Gold Price - Where is it heading?

explod · 6 January 2015

We all tend to can what we do not want to see and I would, over the years be first to admit such errors.

Gold is a financial industry connumdrum, it avoids trailing feesand commissions and throughout history (canary in the cage) it reveals the real worth of money. So against an unbacked paper currency going down the tubes with massive debt, it is enemy number one and the current BS on the evening financial news confirms the fact.

Someone canned Harvey Organ on here the other day, and though he gets a bit excited at times, he just publishes the daily trading figures as the roll. Nothing fictitious in that and his extrapolations are supported by such facts.

Today, off the same site we have another angle from Jim Willie, that if taken with the mind open makes good sense on where we may be headed with gold.

http://www.silverdoctors.com/jim-willie-the-end-game-is-underway/

And followed charts since 1968, W. D. GANN was very valuable in my early years. But the politics behind the banks is where it is really at. My study of the original founder of the Rothchild's the big eye opener.

Bintang · 6 January 2015

explod said:
Someone canned Harvey Organ on here the other day, and though he gets a bit excited at times, he just publishes the daily trading figures as the roll. Nothing fictitious in that and his extrapolations are supported by such facts.

Explod, do you include in that HO's extrapolation back last September of $200/oz silver and $10,000/oz gold by 1 January 2015? Last time I checked the facts on the silver and gold charts it looks like he was a bit wide of the mark.

explod · 6 January 2015

Bintang said:
Explod, do you include in that HO's extrapolation back last September of $200/oz silver and $10,000/oz gold by 1 January 2015? Last time I checked the facts on the silver and gold charts it looks like he was a bit wide of the mark.

Agree, and we would all be guilty of that. As I said, he does get a bit excited and any predicting is fraught, but particularly in the current market.

I have followed Harv's blog for a number of years as he is one of the closer reporters to the trading platforms.

Lol, at the start of 2014, I predicted gold to hit $US3100, hey, could have just been 12 months out. The way oil and the US dollar are looking, and the sheer pace of it would suggest a big Wall is set to hit soon in my view.

To ignore good info based on a wild prediction or two would be to take off the glasses. We need all the help we can find to steer our way in these crazy times I suggest.

Bintang · 6 January 2015

explod said:
I have followed Harv's blog for a number of years as he is one of the closer reporters to the trading platforms.

I used to follow HO's original (pre-shutdown) blog just for its useful compilation of daily news articles. But as for his own commentary I have always found it nebulous and repetitious. Since he moved over to silverdoctors his posts no longer contain the news articles and the only thing of interest are the reader’s comments.
HO's obsession with GOFO rates has become a big yawn and the following paragraph gets repeated day after day:
"The registered vaults at the GLD will eventually become a crime scene as real physical gold departs for eastern shores leaving behind paper obligations to the remaining shareholders. There is no doubt in my mind that GLD has nowhere near the gold that say they have and this will eventually lead to the default at the LBMA and then onto the comex in a heartbeat (same banks)".

Ann · 6 January 2015

Bintang said:
Ann, it doesn't matter whether you use linear scale, semi-log scale, log-log scale or squiggly scale the lines are meaningless and have no predictive capability. If you draw straight lines on a semi-log scale you are simply applying an exponential trend. There is no intrinsic reason why any trend should be constantly exponential. I think vomitting camel pattern analysis has much more credence. http://www.cnbc.com/id/102147311

You are missing the entire point about charts Bintang, a chart is a universal language which can be understood by millions upon millions of people of any nationality without any delay of information.

Once they understand and accept the general principles of charting, millions of people can act in unison with absolutely no co-ordination other than a single line on a chart. There is no need for blogs or news reports, all they need is a knowledge of charting to co-ordinate their buy/sell signals.

If certain lines are more universally used than others as in long term support lines then you will get a ship load of people dumping at the same time. Some will read in Log and bail out earlier and take larger profits, some will have their charts set in Linear and perhaps sell during a panic. Others will have had percentage stops levels set at various time delays, by now these last people will be well and truly sold out of gold and into their next speculative foray.

Gold is a more universal product than local stocks so you are likely to have more people reacting to gold's movements on an international basis.

Imagine the number of speculators of gold in India and China alone! All reading their charts, all waiting for a sell signal to be triggered.

MARKETWINNER said:
I believe this could be very important year for gold. Any further fall in gold prices especially below $500 will create gold crisis in Asia. Some emerging countries such as China and India will hit hard.

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11366711

Swiss reject gold hoarding plan

DYOR

Hi Marketwinner, that was a very interesting article you linked to.....this is the part I found the most interesting

"Until 1973, Switzerland was part of the Bretton Woods system of fixed exchange rates and the value of the Swiss franc was defined in grams of gold. But the Swiss National Bank (SNB) was criticised for holding excessive gold reserves that generated too little return. Moving away from this system allowed the bank to decide more freely how to invest its currency reserves."

It has always been the lack of return from gold which has kept me from investing. Capital gains are one thing but I always like a bit of rent/interest/dividend along the way.

Bintang · 6 January 2015

Ann said:
Imagine the number of speculators of gold in India and China alone! All reading their charts, all waiting for a sell signal to be triggered.

I doubt this very much. The Indians and Chinese will be waiting for buy signals and if they are looking at charts they will not be configured in US$ and will therefore look nothing like the charts you are using.

PS: In fact even for me I care little what the US$ price of gold is. Its the AUD price which I look at.

Bintang · 6 January 2015

Ann, you also neglected to mention the Russians.
Here is the chart they are probably looking at - apologies for the linear scale but I don't think it matters.

Ann · 6 January 2015

Bintang said:
Ann, you also neglected to mention the Russians.
Here is the chart they are probably looking at - apologies for the linear scale but I don't think it matters.

View attachment 61008

You are quite right Bintang it is such a very short time frame it wouldn't matter whatever scale it is in , it would look the same.

What I am finding interesting on the chart in Rubles is it appears Russian Rubles may be suffering from some degree of devaluation and gold in their currency may be a reasonable hedge. Don't know, don't do Forex.

I actually didn't forget Russian gold speculators/investors but they are a mere drop in the ocean with around 143 million people to India's 1.27 billion and China's 1.35 billion.

Looking at the 10year gold chart in Chinese Yuan, it is tracking the US chart virtually step by step. http://www.kitconet.com/charts/metals/gold/2a-cny-us-10y-Large.gif

Looking at 10 year chart for Indian Rupees it looks pretty much the same as a chart in US$ http://goldprice.org/NewCharts/gold/images/gold_10_year_o_s_INR.png?0.24251371833785773

Excluding Russia I think the world is likely to jump all together.

Ann · 7 January 2015

Bintang said:
PS: In fact even for me I care little what the US$ price of gold is. Its the AUD price which I look at.

The AUD price of gold is masked by our falling currency...our currency loses value as gold loses value so therefore anyone holding gold in AUD is a double loser so the losses may be much more than people can see on a gold chart using AUD. It is an illusion gold is holding up better in AUD, it is not.

Bintang · 7 January 2015

Ann said:
Excluding Russia I think the world is likely to jump all together.

I think I now understand the point of your chart, which started this banter. So you believe based on your chart and its semi-log line that the gold price is heading downwards from its current price level. Let me offer an alternative view.

In the accompanying chart I have applied vomiting camel pattern analysis to the longer term trend. We are thereby able to see an earlier, somewhat larger vomiting camel pattern that developed around the 2007/2008 period. I’m not an expert with this charting technique and the textbooks are yet to be written on the subject but I think it is important to do this analysis on a linear scale because a log scale will distort the true shape of the camel’s humps. This is important because once the humps are correctly identified it puts the camel’s head in the correct splat zone position. Now what does this mean? Well we can see that gold had a spectacular 200% price rise after the first camel splat (i.e. chunder in Australian vernacular). The magnitude of the price rise is probably somehow proportional to the size of the splat so I am not suggesting that we are about to see a price surge of similar magnitude. The most recent vomiting camel manifestation is smaller and I also have to acknowledge that it looks like the first camel had an almost vertical flagpole up its rear end, which would have made its splat considerably more energetic. However, I think the gold price is heading upward – especially in rubles. And if the price does not go up it will simply be because it goes down instead. Charts can't be right all of the time but one thing they tell us with 100% certainty is that the price never stays constant.

Ann · 7 January 2015

Bintang said:
I think I now understand the point of your chart, which started this banter. So you believe based on your chart and its semi-log line that the gold price is heading downwards from its current price level

Eureka! I think he has got it! Well done Bintang! However it may head up as I keep watching the chart. The Russians may start speculating big time in gold if their Ruble continues to devalue. Gold may be the only game in town....or maybe not....perhaps the US$ may have some appeal to them as well!

This means FA to me, I am pure TA so I will keep watching the charts, they will tell me all I need to know ...bless them!

Uncle Festivus · 9 January 2015

Ann said:
The AUD price of gold is masked by our falling currency...our currency loses value as gold loses value so therefore anyone holding gold in AUD is a double loser so the losses may be much more than people can see on a gold chart using AUD. It is an illusion gold is holding up better in AUD, it is not.

Huh? How can I be a 'double loser' when the price is 8% higher in $AUD at the end of the year than the start? How do you think the price in $AU is derived??? NO illusion there.

That's the whole point of what's happening now with the (dirty) currency wars - trying to make economies artificially competitive through currency devaluation via various QE, etc and the ever growing revulsion of the $USD as the global currency which manifests itself in trade deals and currency swaps that don't include the $USD.

The advantages this system bestows on the US are enormous. “Reserve currency status” generates huge demand for dollars from governments and companies around the world, as they’re needed for reserves and trade. This has allowed successive American administrations to spend far more, year-in year-out, than is raised in tax and export revenue.

.....seven decades on from Bretton Woods, the governments of Brazil, Russia, India and China led a conference in the Brazilian city of Fortaleza to mark the establishment of a new development bank that, whatever diplomatic niceties are put on it, is intent on competing with the IMF and World Bank.

And this is why gold will literally take of soon, and the US will have to start paying the pipers - the 22% crash in USD foreign exchange holdings in just 12 years...

Although the dollar’s reserve status won’t end overnight, the global payments system is now moving inexorably towards that outcome. The US currency accounted for just 33pc of all foreign exchange holdings in 2013, on IMF numbers, down from 55pc in 2001.

http://www.telegraph.co.uk/finance/...rs-70-year-dominance-is-coming-to-an-end.html

As for charting generally, if enough fools know the same rules then the fools will herd themselves off a cliff eventually..................

Uncle Festivus · 9 January 2015

DeepState said:
Why does it follow that those pegged to the USD defaulting in some way, associated with breaking of the pegs and depletion of foreign reserves (presumably), results in the US sovereign being forced to repay its debts (presumably you mean having to reduce the stock of debt rather than rolling it)?

The rising dollar is an imbalance in an already unbalanced system. To raise rates would be the final capitulation for foreign debtors, so unlikely it will happen soon, most probably not at all? We just have to sit back and wait now....

Against this backdrop, the BIS is concerned that some emerging economies could come unstuck because of a growing dependence on loans taken out in US dollars.

Offshore lending in US dollars has hit $9tn, roughly double its 2008 value. Emerging economies have taken out $3.1tn in cross-border loans, mostly in US dollars. Since the end of 2012 alone, dollar loans to China have doubled to $1.1tn, and Chinese citizens have borrowed more than $360bn in debt securities.

But this puts borrowing economies in a vulnerable spot. As the dollar appreciates in value against the local currency, the loan becomes more expensive to repay, raising the risk of default and economic instability. The dollar has been rising against the euro and the yen since the US Federal Reserve announced an end to its stimulus programme and hinted at an interest-rate rise next year. In contrast, the European Central Bank and Bank of Japan have loosened monetary policy and signalled greater stimulus.

“The appreciation of the dollar against the backdrop of divergent monetary policies may, if persistent, have a profound impact on the global economy, in particular on [emerging market economies]. For example, it may expose financial vulnerabilities as many firms in emerging markets have large US dollar-denominated liabilities,” BIS said.

Bintang · 9 January 2015

Ann said:
The AUD price of gold is masked by our falling currency...our currency loses value as gold loses value so therefore anyone holding gold in AUD is a double loser so the losses may be much more than people can see on a gold chart using AUD. It is an illusion gold is holding up better in AUD, it is not.

Like most Australians my income and living expenses are entirely in Australian dollars. When I buy gold the fiat I have available to buy it with is AUDs. If I sell it (but I don't) the Perth mint would give me AUDs in return.

Now suppose I had bought one oz of gold in May 2014 for AUD 1340 (which I did but more than 1 oz actually) and sold it yesterday. I would have around AUD1500.

Suppose that instead of buying the oz of gold in May 2014 I had put my AUD 1340 in an 8 month term deposit at 3% annual interest rate and it matured today giving me AUD 1368.

Please now tell me why purchasing gold in AUD would have caused me a double loss. Perhaps you can use your charts to explain it.

explod · 9 January 2015

I am with your thoughts Bintang.

Holding physical gold (in my case silver) is not about trading or making money, it is about preservation of capital in uncertain times. And if ever there was such a time, it is now.

But back to the ponzie paper game, the US$ gold price is looking for a run towards the $1245 mark, next resistance. I base this idea on main street media jargon, fundamentals and chart behaviour of the last day or so.

Just a rough view with gobbledygook thrown in.

Ann · 10 January 2015

Bintang said:
Like most Australians my income and living expenses are entirely in Australian dollars. When I buy gold the fiat I have available to buy it with is AUDs. If I sell it (but I don't) the Perth mint would give me AUDs in return.

You will lose purchasing power. Most of our big ticket purchases (cars, electronics, clothing) are manufactured overseas, they will become more expensive as the AUD falls. Property is likely to rise in price as it becomes cheaper for foreigner investors to buy with their appreciating currencies.

Bintang said:
Now suppose I had bought one oz of gold in May 2014 for AUD 1340 (which I did but more than 1 oz actually) and sold it yesterday. I would have around AUD1500.

Suppose that instead of buying the oz of gold in May 2014 I had put my AUD 1340 in an 8 month term deposit at 3% annual interest rate and it matured today giving me AUD 1368.

Had you actually sold yesterday and taken profits I would have applauded your win. However you say you buy gold and hold.

It is fine to cherry pick a good looking date and show paper profits. I will cherry pick a date from three years ago when there appeared to be a great buying opportunity for genuine gold bugs....just 5 months after its high it sank down dramatically. A good time to buy into the retrace one would have thought.

Bintang said:
Please now tell me why purchasing gold in AUD would have caused me a double loss. Perhaps you can use your charts to explain it.

1. You will be paying more for overseas products as the AUD continues to lose value.

2. the $ value of your gold assets will be depreciating if gold continues to fall.

I need to spell this out very clearly in the simplest possible way..... Gold may or may not fall further, I am not saying it will, I am not saying it won't. I am simply saying if it does this may be the outcome.

I will put up the chart you requested to show why you lose twice.

Uncle Festivus · 10 January 2015

Ann said:
You will lose purchasing power. Most of our big ticket purchases (cars, electronics, clothing) are manufactured overseas, they will become more expensive as the AUD falls. Property is likely to rise in price as it becomes cheaper for foreigner investors to buy with their appreciating currencies.

Had you actually sold yesterday and taken profits I would have applauded your win. However you say you buy gold and hold.

It is fine to cherry pick a good looking date and show paper profits. I will cherry pick a date from three years ago when there appeared to be a great buying opportunity for genuine gold bugs....just 5 months after its high it sank down dramatically. A good time to buy into the retrace one would have thought.

1. You will be paying more for overseas products as the AUD continues to lose value.

2. the $ value of your gold assets will be depreciating if gold continues to fall.

I need to spell this out very clearly in the simplest possible way..... Gold may or may not fall further, I am not saying it will, I am not saying it won't. I am simply saying if it does this may be the outcome.

I will put up the chart you requested to show why you lose twice.

I think you are just confusing yourself even more. What has imported goods prices got to do with the gold price in $AU? There is no argument there - imported goods prices should go up as the exchange rate falls (if they are imported from the US), all else being equal.

And it's not about cherry picking prices - the price of gold in $AU will go up as the $US/$AU exchange rate falls, all else being equal. It's simple maths.

Your points? 1 - correct, if buying from the US, but irrelevant here.
2 - Depends on the exchange rate doesn't it?

tinhat · 10 January 2015

Here is a chart showing the value of the AUD in USD (black)and the relative value of gold in USD (blue) going back as far as I have data for (from 1998).

Ann · 11 January 2015

Uncle Festivus said:
I think you are just confusing yourself even more. What has imported goods prices got to do with the gold price in $AU? There is no argument there - imported goods prices should go up as the exchange rate falls (if they are imported from the US), all else being equal.

And it's not about cherry picking prices - the price of gold in $AU will go up as the $US/$AU exchange rate falls, all else being equal. It's simple maths.

Your points? 1 - correct, if buying from the US, but irrelevant here.
2 - Depends on the exchange rate doesn't it?

G'day Uncle Festivus, I think it is you who is confusing yourself! Let me try to clarify for you, I was suggesting to Bintang he was taking a double hit holding gold bought in $AUD, because the price of gold is falling in $AUD. Monday August the 22 of 2011 the gold price saw an all time high close of $AUD1822.10 it is now down to a close on Friday January 9 2015 of $AUD1489.69.That is a fall in price and his first hit. It's simple maths.

The second hit I was suggesting Bintang was taking, was on the value of his Aussie dollars as it is losing value against our trading partners (Japan to a lesser extent so far) which means it will cost more for imported goods and not just from the US but from China as well. The Yuan tends to track the $USD.

So holding an asset which is falling in price using a currency to hold it which is falling in value is in my opinion taking a double hit.

I would hazard a guess that we currently buy the majority of our big ticket items from China not so much from the US although the government is going to buy a few bobs worth of fighter planes in a few years from the US. Could be a very expensive exercise, unless they pay for them in $USD, hopefully we are holding some.....if not, tighten your belts folks!

Now for the inevitable chart ....this time showing the Australian dollar to the Chinese Yuan

Hope that clarifies it for everyone, probably not for the gold bugs, they tend to be blinded by gold dust! Not too far removed from bulldust!

Bintang · 11 January 2015

Ann said:
So holding an asset which is falling in price using a currency to hold it which is falling in value is in my opinion taking a double hit.

Let's see now. Gold price falls to USD1000 and the Australian dollar exchange rate drops to 0.65. At that point the gold price is AUD 1538. That looks to me like a preservation of value rather than a double loss. But if your charts tell you otherwise that's ok by me.
As for cherry picking that is exactly what I try to do. I target the dips in the AUD price for the purpose of accumulating. What I allocate to gold amounts to less than 10% of my portfolio at any particular time.

Ann, you obviously only think in terms of trading activity so you will never understand why people like me buy gold and hold it. But I think also that your idea that there are millions of Chinese and Indians watching USD gold charts and waiting to hit the sell button when the price drops is non-sensical. Quite the opposite is the case. That is why the gold price has already managed to stay above USD1130 and hasn't dropped to the USD800 level suggested by the likes of Goldman Sachs.

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