Gold comments - for the first half of 2008

[Steve Netwriter]

I found this article interesting on the possible consequences of various flights to gold.

 

There's Just Not Enough Gold; Modeling A Dollar Flight To Gold

http://www.kitco.com/ind/Dillon/jan172008.html

 

and more recently:

 

The Time For Gold Is Now!

http://www.marketoracle.co.uk/Article3529.html

 

It makes you wonder:

 

 

There isn't much gold for storing all that safe haven cash

[drbubb]

Frank Barbera is BEARISH on Gold stocks (including Juniors)

 

He doesnt like:

 

+ The downside reversal in the Major Gold stocks,

+ The failure of juniors to participate

 

Next 4-5 months, "we could see gold moving down to $675-700 area"

 

After the drop, he sees a "mega-rally in the gold stocks"

 

IF "we go thru $950, I will throw in the towel on the Bear case"

 

(Personally, I think he will be throwing in the towel. But let's see,

and let's keep open minds on what might happen.)

[frizzers]

Remember during the August sell-off , or perhaps it was July, Barbera was talking about gold going to 500, if I remember right.

[Gatesy]

Remember during the August sell-off , or perhaps it was July, Barbera was talking about gold going to 500, if I remember right.

 

Frizzers, I heard these comments on FSU newshour too. Are you saying you think he over called a downturn last time (Aug 07) or that he got it right (Aug 06)?

[frizzers]

No, he was wildly off (July /Aug 07).

 

[Gatesy]

No, he was wildly off (July /Aug 07).

 

Nice analysis. The one thing that bugged me about Mr Barbera's comments was that he just wasn't really backing them up with why gold will be so bearish.

 

Here's to 'buying on the dips'...

[Steve Netwriter]

I'm getting more and more opinionated on gold these days. That doesn't mean I'm right of course.

 

There's no way it will correct to 860. It's not "likely" it's "very unlikely".

 

It may get as far as 880.

 

IMO more like this:

 

 

Although nothing would make me happier than to see a brief fall to 800

[No6]

Another short term bearish view. $1000 gold "out of the question for the next six months" and he's a long term gold bull. Worth watching even if you disagree with him.

 

Gartman Sees Up to 15 Percent Short-Term Drop for Gold: Video February 5 (Bloomberg) -- Dennis Gartman, editor of the Gartman Letter, talks with Bloomberg's Betty Liu about the outlook for gold prices, investment strategy for gold and expectations for crude oil prices.

 

http://www.bloomberg.com/news/av/

[1waving]

We could have seen an Elliott 5 up from July '07, chart does look ready for consolidation or mild correction.

Dollar strength against the Euro today, even following very week U.S services ISM, now gives a hint of a triple top on eur/usd.

[polo]

good day for the $

http://stockcharts.com/c-sc/sc?s=$USD...0240&r=9008

and gold in £ (to monday)

http://stockcharts.com/c-sc/sc?s=$GOL...4175&r=5968

and in $

http://stockcharts.com/c-sc/sc?s=$GOL...6311&r=5186

the weekly charts looks more bullish than hte dailies

we could see a retrace to 850$ or £4

the daily $ cahsrt suggests a period of consolidation is likely - volatility is falling

[Steve Netwriter]

Did someone say gold was going to drop to $860

 

Remember my prediction ?

 

 

Well, my crystal ball seems to be working rather well at the moment

 

 

 

IMO, with the current climate, the gold price in the short-term is likely to move towards the top of the channel.

A serious bit of manipulation is the only thing that's going to drop the price....briefly. Bring it on

 

 

£474.1 for gold and £8.81 for silver.

[Steve Netwriter]

Now, is this a way to hit the gold price down or is it necessary to get some money to keep things running ?

 

G7 approves IMF gold sales - Italy econ minister

http://in.reuters.com/article/businessNews...l=0&sp=true

 

TOKYO (Reuters) - The Group of Seven rich nations on Saturday approved the sale of gold by the International Monetary Fund from April as part of a broad reform of its budget, Italian Economy Minister Tommaso Padoa-Schioppa said.

 

"There was an acceptance among the G7 that resources should be raised by selling gold," Padoa-Schioppa, who is also the head of the IMF's steering committee (IMFC), told reporters after a meeting of G7 finance ministers in Tokyo.

 

He said the agreement would be finalised in April and would complement spending cuts being drawn up by the IMF under its new managing director, Dominique Strauss-Kahn.

[frizzers]

They are doing exactly the same thing Gordon Brown did. Telling the market they are going to sell it before they sell it. That is not the way to get the best price for their gold. But perhaps that is no their agenda. You might even think they're trying to get the price down.

[Gatesy]

Interesting results of a current Yahoo survey, showing the "popularist" sentiment towards different investing options (sorry about the formatting, but you get the idea):

 

Question: Where would you invest now?

32271 votes

 

FTSE 100 tracker; now's the time to buy 30% 9441 votes

Gold; it's a defensive asset 16% 4968 votes

Bonds (gilts) 6% 1909 votes

Property - despite interest rate fears 11% 3471 votes

Savings account; cash is king 31% 9800 votes

...under the matress 9% 2682 votes

[drbubb]

Gold; it's a defensive asset 16% 4968 votes

 

Interesting.

But I disagree with their characterisation of gold as "defensive".

It's a great way to play offense, and when the man in the street realises that

it will be slowly nearing the time to sell

[Justin Thyme]

. . . . and when the man in the street realises that, it will be slowly nearing the time to sell

 

I've been thinking about this for some time now. Will it really get to the point where the average Joe will advocate buying gold ? Obviously the internet has made this kind of information widely available to those willing to look for it but isn't it a bit unrealistic to envisage the Sun or Daily Mirror running features on buying precious metals with the same effort they put behind ramping property ? After all, a home is something that even the most financially unsophisticated person can understand and touch. I don't think the same can be said about gold/silver and, say, its correlation to loose monetary policy in the US and the price of oil etc.

[drbubb]

I've been thinking about this for some time now. Will it really get to the point where the average Joe will advocate buying gold ? Obviously the internet has made this kind of information widely available to those willing to look for it but isn't it a bit unrealistic to envisage the Sun or Daily Mirror running features on buying precious metals with the same effort they put behind ramping property ? After all, a home is something that even the most financially unsophisticated person can understand and touch. I don't think the same can be said about gold/silver and, say, its correlation to loose monetary policy in the US and the price of oil etc.

 

The Average Joe wont get in, until he hears his brother-in-law, or hi sneighbor bragging about how

much money he made in gold or gold shares

[Vicarious]

I've been thinking about this for some time now. Will it really get to the point where the average Joe will advocate buying gold ? Obviously the internet has made this kind of information widely available to those willing to look for it but isn't it a bit unrealistic to envisage the Sun or Daily Mirror running features on buying precious metals with the same effort they put behind ramping property ? After all, a home is something that even the most financially unsophisticated person can understand and touch. I don't think the same can be said about gold/silver and, say, its correlation to loose monetary policy in the US and the price of oil etc.

 

I can remember when I was at uni picking up the daily mail in the student union, this was at the height of the dot com bubble and the centre page spread was an article about a bloke who had quit his job and taken all of the equity out of his 3 bed semi (£60k) and was going to start making a living from trading technology shares. He was going to write for the paper each week to update the readers on his progress and profits, suffice to say he didn’t make the profits he had expected and the series ended after only a few weeks.

[drbubb]

im staying complacent on this $15 drop.

at -$20, i start to worry a bit

[1waving]

Formed Elliott 5 waves up from July 07, now formed A-B of a corrective phase, C leg down at moment ??

[1waving]

Formed Elliott 5 waves up from July 07, now formed A-B of a corrective phase, C leg down at moment ??

 

 

 

In the longer term the 5 waves mentioned above seem to have formed a a greater wave Three up. This formation starts from Oct 06, with the wave One peak in April 07 and the bottom of the corrective wave Two in Jun 07 and from there the wave Three up. This does imply a protracted consolidation of weeks if not months to form a corrective wave Four unless there is a near term extension breakout above $940.

 

Current trendline support from Dec 07 is about $900 or fractionally above. A move below this with acceptance would also point to a consolidation phase.

 

The chart looks very orderly to me and gives a strong bullish view in the medium to longer term.

[Steve Netwriter]

I was listening to HowStreet the other day. I was amazed at the apparent lack of knowledge of the person who was introduced as an expert.

They were talking about the "IMF gold sales".

 

Maybe they'd do well to read the Jim Sinclair comments on what has happened historically when the IMF declare gold sales.

 

And this is also a good read:

 

International Gold Sales

http://www.whiskeyandgunpowder.com/Archive...8/20080212.html

 

Au contraire. According to the recommendations of an advisory panel — this includes Morgan’s CEO, Greenspan and central bank heads from Mexico, Saudi Arabia, South Africa, the ECB and China, “only the gold acquired since the Second Amendment of the Articles in 1978…which amounts to about 400 metric tons” are to be sold. Moreover, it:

 

“Should be handled in a way that avoids causing disturbances to the functioning of the gold market and, accordingly, should be coordinated with current and future central bank gold agreements so as not to add to the volume of sales from official sources… It would simply take the place of some gold sales that would have been done by other parts of the public sector, other official sellers.” — IMF Survey, Volume 36, No. 3 (Feb. 12, 2007)

 

Did you get that last sentence? I underlined it for you.

 

 

Did you get that ?

 

"so as not to add to the volume of sales from official sources"

 

Gold should be bought on any dip, especially those subsidized by gold-unfriendly policies.

 

IMF selling........buy buy buy buy buy................. :D

[Steve Netwriter]

Oh, in case you're wondering what the history of IMF gold sales has been:

 

Dear CIGAs,

 

The following is the history of the IMF and their gold shares.

 

It is important to note that their sales all have taken place at times when major bull markets were either just beginning or, as in 1976-1980, at the start of the major parabolic move to then all time highs.

 

Now you know why I said our friends from 2002 Chung Phat and Dr, No are high-fiving at the news that the biggest dopes in gold are about to prove their status beyond any doubt once again.

 

How and when the IMF used gold:

 

Outflows of gold from the IMF's holdings occurred under the original Articles of Agreement through sales of gold for currency, and via payments of remuneration and interest. Since the Second Amendment of the Articles of Agreement, outflows of gold can only occur through outright sales. Key gold transactions included:

 

* Sales for replenishment (1957–70). The IMF sold gold on several occasions during this period to replenish its holdings of currencies.

* South African gold (1970–71). The IMF sold gold to members in amounts roughly corresponding to those purchased in these years from South Africa.

* Investment in U.S. government securities (1956–72). In order to generate income to offset operational deficits, some IMF gold was sold to the United States and the proceeds invested in U.S. government securities. Subsequently, a significant buildup of IMF reserves prompted the IMF to reacquire this gold from the U.S. government.

* Auctions and " restitution" sales (1976–80). The IMF sold approximately one third (50 million ounces) of its then-existing gold holdings following an agreement by its members to reduce the role of gold in the international monetary system. Half of this amount was sold in restitution to members at the then-official price of SDR 35 per ounce; the other half was auctioned to the market to finance the Trust Fund, which supported concessional lending by the IMF to low-income countries.

* Off-market transactions in gold (1999–2000). In December 1999, the Executive Board authorized off-market transactions in gold of up to 14 million ounces to help finance IMF participation in the Heavily Indebted Poor Countries (HIPC) Initiative. Between December 1999 and April 2000, separate but closely linked transactions involving a total of 12.9 million ounces of gold were carried out between the IMF and two members (Brazil and Mexico) that had financial obligations falling due to the IMF. In the first step, the IMF sold gold to the member at the prevailing market price and the profits were placed in a special account invested for the benefit of the HIPC Initiative. In the second step, the IMF immediately accepted back, at the same market price, the same amount of gold from the member in settlement of that member's financial obligations. The net effect of these transactions was to leave the balance of the IMF's holdings of physical gold unchanged.

 

More: http://www.imf.org/external/index.htm

 

 

 

Should they sell in April of 2008 then gold is going to the next Angel above $1650.

 

That is the only implication IMF sales have to the price of gold. It has been the most powerfully bullish event every time they have done it, and will be again.

 

If any newcomer to gold sees the IMF news as a reason to sell gold these newcomers are as DOPEY as the IMF has proved to be every time, time and time again.

 

Respectfully,

Jim

 

From: http://www.jsmineset.com/ARhome.asp?VAfg=1...=imf&UArts=

[Steve Netwriter]

It's very quiet on precious metals on here. You must all be too busy buying.

 

Silver just got to £9/oz.

 

Gold is back up at around $929, and peaked at £477.5, and passed the JPY100,000 at JPY100,300.

 

I think this is very well thought out.

 

GOLD - HOW HIGH WILL IT GO?

How about $10,000? or $1,000? Or even $100,000?

by Krassimir Petrov, PhD

The American University in Bulgaria

February 19, 2008

http://www.financialsense.com/editorials/p.../2008/0219.html

 

Which is the most likely price target will depend on how Fed will fight inflation. Based on the Fed’s reaction, there are three possible future scenarios: (1) deflation, (2) stagflation, and (3) strong inflation. Let us consider each in turn.

 

The first scenario, deflation, implies a major contraction in the supply of money and credit, similar to the one during the Great Depression. Consumer and commodity prices would fall rapidly; the stock market and real estate market would collapse. Back then, stock prices and real estate fell roughly 10 times and gold rose only a little. If this scenario were to play out, then a reasonable forecast for the Dow will be about $1,000-1,500, while the gold price will be likely in the range of $800-1,500. This scenario is highly unlikely as the Fed will fight tooth and nail to prevent a deflation from taking hold.

 

The second scenario, stagflation, is most likely. It should look similar to the 1970s. Back then, the Dow made its peak in 1966. It made little progress for about 15 years, so that in 1980 it was just about where it was in 1966, roughly around 1,000. Gold, on the other hand, rose from a low of $35 all the way to $850. This means that strong inflation during the period kept the Dow from falling, so it did not fall as it did during the Great Depression. On the other hand, inflation powered the price of gold about 25-fold. In this scenario, we should expect the Dow to remain range-bound in the 10,000-15,000 range. Then, a gold forecast of 10,000 is perfectly realistic.

 

The third scenario, very strong inflation, is definitely possible, although less likely than stagflation. This would mean a typical, commonly-observed inflation of a third-world country, may be 15-25% annually. This kind of inflation could easily power the Dow may be 3-4 times in the coming decade, may be all the way to $30,000-50,000. This could mean a $20 for a loaf of bread or a gallon of gasoline. This would imply a gold price in the range of 20,000-50,000. It is possible, even probable, but in my opinion, not very realistic.

 

To summarize, I believe that both deflation and very strong inflation are not very likely. The likely outcome will be stagflation. Then a $10,000 price of gold is consistent with this view. This is my price target for 2015-2020. My advice is simple – stay with gold and you will be fine in the long run.

 

 

 

I've been playing around with Jim Sinclair's prediction. I think this is an interesting one:

 

 

I find it useful as a way of thinking about where prices might go, and where we are now.

[Steve Netwriter]

I think this one is pretty neat.

I've managed to combine Jim Sinclair's prediction of $1650 in 2011 with Krassimir Petrov's prediction of $10,000 by 2020.