Catflap

I think you're ignoring the fact western culture is infested with GREED. Something that I don't think you could apply to Japanese culture. Perhaps a gross generalisation.... well it is... I'll get my coat...

No, you are right - we didn't learn the lessons fron the early 70's house price bubble and secondary banking crisis so went on to repeat the mistakes 18 years later with an even bigger house price crash. Everyone thought that was it - we had learnt our lesson and it wouldn't happen again, but once we got to the late 90's you could see it all just starting again and then the denial kicked in. Different people were in charge and the temptation to make quick easy money on the property merry-go-round came back. The lesson clearly wasn't hard enough and didn't leave a big enough scar on the psyche of people so as not to repeat the mistakes again.

That is why we are here, the big one - the mother of all crashes like 1930's US and 1990's Japan. We will probably learn more lessons from this one and things will never be quite the same for decades to come - the UK and US will be unable to have such debt fueled ponzi schemes for some time to come as the both countries will be burdened with debt for a generation just like the UK was after the second world war. We've got debt that is equal to having fought a major war and it will take a generation to be paid off.

We are going to enter a different era of higher taxes and lower living standards as the East takes more of our jobs and our birth rate declines yet further whilst we continue to live for longer. Our imports will become more and more expensive as our currency loses further value which is why it is important to be hedged with gold.

Secondly, I just can't see a gradual movement upwards because of the speculative nature of price movements. Gold over the next 5 years will only end up in another bubble, like any other asset class, or commodity, currency.

I don't know, it's just an idea - no one knows what will happen as Japan pumped out loads of money and still had deflation for over a decade. There's no guarantee it will work if there is a fundamental shift in attitudes from spending to saving and paying down debts. Do people still have the stomach for more bubbles where they could once again lose a lot of money or are they going to just be more content with what they already have and be thankful they have a job?

We've had 2 severe stockmarket crashes with 50% plus declines along with the worst housing crash in living memory. We've also had the worst financial crisis since the Great Depression with many banks failing and all this has happened in less than 10 years!....... Those who have had their lives ruined and pensions/savings decimated or have seen it happen to others are going to be very wary of participating in another bubble, whatever it is.

You are including Krassimir Petrov in that view

 

Try inflation adjusting $350 from 1980, using the REAL inflation numbers. Your $3500 looks rather low !

Who's he then?

I suppose the only way to see if the inflation numbers are that fraudulent is to do the same with gold in 1980 priced in GBP using the official BoE inflation figures and then see if they match up with the exchange rate back then.

Based on $1,000 gold now, then $10,000 gold would mean a single gold sovereign going for £1,700 and a 1oz Krugerand going for £7,200 - that would be some mania bubble if that happened or we would be having hyperinflation. This would happen around 2014 (14 years from the 2000 SM price earnings top and 5 years after the SM bottom).

As OJ has pointed out in an earlier post, what invalidates gold going to $10,000 is how many ounces of gold will buy the average house at this point.

Eg: Average UK earnings in 2014 could be around £36k and average UK house could be 3 times this, then average house price is £108,000

60 ounces means gold is £1,800 oz

80 ounces means gold is £1,350 oz

100 ounces means gold is £1,080 oz

So I believe we will easily double from where we are now by 2014 and possibly triple, but gold going to $10,000 is just pure fantasy as it's excluding other assets that would be a far better buy in the coming years, ie. property which will be at a bottom AND pays an income.

Hi Claptrap No offence, just a joke!

 

Who says we are going to get a repeat of 1980? What was 1980 a repeat of so as to conclude what would happen then? I think the situation today is far worse, and Im not worried what the price of gold is in dollars, but GBP.

Ha ha - not heard that one before!

Gold is the best defense when we get a currency collapse and that could be coming - 1 GBP could at some stage equal 1 USD which is why there's is every reason to worry about gold priced in GBP.

Just be careful of predictions of gold going to the moon - I think $3,000 is easily achievable within the next few years, but those of us not in the US need to think a lot harder as we also have the currency risk which is hard to predict. Just bouncing ideas off that are in my head right now - who knows what's going to happen....... I think gold possibly performs a lot differently in a deflationary cycle than an inflationary one (like the 70's).

Given current policies i think $10,000 is likely

 

probably before 2015

 

http://www.safehaven.com/article-12774.htm

Same old story, just a different asset this time - the suckers who believe this and who try and justify their arguments when gold is already around $3,000 will be the same kind of suckers that bought heavily into dot.com shares in 1998-99 and property in 2005-06. I can't remember what perentage gold investment was of total gold sales but do remember it being quite low (there was a pie chart I saw once - can anyone post it upif they have it?) compared to jewelry which I think is where the biggest demand comes from (eg, the wedding season in India). Industrial uses and dentistry use was also a fairly big chunck - if gold gets too expensive then I think demand from these other users would tail off thereby causing prices too fall back.

And to put this into context, with Alf Field's numbers:

 

 

Elliott Wave Gold Update 23

http://www.kitco.com/ind/Field/dec022008.html

You do realise that gold averaged $675 in January 1980 when gold hit it's 1-day peak of $850. Using the following calculator gives the inflation adjusted values:

http://www.minneapolisfed.org/

$675 in January 1980 would be $1789 today

$850 on 21 January 1980 would be $2253 today

How many people actually sold their gold on the 21 January for the absolute peak price?........ not many so this figure is totally useless - at best you would probably have sold for the monthly average since you are likely to 'average out' at a top in the same way as you 'average in' at a bottom.

So the achievable gold peak price in January 1980 was really about $1800 in todays terms - I find it really really hard to understand how some people think gold is likely to go to anything like $10,000. They are complete nutters, end of - I'm interested in rational arguments about what gold is likely to go to. So allowing for a peak in maybe 5/6 years time with 1/2 more years of very low inflation and 3/4/5 years of higher inflation (possibly much higher) then $3,500 is a possible target, but $10,000 - forget it!.

Ta for posting the chart btw

Here's another Dow Jones Industrials/Gold Price chart - goes back to 1880's and shows the ratio also hitting 1.0 in 1896. Someone might like to put the chart up as I'm useless at these things.

http://www.thelongwaveanalyst.ca/DowGold/DowGold.htm

How is it possible to get even slightly bearish about gold priced in GBP?

http://www.marketoracle.co.uk/Article9241.html

As Novembers article pointed out ( Bankrupt Britain Trending Towards Hyper-Inflation?) Britain is already on its way towards becoming a big version of Iceland as liabilities continue to soar, the greater the liabilities the greater the probability that the British economy will collapse into debt default and hyperinflation. Gordon Brown has already loaded the UK tax payer to the tune of £1.2 trillion of bankrupt bank liabilities, with the odds strong that this will pass above £2 trillion by the end of 2009. The amount of liabilities are truly staggering and really do risk the bankruptcy of the country, for example the total amount of revenue the government earns from taxation is just £550 billion AND CONTRACTING. Debt EXPLODING, Revenues CONTRACTING = Further sharp falls in the exchange rate towards parity to the US Dollar.

Seems reasonable to me - GBP is going further down the crapper.

With that I guess you will be shorting gold to make some healthy profits?

Should also add that I think shorting gold which is in a long term bull market is a dangerous thing for anyone to do and I would never consider it.

I'm thinking that gold probably won't undergo a severe correction like it did in the 1970's as that was a different part of the kondratieff cycle (which I'm studying again after dissmissing it).

Should have also said that if we really are in a deflationary period and end up going Japanese then perhaps gold will just steadily keep increasing year after year with no serious correction like we had in the inflationary mid-70's. I definitely can't see the stockmarket bouncing back to it's previous highs in the way it did back then - it's looking really ugly for this year and next so I'm finding it hard to believe any SM rally is going to pull much money out of bonds, gold and cash sitting on the sidelines.

Could be, or not.

 

The question is, why should there be a 'normal' season during the biggest and most devastating financial crisis the planet has ever seen?

TBH - I'm not sure either. The more I think about gold and the period we are in, the more I want to understand what happened in the 1930's but that's difficult because we were on the gold standard back then. Having seen the sell-off in stocks again and what happened to the SM in the late 30's and 40's then I'm thinking that gold probably won't undergo a severe correction like it did in the 1970's as that was a different part of the kondratieff cycle (which I'm studying again after dissmissing it).

Good chart here:

http://www.anglorandcapital.com/newsletter...1/kondcycle.gif

I'm starting to believe that certain stocks are going to be dud investments for the foreseable future and that PM's is the place to be with the biggest part of your portfolio. With this in mind I'm going to buy more PM mining stocks on any pullbacks as long term 'buy and hold' - I've has a foot comfortably in both camps but I'm more comfortable with the fundamentals of PM's and their relation to house prices.

With that I guess you will be shorting gold to make some healthy profits?

No, there's really no point as I think I've found a better way to make some healthy profits. Buy life insurance companies when they are oversold, which are financials but with lower risk than banks (but not without risk). Sell them when they are overbought and buy gold/silver mining stocks hopefully when they are oversold and sell them when they are overbought and life insurance companies are again oversold.

I've not tried it yet, but if you look at the graphs between a gold/silver miner and a life insurance company you will see they are often opposite ends of the seesaw. This means you make even more money when gold/silver goes down and can buy far more shares when you buy back in - the life insurance shares have been making some big swings and companies like Aviva have always bounced back unlike banks but of course that could always change so dyor. I certainly wouldn't do it for all the PM shares I own, but it might be good to try this for say 20% of them to try and boost the return.

It's a no brainer for me - you might want to put some thought into it...

Seasonals - where does the biggest demand for gold come from?

Gold is usually lower in price by the time August/September arrives so why buy in March at a peak?

Thanks for posting those excellent charts G0ldfinger, much appreciated.

ANYONE WHO HAS GOLD ETF's PLEASE READ THIS:

http://www.marketoracle.co.uk/Article9030.html

c'mon catflap, you shouldn't need to be asking that by now.

Sell the lot & get a good nights sleep.

I've everything to play for - I'm hedged with PM mining stocks and that has served me well so far. If I was sitting 100% in cash right now I would lose my nerve about going in so the best way for me to play this is to adjust my portfolio weighting on a week by week basis.

Be skeptical if you like, but check out my Dow highs thread and look at the levels of the markets against the dates of my posts. I have succesfully called most of the twists and turns of this bear market using EW. In fact i have taken enough out of the market since last summer to pay for nearly a whole year off travelling, which is what i shall be doing come May (and i am only a small time gambler).

 

I accept that applying EW to gold is much more difficult though and far less certain. The patterns are less clear than they are with major stock markets. I have commented on this a few times on GEI, but nevertheless, i still agree with other EW practitioners (Prechter, Neely etc) that gold will likely fall back. I am not as bearish as Neely's $500 call, but see Prechter's $600 region call as quite possible. There was a cluster of price action there (and potentially what EWavers call a 4th wave) which is often attractive to prices that are correcting. But, that isnt to say that i would sell any small holdings of physical gold or silver if i had any. It is good to have insurance and so i would keep onto it.

Thanks, not looked at that thread before - there is definitely something in it, but I find it too confusing to use and it looks complicated. I prefer to develope my own form of TA and trading which is slowly evolving and making more sense. I'm interested in the pattern of waves as they seem to repeat - I've looked at the Dow from 1929 to 1938 and it's incredibly similar to the Nasdaq from 2000 to 2009 in terms of length and where some of the lows happened (eg. major low on November 22 1937 and then falling further in late February 1938 by another 20% to 25% bottoming in late March).

I'm really glad it's worked out for you and I'm hoping with time to have a similar success - what does your EW count say at the moment as I'm unsure whether the markets are going to rally or fall further, at the moment I'm going with the later because gold may soon hit support and start rising again which could push stocks even lower. The UK market looks like it wants to rally but is being held back by a now bearish Dow and S&P.

Can we expect a March rally from here or is it going to be like March 1938 again?

As if all that were not enough, a subscriber reminded us today that we are in the Puetz window for a market crash. For newer subscribers we will simply note that Steve Puetz did extensive research on market crashes and found that what he called the eight greatest crashes in financial history all occurred within a few weeks of a lunar eclipse and within six weeks of a solar eclipse. A solar eclipse occurred at the end of January and a lunar eclipse occurred on February 9th. As most subscribers know, our line in the sand was what we called the hidden support level on the S&P 500 which was clinging by its fingernails at yesterday's close. Those fingernails appeared to give way today and it is but one more reason to anticipate a very negative resolution.

 

(that's from Peter Eliades)

Came across this (click link to see the chart)

http://www.astrojyoti.com/eclipses.htm

The lunar eclipse of 9th February 2009 is a is not an eclipse in the umbra shadow but a penumbra shadow eclipse and hence no major negative effects. It is visible in most parts of western and southern India (See eclipse path picture bellow). It starts at 6.08 pm IST and ends at 10.08 pm. It's happening in karka rashi and ashlesha nakshatra.

We might be ok then - I must say I am fascinated by the way that planets seem to act on humans and financial markets.

I do take him seriously. His track record is superb. He was top Gold timer in 2008.

And this is one (of several) reasons I have been lightening up on Gold shares.

A drop from a double top to $500 cannot be ruled out.

And we are in the right season for a high in Gold, whatever the bulls have been saying.

This is completely at odds with everything Peter Schiff is saying and everything else I've read and understand - printing money and lots of it does not lead to a 4 to 6 year bear market in gold, it can't!. I must admit, I'm becoming really sceptical of anything with the words 'Elliot' and 'wave' in them these days - hasn't Prechter predicted some daft things like 100 year bear markets?. I'm predicting a big correction in gold of up to 40% but that is after it has reached something like $1200/oz first and even then I don't see a bear market in lasting more than 18 months.

Adam Hamilton of Zeal puts it like this:

I was reading a book last month that discussed the monetary base's direct impact on inflation. So I decided to take a look at M0 again. I could not believe what the data showed, I almost fell out of my chair it was so mind-blowing. Per the Fed's own data, we have just witnessed the most inflationary event in modern history. This crazy monetary base chart will make even the most rabid deflationist very uneasy.

 

M0 has gone parabolic! Year-over-year in December 2008, it was up 98.9%! This is so shocking it defies belief. In late September as the stock panic started, it had grown by 9.9% over the past year. By October, this rate ballooned to an all-time high of 36.7%. In November, it rocketed again to 73.0%. And in December, it surged up to the staggering 98.9% you can see above. Ben Bernanke's Fed has doubled the monetary base in a single year! Holy cow.

Contrary to wildly bullish forecasts of the time, Glenn turned adamantly bearish just 4 days after the March 2008 all-time high of $1048 (basis Dec. futures). At the same time, he confirmed to subscribers the 4- to 6-year bear market had begun (which he had long anticipated) and, shockingly, he predicted Gold would break $500 an ounce by 2012. In just 6 months, Gold dropped $367 off its historic high, recently bottoming at $681 – a 35% decline.

What??

Can this guy be taken seriously?

This is good - Philip Manduca on Gold:

Great chart here.

Dow/Gold Ratio 40year Cycle and the Secular Depreciation of Fiat Currencies:

http://www.marketoracle.co.uk/Article8992.html

With the greatest respect, I would say that you just don't get it...

 

I refer you to Nixon 1971: http://en.wikipedia.org/wiki/Nixon_Shock

 

It has taken 38 years to get this far. Charts are great at telling you where you have been, not where you are going.

 

The thing about money is that it has infinite demand from people - who doesn't want to be rich? The FED and the BoE thought that they could control the supply side. Not too much printing to give the illusion of the fiat holding some value. With the trillions in bank bailouts this illusion has been shattered. Now we are on our way to Harare...

 

By buying and holding gold, you can hedge against two possible outcomes.

 

1) Gold becomes money (due to hyperinflation e.g. Zimbabwe) via restatment of Bretton Woods or Bancor system - gold holders win.

2) Fiat lives and does not fully die - this will lead to either inflation or deflation - either way gold holders win.

 

So there you have it - trading gold is like Goldfinger already said "for people that like steamrollers" or "catching falling knives".

Don't trade gold and don't sell your insurance. I am pro gold long term and I am also bullish on stocks when they are at a bottom - I would rather buy an asset at the very bottom than buy into a market that has already risen by a large amount.

What you fail to get is that stocks and gold can often move in the opposite direction in the absence of high inflation or safe haven buying which is where we will soon be. Once stocks bottom and are very undervalued with low p/e ratios and high yields then they will become much more attractive than gold - this is what happened at the end of 1974 when the Dow had crashed by 45%. Gold began an 18-month bear market at the end of December 1974 until August 1976 3 weeks after stocks made their final low in early December 1974.

Have a look at current yields on the FTSE 100 for today:

Old Mutual 14.5%

BT 17.5%

Barclays 36.4%

Aviva 10.8%

Stupid people are panic selling these shares and fleeing into cash for 1% - most of these stocks will easily double in the next 12/18 months and also pay you a nice big dividend. Once the panic goes and stocks simply cannot go any lower then the money will go into stocks and not gold - it will come out of cash, treasuries and gold where it's been seeking safety. Watch the VIX - I think once it gets under 30 then a wall of money will come from these safe havens and back into stocks.

I forgot to include you below, Catflap.

 

Add me next month if you will, at the very top 'Catflap predicts 12/18 month mid-cycle gold bear market'

I'm bullish for now but I'll let you know when the top is in

EDIT EDIT EDIT

Sorry, just spotted it's the GBP graph - pound is going to tank further so gold priced in GBP could be ok. Maybe slight falls or slight gains after March unlike gold priced in dollars.

The 10:1 level is now major long-term resistance for the DJIA-gold ratio.

 

http://gold.approximity.com/since1968/DJIA...-Ratio_LOG.html

Great chart - now I'm a little confused. Perhaps we are a not at the same point as in late 1974 yet but maybe at a similar point to 1973 - second thoughts, I think that it should spike down fairly quickly over the next few weeks as gold goes even higher and the Dow goes even lower. Worth checking that graph if it's updated regularly as it would be a great indicator for the mid-cycle gold correction and that stocks were going to rise again in a 12/18 month cyclical bull run.

I can't get this stupid song out of my head

 

http://rathergood.com/bullion

 

 

Bullion! That's the stuff for me! We've done a song about how great it is! Hooray for Bullion!

That's another warning indicator of a coming top - too mainstream now, the general public are well informed of golds rise and are buying this peak.

I feel that gold could first make a new record high after the stockmarket has bottomed, just like it did at the end of December 1974 - the US stockmarket looks as if it could go lower so I'm waiting until March to see what happens. Another 20% '5th leg' down in the stockmarket could well propel gold even higher so there's every reason to be cautious about going long or short on either gold or stocks - besides, further weakening of the pound against the dollar could help cushion any gold price falls for UK investors.

BOE Unanimously Asks For Authority to Create Money (Update1)

http://www.bloomberg.com/apps/news?pid=206...&refer=home

I wonder when the first £100 note comes out?....... obviously a proud moment for Robert Mugabe to have the UK following his example.