of US dollars and the changing of an economic powerhouse. ie US to China?
Gold above $1000 is sustainable, however I think we are in for a correction therefore equity,commodities and currencies should give back some gains over the next few sessions.

 

[Tradesurfer]

I think I've been saying this for a while, but when was the last time that the "crowd" has been right? EVERYONE is saying that massive inflation is coming and Gold is going to the moon. In the US, I see more invest in gold commercials now than ever. Covers of magazines talking about it etc etc.

Now from a technical picture- gold did break out and hold above 1000. Longs might have a stop loss set a bit below there. But really gold has been in a range for some time compared to other things.

The nice thing about followign price is that you are not making bets- only following the trend.

My mailman the other day was asking me if he should go all-in on gold mutual funds.

I think my mailman in March of 2000 was retiring to become a daytrader.

Anyway

cheers

Derek

 

[sinner]

I think I've been saying this for a while, but when was the last time that the "crowd" has been right? EVERYONE is saying that massive inflation is coming and Gold is going to the moon. In the US, I see more invest in gold commercials now than ever. Covers of magazines talking about it etc etc.

Now from a technical picture- gold did break out and hold above 1000. Longs might have a stop loss set a bit below there. But really gold has been in a range for some time compared to other things.

The nice thing about followign price is that you are not making bets- only following the trend.

My mailman the other day was asking me if he should go all-in on gold mutual funds.

I think my mailman in March of 2000 was retiring to become a daytrader.

Anyway

cheers

Derek

I think the inflation argument is DEAD. Dead as a god-damned door knob and I wish people would stop talking about it.

Fact of the matter is: silver did not make a new all time high. Therefore, this gold bull is not based on monetary inflation.

End of story.

 

[explod]

I think the inflation argument is DEAD. Dead as a god-damned door knob and I wish people would stop talking about it.

Fact of the matter is: silver did not make a new all time high. Therefore, this gold bull is not based on monetary inflation.

End of story.

Inflation is not dead, in the last few years the price of fuel has gone through the roof. Two years ago you could buy a slab of beer for $32, today it is $44 a bottle of whisky $28 to $35 Many items on the shelves in the supermarkets have not only gone up but they have reduced the contents. Pencils I buy have gone up 120% Houses have gone up, cars, entertainment, school fees way above the official stats.

Sinner you are in dream (make that think) land

Do your own anecdotal research and you will find the authorities are lying with thier stats ol son

 

[explod]

There has been little action in gold of note, the last week or so a down bias but in my view a very siginifcant change has occurred during the NY session this morning.

Gold for a year or two now has followed the general market, with an upward bias, but big moves on the Dow take gold with it in the immediate term.

Last night the Dow dropped steadily during the session to end 251 points lower (2,5%) and gold went down with it for the first three hours into the session. However it made a remarkable recovery from that point and rose for the rest of the session whilst the dow continued its slide. As we head into the close gold has all but recovered its losses for the week and most of that in the last day, quite at odds with both end of month contract settlements and the fall in the market.

This decoupling in my view is a very bullish sign and maybe the flights to safety this time will be to where true holding value is. IMHO

Time will show the way but interesting times.

 

[joeyr46]

Inflation is not dead, in the last few years the price of fuel has gone through the roof. Two years ago you could buy a slab of beer for $32, today it is $44 a bottle of whisky $28 to $35 Many items on the shelves in the supermarkets have not only gone up but they have reduced the contents. Pencils I buy have gone up 120% Houses have gone up, cars, entertainment, school fees way above the official stats.

Sinner you are in dream (make that think) land

Do your own anecdotal research and you will find the authorities are lying with thier stats ol son

trouble is this is all IMO not due to more dollars being printed but due to more credit being created and as always the only posible end to too much credit being created is default or deflation. and your right temporarily prices are moving up ie inflation but when this ends they will retrace far more than we expect if history is any guide

 

[sinner]

Buying gold today at 1045.5 with a 9 point stop loss (1036.4) with the justification of possible end of wave 4 down to be followed by wave 5 up (the big divergent one). Trading small sized, don't mind being wrong.

 

[sinner]

Gold showing a high possibility of wave 4 completion to begin a move into wave 5. This could be the big one people. I am targetting well above the previous highs!

Hourly chart showing last nights pre-Frankfurt entry:


Daily chart showing possible beginnings of final wave up of bullish impulse for gold:


EDIT: Worth noting that on the hourly we have already completed five possible waves up so the ride up from here could be a bit rocky!

 

[explod]

Looks like you were spot on Sinner, good call. The following from J/S Mineset s Trader Dan

Posted: Nov 03 2009 By: Dan Norcini Post Edited: November 3, 2009 at 2:51 pm

Filed under: Trader Dan Norcini

Dear CIGAs,

News overnight that India was going to stand for half of the proposed IMF gold sale sent shock waves through the gold bear camp resulting in a near panic among trapped shorts. Their buying sent prices ripping through overhead resistance just above the $1,070 level setting off a cascade of pre-placed buy stops that propelled gold above $1,080, a mere $20 from psychologically significant $1,100.

By the way, let me take a minute here to give a Hat Tip to Jim who has been saying for YEARS (and received a fair amount of trash talk for so doing), that any gold sold under an IMF arrangement would never see the light of day as Central Banks would gobble it all up. That is precisely what India did and I am convinced that China is also looking to do. As a matter of fact, India probably got the jump on China because they knew that they were lurking in the background looking to buy.

How many times over the last few years did we hear talk about IMF gold sales just about the time gold was threatening to put in a technical break out on the price charts. The news would cause a near panic among ignorant analysts and talking heads who would promptly advise their clients to dump their long positions playing right into the hands of those who originally trotted out the story. Let’s hope that after today, gold longs are no longer the least bit troubled by any further chatter concerning IMF gold sales. Do not forget, that the Central Banks of the rising powerhouse economies of the East are looking to diversify their foreign reserves and need large block sales of gold at a preset price in order to facilitate an order of the magnitude that they are placing. Try obtaining 200 tons of gold on the open market! That is why they welcome such large sized gold sales.

What makes the surge higher in gold even more impressive is that it came in the face of a weaker Euro, a stronger Dollar, and most particularly, a dropping equity market. The net result of such occurrences is that gold moves higher in terms of nearly all of the major foreign currencies. Gold priced in terms of Euros is at its best level since March of this year with British Pound priced gold back near the 650 level.

Based on today’s price action, one would have to say that the price of gold has consolidated long enough above $1,000 that the market has now come to terms with a permanently higher gold price of 4 figures. Without wanting to be premature, gold under $1,000 would undoubtedly be viewed now as a bargain. That is why markets that move higher, consolidate, move higher, consolidate, etc, are sustainable bull runs. The run and pause effect gives the industry TIME to become acclimated to the new, higher price level whereas markets that launch into parabolic type blow offs, while spectacular, are generally unsustainable and short lived in the broader scheme of things. They come crashing back to earth as quickly, if not faster, than they went up.

... report continues on js mineset

Took a good position in OGC yesterday as the move was on but the jump overnight is very bullish in my view now.

Gold US is up 49% for the last 12 months, cheers to the bugs

 

[explod]

Full report continued from previous post:-

The mining shares, while still lagging far behind the price of bullion, are sharply higher today as the market now has to reprice those shares to allow for the changing dynamics of the gold market. A fair number of our readers keep asking me about the shares and why they are performing so poorly compared to the metal itself. My view is that the Gold ETF’s have sucked a large amount of investment capital that would normally be flowing into the shares into those particular investment vehicles. The big funds can leverage those up and obtain the same effect that they used the mining share purchases for, namely as a way to obtain leveraged exposure to the gold price.

Jim has written a masterpiece about the gold shares that is a must read for anyone who has exposure to this sector that deals specifically with what to expect in these moving forward. I urge the readers to refer to that often. Those miners with exposure to non-recourse loans and the inherent short-of-gold derivative are now seeing what Jim warned them about years ago.

The Dow Jones/Gold ratio is currently trading exactly at “9” as I write this. You might recall that chart I put up not all that long ago where I noted that the ratio near “9” has been a floor of support. If this level gives way, it will indicate that savvy investors who can read the tea leaves of the US economy have seen the handwriting on the wall and understand that the lake of inflation is relentlessly rising behind the dam of illusionary wealth soon to break forth with a fury. As said so many times on this site by Jim, Monty and myself, you cannot print your way to prosperity. If that were the case, it would have been successfully attempted long, long ago by nations throughout the course of history. Sadly, our current monetary officials and political leaders are oblivious to this truth and refuse to back away from their reckless policies and short-sighted courses of action. The Dollar, while moving higher today, is a catastrophe waiting to occur. The collapsing Dow/Gold ratio says it all.

Bonds are moving lower in tandem with stocks today which is unusual. I have not been able to clearly read the bond market ( then again I know of no one else who can for that matter these days) but perhaps the surge in the gold price caught bond traders’ attention and they are a bit more worried about inflation than they are the lower equities. Bonds are probably going to have to get below the 117 level and stay there to flip the inflation/deflation battle over to the inflationist camp. All I can say is that you could not pay me to hold a US debt obligation. They are nothing but confetti paper in my opinion as the world is literally awash in them.

Back to gold for a brief moment – volume in the gold pit is very strong today and most impressive. This move is coming with a lot of emotion particularly fear among the gold shorts. The weaker ones were blown out – the only selling left is the bullion banks but it should be noted that they have not been able to cap the price below the early morning price peak. Buying is quite persistent and is eating through the overhead selling allowing the market to move higher and put in a new peak as it moves further into the session. That is not the norm that we have grown accustomed to seeing in this market.

 

[explod]

Dan's chart that goes with above report

cheers explod