Gold Price - Where is it heading?

bean said:

Latest COT and the MAY 2006 COT
Interesting to say the least

DEJAVU

http://news.goldseek.com/COT/1190404200.php

http://news.goldseek.com/COT/1147463220.php

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Good one Bean. The article by David Vaughn "How High Will Gold Climb" is excellent and should be read by anyone thinking of cashing in their gold positions

Monthly GOLD with Guppy MMAs.....Something different.

Madrid has been a major cap on prices this year, flooding the market with 150 tonnes. The bank has now cut its total holdings by 46pc, leaving the country with wafer-thin foreign reserves.

Experts suspect that Asian central banks may have become buyers. China has less than 2pc of its vast $1,340bn reserves in gold, and has signalled an intent to diversify away from dollars.

President Vladimir Putin has instructed Russia's central bank to raise the gold share of its huge reserves from around 5pc to 10pc.

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http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/09/22/cngold122.xml

The obvious relevance, the USD index at 20 year lows.... Very interesting times to say the least.

CanOz said:

The obvious relevance, the USD index at 20 year lows.... Very interesting times to say the least.

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Breaking 80 support. Is that a dodgy H&S? Wave 3 down?

kennas said:

Breaking 80 support. Is that a dodgy H&S? Wave 3 down?

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Possibly,

But I would say a higher probability is that this is a wave B (unorthodox new low) of an expanded flat correction, there are other possibilities ofcourse

Cheers

Referring to your chart Canaussieck

The high volume around mid 2005 indicates a lot of dollars changing hands, following which interest wanes by both volume and value falling away.

A seperate important point, (from Bill Buckler, Privateer neswsletter)"... the US dollar is now at the point of an all time low..." Commentators tend to talk 10 year low, and there is in my view a big difference.

The price of gold is of course considerably below true value on an inflation adjusted basis.

The interest in the US dollar with the interest rate cut should accellerate this week and with decreasing alternatives to park money the interest in gold will intensify accordingly.

Will be intersting to see what pans out.

WP - i certainly hope its a flat bottom on the USD Index....and Kennas, i saw that H&S too, stands out like 'dogs ......' but i did a quick visual on the target zone and thought

Explod, In my view, i'm expecting a pullback in GOLD of some kind before it pushes on (so i can jump on), this may also see the rally in the USD before another move lower, who knows really???

I tend to think there will be a few who think the USD is good buying at this point. What do the economists say about US exports increasing on these values?

Cheers,

CanOz said:

and Kennas, i saw that H&S too, stands out like 'dogs ......' but i did a quick visual on the target zone and thought

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Yep, target about 58 cents.

CanOz said:

I tend to think there will be a few who think the USD is good buying at this point. What do the economists say about US exports increasing on these values?

Cheers,

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Apparently 75% of the time the fed cuts, the USD increases in value. This of course is probably more applicable to times when CB's around the world are cutting rates en masse, when growth is also slow or negative. So, I think a lot depends on what other CB's do, especially the Europeans. With everyone but the US seemingly doing well or OK, perhaps this time is going to be amongst that 25% ?

CanOz said:

WP - i certainly hope its a flat bottom on the USD Index....and Kennas, i saw that H&S too, stands out like 'dogs ......' but i did a quick visual on the target zone and thought

Explod, In my view, i'm expecting a pullback in GOLD of some kind before it pushes on (so i can jump on), this may also see the rally in the USD before another move lower, who knows really???

I tend to think there will be a few who think the USD is good buying at this point. What do the economists say about US exports increasing on these values?

Cheers,

Click to expand...

Yes the pullback is expected but the dynamics are shifting now with institutional investors coming in so dont' count on it.

It is worth checking the comments of David Vaughn via the link posted by Bean yesterday. I have followed this bloke going back and he is a thoughtful commentator

The current COT structure is very bearish and almost the same as May 2006
And look what happened to POG

Is this time different??
USD a rally...what would make it rally??
Moving from stocks to cash as the market moves down???
And we have my scenario the gold stocks will fall with the market?

At the moment I see no other way for the USD to rally.

Kennas hope your looking at the low price for POG

bean said:

Kennas hope your looking at the low price for POG

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I'm only looking at 690 support to hold before maxing out the margin loan and selling a liver or two to top up my gold holdings. Or, if all time highs hold I might buy a few more of something. Probably more NEM and NCM. I'm heavy LGL and it's run pretty hard. pe must be in the 100s now....If 690 support fails, I'll take some profits and re-evaluate.


you are = you're

CanOz said:

WP - i certainly hope its a flat bottom on the USD Index....and Kennas, i saw that H&S too, stands out like 'dogs ......' but i did a quick visual on the target zone and thought

Explod, In my view, i'm expecting a pullback in GOLD of some kind before it pushes on (so i can jump on), this may also see the rally in the USD before another move lower, who knows really???

I tend to think there will be a few who think the USD is good buying at this point. What do the economists say about US exports increasing on these values?

Cheers,

Click to expand...

The trouble with classical TA patterns is that they can be very subjective, just like EW. But at least with EW you have a bit more to work with(as in rules and guidelines thus making the conclusions a little more objective but not necessarily correct)

When I started to trade FX I used to look for H&S patterns etc, very rarely did they ever happen the way I expected it to.

Canaussieuck, those are very impressive charts, what package is it that you are using?? Do you(or does anybody) have access to any raw data(preferably monthly) for the USD Index?? I am looking to do some further analysis on this Index but cannot do it without the raw data.

Cheers

wavepicker said:

Canaussieuck, those are very impressive charts, what package is it that you are using?? Do you(or does anybody) have access to any raw data(preferably monthly) for the USD Index??

Cheers

Click to expand...

Thanks WP, its Amibroker and Premium Data, i suppose its in raw form in the PD directory, wouldn't it be?

Cheers,

Deflation

Bernanke Has Snookered Us All
by Gary North

http://www.lewrockwell.com/north/north568.html

Bernanke and the Federal Open Market Committee (FOMC) have done something extraordinary. They have publicly lowered the FedFunds target rate, and have forced down the actual FedFunds rate to meet the target rate, while deflating the money supply.

You read it here first: "deflating."

The only monetary indicator that reveals directly what the FOMC has done in recent weeks is the adjusted monetary base. This is the one monetary aggregate that the FOMC controls directly. It reveals what actions the FOMC has taken.

The adjusted monetary base serves as the monetary base of the fractional reserve commercial banking system. Take a look at what happened from the middle of August, when the FOMC lowered the discount window's interest rate from 6.25% to 5.75%, until mid-September.



From early July, 2007, to mid-August, it climbed rapidly. From mid-August to mid-September, it fell just as sharply.

This is deflation.

The monetary base declined. This requires an explanation. I have one. The Federal Reserve was simultaneously selling T-bills from its own account. It sold enough to more than offset its purchases of repo's from commercial banks.

The buyers need not have been American commercial banks. They could have been foreign central banks, individual investors, and funds looking for safety/liquidity. The point is, the sale by the FED extinguished the money that came in from outside the FED.

This solved the immediate problem: supplying reserves to banks. If the FOMC bought repo's of assets other than Treasury debt, this provided liquidity for assets that would not have been worth as much as the FED loaned had they been sold into the free market.

Meanwhile, the sale of FED assets such a T-bills enabled the FED not to increase the rate of money growth. It made the repo purchases non-inflationary.

Can this continue? Yes. Will it continue? For a while, maybe. Bernanke seems determined to avoid price inflation. There is only one way to achieve this goal: reduce the rate of monetary inflation. But a policy of monetary deflation or even slow growth does not solve the problem of the business cycle. The U.S. economy will slide relentlessly into recession.

The FED is caught between the rock and the hard place. I believe it will inflate. But this recent decline in the AMB indicates that the FED is determined to hold off for as long as politically possible.

WILL THE FED RE-INFLATE?

Eventually, yes. It has always inflated since about 1938. That is what it does. That is why it exists.

The crucial question today is this: Can the FED avoid a recession without re-inflating seriously? I think the answer is no.

Next: Will it re-inflate fast enough to avoid a recession? Again, I think the answer is no.

Next: Will it re-inflate, once the economy slides into recession? I think the answer is yes.

In other words, between today and the next wave of monetary inflation, we are likely to go through a recession.

i remembered before the sub prime situation, the resources' values were going up like there's no tomorrow. then global markets had the correction. but it was not until very recent we see the increase of POG. Not sure what's the reason. Maybe,

1. people are buying gold to shelter their wealth in a possible global recession OR
2. POG playing catch up OR
3. something i didn't think of?

kerosam said:

i remembered before the sub prime situation, the resources' values were going up like there's no tomorrow. then global markets had the correction. but it was not until very recent we see the increase of POG. Not sure what's the reason. Maybe,

1. people are buying gold to shelter their wealth in a possible global recession OR
2. POG playing catch up OR
3. something i didn't think of?

Click to expand...

Unwinding of the gold carry trade?

kennas said:

I'm only looking at 690 support to hold before maxing out the margin loan and selling a liver or two to top up my gold holdings. Or, if all time highs hold I might buy a few more of something. Probably more NEM and NCM. I'm heavy LGL and it's run pretty hard. pe must be in the 100s now....If 690 support fails, I'll take some profits and re-evaluate.


you are = you're

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Surviving the PPT on a US Monday trading US$730 an oz., is looking like consolidation and a new level of support. A lot of sales supporting the price now and a hold at this level for a couple of more days will give the breakout continued legs.

Re: Deflation

BlueDaze said:

Bernanke Has Snookered Us All
by Gary North

http://www.lewrockwell.com/north/north568.html

...

This is deflation.

The monetary base declined. This requires an explanation. I have one. The Federal Reserve was simultaneously selling T-bills from its own account. It sold enough to more than offset its purchases of repo's from commercial banks.

The buyers need not have been American commercial banks. They could have been foreign central banks, individual investors, and funds looking for safety/liquidity. The point is, the sale by the FED extinguished the money that came in from outside the FED.

This solved the immediate problem: supplying reserves to banks. If the FOMC bought repo's of assets other than Treasury debt, this provided liquidity for assets that would not have been worth as much as the FED loaned had they been sold into the free market.

Meanwhile, the sale of FED assets such a T-bills enabled the FED not to increase the rate of money growth. It made the repo purchases non-inflationary.

Click to expand...

I won't claim to even remotely understand this stuff and how the international bond/treasury/debt/banking systems work.

But doesn't this whole exercise mean the fed is effectively taking on bad debt (lending money to banks that have been impacted by sub-prime at low rates via the discount window at 30 day terms rather than the overnight terms from previously, using poor quality assets as backing) whilst at the same time effectively passing on that bad debt to others by the writing of t-bills (supposedly good debt, but how good now?). And isn't it exactly this behaviour (and the willingness to do this rather than let the original owners of the bad debt face up to the consequences) the reason that confidence in the $US is likely to be impacted?

Also foreign buyers of those t-bills are betting on a $US rise are they not? If the $US falls won't they also begin to sell their t-bills and then sell the $US that they get from the sale of the t-bills, accelarating the USD decline?