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The Definitive GOLD’s Near-Term Outlook Thread

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  • Tue, Apr 28, 2009 - 10:08am

    #1

    Erik T.

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    The Definitive GOLD’s Near-Term Outlook Thread

This thread is intended to replace a previous thread titled "Gold’s Near Future". The reason for a new thread is that the old thread had grown to more than 300 replies, and it was becoming difficult to navigate.

Please use this thread for future discussion of the price of gold and near-term speculation about where it’s headed.

Thanks,
Erik

 

  • Tue, Apr 28, 2009 - 12:53pm

    #2
    Peak Prosperity Admin

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    Re: The Definitive GOLD’s Near-Term Outlook Thread

Great idea. . . Thanks, Erik

 

  • Tue, Apr 28, 2009 - 02:29pm

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    Re: The Definitive GOLD’s Near-Term Outlook Thread

Thanks Erik, it was getting tough to get to the end and then not see which were new posts. Although I just realized you can list posts newest first which will preserve the ‘new’ tag, though you have to read from bottom to top to get it time ordered.

One downside about a new thread is it doesn’t show up in ‘My Posts’ which is handy to track threads of interest – but I guess now that I’ve posted I’ve fixed that….

  • Tue, Apr 28, 2009 - 03:27pm

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    Re: The Definitive GOLD’s Near-Term Outlook Thread

 After reading Bob Pretcher’s latest Elliottwave Theorist newsletter (I would link to it, but its a subscription service), I think I am pretty well convinced that Gold/Silver are headed down over the next few years. Though there are many, many reasons to feel that gold should rise, I’m going to have to side with the guy who called the top of the market in 2007, and who warned about the simultaneous drop in oil and commodities the same year.

Having established my "emergency" gold and silver reserves, I think I’ll wait until there is a lot more pessimism in the PM markets to buy more. This thread ought to be a good source of sentiment and practical information over the coming years.

  • Tue, Apr 28, 2009 - 05:20pm

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    Re: The Definitive GOLD’s Near-Term Outlook Thread

What happens when this thread hits over 300 posts? Do we start a "Definitive Definitive Gold Gold" thread? 

On a serious note, there seems to be something trying to drive gold down the last two days as seen here:

Yet, there is also resistance driving it steadily back up again. Anyone have any thoughts on what’s driving this?

Also, JAG said:

…I am pretty well convinced that Gold/Silver are headed down over the next few years.

With the dollar almost guaranteed to become worthless in the future, what would drive the price of PM’s down?

  • Tue, Apr 28, 2009 - 05:39pm

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    Re: The Definitive GOLD’s Near-Term Outlook Thread

So what do you guys think of the reverse H&S pattern Turk identified in the (updated) chart I posted, and his interpretation?

  • Tue, Apr 28, 2009 - 06:11pm

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    Re: The Definitive GOLD’s Near-Term Outlook Thread

Chris K: wrote: The only logical interpretation of this reverse H&S pattern is that gold represents exceptional value, as if it were at a bear market bottom. A bold interpretation would be that a 3-digit gold price will soon be an historical artifact, just like the 2-digit gold price."

JAG wrote: After reading Bob Pretcher’s latest Elliottwave Theorist newsletter (I would link to it, but its a subscription service), I think I am pretty well convinced that Gold/Silver are headed down over the next few years.

Chris K: After reading the above two comments, I don’t know what to think. Let me turn the question back to you – what do you think?

  • Tue, Apr 28, 2009 - 06:45pm

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    Re: The Definitive GOLD’s Near-Term Outlook Thread

Yeah Sam, I’m with you. Us normal guys don’t stand a chance in figuring out what to do. The only way to know what’s going on it to look at past data and then say “I should have…” 

My current thinking is to wait another month or so and if there’s no downward trend, then I’ll just start buying. Yes, gold might start declining in the fall but I think the risk of a major event between now and then that could cause panic buying (and increase the price) is not worth the wait for the price to decline.

 

  • Tue, Apr 28, 2009 - 06:51pm

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    Re: The Definitive GOLD’s Near-Term Outlook Thread

[quote=SamLinder]

With the dollar almost guaranteed to become worthless in the future, what would drive the price of PM’s down?

[/quote]

I know this is going to sound outrageous, but Pretcher thinks the dollar is going up in the intermediate term (1-2 years) because of massive credit deflation. Of course the Fed will try to counter this destruction of "money" with quantitative easing, but Pretcher thinks they will fail for various reasons. Overall, I can’t really argue with the ubiquitous arguments that the dollar will collapse and PM’s will soar, they make sense. But I think Pretcher’s perspective is that these events might be farther off than most people realize, and that there might be a better opportunity in the coming years to "invest" in gold.

Its just another possibility to consider.

  • Tue, Apr 28, 2009 - 07:22pm

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    Re: The Definitive GOLD’s Near-Term Outlook Thread

Sam,

I agree that no one really knows the answer.  Impossible to know for certain, except in hindsight.

That said, I tend to agree with Mish’s theory (backed by historical analysis) that gold does well in periods of high economic stress.  We are certainly in one of those now, and I expect it to only get worse over the next few years.  Therefore, with the exception of some possible short-term downward movements, I think gold will do very well in the future.

A common misconception is that gold performs well during inflation, but not deflation.  That is easily contradicted, as Mish points out in his post Gold Continues To Act Well:

Gold fell from over $800 to $250 over the course of 20 years with inflation all the way. The reality is gold does well in periods of high economic stress (deflation, stagflation, hyperinflation, and periods of prolonged credit stress).

And while gold’s performance is often inversely correlated with the dollar’s, that pattern ended this year as Mish pointed out in You Can’t Food Gold:

Many have not yet noticed, but recent strength in gold comes at a time of increasing strength in the dollar as well. Correlation between gold and the dollar has been near perfect since January 26, and more correlated than normal for quite some time.

Gold Daily Chart

US$ Index Daily Chart

Mish goes on to advance the more convincing theory that gold does well during severe credit dislocations.  

In 1971, Nixon Closed The Gold Window making the dollar inconvertible to gold and imposed wage and price controls. Commodity prices and interest rates soared for a decade. This was a credit event.

We are certainly in the midst of another major credit crisis, and it’s much worse this time around.  If you buy this line of reasoning, and you agree that the age of easy credit is over, then it’s hard to argue against PMs doing very well in the years to come.

 

 

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