Monday, Jan 14, 2008
Gold-ramping works
Yahoo: Gold prices reach record as nervous investors pile in
The price of gold has hit a record high above $900 an ounce.
The uncertainty in the markets has led investors to pick the traditionally safe haven of gold.
Turmoil in financial markets and expectations of sharp interest rate cuts in the US have helped raise gold's appeal.
Posted by little professor @ 09:58 AM (963 views) Add Comment
24 Comments
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1. sold 2 rent 1 said...
Gold is at $912 now. For kondratieff-wave theorists, it is conclusive proof that we are in the k-winter.
The big question is at what price will gold be signalling an even bigger event.
If gold can beak its all time high of $3100 (in real terms) set in 1492 then maybe this is a singal of a Spengler Winter is head - a radical change in civilization is happening
2. sold 2 rent 1 said...
3. sold 2 rent 1 said...
Oswald Spengler wrote "The Decline of the West" in 1918 when gold was at an all time low in real terms.
Since then it has failed twice to retest that low.
Gold fell massively during the Kondratieff Autumn (1982-2000)
It also fell massively during the Spengler Autumn (1500-2000)
As the graph says - are we indeed heading into a new world?
4. happyrenterz said...
Thanks s2r. Traders are talking down gold but they are stuck in a time frame of decades. The dollar has taken the place of gold for these decades. Now that the dollar has been possibly mortally wounded by bad debts where else do you store wealth? Gold has few industrial applications it is even more useless than paper. There is no point in seeing it as a commodity. It is a store of wealth when things go bad, like now. The Chinese and Indians know this, they will determine the price because theirs will be the economies growing in the future.
5. happyrenterz said...
CNBC did a feature on how to trade gold with www.bullionvault.com here.
6. techieman said...
Way too toppy for me boys - overthrow of the higher trend channel, exhaustion gap and EVERYONE is bullish. Remember what Joe Granville said - "Whats obvious is obviously wrong" - Im out of all longs except for my core holding.
7. drewster said...
techieman: I disagree, I don't think we're anywhere near saturation. About a year ago, I noticed that hairdressers were all suggesting I should venture onto the housing ladder. Until my hairdresser starts tipping gold, I'll keep buying.
8. harold said...
Very interesting post s2r1. I think there may, however, be a correction / consolidation later this week/month as hedge funds take profits to cover losses.
9. techieman said...
@drewster - you may be right - im looking at a SHORT TERM sidelining - then see what market action dictates. Interesting indicator - i'll have to raise it at my next haircut! As i said I still have a smallish core holding which i accumulated at much lower levels, but trading around I may miss a few more days but im happy to take the money and run at the moment. 14-day RSI is way above 70.
10. sold 2 rent 1 said...
I think techieman is talking of a short term correction on a long term bull.
This is only stage 2 of 3 that has been going since 2001.
Not sure where stage 2 will top out at but as a rough guess $1500 - $2500 an ounce some time in the next year.
Stage 3 is where it will get absolutely mental. This is where your friend's hairdresser's mother buys into the madness.
This is also where I think governments, after destroying our currencies, will impose new laws to seize back the gold for free or very cheap.
Planet Earth is heading into unchartered waters.
We can see this with global warming, peak oil, peak food, and the testing of quantumn physics theories that have been around for 100 years.
Discovery Channel - Time Machine
http://www.youtube.com/watch?v=yYOjYU2GKA0
BlueSci Film - Large Hadron Collider
http://www.youtube.com/watch?v=5AW48qqUT5c
Anything is possible.
11. happyrenterz said...
@tm short term of course it can drop, but long term the gold price it is about fear. I am still buying gold because I can see fear is going up not down. The UK hpc has not even begun. In the USA subprime is rolling into problems with prime lenders. If we get a bad recession corporate debt will be defaulting too. Only when these issues are resolved will gold be dropped. I am also buying gold because the pound is dropping.
@drewster I think it is the super wealthy driving prices now (and people like us). When hairdressers start talking about gold it will be when house prices have started crashing and inflation is at 10%. But even then I would want to see improvement in the credit crunch situation before I sold gold. If the dollar is finished as the currency of the world, gold will naturally take that role again. It might take several years to regain confidence in fiat currencies.
12. stillthinking said...
Isn't this due to Chinese purchasers who are getting hammered(now) by inflation, and desperate? That graph makes the current price look like a blip.
13. stillthinking said...
By blip I mean you would be making a speculative purchase, or a gamble. Not a long term investment. Particularly as their is no return.
14. drewster said...
Thanks Techie - as a short-term trader, you're coming at it from a different angle.
In the medium-to-long term, gold will shift from nice-to-have jewelry to must-have investment. This mirrors what happened in other bubbles: tulips went from nice-to-have flowers to must-have investments during the Dutch Tulip Bubble. Housing changed from just being a home to a must-have asset. In the roaring 1920s, share ownership spread from professional traders to household amateurs, until the peak in 1929. That was the year when Rockefeller famously received a stock tip from a shoe-shine boy. Hairdressers are the new shoe-shine boys.
Gold has all the features necessary to make it popular amongst the masses. It has historical value. It can be flaunted in jewelry or on the mantlepiece. It can be bought and sold by ordinary people, not just professional investors. You could go out tomorrow, buy an antique gold or silver trinket, and display it on the mantlepiece. At the next dinner party you can boast about how much the value of said trinket has increased, and how "you can never go wrong with gold".
The international angle is another. Indians have a traditional cultural fondness for gold, and as the country becomes more wealthy they will have more disposable income to spend on jewelry. In China, inflation is running at 6-7% - yet another incentive to hoard gold rather than cash.
So far in 2008, only a relatively small number of people know about gold. Ordinary investors aren't heavily invested in gold yet. I talk about gold at my dinner parties, but I don't think most other people do yet. My hairdresser certainly doesn't know about it yet.
15. techieman said...
@ Drewster absolutely right. My general view is that we will have a correction and then PERHAPS the real bull as you say.S2R1 pointed out that the 30s saw a large increase in Homestake mining and likened this to an increase in Gold (since the price of Gold was fixed it couldnt rise, although he asserts due to this mining increase it would have - incidentially I read precther who said that mining stocks didnt go up that much and that silver - a free market didnt go up either). My view was that people would cash in assets if things got bad, and in a general deflationary environment gold would react like other commodities. I accept i may be wrong, but my angle is that the market action dictates and will tell me soon enough if i am wrong. S2R1 could also be right about his count - to be honest my interest was tweaked in Gold recently because of the 4th wave DAILY chart partern (Triangle), which called for a squeeze up from the large sideways action after 850 to the 770 area. My target from 800 ish was 888 to 903. Of course its done that and now i feel there are probably more interesting paterns in other markets.
Clearly the 5 waves up are an impulse wave. I would expect a decline as perhaps wave 2 of this move (which will get quite a few people out). The weeklies are interesting too. S2R1 - do you have an Elliott count at the moment?
16. happyrenterz said...
@techieman have you noticed that the China index is doing the same cone shaped sideways movement from early November that gold did around 800 for example look here. As I understand it this can shoot up as well as down?
17. sold 2 rent 1 said...
Techieman,
I think we are in Elliott wave 3 of stage 2/3 in this gold bull.
We are due for a correction but that may not come for a few more weeks yet.
18. submedia said...
Gold Gold Gold. A metal that doesn't tarnish and is to a human what silver foil is to a magpie. I was advising to buy gold two years ago and it would seem to have been a pretty good tip. I believe gold is a good investment to protect your wealth against turbulent times but I also think that currently there is froth starting to creep into the subject of gold. Anyone thinking about gold needs to think seriously about doing so. I don't agree that gold is not an in topic subject at the moment and also am not sure if the cost of gold will break $1200 mark. At that level i would cut and run anyway as it is likely to fall down to $400 - 600 long term. If the financial system were to break down anyone with gold would have a useless investment. It cannot be used for anything useful that adds value into a system. And who presumes that they would be able to use it as a currency if it has been plundered. The things that will preserve wealth in a new order that has been expressed above is food, fuel, land, security and skills. IMHO.
19. techieman said...
I dont really understand the question @hr. The HK index (i trade the ETF) is looking like the gold did - and thats a better chart than China, so yes i would expect an upmove, but i dont really like equities at the moment - FTSE has cost me small amounts as i keep on buying out of the money calls looking for a 5th wave that hasnt mateialised! Im a bit too conservative to buy futures in the FTSE but my feeling is that the HK market goes higher. So I dont understand the point. The cone shape as you put it is a triangle (sideways) which normally gets resolved in the direction of the prior move after around three quarters of the length of the triangle (join the tops of the bars and the bottoms to give the triangle). We have broken out of the triangle in gold - and that normally indicates a swift move in the prior direction. We have had that and its just how far does that move go.
20. happyrenterz said...
@tm thanks for reply sorry if question was unclear. What I meant is as the triangle forms and creates a point I thought this indicates the pattern is about to change but it does not necessarily indicate which direction it will change. So prices can make a large drop or large gain. But your reply clarifies that, i.e. it tends to resolve in the direction of the prior direction, in this case up for China, since that was the prior direction.
21. sold 2 rent 1 said...
submedia,
"At that level i would cut and run anyway as it is likely to fall down to $400 - 600 long term. If the financial system were to break down anyone with gold would have a useless investment".
The financial system won't break down before 2010-11 at the earliest. There is too much money from SWFs and governments can create as many bail-outs as they like. As long as the financial system is intact then gold will go higher and higher.
Of course in the end gold will probably become worthless but it will do a decent job in getting you to whereever we are all headed.
22. techieman said...
@HR you are right. Basically the prior move falters and a triangular or pennant shape manifests. In simplistic terms that prior move (up in the case of gold re-asserts itself). As i said three quarters along to the apex is (often) where the move starts. The apex of the triangle is often an important point. http://www.trending123.com/patterns/bullish_symmetrical_triangle.htm . There is discussion as to whether the move after the breakout is equal to the move before or , as i favour - the widest part of the triangle. The gold move was difficult to trade only really because this was all happening around Christmas!!
23. techieman said...
This is probably better!!
"There are measuring techniques specifically used for triangles. In the case of the symmetrical triangle, there are two. The most commonly used is the simplest technique of measuring the height of the vertical line at the base (the widest point, marked A to B). The height measurement at the base is then projected from the breakout point. Marked as #1 on the graph below.
The second method is to draw a trendline, or channel line, from the top of the the base, point A, parallel to the lower trendline. This line then becomes the upside target in an uptrend. This measurement makes it possible to estimate a time target for ascending prices to meet the upper channel line. It's not unusual for the prices to hit the new upper line at the same time the two original trendlines converge at the apex."
http://www.stockstoshop.com/symmetricaltriangles.htm
24. submedia said...
sold to rent,
agreed.