Spot gold blows through $1,200

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  • Wed, Dec 02, 2009 - 11:31pm

    #21
    Peak Prosperity Admin

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    Re: Spot gold blows through $1,200

[quote=machinehead]

[quote=Morpheus]

It’s running too high, too early in the process. In this environment I believe a sharp correction is in order. 

I hope so. I’ll buy more of both if they do. 

[/quote]

Guy Lerner, a technical analyst whose views I respect, has just posted an essay on this subject at safehaven.com. He cites Market Vane’s sentiment survey, which shows bullish sentiment on gold at 88%. This is high, but not yet a record.

On the other hand, 52-week momentum of gold versus a basket of eight major currencies has hit a record high, indicating tremendous momentum behind the move.

http://safehaven.com/article-15183.htm

Bullish sentiment is going to boil over one of these days. It’s possible that gold will reach $1,250 first. I’ve been lightening up on gold stocks in one of my accounts, cutting them back to 75% instead of 100% weighting. If gold reaches $1,250, I’ll cut back to about 60%. But going naked with no hedge against a collapsing dollar? Too scary — couldn’t sleep at night!

[/quote]

Dow theory as you know defines three trends (range bound is not a trend): 1. uptrend, downtrend, and correction. 

Corrections are normal in a bull market. In fact, I would argue that they are stabilizing factors for enabling secular markets, be they a secular bull market or a secular bear market. 

That said, I would actually welcome a retracement at this point, and do anticipate one. And I have to strongly disagree that we are in a bubble market environment, particularly for silver. See, the industrials haven’t “freaked” yet due to investment demand. In our “just in time” inventory model, an acute silver shortage could, and WOULD, shut down production of electronics, polymers, medicinals, ect. 

When the BIG industrial players violate the inviolate axiom of “just in time” inventory to mitigate their supply chain risks, THEN we can consider stage 3, or the manic phase, as they will drive silver into the stratosphere. When that happens, the sheep’s ears will perk up, the herd will pile on, and then we’ll all be arguing over what fraction to sell off before the parabolic blowoff. 

I see things very differently that many. In the end game, I see silver blowing gold through the roof, not vice versa. Silver has both monetary and industrial pressures. And it’s rarity is way greater than 99.999% of people think it is. 

We ain’t there yet. And that’s my 2/100ths of a Federal Reserve Note. 

  • Thu, Dec 03, 2009 - 08:21am

    #22
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    Re: Spot gold blows through $1,200

 

I see things very differently that many. In the end game, I see silver blowing gold through the roof, not vice versa. Silver has both monetary and industrial pressures. And it’s rarity is way greater than 99.999% of people think it is. 

 

Yes Sir!

  • Thu, Dec 03, 2009 - 10:01am

    #23
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    Re: Spot gold blows through $1,200

http://www.telegraph.co.uk/finance/china-business/6712676/China-wary-of-gold-bubble-danger-after-quietly-doubling-its-reserves.html

China wary of gold ‘bubble’ danger after quietly doubling its reserves

The Chinese authorities have given the clearest indication to date that they view the surge in gold to an all-time high of $1,217 (£730) an ounce as a speculative frenzy.

By Ambrose Evans-Pritchard
Published: 8:22PM GMT 02 Dec 2009

Hu Xiaolian, the vice-governor of the central bank, said Beijing would not buy gold indiscriminately.

“We must keep in mind the long-term effects when considering what to use as our reserves,” she said. “We must watch out for bubbles forming on certain assets and be careful in those areas.”

China announced this year that it had quietly doubled its gold reserves to 1,054 tonnes, the world’s fifth largest holding. India has also joined the rush, gobbling up half the IMF’s gold sale.

  • Thu, Dec 03, 2009 - 01:16pm

    #24
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    Re: Spot gold blows through $1,200

The true, longest-running Bubble on this planet is the ad hoc Bretton Woods II floating currency arrangement. Under it, the U.S. dollar retains major vestiges of its obsolete ‘universal reserve currency’ role decreed under Bretton Woods I — even as the underlying U.S. economy has been hollowed out, systematically corrupted, and driven into Third World banana republic indebtedness by our reckless political authorities.

Like cartoon character Wile E. Coyote, the dollar has remained inexplicably suspended in midair above a bottomless canyon of doom for lo, these 36 years since unbacked fiat currencies were set free to chaotically float against each other.

Compared to the absurd, unbelievable dollar bubble which has prevailed for more than half our lives, gold is a rock-ribbed value investment. Unlike paper currencies, which can simply go ‘poof’ if their demented sponsoring regimes default, gold ain’t gonna disappear. Silver neither.

The Dollar is the Mother of All Bubbles. And U.S. Treasurys are probably the Godmother of All Bubbles. Everything else, you can pretty much buy blindfolded. LOL!

  • Sat, Dec 05, 2009 - 04:34pm

    #25
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    Re: Spot gold blows through $1,200

Many of the posters on this site seem like professional investors.  As a regular person trying to protect my nest egg, I am interested in gold and silver.  However, there is something that concerns me about this plan for protecting my assets.  I have a feeling that you folks have already thought this one out.  Here is my question:  Since gold is unlike other commodities in that it does’t get used up the way oil or tobacco (or even silver) do, won’t there eventually be a glut of it on the market.   It would seem that as the price and demand for gold rise, the extraction of gold would  intensify… which would lead to a glut… kinda like Beanie Babies Smile.  Which would drive down the price, no?

  • Sat, Dec 05, 2009 - 04:59pm

    #26
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    Re: Spot gold blows through $1,200

janjee

[quote]Since gold is unlike other commodities in that it does’t get used up the way oil or tobacco (or even silver) do, won’t there eventually be a glut of it on the market.[/quote]

I think that depends on the extent to which the world still views gold as real currency.  As fiat currencies worldwide lose value, more countries, institutions and people will ultimately flee to safety, i.e. gold.  At least that’s the theory.  There is a limited amount of above ground gold in the world, and production is, to my understanding, decreasing.  We are beginning to see institutions like the insurance industry add gold to their reserves, and nations, particularly China, buying gold as fast as they prudently can.  Meanwhile, in the US less than 1% of the population owns bullion.  So, with an effectively static amount of gold on the market a relatively small increase in demand from people, institutions and governments could force gold prices to increase rapidly.

OTOH, we as a world might just continue to muddle through with ever devaluing currencies and hope for the best.  It might even work, for a while, but ultimately there will be a flight to real value.  Given gold’s history, I’m guessing it will be a large part of what is deemed real value.  It just seems prudent to own some.

Doug

  • Sat, Dec 05, 2009 - 11:29pm

    #27
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    Re: Spot gold blows through $1,200

[quote=janjee]

…won’t there eventually be a glut of it on the market.   It would seem that as the price and demand for gold rise, the extraction of gold would  intensify… which would lead to a glut…

[/quote]

Like Doug said, production (mining) is not increasing right now.  Even if it did, it would be slow to ramp up. 

Another way to look at the supply and demand equation is that the population has increased at a very strong expodential rate whereas gold production has not.  When people realize they need to leave the dollar in favor of gold or silver, there will be a flood of people fighting over the small amount of gold on the market.

  • Sun, Dec 06, 2009 - 11:29am

    #28
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    Re: Spot gold blows through $1,200

[quote=janjee]

Many of the posters on this site seem like professional investors.  As a regular person trying to protect my nest egg, I am interested in gold and silver.  However, there is something that concerns me about this plan for protecting my assets.  I have a feeling that you folks have already thought this one out.  Here is my question:  Since gold is unlike other commodities in that it does’t get used up the way oil or tobacco (or even silver) do, won’t there eventually be a glut of it on the market.   It would seem that as the price and demand for gold rise, the extraction of gold would  intensify… which would lead to a glut… kinda like Beanie Babies Smile.  Which would drive down the price, no?

[/quote]

A glut is highly unlikely considering that there is far less than one ounce person per on Earth available.

  • Mon, Dec 07, 2009 - 02:10pm

    #29
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    Re: Spot gold blows through $1,200

[quote=janjee]

….. As a regular person trying to protect my nest egg, I am interested in gold and silver.  ….  It would seem that as the price and demand for gold rise, the extraction of gold would  intensify… which would lead to a glut… kinda like Beanie Babies Smile.  Which would drive down the price, no?

[/quote]

Don’t think of gold in terms of supply/demand consumption.  Its recent run up was driven by its “store of value” reputation.  A reputation that was particularly fueled by a limited perception that floating currencies, such as the dollar, won’t survive.  The reversal in price since Friday showed perception has swung the other way.  That’s because positive job growth will give the fed liscence to raise interest rates, which in turn will restore the dollar…

Trying to see out of this looking glass is why gold is regarded as a speculative, not for the faint of heart, investment.  I think its price performance generally shows that it corrects when economic recovery begins.   

  • Mon, Dec 07, 2009 - 03:25pm

    #30
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    Re: Spot gold blows through $1,200

Production will increase if the price stays in excess of $1000, but I think the production is still less than 1% of the total supply per year — even if production ramps up.  Compare that to the printing press we now use.

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