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Gold bugs at last have their perfect trinity- http://www.telegraph.co.uk/finance/comment...ct-trinity.html

Great article. Hope you don't mind me highlighting certain parts on my deflation thread. :)

Gold prices tend to slide in late May and languish through the summer, because of the seasonal ups and downs of jewellery demand. The trader reflex would be to short gold at this stage after its $90 vault to $959 an ounce over the past month. They may think again this year.

 

Paulson & Co has bought $2.9bn in SPDR Gold Trust, the biggest of the gold exchange traded funds (ETFs), which now holds 1106 tonnes − three times the Brown-gutted reserves of the United Kingdom.

 

Mr Paulson has also built up a $2.3bn holding of Anglo Ashanti, Goldfields, Kinross Gold, and Market Vectors Gold Miners. The fact that he is launching a "Paulson Real Estate Recovery Fund", reversing the bet against sub-prime securities that made him rich, tells us all we need to know about his thinking. This is a liquidity-reflation play.

 

He may be wrong, of course. In his early fifties, he belongs to the baby-boom cohort most psychologically vulnerable to the 1970s "paradigm-error". And perhaps he has never lived in Japan.

 

It is striking how many of those most alert to the deflation danger are either veterans of Japan's Lost Decade or close students of it: Albert Edwards at Société Générale, Russell Jones at RBC Capital, Nobel laureate Paul Krugman, the Fed's Ben Bernanke, and Athanasios Orphanides, who helped draft the Fed's study on the Japan trap. "People always thought Japan's bond yields had to rise, but they kept falling and Japan is still not really out of deflation," said Mr Edwards. Indeed, 20 years after the Nikkei peaked at over 39,000 it stands today at 9,280. Interest rates are 0.01pc. The yield on two-year state bonds is 0.34pc. Still there is not a whiff of inflation.

 

A number of readers have written to me in tones of polite reproach asking why I fret about deflation when governments everywhere are spending and printing as if there was no tomorrow. I admit to being tortured by self-doubt, like others grappling with this extraordinary situation.

 

What we know is that inflation is already negative in Ireland (-3.5pc), China (-1.5pc), Thailand (-0.9pc), Korea (-0.5pc), US (-0.7), Japan (-0.3), Switzerland (-0.3, Spain (-0.2pc). The eurozone may be negative by July. Alistair Darling said Britain's retail RPI inflation used to set wage deals will be minus 3pc by September.

 

Does this constitute deflation in a meaningful sense? Not yet, perhaps. But it is moving too close for comfort in a world stretched by extreme leverage. The economies of the US, Japan, the eurozone, and Britain have been contracting in "nominal" as well as "real" terms – which smacks of the 1930s.

 

The "yen GDP" of Japan has shrunk by 10pc in one year; the "euro GDP" of Germany has shrunk 6.2pc, and Italy's by 4.7pc ; the "dollar GDP" of the US has shrunk 3.3pc. Debts are not shrinking, however.

 

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Did anyone get any?

 

I couldn't get excited over such a small offer on a coin I didn't know existed until this morning. :-) I know gold's gold, but I'd rather pay a bit more and have something more recognisable if I ever need to sell them for cash locally.

 

Andrew McP

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I couldn't get excited over such a small offer on a coin I didn't know existed until this morning. :-) I know gold's gold, but I'd rather pay a bit more and have something more recognisable if I ever need to sell them for cash locally.

 

Andrew McP

Paying spot price for physical without paying a premium is the same as scrap value. B)

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I couldn't get excited over such a small offer on a coin I didn't know existed until this morning. :-) I know gold's gold, but I'd rather pay a bit more and have something more recognisable if I ever need to sell them for cash locally.

 

Andrew McP

My sentiments exactly. It worked out to the equivalent of about £10 off an Elizabeth sovereign. There were no examples of this coin on ebay UK but ebay Austria had 6 on offer this morning.

 

Our special offer proved to be so popular that the reserved quantity of 550 pieces was already sold out.

550! Plenty of people felt otherwise then.

 

If it was Britannias at spot I'd have bitten their arm off.

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I am not one for posting overtly positive articles on gold with little analysis (aka 'ramping') but a paragraph from this one caught my eye:

 

http://www.marketoracle.co.uk/Article10711.html

 

I am very positive on the precious metals complex. However, the worst possible approach for anyone is to be overcommitted and borrow money to leverage their position. If you do that you are almost guaranteed that you will sell when the first or second violent shakeout occurs. Be assured that a parabolic rise will have violent shakeouts. The best pros, the big talkers, the wonder boys, the super duper traders down to the last person all can be shaken out by violent corrections when they are over committed. They are often overcommitted. That is what causes the violent fluctuations! Do not play their game.

 

A modest commitment will be in a position to make a small fortune. I do not recommend “going for broke.” There is no need to do so. Those who go for broke usually succeed - at going broke.

 

--------------/----------

 

 

 

funny thing is I have (coughs) taken out a loan to do the very thing the author warns against; not on a dangerous scale you understand, but nevertheless I am strongly considering going leveraged

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I am not one for posting overtly positive articles on gold with little analysis (aka 'ramping') but a paragraph from this one caught my eye:

 

http://www.marketoracle.co.uk/Article10711.html

 

I am very positive on the precious metals complex. However, the worst possible approach for anyone is to be overcommitted and borrow money to leverage their position. If you do that you are almost guaranteed that you will sell when the first or second violent shakeout occurs. Be assured that a parabolic rise will have violent shakeouts. The best pros, the big talkers, the wonder boys, the super duper traders down to the last person all can be shaken out by violent corrections when they are over committed. They are often overcommitted. That is what causes the violent fluctuations! Do not play their game.

 

A modest commitment will be in a position to make a small fortune. I do not recommend “going for broke.” There is no need to do so. Those who go for broke usually succeed - at going broke.

 

--------------/----------

 

 

funny thing is I have (coughs) taken out a loan to do the very thing the author warns against; not on a dangerous scale you understand, but nevertheless I am strongly considering going leveraged

 

Invest in gold with no debt = use it as a medium to save - use it as money - it's historic role the function it performs best.

 

Houses became an investment --> an unfolding disaster.

 

I somehow think gold does not want to be an investment with all the trouble of bubbles and busts - free market money will I hope remain money, I think the invisible hand of the market will keep it so.

 

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Invest in gold with no debt = use it as a medium to save - use it as money - it's historic role the function it performs best.

 

Houses became an investment --> an unfolding disaster.

 

I somehow think gold does not want to be an investment with all the trouble of bubbles and busts - free market money will I hope remain money, I think the invisible hand of the market will keep it so.

 

I suppose it comes down to how much you believe in a strong inflationary outcome*; if you believe this is a distinct possibility then their is an argument for using some leverage; though I do understand your sentiment regarding golds historic role as money

 

*or rather, fiat currency decline

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Gold: unstable metal (Interactive graph) - http://www.ft.com/cms/s/0/046b52f6-3a41-11...144feabdc0.html

 

Also, not directly gold but saves me faffing about finding somewhere else to put em...

 

China stuck in ‘dollar trap’ - http://www.ft.com/cms/s/0/5b47c8f8-488c-11...144feabdc0.html

 

US bonds sale faces market resistance - http://www.telegraph.co.uk/finance/finance...resistance.html

 

EDIT: forgot this one. Gold on verge of historic breakout? - http://www.marketwatch.com/story/gold-on-v...d=rss&rss=1 Check out reference to James Turk's recent comments. Hints at leveraging? (I'm certainly not 'ramping' that.) Would like to check out more of this FGMR - if anyone gets it, care to summarise?

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EDIT: forgot this one. Gold on verge of historic breakout? - http://www.marketwatch.com/story/gold-on-v...d=rss&rss=1 Check out reference to James Turk's recent comments. Hints at leveraging? (I'm certainly not 'ramping' that.) Would like to check out more of this FGMR - if anyone gets it, care to summarise?

 

"I think we are very close (7-10 months) to the beginning of a hyperinflationary spiral. ... If I am right ... there obviously is an exceptional opportunity to load up (i.e., a leveraged position) by buying gold."

 

But Turk has his fair share of trading scars and more.

 

He warns: "Comex options expire this Tuesday, May 26th, and options in the much larger over-the-counter market expire a couple of days later. We all know what has happened regularly over the years on option expiry. The gold cartel slams gold."

 

Turk is part of a faction I call the radical gold bugs, because they watch not merely inflation but what they believe to be the authorities' manipulation of the gold price to preserve the illusion of financial stability

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I am not one for posting overtly positive articles on gold with little analysis (aka 'ramping') but a paragraph from this one caught my eye:

 

http://www.marketoracle.co.uk/Article10711.html

 

I am very positive on the precious metals complex. However, the worst possible approach for anyone is to be overcommitted and borrow money to leverage their position. If you do that you are almost guaranteed that you will sell when the first or second violent shakeout occurs. Be assured that a parabolic rise will have violent shakeouts. The best pros, the big talkers, the wonder boys, the super duper traders down to the last person all can be shaken out by violent corrections when they are over committed. They are often overcommitted. That is what causes the violent fluctuations! Do not play their game.

 

A modest commitment will be in a position to make a small fortune. I do not recommend “going for broke.” There is no need to do so. Those who go for broke usually succeed - at going broke.

 

--------------/----------

 

 

 

funny thing is I have (coughs) taken out a loan to do the very thing the author warns against; not on a dangerous scale you understand, but nevertheless I am strongly considering going leveraged

 

I think this article is actually a warning of what could happen next with gold based on where the stockmarekts are at, although the author doesn't want to tell you anymore unless you pay a subscription.

 

This is a fascinating concept, but how can it help us determine if the bear market in the stock averages is complete or ongoing? We can not see the future or predict it with certainty. We have the past and the present and that is all we have that is visible to us. So, let’s take a look at the past and compare it to the present.

 

The last major bear market in the D. J. I. A. bottomed in December 1974 at 577.00. The previous bull market top in 1966 was 1000.00. Over an eight year period the Dow lost 42.3%.

 

The recent bull market in the D. J. I. A. topped in January 2000 at 11,840.00. The bottom in March of 2009 was 6,460.00. Over a nine year period the Dow lost 45.5 %.

 

The bear market of 1966 to 1974 lasted 8 years.

The bear market of 1966 to 1974 lost 42.3 %.

 

The bear market of 2000 to 2009 lasted 9 years.

The bear market of 2000 to 2009 lost 45.5%.

 

Both bear markets compare favorably as to time consumed and percentage of price lost. Does this mean that the current bear market bottomed in March 2009?

 

 

I've done a lot of work on this myself and know what he's getting at, although he refuses to spell it out directly he's basically saying that if you are overcommitted, leveraged or have all your eggs in the gold basket you may be in for a rough ride from here. That's why he is quoting the stockmarkets, because in in terms of duration and falls we are at a similar point to early 1975 from where gold made a big correction (although it was more overvalued back then in relation to peoples earnings at that point than is the case today)

 

Given there is so much bullishness on gold and still much bearishness on equities, the contrarian would be betting the other way - ie. a big rally in equities and a decent (large?) correction in gold. The correction in gold in the mid-70's would have had many on here heading for the exits and feeling very depressed which is why the author of this article is saying 'be careful here'. Not many people saw the large crash in stockmarkets and commodities coming and everyone (myself included) was bullish on commodities for the future.

 

We have additional evidence that may help us determine whether or not the bear market has ended. The evidence takes the form of patterns and time consumed by these patterns. For a number of years I have been writing about the different corrective patterns in the S & P 500 and the D. J. I. A. First let’s review the patterns and then see if they are complete. They are known market corrective patterns that have occurred in the past. What is interesting is that once these patterns have completed their corrective work a powerful bull market is called for.

 

I've been doing exactly the same thing and also believe a bull market is already underway in equities for the same reasons - people will keep calling this a bear market rally all the way to the top when in fact it is a short cyclical bull market in a long (17 to 20 year) secular bear market that will not end until p/e ratio's are at their lowest towards the end of the next decade.

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From the master himself (Richard Russell) - latest remark:

 

 

Total NYSE volume is contracting dramatically, and as Hamilton warned us, this is a bearish sign near the top of a rally. Those holding DIA might move to the sidelines if you haven't already. It's been a profitable rally, but this ain't a bull market.

...

A few months ago if gold was up 10 on the opening gold would spend the rest of the session selling off. Not so now, gold tend to close in the top third of it high price for the day.

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Given there is so much bullishness on gold and still much bearishness on equities, the contrarian would be betting the other way - ie. a big rally in equities and a decent (large?) correction in gold. The correction in gold in the mid-70's would have had many on here heading for the exits and feeling very depressed which is why the author of this article is saying 'be careful here'. Not many people saw the large crash in stockmarkets and commodities coming and everyone (myself included) was bullish on commodities for the future.

So you are saying that most here are expecting a correction in equities and a rally in gold while the contrarian is expecting the opposite, a correction in gold and a rally in the equities.

 

There is a third option, perhaps the contrarian's contrarian, that both gold and equities correct. The rationale for this is that we may be due shortly for another round of deleveraging/ forced liquidation. I think the above chart comparing the present Dow with the past is quite compelling. As others have observed, I doubt gold will go as low as the last correction as there are many smart money lining up to buy which would act to counter too large a sell-off.

 

 

I think it will be unlikely to see gold correct while equities continue to rally. They should both continue to be the beneficiaries of inflation fear as long as investor perceptions remain fixed on Bernanke's money supply. The Dow and gold may well continue to rally together before they then correct together, which should come on the back of some economic news or event sparking a deflation scare.

 

Gold would afterwards bounce back to a higher high as it is further monetized [bought as a currency] and be in stronger hands. The Dow should continue down to lower lows.

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So you are saying that most here are expecting a correction in equities and a rally in gold while the contrarian is expecting the opposite, a correction in gold and a rally in the equities.

 

There is a third option, perhaps the contrarian's contrarian, that both gold and equities correct. The rationale for this is that we may be due shortly for another round of deleveraging/ forced liquidation. I think the above chart comparing the present Dow with the past is quite compelling. As others have observed, I doubt gold will go as low as the last correction as there are many smart money lining up to buy which would act to counter too large a sell-off.

 

 

I think it will be unlikely to see gold correct while equities continue to rally. They should both continue to be the beneficiaries of inflation fear as long as investor perceptions remain fixed on Bernanke's money supply. The Dow and gold may well continue to rally together before they then correct together, which should come on the back of some economic news or event sparking a deflation scare.

 

Gold would afterwards bounce back to a higher high as it is further monetized [bought as a currency] and be in stronger hands. The Dow should continue down to lower lows.

 

Yep, that's a concern of mine.

 

Think deleveraging is about the only thing could knock gold down seriously now... Personally, with what's going on with bonds and $ though, I'm not so worried about gold - I'm more worried about silver. It also wouldn't surprise me if G&S go bonkers now though - if a real desire for physical kicks in. Things are turning topsy-turvy.

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The Dow chart "bears" posting.

 

beardow.png

 

What do you think will happen to the price of gold when the Dow tests new lows? :rolleyes: Hint.... the smiley is giving the wrong hint.

 

OK - first the graph. I think it's wrong to compare 1929 where the stockmarket was at it p/e peak with 2007 where it wasn't. If you want to compare the 1929 to 1932 Dow with anything then compare it with something like the 2000 to 2002 Nasdaq which had a 77% fall over a similar period of time or the Nikkei from 1989 to 1992, a similar period of time also. Those were p/e peaks of excessive overvaluation and interestingly, those 3 biggest crashes have all started at the end of a '9' year or beginning of a '0' year - I've often thought that the dot.com bubble should have burst in late 1999 but the significance of a new milenium probably carried it through to 2000.

 

So you are saying that most here are expecting a correction in equities and a rally in gold while the contrarian is expecting the opposite, a correction in gold and a rally in the equities.

 

Yes - too much bullishness on gold and too much bearishness on equities despite bullish indicators.

 

There is a third option, perhaps the contrarian's contrarian, that both gold and equities correct. The rationale for this is that we may be due shortly for another round of deleveraging/ forced liquidation. I think the above chart comparing the present Dow with the past is quite compelling. As others have observed, I doubt gold will go as low as the last correction as there are many smart money lining up to buy which would act to counter too large a sell-off.

 

Does'nt seem likely to me at the moment, but if we go back to the previous highs with all this stimulus money and 0%/0.5% interest rates then we could get back to the previous highs (like in 1976) from where the problems resume. I can't see why equities would correct anymore from here - yields are high so why sell when interest rates are so low?

 

I think it will be unlikely to see gold correct while equities continue to rally. They should both continue to be the beneficiaries of inflation fear as long as investor perceptions remain fixed on Bernanke's money supply. The Dow and gold may well continue to rally together before they then correct together, which should come on the back of some economic news or event sparking a deflation scare.

 

Gold would afterwards bounce back to a higher high as it is further monetized [bought as a currency] and be in stronger hands. The Dow should continue down to lower lows.

 

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.

 

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.

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What do you think will happen to the price of gold when the Dow tests new lows? :rolleyes: Hint.... the smiley is giving the wrong hint.

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

 

 

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