calling a top in gld

Discussion in 'Trading' started by billyjoerob, Sep 8, 2011.

  1. That's right, the top in gld. We've seen it. With the Euro below 1.40 and the dollar breaking trend lines, the gold bugs are advised to find old copies of "Dow 36,000" on Amazon, because that'll be here long before gold reaches 2000.

    I recommend this article from Minyanville.

    "How do you value gold? Like all commodities, it offers no yield which is why historically it offers such dismal returns. What you can do, however, is to compare gold to an asset that should theoretically be one of those entities that you can exchange gold for in 30 years. Real estate appears to be an excellent comparison vehicle since it also follows inflation pretty well. Since transaction costs are so high, real estate is usually very stable and goes up a little bit each year. Yes, we recently have had real estate bubble, but nothing is perfect and it really is a rare occurrence.

    In 2011, the gold/real estate ratio is the second-most expensive out of 122 years. No doubt, the gold bugs will note that in 1980 the index went even higher. For those curious, if gold would reach 1980 levels it would trade at an average price of $1,868 for a calendar year."

    Today gold closed at 1818.18.

    "The gold/real estate ratio is robust; it does not appear to have any major secular trend creep issues and it offers both great buy and sell signals."
  2. i'm gonna call the top in fiat currencies- they are all on their way to zero and they are in a race to get there. you can call a top on gold all you want, please sell it to me- i'm not a weak hand... i'll hold it for the next 50 years and then i still won't take your wheel-barrow full of paper for it, i mean it doesn't create that much heat when burnt.
  3. Ha ha I knew the gold bugs were dead-enders. No trailing stops for these true believers.

    You do realize that fiat currencies trade as pairs, so they all can't go to zero?
  4. m22au


    correct, but if enough "Dollars" or "Euros" or "Pounds" or "Francs" or "Yen" are printed, then gold could go to
    20,000 Dollars / Euros / Pounds / Francs and it could go to 2 million Yen.

    If that happens, I wouldn't really care if the EUR/USD had gone to parity.
  5. Lucrum


    Which "top" is this one?
  6. The last one.
  7. Lucrum


  8. But like the article I quote points out, what you ultimately want to buy with gold is stuff, not paper. And 90% of what you consume is domestic, not foreign. So even if the dollar does depreciate vs. gold or the yen, I don't buy much gold or japanese exports. So to the extent that it does matter, gold is already historically overvalued as valued by housing, for instance. You're better off dumping your gold and buying some real estate.
  9. Good point. I am a seller.
  10. m22au


    For an investor who believes that hyperinflation will occur, selling gold and buying US real estate with the proceeds makes sense. However the strong benefit to holding gold is that is much easier to convert into US dollars than it is for real estate.

    For an investor who believes that deflation will occur, gold may not go much further beyond 1925 USD per ounce, and it could have peaked already. However in that scenario it is still a strong possibility for gold to outperform real estate, because the former may not decline by as much as the latter.

    Keep in mind that the discussion of gold is often very US-centric and USD-centric.

    Even though US real estate may appear to be cheap versus gold, the purchase of the former may be too messy for an investor based outside of the US. This is particularly true for residents of countries such as Switzerland and Australia, where gold hasn't done nearly as well in local currency terms. This is particularly true for the latter where the cash rate is still at 4.75%, and if and when the AUD fell back to sub 0.7000, gold would be an excellent store of value, when measured in AUD.
    #10     Sep 8, 2011