Where Is Gold Going In This Market

[VegasVic]

Didn't sell, so in some sense one might say those are paper loses. Wasn't on margin. Actually the bullion is still somewhat above my basis price, some of it was bought at $400 an ounce, none of it bought this year. It's the gold mining shares that have gotten competely killed, they're back down to a level that I bet hadn't occurred since gold was in the 300's.

Ouch ! Yeah the rout in mining stocks has been painful to say the least. I bought a handful myself and have lost a few quid but I'm not selling them. It costs a lot of money to get gold out of the ground and many miners aren't hedging their output anymore which is a sure sign they expect prices to rise. I'm hanging on to the goodies especially those in Jinshan Gold Mines. They've got China Gold backing them and seeing as China's eclipsed South Africa as the largest gold producer, I think that, as a long term hold, they're a good bet. Price plunged recently but they ain't going outta business so what the hel_l.

I remain bullish on gold and commodities in general simply because contrary to popular consensus, the laws of economics can NOT be altered. These huge nationalizations and bailouts only serve to postpone and exacerbate the inevitable.

Manipulation! manipulation! maipulation, and of course conspiracy too My guess is that you are a deciple of Jimmy (the weasel) Rogers or Marc ( Dr.Doom) Faber, I am certain that either of those gents would be very proud of your posts here Despite the fact that you have bought into all of these vast international conspiracies that have kept the price of gold down, I have actually been buying a few of those beaten down goldminers and a Drilling Co. or two as well over the past few days, however my bet is just a hedge against positions that have already made me some very nice Dollars over the past few months If people on ebay are actually paying $1000 for a one ounce gold ingot when the market price has been below $750/ounce, then I guess that just proves that the greater fool theory is still in full effect in the Gold markets You gold bugs are really a breed apart!

[churchill]

Why Gold Might Soar Over the Next Four Weeks

By Patrick A. Heller, Market Update

October 28, 2008

http://www.numismaster.com/ta/numis/Articl...;ArticleId=5514

Edited October 29, 2008 by churchill

[ace]

You know, $60 is a pretty good price to be getting for 42 gals of crude oil.

Nice one. You should team up with Naam.

[glyph]

"They've DOUBLED the federal deficit in a MONTH"

No, that's not true.

"how on earth do you think they're going to pay that down?

The deficit becomes a part of the national debt, and it's seldom decreased.

"Raise taxes on an economy that's plunging into recession?

Nope.

"Or will they do what they always do; inflate the currency?"

You do not know what you are talking about, do you?

"The US is toast and is held to ransom by the huge holders of US debt, Russia, China and Japan."

Nope, you do not know what you are talking about.

"If you think the US is gonna get out of this with a V-shaped recession, you really need to get into remedial economics 101."

Again, you do not understand what you are talking about.

[HardenedSoul]

"They've DOUBLED the federal deficit in a MONTH"

No, that's not true.

"how on earth do you think they're going to pay that down?

The deficit becomes a part of the national debt, and it's seldom decreased.

"Raise taxes on an economy that's plunging into recession?

Nope.

"Or will they do what they always do; inflate the currency?"

You do not know what you are talking about, do you?

"The US is toast and is held to ransom by the huge holders of US debt, Russia, China and Japan."

Nope, you do not know what you are talking about.

"If you think the US is gonna get out of this with a V-shaped recession, you really need to get into remedial economics 101."

Again, you do not understand what you are talking about.

With respect - due or otherwise - it's all very well saying "you don't know what you're talking about" but if, for example, you can say that governments do NOT tend to inflate their currencies in the face of over-indebtedness of the type we see currently, then you shouldn't really comment.

Do you think the Treasury took Fannie Mae and Freddie Mac into conservatorship for the sake of it or was it more a case of being pressurized by the huge Chinese Freddie/Fannie bondholders to afford these holdings the same guarantees as US government treasuries "enjoy" ?

[HardenedSoul]

Manipulation! manipulation! maipulation, and of course conspiracy too My guess is that you are a deciple of Jimmy (the weasel) Rogers or Marc ( Dr.Doom) Faber, I am certain that either of those gents would be very proud of your posts here

So because I see a longer term bull market for precious metals, I'm a die-hard goldbug ? I've not heard Jim Rogers or Marc Faber whinge about manipulation of the gold market. In fact the latter recently suggested that gold will find it difficult to maintain its bull-run in the current environment.

Do you really think that, faced with the collapse of the global financial system, the US didn't have a vested interest in suppressing the price of gold ? Why is it that at the beginning of every COMEX session, gold is smacked down whilst during the Asian sessions, it tends to gain ? If you believe the tinkering the central banks are doing with the system will bear fruit, why not follow Buffett into US equities and hold cash in US treasuries ? I wish you well

[glyph]

"t's all very well saying 'you don't know what you're talking about' but if, for example, you can say that governments do NOT tend to inflate their currencies in the face of over-indebtedness of the type we see currently, then you shouldn't really comment."

You do not understand the basics of economics, and that's unfortunate. You believe that governments directly control the exchange rates of their respective currencies, and that's hilariously wrong. If that was true, ALL governements would choose to have strong currencies, regardless of the economic realities.

With the political and economic ebb and flow, exchange rates change daily...hourly...by the minute. Six months ago, Brits were crowing about the strong pound. Today, they are crying in their warm beer. You think that the UK government manipulated the exchange rates for its own good <chuckle>, and you think the US has done the same <chuckle>.

Too, there's a difference between INFLATE and DEFLATE.

[lannarebirth]

You believe that governments directly control the exchange rates of their respective currencies, and that's hilariously wrong. If that was true, ALL governements would choose to have strong currencies, regardless of the economic realities.

With the political and economic ebb and flow, exchange rates change daily...hourly...by the minute. Six months ago, Brits were crowing about the strong pound. Today, they are crying in their warm beer. You think that the UK government manipulated the exchange rates for its own good <chuckle>, and you think the US has done the same <chuckle>.

It reminds me of going to the horse racetrack here in Chiang Mai. Ostensibly it is paramutual betting that is going on amongst the punters. In reality, no one looks at the racing form or weighs the pros and cons of betting on one horse versus another. Instead, they look away from the track, into the grandstands. There, they will see betting window runners circled around the guy who knows how the race will turn out. It makes for great theater afterwards as lead horse jockeys pull with all their might to rein in their horses who are not meant to win.

Anyway, it's all those interest rate swaps that got me thinking about the track. Trillions of dollars worth. What can central banks do with interest rate poilcy, if doing the apparent right thing for their economy triggers defaults on trillions in derivatives that can't be payed out? It's what I always call "the tail wagging the dog". Systemic risk exists till the vast majority of those bets are cleared IMO.

Edited October 31, 2008 by lannarebirth

[lannarebirth]

A Tale Of Two Charts:

[flying]

A Tale Of Two Charts:

I think I need subtitles

[lannarebirth]

A Tale Of Two Charts:

I think I need subtitles

Each chart shows the Primary LT Uptrend Line (green) and the line from which each metal broke out (black). It's axiomatic, breakouts need testing...eventually.

[flying]

Each chart shows the Primary LT Uptrend Line (green) and the line from which each metal broke out (black). It's axiomatic, breakouts need testing...eventually.

Thanks it is still beyond my basic TA skills

I do wonder why the green up trends are based so far back & then just projected out?

Same for the black breakouts. But are you saying that the gold will or possible to drop back to where the black projects as the copper did?

I always wanted to learn more about chart analysis as it seems more correct than not. Funny how trends repeat themselves. Perhaps I will start & look for some good books.

Thanks

[lannarebirth]

Each chart shows the Primary LT Uptrend Line (green) and the line from which each metal broke out (black). It's axiomatic, breakouts need testing...eventually.

Thanks it is still beyond my basic TA skills

I do wonder why the green up trends are based so far back & then just projected out?

Same for the black breakouts. But are you saying that the gold will or possible to drop back to where the black projects as the copper did?

I always wanted to learn more about chart analysis as it seems more correct than not. Funny how trends repeat themselves. Perhaps I will start & look for some good books.

Thanks

The lines are based so far back, as that's where the cycle lows originated from. I'm not saying anything "has to" happen, but a hallmark of bull market trends is that support is tested, prices move higher, and higher support is then tested, and prices move higher. Metals (and many other commodities) had "breakouts" from support areas and never looked back. When any kind of pressure is applied to the market, there is not that established higher support to break the fall.

Take a look at that copper chart. Think of that breakout from the black line like a tree growing from the earth. Fast growing tree, shoots up quickly, with a thin "trunk". Then the tree sprouts a branch, many meters above the earth, that keeps getting longer and heavier. Tree never had a chance to get good "root" development. something's gonna give. I'm about as dumba as they come, so that's the way I have to look at these things. It's either that, or I could listen to these guys:

Actual headlines from today:

Metals Stocks: Gold rises as rate cuts spur inflation worries

at MarketWatch(Thu 9:55am)

Metals Stocks: Gold futures little changed on mixed dollar

at MarketWatch(Thu 10:55am)

Metals Stocks: Gold falls as dollar strengthens, crude tumbles

at MarketWatch(Thu 12:11pm)

[flying]

The lines are based so far back, as that's where the cycle lows originated from.

Thanks I thought it was interesting that if I moved the gold break back to start at $388.9 & then $433 it puts the projection pretty much where gold is now

Thanks for your explanation. It is all very interesting to me.

[cclub75]

the simple explanation is: Gold has NO intrinsic value (as the goldbugs claim). actually nothing exists which has intrinsic value if there is no demand. stranded on an uninhabitated island the demand for Gold is ZERO. on this island the art of hunting and fishing as well as the knowledge of a source with drinkable water is a zillion times superior in intrinsic values than tons of Gold

To be fair, the problem would be exactly the same with.. USD bills... Difficult to catch fishes with 100 USD paper bills.

However, I agree, I can be used as... combustible. Fuel.

Okay, okay ! The USD does have an intrinsic value.

[churchill]

Perhaps an interesting new topic ! "What else can Dollar bills be used for as their value declines ?"

Edited October 31, 2008 by churchill

[lannarebirth]

Perhaps an interesting new topic ! "What else can Dollar bills be used for as their value declines ?"

In 2002 I was short the market and was up about $175,000 for the year. I gave it all back in 9 days. Lesson Learned: when what you expected to happen, happens, take your profit and don't change your expectations instead. It doesn't hurt any less, when it is "their money" you're giving back.

Edited October 31, 2008 by lannarebirth

[HardenedSoul]

You do not understand the basics of economics, and that's unfortunate. You believe that governments directly control the exchange rates of their respective currencies, and that's hilariously wrong. If that was true, ALL governements would choose to have strong currencies, regardless of the economic realities.

With the political and economic ebb and flow, exchange rates change daily...hourly...by the minute. Six months ago, Brits were crowing about the strong pound. Today, they are crying in their warm beer. You think that the UK government manipulated the exchange rates for its own good <chuckle>, and you think the US has done the same <chuckle>.

Too, there's a difference between INFLATE and DEFLATE.

No, I do not believe that all.

What I do believe is that, right now, it is undeniably in the interests of the US government to have a weak dollar and through its current monetary policy and its burgeoning federal deficit, it appears to be getting what it wants.

As far as being wrong about the Federal deficit doubling, do I really have to put up a chart ? Believe what you like but the facts do not lie - Gold is higher against almost every currency including my beloved sterling. I bought gold in sterling over a year ago and it's done the job it was supposed to. The dollar will fall flat; just a matter of time and I'm perfectly happy to put my feet up and watch it all unfold.

[flying]

the simple explanation is: Gold has NO intrinsic value (as the goldbugs claim). actually nothing exists which has intrinsic value if there is no demand. stranded on an uninhabitated island the demand for Gold is ZERO. on this island the art of hunting and fishing as well as the knowledge of a source with drinkable water is a zillion times superior in intrinsic values than tons of Gold

To be fair, the problem would be exactly the same with.. USD bills... Difficult to catch fishes with 100 USD paper bills.

However, I agree, I can be used as... combustible. Fuel.

Okay, okay ! The USD does have an intrinsic value.

Wait now along those lines gold does have value

On that island remember when Tom Hank needed a filling? Ok gold fillings....gold teeth....gold bullets ( even if shot from a sling shot ).... lots of value Im sure.

Edited October 31, 2008 by flying

[churchill]

"It is likely that a major debasement of all currencies will be undertaken to rescue the global economy and with it, the world’s politicians." see under

What does a major debasement of all currencies mean ?

http://www.europac.net/externalframeset.as...me&id=14477

Reality Dawning...For Gold

Despite the fact that the governments of the G-7 nations have injected some $3.5 trillion into their financial systems to prevent a meltdown of the world’s financial system, stock markets are still reeling. With some stocks down by over 60 percent, many investors already have been through a disastrous erosion of wealth. The declines have not occurred in just a few days as they did in 1929. Rather, Government interventions, regulatory changes and bailouts have drawn out the fall in prices over a long enough time period to make it feel like a slow water torture.

Nonetheless, the reality is that there has been a dramatic fall in the price of stocks, precipitated by a massive sub-prime induced deleveraging and the opening salvos of a credit crunch that will likely be with us for some time. After years of misplaced optimism, market participants are now coming to grips with some rather unpleasant recessionary prospects. So, despite government rescue measures around the world, markets continue to sputter.

Worse still, as America is perceived as the engine of the fading economic order, the looming recession appears increasingly to be both worldwide and potentially severe. Indeed, it looks likely that, if badly handled, the recession could easily slip into a depression, based on a far more highly leveraged base than in the 1930’s.

Therefore, the sad conclusion of the current stock market crash is that it appears to be anticipating an economic crash, just as bad as that of the 1930’s.

For a moment at least, attention is focused increasingly on economic recession and diverted from the risk of financial panic. Temporarily, this is reducing the upward pressure on the price of gold. At the same time, recessionary influences are pressing the gold price down, like other more conventional commodities. Therefore, gold continues to trend downwards, possibly even towards $600 a fine once.

In addition, as the risk of recession appears to gaining international perspective, the strength of certain non-U.S. dollar currencies, including the Euro are eroding and driving the U.S. dollar upwards. This, in turn, is bringing yet further downward pressure on the U.S. dollar price of gold.

Regardless of which candidate the United States selects, the next President will face the prospect of severe recession and be forced to “spend, spend, spend” in an effort to avoid an international depression. In the meantime, a second tsunami of credit card, auto, personal and business loan defaults is heading for the banking industry.

Investors are sensing the approaching storm. On January 12, 2009, General Motors Automobile Credit Corporation (GMAC) is due to redeem $1 billion worth of bond issues. Just three months from redemption, these GMAC bonds are trading at a massive discount from par. In today’s climate, three months can feel like an eternity. It is a finite measure of only a small part of the financial storm ahead.

In the third weekend of November, leaders of the G-20 nations will assemble in Washington for urgent economic talks. There may even be calls for a new Breton Woods to discuss a revised world monetary order. Key will be China’s role. It is likely that a major debasement of all currencies will be undertaken to rescue the global economy and with it, the world’s politicians. As this proposal gathers momentum, gold is likely to explode in price.

However, with the possible exception of countries like Switzerland, politicians the world over are likely to create international rules designed to preclude the holders of gold from making “windfall profits.”

Therefore, holders of gold should renew their efforts to ensure their holdings of gold are as isolated as possible from the long, greedy arm of the law.

Edited November 1, 2008 by churchill

[Naam]

Reality Dawning... For Gold

these were the words of my great-grandmother when the Maharaja of Bullshitterabad proposed to take her as his 37th junior wife. that was in 1926... i believe... but i'm not quite sure

[Naam]

the simple explanation is: Gold has NO intrinsic value (as the goldbugs claim). actually nothing exists which has intrinsic value if there is no demand. stranded on an uninhabitated island the demand for Gold is ZERO. on this island the art of hunting and fishing as well as the knowledge of a source with drinkable water is a zillion times superior in intrinsic values than tons of Gold

To be fair, the problem would be exactly the same with.. USD bills... Difficult to catch fishes with 100 USD paper bills.

However, I agree, I can be used as... combustible. Fuel.

Okay, okay ! The USD does have an intrinsic value.

Wait now along those lines gold does have value

On that island remember when Tom Hank needed a filling? Ok gold fillings....gold teeth....gold bullets ( even if shot from a sling shot ).... lots of value Im sure.

yep! the local witch doctor (in the wet dreams of Tom Hanks) demanded gold for the filling. but then they settled with a few grains of sand and some glue (i think).

[churchill]

So if you believe in the dollar OK

but where else to invest ?

The US has Alaska to sell so perhaps the US is the place ????

[flying]

In the third weekend of November, leaders of the G-20 nations will assemble in Washington for urgent economic talks. There may even be calls for a new Breton Woods to discuss a revised world monetary order. Key will be China's role. It is likely that a major debasement of all currencies will be undertaken to rescue the global economy and with it, the world's politicians.

This world monetary order keeps popping up in things I have read.

Starting to get a bit scary.

[Naam]

In the third weekend of November, leaders of the G-20 nations will assemble in Washington for urgent economic talks. There may even be calls for a new Breton Woods to discuss a revised world monetary order. Key will be China's role. It is likely that a major debasement of all currencies will be undertaken to rescue the global economy and with it, the world's politicians.

This world monetary order keeps popping up in things I have read. Starting to get a bit scary.

we don't need a new world monetary order. what we need is some sort of Sharia Law applied to bankers who destroyed trillions and brought the global economies to the brink of collapse. chopping a few hands off here, cutting off some toes there, public stonings once a week after a football game, a bunch of bankers in an arena with wild animals...

[flying]

we don't need a new world monetary order. what we need is some sort of Sharia Law applied to bankers who destroyed trillions and brought the global economies to the brink of collapse. chopping a few hands off here, cutting off some toes there, public stonings once a week after a football game, a bunch of bankers in an arena with wild animals...

Man I could so go for that.

I would also love some sniper to start hitting the main guys with red paintballs from a distance. Like in the movie Leon http://www.imdb.com/title/tt0110413/

[churchill]

Chinese looking to increase their gold reserves

"Gold rush

Benjamin Scent

Friday, November 14, 2008

The mainland is seriously considering a plan to diversify more of its massive foreign-exchange reserves into gold, a person familiar with the situation told The Standard.

Beijing is considering changing its asset allocations during the financial tsunami in order to build up gold reserves "in a big way," the source said.

China's fears about the long-term viability of parking most of its reserves in US government bonds were triggered by Treasury Secretary Henry Paulson's US$700 billion (HK$5.46 trillion) bailout plan, which may make the US budget deficit balloon to well over US$1 trillion this fiscal year.

The US government will fund the bailout by printing new money or issuing huge amounts of new debt, either of which will put severe pressure on the value of the greenback and on government bond yields.

The United States holds 8,133.5 tonnes of gold reserves valued at US$188.23 billion. China holds gold reserves of just 600 tonnes, worth only US$13.89 billion.

Beijing's reserves could easily go up to 3,000 to 4,000 tonnes, Tanrich Futures senior vice president Colleen Chow Yin-shan said.

Until now, the United States has had little choice but to issue massive amounts of debt to fund its deficits, and China has had little choice but to purchase it, as there are not many markets deep enough to absorb the mainland's US$30 billion to US$40 billion in monthly capital inflows.

Government officials involved in the management of China's reserves are beginning to see gold as an attractive place to park some of these funds. They see it as a real, tangible asset that will not lose its value over time - in stark contrast to the greenback, which is becoming more disconnected from economic realities as more bills are printed.

"It's the right time to increase the gold reserves, as the price is about US$710 to US$720 per ounce," said Wan Guoli, vice secretary general of the China Gold Association.

The International Monetary Fund has made reducing global payment imbalances one of its priorities in the aftermath of the financial tsunami.

"I think China probably will expand its strategic reserves into commodities during this downturn," said a Hong Kong-based strategist.

"China will continue to buy treasuries ... otherwise the system would get distorted," he said.

"But I think China will diversify its reserves."

[churchill]

and the Saudi's are buying

"http://arabianmoney.net/2008/11/13/saudi-a...d-in-two-weeks/

Saudi Arabia buys $3.5bn of gold in two weeks

There has been an unprecedented surge in Saudi gold purchases in the past two weeks with over $3.5 billion being spent on the yellow metal, reported Gulf News citing local industry sources.

Gold market expert Sami Al Mohna told the leading regional newspaper that this buying had substantially increased the gold reserves of the country: ‘Many Saudi investors see this as the right time for making investments in gold as the price is the most reasonable one at present’.

He said gold was seen as a traditional safe haven at a time of global financial turmoil. Gulf regional stock markets have fallen very sharply since early October, leading to an exodus of cash which needs to find a safe haven.

Gold is currently trading at prices similar to a year ago, and 30 per cent off its March peak. Saudi investors clearly think this is the right time to buy and are piling into gold.

News about the Saudi gold rush is bound to fuel speculation about the alleged large physical gold transactions that have been taking place at prices will above the spot price set in the futures market. It is very unlikely that such a large hoard of physical gold could have been bought for the depressed current price.

Market analysts such as the legendary gold bug Jim Sinclair have pointed out that if less than two thousand millionaires insisted on delivery of physical gold at the end of their futures contracts, as is their legal right, then the spot gold market would jump to new highs.

Saudi Arabian investors have spotted a bargain, and it may be a much better one than they think."

[VegasVic]

and the Saudi's are buying

"http://arabianmoney.net/2008/11/13/saudi-a...d-in-two-weeks/

Saudi Arabia buys $3.5bn of gold in two weeks

There has been an unprecedented surge in Saudi gold purchases in the past two weeks with over $3.5 billion being spent on the yellow metal, reported Gulf News citing local industry sources.

Gold market expert Sami Al Mohna told the leading regional newspaper that this buying had substantially increased the gold reserves of the country: ‘Many Saudi investors see this as the right time for making investments in gold as the price is the most reasonable one at present’.

He said gold was seen as a traditional safe haven at a time of global financial turmoil. Gulf regional stock markets have fallen very sharply since early October, leading to an exodus of cash which needs to find a safe haven.

Gold is currently trading at prices similar to a year ago, and 30 per cent off its March peak. Saudi investors clearly think this is the right time to buy and are piling into gold.

News about the Saudi gold rush is bound to fuel speculation about the alleged large physical gold transactions that have been taking place at prices will above the spot price set in the futures market. It is very unlikely that such a large hoard of physical gold could have been bought for the depressed current price.

Market analysts such as the legendary gold bug Jim Sinclair have pointed out that if less than two thousand millionaires insisted on delivery of physical gold at the end of their futures contracts, as is their legal right, then the spot gold market would jump to new highs.

Saudi Arabian investors have spotted a bargain, and it may be a much better one than they think."

The Chinese have got far more imortant things to spend their money on right now (besides gold) within their own borders. As far as the Saudis buying gold over the past few weeks, it sure hasn't affected the POG much, gold dipped below $700/ounce today before the shorcovering rally happened in the states. If I were you I would lay off those goldbug newsletters, suckers have lost their entire life savings over the past couple of years by believing the $2000/ounce hype, or the COMEX will fail to deliver hype, or the U.S. dollar downfall and hyperinflation hype! We are in a worldwide recession and their will be a strong deflationary trend for quite some time, so investing in gold now will only bring you heartbreak and losses for the foreseeable future. Gold will break down below $650/ounce before years end, so if you really feel the need to own some of the shiny stuff I would wait a while

[lannarebirth]

In the third weekend of November, leaders of the G-20 nations will assemble in Washington for urgent economic talks. There may even be calls for a new Breton Woods to discuss a revised world monetary order. Key will be China's role. It is likely that a major debasement of all currencies will be undertaken to rescue the global economy and with it, the world's politicians.

This world monetary order keeps popping up in things I have read. Starting to get a bit scary.

we don't need a new world monetary order. what we need is some sort of Sharia Law applied to bankers who destroyed trillions and brought the global economies to the brink of collapse. chopping a few hands off here, cutting off some toes there, public stonings once a week after a football game, a bunch of bankers in an arena with wild animals...

I have the bankers third in line for retribution. First, I'd pick out random members of the public "stakeholders" and quiz them on why they bought all the garbage equities, junk bonds, and sucked their equity out of their homes, and failed to hold their government to account for it's oversight responsibilities. If they fail the quiz, stone them first. Next, the politicians and bureaucrats who failed to discharge their fiduciary responsibilities to their citizen masters. Of course all of them wanted to get a job at the banks they were regulating for multiples of their government pay. Stone them all together Finally the fund mangers and bankers. I hold them least responsible, because everyone should have already known they were thieves. Still, stone'em all.

Edited November 14, 2008 by lannarebirth