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Patently not true. Gold and the broad markets rose together 2003 - 2008. I think that proves that gold's price action cannot be summed up as simplistically as that.

 

That depends if your simply measuring the stockmarket by it's price or it's earnings and yield - US and UK stocks have been falling in value since the bursting of the dot.com bubble where p/e ratio's were at a peak. On this measure, the real value of stocks has been falling from 2000 to 2009 as gold has been rising but we got to a point where stockmarket valuations got far too low in the crash just like 1974 - the markets were pricing in another Great Depression in a panic sell-off where everything of value was liquidated regardless of fundamentals, gold included through the paper markets.

 

If we now go back to the end of 2008 and the beginning of 2009 then on a p/e ratio stocks had a significant low and had been oversold - eg. UK stockmarket was trading on a p/e ratio of 6.8 on 6 March 2009 the day before this rally started - even China was 8.9 which was incredibly cheap considering it had been over 25 in 2007. You would expect to get these kinds of valuations at the end of a secular bear market in stocks/bull market in commodities.

 

The problem now is that stocks have likely entered another bull market as they did in late 2002/early 2003 which I think could last until the end of the year or beginning of next year but with gold 3 times the price it was back then. Some stockmarkets like China's could go back to their 2007 highs by the beginning of 2010 but even if they did that, they would probably be on a lower p/e to what they were in 2007. The final p/e low for stockmarkets is likely to be towards the end of the next decade a couple of years or so after the gold price peak where stocks will be a screaming buy - that will be the end of the commodity cycle and the equivalent point to August 1982.

 

Maybe there is a graph somewhere that can compare the stockmarket in terms of it's earnings to the POG?

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another chart worth posting

 

:ph34r:

 

That's a pretty scary chart - is it for real?

 

Edit - seems to be doing the rounds on the web and obviously it's taking into account all the huge losses (negative earnings) from the banks and motor companies.

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Patently not true. Gold and the broad markets rose together 2003 - 2008. I think that proves that gold's price action cannot be summed up as simplistically as that.

 

Here we go - found something that Steve did last year which makes the point better.

 

http://www.greenenergyinvestors.com/index.php?showtopic=4736

 

DOW_PE_GoldUS_1880to2008.gif

 

Could do with an update though - Dow Jones hit 8.9 on the March low.

 

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Where do you think the money will go when it leaves equities? :lol: Hint.... think safe havens that historically preserve capital.

The dumb money would pile back into the dollar. The smart money will go to gold. This may entail a short term correction in gold before we see gold go to new heights in stronger hands..

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It happened in December 1974 to August 1976 - why should it been any different now?. Gold tends to go up if stocks are going down and visa versa. Talking about inflation, what inflation?!..... that could be years away. Yes, there could be high inflation or even hyperinflation in the future if things get really bad but that's a long long way off. We are getting a small amount of deflation at the moment which will gradually turn back to low inflation but we are a long way off even getting back to even 80's or 90's style inflation let alone 70's or hyperinflation.

I agree that deflationary forces are dominating at the moment. The real economy is one thing but perceptions are quite another. Inflation fear refers to the perceptions of the mass of investors. Many perceive inflation to be coming which is exactly what Bernanke wants them to think as he threatens to print ad infinitum. I see this psychology being the prime driver of the rally as investors seek to get out of dollars and into equities, and I would add commodities. I doubt many are buying the Dow for fundamental reasons and because they see a rosy future for the American economy. Perhaps some are just buying because it looks cheap. The fundamentals are, as you suggest, deflationary which is not good for any economy. But where you see a small amount of deflation, I see deflation dominating the economy for a while to come.

 

Before we can get high inflation the banks have to be repaired and acting normally again - as I see it, all this money that is being created to support the banks isn't going to come flooding out in a hurry just yet. Remember that gold isn't a hedge against inflation like many say it is but is a form of insurance against corrupt government and the worst economic conditions - investors will always put their money where they can make the best return, even if that means dumping gold in the short-term.

I guess it comes down to whether you believe the crisis is over. I don't think it is. I reckon we will see continued trouble with the banks and the economy morphing eventually into a currency crisis as Bernanke tries to delay the inevitable, namely that consumers and institutions need to deleverage. This debt deflation is not going away anytime soon.

 

Dow could go to 10000 before turning.

 

Back to gold. I also agree with you that it performs due to economic crisis, but would add it will ultimately perform with a currency crisis.

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Found some gold supply/demand information. I’ve not seen this posted before

 

http://www.blackrock.co.uk/content/groups/...mea02012243.pdf

It was interesting to note some of the points raised by GFMS, the authoritative gold consultancy, in their

preliminary survey on the 2008 gold market. Some of the highlights of the report include: a 4% decline in

mine production, to the lowest level since 1995; South African supply fell by 14%, the steepest percentage

fall since 1901. South Africa, which had been the world’s largest producer for more than a century, now

ranks third behind China and USA in terms of gold production; meanwhile, central bank sales were down

42.5%; on the demand-side, jewellery offtake was down 8% in 2008; producer de-hedging was down by

22%; and gold bar hoarding surged by 62%. In terms of the outlook for gold prices, GFMS expects prices to

trade in the US$750-1,080/oz range in the first half of 2009.

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http://www.3news.co.nz/Video/Gold-fever-st...efault.aspx#top

 

Gold fever strikes again in Central Otago

Wed, 13 May 2009 19:57:00 +1200

Those who catch gold fever say it's a hard one to shake. With the current tough times and the high price of gold, it is now over $1,500 per ounce and it has all of a sudden become popular again to seek out that speck of gold

.
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Further to what Lowrenty posted.

 

http://news.goldseek.com/CliveMaund/1243318380.php

The abnormal and surreal nature of the recent rally is made starkly clear by the small charts below, prepared by www.chartoftheday.com. Both of these charts go way back to the 1930's and the first of them shows the extraordinary collapse in earnings of the S&P500 companies. The second of them shows that the resulting overall P/E ratio has risen into the stratosphere. These charts are most interesting as they demonstrate that earnings no longer matter to investors - all it takes to make the market go up these days is hope, TV commentators talking the market up - and a big dollop of TARP money. This is what is commonly known as a disconnect from reality. One thing is for sure - you don't want to be around when the market suddenly realizes that Barack Obama is not going to be able to wave a magic wand and make everything right, even with the benefit of creating trillions of dollars out of thin air to bid everything up. All this manufactured money had better create a recovery soon or the market is likely to implode. However, recovery is unlikely for, as we know, the banks are jealously hoarding their government granted largesse, and even if they made the funds available to the wider world, companies and individuals are so lamed by debt and fearful that they are in no mood to borrow, no matter how low the interest rate. So let's put 2 and 2 together - the stockmarket rallies hugely to discount recovery, but the recovery never materialises. Well, what a shame - it's an awful long way down from here.

 

pe.gif

 

pe2.gif

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This from the latest James Turk commentary;

 

http://goldmoney.com/en/commentary.html

 

Gold’s reverse ‘head & shoulders’ pattern continues to develop nicely. It has been a good run for gold over the last couple of weeks, so some ‘backing and filling’ may occur. But the important message from this chart is that gold will move up to the neckline of this pattern around $1,000 in the weeks ahead.

 

alert_2009-05-25b.jpg

 

 

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This from Jim Sinclair today;

 

Dear CIGAs,

 

Predictions:

 

1. Gold reacts as currency support for the dollar enters mid June to a slow decline (that is the official definition of a strong dollar policy, really).

 

2. End of 2nd week going into the beginning of the 3rd week of June Gold launches towards and this time through the neckline of the reverse head and shoulders formation.

 

3. Gold rises to $1224 where it hesitates.

 

4. The OTC derivative market takes on the dollar as short sellers into dollar support.

 

5. This OTC derivative currency short position builds.

 

6. It is the US dollar where Armstrong will get his WATERFALL.

 

7. The main selling takes place when Israel makes a major miscalculation.

 

8. Hyperinflation is always and will continue to be a currency event.

 

9. Hyperinflation will be a product of the upcoming massive OTC derivative short dollar raid.

Should I be correct in the gold price action going into late June, it will fit Armstrong’s criterion for a move to $5000.

 

Alf’s work permits an over-run of the gold price to $3500 in the major 3rd phase, indicating overruns into the major 5th.

 

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Haha funny....... :lol: check out the projected parabolic curves on that inverted head and sholders.

 

Jim has really been specific here. I hope he is right else his credability will be on the line, oh, and I will up big time :) I wonder how much influence he has on the market with these predictions?

 

I have a copy of Gold Wars, by Ferdinand Lips for sale if anyones interested. http://www.amazon.co.uk/Gold-Wars-Ferdinan...8642&sr=1-1

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Jim has really been specific here. I hope he is right else his credability will be on the line, oh, and I will up big time :) I wonder how much influence he has on the market with these predictions?

He was also quite specific last year with his $1200 by March, which came and went without much fuss. Oh well hopefully he is right this time, it does seemed backed in the chart this time.

 

 

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I'm hoping we get a decent correction in gold soon - we all know where it's going to eventually, but wouldn't it be nice to have one last chance to get in at a lower price before it goes to the moon. :)

Any price below $1000 will look very cheap in a year :)

 

 

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He was also quite specific last year with his $1200 by March, which came and went without much fuss. Oh well hopefully he is right this time, it does seemed backed in the chart this time.

I might be wrong about this (likely considering I just downed a bottle of wine, but WTF) but,.....I think he said $1200 by March, but delayed by 3 months due to something or other. Collapse of world economy and delevereaging or something trivial like that. Anyones memory less anhebriated than mine? :blink: :blink: :blink: :blink: :blink:

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I might be wrong about this (likely considering I just downed a bottle of wine, but WTF) but,.....I think he said $1200 by March, but delayed by 3 months due to something or other. Collapse of world economy and delevereaging or something trivial like that. Anyones memory less anhebriated than mine? :blink: :blink: :blink: :blink: :blink:

I thought he predicted $1200 by December then delayed it by 3 months till March, but equally I might be wrong.

 

 

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I thought he predicted $1200 by December then delayed it by 3 months till March, but equally I might be wrong.

Why? You downed a bottle too? :P :P :P :P :P

 

Come on, any offers for my book??? Id rather sell it to one of you guys who will appreciate it than on ebay to some stranger.

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The thing that concerns me, is that he always leaves a scapegoat

 

 

 

 

 

Dear Arlen,

 

Absolutely not. We are in major #3 according to Alf.

 

The overrun price could be as high as $3500.

 

The low in June could be from higher levels than today.

 

Who cares about a few dollars when you might be looking at thousands of dollars of appreciation.

 

If you are a trader I can’t help you. Ask God, maybe he can shed some light.

 

Respectfully yours,

Jim

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A fun little strory about a bubble in goats. Here's a taste:

As you can see, we had entered a classic momentum market, where the price of the goat had decoupled from the fundamental value of the goat: the cost of a goat now vastly exceeded the capital returns which were possible over its lifetime from sale of milk, cheese, and, ultimately, meat and skin. However, vast fortunes can still be made in strong momentum markets, regardless of fundamental values, as long as you are not the one left holding the goat when the reversion to fundamental value occurs. And so I stayed in the market, fully invested in goats.

http://www.juliangough.com/the-great-hargeisa-goat-bubble/

:lol:

 

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I thought he predicted $1200 by December then delayed it by 3 months till March, but equally I might be wrong.

Yes, I think this was it. He postponed to March due to the unexpected autumn deleveraging.

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Jim has been consistantly wrong about gold for the last 14 months. How many predictions has he made about gold being about to VAULT up? :unsure:

 

Every trader in the world has now got their eye on this inverse head and shoulders.

 

Bob Prechter and his team expect this to fail. Let's see who is right. Although looking at the pattern it could even take another 5 or 6 months to play out.

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