PM End of Week Market Commentary - 7/27/2013

davefairtex
By davefairtex on Sat, Jul 27, 2013 - 3:30am

Gold ended the week at 1331, up 36.90 while silver closed at 19.99 up 0.58.  Week over week the gold/silver ratio declined slightly to 66.63, just fractionally down from its cycle high from last week.  During this week we saw the breakout of gold above 1300, a test of 1350 on the upside, a test of 1310 on the downside, and a close in the middle of the range just above the important 50 day moving average.  Looking at the daily chart, it appears that gold this week is resting right above its 50 day moving average, while the 20 day EMA is moving up for a cross of the 50 MA possibly next week, which would be another bullish sign.  The amber line below represents resistance - the bunch of dip-buying longs that bought around April 15th, or May 20th, and perhaps June 20th, and are now looking to sell "when they get back to even."

Three things can happen at resistance.  Price can plow through it - that's very strong.  It indicates the pressure from buyers completely absorbs all the selling, and then some.  Price can bounce off it, and consolidate.  That's what happened two weeks ago, prior to the move through 1300, and that's what is happening now now.  Or, price can hit resistance, bounce off it, and start back down lower.  That's what happened all the way down from 1800, and is typical behavior in a downtrend.  This is because shorts use resistance as a point of entry for new short positions.  However, shorts also place their stops above the resistance line; if resistance can be broken, there is usually a big short covering move immediately afterwards as the shorts flee and buy-to-cover.

How the market behaves when it hits resistance is an important clue to us tea-leaf readers.  Had the market hit 1350, then immediately and steadily moved down back down to 1300, perhaps closing the week at a low, that would have been a bad sign, indicating the shorts are outnumbering the longs.  But as we can see from the chart, that's not what happened.

Watching the market intraday can also give us hints too - little vignettes that play out - which give us clues as to the balance of (futures) supply & demand.  Friday there  was a relatively high volume move down starting around 10:45 as selling drove the price from 1327 down to 1312 in less than 10 minutes.  However, after that move, gold steadily rallied over the course of the day, closing substantially higher than the initial point of the move down.  This sort of move - a reversal especially one that reverses back above its initial point of departure - is always a very bullish sign for me.  Shorts tried hard to pound the market down, were unable to get past support at (around) 1310, and then buying + covering drove the market up past the initial point of departure.  If you're short, that's gotta tell you something.  Perhaps traders did not want to be short going into the weekend.  Maybe the ambush conducted by the longs at 0714 last Monday in Japan had something to do with that thinking.  Maybe and perhaps - that stuff is all just guesswork and story-telling, but that bullish response was real, and can't be denied.

My Philosophy: trade what you see, not what you think

Which brings me to philosophy.  I'm really two different people in one body.  With my long term perspective, I make decisions based on 5-20 year timeframes - I believe that an eventual inflationary outcome is most likely [although after a debt bubble pop, there could be severe deflation along the way], Peak Everything resource limits, exponential population growth, it all points to some pretty clear outcomes.  These are the fundamental forces that I believe will be acting on the world over the very long term, and as a result they drive my long term decision making - where I live, what sort of skills I want to acquire, what core positions I want to hold in PM, being out of debt, and so on.  Life-direction sort of stuff.  In the 5-20 year timeframe, I'm probably aligned with most everyone here.

However.  Understanding the markets is a completely different thing.  Here is where my alternate personality makes its appearance.  While lots of different factors go into my thinking about directional bias, I try and keep my market reads driven by what I observe inside the marketplace, which is all about trends and price/volume data.  Its a particular sort of trading philosophy that a friend of mine describes as "trade what you see, not what you think."  Looking at it from the outside, it is a bizarre state of mind to be in, and I now realize that a lot of people might not understand it.  But the impact is, over the shorter term (i.e. less than the 5-20 year perspective) I try hard not to let "other stuff" interfere with this mindset, including my own long term outlook!  And since I can be outspoken on trading matters, and since I didn't provide enough context, this has understandably confused some people who from their perspective quite rightly imagined I was a shill for the bankers, or a troll, or ... some other unpleasant creature.

Why do I split my personality like this?  Well - because it works.  In order for me to read the market successfully, I have to detach from my own ego and expectations for the future and tune in to what the (futures) market is saying.  Today, the market was saying to me, "I'm a bit nervous about being short going into the weekend."  And, "gold at 1310 seems like a good deal."  So that's what I write.  If I'd read something different, such as "boy am I looking forward to breaking 1300 support" I'd have written that, regardless of my 5-20 year focus, the premiums in Shanghai, COMEX registered gold inventory, the leakage rate of gold from GLD, backwardation, etc.

Here's something we've likely all experienced in life.  Have you ever been SURE that your keys aren't in the room; so you search and search, you don't find them (of course - they aren't there) but and at long last you do and they were right there in plain sight!  How could you miss them?  Our minds and egos are extremely powerful.  If we tell our eyes something doesn't exist, we won't see it!  This is just how we're built.  Our perceptions, senses, and even our bodies take orders from our ego and our mind, not vice versa.

The market is the sum total of all the participants ideas about direction.  In order to "read" this market successfully, I have to get out of my own ego and belief system about where I think things should go and adopt a posture of neutrality.  Its a form of ego-less observation.  I actually anthropomorphise a bit - "the market" wants to do this, or that.  I believe the market does have a consciousness, because it is an amalgam formed by all the participants - those manipulators included.  They buy and sell just like everyone else; perhaps for different reasons, but their effect on the market can be read, and I find I can do this much more effectively when I release my ego (and anger, and/or resentment) and just observe.  I'm not the only one who does this, its pretty standard fare for most traders.  They may rage and yell about their opinions Santelli-style, but if they want to survive in the markets, they never let that emotion or worldview affect their read.  Dan Norcini is one such guy - although he's pretty genteel, he definitely has strong opinions on where he thinks things should go.  However he never lets that interfere with his read on the market.

Of course fundamental things do affect into the market, because they affect the participants mindsets.  Perhaps the fears about a gold supply shortage caused those futures buyers to jump on gold at 1310 on Friday morning.  Its quite possible.  But I try not to let my opinion on the gold supply shortage interfere with my reading of the market.  When it comes to a contest between my opinion and the market consciousness, the market wins, every single time.  It's a lot bigger than me!  So I let it win.  I don't try and impose my will on the market; I let it have its own free will.  It might be wrong over the long term (boy, how often have we seen THAT happen?) but when it comes to reading it, I need to let it have its own free will.

The current equity market is a great case in point.  My mind, my ego is screaming at me "the market is going down, it HAS to go down!"  But then I let that go, and read what the market consciousness is saying.  Like a child or a friend, I grant it the right to have its own way, I give it space to speak.  Then I listen.  And I hear, "I just don't want to go down.  In fact, I see every move down, even small ones, as stuff going on sale!"  This may change tomorrow and if it does, I will see the signs and jump right on in there, but that is what it is saying today.

So for you guys it may be confusing, this split personality of mine, especially here where the focus tends to be on the megatrends and the 5-20 year timeframes.  So going forward I need to do a better job explaining this perspective/personality split.  You can help me too, by asking me to clarify.  One really good example of this was the question about "long term."  From one standoint, my answer could have been seen as Clintonesque - "it depends on what the definition of is, is."  But there was no intent to temporize or deceive on my part, I was writing with my futures-market perspective/personality.  And there, long term is defined (more or less) by the 200 day moving average.

If you prefer to only focus on the 5-20 year timeframe, that's perfectly reasonable.  You have more important stuff to do, and the monthly (or yearly) movement of the markets will not affect your thinking.  They don't affect mine - at least not for my long term planning anyway.  Except maybe the bits about severe deflation; that's a strong enough force that I pay attention when it starts to appear.

But if you want to be able to understand market consciousness in the shorter term timeframe, then you will likely find it beneficial to be able to see and understand the market trends, so you can see the shorter term moves (which can be gut wrenching for some) forming and perhaps either take action either hedging, modifying your investment portfolios, or buying more PM once you think the a move down has reduced velocity and perhaps started moving back up again.

All right, enough philosophy!

Going Forward:

Trends: [based on slopes of the 20 EMA, 50 MA, 200 MA]

Gold: short term UP, medium term DOWN-but-flattening, long term DOWN

Silver: short term UP, medium term DOWN, long term DOWN

If-Then Outcomes:

1) 40% - gold breaks up out of its 1310-1350 trading range, IF dollar neutral-to-down

2) 30% - gold trades within its range, IF dollar neutral

3) 30% - gold breaks 1300 on the downside, IF dollar up

Independent of dollar moves, my sense based on futures market observation is the bias is up.  However, the dollar's moves will likely affect what happens to gold, if the moves are significant.  A neutral-to-falling dollar likely results in a breakout above 1350.  A strongly rising dollar brings with it a probable test of 1300, and a possible breakdown.  This is based on market observations over this past week.

The buck has been in a large modestly uptrending range bounded by 80.5 on the low end and 85 on the high end.  While the short term trend (20 EMA) is down, the longer term trend (200 MA) is up.  This mixed message can be seen in the USD chart - longer term we have a series of higher lows and higher highs over the past six months while over the past month the buck has gone from 85 to 81.79.  A short term trend down, but acting within a range defined by a long term trend up.  And since the buck is getting to the lower end of the trading range, the risk of a move back up again is real.

13 Comments

Grover's picture
Grover
Status: Platinum Member (Offline)
Joined: Feb 16 2011
Posts: 878
Waiting for Godot

Dave,

Thanks for explaining your split personality with regards to your strategy versus your long term views. I suspected that was the case. I don't know anyone who can make rational decisions when emotions run rampant. It makes sense to divorce yourself from emotions if you're looking for profit potential.

I generally share your long term perspective. For those who don't already have a core position in PMs established, it is probably best to wade in gradually, get accustomed to the water temperature, and then wade a little deeper. For those with a core position established, it doesn't matter as much if the price goes up or down a few percent before pulling the trigger to get some more. Of course, we'd all like to buy low and sell high. The question boils down to buy now or wait.

I'm susceptible to listening to stories. I know this about myself. I listen to the stories and try to observe them from other positions. The market is basically driven by the big boyz who look at the stories, TA, and who knows what else. If they see a way to make a quick low risk profit, they will. For now, it seems that gold is an anti-dollar trade. As you noted, the dollar is near a resistance point. If worries about the US debt ceiling gain traction, the dollar could plunge below. If something happens in Japan or Europe to weaken those currencies, the dollar will likely rebound. Unless tension escalate dramatically in the Middle East, gold will likely go the opposite direction.

This paragraph that you wrote was the most informative to me. The interpretation of moves from a rational viewpoint adds context. I understand it is just speculation, but the story resonates on several levels.

Watching the market intraday can also give us hints too - little vignettes that play out - which give us clues as to the balance of (futures) supply & demand.  Friday there  was a relatively high volume move down starting around 10:45 as selling drove the price from 1327 down to 1312 in less than 10 minutes.  However, after that move, gold steadily rallied over the course of the day, closing substantially higher than the initial point of the move down.  This sort of move - a reversal especially one that reverses back above its initial point of departure - is always a very bullish sign for me.  Shorts tried hard to pound the market down, were unable to get past support at (around) 1310, and then buying + covering drove the market up past the initial point of departure.  If you're short, that's gotta tell you something.  Perhaps traders did not want to be short going into the weekend.  Maybe the ambush conducted by the longs at 0714 last Monday in Japan had something to do with that thinking.  Maybe and perhaps - that stuff is all just guesswork and story-telling, but that bullish response was real, and can't be denied.

I saw a graph years ago that showed monthly changes in gold prices averaged over many years. Based on that graph, June and August are the best time to buy. The Indian wedding season buying starts in September, so demand generally increases then (as do prices.) July usually has a small bounce. Once August arrives, the worry about Comex running out of inventory will be suppressed for another month. With the dollar at the bottom of its recent channel, it will likely rebound somewhat. With gold at a major resistance lever, it will be difficult to power through.

I'm keeping my powder dry for now. My gut tells me there is going to be another takedown. I've been wrong before, but I can live with the outcome either way.

Grover

KennethPollinger's picture
KennethPollinger
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Many thanks, again, to Dave

Wonderful explanation of your philosophy.  It certainly helped me gain much clarity and will

influence my decision-making process.  Not being a trader, I find all this fascinatingly educational

which is one of the main purposes of PP. Are you thinking of establishing some sort of

"financial service organization," or do you have one already.  I was recently emailed a lot

of VisualCapitalist.com graphic presentations on junior miners.  The approach seems enlighterning.

Check this out.  Any comments?

 

 
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Rob P's picture
Rob P
Status: Bronze Member (Offline)
Joined: Oct 8 2008
Posts: 85
Dave thanks

Dave, thank you,  I generally agree with your stance. I have come to similar views over the years.  These are very tough times for deciding what to do with mony. 

I think that people who disagree with you simply want confirmation of their biases - biases which are likely to cost them a lot of money.  Everyone needs to learn to consider multiple divergent views when investing; eventually taking responsibility for coming to their own conclusions.  

I really appreciate your work.  I consider it as one more, important input to my decision making.  Keep up the good work.   I view it as one of the things I get for my money with this site.

Bob

Rob P's picture
Rob P
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Posts: 85
Dry powder

Also, I have some "dry powder".  I would be happy to see another take down in August to 1180  - especially if it then bounced off of that level.  I love getting more shares or (or for some, more ounces) for the same amount of money.    Right now, I'm sufficiently hedged and waiting for another bounce off of the bottom (or deeper  drop) OR a confimation that we're decidedly moving up again before I commit more money.

But I do (try to)  take all of that low physical inventory talk into my decisions too.  There are two problems with it. One: Who can tell the factual truth from intrepretation and opinion? - Jeez, is it hard to sort that one out, and Two: assuming there is a significant  degree of truth in it (I think likely), who can guess the timing of any effects?  I have said many times: seemingly impossible things can keep going for a lot longer than you think.  These systems are simply too complex, there are too many unkown variables, to guessthe  timing of the these sorts of things.

So, we're left with technical analysis.  I take it with a grain of salt, but I do take it seriously, at least for now.

My gut feeling - for whatever that's worth -  is that this fall is going to be a lot of fun.

Again, I greatly  appreciate your take on things.

davefairtex's picture
davefairtex
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Posts: 5683
shanghai premiums predict bounces in COMEX Gold

@Rob -

I did some work over the weekend trying to quantify the Shanghai premium thing.  My data is a little suspect, because I have to do a lot of conversion to compare apples and apples.  Shanghai's daily data is listed as "CNY per 1 gram of gold" (now 266.53) and I have to compare that to "1 troy ounce in USD".  The SGE has closing prices as of 1530 CST - or 0330 EST; that means I had to get the price of COMEX gold every day at exactly 0330 EST which was...not so easy.  What's more, I need to have FX rates for CNY/USD in order to conver to USD per troy ounce.  But I don't have intraday data for CNY, all I have is daily data (closing time...unknown), which could be off by - well at least 1% worst case, which is pretty significant.

http://www.sge.sh/publish/sgeen/sge_price/sge_price_daily/10243.htm

Equation:  USD premium = CNY:USD * SGE.Au(T+D) * 31.1034768 - [email protected]

I'd track this daily, but the limited infrastructure I have means this is a pain in the butt.  I do wonder if the other sources I've seen for "Shanghai gold premiums" took the trouble to find the COMEX prices at 0330 EST each day - this is not something that's readily available unless you have minute-by-minute COMEX prices.

Roughly, it appears that Shanghai premiums grow every time there's a dip in gold, and they shrink - and sometimes go negative - whenever there is a bounce.  In other words - Chinese people treat drops in COMEX prices as a sale, and they back up the truck.  But the premiums fade as the price recovers.  As a "market guy" this makes sense to me.

If one wants to stop "the flow of gold from west to east" - price of gold goes up and the problem is solved.  Heck, sometimes the premium goes negative, and gold flows the other way.

Another way to look at it is, Shanghai premiums look good as an indicator of at least a temporary bottom in the price of gold.  No doubt the negative GOFO rates coincide.  That's not to say they're a guarantee of a change in trend but at a minimum they seem to indicate a bounce, which is in fact what we've seen.

That's better than a poke in the eye with a sharp stick.  :-)

Last note: this is "new code I just wrote" so if anyone has a similar chart supplied by someone else, it would be awesome to check my results and see how they compare.

 

Jim H's picture
Jim H
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Trading on Price signals vs. the manipulation construct

DaveF said,

However.  Understanding the markets is a completely different thing.  Here is where my alternate personality makes its appearance.  While lots of different factors go into my thinking about directional bias, I try and keep my market reads driven by what I observe inside the marketplace, which is all about trends and price/volume data.  Its a particular sort of trading philosophy that a friend of mine describes as "trade what you see, not what you think."

So I see price, but I see many other things happening as well.  The manipulation construct is another lens. Understanding how manipulation works does not mean you are trading on emotion.   I see other central banks continuing to buy Gold.  I see the dollar continuing to lose reserve status by 1000 Yuan-swap cuts, I see a Comex futures market where the short position has been distributed over to the managed money/hedge fund community, which is primarily driven by momentum - and as Alasdair Macleod says in the following piece, "everybody has sold, and there is nobody left to sell contracts".  Hedge funds in general have no idea what truly drives the Gold market.  When we put lots of pieces of information together, we start to see in this collage the fingerprints of the manipulation, and the disconnect that has been building between supply and demand.    

http://jessescrossroadscafe.blogspot.com/2013/07/macleod-bank-of-england...

I think that you have to ask yourself this;  If and when something finally breaks, and there is a + $100 day in Gold.. will I have the balls to buy in at that point, or will I be frozen out waiting for the next dip to $1180?    

 

Rob P's picture
Rob P
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Posts: 85
wow, that is sooo interesting

You went through a lot to try to get to the facts of it and it sounds like you still have some reservations about it.  That took serious work. This is what I mean.  It seems like people act like they have "the facts", but it actually takes this kind of digging to just get to square one.

When you say it might be taken as an " indicator" of "at least a temporary bottom in price", it looks like we're likely moving back to a convergence on your chart (ie. zero premium or there abouts) which would likely involve the price holding  - or going up.  I assume this is how you see it.

It is interesting that there is some sort of upper price  threshold, above which, the S premiums actually appear to turn negative.  This means that someone in the east is taking the spread.  I wonder about the volume, how much actually changes hands at that point. Do you think much physical actually moves back west.

 

 

davefairtex's picture
davefairtex
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Posts: 5683
shanghai premiums

RobP -

It was a lot of work - a couple of days of screen scraping hell.  No doubt the big firms did it using an intern, a big excel spreadsheet, and bloomberg probably provides them with closing prices for the exchange.  I do wonder if the intern used the 0330 EST COMEX intraday price or the COMEX close at 1714 EST.  To do this properly, I really need intraday data (and that 0330 price) on USD:CNY over the last 3 years but I don't have it.  I think the possible distortion is limited - perhaps by at most $4-$5 at the outside.  And it likely wouldn't be a consistent distortion.  China keeps USD:CNY pretty well controlled.

I agree with you about people who seem to "have the facts."  About 20-30% of the time when I really dig down, I find someone has a serious misunderstanding and/or just plain wrong data.

For example, Harvey Organ on his page always quotes the CEF website for his "discount to NAV" which is sometimes wildly wrong on days with big moves in gold or silver.  CEF website uses the "London Gold PM FIX" for its gold prices and "London Silver fix" for its silver price, while it uses the closing NY price for its quote for CEF.  (London PM Gold Fix: 1530 GMT, London Silver Fix 1200 GMT, CEF close: 1600 EST).  With price samples taken at three different times of the day, it's an apple, an orange, and a banana - added together, multiply by the number of ounces of gold & silver, and you end up with fruit salad, but not a valid closing NAV premium/discount calculation.  If you trade using this bad information, you may well lose money.  And this is the official CEF website!

But I digress.

Based on that chart we seem to be heading back to convergence.  Higher prices restrain demand - which seems to make sense.

Now, do I believe gold really flows from east to west with Shanghai Discounts?  That was one of those throw-away comments.  I mean, how am I to know these things?  Its way above my pay grade!  But it does make sense.  If gold flows in with premiums, it should also flow out with discounts.  I must confess, when I hear people on KWN talk about how gold is flowing from west to east "and never coming back" it just smacks of propaganda.

At the end though, I agree with you.  Really interesting, especially seeing where we are today.  It suggests to me that if we break through 1350, then we (quite possibly) don't get any more lift out of Shanghai.

I'd still like confirmation from someone else's chart though to be sure!

davefairtex's picture
davefairtex
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Posts: 5683
views on manipulation often are emotional

Jim -

I totally agree, people can have views about manipulation they see, and as long as they don't let that affect their ability to read the markets, then its not a problem.  I have my own views, and I'm firmly convinced I've seen manipulation if not daily, then at least many times per week.

However most postings I read about gold price manipulation have a very strong emotional content to them - and if a normal reader were to read that, they might become emotional too, and that directly affects their decisionmaking.

My read of the standard goldbug attitude towards manipulation is that there is a huge amount of negative emotion attached - resentment, anger, frustration.  Just listen to most of the guests on King World News.  Can these guys successfully read the market?  Every time gold goes down, Eric King starts out saying, "what do you think about the BIG SMASH in gold today?"  And he sure sounds pissed.

If these guys are traders, they are able to split their public persona away from their "let's make money" practical side.  But likely, they do that in private.  But if your or I try and trade using their public emotional persona, trading with anger, resentment, and frustration, we will almost surely lose money.

My other issue is with a sub-group of goldbugs that suggests the Fed/JPM have complete control over the gold market.   [I'm NOT saying you are a member of this group]  My objection is based on logic.  If we assume the Fed hates gold, and thus the Fed doesn't want gold to rise, and most importantly the Fed has complete control over the gold market - then gold should be at $300, not $1330.  Some people think the first three are true, but they don't go the next step and ask the question "how can gold possibly ever go up then?"  I'd say a fourbagger over 12 years is a terrible job at controlling the gold price.  If anything, it would show pretty conclusively that the Fed has no control over the price of gold.  Gold has outperformed SP500 by, what, 350% at least?  Gold: big winner, Fed: big loser.

I think the Fed and their mouthpieces try to talk it down whenever possible because they don't have control, and they know that if the genie ever gets out of the bottle, they have no hope of stopping it.

Now the rest of the stuff you talk about, I largely agree, it will likely provide an upward pressure to the gold price as long as it remains in place.  That upward pressure will show up in price/volume data.  But the buyers of gold do not want to move the market - so it will be a gentle upward pressure, most likely.  Perhaps its the reason I'm reading an upward bias to gold right now.

Could gold pop $100 in a day?  You bet it could.  More, even, if a black swan were to hit.  Its important to have a core position for that reason, I believe.

But Pearl Harbor doesn't happen every day.  Most days are normal.  Resistance gets broken - like the $40 pop like we had going through $1300.  Breakouts or breakdowns happen.  No black swans strike, 999 days out of 1000.  That core position is for day 1 out of 1000.  The rest of the time - follow the patterns, big gains and stopped out losses.  And less emotion is better.  My opinion.

Even the 2008 crash unfolded slowly over 16 months.  Things usually happen day by day.  Not always - and that's why you have the core position - but usually.

And for our friends here that are waiting for a retest of the lows before we take off - if the dollar goes to 85, I suspect their patience will be rewarded.  A difference of opinion among intelligent people - to be respected.  After all, it's what makes a market.

Grover's picture
Grover
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When to pull the trigger
Jim H wrote:

I think that you have to ask yourself this;  If and when something finally breaks, and there is a + $100 day in Gold.. will I have the balls to buy in at that point, or will I be frozen out waiting for the next dip to $1180?

Jim,

That is a good question and one that shouldn't be taken lightly. If I were looking to establish a core position, your question would have more gravity. It is quite unnerving to watch prices relentlessly march higher and higher. Since no one knows the future, it is all speculation as to when and how deeply to pounce. The last time I bought physical was at 1680 (just before the election. You can see a little dip on the chart Dave posted.) Those ounces haven't changed a bit - same weight, same character.

I'm not angry that I paid about 500 more per oz than I could have ... if I only waited (and had known that June 28th would have been the "right" price.) At the time, it seemed like the best option and I pounced. For me, the question is: "Am I going to kick myself harder for jumping too soon (in a downtrending price channel) or waiting too long (and trying to catch a ride on a rocketship)?"

The fundamentals really haven't changed much since gold reached its peak. Nothing dramatic has changed to support the price drops this year. Is it just temporary manipulation by the big boyz? If so, they've been rewarded handsomely. What's their next move? I'm convinced that we can't know what the inner club will do ahead of time. Quite literally, your guess is as good (or as bad) as mine.

We've all seen outlandish predictions for gold prices in the future. The actual price may exceed the highest current estimate. If it gets to $3000, will you sell? What if it goes substantially higher ... will you kick yourself? What if it only reaches $2950 before it drops $100 per day ... will you be able to sell into a cliffdiving market? These are tough questions. How do you know when to pull the trigger when the market is so unpredictable?

For me, it is easy. I have a specific goal in mind. When I can trade my PMs to attain said goal, it is done. After that, I don't care what the price does. If the price never gets to that point, it will still be a goal. The more PM I get, the lower the ultimate price has to be before I trade. This approach sure takes a lot of stress out of the day-to-day price movements.

Grover
 

Rob P's picture
Rob P
Status: Bronze Member (Offline)
Joined: Oct 8 2008
Posts: 85
Dave - a question

Apart from your data digging efforts (greatly appreciated), when you say something like there is a  40% chance that we'll see X happen.  Do you mean the following:

Whenever the present  conditions or configuration occurs (price action relative to moving averages, patterns, or whatever else you're using), the price will do X,  4 out of 10 times?   Is it that precise, or something like that, in your mind?

 

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5683
a 40% chance?

RobP-

Don't pay too much attention to my numbers.  They're just my attempt to quantify my sense at that moment what the balance of forces feel like overall - with a timeframe of a week or two going forward.  I should probably stick to saying things like "my sense is the bias is up."  I listened to an interview of Jim Rickards over the weekend who suggested that assigning a % chance approach was wrong-headed, because only one of the outcomes will end up having a 100% chance of happening and that instead what we should do is look for signposts along the way.

I'm still a believer in the if-then approach though.

 

Rob P's picture
Rob P
Status: Bronze Member (Offline)
Joined: Oct 8 2008
Posts: 85
right

Right, I have a hard time listening to the weather forcasts because I always wonder just exactly what they hell they mean by that.  I over think things I guess.  They used to call me "dogbert" because of that dilbert cartoon; there was one in which the dog claimed he could "quantify anything".  But I still don't know what those weather reporters mean by that. 

I thought it was just a way of stating your impression which is fine as long as I understand that.

But you know, maybe that way I said it could be an approach to developing a certain sort  algorithm?

Hey, I'm an if/then guy too - as long as it's not

"IF I feel really scared/greedy/freaked-out (choose one)  THEN    I'll buy/sell (choose one)  X at any price I can get"      Ha     :)

 

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