Friday, February 29, 2008

This guy is looking at 3 March for an intermediate top

Gold Accelerating Towards Blow off Top

Current price of GLD is 95.99. He sees the top of the channel as 96.5

Posted by sold 2 rent 1 @ 06:51 AM (1004 views)
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10 thoughts on “This guy is looking at 3 March for an intermediate top

  • sold 2 rent 1 says:

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  • Gunning For Gold says:

    Looks like it will hit around 92.00 as a low, if it stays within the channel.

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  • So this is a gold mining shares ETF he is talking about?

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  • no its an ETF based on spot gold hr (http://www.streettracksgoldshares.com/us/index.php?noMsg=true) – but its not the spot (multiply it by ten and add a bit!). We were discussing this yesterday, I said that I’m nervous now everyone is long of gold. Harold said that not everyone is long (stating that the people here does not constitue “everybody”) to which this is the reply I just posted:

    “harold – yes well by Everyone i’m not really referring to here. I mean the market…im not talking about the Drewster hairdresser indicator – if we go to the moon then that is the indicator for liquidiating the rest IMO. No, I was talking about the Commitment of traders.

    See this: http://www.technicalindicators.com/gold.htm.

    Also see http://www.cftc.gov/dea/futures/deacbtlf.htm and do a search for “GOLD”.

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  • techieman, sure okay, point taken. We’re definitely on a very steep part of the curve right now, where timing is everything. And it’s important not to be greedy, and to cash out when you are happy with the profits. However, I have to say I’m in something of a quandary as unlike the blow-off in mid-2006 this current bull is being driven by some scary fundamentals relating to inflation and paper assets in general. All bull markets have ‘walls of worry’ which must be overcome if progress (higher price) is to be achieved. And at the moment there is a lot of worry out there and it’s growing. Only time will tell whether the current wall of $1000 can be climbed. The best thing IMHO is to think very long-term, which I reckon is applicable to most on this site as they are not about to jump back into housing. That way, even if you do go into metals now and there is a strong correction, long-term you will still probably do very well.

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  • If we have had the Elliott wave 4 correction then I can’t see this whole upleg (from August) getting beyond 1200-1250.
    If we haven’t, and we get a big correction down to 890-920 in the next 2 weeks then we could see a top of 1350-1500.

    I guess the tipping point is 1000 where the correction either does or doesn’t happen.

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  • I guess another other thing to keep in mind is that gold is not actually going ballistic in all currencies. In euros this week we have only had a very modest rise – the action at the moment is very much dollar (and to a lesser extent £) related.

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  • harold,

    Good point about the euro still being seen as the safe haven too.
    I still think that gold will finally blow-off when all the major currencies are seen as not that safe.

    If we get the wave 4 correction, then not only will we have this upleg extend into May/June but the euro will have surely peaked and be dropping sharply to provide extra power into gold for a vertical stike in early summer

    Come on Plunge Protection Team. Do your stuff and correction gold before it hits 1000.

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  • “Come on Plunge Protection Team…”

    I think they might be going to give up S2R1. I mean, with food etc. going crazy, what’s the point – the games up:

    http://www.gata.org/node/6029

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  • From FTAlphaville view on inflation and commodity prices, long but worth a read

    John Kemp of Sempra Metals

    Commodity prices will continue to rise in the short term until the increase in global inflation draws a response from central
    banks, especially in China.
    (1) Contrary to the speech given yesterday by Federal Reserve Vice-Chairman Donald Kohn, there is no reason to think that
    commodity prices or inflation will stabilise in the short-to-medium term. Energy and commodity prices are being driven by two
    factors that will ensure they are largely insulated from any slowdown in the United States:
    (a) Strong demand from China which is offsetting slower commodity consumption in the United States and
    (prospectively) in Western Europe.
    (b) Strong investment inflows as institutional and private investors re-allocate funds from large and liquid but underperforming
    equity and bond markets to small, illiquid but out-performing commodity assets, which is having an
    outsized impact on commodity prices.
    (2) Even as the US economy slips into recession, prices for crude oil and a range of other commodities have continued to soar, and
    that trend looks set to be extended. Until China’s commodity appetite slows, or investors lose their enthusiasm for commodity
    futures, price increases fuelling inflation will continue. Neither appears likely in the next few months.
    (3) The global economy has shifted into a period of perceptibly faster inflation. For the time being none of the major central banks
    appears ready to push back by raising interest rates to curb growth. In fact, interest rate reductions in the United States and
    United Kingdom appear designed to stimulate otherwise slumping demand.
    (4) Higher commodity-driven inflation will make bonds less attractive, and spur further allocation of investment funds into
    commodity futures, intensifying upward pressure on prices still further.

    Thinking about the inflation end-game: H2 2008
    (1) In a globalised economy, capacity constraints are global rather than national. The speed limit for global growth is set by the
    availability of adequate raw materials and transportation capacity. Bottlenecks in the extractive and transportation industries
    drive inflation rates worldwide. It makes no sense to focus slower growth at national level in the United States and Western
    Europe leading to “slack” emerging in local labour markets and manufacturing industries if China continues to grow rapidly and
    put pressure on the availability of energy, mineral and port terminals. They are all drawing from the same resource “pool”. Nor
    does it make sense to talk about China “picking up the slack” created by a slowdown in the United States because there is no
    slack in the global economy.
    (2) The Federal Reserve, Bank of England and European Central Bank are (largely) powerless to control commodity-driven
    inflation within their own economies. The only way to return inflation to target levels would be to engineer deep local
    recessions in which massive unemployment and sharp falls in the prices of non-traded items and non-energy intensive items
    offset the continuing upward pressure from internationally traded energy and commodity items. This type of “shock therapy”
    remains extremely unattractive and is not under serious consideration at present. Central bankers prefer to minimise the
    inflation problem by suggesting it is limited to a few items or will prove short-lived in an effort to anchor expectations and
    prevent demands for compensatory wage increases. Like Mr Micawber, the central banks hope something will turn up to solve
    the problem for them.

    In the short-term commodity prices and inflation will continue to accelerate. Fed Chairman Kohn has pointed to the forward
    price curve as a reason to think that oil and other commodity prices will stabilise near current levels, but that is probably a
    misunderstanding about the nature and function of forward futures prices (which are not good predictors for future spot prices).
    While Kohn hopes energy prices might be stabilising, crude oil prices for nearby months have started to settle above $100 per
    bbl and many in the market are now targeting $105-107 in the next few months. Copper prices are approaching the peaks set in
    May 2006. Primary aluminium prices have broken into new ground above $3000. Iron ore producers have secured a 70%
    increase from the steel industry, which is in turn busy raising the prices which it charges to its own customers to pass on the
    cost.
    (4) Until global growth slows, especially in China, either of its own accord or because the central banks start tightening monetary
    conditions to push back against inflation, commodity prices will continue to rise, and inflation will intensify.

    But various processes are already in train which suggest that the end-game for global growth, inflation and commodity prices is
    now starting to emerge:
    (a) As it becomes clear that inflation is persistent and worsening, it becomes increasingly difficult for central banks to ignore
    the problem.
    (b) Accelerating price pressures present an increasing challenge to the competitiveness of China’s exporters and its internal
    social stability. After boosting interest rates and raising reserve requirements through 2006 and 2007, the government
    switched to a system of comprehensive price controls in autumn 2007 and early 2008 to hold the inflation rate down. But
    the controls have bottled up rather than eliminated inflationary pressures and their effectiveness has been limited.
    Consumer prices are now rising at more than double the central bank’s target rate of 3.0%. The controls are also creating
    more distortions in the economy. Controlled gasoline and diesel prices have done little to encourage consumers to conserve increasingly expensive crude oil imports, and are undermining the profitability of the refining industry.
    Similarly, there is a growing contradiction between controlled electricity and domestic coal prices and the rising price for
    China’s coal on international markets. The coal companies’ preference for exporting rather than supplying domestic
    power companies played a key part in the power shortages during the recent snow and ice storms.
    (c) After insisting last year that the economy was not “overheating” (an emotive word in China), the government has edged
    closer in recent weeks to admitting that the economy is growing too fast and will have to slow. Sooner or later, the
    government will have to replace or complement the current system of price controls with measures to hike domestic
    energy prices and slow the pace of growth in the manufacturing and real estate sectors. Rising prices will probably force
    the government’s hand in H2 2008.

    It remains possible the housing-driven slowdown in the United States will spread to Western Europe and translate into
    slower growth in China as falling consumer demand in North America and Western Europe cuts the demand for China’s
    manufactured exports. Again the effects are most likely to make themselves felt from H2 2008. So far the fallout from
    problems in the US housing market has been limited. Homebuilding has slowed but commercial construction activity has
    held up well. Consumer spending has slowed but is not yet falling and business investment expenditure has remained
    strong. Exports have risen but import volumes from China and elsewhere are only down marginally. But there are good
    reasons to think that the full impact of the crisis has not been felt yet and will only become apparent later this year.
    Commercial construction activity is still being buoyed by orders originally placed in 2006 and early 2007 before the
    banking crisis broke. As those orders are completed, there are no new ones coming through to replace them, so
    construction volumes look set to fall as the year wears on. Corporate profits have started to fall which will lead to a
    squeeze on investment spending later in the year. And as household debt problems and default rates continue to mount, it
    looks likely that consumer spending will fall later in the year. There are good reasons to think that the full impact of the
    crisis will not be felt until H2 2008. Moreover, the slowdown is likely to spread to the United Kingdom and Western
    Europe, but only slowly. Again, the impact is likely to be more apparent in H2. The full impact of slower growth in
    North America and Western Europe on China’s growth rate will only be evident later in the year. If China’s exportoriented
    economy started to slow in response, it would curb the appetite for raw materials and probably lower commodity
    prices and inflation rates worldwide.

    Bottom line: The global economy looks set to enter a period of stagflation throughout H1 2008 and extending into H2. Central banks
    seem set to accommodate rather than push back against commodity-driven inflation. The Fed’s inaction, in particular, will also produce a
    further devaluation in the USD, which will add to upward pressure on prices. An environment characterised by stagflation and a
    weakening dollar is highly favourable to further increases in commodity costs. Investors will continue to favour commodities as an asset
    class rather than inflation-hit bonds. Commodity prices are already pushing higher across the board and look set to establish new peaks
    during the next few months. But the backdrop is likely to change in H2. If the slowdown spreads from the United States to Western
    Europe and China, commodity demand and hence prices and inflation will moderate. If not, the continued surge in prices and inflation
    must eventually draw a response, crucially from China. One way or another, the global economy has hit the limits (and gone beyond) its
    capacity for non-inflationary growth. Global growth (and commodity demand) will have to slow in the next six months if inflation is not
    to rise to levels last seen in the 1970s (undoing 25 years of progress).

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