Gold gold gold!

I am, reluctantly, starting to share your opinion. The nature of the problem facing us (credit meltdown) is inherently deflationary, although the escape will be inflationary (the deflation shows up in the short term, followed by longer term structural inflation).

I would not exclude a strengthening of the dollar against the Euro to 1.20, simply because the fed's and paulson's defense of the rate of fall of the dollar (note what I said there) via interest rate policy has been overdone and is likely to create a recession with excessive debt. Fed fund rates will fall, too little, too late, and we'll see Gary Shilling be correct with a strengthening dollar and 30 year rates back down to 3%. For a while.

The only place where I disagree is regarding the price of gold or oil, and possibly agricultural commodities. Because of the fiat system and competitive devaluations of currencies, I think players are starting to 'opt out', and some of these players may be certain CB's as well. So, I could see a world where we have a strengthening dollar, stable gold price, and still relatively high prices of oil (from global demand and political instability). Agriculturals move due to different reasons, but stay bid.

Other commodities, etc... may either be lifted by a rising tide or simply not participate, particularly the industrial ones as demand slows.

 

Well, it's not THAT bad, since I had a stop and reverse on the upside breakout of the triangle. I prefer to be a bear when everyone else is a bull but, the chart IS the chart.

 

I'm very leery of the current rise in the price of gold as well. If you think about it, gold has not performed nearly as well as one might expect given the current backdrop.

- The U.S. dollar has been falling since 2003

- basic commodities have been inflating in price

- there has been considerable monetary stimulus around the world since 2002

- we now have the central banks injecting billions of dollars into the banking system

- debt instruments are being shunned by market participants and parts of the credit market are not functioning

- derivatives continue to be a dark cloud on the horizon


Yet, gold has only managed to rise from $300 an ounce to its current $700. One would think gold should be over $1000 an ounce at this point in time.

I used to be a 'gold bug' back in 2002-2003 and made some good money on the rise. But since the middle of 2006 to now, I am dubious about gold. I am starting to lean the other way and think that the U.S. dollar is going to enjoy a turnaround. I'm not gutsy enough to short gold at this point but I'm certainly not waving my hands in the air thinking this is the big move. There are just too many people on this trade.

 

I'm bullish on the stocks, but neutral on the metal, for now. IMO, still consolidating within the 550-725 range established by the big runup last year. I think it will break over 725 rather than fall below 550, but I'd like to see the stocks, which usually lead the metal, firmly break to new yearly highs first, before getting really bullish on the metal.

 

keep in mind that Greenspan (the Fed.) doesnt like gold romping higher because it gives off the sense that CBs are losing control.....

a la 1988 when Greenspan had these comments

Greenspan argued that, “There is no reason to believe either equity swaps or credit derivatives can influence the price of the underlying assets any more than conventional securities trading does.”

One might think the chairman guilty of a surprising naïveté, or perhaps something a bit more sinister, but that’s a topic for another day. The relevance here is that gold, in addition to being a fundamental currency, is also a commodity, and as such the CFTC is responsible for oversight of its market.

Greenspan waved off the necessity for the CFTC to regulate gold derivatives, telling Congress to fear not, that the “central banks stand ready to lease gold in increasing quantities should the price rise.”

Oops. Bet he wishes he hadn’t let that slip. As Chris points out, “Greenspan was telling Congress that the purpose of gold leasing was not what the central banks had been telling the world—to earn a little money on a dead asset. The real purpose of gold leasing was to suppress the gold price. His remarks are still posted on the Federal Reserve’s Internet site.” [they are—we checked]

ever wonder why gold cant muster a $30 or $40 move up in one session???

 

In context, that statement doesn't mean what you think it means.
The context is an argument against regulation of some derivative markets, because of an inability on the part of speculators to corner those markets:

The Commodity Exchange Act of 1936 and its predecessor the Grain Futures Act of 1922 were a response to the perceived problems of manipulation of grain markets that were particularly evident in the latter part of the nineteenth and early part of the twentieth centuries. For example, endeavors to corner markets in wheat, while rarely successful, often led to temporary, but sharp, increases in prices that engendered very large losses to those short sellers of futures contracts who had no alternative but to buy and deliver grain under their contractual obligations. Because quantities of grain following a harvest are generally known and limited, it is possible, at least in principle, to corner a market.
It is not possible to corner a market for financial futures where the underlying asset or its equivalent is in essentially unlimited supply. Financial derivative contracts are fundamentally different from agricultural futures owing to the nature of the underlying asset from which the derivative contract is "derived." Supplies of foreign exchange, government securities, and certain other financial instruments are being continuously replenished, and large inventories held throughout the world are immediately available to be offered in markets if traders endeavor to create an artificial shortage. Thus, unlike commodities whose supply is limited to a particular growing season and finite carryover, the markets for financial instruments and their derivatives are deep and, as a consequence, are extremely difficult to manipulate. The type of regulation that is applied to crop futures appears wholly out of place and inappropriate for financial futures, whether traded on organized exchanges or over-the-counter, and accordingly, the Federal Reserve Board sees no need for it.
...
The vast majority of privately negotiated OTC contracts are settled in cash rather than through delivery. Cash settlement typically is based on a rate or price in a highly liquid market with a very large or virtually unlimited deliverable supply, for example, LIBOR or the spot dollar-yen exchange rate. To be sure, there are a limited number of OTC derivative contracts that apply to nonfinancial underlying assets. There is a significant business in oil-based derivatives, for example. But unlike farm crops, especially near the end of a crop season, private counterparties in oil contracts have virtually no ability to restrict the worldwide supply of this commodity. (Even OPEC has been less than successful over the years.) Nor can private counterparties restrict supplies of gold, another commodity whose derivatives are often traded over-the-counter, where central banks stand ready to lease gold in increasing quantities should the price rise.

In short, all he's saying is that it's very hard to restrict the supply of gold because central banks have plenty of it, and can lend it out if the demand is there, which it presumably would be if there were sudden problems getting gold for delivery on settlement of a contract. Therefore, it would be unnecessary to regulate gold derivatives.

Testimony: http://www.federalreserve.gov/boarddocs/testimony/1998/19980724.htm

 

There's a distinction between disinflation and deflation.

Despite gold's bottom in 2001, it's still a lagging commodity.

When eventually runs, it will............RUN.

ala' 1973-1980.

 

the time to be really bullish on gold was in 1999.

i jumped the gun and bought in 1998

but seriously, everybody is pimping gold now that it is near $700

lol

some people never learn

of course it could still go up significantly, but being a contrarian WoRKS

everybody LOVED tech stocks in 1999 and HATED gold

do the frigging math