Where Is Gold Going In This Market

[lannarebirth]

I bought $XAU puts instead.

If this was based on some type of wave analysis does it predict how low the gold price might reach? Is the $1200 figure (if that analysis proves incorrect) based on a TA of some type as well?

I don't use Elliot Waves as I find no predictive value in them. I have only known of two people that ever could use it in a predictive way and they do very very well.

I do not have a target and I do not yet know if this will be a one off trade or a campaign whereby I can pyramid a position.

The 1200 is a bit arbitrary, but its a rough calculation on what could happen if $USD pancakes.

[cloudhopper]

I bought $XAU puts instead.

If this was based on some type of wave analysis does it predict how low the gold price might reach? Is the $1200 figure (if that analysis proves incorrect) based on a TA of some type as well?

I don't use Elliot Waves as I find no predictive value in them. I have only known of two people that ever could use it in a predictive way and they do very very well.

I do not have a target and I do not yet know if this will be a one off trade or a campaign whereby I can pyramid a position.

The 1200 is a bit arbitrary, but its a rough calculation on what could happen if $USD pancakes.

Well I'm not sure what pancake means but if 1200 is the calculated upside I wonder what other currency or commodity would absorb the capital flight of a $ pancake? Increasingly more to absorb by the week it would seem.

I've been reading about a USD carry trade that will benefit the $ when it (the carry trade) unwinds. That would probably be bad for gold...

[churchill]

BRIC may discuss supranational currency

MOSCOW (Reuters) - The world's biggest emerging markets may discuss the idea of a supranational currency later this month as the economic crisis in the United States changes perceptions of the U.S. dollar, the Kremlin said on Tuesday.

President Dmitry Medvedev said a wider range of reserve currencies was needed as the crisis has shown the failings of the system set up by the 1944 Bretton Woods conference.

"The world needs more reserve currencies," Medvedev told U.S. television station CNBC, according to the text of the interview provided by the Kremlin.

"The perception of the dollar has naturally changed because of the crisis in the American economy."

Moscow in recent years has reduced the dollar's role in its reserves, which totalled $399.9 billion (241 million pounds) on May 22, and repeatedly called for the use of the Russian rouble as a regional reserve currency.

Russia, which holds the world's third largest foreign exchange reserves, has proposed the creation of a new world reserve currency that would be issued by international financial institutions to reduce reliance on the U.S. dollar.

The leaders of Brazil, Russia, India and China, known by the BRIC acronym, will meet in the Russian city of Yekaterinburg on June 16 for the first summit since the international downturn struck their economies, which had driven global growth.

A Brazilian official told Reuters last week that the summit would discuss the dominance of the U.S. dollar as well as ways to reshape the world trade system and nuclear disarmament.

"I do not exclude that the Russian president's idea about the creation of a supranational currency and the rouble as a (world) reserve currency will be discussed," Medvedev's spokeswoman, Natalya Timakova, told reporters.

The BRIC states are trying to strengthen their clout as the producers of 15 percent of global output by building up the grouping into a powerful world player.

CURRENCY DISCUSSIONS

"The current situation demands a bigger number of currencies which could be used for investing money and by banks, citizens and states," Medvedev said.

He said that China, which has the world's biggest hoard of foreign currency reserves, supported Moscow's idea for making the International Monetary Fund's Special Drawing Rights (SDR) the basis of a new supranational currency.

Reserve currencies also remain a theme for the upcoming G8 and G20 meetings, said deputy finance minister Dmitry Pankin.

Medvedev said Russian gross domestic product would contract by "no less than 6 percent or perhaps even more," in 2009 and called on the government to deal with difficult levels of unemployment.

When asked about the risk of global inflation soaring, he said: "In this situation there is a threat of an acceleration of inflationary processes in the world and that could result... in problems for the banking system."

http://www.iii.co.uk/news/?type=reutersnew...cleid=TRE5517QF

[churchill]

BRIC May Discuss Moving From Dollar: Kremlin

interview on CNBC http://www.cnbc.com/id/31061545

[cloudhopper]

Another good read IMO-

"Of course fiat currencies do not really float anyway. They simply sink at varying rates, slowly going worthless over time.

Eventually, every fiat currency in existence is headed for zero. Gold is not headed to zero."

http://globaleconomicanalysis.blogspot.com...ar-highest.html

[churchill]

Funds STARTING to buy Gold

Northwestern Mutual Makes First Gold Buy in 152 Years (Update2)

Northwestern Mutual Life Insurance Co., the third-largest U.S. life insurer by 2008 sales, has bought gold for the first time the company’s 152-year history to hedge against further asset declines.

“Gold just seems to make sense; it’s a store of value,” Chief Executive Officer Edward Zore said in an interview following his comments at a conference hosted by Standard & Poor’s in Brooklyn. “In the Depression, gold did very, very well.”

Northwestern Mutual has accumulated about $400 million in gold, and Zore said the price could double or even rise fivefold if the economy continues to weaken. Gold gained 10 percent last month, the most since November. The commodity has more than tripled since 2000, rising for eight straight years. Gold futures for August delivery slipped $4.80 to $975.50 at 4:03 p.m. in New York.

“The downside risk is limited, but the upside is large,” Zore said. “We have stocks in our portfolio that lost 95 percent.” Gold “is not going down to $90.”

Policyholder-owned Northwestern Mutual, based in Milwaukee, ranks third by 2008 life insurance premiums according to data from the National Association of Insurance Commissioners. The data excludes annuities.

http://www.bloomberg.com/apps/news?pid=ema...id=ajf0L9wTPq6Y

[lannarebirth]

BRIC may discuss supranational currency

MOSCOW (Reuters) - The world's biggest emerging markets may discuss the idea of a supranational currency later this month as the economic crisis in the United States changes perceptions of the U.S. dollar, the Kremlin said on Tuesday.

President Dmitry Medvedev said a wider range of reserve currencies was needed as the crisis has shown the failings of the system set up by the 1944 Bretton Woods conference.

"The world needs more reserve currencies," Medvedev told U.S. television station CNBC, according to the text of the interview provided by the Kremlin.

"The perception of the dollar has naturally changed because of the crisis in the American economy."

Moscow in recent years has reduced the dollar's role in its reserves, which totalled $399.9 billion (241 million pounds) on May 22, and repeatedly called for the use of the Russian rouble as a regional reserve currency.

Russia, which holds the world's third largest foreign exchange reserves, has proposed the creation of a new world reserve currency that would be issued by international financial institutions to reduce reliance on the U.S. dollar.

The leaders of Brazil, Russia, India and China, known by the BRIC acronym, will meet in the Russian city of Yekaterinburg on June 16 for the first summit since the international downturn struck their economies, which had driven global growth.

A Brazilian official told Reuters last week that the summit would discuss the dominance of the U.S. dollar as well as ways to reshape the world trade system and nuclear disarmament.

"I do not exclude that the Russian president's idea about the creation of a supranational currency and the rouble as a (world) reserve currency will be discussed," Medvedev's spokeswoman, Natalya Timakova, told reporters.

The BRIC states are trying to strengthen their clout as the producers of 15 percent of global output by building up the grouping into a powerful world player.

CURRENCY DISCUSSIONS

"The current situation demands a bigger number of currencies which could be used for investing money and by banks, citizens and states," Medvedev said.

He said that China, which has the world's biggest hoard of foreign currency reserves, supported Moscow's idea for making the International Monetary Fund's Special Drawing Rights (SDR) the basis of a new supranational currency.

Reserve currencies also remain a theme for the upcoming G8 and G20 meetings, said deputy finance minister Dmitry Pankin.

Medvedev said Russian gross domestic product would contract by "no less than 6 percent or perhaps even more," in 2009 and called on the government to deal with difficult levels of unemployment.

When asked about the risk of global inflation soaring, he said: "In this situation there is a threat of an acceleration of inflationary processes in the world and that could result... in problems for the banking system."

http://www.iii.co.uk/news/?type=reutersnew...cleid=TRE5517QF

If this idea has legs it could cause the $USD to soar IMO. Every country needs a buy in level and you don't think the $USD will be buying in at its lows do you? Russian sponsorship? C'mon!

[churchill]

I am probably totally wrong but Germany seems to be making noises at the momment and asking for their gold to be returned from the US - Do you think they are working behind the scenes with China/Russia etc and thinking about how to solve the world's dependence on th US$ .

I don't see how this would strengthen the us$ as surely world economies would be selling some of their US$ reserves to invest in any new currency .

This speculation whether right or wrong is probably not good for the us$ at this time but I think gold may take a breather here and decline down towards 900 before heading higher again .

[Abrak]

If this idea has legs it could cause the $USD to soar IMO. Every country needs a buy in level and you don't think the $USD will be buying in at its lows do you? Russian sponsorship? C'mon!

Either I am being thick and missing your point or you meant to say that gold will soar. There is absolutely no point in having a supernational currency because there will be noone to take responsibility for printing it out of existence. In any case one exists and it is gold. Why doesnt China simply swap say half its treasuries for gold with the US at US$1,100? By the way the answer maybe because the US doesnt have enough gold but I know it has a lot.

[Naam]

Northwestern Mutual Makes First Gold Buy in 152 Years (Update2)

Northwestern Mutual Life Insurance Co., the third-largest U.S. life insurer by 2008 sales, has bought gold for the first time the company’s 152-year history to hedge against further asset declines.

“Gold just seems to make sense; it’s a store of value,” Chief Executive Officer Edward Zore said in an interview following his comments at a conference hosted by Standard & Poor’s in Brooklyn. “In the Depression, gold did very, very well.”

“The downside risk is limited, but the upside is large,” Zore said. “We have stocks in our portfolio that lost 95 percent.” Gold “is not going down to $90.”

definitely a financial genius who holds stocks all the way down to 5% and then considers buying some gold

[Naam]

I am probably totally wrong but Germany seems to be making noises at the moment and asking for their gold to be returned from the US - Do you think they are working behind the scenes with China/Russia etc and thinking about how to solve the world's dependence on th US$ .

Churchill, i don't know where you get these kind of news from. being a German i follow closely what is going on in my home country but i have not heard/read any of these rumours (which, by the way, i consider ridiculous).

[churchill]

Re Germany asking for gold to be returned see here

"Background inventory strain has come from unexpected sources. The Germans have demanded that gold bullion held in US custodial accounts be returned to their owners, with physical gold shipped back to Germany. The Dubai bankers have demanded that gold bullion held in London custodial accounts be returned to their owners, with physical gold shipped back to the United Arab Emirates. They are following the hired German counsel. In all likelihood, neither US nor London sources are in possession of all the gold held in those custodial accounts, since at least some of it probably was improperly leased. By that is meant without owner permission or knowledge. So an uproar could come soon with charges of gold bullion theft, or at least failure of fiduciary responsibility. Theft is a simpler description."

http://www.321gold.com/editorials/willie/willie052809.html

and the rest is pure speculation .

[Abrak]

Funds STARTING to buy Gold

Northwestern Mutual Makes First Gold Buy in 152 Years (Update2)

Northwestern Mutual Life Insurance Co., the third-largest U.S. life insurer by 2008 sales, has bought gold for the first time the company’s 152-year history to hedge against further asset declines.

“Gold just seems to make sense; it’s a store of value,” Chief Executive Officer Edward Zore said in an interview following his comments at a conference hosted by Standard & Poor’s in Brooklyn. “In the Depression, gold did very, very well.”

Northwestern Mutual has accumulated about $400 million in gold, and Zore said the price could double or even rise fivefold if the economy continues to weaken. Gold gained 10 percent last month, the most since November. The commodity has more than tripled since 2000, rising for eight straight years. Gold futures for August delivery slipped $4.80 to $975.50 at 4:03 p.m. in New York.

“The downside risk is limited, but the upside is large,” Zore said. “We have stocks in our portfolio that lost 95 percent.” Gold “is not going down to $90.”

Policyholder-owned Northwestern Mutual, based in Milwaukee, ranks third by 2008 life insurance premiums according to data from the National Association of Insurance Commissioners. The data excludes annuities.

http://www.bloomberg.com/apps/news?pid=ema...id=ajf0L9wTPq6Y

Despite know that making short term predictions of any price is fairly foolish, I was about to write a post about how gold currently faced the 'perfect storm' that might well take it above US$1,000 and beyond. After reading this, I cant help but feel that the post would be ridiculed forever for perfectly calling the top of the market.

Still I am not selling until E Entertainment runs a feature about how 'bling' is the best investment.

[Naam]

Re Germany asking for gold to be returned see here

"Background inventory strain has come from unexpected sources. The Germans have demanded that gold bullion held in US custodial accounts be returned to their owners, with physical gold shipped back to Germany. The Dubai bankers have demanded that gold bullion held in London custodial accounts be returned to their owners, with physical gold shipped back to the United Arab Emirates. They are following the hired German counsel. In all likelihood, neither US nor London sources are in possession of all the gold held in those custodial accounts, since at least some of it probably was improperly leased. By that is meant without owner permission or knowledge. So an uproar could come soon with charges of gold bullion theft, or at least failure of fiduciary responsibility. Theft is a simpler description."

http://www.321gold.com/editorials/willie/willie052809.html

and the rest is pure speculation .

"Jim Willie CB is the editor of the "Hat Trick Letter" Use this link to subscribe to the paid research reports"

you believe some Willie?

Edited June 3, 2009 by Naam

[PCA]

Funds STARTING to buy Gold

Northwestern Mutual Makes First Gold Buy in 152 Years (Update2)

Northwestern Mutual Life Insurance Co., the third-largest U.S. life insurer by 2008 sales, has bought gold for the first time the company’s 152-year history to hedge against further asset declines.

“Gold just seems to make sense; it’s a store of value,” Chief Executive Officer Edward Zore said in an interview following his comments at a conference hosted by Standard & Poor’s in Brooklyn. “In the Depression, gold did very, very well.”

Northwestern Mutual has accumulated about $400 million in gold, and Zore said the price could double or even rise fivefold if the economy continues to weaken. Gold gained 10 percent last month, the most since November. The commodity has more than tripled since 2000, rising for eight straight years. Gold futures for August delivery slipped $4.80 to $975.50 at 4:03 p.m. in New York.

“The downside risk is limited, but the upside is large,” Zore said. “We have stocks in our portfolio that lost 95 percent.” Gold “is not going down to $90.”

Policyholder-owned Northwestern Mutual, based in Milwaukee, ranks third by 2008 life insurance premiums according to data from the National Association of Insurance Commissioners. The data excludes annuities.

http://www.bloomberg.com/apps/news?pid=ema...id=ajf0L9wTPq6Y

Despite know that making short term predictions of any price is fairly foolish, I was about to write a post about how gold currently faced the 'perfect storm' that might well take it above US$1,000 and beyond. After reading this, I cant help but feel that the post would be ridiculed forever for perfectly calling the top of the market.

Still I am not selling until E Entertainment runs a feature about how 'bling' is the best investment.

Indeed foolish for the unskilled though you don't sound like one. What is going to come is a big move but unfortunately from the current key point it can go either way. For those in and long like yourself this point should not make you a seller and for those who want to freshly engage and take a ride they should do it with an option straddle (put+call at the money) and exercise the winning side at a later stage. I think Gold goes up but I know to exit profitable regardless if very wrong or right.

[lannarebirth]

If this idea has legs it could cause the $USD to soar IMO. Every country needs a buy in level and you don't think the $USD will be buying in at its lows do you? Russian sponsorship? C'mon!

Either I am being thick and missing your point or you meant to say that gold will soar. There is absolutely no point in having a supernational currency because there will be noone to take responsibility for printing it out of existence. In any case one exists and it is gold. Why doesnt China simply swap say half its treasuries for gold with the US at US$1,100? By the way the answer maybe because the US doesnt have enough gold but I know it has a lot.

Why not corn?

[Abrak]

If this idea has legs it could cause the $USD to soar IMO. Every country needs a buy in level and you don't think the $USD will be buying in at its lows do you? Russian sponsorship? C'mon!

Either I am being thick and missing your point or you meant to say that gold will soar. There is absolutely no point in having a supernational currency because there will be noone to take responsibility for printing it out of existence. In any case one exists and it is gold. Why doesnt China simply swap say half its treasuries for gold with the US at US$1,100? By the way the answer maybe because the US doesnt have enough gold but I know it has a lot.

Why not corn?

Because corn is about as easy to 'print' as dollars.

No seriously what you need for a credible currency is a large amount of stuff and a limited increase in supply. IF you took total corn stocks and the price of corn doubled, increased production and reduced demand of corn could easily double your money supply etc. There is really no choice - water would be good but there be a fight of who gets what, Oils a possibility but it does hand control to the Middle East and Land while being fixed is very variable in terms of quality and is a bit to fixed in the sense you cant move it. So gold is great - existing stocks are at least 50 years supply so the price could go up ten times without significantly effecting your money supply or certainly not by Bernanke factors.

I think the Norwegian Kro looks good but I dont see it becoming a global reserve currency even if it is fully justified.

Edited June 3, 2009 by Abrak

[lannarebirth]

Slaves were once a "store of value", but times change you know.

[flying]

http://www.reuters.com/article/usDollarRpt...331977620090603

http://www.reuters.com/article/usDollarRpt...N03158620090603

Possible reasons for the small pull back in gold before it sling shots

[flying]

Why doesnt China simply swap say half its treasuries for gold with the US at US$1,100? By the way the answer maybe because the US doesnt have enough gold but I know it has a lot.

If allowed to I am sure China would ;ove to.

Of course the US would not allow it

1) It would mean their Fiat had failed

They cannot have others suddenly asking to be paid in real money. Nor could they afford it...

2) You know they ( USA) have a lot? How do you know this? They have not allowed a independent audit since the 30's

It is probably the biggest secret passed from president to president

Edited June 3, 2009 by flying

[AlexLah]

Slaves were once a "store of value", but times change you know.

And the definition of "Slave" changes as well.

How about: "Tax Slave"

[Abrak]

Churchill, your point about being invested in gold stocks rather than physical gold is well taken and is certainly validated by this long term graph (above).

But if you look at the shorter term returns say two years you will see that physical gold has outperformed. If you look at the last 2 months that has been somewhat reversed. I see the inherent argument that stocks should be a geared play on physical but I am hard pushed to 1. find a major gold producer whos stock price performs in line with the HUI (they generally underperform) and 2. I am worried that the underperformance seen in the last 2 years is structural (due to higher mining costs, environmental controls) rather than a simple mispricing by the market. Much of this view taken by looking at the majors and not necessarily seeing inherent value in them - (if gold was at US$1100 I would expect them to be on a PE of 6-8x giving me 50-100% upside, as opposed to gold physical where I would only get 15%.)

[PCA]

Churchill, your point about being invested in gold stocks rather than physical gold is well taken and is certainly validated by this long term graph (above).

But if you look at the shorter term returns say two years you will see that physical gold has outperformed. If you look at the last 2 months that has been somewhat reversed. I see the inherent argument that stocks should be a geared play on physical but I am hard pushed to 1. find a major gold producer whos stock price performs in line with the HUI (they generally underperform) and 2. I am worried that the underperformance seen in the last 2 years is structural (due to higher mining costs, environmental controls) rather than a simple mispricing by the market. Much of this view taken by looking at the majors and not necessarily seeing inherent value in them - (if gold was at US$1100 I would expect them to be on a PE of 6-8x giving me 50-100% upside, as opposed to gold physical where I would only get 15%.)

Gold mining companies do hedge their production level versus Gold. All of them are doing it (individually and anannounced). From a certain price gold moves to the up- or downside it does not change the fundamentals for the company anymore which means growth- and profit- perspectives do no more function as a fuel for the stock price to increase. Thats the reason why you see some or actually most of them stop any corellating move with Gold at a certain point.

This fact makes any statistic and graph like the above a worthless one.

Edited June 4, 2009 by PCA

[churchill]

Churchill, your point about being invested in gold stocks rather than physical gold is well taken and is certainly validated by this long term graph (above).

But if you look at the shorter term returns say two years you will see that physical gold has outperformed. If you look at the last 2 months that has been somewhat reversed. I see the inherent argument that stocks should be a geared play on physical but I am hard pushed to 1. find a major gold producer whos stock price performs in line with the HUI (they generally underperform) and 2. I am worried that the underperformance seen in the last 2 years is structural (due to higher mining costs, environmental controls) rather than a simple mispricing by the market. Much of this view taken by looking at the majors and not necessarily seeing inherent value in them - (if gold was at US$1100 I would expect them to be on a PE of 6-8x giving me 50-100% upside, as opposed to gold physical where I would only get 15%.)

Invest in a fund such as Blackrock Gold and General that tracks the HUI

Edited June 4, 2009 by churchill

[flying]

oops I see it is posted already

Edited June 6, 2009 by flying

[churchill]

I am probably totally wrong but Germany seems to be making noises at the moment and asking for their gold to be returned from the US - Do you think they are working behind the scenes with China/Russia etc and thinking about how to solve the world's dependence on th US$ .

Churchill, i don't know where you get these kind of news from. being a German i follow closely what is going on in my home country but i have not heard/read any of these rumours (which, by the way, i consider ridiculous).

Perhaps they are not actively working behind the scenes but Angela Merkel is very unhappy with the Central banks and I think would probably welcome a shift away from the $ as a reserve currency

http://www.ft.com/cms/s/0/f4d18748-5232-11...144feabdc0.html

As we know China and other countries are seaking to diversify their dollar holdings and perhaps more will shift towards IMF Bonds and Special Drawing Rights, the IMF’s unit of account. I would think that China/Russia and other countries will be big investors they may insist on their currencies being part of the basket ?

"Zhou Xiaochuan also said SDRs should be based on a basket of currencies, including China’s renminbi.

Chinese officials have indicated that at least some of the IMF bonds it will buy will be in SDRs, which would help to diversify its US dollar-dominated foreign exchange reserves."

http://www.ft.com/cms/s/0/6fee1d66-51ec-11...144feabdc0.html

How this would effect Gold prices I am unsure .

[Abrak]

All I see in this debate about a new reserve currency is a lot of whinging by Central bankers who are very long USTs with a Fed Chairman devoted to debase the currency. They know if they sell they will only make his policy become self fullfilling and will switch into another major currency that policy makers do not wish to appreciate. The concept of switching into gold is of course absurd because, although Central Banks wish to see it depreciate, they have been unsuccessfully been trying to devalue it for years unlike paper currencies they have limited resources. If in fact the BOE suddenly started buying gold, I would certainly sell all my gold holdings immediately.

Still I reckon we will see some major strategic gold transactions in the next couple of years, with maybe say China building up reserves and someone liquidating (potentially the IMF sales (assuming they have some)).

[Naam]

an opinion:

UBS Metals Daily 8th June 2009

Reticent On Gold

Positioning in gold is very long and we remain cautious about

chasing the metal higher from current levels, a stance we

have held since gold hit our one month target of $950/oz

recently. Our view has been reinforced by data released by

the CFTC on Friday: the COTR for Comex gold shows that

investors and speculators added to their net long positions

held by this fickle futures market. Net long positions

increased by 2.3moz to 24.54moz after 0.6moz of new longs

entered the market, although this was overshadowed by the

1.8moz of short covering. The changes from the COTR for all

metals are shown, as usual, on page two of the PDF to the

Metals Daily. Our caution towards gold was justified by the

choppy price action late last week, with gold correcting from

$990 to $960 on Wednesday and the recovery seen on

Thursday proved short lived with gold crashing back as the

dollar firmed on Friday. We remain positively disposed

towards gold for this year as we expect safe haven buying to

resume at some point, but gold as an anti-dollar is a

dangerous trade when Comex specs are as long as they are.

[Abrak]

Naam,

The correlation on that chart is almost 100%. Why is that? (I can see there should be some correlation in that if there are a lot of futures at some point someone has to sell physical to match etc but surely this is very small compared to total supply and demand.)

How can you get a comex chart through the internet or Bloomberg?

Being a gold futures trader must be very profitable.

[churchill]

an opinion:

UBS Metals Daily 8th June 2009

Reticent On Gold

Positioning in gold is very long and we remain cautious about

chasing the metal higher from current levels, a stance we

have held since gold hit our one month target of $950/oz

recently. Our view has been reinforced by data released by

the CFTC on Friday: the COTR for Comex gold shows that

investors and speculators added to their net long positions

held by this fickle futures market. Net long positions

increased by 2.3moz to 24.54moz after 0.6moz of new longs

entered the market, although this was overshadowed by the

1.8moz of short covering. The changes from the COTR for all

metals are shown, as usual, on page two of the PDF to the

Metals Daily. Our caution towards gold was justified by the

choppy price action late last week, with gold correcting from

$990 to $960 on Wednesday and the recovery seen on

Thursday proved short lived with gold crashing back as the

dollar firmed on Friday. We remain positively disposed

towards gold for this year as we expect safe haven buying to

resume at some point, but gold as an anti-dollar is a

dangerous trade when Comex specs are as long as they are.

Tend to agree and am selling half my gold holdings to cash ready to reinvest later in the year .