Gold Price - Where is it heading?

ducati916 · 10 March 2020

rederob said:
1. If you need to hedge your gold production and cannot tell a good price from a poor price, you should not be in business! That said, I think you would agree there are many technical indicators that point to when prices are peaking and it becomes more opportune to lock in a forward sale. It is not necessary to "time" the peak in order to hedge advantageously.

2. Your idea that hedges "would also be most active at market bottoms (fearing further falls)" is nonsensical given the technical indicators available to assist make trading profitable.

3. An issue relating to investing in gold producers as distinct from other market sectors worth noting is that whenever possible they try to be debt free so that they do not have to hedge. That's one reason I look closely at the hedge books of companies before investing.

4. Nobody is suggesting that gold's price cannot fluctuate. In trading or investing it's about being on the right side of those fluctuations. If, as it appears, gold is in a bull market then it will cycle through higher tops and bottoms. I have used charts extensively in my posts in this thread over the past year to show these cycles and trends, and point out where gold appears overextended or otherwise. It's not hard!

5. Your points on charts are absolute rubbish! A chart is first and foremost an objective historical document. It is necessarily "true" thereby defeating your idea that is is "circular reasoning." Analysis of the factors affecting the points on the chart allows us to determine what drives the price in any direction. You seem to be suggesting that we cannot know these things and, without the need to get into epistemology, I suspect you would not this week be buying any investment shares in Flight Centre or Qantas.

6. In relation to your claim that gold does not correlate with debt I have previously charted how that idea sits. In logical terms if gold is a store of wealth then its value will increase over time as debt levels increase. Part of this fundamental position is based on the weakness of fiat currencies. An ounce of gold here is equal to an ounce of gold everywhere else, however that is not the case with paper money.

7. At a very practical level I have been reading what you write here to see how it would translate to assisting people invest in gold or gold-related equities. Apart from us agreeing that gold has a good future, I don't find that you have offered many clues. But that door is not closed.

1. Are you seriously advocating that 'technical indicators' have anything much more than a 50% probability?

2. See above.

3. I thought you just claimed that 'technical indicators' would in combination with their informational expertise, would provide them with exact tops and bottoms, making hedging a very profitable undertaking.

4. Lots of ways to trade and make money irrespective of being on the 'right' side. As a longer term hold or investment, then essentially I agree.

5. A chart is a price series, agreed. A chart is often used (technical traders) as a circular argument. You have used your chart analysis as a circular argument numerous times. A chart only becomes non-circular if an extrinsic analysis is added to the price series. This may be micro or macro or a combination.

6. Yes you have. You were incorrect. Nominal levels of debt are not strongly correlated with the POG.

7. That is simply because your mind is closed.

jog on
duc

rederob · 10 March 2020

ducati916 said:
1. Are you seriously advocating that 'technical indicators' have anything much more than a 50% probability?

2. See above.

3. I thought you just claimed that 'technical indicators' would in combination with their informational expertise, would provide them with exact tops and bottoms, making hedging a very profitable undertaking.

4. Lots of ways to trade and make money irrespective of being on the 'right' side. As a longer term hold or investment, then essentially I agree.

5. A chart is a price series, agreed. A chart is often used (technical traders) as a circular argument. You have used your chart analysis as a circular argument numerous times. A chart only becomes non-circular if an extrinsic analysis is added to the price series. This may be micro or macro or a combination.

6. Yes you have. You were incorrect. Nominal levels of debt are not strongly correlated with the POG.

7. That is simply because your mind is closed.

jog on
duc

The best thing about your posts is their consistency = unhelpful here.
Your points on technical analysis and charting are puerile.
In relation to correlations, I have regularly shown that what you have used is not useful.
Going back well over 10 years I recall how I used your analysis as a sound contra-indication of what was more likely. Not much has changed.

ducati916 · 11 March 2020

rederob said:
1. The best thing about your posts is their consistency = unhelpful here.

2. Your points on technical analysis and charting are puerile.

3. In relation to correlations, I have regularly shown that what you have used is not useful.

4. Going back well over 10 years I recall how I used your analysis as a sound contra-indication of what was more likely. Not much has changed.

1. Consistency (in trading/investing) can be a positive attribute, if applied correctly. It can also be a negative if it closes your mind to new information and developments. I'll take your comment as a positive, so ta!

2. Well I haven't really made (recently) too many comments on technical analysis other than showing correlations. Clearly you didn't appreciate those as they contradicted your beliefs, which can often be uncomfortable.

3. If by 'shown' you mean offered your 'opinion', well yes you have.

4. Well if you say so. It seems that you are saying that I was wrong and you were right. Entirely possible, I am often wrong on the market.

jog on
duc

rederob · 11 March 2020

I am not interested in a competition with you as I am trying to explain where my thinking on the gold market sits each time I post.
I also have extensively used charts to demonstrate probable direction and constraints, based on simple patterns.
On the other hand I read pearls from you like this:

ducati916 said:
Gold is correlated Treasury yield (both positively and negatively).

Any data can be correlated against other data. But for a correlation to be meaningful it cannot be both positive and negative at the same time.

Back on topic.
The GOLD BUG'S INDEX
The HUI's step change from last year's breakout is shown below:

So now let's put that into perspective:

ducati916 · 11 March 2020

rederob said:
I am not interested in a competition with you as I am trying to explain where my thinking on the gold market sits each time I post.

So here is your previous post:

The best thing about your posts is their consistency = unhelpful here.
Your points on technical analysis and charting are puerile.
In relation to correlations, I have regularly shown that what you have used is not useful.
Going back well over 10 years I recall how I used your analysis as a sound contra-indication of what was more likely. Not much has changed.

Possibly you could expound on your thinking here. I thought you were just being rude, obviously I have missed the point.

jog on
duc

ducati916 · 11 March 2020

rederob said:
On the other hand I read pearls from you like this:

Any data can be correlated against other data. But for a correlation to be meaningful it cannot be both positive and negative at the same time.

As we are talking about 'Bonds', actually, you can because a bond has 2 components: (a) price and (b) yield which are inversely correlated to each other. Therefore gold can be either positively correlated (price) or inversely correlated (yield) at the same time.

I should have explained myself, but I thought you understood, my apologies.

jog on
duc

rederob · 11 March 2020

ducati916 said:
As we are talking about 'Bonds', actually, you can because a bond has 2 components: (a) price and (b) yield which are inversely correlated to each other. Therefore gold can be either positively correlated (price) or inversely correlated (yield) at the same time.

I should have explained myself, but I thought you understood, my apologies.

jog on
duc

A correlation coefficient has only one value = r.
But above you introduced two separate concepts with gold and proposed that each has a separate correlation coefficient simultaneously, which is true. Yet you were quite specific in your original quote in mentioning yield, so it is impossible for it to have two simultaneously different values.
I'm not here to correct your logic, so do yourself a favour and present what you claim more clearly.

I recall my point about correlations being along the lines of them being after the fact, and of no real value unless it is possible to know the key variable and what drives it. Gold and bonds have identifiable relationships over time, but I would argue that neither is a price driver. I am happy to be shown otherwise.

Gold and debt have a relationship over time, and in the case of debt, the direction is clear. Furthermore, as we know with a high level of probability that debt will increase, we can reasonable surmise gold will ultimately trend with that relationship. So from an investment perspective gold prices are very likely to hold their value or increase when there is pressure on meeting debt obligations.

In the short term I have no confidence in gold's direction, so here I post the charts showing how trends have developed and how they relate to gold's prior history.

I use what I post to inform myself about trading. For example, I had intended to buy EVN shares on Monday, but withdrew the bid because POG spiked when the gold market opened. Such spikes are usually unsustainable and lead to a lot of price choppiness. That has not yet subdued, so I have not ventured another bid. Maybe tomorrow, maybe next week - right now I am happy to wait.

ducati916 · 13 March 2020

rederob said:
1. I recall my point about correlations being along the lines of them being after the fact, and of no real value unless it is possible to know the key variable and what drives it. Gold and bonds have identifiable relationships over time, but I would argue that neither is a price driver. I am happy to be shown otherwise.

2. Gold and debt have a relationship over time, and in the case of debt, the direction is clear. Furthermore, as we know with a high level of probability that debt will increase, we can reasonable surmise gold will ultimately trend with that relationship. So from an investment perspective gold prices are very likely to hold their value or increase when there is pressure on meeting debt obligations.

1. Well that variable is well known. It is simply that both assets are considered 'risk off' assets. That is of course gold itself, not gold miners. The advantage of Bonds over gold (market perception) is that they (generally) produce a yield, whereas gold relies upon capital appreciation for a return. Hence when Bonds yield above inflation, they are (generally) preferred to gold. Hence the correlation (which is a strong one).

2. Incorrect. As already previously demonstrated.

jog on
duc

rederob · 13 March 2020

ducati916 said:
1. Well that variable is well known. It is simply that both assets are considered 'risk off' assets. That is of course gold itself, not gold miners. The advantage of Bonds over gold (market perception) is that they (generally) produce a yield, whereas gold relies upon capital appreciation for a return. Hence when Bonds yield above inflation, they are (generally) preferred to gold. Hence the correlation (which is a strong one).

2. Incorrect. As already previously demonstrated.

jog on
duc

We know the reason for the correlation between gold and bonds, but neither drives the direction of their prices: each serves a difference purpose. However, they react to external factors, or price drivers.
It is true that gold relies on capital appreciation for a return, so the question is why it appreciates at all. Unless you can answer that, your analysis is deficient.
So in the doom and gloom of today's impending market carnage, here's the Australian take on where gold today sits:

qldfrog · 13 March 2020

As i read the graph: still positive for gold short & mid term

rederob · 13 March 2020

This post from the other week shows what happened when gold was last sold down heavily.
The same has not occurred this time, as noted below.

We are in a market gripped with fear.
Despite this POG has held up extremely well.
POG is certainly different the price of gold producers, but you will note the disproportionate decline in gold producer equity prices.
These producers are still selling their gold either into hedges, or at the higher spot prices that prevail.
Buy the dips, but be cautious in the present irrational market.

qldfrog said:
As i read the graph: still positive for gold short & mid term

Not positive in the near term, but the ascending trend for the medium term is unaffected. Indeed, gold was overextended and needed to consolidate in the lower $1600s (based on patterns) before substantively conquering $1700.
The question everyone should be asking is why the market has not punished gold as it has everything else.
The other question, if you are an investor, is what you think the chances are of a plus-$1700 POG are this year, rather than a minus-$1500.
(As I post, POG had just cleared $1580, suggesting for now a series of higher lows is probable.)

ducati916 · 14 March 2020

Coincidence?

jog on
duc

ducati916 · 14 March 2020

rederob said:
1. We know the reason for the correlation between gold and bonds, but neither drives the direction of their prices: each serves a difference purpose.

2. However, they react to external factors, or price drivers.

3. It is true that gold relies on capital appreciation for a return, so the question is why it appreciates at all. Unless you can answer that, your analysis is deficient.

1. Incorrect. That is precisely what drives their price direction.

2. My position is that they do not and have provided my reasons as to why. I have yet to see any reasons, argument, or evidence from you to support your position.

3. I have answered that many times: gold is money, everything else is credit. But money's price can also fluctuate. The price of money fluctuates with the return on money: present value against future value, which must (try to) account for inflation/deflation.

jog on
duc

rederob · 14 March 2020

ducati916 said:
1. Incorrect. That is precisely what drives their price direction.

2. My position is that they do not and have provided my reasons as to why. I have yet to see any reasons, argument, or evidence from you to support your position.

3. I have answered that many times: gold is money, everything else is credit. But money's price can also fluctuate. The price of money fluctuates with the return on money: present value against future value, which must (try to) account for inflation/deflation.

jog on
duc

1. I suggest you learn to write meaningfully as you have simply described a relationship that exists between variables, and not a price driver.
2. Markets react to sentiment which reflects external factors. Markets are not immediately rational. There are thousands of books that tell us this. If you think otherwise then you need to explain why Trump's separate announcements on Monday and Friday significantly affected equity markets in opposite directions.
3. Gold is gold, and nowhere is used as "money." Gold does not turn into something else and then "fluctuate" in value.

ducati916 · 14 March 2020

rederob said:
1. I suggest you learn to write meaningfully as you have simply described a relationship that exists between variables, and not a price driver.

2. Markets react to sentiment which reflects external factors. Markets are not immediately rational. There are thousands of books that tell us this. If you think otherwise then you need to explain why Trump's separate announcements on Monday and Friday significantly affected equity markets in opposite directions.

3. Gold is gold, and nowhere is used as "money." Gold does not turn into something else and then "fluctuate" in value.

1. Oh, but it is a price driver.

2. Present value and future value are individual preferences, which is 'sentiment' writ large. These values are expressed as 'interest rates'. Currently, yields are increasing (measured in basis points to be sure). The important takeaway though is with real yields negative, Bonds also are relying on price appreciation to provide a return. That makes them directly equivalent to gold in this respect. But the higher the yield moves (because the assumption, which I don't agree, is that Treasuries are risk free) the more gold will fall, unless, inflation, really strikes up and exceeds the real yield (as it did in the 1970-1981 period) and then gold will rise even into higher yields.

3. Gold has been used as money from the time money existed. The price of money, like a price of anything, fluctuates.

jog on
duc

rederob · 14 March 2020

ducati916 said:
1. Oh, but it is a price driver.

2. Present value and future value are individual preferences, which is 'sentiment' writ large. These values are expressed as 'interest rates'. Currently, yields are increasing (measured in basis points to be sure). The important takeaway though is with real yields negative, Bonds also are relying on price appreciation to provide a return. That makes them directly equivalent to gold in this respect. But the higher the yield moves (because the assumption, which I don't agree, is that Treasuries are risk free) the more gold will fall, unless, inflation, really strikes up and exceeds the real yield (as it did in the 1970-1981 period) and then gold will rise even into higher yields.

3. Gold has been used as money from the time money existed. The price of money, like a price of anything, fluctuates.

jog on
duc

Your points lack logic.

rederob · 14 March 2020

While there is an inverse relationship between bonds and gold, it is inconsistent and does not reflect the scale of movements. This was most evident in the week commencing 24 February, below:

Knobby22 · 15 March 2020

Gold is not currency. It's a metal. History has moved on.

In Mad Max, no one cares about it.

If the world went to hell, I can't see all the baubles (diamonds, pearls, etc.) being worth much to anyone.

Think what you really would need. A bit of shiny metal (in rings on half the population) ain't going to be important.

Medicines for instance would be valuable.
Guns, seeds, fishing tackle, fuel, food, books with knowledge, good land, strong sons, livestock etc.

ducati916 · 15 March 2020

rederob said:
Your points lack logic.

Or you simply can't refute them.

jog on
duc

ducati916 · 15 March 2020

COT

No support (yet) from the Commercials.

jog on
duc

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