Gold Price - Where is it heading?

[Dr Doom]

True, and all of these that you mention are SPECULATIVE variables.

But I am not interested unduly in the VOLUME of money.
I am interested in the Purchasing Power of the money.

But here we differ. I don't see lower interest rates. That mistake has already been made once by Greenspan, I think Bernanke is actually quite a hawk.

jog on
d998

Yes but...

Spec variable, as against a constant variable? Are not most things financial speculative?. So we try to factor these in as best as we can.

Purchasing power - a $1US in 1910 is worth 5c now?. One way to measure purchasing power is to work out how many oz's of gold it takes to buy an item and compare to when you sell; you then have your real gain or loss?.

Interest rates - it's a tried and true remedy these day's to cut rates if there is a chance of recession, only this time it will be like pushing on a peace of string, no effect eg Japan like. Now if Volcker was there it would be a different matter......

You predict a chance of recession, are you saying they will still raise rates?.

 

[BlueDaze]

Precious Metals Market Timing -Ron Rosen

14 Mar 2007

http://www.dinl.net/guestArticle.php5?id=1545

Gold completed its Major Wave One at $728 in May 2006.
The entire rise from $258.60 to $728 is being corrected to remove excess optimism.

Gold needs one more leg down in order to complete this correction.
A 50% correction of the entire move up would bottom at $492.
However, if the [C] leg equals the [A] leg, the bottom may be $526.

The [A] leg down was $166.50
The leg high was $692.50
$692.50 minus $166.50 equals $526.00

The [A] leg down bottomed at $563.50
The bottom should appear somewhere between $492 and $526
When the bottom is reached, that will complete Major Wave Two

Major Wave Three will then begin.

Silver is in a position similar to gold
The [A] leg gave back 50% of the entire bull move
The [C] leg will most likely bottom lower than the [A] leg
There will be more downside movement before a bottom is made
There is a good probability that silver will bottom in $9.11

If wave [C] equals wave [A], $9.11 will be the target for the bottom of wave [C]. The high was $15.20. The wave [A] low was $9.60. That represents a $5.60 decline. The wave high was $14.71. $14.71 minus $5.60 equals the bottom of $9.11.

The HUI has completed its Major Wave One and its Major Wave Two, a corrective wave. The HUI has also completed its minor wave (1) of its Major Wave Three. Its minor wave (2), a corrective wave, is apparently still underway/ I believe minor wave (2) has already bottomed and will not go lower than the 270 low.

The technicals are pointing down, indicating more corrective action to take place. The corrective action may be more sideways coiling rather than more downside movement.

 

[Dr Doom]

I don't think gold stocks could stand another correction down to those levels Hope it doesn't eventuate.

Here's one for Ducati; it's all relative

(PS why don't you ride your motorbike, instead of jogging )

 

[coyotte]

Just a view on WHAT drives the POG market :


1: NOT war/disasters in themselves -- but the implied inflation from such events

2: Initially LIQUIDITY along with the Merchant Banks --- do a RS chart of POG and NYSE : GS.

3: Finally , the point when GOLD comes into it's own ---- Lack of faith in a nation's currency -- any nation --- this will drive up the POG relative to that nation's currency .


Cheers

 

[ducati916]

Yes but...

Spec variable, as against a constant variable? Are not most things financial speculative?. So we try to factor these in as best as we can.

Purchasing power - a $1US in 1910 is worth 5c now?. One way to measure purchasing power is to work out how many oz's of gold it takes to buy an item and compare to when you sell; you then have your real gain or loss?.

Interest rates - it's a tried and true remedy these day's to cut rates if there is a chance of recession, only this time it will be like pushing on a peace of string, no effect eg Japan like. Now if Volcker was there it would be a different matter......

You predict a chance of recession, are you saying they will still raise rates?.

I would say that *most things financial* have a variability in that at times they are speculative, and at times investment grade.

Regarding the interest rates; if as I believe a recession is underway and will arrive at end of 1Q in 2008, I do not believe that rates will drop. They may not rise overmuch either, I expect them to stay more or less where they are.

Rather than moving the US rate, the US will pressure China to continue to revalue the Yuan, in exactly the same way they did Japan in the late 1980's. This is already underway and I expect it to continue.

jog on
d998

 

[ducati916]

I don't think gold stocks could stand another correction down to those levels Hope it doesn't eventuate.

Here's one for Ducati; it's all relative

(PS why don't you ride your motorbike, instead of jogging )

Just looking at that..............
I would HAVE to sell Gold and buy the S&P500
No brainer!

Because I'm too bloody fat!

jog on
d998

 

[ducati916]

Just a view on WHAT drives the POG market :


1: NOT war/disasters in themselves -- but the implied inflation from such events

2: Initially LIQUIDITY along with the Merchant Banks --- do a RS chart of POG and NYSE : GS.

3: Finally , the point when GOLD comes into it's own ---- Lack of faith in a nation's currency -- any nation --- this will drive up the POG relative to that nation's currency .


Cheers

4: Speculation

jog on
d998

 

[coyotte]

From the deceased Kitco Forum :

Brokers used to use the rule of thumb that fair value was " 1oz = 1 quality business suit ".


Cheers

 

[ducati916]

From the deceased Kitco Forum :

Brokers used to use the rule of thumb that fair value was " 1oz = 1 quality business suit ".


Cheers

Yes true enough, which makes it what currently?
It's been a while since I looked at suits.

jog on
d998

 

[coyotte]

Well I suppose it just shows how wacko gold bugs can get !

 

[bvbfan]

In 1930 average new house cost $7,145.00 and by 1939 was $3,800.00 (250oz of gold to bit over 100oz)
In 1930 the average income per year was $1,970.00 and by 1939 was $1,730.00 (65oz of gold to bit over 50oz)
In 1930 a gallon of gas was 10 cents and by 1939 was 10 cents
In 1930 the average cost of new car was $640.00 and by 1939 was $700.00
(20oz of gold to bit over 30oz)

Can you buy a new car for even a 100oz now

No wonder you're bearish gold if you believe the inflation figures provided.

 

[ducati916]

In 1930 average new house cost $7,145.00 and by 1939 was $3,800.00 (250oz of gold to bit over 100oz)
In 1930 the average income per year was $1,970.00 and by 1939 was $1,730.00 (65oz of gold to bit over 50oz)
In 1930 a gallon of gas was 10 cents and by 1939 was 10 cents
In 1930 the average cost of new car was $640.00 and by 1939 was $700.00
(20oz of gold to bit over 30oz)

Can you buy a new car for even a 100oz now

No wonder you're bearish gold if you believe the inflation figures provided.

I'm not quite sure I follow your argument. The time period that you have utilized is probably the most *deflationary* period in recent history [1930-1939]

For an annualised inflation, the longer the period the better [law of large numbers]

jog on
d998

 

[bvbfan]

Yes it was the most deflationary period where in dollar terms the price levels were the lowest. (not purchasing power)
If your theory of 3.3% inflation values gold at $330 then what of the value of the items I posted?
If yuor theory stood up then the same value of gold should buy those things today.

And before you say a car is more advanced today, the calculation of CPI would actually make a car cheaper than what it really is as applied by the US monetary authorities.

 

[ducati916]

Yes it was the most deflationary period where in dollar terms the price levels were the lowest. (not purchasing power)
If your theory of 3.3% inflation values gold at $330 then what of the value of the items I posted?
If yuor theory stood up then the same value of gold should buy those things today.

And before you say a car is more advanced today, the calculation of CPI would actually make a car cheaper than what it really is as applied by the US monetary authorities.

Still don't really follow your argument.
In the 1930-1939 time period, purchasing power was at a high point, as it would be in a deflationary period.

Now that we are in an inflationary period, purchasing power is at it's lower end, therefore you are contrasting two polar periods.
Why?

Leaving out technological advances, can you illustrate with an example?
I'm having a low wattage day obviously, but I just don't follow your line of thought.

jog on
d998

 

[Dr Doom]

Rather than moving the US rate, the US will pressure China to continue to revalue the Yuan, in exactly the same way they did Japan in the late 1980's. This is already underway and I expect it to continue.

jog on
d998

Let's assume that this will actually happen, & that China revalues and their products become more expensive to Americans as a result. I would assume this would be even more inflationary and a positive for gold. Any Yuan revalue won't be good for the US consumer, so you would then have a complete set of recessionary contributors - manufacturing, housing & consumer spending.

The other option is to raise rates and quicken or further add to recessionary forces. The most likely option if only because there will be political pressure instead of financial responsibility, is to drop rates & flood the country with liquidity, as Bernanke has said he will do, throwing it from a helicopter.

Benny is between a rock & a hard place; maybe Greenspan saw the writing on the wall. Stability is golds enemy; good for gold either way?.

 

[ducati916]

DrD

Just a quickie, I'll come back with a post a bit later, as your queries require some thought!

But in the meantime.................

AP
China Announces 0.27 Pct. Rate Hike
Saturday March 17, 2:23 pm ET
By Audra Ang, Associated Press Writer
China's Central Bank Announces 0.27 Percentage Point Increase in Key Interest Rates

BEIJING (AP) -- China's central bank said Saturday it will raise key interest rates by more than a quarter percentage point in a move to cool torrid economic growth -- the fourth increase in a year.
The 0.27 percentage point hike in one-year deposit and lending benchmark rates will go into effect Sunday, the People's Bank of China said.

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That would raise lending rates to 6.39 percent and deposit rates to 2.79 percent, the bank said in a statement on its Web site.

The new rates will "promote the good, fast development of the national economy" by guiding an increase in credit and investment, preserving price stability and steady operation of the financial system, the statement said.

The rate hike is the latest in a series of measures China's leaders have taken to slow an economy they fear is running at an unsustainable pace. Four years of double-digit economic growth, largely driven by investment and exports, have left the financial system flush with cash.

In recent months Chinese leaders have been sounding the alarm about excessive lending, worried that it would push growth too fast and thereby accelerate recently rising inflation or touch off a debt crisis if imprudently made loans go bad.

Low deposit rates have also encouraged a rush by ordinary Chinese into the country's buoyant stock markets, exposing them to greater risks as a two-year bull market begins to flag.

Premier Wen Jiabao, at a news conference Friday, ticked off a list of economic problems, citing excessive investment, credit and liquidity and swelling foreign exchange reserves.

"My mind is full of concerns," he told reporters.

jog on
d998

 

[ducati916]

Let's assume that this will actually happen, & that China revalues and their products become more expensive to Americans as a result. I would assume this would be even more inflationary and a positive for gold. Any Yuan revalue won't be good for the US consumer, so you would then have a complete set of recessionary contributors - manufacturing, housing & consumer spending.

The other option is to raise rates and quicken or further add to recessionary forces. The most likely option if only because there will be political pressure instead of financial responsibility, is to drop rates & flood the country with liquidity, as Bernanke has said he will do, throwing it from a helicopter.

Benny is between a rock & a hard place; maybe Greenspan saw the writing on the wall. Stability is golds enemy; good for gold either way?.

Higher inflation for the US based on a revaluation of the Yuan, which is obviously well under way now would be a positive for Gold IF

*Gold was currently undervalued
*Gold was fairly valued

That Gold is currently grossly overvalued currently therefore negates the underlying fundamental justification for buying Gold.

Gold may go higher on speculation, but it will be a fast money crowd again and very volatile.

I do not see Bernanke lowering rates for two main reasons;

*Devaluation of the Dollar is not good for the US in the longer term and it won't work as the world is awash in liquidity anyway, lowering rates is simply increasing liquidity via lower cost of credit. The US are really pressing China on the Yuan as they did the Japanese on the Yen in "89, and it's working again, go figure.

*By lowering discount rate, he runs the risk of pressuring the YCT to further unwind, this has really unpredictable consequences, and I very much doubt he'll risk it.

Therefore rates will remain the same, or rise. Bernanke will not replicate Greenspans error.

Gold will remain pretty volatile in a fairly broad range, gradually falling lower.

jog on
d998

 

[Dr Doom]

Higher inflation for the US based on a revaluation of the Yuan, which is obviously well under way now would be a positive for Gold IF

*Gold was currently undervalued
*Gold was fairly valued

That Gold is currently grossly overvalued currently therefore negates the underlying fundamental justification for buying Gold.

jog on
d998

We'll make a true believer out of you yet!

Gold is undervalued according to lot's of traditional benchmark ratio's also eg Dow-gold, oil-gold, Tbond-gold etc

Over the very long-term, gold in $US oscillates around a fair value and this fair value is determined by the total quantity of US dollars and the total quantity of gold. Although it is becoming harder to determine the amount of $US in existence when the Fed ceases to publish them eg M3.

So, what you are basically implying is that gold is worthless either way, at least as a currency?. I'm not sure about the assumptions you have taken in arriving at a fair value eg $200 + $100 fudge factor(?) then an extra $50 for good measure = $350.

Taking that the original figure was in 1930 based on an arbitrary amount nominated by the government of the time means that it's popular value wasn't able to be ascertained for that time period so I don't think it is a valid surmisation to base the original value on.

If gold is to be viewed as a currency & therefore an alternative currency then relative inflation rates would probably be more of a guide to determine fair value, and it is on this basis that most recent valuations have been derived.

You would have to agree that the inflation rate for gold is much less than for fiat money, in any currency, which is evident in golds appreciation in multiple currencies.

So if gold is to appreciate further relative to the $US then anything that puts downward pressure on the $US must be good for gold as a 'flight to the safest currency'?.

As per comments in this article -

" David Bloom, currency strategist at HSBC, urged investors not to confuse a US slowdown and its implications with a carry trade unwind.

“Our contention is that the market has come to a sudden and dramatic realisation that the US slowdown is far from over and, in fact, has a new lease of life.”

He said the recent slide in dollar/yen reflected a downward reassessment of the US economy, not an unwinding of carry trades.

“A true carry trade unwind is an irrational closing of positions due to fear. What we are seeing with dollar/yen at the moment is a rational result of reduced expected returns.”

According to Mr Bloom, the dollar’s relative strength amid the recent turbulence in equity markets has been understandable as investors sought the safe haven of US Treasuries and, by default, bought dollars.

Mr Bloom said that once the dust settled, the market would have to decide what to do with those dollars.

“That is when we might get a true carry trade unwind and the dollar could fall heavily against the board,” he said.

There were signs on Friday that the process might have started, as the dollar slid against the euro and sterling, having held up well during the rest of the week."

 

[Kauri]

Has reached what I would consider the min for Wc-ii... interesting to see if she forms into a W iii that ties in with the potential bearish flag..

 

[Sean K]

Trying to crack 660. Another key area.

Channelling up at the moment. Wish I had better charts than these!!!

(does channelling have two n's and l's )

Breaking though here would indicate further upward momentum IMO.