halcyon

Yes, we've covered that. I was critical of the Approximity mode, but was now quite taken aback to find such a strong correlation with US M2 vs world M2 (vs gold cap global). I think this is a worldwide phenomenon and gold cap (global) should be compared to worldwide M2 - looking at US only is too simplistic, and might only indicate if gold goes up in nominal USD (and not in most OECD currencies). But alas, Tudor shop stat is global and it agrees fairly well with the US only data. Wish they'd plotted the raw for each (M2 aggregate and gold) and not the ratio - that would have been even more indicative and one could have always done the ratio oneself. But yeah, evidence is piling up, even from non-gold bug (ie. non-nutter gold-expert) sources. Probably time to pile up some in a dip. I wash hoping for a bit longer USD rally than just these past days, but it looks like it might have ended.

Tudor's shop whole analysis is here at Scribd. Couple of graphs worth noting from the Tudor report: Inflation adjusted gold price - last peak $1600-$2400, depending on inflation metric Global mkt cap of gold / global M2 BTW, monetary base chart looks scary, but it is not the money supply until unleashed. Look at the money supply for clues. It's in there.

Heh, like I have said on numerous occasions, my position is NOT dichotomous. It's not either "GOLD, YEAH!! GIVE ME UNDERPANTS OF GOLD!" or "Excuse me, gold will never mount up to anything." I'm agnostic, but willing to overweight on either side, depending on situation and how things are developing. If it goes up, I try to ride it. If it goes down, I try to exit it. Just like ANY other asset. No special status given over the long term, but only in certain contexts. No 'once and future money' or any silly mythologies about it. Just a ticket with a price and market to resell it. That's my stance, I don't claim it's 100% true or best for everybody else or that I won't change my opinion in the future, if information changes. As for when to exit gold, there seem to be several camps about it (not exhaustive): 1) sound fiscal/monetary policy is reinstated (in most OECD countries), meaning: drawing back liquidity succesfully, hiking up rates, letting overlevered/over-indebted players go bankrupt, basing gdp growth on real economy growth and not funny money, deflating asset bubbles. I give this a fairly high probability to *start* in the next 2-5 years (it's a process, not an event). Not guaranteed and we can go in the opposite direction as well. 2) when gold-standard is re-instated. Personally I give this a very very very low probability, something in the order of 10E-3%. Also, if it happens, I think it might be through such a hardship (war, breakdown of nations, multi-decade chaos) that it might be the least of my problems. If this was to happen, I hope I'd still own some physical at the right moment, which I can then transfer to other more mundane property (like cultivated land, clean water source, forest, etc). 3) after gold as an asset/store-of-value/whatever hits the final mania phase and starts to go through the roof and it's relative price becomes so obnoxiously overpriced that all the seasoned investors start exiting. I.e. a pure relative-price based crash. 4) if a real economic growth starts in other investment classes that gives better risk adjusted annual returns - after correcting for inflation and costs. I cannot know what this could be, perhaps theoretically an OECD-wide Apollo-style green tech program to wean us off oil/goal/GHG and into renewables/electricity with very hefty tax breaks and other incentives (i.e. transfer of wealth from one place to another). Never underestimate the power of governments to make (distort) markets, if enough profit potential is cleverly attached. 5) something else I can't even dream of - i.e. a black swan. It just starts to drop precipitously and I have no idea of the reason at all. That's what worries me the most with any asset I own. Because I will be unprepared at least for a while. Personally I try to keep my eyes open to different contingencies. Hope I'll catch some of them before they unravel completely.

Considering the review was done at the Value investing congress in October, I assume it has to be one of these: * Julian Robertson, Tiger Management * Joel Greenblatt, Gotham Capital * Bill Ackman, Pershing Square, L.P. * David Einhorn, Greenlight Capital * Alexander Roepers, Atlantic Investment Management * Eric Sprott, Sprott Asset Management * Sean Dobson, Amherst Securities * Lloyd Khaner, Khaner Capital * David Nierenberg, The D3 Family Funds * Paul Isaac, Cadogan Management * Candace King Weir & Amelia F. Weir, Paradigm Capital Management * Jason A. Stock & William C. Waller, M3 Funds * Zeke Ashton, Centaur Capital Partners * Kian Ghazi, Hawkshaw Capital Management * Whitney Tilson & Glenn Tongue, T2 Partners My bet is David Einhorn of Greenlight. They have had a strong Gold ETF position, but have transferred that to physical gold due to efficiency. They also have largish (4%) position on Gold miners ETF. Einhorn's position on gold in his VIC 09 speech. In short, he believes gold is a good hedge against bad monetary/fiscal policies and will probably do well in future, esp. if there is a sovereign default. Better than holding cash - both at zero interest currently. If sound policies are reinstated, he will exit gold. He also has a twist on Robertson's CMS bond trick - buying higher yield options on JAP/US bonds. That may prove to be a very clever me and me thinks it should be copied

Julian Robertson suggests gold miners, who can thrive even on falling gold price. . BTW, he thinks gold bugs are nuts and that gold will not go through the roof. The is also an interesting longer term cycle paper on gold ore prices predicting a potential leg of 35% down (from c. early 9 price levels). There's also a recent paper about the performance of long term TA that argues little historical correlation on return over the long term. There's a bias I urge everybody to look up and internalize what it means to their own thinking.

Roubini on gold price on the short and interim term: Strong words from Roubini. He thinks the system (and sentiment?) is stabilized enough for now, so that gold price moves on the upside will be limited. Interesting.

Rolfe Winkler recommends caution about time of entry to Gold these days: http://blogs.reuters.com/rolfe-winkler/200...the-gold-trade/

I don't think anybody was gloomy about gold. Good wealth preservation move, but not a relatively good trade. Emerging markets are up more than 50%+ in the same time period (dollar adjusted). Duly noted. This is still a trading thread for gold though It's perhaps worth pondering that people have different aims (ie.g. preserve, grow), with different time horizons (6mo, 5yr, 25yr,etc.), and different tactics (e.g. concentrate vs spread the allocation, trade/sit-n-hold, bet vs hedge, etc). With that said... Back to actual gold trading discussion: http://www.futurespros.com/analysis/future...-analysis-10088 P.S. Talking about some sources analysis (pro or con) should not mean that one is aligned to that position or against it. It's about learning.

Thanks, great charts. Look like investing charts (5 year). Not trading. Perhaps they might deserve an even wider audience in the gold investing thread? I have no idea about EWI, I don't subscribe. I do entertain multiple hypothesis though. One of them - on a trading time frame - is that gold price may drop from a short-term resistance soon. If it does, it's a possible buy opportunity on the *trading* horizon. This is a trading thread after all. I don't try to *predict* the future and bet on it now. I try to anticipate what might happen, so I can take advantage of it if it happens. Trading, not investing.

I have no idea. Passing along the information. Regardless of EWI, I think it pays to look at the long term currency basket (sans dollar) price of Gold.

Fixed. Of course it has made new nominal highs in USD, but that matters very little to the argument EWI is trying to make.

More from EWI via Tradersnarrative: Quote: from Trader's narrative: Gold has not made sustained new real highs (only nominal in USD), dollar is making new lows. Watch for a breakout in the resistance line. However, if there's one, it's probably due to some news you're going to be aware of at any rate.

This one from BoA/ML (dated Oct 5th): They also note: 10y T-Note deeply-shorted (maybe too much already). 30yr T-bond getting there in shorts, not there yet. USD Index net short, not overly crowded. Yen net long, very crowded.

BINGO! We have a winner!

Romans, I agree. Won't go into details. Trying now to keep the thread tidy for my part. As for GF, don't agree and I have cited resources as to why. anybody interested can read them. I leave it at that. Now, for some gold trading signal related comments, from RGE Monitor: Gold Outlook - Demand for gold will likely wane after Diwali and if the dollar strengthens on bouts of risk aversion. - BNP: Gold is not expected to stay above the US$1,000/oz level in the coming months, given the likelihood that the U.S. dollar will rebound and headline inflation will stay weak. - # Merrill Lynch (not online): Short-term rates of 0% are bullish for gold, which serves as a store of value but is a useful hedge against deflation as well, since deflation is inherently destabilizing for financial assets. In the 2001-03 deflationary period, gold rose more than 30%, not to mention the prospect of a return to a dollar bear market. "Gold is inversely correlated to global short-term interest rates and there is a race right now towards 0%. Production is down 4.0% y/y while fiat currencies globally are being created at a double digit rate by the world's central banks....As for all the talk of a 'gold bubble,' it would take a nearly 625% surge in gold to over US$6,000/oz and a flat stock market to actually get the ratio of the two asset classes back to where it was three decades ago when bullion was in an unsustainable bubble phase." - Noncommercial net longs rose to an all-time high 239,668 lots in the week ending October 9 Commercial banks price ranges are hard to take seriously, just because their individual stock pickings and commodity recommendations are generally so off the mark. However, their supply/demand analysis is often - regardless of the previous - quite right. The situation looks mixed. Maybe a nominal gold-in-USD correction and then determination of the long term direction. BTW, for EW fans Prechter things USD is bottoming for now.

Typo corrected, thanks. Agree.

You do understand that he would have achieved the same or a better result by switching his krónur into USD then JPY then CHF, etc. Only value ratios matter. All value is relative, until you have to eat. And then only edible things matter. I'm sure that the people who switched their gold holdings to USD in early 80s and then those USD to houses, cars, stocks and other assets were equally happy campers, when gold plummeted. Let's hope we are all wise to get unstuck on the way down.

I recommend you read Gold Standard in Theory and History (Eichengreen, 2005) to find out why gold had more than just 'desirable' properties and why gold-standard was given up on. The actual historical explanation is a bit more straightforward and believable then the global elite-banker conspiracy pushed by most gold-bugs. This is also why I don't share Romans holiday's notion that we would go back to a gold backed currency. It doesn't work, except in gold-pushers mythologies. It has serious structural issues of it's own (relating to base growth vs. real economy growth for example) and its policy flexibility is far worse than that of paper currencies. And if one is so inclined, one can also look at the golden period of 1913-1939 in Gold Standard Illusion by Kenneth Mouré Or let Peter L. Bernstein continue on the folly of gold beliefs throughout the written history in his book The Power of Gold - The History of an Obsession. "[...] from the gorgeous artworks of the Scythians to the Corichancha of the Incas, from the street markets of Bengal to the financial markets in the City of London, gold reflects the universal quest for eternal life - the ultimate certainty and escape from risk. That's my position, more or less. From now on I try not to care what others think on this anymore. I just understand that the more people believe in the gold mythology pushed by gold-pushing snakeoil salesmen, the better a trading opportunity I have. In fact, potentially one of a lifetime. So if you are a gold-is-money-believer, then please ignore this post and all the scholarly analytical literature on gold standard. I'm sure it's all crap spouted by shoople historians who are in the pocket of the central banks. From now on, I'll stick to discussing gold price moves and everybody who so desires can keep on believing in the gold-tooth fairy If this was off-topic, please feel free to move/delete the whole post.

Can you please reveal us your technique for this prediction? How do you arrive at $5000 and higher levels still? Also, would you say the same amount of rise in EUR or CHF or JPY or CNY? Or just USD? Inquiring minds want to know.

--- OFF-TOPIC - skip to the next divisor if not interested in gold value theory ---- Indeed. I'd like ton know, how it has performed *on the average* historically over long periods of time against: industrial commodities, land, rich topsoil, etc. I'm sure somebody has already plotted those with some accuracy. Just can't find them. Oh, I fully agree. If many of my posts weren't met with "IDIOT, BUY GOLD!" emotional drivel, I could stick to the analytical part only. The analytical part says: gold is bad very-long term buy & hold investment (see the graph I posted). Even stocks are better (both CPI adjusted, over 100+ years). Value is human conception yes. But beyond that, intrinsic value is what financial / economic theory of value defines it to be, that is: Intrinsic value does change in time and through information. In case of gold, to me all gold's value on top of it's industrial/jewellery demand is pretty much speculative exchange value, i.e. non-intrinsic. Speculative, because it's not generally agreed upon AND because historically this value has oscillated wildly - and I see no reason for this trend to break. That is, all this "gold is money, gold is wealth, gold is store of value" is non-intrinsic. It's speculative exchange value based on history and culture. No guarantees it'll work like that. Others may not agree, I'm fine with that. Would like to see an intrinsic value analysis of gold for it's wealth storage function. Haven't seen such yet. There's of course the ecological economics definition (ref: Leopold, et al.), which I found to be even more deeply correct and ethically more sound, but that is quite off-topic for today's discussion, so I'll pass. Gold has had monetary value, when it's been used as a dictated or preferred tool in the transferral of value in exchange. Not today, it's just speculative value mostly on top of intrinsic industrial use value. So all arguments about it's "function as money" are based on it's history: "once and future money". And even that value has been shrinking constantly over the span of several fiat-paper money failures. This is perhaps splitting hairs to somebody, to me it's a matter of understanding WHY gold goes up. Not because of inherent properties of gold, but because of the value people culturally attach to it. And *that* can be fleeting. Especially in a breakdown scenario, for which many are hoarding gold. Indeed. Just like any other investment or asset (sans actual physical edible commodity investments - you can eat those if it comes to that, they will never go to zero. They can be an end in themselves). --- OFF-TOPIC ENDS here ---- Now some gold price calls: - Andrew Cardwell: correction to $1015-$1030, $1150 by end of year, $1500 probably by 7-8/2010 - Alexander Elder: $1300-$1500 possible if resistance is broken - Moose Calls says UP for short and interim term trades for gold And an interesting graph of gold's value against a basket of currencies (middle graph). The lowest is a bullish index for gold. Still some ways to go, esp. if USD keeps tanking (which is LOSS of USD, NOT gain of gold). Gold volatility is up again and may signal a top or a break-out.

Maybe. Let's plot an average of all fiat paper currencies PP with SS CPI adjustment and compare that to gold. That's the proof. I don't really want to believe anything this important without proof. Especially not gold-bug propaganda. As for GF, only he can say what he believes, but I've gotten the impression that he believes: not trading in gold, gold will go to $2000-$5000 (inf adjusted), COMEX will default, gold somehow has intrinsic value, gold is money, and many other things. That to me is tantamount to "buy & hold & be happy". If I have misrepresented his views, I apologize and I hope he he will correct me. Sorry, should have been more precise. Fiat as in 'through faith'. Gold is not de jure money anywhere and it's use as a money-like store of value is based on culture, history and mainly other non-intrinsic features. That's why it is faith based. Either you believe gold has the value that people say it has - or not (or believe these to a degree, based on price). I don't believe it is "once and future money, a perfect store of value." Valuable? Sure! For industrial uses, for historical reasons, due to cultural expression and due to the emergy embedded. Money? Historically yes. Now? No. That's not quite as I view it. Only produced (mined) gold can really be valuable in use (excl. futures/options on assumed reserves in the ground are speculation, even though on can exchange it to something of true value). Now, the price of something is determined (I believe in microeconomic theory in this regard) by supply and demand. Currently we have due to many cultural/historical reasons increasing demand. And the production isn't rising as fast. Hence price rises. Nothing to do with intrinsic value or perfect store of value. I believe food has more intrinsic value and its price can still fluctuate wildly according to supply and demand. If you don't eat, you die. Food is essential. Food in itself is useful, without any intermediaries. If gold is chosen as 'perfect' money, because it has not intrinsic value, then it is by definition granted value based on faith. Whether that is cultural silent agreements or a de jure position, matters none. If it has no intrinsic value, then whatever given to it is based on faith. This is basic logic. BTW, all paper money fiats have had a practical limit to it's quantity - namely loss of credibility. Gold can experience a correction in this regards in its price, just as it has, several times before in history. If too many start piling up on it, and the prices rise too high, it's credibility as a cultural store of value at that time can rapidly diminish. As has happened before in history. Again, this is not an either/or issue. I'm not "against gold". I respect gold, but I don't go into the "hey, it's once and future money! BUY IT! It can only go up" camp either. What is the point of all this, I hear some of you saying? Some academic posturing? The point is this: gold both historically and the way it is given value can have wild upswings (overvaluation) and downswings (relative historical mean undervalution). It is a potential good trade or mid-term investment, if you believe in it due to the volatility and sentiment hypothesis. It's not a GOOD long term investment, if you believe it on the the long term historical averages. Very crude graph with a hand drawn approximation linear regression (don't have the original dataset to plot algorithmically) My point to myself and perhaps to some others who haven't thought about this: Understand what you invest in, why and when. Don't fall for dogma.

I have no data on anything that has performed relatively better. I have ideas, but not data to find out if they are true or not. However, IF the mentioned gold graphs are true within the error margin assumed, then the whole notion of "gold as inherent store of value" is silly. It's a fiat, just like anything else. Better fiat than many other, but susceptible to value erosion and fiat nevertheless. Can still be a great interim term investment and good trade, which is the whole point in this thread. Agreed. Good graphs, very thought provoking. All gold-bugs should study them hard. Especially investors. Thanks again!

I've woken up to gold, thank you very much. If you've got a point to make, please argue it.

This time it's different, eh? That's pretty funny Look at the long term historical chart and think again. Fiat currencies have come and gone, but the charts show that the price of gold has gone down, down, down down down - as an average over the very long term. PS. I hope this thread is less religious than the other gold thread, where the only truth that is apparently allowed reads: "Buy gold now, it can only go up, it's a safe bet, don't trade it.". We can do better than be emotionally dogmatic like that.

Can you explain what you think that the graphs show? To me it looks like the gold and silver have been worse than linearly falling as stores of value over a very long term. This flies in the face of all the gold-bug propaganda of course. But I don't believe those graphs are very accurate, because nobody has CPI data that is consistent and dates back that long. Still, if the error hasn't grown exponentially in time, it could have a story.