Gold Price - Where is it heading?

[ducati916]

1. I do not find the correlations of gold and treasuries to be especially meaningful for short term movements,

2. and for the longer term regard debt to be gold's principal driver.

3. Beyond that I will rely on charts and market sentiment for direction.

4. Gold will always be a fungible store of value so I am not concerned about what "paper" says should or could be more valuable.

1. So here is an 18yr chart:



2. Debt does not correlate well. 1981 - 2002 gold goes down. Same time period debt goes higher. We have already covered this point earlier in the thread.

3. Fine.

4. Yes it is. That doesn't mean you can't show a loss on it.

jog on
duc

 

[rederob]

Debt does not correlate well. 1981 - 2002 gold goes down. Same time period debt goes higher. We have already covered this point earlier in the thread.

I am looking at what will continue to drive gold increasingly higher, and that will be debt.
The difference in our words relate to correlations being post fact while drivers are forward looking.
As I have said before, unless you know which metric leads the other, and that the relationship is consistent, I don't worry too much about correlations.

 

[rederob]

Given long-term resistance of $1640 is just a whisker away now, it is going to get very interesting indeed once it is cleared.

That was Friday.
Here's what happened:

So resistance has been reset at $1680 which is about $100 higher than a week ago.
This is not a sustainable rise imho, so look to the above gap being filled.

 

[rederob]

Monday's POG peaked at $1689.30 and we have seen a firm retracement in price since then.
I hope that continues for weeks to come.


Although gold equities were heavily bought Monday, their prices have since returned to previous week levels in the main.
I was checking out a number of various company announcements and found some institutional stock holders have added to their positions.
In the case of Van Eck (one of the the biggest players in world gold markets), they went from zero to a +5% holding in AMI in the last month.
I believe there is a steady change from trading to investing in gold equities, as this bull market has a lot left in it and most producers were already turning a useful profit when POG was US$300/oz less than today.

 

[ducati916]

Just hope there is no rise in yield.

In the short term, I would not expect any rise, rather, a fall, which for gold would be very positive. Longer term however, as the lowest CapEx since the 1950's takes root in oil producers and production levels fall, the imbalance in supply/demand will see the oil/gold ration move against gold.

That will be seen as inflationary, which could, drive yield higher.

jog on
duc

 

[gartley]

Monday's POG peaked at $1689.30 and we have seen a firm retracement in price since then.
I hope that continues for weeks to come.


Although gold equities were heavily bought Monday, their prices have since returned to previous week levels in the main.
I was checking out a number of various company announcements and found some institutional stock holders have added to their positions.
In the case of Van Eck (one of the the biggest players in world gold markets), they went from zero to a +5% holding in AMI in the last month.
I believe there is a steady change from trading to investing in gold equities, as this bull market has a lot left in it and most producers were already turning a useful profit when POG was US$300/oz less than today.

I think we neen to be really careful here. Gold stocks got hammered in 2008. Personally I prefer the physical stuff at this point in time.

 

[barney]

I think we neen to be really careful here. Gold stocks got hammered in 2008.

Gold Stocks also got hammered today on our market in a high 'gold price' arena ……..

Punters are obviously nervous, and when punters are nervous … fundamentals go out the window in the short term.

Personally, I am in pain financially in this current smash up … but hopefully I will be smarter coming out the other side than in the past ...

 

[fergee]

Gold Stocks also got hammered today on our market in a high 'gold price' arena ……..

Punters are obviously nervous, and when punters are nervous … fundamentals go out the window in the short term.

Personally, I am in pain financially in this current smash up … but hopefully I will be smarter coming out the other side than in the past ...

Weak hands getting shaken out, its not all bad they are getting margin calls or just chicken, good to see. I don't want to see a vertical rise in gold it creates a weak price structure over the longer term. Climb those stairs then jump a few back every now and again is healthy imo

I think a lot of people are in pain you can ride it out or rip the band aid off.

Im looking forward to those bargains baby

 

[ducati916]

Silver lagging. Has the same 'money' reality as gold, yet, little to no movement. By far the better value if one is looking to insure that one has money and not credit.

jog on
duc

 

[rederob]

I posted this a week ago:

Gold took the elevator down overnight.

Overnight POG dipped to as low as $1562.74 (4 hours ago) and has been recovering since.
It's clear that this past week has been ruled by fear.
In that environment, even gold has been dumped - at least for now.
My view is that so far $1550 has not been breached, and this apparent calamity is well within the consolidation bands I posted last week. When or if $1550 is breached, then we have a new ball game.
COVID-19 was overnight elevated to a high level global threat.
So I have parked some money until the threat level has reduced and will stay out of the markets until then.

 

[finicky]

From this angle, on a monthly chart, Gold could be starting to outperform the Dow again - second positive signal of this type since 2002.

Interesting twitter remarks by this guy:

Benjamin Deutsch
@TradingForPro

1/ I know... #GOLD Investors are again depressed. We get the deep cleansing now. Weak hands have to sell, strong hands have to buy again. Comment to the chart below: We got only 3 signals in 20 years. The third one came yesterday. Never forget the big picture! We are...

2/ clearly in a new #GOLD bullmarket. Many fearing the sell off and a big catastrophy like 2008. Don't fear it, see the opportunity what is ahead of us. Very soon we'll get the biggest stimulus we have EVER seen in our lifetimes, it's time for hard assets.

 

[rederob]

For the best analysis I have ever seen on POG's probable future, please visit this site, which includes the below plus many other excellent charts:


Note that the "blue" line above confirms the point made by @finicky in his previous post.

 

[rederob]

Absolutely crazy opening on gold this morning.
Immediately jumped to $1593 - some $7 higher than Friday's close.
Then spent the next +20 minutes tracking lower before rebounding.
As you can see from the below chart, minute by minute swings were wild early on, and of large magnitude.

I know it's still early in the proceedings, but wondered if there was going to be something decisive to shape the week ahead.
Had he brief downtrend continued, then I would have been pessimistic.
However, so far it appears that last Friday's selloff was overdone.

 

[ducati916]

The big selloff in Gold was Russia selling gold to balance its losses in oil revenues and meet payments on debt obligations.

jog on
duc

 

[rederob]

The big selloff in Gold was Russia selling gold to balance its losses in oil revenues and meet payments on debt obligations.

Do you have a reference?
I read and heard analysts over the weekend saying it was general short covering, but nothing about Russian oil.
Anyway, the past 20 hours saw POG range-bound between $1590 and $1610 ($1593 as I posted but rapidly dipping to $1585 as I did this edit 10 minutes later).
If COVID-19 runs as previous pandemics did, then the general equities markets have a lot more pain ahead.
As @peter2 notes, if you are looking for something to survive the rout, then good gold equities are likely to offer hope.
Reasons:

1. As gold is a safe haven in tough times, POG is unlikely to weaken, and certainly not at the same rate as other market sectors
2. Hedged producers are not going to be significantly affected, while those largely unhedged will be delivering into a market already several hundred USD higher than last year
3. Those buying into gold will be looking more to park their money safely for a while than think they can trade their way to profits, so a semblance of progressively higher prices seems likely to prevail as more buyers enter the fray.
4. Unlike other metals, gold's market is not affected by industrial production, so its price will move almost entirely on sentiment rather than economic demand.

 

[ducati916]

https://www.bofit.fi/en/monitoring/weekly/2020/vw202003_4/

https://tradingeconomics.com/russia/balance-of-trade

https://tradingeconomics.com/russia/external-debt

So putting it altogether from when the plunge in oil revenues occurred:



Putin (is apparently paranoid about a Russian default a la 1998) will not allow any hint of Russia not being able to service its debt, hence, the word is, Russia dumped a portion of its reserves to pay.

jog on
duc

 

[rederob]

@ducati916 - I don't doubt that Russia places great importance on their oil and gold assets, but there is no evidence so far that Russia triggered last Friday's gold selldown.
I have below charted OIL prices against GOLD price changes in AUD and USD (over the past 4 months) to reiterate my view that trying to use an OIL:GOLD ratio is meaningless without a positive correlation between them.

My reading of gold's near term direction is a move into the $1620-$1660 band where it will consolidate for a month or so on what I call a "business as usual" scenario. That is, based on the present state of global affairs I see a rational move into gold holdings that will be sustaining for as long as COVID-19 remains a menace.

 

[rederob]

Another incredible night for gold, this time bouncing northwards.
It's instructive to note that although POG is considerably higher today than at its January peak, most gold producers are currently trading around 10% lower in price than back then.
So it's certainly not too late to ride gold producers if you have some spare cash.


At time of posting POG ($1640.50) was at the lower boundary of the green trend channel. I expect the median (red line just below $1660) to be gathered in over the next week or so.
As noted in the chart by @finicky, POG is now outperforming the DOW. As the effects of COVID-19 are still relatively mild from a global perspective, there seem little prospect that this trend will be broken in the months ahead. Indeed, the previous outperformance carried through for 10 years.

 

[rederob]

At last, an overnight breather to POG.

Trying to guess what will happen day to day is a fools errand, as movements of $60 can occur in a matter of hours.
All we can be reasonably sure of is that this has all the hallmarks of a long-term bull market.
And while COVID-19 has caused some dramatic day-to-day price fluctuations, its overall impact will be to drive a lot of money into the safer haven of gold in its many forms.

 

[ducati916]

The Commercials are simply sellers.



It is a week out of date, so it could of course change.

jog on
duc