Here is the logic behind shorting gold. First, the chart tells me to short it. It didnt reach that far above the old highs before it failed. Second, we are going to be in a period of deflation fairly soon. Oil has fallen and now its gold's turn. Gold going up during a period of deflation doesnt make sense. I see much lower gold prices.
IF the man is right there's a whole lot of downside, 'cause the stocks fell out of bed last year, and they usually foretell what's going to happen to gold. They started moving up well before the metal back in '99 - '01.
When you account for the deflation we've already had, depending how you calculate it, gold's new high is near or above the high a year ago. That fact show's that the demand for gold has grown (something we already knew, but isn't shown in the nominal price). Although its nominal price is not setting records at this moment, its real price is. When inflation comes we will be able to turn that real gain into a nominal. I've been heavy long since August 07 and I am still a buyer here.
This chart tells you exactly why gold rose and fell...we have not gone into deflation...yet...gold has a lot more room to fall as deflation sets in...
That chart means nothing if it is not compared to GDP. Also it shows CPI, the PPI is more relevant to gold. Look at the dollar index. It shows 18% deflation in the last 9 months. Take the average of CPI and PPI, subtract GPD. Average that with the dollar index and then you have something which I would say is close to the real number. You can't say oil has gone from 140 to 40 and there is no deflation.
Lord...please read what the definition of deflation is... Deflation is not falling prices... Deflation is a CONSEQUENCE of the contraction in money supply... That's like saying the thermometer is the cause of your fever... We are in a forced liquidation/deleveraging mode. Have some asset prices fallen? YES. But it's not deflation.
Wow, really? Youâre going to say I don't know what deflation is when I just gave a method to calculate it? I gave the price of oil as a supporting item, considering energy is one of the most important factors in determining inflation and deflation, you are way out of line for criticizing its use. The dollars movement in the last 9 months IS deflation. How else would like to quantify deflation if not in the value of the dollar? Edit: Just read some of PohPoh's other posts, and now his reply makes a lot more sense. I blocked him, and would advise others to as well.
Very good call Port! Congratulations I never trade gold but noticed something lately. There is a creepy guy advertising gold coins on many channels... keeps pumping the idea of gold going to 2000 and "how you can protect your assets if you buy now" When you see something like this, be careful.
Gold has no intrinsic value, has carrying costs, wide bid/ask spread on gold. When you see the pundits on TV and radio telling folks to liquidate 401Ks and put every penny into gold you are in a bubble. Just like what happened during the property bubble.
Lets take a look now at what I am looking at on the charts and what made me make this call in the first place. I honestly believe that we will have certain deflation in the future bringing down gold just like it brought it down in the early 80s. However, thats not why I made this call This chart is the underlying spot gold chart. Anytime you have seen a chart like this where price was not able to get up over the old high what has happened the majority of time? I dont know about you, but it has crashed down upon me most everytime. Look at the Bollinger and Keltner channels. Price may pivot at that bottom line, but I dont count on it. My opinions are always strong, but loosely held. 5-6 continuous down-days signal are very rare and signal a certain failure in fundamentals. Gold has had it. This pattern on the spot chart is a topping formation. I wouldnt be surprised if gold gets cut in half and fairly quickly from this point. A retest of the 52 week lows is in order. This gold chart reminds of certain year 2000 stocks that were finally exhausted from the wild uptrends. I expect gold to crash down just like Amazon and yahoo in year 2000. Dont think that gold cant go to some insane low. Periods of deflation often occur during or after periods of war or great stress in the economy such as the great depression. Is this time somehow different then the other times and we will escape deflation? I think not.