Discussion in 'Business & Economics' started by Billy T, Dec 5, 2009.
I would think that nobody buys gold in the good times for it
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By close of business yesterday (8Dec09): "The yellow metal fell 1.8% to settle at $1.142.80 per ounce on the New York Mercantile Exchange ..."
Oil closed a little above $73/ barrel. So an oz of gold buys ~15 barrels of oil. I don't have historic data. Perhaps someone will post a graph?
Gold/$ is stongly related to value of dollar and fears about the economy. Gold/(oil cost) may be better index of just this economic currency fear, I would think. I.e. when many think economy is crashing they expect demand for oil to decline and the price per barrel too also; hovever, they may also fear the drop in taxes and increase in government expenditures will weaken the currency and make Gold/$ index increase by both factors.
Anyone have ideas how these two ratios track and what they tell that is different one from the other?
A couple of informative graphs:
Please Register or Log in to view the hidden image!Note recovery starts with ObamaPlease Register or Log in to view the hidden image!
But he, FED and Treasury are killing the dollar to make that happen! Who knows if they can recover the dollar and keep the jobs/ economy still moving up?
Here is the text that follows:
“What's it mean for gold? - Sorry to say, but it appears that gold is going to take it on the chin here (along with commodities in general). Not tomorrow or the day after, but over the course of the next six to eight weeks, as the dollar firms, we expect to be watching a very swift retreat on the part of the gold buggerers. It will be a process, mind you, so the turn is going to be tricky, coming in fits and starts. This will convince everyone to stay dollar-short and gold-long, even though that is a sure recipe for financial suicide.”
From: Residual Income Report - Oxbury Investment Research <jaubrey@oxburyr> (an Email I briefly got for free on trial)
Billy T comments: I think they may well be correct and would thus like to switch from 2nd to 1st choice vote. I.e. Gold does seem to thrive on adversity – go up when people think the economy and/or dollar is going down. Thus, if I am correct and this recovery now in progress is but the lull before the real storm hit, there could be an over shoot of gold price on the downside near term with extreme and rapid recovery when the run on the dollar begins.
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I took advantage of the rapid run up and topping out to cash in two thirds of my leveraged paper gold. A portion of the proceeds awaits a new buy point and will be shifted to silver bullion. My hard gold remains in the vault long term in spite of the fits and starts that you point out will accompany the period between short term highs and lows.
I am still OK with option two and will not be ready to join you on option one until a close below 1090 and a failure to rebound above 1100. Then I join you on option one Please Register or Log in to view the hidden image!. The time frame for the next short term bottom of six to eight weeks is good IMHO, but the shorter end of that time frame seems more to my thinking. If we approach 1000 in the first half of January I am back in. If we play with 1100 for four weeks without the anticipated dip to 1000, I will begin a move back into gold in several increments.
Put me in for changing to option 1, with the caveat that I will be trading back in if we are around $1030 in the first week or two of 2010. With all of the triggers that can cause precious metals to spike I hate being on the sidelines too long.
Thanks for posting about this!
I view today's gain in gold to reflect the US Senate vote on the health care bill. The bill will continue the increase in unfunded spending, and to the extent that it is funded, the taxes and penalties will prolong the recovery and leave us open to the coming commercial real estate collapse :yikes;. However, the gold frenzy of the past few months has not been sufficiently unwound IMHO, and I still look for gold to approach $1030 in January while they battle out the final health care bill.
I don't own any gold, never have, but do own shares of two major miners of gold etc, (NEM & GG) plus one would be "block buster" in a few years, OSKFF. It owns large track in Canada where many small conventional mines were profitable along an 8km deposit, they will make an open pit operation, have eight drills now exploring the ore grade. Their independent study shows, before some recent higher grade sections were found, that they will produce 591,000 ounces of gold per year over a ten-year mine life with estimated average production cost of US$319/oz.
They own the Canadian Malartic deposit along HiWay 117, which currently represents one the biggest gold reserves in Canada for a single deposit, and is still growing by ongoing drilling on new mineralized zones, which are running at about twice as rich ore as the old mine areas.
They as have a joint project (a few approvals still needed) with Clifton Star, 90km NW from the main malartic ore body. They paid Clifton Star well for participation so must be promising. OSKFF is up some from when I bought a month an half ago, but how well it turns out will not be known for several years.
I am not recommending any of these three companies but do think in the long run owning share in the producers now is better than owning the gold itself; because I expect bad times ahead and their labor, etc. cost will not rise nearly as much as the gold they produce will. Gold producers are sort of like airline companies in that once the overcome their costs the incremental gains are greatly profitable - like a license to print money, until your ore body is exhausted.
World Gold Council (WGC) data reveals that for the first time in 21 years the world's central banks have been net buyers of gold and
China has been the biggest buyer this year, adding 454 tones to bring its central bank reserves to 1,054 tones.
Amid growing concern over the weakness of the dollar, about 28 billion U.S. dollars worth of bullion was bought by central banks this year, based on an average price of 978 U.S. dollars an ounce, according to the WGC.
The biggest buyers have been the emerging economies of China, Russia and India, but smaller countries such as the Philippines, Kazakhstan, Sri Lanka and Mexico have also been shifting their reserves into gold.
BTW, gold a few minutes ago was $1104/ oz.
You know, if they start talking about doomsday gold falls like a rock :humor:.
What is next? Not decreasing production (as some of the producer want you to think, for obvious reasons):
"China's gold output rose 11.34 percent to a record of 313.98 tonnes in 2009, according to latest statistics from China Gold Association. It is the third year in a row for China to rank the first in gold production in the world, according to the association. ..."
It is my understanding that near the boarder with Mongla, China has a huge relatively untapped, field of good grade gold deposit.
They keep digging it out of the ground...
From a technical gold has been rejected and continues to break down through major support while it's inversely correlated pal USDX continues to break higher and higher with only the highest moving averages standing in its way.
However the long-term on dailies clearly show a long up-trend and a bullish gold market. The current decline in gold is classified as a pull-pack thus-far, sitting only a few points off the 50% retracement level of its former 5 wave Elliot thrust.
The last consolidation period on the weekly is clearly seen triangle with breakout to the top side. It lasted for about 22 weeks so from a technical point of view gold still has higher probabilities of going higher rather than lower however it could take a long time.
So it's on the BillyT for the fundamental analysis. In what ways do you think oil prices impact gold? Do you think the dollars strength right now is solely because there aren't really any healthier currency alternatives atm? Or is taking the cash out of gold and putting it back into USD a sign of new investment? Wondering on your opinions on how the flows of these commodities and currencies are working ATM
I think oil and gold (and commodities in general) tend to move inversely with the dollar. - that certainly would be the case if they held some static value. I.e. just reflect that more of a less valuable dollar are require to express that assumed static value.
Industrial demand tends to drive up oil and other commodities, but not gold;However gold MAY be driven up more by inflation fears, despite owning commodities also gives inflation protection. I.e., at present and for much of the past, gold was the more obvious inflation hedge - If more were to recognized that many other inflation hedges give greater LONG TERM inflation protection, then the current bias towards gold might be reduced. As it is now gold prices can and does surge up faster than commodities when there is a surge of inflation fear, but the price of gold tends to fall back when the surge of fear is just a steady fear.
To be specific: I don't think that there is much of a causal link between gold and oil price movements - it a correlation to (of the same sign) to other factors that suggests there is a causal link.
I don't know the numbers, but would strongly guess that the magnitude of "cash out of gold" is almost insignificant compared to the cash out of foreign equity markets. I.e. when there is "flight to safety" many emergent markets give up a lot of their recent gains as US & EU owners of shares sell and convert the local currencies into dollar to take their dollar (or Euros) home.
ATM the Brazil market is down more than 5% from a couple of weeks ago and the dollar will buy a little more than 5% more Real. So I take that to indicate, in agreement with the paragraph above, to indicate a "surge to safety" -probably mainly related to all the headlines about Greece, Spain, Italy and Portugual (the "PIGS" of the EU)
yeah I think if the current USD strength keeps coming it might pop some bubbles in developing countries.
As for the Real, this has to do with domestic policy towards a weaker Real. The government announced they think 19% lower currency is what it needs to be for optimal economic growth/exports.
And yes I can agree that money is being exchanged for USD right now.
Also agreed on a surge to safety, or as I often hear it "risk aversion" Eurozone's talks about defaults are doing nothing good for the euro.
If you have been keeping up with the swiss talks, the LUV analogy is funny. L is europe, U is USA and V is Asia. It's simple but it's nice and explicate.
How long have you been trading BillyT?
Monday morning Asia session. Looks like long term bullish for dollar is in a slight pullback but still in a downwards trend.
Comparing the majors, the euro still looks the weakest. On the upside there is strong resistance by a daily, weekly, and monthly pivot all lined up, as well as all the big moving averages. On the downside we see weekly support 1 and other minor supports.
I will be selling euro and buying USD this morning it looks like. If price can manage to come back to its monthly pivot I will sell there with 3% of my account risked and a very big 1:15 risk / reward. The trade should increase my account be 45% or at worst I will lose 3%. It is still far away from the pivot so I might have to wait until London and hold out through NYC session and beyond. If there isn't enough pullback strength I will have to look at its weekly pivot for entry, or try playing a breakout strategy on its last low.
I bought most of my gold at 4-500. I think it will keep going up. The econ is not recovering. The numbers were cooked. Inventory was manipulated. Any business person knows how that works.
When was that? I.e. what year or how long ago?
Still nothing on the euro. A lot of pairs were weaker. Doesn't make fundamental sense though so the divergence in correlation with other pairs could be indicative of being overbought. I still am waiting to short this pair but because of recent strength I really want to see Oil drop first, and a fast 10 pip movement under 5 seconds and ride that big sell-off. No telling if that will happen or not.
Which numbers were faked Sandy?
had to be before 07 or around there. I don't have enough history on my charts though to see further back.
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