Gold Price - Where is it heading?

[Edwood]

I disagree.

fear enough

USD TWI posted its low on 26 Nov, XAU put in a temporary high same day then rallied to 1220's (arguably on a short squeeze) before rolling over. since then while USD has been rallying XAU has been declining. USD is about to decline again temporarily and XAU should rally. which one leads which one might ask? USD imo.

Still looking for XAU down to the 1000 area (as posted late Nov) so not far away from your 993 area sinner

nohing is for certain of course, just my view

 

[explod]

fear enough

USD TWI posted its low on 26 Nov, XAU put in a temporary high same day then rallied to 1220's (arguably on a short squeeze) before rolling over. since then while USD has been rallying XAU has been declining. USD is about to decline again temporarily and XAU should rally. which one leads which one might ask? USD imo.

Still looking for XAU down to the 1000 area (as posted late Nov) so not far away from your 993 area sinner

nohing is for certain of course, just my view

Agree with you Edwood. In the last 12 months on the charts and apart for a short period in March of this year the gold pirce and the US$ index have moved almost precisely in opposite directions.

Some short periods of moving together when fear drives all quarters to the so called "Safe haven" ie. gold and the cash.

Wont post it hear more for the correction thread but James Turk latest on Kitco is well worth a look by gold followers.

cheers for the festive all

explod

 

[Uncle Festivus]

An interesting juncture for all markets? Weekly equity charts of FTSE & SPX show a rolling over, coinciding with the Dubai & Greece fiasco's and shift from the Euro into the USD. Even though the 'pretender' index the Dow had a good day, the GDP figure revision was ignored? Take a bow boofheads-who-call-themselves-economists - calling it at 3.5% initially, then revise it down to 2.8, then down to 2.2%! Take out the government subsidy bits and it's still a pale imitation of a recovering economy.

Not good news for gold though, momentum is now down comrades .
Sold out of all my gold equities 2 weeks ago now, still got bullion though.

Then again, if the Eurozone s#it hits the fan then some Europeans might just decide to pile into the last currency standing - gold? Still, must wait for this reaction phase to play out though......USD carry trade unwinding.....suck all those equity capital raisings into the system then splat!!! Insiders still selling big time!

 

[sinner]

Let's face it of course there will be some affect of the USD on gold, because it is priced in USD.

But I don't think the USDX is somehow the key here at all. It's a common misconception, they even spout it off on Bloomberg all the time.

What you should be watching is US Treasuries, Japanese Government Bonds and German Bunds.

EDIT: Oh yeah, and the ABX subprime index.

http://www.markit.com/en/products/data/indices/structured-finance-indices/abx/abx-prices.page?

 

[Glen48]

USA owes so much money at this stage that if they paid it back at $1 Billion a day it will take 366 years to repay.. Gold has no choice but to rise. I saw some expert predicted it would drop to 1080 and then start on the next leg up.. Merry Xams to all us who believe.

 

[Beej]

USA owes so much money at this stage that if they paid it back at $1 Billion a day it will take 366 years to repay.. Gold has no choice but to rise. I saw some expert predicted it would drop to 1080 and then start on the next leg up.. Merry Xams to all us who believe.

Wow "impressive" numbers there!! Did you know that $1B amounts to less than 2.4% of current US GDP per day?? How's that for an "unimpressive" number? And the gold expert - did they have a crystal ball? It's amazing that they can predict the future like that! I just hope their predictions turn out better than most of yours have for the past couple of years Glen48

Merry Xmas to all at ASF! Even to those who I think should stick to wearing their tin foil hats

Cheers,

Beej

 

[Uncle Festivus]

Wow "impressive" numbers there!! Did you know that $1B amounts to less than 2.4% of current US GDP per day?? How's that for an "unimpressive" number? And the gold expert - did they have a crystal ball? It's amazing that they can predict the future like that! I just hope their predictions turn out better than most of yours have for the past couple of years Glen48

Merry Xmas to all at ASF! Even to those who I think should stick to wearing their tin foil hats

Cheers,

Beej

Actually I think the figure that is interesting is the one where the US requires foreign investment of approx $2BILLION A DAY just to stay breakeven with it's debt commitments. Add in the interest bill, future unfunded spending etc and you have a small crisis. Several states are already insolvent, as are several countries.

While the US technically will always be able to print more money to repay any debts due, it means than US citizens will have to be committed to substantially lower standards of living ie like the 35 million currently on food stamps, or the 18% who are under or unemployed.

The problem then is not so much for the 'tin hat brigade', who have gotten it right so far, but the Pollyanna, sun-always-shines-tomorrow brigade who conveniently dismiss bad data, and who totally failed to see any glimmer of the first Global Financial Crisis, and who now think that the worst has passed and we are forever onwards and upwards again ad infinitum?

The next leg DOWN is about to start.

 

[joeyr46]

USA owes so much money at this stage that if they paid it back at $1 Billion a day it will take 366 years to repay.. Gold has no choice but to rise. I saw some expert predicted it would drop to 1080 and then start on the next leg up.. Merry Xams to all us who believe.

If the US can't repay debt that will be deflation not inflation so don't expect gold to go up

 

[Uncle Festivus]

If the US can't repay debt that will be deflation not inflation so don't expect gold to go up

Deflation is better for gold - fiat currency demonetisation will ensure that happens, despite short term 'flight to qaulity rallies. Gold is the currency that won't, relative to all other paper money currencies, be evaporated to oblivion by human financial hubris?

 

[GumbyLearner]

ATM golds getting spanked by a "strong" :bonk: US dollar.

I'm waiting for $1.5K Au and $2K Platinum in mid 2010.

DYOR

 

[moXJO]

ATM golds getting spanked by a "strong" :bonk: US dollar.

I'm waiting for $1.5K Au and $2K Platinum in mid 2010.

DYOR

China is eating it up atm

 

[explod]

China is eating it up atm

China has a very vested interst in a strong US dollar. The US owes them heaps and China holds US treasury bills big time. So much so that they have to download slowly, so holding the dollar up and keeping gold at bay is a frantic preoccupation for China at the moment.

If it fails everything is going to be jammed at the gate.

 

[Whiskers]

While the US technically will always be able to print more money to repay any debts due, it means than US citizens will have to be committed to substantially lower standards of living ie like the 35 million currently on food stamps, or the 18% who are under or unemployed.

That's the key alright.

The next leg DOWN is about to start.

Nah, not quite yet... all psychological.

I think now that Obama has started kicking in some of the regulatory changes/improvements that Bush flagged, but failed to act on, the yanks have gasped a bit of a sigh of relief and have just been toughing it out for a bit to maintain their living standards. I suspect as the short term household financial outlook improves as opposed to the macro economic numbers, they will start to spend again and keep the market going for a while yet.

I think the old cliche once bitten twice shy will kick in when the effects of stimulus spending phases out and the markets start to slide again. I'd say that the gravity of the US macro economic prediciment and unfunded health and retirement obligations etc will only reflect in permanently lower living standard expectations when the gov does not have the capacity to prop up the next financial market down turn in the US to the same extent.

In the meantime, for the POG, as poignantly pointed out by others there are titanic vested interests in the USD and the POG at work which will take some time yet to diminish before I think the POG will make any significant gains.

It peaked a tad higher than the 1,200ish I expected, but I still expect it to trade pretty much sideways in USD for maybe years rather than months... but better in AUD in the short to medium term with the falling AUD/USD, despite ( if I heard correctly) that Macquarie Wealth economist on Ten news tonight expecting the AUD to firm again in the new year.

 

[daki]

U.S. will have to engage into new war to battle unemployment! where will gold go from then?

 

[explod]

U.S. will have to engage into new war to battle unemployment! where will gold go from then?

To do that they will have to print even more money to either prop up unemployment or, as I suspect what you are saying, to wage a militarly war, and further dilute the US dollar so gold will just keep steadily going up IMHO

 

[joeyr46]

Deflation is better for gold - fiat currency demonetisation will ensure that happens, despite short term 'flight to qaulity rallies. Gold is the currency that won't, relative to all other paper money currencies, be evaporated to oblivion by human financial hubris?

Gold priced in US dollars will go down as the US dollar gets stronger because there are less of them as debt defaults (thats deflation) the opposite of printing USD and causing it to weaken (inflation) which is what gold has always been a hedge for. Gold wont evaporate to oblivion and after deflation (debt default )causing everything to become cheaper or the dollar to be more expensive against goods (not neccesarily against other currencies ) if the government prints more money at that point then Gold could well run to extremes, but deflation has to run its course IMHO first

 

[moXJO]

To do that they will have to print even more money to either prop up unemployment or, as I suspect what you are saying, to wage a militarly war, and further dilute the US dollar so gold will just keep steadily going up IMHO

Maybe the bunker buster bombs being fast tracked (not sure how reliable) means trouble for Iran. http://www.debka.com/headline.php?hid=6288

Only problem is Iran can shut down oil supply as they updated their navy and hold the Strait of Hormuz.
Is the US really willing to get into another war, or will Israel kick it off and leave it to the US.

 

[explod]

Gold and Silver to Explode with Treasury Issuance in 2010

By Dr. Jeffrey Lewis
Dec 30 2009 2:34PM

www.silver-coin-investor.com



Now that 2009 has come to a close, investors are looking forward to the happenings of 2010. One of the most important events is the issuance of nearly $2.2 trillion in Treasury bonds to fund government spending. Although $2.2 trillion seems relatively small compared to a federal debt just over $12 trillion, the size is magnified when you consider its impact on the markets.

2009 Treasury Sales

The 2009 Treasury issuance was relatively tiny due to the amount of quantitative easing enacted by the Federal Reserve. To help ease the credit markets, namely the Treasury markets which allow the government to spend money, the Federal Reserve printed over a trillion dollars and purchased several hundred billion dollars of US Treasuries, as well as nearly $1 trillion of “agency debt” or mortgage-backed securities.

After the Fed’s buying spree, there was only $200 billion in fixed income remaining, creating a net issuance in 2009 of $200 billion. Of course, $200 billion is virtually nothing when it comes to the world economy and the amount of money in existence, and thus, $200 billion was consumed relatively easily, with no real impact on the marketplace.

The Situation in 2010

Fixed income issues are set to increase from $1.75 trillion to $2.25 trillion next year, with the difference mostly comprised of heavier borrowing by the Federal Government via the Treasury markets.

Unfortunately, the Federal Reserve has only $200 billion remaining in its quantitative easing fund to buy agency debt and US Treasuries, and the funds will only last until March under the program enacted early last year. This leaves a total of $2.05 trillion unfunded that must be borrowed to keep government programs in the black – at least with capital and not actual earnings.

Therefore, in the next year, the US Treasury will need to borrow more than $2 trillion without the help of the Federal Reserve. China has already said it is limiting its purchases of US Treasuries, and the government is proving its resolve by redeeming long-dated bonds and rolling them into short term debt. Other purchasers, such as Japan, have their own financial problems. The remaining countries, institutions, and other investors aren't too keen on earning low rates on what is quickly becoming riskier debt.

What is the solution? The Fed will simply need to print more money.

The Fed Will Have to Step in with its Printer

Remember, this recession was triggered due to a shortage of credit. To aid in both creating credit, as well as providing short term loans to businesses and government, the Federal Reserve began to create money to ease the burden. As a result, the Fed bought more debt than anyone else by a factor of 10.

Moving into next year, with the same credit problems and net issuance of $2.25 trillion, the Fed will have to further its quantitative easing (inflation) programs to keep the Treasury markets liquid. Should the Federal Reserve continue to print money to gap a shortfall in Treasury sales, the creation of $2 trillion would create inflation of 25% overnight. Obviously, as in all markets, inflation will not come out of the woodwork for a period of months and possibly up to two years, but it will eventually reach the market. Subsequently, in 2010, investors of all types need to be incredibly prudent with their money and protect their assets with precious metals.



Dr. Jeffrey Lewis

 

[Bolivia]

Explod: "What is the solution? The Fed will simply need to print more money"

The other solution, which actually happened over the last Treasury issuances, is a substantial increase in interest rates. The risk premium that buyers of treasuries are willing to pay has begun to increase. This will continue to happen as sovereign risk increases in all debt laden countries.

In effect, the Fed has no ability to stop these rate rises, totally going against what they want. Remember the Fed wants rates low to keep stimulating the economy, but in order to fund the federal deficit the Gov needs to keep issuing debt. As Explod rightly points out, this year will see a huge net issuance, which will only be taken up at considerably higher rates.

This whole scenario smacks of impending stagflation. Rates rising out of control, economic growth falling due to higher rates, and of course with higher rates it means higher prices.

The initial response WRT the US dollar will be an upward move, due to the higher rates, but when one looks through the reasons for the rate rises, the dollar will soon spiral.

The outlook for gold in the medium to long term can only be bullish under this unfolding scenario.

Good luck to all.

 

[GumbyLearner]

It was great to meet Explod and his Missus this week. We went to Dalia's in Dromana and drank lattes, long blacks etc.. until the cows came home (Great coffee by the way) discussing the precious metals market. Wonderful to meet up with a fellow ASFer in person. Had a great yak and confirmed everything the thread entails thus far. Cheers explod, you're a top bloke.