Gold Price - Where is it heading?

[ducati916]

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.

Some quotes for you:


However, counterfeit is also a medium of exchange. Therefore, a more precise definition of both money and counterfeit are required. Money mediates the exchange of full value for full value. Counterfeit represents the exchange of fractional value (or no value at all) for the exchange of full value. Money, therefore, represents productive work and counterfeit represents theft from productive work.

Aristotle NICHOMACHEAN ETHICS


Commodities, says Say, are ultimately paid for not by money, but by other commodities. Money is merely the commonly used medium of exchange; it plays only an intermediary role. What the seller wants ultimately to receive in exchange for the commodities sold is other commodities

Money, per se, cannot be consumed and cannot be used directly as a producers’ good in the productive process. Money per se is therefore unproductive; it is dead stock and produces nothing

The services which money renders can be neither improved nor repaired by changing the supply of money. … The quantity of money available in the whole economy is always sufficient to secure for everybody all that money does and can do

An essential point in the social philosophy of interventionism is the existence of an inexhaustible fund which can be squeezed forever. The whole system of interventionism collapses when this fountain is drained off: The Santa Claus principle liquidates itself


jog on
duc

 

[rederob]

The week closed miserably for gold bugs.
Here's the medium term snapshot:

The only saving grace was that it recovered slightly towards the end of trading.
Without data to support my idea, Friday's selldown was likely prompted by some large gold profit takers transferring into US equities, which bounced over 9.3%.
My suspicion is that equity markets are going to keep declining, so if that proves true, then next week will see gold recover.

 

[rederob]

While we tend to focus on how much prices changed over a day, this 5-minute chart for POG over the past 2 days shows that there is still support for gold. It just got overwhelmed by a few large selloffs, possibly prompted by one of the craziest days on the DOW you will see, where it added 1450 points (over 6%) in the last 25 minutes of trading.

I anticipate a more sombre mood in the markets next week as COVID-19 bites deeper in North America and Europe in particular.

 

[finicky]

Someone I follow on twitter, Northstar @Northst18363337, was saying this on Mar 13,
"I heard some Elliot Wave target in the $1430 region. This fits in very well with an earlier chart of mine. It'll test your nerves though"

 

[rederob]

Someone I follow on twitter, Northstar @Northst18363337, was saying this on Mar 13,
"I heard some Elliot Wave target in the $1430 region. This fits in very well with an earlier chart of mine. It'll test your nerves though"
View attachment 101361

Here's a variation on your theme with weekly POG charted below @finicky:

For simplicity above I have shown the trend channels for the respective bull runs for POG using the November 2015 low value of approx $1050 as the starting point.
The initial bull run was frenetic by comparison with where we are now.

Whichever way we might want to cut it, COVID-19 gave POG a premature peak, and the come-down has been dramatic. We got to $1700 many months ahead of where a more orderly progression would have taken us.

What occurred last week might have been nasty, but that's what happens to gold from time to time. In bull markets I welcome the return to a more realistic level, and while it would be nice to see a quick bounce to the $1600s, we are still sitting comfortably within the ascending price band.

 

[rederob]

The Elliott wave target of $1430 crept into view overnight, with a plunge that ranged through $125 before a recovery of sorts got underway.
As I post, POG is struggling around the $1500 mark, albeit within an intra-day recovery.
Given what the Dow went through over the past few trading days, POG is doing comparatively well.
The wall of worry wonders where to park money as recent weeks have seen both gold and treasuries heading in the same direction, exemplified again yesterday as each declined.

The trend presently remains downward although momentum is suggesting a breakthrough is possible, but currently on very light volumes.
I have a suspicion that if POG does not breakdown with everything else, it's status as a store of value will return and POG will recover firmly in coming weeks.
If we take the longer term view, then we can equate the economic conditions now prevailing as similar to those after the GFC that rocketed POG to record highs over the next 3 years. And for the record, POG collapsed $300/oz after peaking in March 2008 slightly over $1000/oz. The only real difference is that COVID-19 has compressed the 2020 declined into a very brief timeframe as the global pandemic has been realised in a few months.
(POG at $1512 as I post.)

 

[rederob]

There's no rainbows to be found in global markets at present so here's my take on the pot of gold the lucky Irish wish for:

Still early days in this COVID-19 inspired crash so anything can happen!
Hard to believe that on 9 March POG ran through $1700, and 5 days later had dropped as low as $1450. The next day POG pushed back over $1550 before running out of steam, and was trading in a comparatively tight range around $1530 after midnight. As I was writing this POG jumped quickly higher to $1545, and as quickly again fell back as I post.
On trend then, it suggests a series of higher lows is likely to soon see us over last September's peak.

Outside of the gold market I expect things to get materially worse for at least a few more months.

 

[rederob]

The chart below magnifies and updates the recent days' trend from post #12105.
Support is still holding, although today POG has been weak.
I have added my personal "wall of worry" to the chart as if it breaks through this then gold is in trouble, at least for the near term.
I remain confident that gold will recover all its losses this year as there really are not many other places you can park your money.
And if I am wrong, then I will be like the millions of others who have regarded gold as a store of value. However, it would also be an interesting proposition for the Central Banks who would have had trillions of dollars worth of physical gold turn into cheap trinkets. Somehow I cannot see that happening.

 

[rederob]

Zooming in on the above chart at a daily level from last October to see how close we are to the "wall of worry":


And here's the same chart again, but at 15 minute intervals over recent hours showing a declining trend nearing the wall:

What you might not have noticed that POG dropped $10 between this post and the one above - just 30 minutes ago - and was still trending down, below $1470 as I pressed "post".
It should bounce... trust me .

[Footnote: gold takes as much notice of me as my wife - neither know better!]

 

[finicky]

So relaxed .. Coopers pale ale .. really .. had it for breakfast, lol

 

[rederob]

And to finish my gold posts today on a near high, or at least a big smile, here's what gold looks like to Australians :

 

[finicky]

Exactly, plus lower oil prices for machinery. Although we don't know the implications for supply of parts and reagents yet for Oz gold miners.
Or what Wuhan plague infections on the gold field might do.

 

[ducati916]

And if I am wrong, then I will be like the millions of others who have regarded gold as a store of value.

To state that gold is a 'store of value' is to state that gold is money. A proposition that I agree with.

Money is a commodity. As a commodity, its price will (and needs to) fluctuate. Gold was 'legal' money until August 1971, when Nixon was forced to close the gold window.

The tricky question is: what is the true value of gold? You cannot value it like a business, discounted cash-flows or any other methodology used, as gold generates no cash-flows.

Gold will be valued (estimated) through broad exchange across economies. In inflationary times, the price will rise, in deflationary times the price will fall.

However, gold as money (or an asset) will always be in competition with other asset classes for returns. The closest competitor are Bonds. Sovereign Bonds (which are considered risk free depending upon Government issuing) compete with gold for investor capital, which provides the volatility in price. The lower the real return on other asset classes, the higher the price of gold.

Gold is also the asset of uncertainty, which, we have currently.

jog on
duc

 

[rederob]

However, gold as money (or an asset) will always be in competition with other asset classes for returns. The closest competitor are Bonds. Sovereign Bonds (which are considered risk free depending upon Government issuing) compete with gold for investor capital, which provides the volatility in price. The lower the real return on other asset classes, the higher the price of gold.

Market uncertainty has had gold and bonds regularly running in tandem, as exemplified below in the period from late January 2020:

So it's not true to presume they are always competing, and it is least true in uncertain times.

Here's where we see POG start our day:
Not at all promising, so.........

But if you ascribed to @ducati916's school of thought then the above is not really possible. It's the difference between theory and the real world that we need to disambiguate in markets.
Right now there is a struggle of market sentiment running in tandem with fiat currency interdependencies that price gold quite differently.

 

[ducati916]

1. Market uncertainty has had gold and bonds regularly running in tandem, as exemplified below in the period from late January 2020:

2. So it's not true to presume they are always competing, and it is least true in uncertain times.


3. But if you ascribed to @ducati916's school of thought then the above is not really possible. It's the difference between theory and the real world that we need to disambiguate in markets.

4. Right now there is a struggle of market sentiment running in tandem with fiat currency interdependencies that price gold quite differently.

1. The correlation goes back far further than January 2020, how about 1971 as a start.

2. Incorrect. Bonds and Gold have been competing since 1971 as at that point the US went off the gold standard and inflation started to ratchet higher. Bond yields lagged the rate of inflation (seriously) and POG continued to rise. Only when the rate of interest exceeded the rate of inflation, which had the 10yr yielding 15%, did inflation reverse, as did, the POG.

3. So currently we have a situation where since 2001 where 'low' interest rates have predominated, the POG has risen (or stayed relatively stable) through that same time period. IF yield rises, POG will fall, which we have already seen with only 'basis points' increase in yield.

4. Yield governs fiat exchange rates also, as should be abundantly clear in the massive carry trades that predominate within the fx world.




jog on
duc

 

[rederob]

1. The correlation goes back far further than January 2020, how about 1971 as a start.

2. Incorrect. Bonds and Gold have been competing since 1971 as at that point the US went off the gold standard and inflation started to ratchet higher. Bond yields lagged the rate of inflation (seriously) and POG continued to rise. Only when the rate of interest exceeded the rate of inflation, which had the 10yr yielding 15%, did inflation reverse, as did, the POG.

3. So currently we have a situation where since 2001 where 'low' interest rates have predominated, the POG has risen (or stayed relatively stable) through that same time period. IF yield rises, POG will fall, which we have already seen with only 'basis points' increase in yield.

4. Yield governs fiat exchange rates also, as should be abundantly clear in the massive carry trades that predominate within the fx world.


jog on
duc

My posted charts show your points are regularly untrue.
But you insist you are right.
This thread is about determining direction.
You have again said a lot but as usual are going to rely on after the fact information to state the obvious.
What you have never yet shown is what drives any of the components.
I say it's ultimately debt.
In the near term too many other factors are at play.
I remain bullish on gold now, especially, as the world over is printing valueless money faster than COVID-19 can spread.

 

[rederob]

1. The correlation goes back far further than January 2020, how about 1971 as a start.

Ok, here's the 9 year period from August 1971 when Bretton Woods was scrapped:


The shaded periods above were recessionary.
If we are to believe you, this relationship (correlation) is wrong!
Maybe 9 years of being wrong is not enough?
Here's a separate period of 9 years:


And here's the period immediately afterwards (ie from 1995) to the present, and the relationship is now mostly inverted:


So when we go back to 1971 as you suggest then we get very long periods of the opposite to what you think holds true.

 

[peter2]

@rederob Thanks for the golden updates. I see that you're monitoring the POG with obvious enjoyment. Had a chuckle when I saw the "wall of worry" appear. $1450 is such an obvious level that it may be tested just to see what happens.

Like you I've been bullish gold since the Dec19 break-out. I can't say it's been all smooth trend trading. The depth of the selloff from $1700 caught me and my gold stocks by surprise. Ouch.

In the past two days I've been accumulating some leveraged gold ETFs (NUGT @ $6, JNUG @ $4) just because they're so low, rather than buy gold stocks. These leveraged ETFs can only go to zero if the POG falls more than 30% in a day. That's unlikely, although many thought that about the POO. That went close when the Saudi's dropped their POO suddenly.

As if on queue the POG has rallied during the Aussie session. Onward and upward to the old high at $1700, then even higher? The leveraged ETFs will be worth much more if this happens.

 

[ducati916]

Ok, here's the 9 year period from August 1971 when Bretton Woods was scrapped:
View attachment 101522

The shaded periods above were recessionary.
If we are to believe you, this relationship (correlation) is wrong!
Maybe 9 years of being wrong is not enough?
Here's a separate period of 9 years:
View attachment 101523

From 1971 through 1980, inflation exceeded the yield. Thus, you see in the chart exactly what you would expect to see: viz rising POG and rising yield.

jog on
duc

 

[ducati916]

And here's the period immediately afterwards (ie from 1995) to the present, and the relationship is now mostly inverted:
View attachment 101525

From 2001, where yields were again lowered by Greenspan, is when the rise in the POG entered its bull market (as yield dropped). Exactly what you would expect to see.

jog on
duc