Tuesday, August 9, 2011

Meanwhile, back on the financial markets….

Traders target $2,500 high for bullion

Gold touched a new nominal record of $1,716.19 a troy ounce on Monday [currently $1,770!] in the wake of the downgrade of the US government's credit rating by Standard & Poor's over the weekend. But strategists were already looking to the next milestone. JPMorgan encapsulated the bullish sentiment in the gold market, predicting that bullion could hit $2,500 by the end of the year. That would surpass gold's inflation-adjusted high, touched in 1980, which translates to just under $2,500 in today’s money. "Before the downgrade, our view was that cash gold could average $1,800 per ounce by year end," said Colin Fenton, JPMorgan's head of commodities research, in a note to clients. "This view will likely now prove to be too conservative: spot gold could drive to $2,500 per ounce or higher."

Posted by drewster @ 10:31 AM (2065 views)
Please complete the required fields.



23 thoughts on “Meanwhile, back on the financial markets….

  • “I didn’t buy any gold because ———- convinced me not to. Now I am sitting on top of a load of worthless paper – well I suppose I can burn it to keep warm, or use it as toilet paper….”

    Reply
    Please complete the required fields.



  • hi Hpw… well wanted to acknowledge being wrong on 1675 -well sort of wrng it was a after all. Glad Drewster has given me the opportunity, anyway as i said the markets are going to continue to be volatile. A while back i noted that i wouldnt be surprised if we had some spike ups to end the move. This is all very classic looking blow off action to be honest.

    How volatile? Well i think a range of 90 S&P points in a day is volatile enough thanks. Was a bit busy yesterday and exhausted by the end of it as you can probably imagine. Expecting a move back up from 1100 ish but to be honest how long and how big that move is, is the $64 trillion question.

    http://2.bp.blogspot.com/-vTCZRSXlaoI/Tjs8fy_ClDI/AAAAAAAAJpE/qjzA0P4OesE/s1600/golld.png

    I have often banged on about FTSE and House Price correlation. Lets see …

    Reply
    Please complete the required fields.



  • hi Hpw… well wanted to acknowledge being wrong on 1675 -well sort of wrng it was a after all. Glad Drewster has given me the opportunity, anyway as i said the markets are going to continue to be volatile. A while back i noted that i wouldnt be surprised if we had some spike ups to end the move. This is all very classic looking blow off action to be honest.

    The rise isn’t anything desirable at all – it’s looks like it’s overheating….but we shall see.

    Reply
    Please complete the required fields.



  • I’d agree, it does feel like we’re moving towards a blow-off. Where are we on the famous bubble chart? I’d say we’ve just left Enthusiasm and are now entering Greed. No signs of Delusion yet.

    Reply
    Please complete the required fields.



  • “well wanted to acknowledge being wrong on 1675 -well sort of wrng it was a after all” should have said “sort of wrong was a target for a long position after all”…. Obviously took the wrong day off :). If we see a couple of 50+ $ moves then it would look iffy. Drewster – see teh link chart i posted – it bears some resemblance to the “classic” but where we are on it EXACTLY god only knows.

    Reply
    Please complete the required fields.



  • general congreve says:

    I don’t think this is the final moonshot stage (more on that in a moment), I think it will spike up and correct back a bit sooner or later, perhaps to around the 1700 mark. That said, you never know, all bets are off. If the Feds charge in with QE3 and they way the markets are – it’s odds on they will in fairly short order – then the immediate response to that is an unknown quantity. Personally, I think that it may calm markets for a while, but I think the effect will be short lived as it causes commodity prices to spike and inflation picks up pace, making it pretty obvious that QE is not the magic answer to anything.

    As for the blow off top in gold. What are people going to exchange their gold CURRENCY (that’s the important bit) for? Swiss Francs? The Swiss Franc is holding pretty steady against gold because a lot of investors are piling into it. However, the Swiss government is doing its utmost to devalue the Swiss Franc, because it if appreciates then Swiss exporters get hit hard and more importantly Swiss Banks will be in big trouble, as huge number of people in Eastern Europe with Swiss Franc denominated mortgages start defaulting on their payments.

    I suppose the Norwegian Krone looks good too, but just like Switzerland there is no way a tiny country like Norway could absorb the capital inflows from collapsing markets and currencies, they would be forced to devalue too.

    Please bear in mind that the dollar ascended to great heights and then stayed there for over a century thus far, it didn’t have a blow off top, just a slow drawn out death at the hands of the money masters. This is not housing, this is not stock markets and this is not a bonds we are dealing with, it is currency, in its purest noblest form. There will be no blow off top, you heard it here first.

    To get an idea of what I mean this graphic might be helpful.

    Image and video hosting by TinyPic

    Reply
    Please complete the required fields.



  • gc,
    I largely agree with you. Trouble is, gold has no underlying value. It’s a poor medium of exchange. You can’t even use it to pay your taxes, which is the one thing cash can always be used for. So I firmly believe that gold is in a bubble, one which will inevitably pop. As usual it’s all about the timing. That said, when it does crash the bottom will be higher than the previous bottom.

    Reply
    Please complete the required fields.



  • “As for the blow off top in gold. What are people going to exchange their gold CURRENCY (that’s the important bit) for? Swiss Francs?” Nope Swissy is overbought. Long term (after a bit more downside probably) emphasis on a bit – and as dumb as it may sound – its the greenback.

    Reply
    Please complete the required fields.



  • general congreve says:

    @7 – You can’t use illegal drugs to pay taxes either, but I hear they’re doing a roaring trade. Besides, I can’t pay taxes in the the UK in dollars either, but I can change dollars for pounds and pay my taxes. You couldn’t pay taxes in dollars in Zimbabwe when their troubles kicked off, but I didn’t see anyone refusing to accept dollars for payment in the shops when I was working there, in fact it was much preferred. Not being able to pay taxes in a certain currency does not make it any less attractive or lower its demand if the local currency is badly managed and therefore doesn’t hold value (one of the key functions of sound money).

    @8 – The dollar? Where is this strength going to come from? I have yet to see the slightest move from the US government towards making the harsh moves necessary to shore up their currency. And the longer they leave it, the more difficult it becomes to turn the ship around from it’s rendezvous with the edge of the world.

    Reply
    Please complete the required fields.



  • general congreve says:

    @7 – Also, as for poor medium of exchange, I admit, paying for stuff with gold coins is a bit old hat. So old hat in fact that centuries ago it became the norm to let a goldsmith or bank hold your gold in his vault for a small fee for which he would issue a certificate – later becoming the notes we are familiar with today – that could be used to trade for things and be redeemed for the gold by whoever ended up holding the note when they wanted. Such a system still functions today and is electronic too, it’s just that the gold backing and exchangeability of paper/digits for gold has gone. It can easily be reintroduced as we still have paper, computers and vaults. Of course there will be some wealth dislocation when this happens, but that is scheduled anyway, so there’s little to lose in the process.

    I mean, what is more outlandish to your mind? Money backed by a real tangible asset or money backed by the vague promises of nefarious politicians and bankers?

    Reply
    Please complete the required fields.



  • For every ounce of gold bought, there’s an ounce of gold being sold, and you have to ask yourself – ‘who’s the mug – the buyer or the vendor?’

    The history of gold bull runs tells us that when they end, they do so brutally, with a multitude suddenly trying to sell, only to find that the dealers have left the phone off the hook until the market settles..

    ..so anyone playing the market needs to make a decision, and set their sell point. If you wait until the market has peaked, you may well be unable to find a buyer until the price has collapsed.

    Reply
    Please complete the required fields.



  • general congreve says:

    @12 – Did you read @6?

    If I could see a way out of the current woes the dollar faces, or another viable stable fiat currency rising up to steal its crown, then I would be in wholehearted agreement. But I do not. Do not make the mistake of thinking of money in terms of pounds and pence or dollars and cents, just because recent history has shown that to be the case. Money is ultimately what the market decrees based on the fundamentals.

    Reply
    Please complete the required fields.



  • GC,

    There is a perfectly rational and likely way out of the current crisis, which is that Japan, the US, the UK, the eurozone, and probably India and Russia as well; will all print their debts to oblivion, with perhaps 300-600% of cumulative inflation over the next 20 years.

    As they do, interest rates will rocket, but that may be mitigated by rounds of consumer debt forgiveness as part of the money printing exercise.

    The Chinese Yuan will almost certainly emerge as the global currency of reference, much as the US dollar emerged nearly a century ago.

    The current gold bubble will eventually burst, and the fools who came in late will lose a lot of money.

    Ideas of a return to a gold standard, or that the gold price will somehow plateau high are just wild fantasy..

    Reply
    Please complete the required fields.



  • Consumer debt forgiveness? No way. Money printing is so much easier. Voters were mildly peeved when 10,000 bankers were rescued; they’d be far more annoyed if 10,000,000 mortgage-holders were bailed out. (Although 0% interest rates in a country of variable-rate mortgages amounts to largely the same thing.)

    China doesn’t want the Yuan to become the global reserve currency. Instead we’re likely to see a multi-polar world with multiple reserve currencies, including the Euro, the Dollar, and possibly the Yuan.

    Gold might just play a role as reserve currency too. If so, we could certainly see GC’s orbital plateau. That’s not the same as having a fully-fledged gold standard; just that it might come to be accepted as a reserve currency alongside others. Ironically for that to happen, gold would need to stabilise first – right now it’s far too volatile.

    Reply
    Please complete the required fields.



  • general congreve says:

    @14 – You cannot have that level of inflation without negative real interest rates, so while interest rates will rise with the inflation, the inflation rate will always stay out ahead until they stop printing money like there’s no tomorrow. The fact you believe they will go for 300%-600% inflation is reason enough for anyone not to hold these joke currencies as a savings vehicle, hence the reason gold will continue to rise in value.

    As for debt forgiveness, all that does is leave previously loaned money in the system and allow the debt forgiven to borrow more, this would also be inflationary.

    I have no need of, or desire for, a gold standard. Such a standard would be dictated by the powers that be and cheated on from the get go, i.e. they’ll print more money against the gold, just like happened last time. A de facto gold standard based on the freely traded price of gold would be the ideal.

    Reply
    Please complete the required fields.



  • “You cannot have that level of inflation without negative real interest rates”

    Why not? It’s happened before..

    300-600% compound inflation over 20 years equates to inflation averaging beween 5.7% & 9,4 % p.a. – so get used to the idea of paying 10% p.a. for your mortgage again.

    Debt forgiveness is new territory, but I think the mood is there for someone to give it a go – essentially a one off hit, and certainly not a rolling event; but a tool for knocking back negative equity and averting wholesale debt defaults – maybe 5% or 10% of existing consumer debt, written down at a stroke..

    Reply
    Please complete the required fields.



  • aha the dollar where is the strength going to come from? Well the market theory is that all the information is already in the market and reflected in price. Also any market looks crap at the bottom and brilliant at the top. Gold looks great dollar looks crap – the rest can be worked out for yourself! However there are (from TA standpoint – which differs from the fundamental analysis you are intent on pursuing) limits to how much lower the greenback can go, before it does break some technical rules of the bullish potential.

    Essentially my world doesnt revolve around gold. For example i have been out of all equities – not just trading ones but ones i have held for quite some time – @ around footsie 5600.Yes i looked a bit silly with FTSE above 6k, but i was pretty sure it was the right decision and was very happy with it at the time.

    GC for you here is a video: http://www.youtube.com/peterboston#p/u/31/pbLj6rNsbEA

    hurst stuff : http://www.tradingfives.com/JMHurst/JMHurst-Cycle-Trading.htm

    Reply
    Please complete the required fields.



  • general congreve says:

    @17 – To achieve that level of inflation you need negative real rates. If interest rates are 2% above inflation, it generally quells inflation and brings it back down, so if you want inflation, and you want big inflation over a few years you need negative real rates, you can’t high inflation and higher rates for a sustained period, because that reduces the inflation, scuppering your inflationary get out of jail free plan.

    Think about it, if it was possible, right now we’d be inflating away the debt while savers were happy as pigs in sh1t getting real returns on their savings!

    Reply
    Please complete the required fields.



  • general congreve says:

    @18 – As you are only too aware techie my financial world does revolve around gold and as this week proves, it’s been a pretty good call. Anyone buying it in the last 10 years has not lost money, save anyone who bought on Monday and Tuesday who would be down a few quid due to short term volatility.

    For everyone reading I’d like to say the action in the markets this last week has been tremendously vindicating and personally satisfying, after a rather heated debate last week where I was told I was an idiot amongst other things and that I should have bought the stock market in 2009, not gold – not by your good self of course Techie.

    Your forte is trading it seems and that’s not for me, not in the short term anyway, obviously there’s a time to be in and out of certain markets, but my time frame is the medium to long term, rather than the shorter term trade like yourself and I look for the fundamentals rather than the technical indicators. Although I believe a combination of both can probably give the fullest picture if trading regularly and you have a good command of tech ananlysis. If you can make it work for you that’s great. But my view is from a wealth preservation first, wealth accumulation second perspective and the taking a longer term position in the gold market seems to fulfil that role perfectly in the current environment.

    Reply
    Please complete the required fields.



  • general congreve says:

    @20 – That should be – anyone buying and holding in the last 10 years.

    Reply
    Please complete the required fields.



  • cornishtinmine says:

    When you are buying gold – how do you know that it actually exists?

    Reply
    Please complete the required fields.



  • general congreve says:

    @22 – Because you buy physical and only physical.

    Reply
    Please complete the required fields.



  • “I firmly believe that gold is in a bubble” Incorrect! Bubbles are caused by excessive liquidity, right now less than 2% of institutional funds are in gold, the big money has not yet even bought in, no bubble yet.

    Reply
    Please complete the required fields.



Add a comment

  • Your email address is required so we can verify that the comment is genuine. It will not be posted anywhere on the site, will be stored confidentially by us and never given out to any third party.
  • Please note that any viewpoints published here as comments are user´s views and not the views of HousePriceCrash.co.uk.
  • Please adhere to the Guidelines

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes:

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>