GOLD

[CIGA]

I don't own share for two reasons: (1) lazyness (no account yet), (2) lack of money. But I think shares should not be a substitute of a physical core holding.

 

 

I think the worst case in silver will be that it performs as well as gold.

 

you've saved yourself a beating.

[G0ldfinger]

http://gold.approximity.com/gold_analysis.html

The news that came out about Fanny Mae, Freddie Mac and IndyMac this week are deeply disturbing, although not at all unexpected for the informed investor. However, for less well-informed investors these news might have come as a shock, and the knock-on effect could be explosive moves in the precious metals within a short time horizon from here. We think that especially silver would benefit from a sudden move in the metals. As mentioned in earlier updates, silver still is in a rather unusual coiling pattern that looks highly explosive to us. (Please read on below.)

Our short- to mid-term target for the Gold:Silver ratio of 40:1 to 35:1 is therefore still in place.

 

Meanwhile, the Dow Jones Industrial Average looks deadly wounded when compared with gold. While the downside in the Dow:Gold ratio has come to a large extent from the Dow's sinking recently, we don't think gold will linger for much longer and we expect the price pair to move closer towards the target area (upper triangle) that is shown in the chart below.

[G0ldfinger]

[frizzers]

Excellent article from Turk

 

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

[romans holiday]

Excellent article from Turk

 

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

 

Always appreciate anything Turk writes. I thought his interview was especially good on financialsense a couple of weeks ago.

 

I wonder if the bankers are suffering from vertigo yet?

[headmelter]

Excellent article from Turk

 

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

 

 

Hope you don't mind I posted this over at hpc.

 

(credit facilitated of course.)

[Steve Netwriter]

Al discusses gold, silver and the U.S. Economy with Ed Steer of Casey Research.

http://www.kereport.com/audio/0712-04.mp3

 

My summary of what is said:

 

"The US financial system is over. It doesn't matter what they do".

 

A discussion of gold. A lot of talk about the shorts.

 

"I think everyone has a right to be absolutely scared of what's coming"

"I look at the big picture. I've been around a while, I'll be 60 soon"

"I remember the crash of 1929 from what my grandfather told me"

 

"And this one is going to be orders of magnitude worse than that"

 

"It doesn't matter how well prepared you are.....I'm scared to death".

 

[Steve Netwriter]

I've been thinking about gold over the weekend. I think most people expect a fight at $1000.

With the recent bad news, I'm just wondering whether we're all going to be shocked by it just slicing through $1000 as if it's not there.

It looks like this week could be very interesting.

[Gatesy]

A piece which raises many questions and much debate I expect.

 

 

Monetarists warn of crunch across Atlantic economies

 

http://www.telegraph.co.uk/money/main.jhtm....xml&page=1

 

Snippets:

The money supply is crumbling in the US. There was a very sharp lending contraction in the second quarter lending. If the Federal Reserve is forced to raise rates now to defend the dollar, it would be checkmate for the US economy," he said.

Leigh Skene from Lombard Street Research said the lending conditions in the US were now the worst since the Great Depression. "Credit liquidation has begun," he said

 

The Fed's awful predicament does indeed have echoes of the early 1930s when the bank felt constrained to tighten into the Slump in order to halt bullion loss under the Gold Standard

 

In Britain, the Shadow Monetary Policy Committee - hosted by the Institute for Economic Affairs, and a refuge for UK monetarists - issued its own alert this week. The focus is on "adjusted M4", which covers loans to "private non-financial corporations" and may offer the best insight into the health of British business.

 

The growth rate has dropped from 16.1pc a year ago to minus 0.5pc in April. It is the suddenness of the decline that matters most. The data reeks of recession. Professor Patrick Minford from Cardiff Business School called for an immediate rate cut, arguing that the credit crunch is a more powerful and long-lasting force than the oil inflation.

.

 

Two things which I'd be interested in opinion on:

 

1) The article talks about different M's as you'd expect; if relevent money supply is now going to contract sharply, I note with interest the point about 1930's tightening to halt the bullion loss under the gold standard. Between 1929 and 1932 this deflation caused the DOW to fall from a high of $381 to a low of $41. During this time , under the gold standard, gold was fixed at value $20.7 per ounce. The astute amongst you will note that the DOW/Gold ratio therefore fell from a heady 19 to 2 times.

 

Now, if we had a gold standard today and tight policy did indeed exist, I could certainly see a similar scenario play out, where one could predict today's DOW falling from a high of aorund $13,000 dollars in 2007 to perhaps $1300 in 2010.... Owning dollars/pounds would be as good as owning gold as value would be maintained, and your purchasing power increasing by the day as goods get cheaper. Clearly there would be other issues to deal with such as mass unemployment amongst other things as demand for goods dries up amidst a collapsing economy and holding onto your gold backed money makes sense.

 

But we don't have a gold standard, so even if we do get deflation of fiat money and the DOW falls to $1300, gold at 2 times the DOW, will rise to $2600.

 

2) As we know "The Federal Reserve stopped paying much attention to the data a long time ago. It has abolished M3 altogether". Is this article playing exactly into the hands of the media and public exactly as the US / fiat proponents wanted all along? Such that calls for looser policy, so as to avoid deflation, gets all this debt flushed down the toilet as per plan? In this scenario we all know that gold is going to the Moon, Mars and the Kuiper belt. Consider that between 1966 and 1980 (inflationary period) the DOW went from $1000 to $800 ( a 20% nominal fall or bear market). Gold went from $35 to $850. Looking to that DOW/Gold ratio again that's from 29 to 1. Say hello to $10,400 gold?

[romans holiday]

Next to the POG, I like to keep an eye on the DOW. It will be very interesting to observe how the price of it will pan out. As assets continue to deflate we would expect it to go into a death spiral, yet as monetary inflation kicks in maybe the nominal dollar price may stagnate or even go up [as your post suggests in comparing the 70's DOW].

 

To me it does not really matter as the dollar will become an irrelevancy. Of more import will be the ratio of the DOW to gold.

[Bobsta]

A piece which raises many questions and much debate I expect.

Your link was broken Gatesy... I think I've found it here:

http://www.telegraph.co.uk/money/main.jhtm.../cnmoney111.xml

 

Haven't had chance to digest it yet though.

[kernull]

 

why does it start the break out at 800 ? why not 950 ? at 800 level the dots look flat.

[warpig]

You're a good man Steve! Thanks.

 

This graph monkey has just created a US$ gold price with the Fed Funds Rate for you.

 

 

[warpig]

Thanks, I will have a good read over the week.

 

The key seems to be real interest rates. When they're low, gold rises. But it is then difficult to get gold slowing down again.

Several articles out there on it. Google Adrian Ash, Head of Research at BullionVault.

 

[warpig]

Thanks for your efforts Steve. Whilst IMO this collapse is a done deal, I need to start thinking about what might represent the important early market indicators that gold has peaked. Has there been any analysis on this yet?

 

Yes :D

 

But so far I haven't managed to get the REAL inflation numbers. So that's based on the nearest I've found so far.

So yes, the case for gold is even greater.

Maybe imagine the 'Real' fed fund rate sloping down another 2 to 4% as the 'adjustments' reduced the decline in that line.

 

I will try and find some better numbers.

 

Edit: Oh, I should point out those are annual numbers, so there is no 2008.

 

[G0ldfinger]

why does it start the break out at 800 ? why not 950 ? at 800 level the dots look flat.

In fact, I think you're right. I had no time yet to update this chart. But I think the base is now $900-$950, and the next upsurge will be to the $1,200 area.

 

The whole correction down from $1,000 turned out to be much weaker than many of us thought. (If the PPP doesn't through a last kitchen sink against gold soon.)

[Steve Netwriter]

warpig,

No worries

It's something I should have done before. Your request was incentive enough to do it.

Which reminds me, I must find the real inflation numbers and plug them in.

 

I think we have a few years (min) to think about that. But you are right, it will need to be done.

 

I just checked the volume chart. Looks quite good to me.

 

[Gatesy]

Your link was broken Gatesy... I think I've found it here:

http://www.telegraph.co.uk/money/main.jhtm.../cnmoney111.xml

 

Haven't had chance to digest it yet though.

Thanks Bobsta

[marceau]

Why is it every time gold goes crazy I get stuck away from a computer?

 

Anyway, having been without computer access for the past three weeks I can finally post again and it's nice to be able to say that the path for gold is totally clear. The downtrend was broken, we've formed a new uptrend channel and the good old dollar is sinking into oblivion, and it feels great.

 

I've spent most of the past few weeks placing buy orders around the $911-$920 level in anything gold (with a few little side punts in the low-mid $1700s for silver). Almost all of which were filled. Needless to say last week paid off very well for me, so I've lightened up on a number of positions in order to book some profits, the rest I'm hanging on to for the pretty inevitable march back to the old highs.

 

As far as I'm concerned the correction is dead, and with news like ol' helicopter Bernanke's Fannie and Freddy bailout around gold won't remain in triple digits for long.

 

I am kind of expecting some kind of counter-intuitive reaction to the bail out news though and would expect gold to take another fishing line drop early this week. If it does I'll be buying heavily and holding, if the uptrend is good it will take care of any minor timing errors pretty quickly, and so long as people avoid buying strength I think there is some very easy money to be made in gold over the coming months.

 

I'm looking at anything below $950 as a gift now, the trick will be to stay brave and make those buys after we drop $15-20 in a heartbeat to get there.

 

BTW great posts over the last few weeks guys, it's nice to be back in such esteemed company.

[romans holiday]

Good to see you back again M.

 

I stocked up on bullion a few weeks ago when it was at $935. It dipped a little but did not bother me as POG threatened to take off anytime. This week served to justify my feeling. I am still wanting to get in for the next few paydays and must say it is nice to see it dipping down into the 950's. Like yourself, I can not see POG at these levels for long.

[Bobsta]

Good to see you back again M.

Seconded.

 

I generally don't do "forum stalking" but I have to admit to viewing your profile this morning, wondering where you'd been.

 

Although if last week's movement in gold is anything to go by, please feel free to have more of this downtime.

 

Lots of bearishness all over the newswires this weekend... and gold drifts down on European trading - kinda to be expected, I guess.

[frizzers]

http://broadcast.ino.com/education/gold_cl..._pattern/?we711

[cgnao]

http://broadcast.ino.com/education/gold_cl..._pattern/?we711

 

Technical analysis in gold is the best way to the poorhouse.

[ChrisP]

Technical analysis in gold is the best way to the poorhouse.

I tried this when I first started spreadbetting - technical analysis of intraday trends. You can guess what the result was...

 

I won't touch TA these days. I just try to find the long term trend and ride it.

[Steve Netwriter]

Its easier if you control 85%+ of the short positions