Gold Price - Where is it heading?

[rederob]

You are seriously trying to prove your point using a 2hr chart?

I showed that over the past fortnight (not the past 2 hours), silver has actually outperformed gold.
This is the opposite to your claims such as "Silver is not confirming the move in Gold."

 

[ducati916]

And so another view:



Silver just isn't playing along at the moment.

jog on
duc

 

[ducati916]

And another (6 mths on a % basis) rather than just price.



jog on
duc

 

[rederob]

Your posted charts confirm my earlier points, but not yours.
For example:

1. Silver mirrored Gold all the way from 1973 through 2018. From 2018, Silver has diverged from Gold.

Yet at post #12182 there is a marked divergence from 2010, as shown below:
It is a long bow to draw and suggest the above is mirroring. However, it remains a positive correlation.

Silver is (currently) not confirming the move in Gold.

"Currently" means the present, yet you posted a chart going back almost 6 months, while I posted a comparison for recent weeks actually showing silver's outperformance.

 

[ducati916]

1. With regard to your 7th point at post #12178 you are separating the issue of debt from "price."

2. These factors affect the economy in different ways. We are heading into a recession (shaded areas charted below) and gold is likely to do ok. However, it's the out-years where gold comes into its own:

1. Again, not really sure what you are referring to with your comment.

2. An interesting chart.

(a) In 2000 (from April) the Federal Reserve started lowering interest rates, Gold moved higher, which has been my original argument.

(b) The Fed than had a short period raising rates late 2005 until June 2006 reaching 5.11%, before rates were cut again, which more or less corresponds with your chart.

(c) Rates have headed lower ever since. Gold has headed higher until 2011/2012, when it swooned.

(d) Inflation (CPI variety) has been trending lower since the 1970/1980 period.

So if the yield on Treasuries are nominally close to or at 0% and in real terms negative, can you expect rates to go lower? If so, by how much? It is that negative yield that (to me) gives the potential target for gold's further price appreciation.

In May 2000, when Greenspan started cutting rates, look what happened to the US$



It weakened all the way into 2008, some blips in 2009/2011 and then it started to strengthen 2012 onwards, which is the time that gold swooned. 2017, dollar weakens, gold stronger.

So the question is which is the dog and which the tail (Bonds or Currency). The answer is Bonds are the dog and Currency the tail. Looking at major currencies: Japan, deeply negative, Europe negative, China (not sure on this one), so the US (until the latest cuts) was the one positive yield world wide which attracted capital inflows (strong dollar). Currently, as already stated, the least bad yield wise and providing currency appreciation profits. Obviously there is no exchange rate/yield buffer, so capital inflows are a straight long position, which could create further volatility if positions need to unwind for any reason, due to the net size.

The US$ (rightly/wrongly) is the strongest currency atm due to its reserve status globally. With everybody inflating their currencies currently, that is not going to create a weaker dollar relative to all other currencies, so the US$ will either stay about the same or possibly (even at zero yield) get stronger. If it does strengthen further, I suggest gold will fall.

Currently US$ is at a chart based resistance point. My guess...based on the current situation, is that it moves higher. Only because of that reserve status (the least bad) globally, not that it is anything fantastic fundamentally.

So why is silver lagging? I think largely due to Central Banks buying. Take out the minor players (speculators) of all stripes, the Central Banks will buy gold, but generally not silver and currently the speculators do not seem to be pursuing silver with much zeal. If the US$ starts to fall (instead of rising) then I think silver explodes higher to close the gap.

To trade this possibility: Short gold/Long silver (pairs trade). As to the Miners, they will follow along behind to whatever happens in their physical.

jog on
duc

 

[ducati916]

Well Mr Rederob is in good company with Flippe-floppe-flye:

http://ibankcoin.com/flyblog/2020/04/06/important-alert-treasury-coopted-fed/

jog on
duc

 

[rederob]

Gold has recovered strongly since the COVID-19 induced selloff a few weeks ago.
Below charts the genesis of this long-term bull market for gold, although it really only got "legs" last June when it hurdled over some 5 years of resistance.

By way of comparison with POG's post-GFC dip back in 2008, just over a year later gold climbed over $500, and continued another $700 higher over the next 2 years. Should gold replicate a similar percentage increase over the next 2-3 years, then $3500 is a realistic high.

 

[rederob]

Take care when you read headlines that seem a bit out of kilter with what is going on.
I was surprised when I read this today:

"Gold Price Loses Ground After Topping $US1,700"​

In fact it was the COMEX June futures being referred to, and prices there topped out over $1740.
The takeaway for us however is that prices well over $1700 are being negotiated, and that's good to know.

 

[rederob]

Almost due for a breakout?

Periods of consolidation leading to new highs have been running from 6-8 weeks.
We are presently at the front end of that period.
If the pattern repeats then by early May we will see a spike to about $1800 before a consolidatory pullback in the mid $1700s.
My view at present is that fear factor which plummetted gold in mid-March is not likely to repeat unless COVID-19 throws a curve ball and wave 2 rolls over early. In that light, I expect the trading range to narrow (except for the next spike north).

 

[ducati916]

There is a new analysis from Sunshine Profits:

https://www.barchart.com/story/futu.../4673978/is-that-golds-inverse-hs-or-reversal

It's pretty long, so I've just added the link.

jog on
duc

 

[rederob]

Almost due for a breakout?

Nearly there:

Breaking the March peak of $1703 is just $20 away, so should not be too hard from here.
We have to go back to December 2012 to see similar prices.

 

[rederob]

Last Friday saw spot gold close at a 12 year high.
Tonight has a plus$1700 close well in sight.
Below I have noted that there has been a closing of the AUD:USD ratio recently, as the AUD creeps a little higher.

I am going to punt on a chance the AUD will further strengthen against the USD due to our strong exposure to China which is on the mend, while the USA is not even close to re-opening its economy.

 

[rederob]

Gold set a 12 year record high price overnight as it continues its bull run.
Had you read the link at @ducati916's post of last Thursday, you would have seen it saying this about POG's rising trend: "We have very little trust in this formation." His link had 7 charts showing why gold was destined to fall in the immediate term.
It did not happen.
The chart below is a continuation of the two I posted immediately above, but focuses on only the last month's price action (15-minute bars):


On 3 April @ducati916 posted one of the least useful contributions I have seen in this thread, and we exchanged many posts. In one he suggested:

Silver is sending a warning that all is not well in this move higher for Gold

I will show below that this was not true:

The mistake @ducati916 continues to make is in not appreciating that divergence affects the strength of an otherwise strongly positive gold:silver correlation.
It's also important to make logical statements, and @ducati916 does not always do that. For example:

2. Your argument above is essentially the chart posted by myself (from a 3'rd party) is wrong. Well there are actually two arguments there:

(a) That Gold will fall; and/or
(b) Silver will rise.​

Well, no.
Both can rise, and that's where we are right now.
The difference is that silver remains about $3.50/oz below its Feb 20 peak this year, while gold is at a 12 year high.

 

[ducati916]

1. Gold set a 12 year record high price overnight as it continues its bull run.
Had you read the link at @ducati916's post of last Thursday, you would have seen it saying this about POG's rising trend: "We have very little trust in this formation." His link had 7 charts showing why gold was destined to fall in the immediate term.
It did not happen.

2. The chart below is a continuation of the two I posted immediately above, but focuses on only the last month's price action (15-minute bars):


3. On 3 April @ducati916 posted one of the least useful contributions I have seen in this thread, and we exchanged many posts. In one he suggested:I will show below that this was not true:



4. The mistake @ducati916 continues to make is in not appreciating that divergence affects the strength of an otherwise strongly positive gold:silver correlation.
It's also important to make logical statements, and @ducati916 does not always do that. For example:

5. Well, no.
Both can rise, and that's where we are right now.
The difference is that silver remains about $3.50/oz below its Feb 20 peak this year, while gold is at a 12 year high.

1. I provided that link for 2 reasons: (i) you asked for updates and (ii) to provide an alternative viewpoint.

2. Gold compared to currency fluctuations adds what to the argument?

3. And your chart is incorrect in relation to the discussion: viz. that Silver is not confirming the move in Gold. Why is that important, simply because for the last 40+yrs, Silver has confirmed the move.



You simply want to present a distorted view of the position. You are not really interested in actually discussing why this divergence might be happening.

4. Clearly Gold and Silver are not currently correlated. They were. They are not currently. Whether that correlation again reasserts itself, we shall see. The correlation can reassert itself if: (a) gold falls, or silver rises (faster) than gold. If they both rise at the same % rate, their divergence will be maintained.

5. See (4) above.

So my questions are:

With conditions absolutely perfect for gold, rising debt (credit expansion by the Fed) which you state to be the primary driver of a rising gold price and a catalyst that has created widespread uncertainty, is gold moving so slowly and is still below its all time high?

Why is silver divergent?

What happens to gold if yields start to rise, reflecting the inflation that you maintain is being (or going to be) created by the Central Banks? My position being that gold is more tightly correlated to the 30yr Bond than it is to your chart analysis skills.



Is gold currently still being driven by the secular trend that started +/- in 2002, or, is the secular trend ending?

jog on
duc

 

[rederob]

With conditions absolutely perfect for gold, rising debt (credit expansion by the Fed) which you state to be the primary driver of a rising gold price and a catalyst that has created widespread uncertainty, is gold moving so slowly and is still below its all time high?

Conditions were good for gold last year.
They are just a lot better now.
Debt of itself is not a catalyst for gold to rise (except in response to costs of production) as there is always debt. It's how debt sits with regard to economic sentiment that affects its trajectory.
As to uncertainty, that is presently due to what COVID-19 has spread globally.
As to gold's all time high, it took a very long time to reach - and 3 years after the GFC.
POG has risen over $350 in less than year, which does not conform to your idea that sees "gold moving so slowly" that it won't be in reach of a new high in the next 12 months. I see it as possible, but more likely much later in 2021.

 

[finicky]

Nordesmic on 12 April. Sounds more upbeat than usual.
Thinks USD Gold "on the cusp of a new phase".
Compares USD Gold's action to the rapid rebound during the 2008 Lehman crisis.
Includes comments about the AUD rallying against USD, thinks AUD strength temporary, bad news not out yet.
"The Australian gold miners counter-intuitively tend to rally when the USD Gold price strengthens"
"There's going to be a mainstream move to demand for gold products" (incl miners)
You can support for $6/mth on Patreon. Extra material, earlier delivery, requests considered.

 

[rederob]

1. I provided that link for 2 reasons: (i) you asked for updates and (ii) to provide an alternative viewpoint.

2. Gold compared to currency fluctuations adds what to the argument?

3. And your chart is incorrect in relation to the discussion: viz. that Silver is not confirming the move in Gold. Why is that important, simply because for the last 40+yrs, Silver has confirmed the move.

View attachment 102246

You simply want to present a distorted view of the position. You are not really interested in actually discussing why this divergence might be happening.

4. Clearly Gold and Silver are not currently correlated. They were. They are not currently. Whether that correlation again reasserts itself, we shall see. The correlation can reassert itself if: (a) gold falls, or silver rises (faster) than gold. If they both rise at the same % rate, their divergence will be maintained.

5. See (4) above.

So my questions are:

With conditions absolutely perfect for gold, rising debt (credit expansion by the Fed) which you state to be the primary driver of a rising gold price and a catalyst that has created widespread uncertainty, is gold moving so slowly and is still below its all time high?

Why is silver divergent?

What happens to gold if yields start to rise, reflecting the inflation that you maintain is being (or going to be) created by the Central Banks? My position being that gold is more tightly correlated to the 30yr Bond than it is to your chart analysis skills.

View attachment 102247

Is gold currently still being driven by the secular trend that started +/- in 2002, or, is the secular trend ending?

jog on
duc

I took some time to re-read your comments.
I wondered if anything else warranted comment.
First, you have a knack for poor analysis, and it's not helped by presenting an alternative viewpoint that gets almost everything wrong.
Second, I explain my charts, and sometimes there is a commentary embedded in the chart that makes a different point.
Third, I have no interest in explaining what is happening with silver in this thread, so I have instead shown why some of your points do not stack up.
Fourth, it is absolutely wrong to say gold and silver are not correlated. They are strongly positively correlated. However, the strength of the correlation varies and over long periods can give the appearance that their respective trends are not complementary. With regard to gold and bonds there is a similar correlation. However, in none of these cases can it be shown that any one drives the other.
Finally, I use charts to show patterns and relationships, and I explain their context and relevance. You can read what I wrote last Wednesday as an example.

 

[rederob]

Another day and another recent record high:

Below I look at the recent action of gold measured in Australian dollars versus US dollars using only the past month, and base it on the spot gold chart immediately above:

The equity market contradiction is that yesterday our gold producers rocketed higher. However, they are getting exactly the same returns for their output as they received a month ago. Go figure .

 

[finicky]

The equity market contradiction is that yesterday our gold producers rocketed higher. However, they are getting exactly the same returns for their output as they received a month ago. Go figure

Could be what Nordesmic was saying - that our miners are often more sensitive to the USD price than the AUD price as the former is seen as more about a Gold bull than a weak currency. This is mostly what fooled me into getting into Oz gold miners later than I otherwise would've around 2016; I just saw it as a currency anomaly that couldn't be trusted to last.
Also of course we have the international investors/speculators in our gold miners whose interest would perk up when they notice gold performing in USD. Also the mining etfs: GDX, GDXJ. We were in a purely lucky privileged position here for years because we were confronted by our gold miners sustainably making excellent profits and doing acquisitions while North American miners were languishing. Now it's segueing into a 'real' bull market.

 

[ducati916]

I took some time to re-read your comments.
1. I wondered if anything else warranted comment.

2. First, you have a knack for poor analysis, and it's not helped by presenting an alternative viewpoint that gets almost everything wrong.

3. Second, I explain my charts, and sometimes there is a commentary embedded in the chart that makes a different point.

4. (a) Third, I have no interest in explaining what is happening with silver in this thread, (b) so I have instead shown why some of your points do not stack up.

5. Fourth, it is absolutely wrong to say gold and silver are not correlated. They are strongly positively correlated. However, the strength of the correlation varies and over long periods can give the appearance that their respective trends are not complementary.

6. With regard to gold and bonds there is a similar correlation. However, in none of these cases can it be shown that any one drives the other.

7. Finally, I use charts to show patterns and relationships, and I explain their context and relevance. You can read what I wrote last Wednesday as an example.

1. I'm taking it that as you have not addressed any of the issues raised, that you will not be doing so going forward.

2. In your opinion. Clearly that's all it is, since you decline in (1) to address any of the issues.

3. Accepted. And in general I address your charts where there is an issue to be addressed.

4. (a) Fair enough. (b) Where is that exactly?

5. Again you simply misquote: I have demonstrated via the chart that over the past 40+yrs, that gold/silver are very closely correlated. What I said was that currently they are not confirming one another (correlation is broken for the moment, maybe it returns).

6. But I have shown it. Further, I have explained the fundamental reason why it is so. I will repeat:

(a) US Treasury securities are considered as the benchmark risk free return. Gold, also has no 'default' risk and in that context (ignoring market risk for the moment) are also a risk free asset.

(b) US Treasury securities provide a return or yield. Gold does not. Hence, as Bonds rise in value and yields drop, they become ever more equivalent to Bonds (both carrying market risk) but at no risk of default (in theory). In reality, only gold has zero default risk.

(c) When in August 1981, 1yr paper yielded 17% and 30yr paper 14.78%. Gold was already well underway into its bear market. The double top occurring in Sept 1980.



(d) Why? Because you could earn a risk free return of 17% holding 1 yr paper. The correct position was of course to hold 30yr paper. Easy with hindsight. Holding gold, nothing but losses (unless you could trade the wiggles) until circa June 2002.

(e) Why June 2002? Because Greenspan started to aggressively lower rates due to the bear in equities and yields dropped low enough that the risk free return (further exacerbated by 2008) was not as attractive to new investors and gold became correspondingly more attractive.




Which leaves my next question for you:

What happens to gold if the 30yr starts to rise in yield (fall in nominal price)?

jog on
duc