bullish gold chart alert
MoneyLA
Posts: 1,825 ✭
the one year gold chart shows a HUGE pennant formation and pennants usually reach a peak (point or tip of the pennant) and break to the upside. this "point" or "tip" would probably come at the 980 level, so should gold trade back to 980 the pennant formation will be completed and the breakout would follow.
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No matter how you slice it, any one of the above choices gives you a bullish option. To me, it's not a matter of IF $1000 is going to be the new bottom in gold, but only when. And I'm already on record for this occuring by end of May 2010. But more than likely it will be taken out much earlier than that.
The Prechterish crowd is predicting the pennant will break to the downside hard to take us back into the $400-$650 range again. I look a the totality of the 8 yr chart and it's generally all up except for the black swan credit event of fall 2008. I see no reason why it shouldn't continue upwards based on the current financial and USD conditions.
roadrunner
Things could break either way here and I wouldn't be surprised to see a dollar rally send Gold and Silver temporarily down 20% or more either.
Another wild card is if the CTFC does the unexpected and limits the amount of naked shorts along with long positions in commodities, this should send the price of Gold and Silver significantely higher.
These guys think that the run up in oil to $147 was a problem. But have no issues with the short selling that ran it down to $33. That was all legitimate hedging (lol).
roadrunner
<< <i>Norseman, right now the CFTC is specifically looking at the long side of commodities speculation. It's very possible they might invoke long side limits and leave the short side (ie hedgers) alone. That would make gold and silver an even bigger carnival than before. To think that 2 banks controlling up to 100% of the commercial short side of the silver futures are legitimate hedgers.
These guys think that the run up in oil to $147 was a problem. But have no issues with the short selling that ran it down to $33. That was all legitimate hedging (lol).
roadrunner >>
Yes it is possible that they would continue to allow rediculous massive naked short positions while limiting long positions, however at some point I think they will have to acknowledge that allowing one commodity (Silver) to be shorted in much larger amounts than any other commodity is unexplainable.
<< <i>Norseman, right now the CFTC is specifically looking at the long side of commodities speculation. It's very possible they might invoke long side limits and leave the short side (ie hedgers) alone. That would make gold and silver an even bigger carnival than before. To think that 2 banks controlling up to 100% of the commercial short side of the silver futures are legitimate hedgers.
These guys think that the run up in oil to $147 was a problem. But have no issues with the short selling that ran it down to $33. That was all legitimate hedging (lol).
roadrunner >>
Best post of yours I've ever read.
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Even the CFTC can understand why the hedgers, uhh I mean bankers, need such a larger position. It's called self preservation. But imagine what effective short side limits would do to future silver prices. But then again, those same 2 banks could induce 10 or 20 other banks to enter the market and carry those positions for them.
Thanks Wolf359.
roadrunner
<< <i>Gold has made multiple runs to $1,000 only briefly breaking through before going down so if it did break through again it could potentially trigger a large amount of short covering like Roadrunner said and propel Gold higher than many people think possible.
Things could break either way here and I wouldn't be surprised to see a dollar rally send Gold and Silver temporarily down 20% or more either.
Another wild card is if the CTFC does the unexpected and limits the amount of naked shorts along with long positions in commodities, this should send the price of Gold and Silver significantely higher. >>
Without wishing to start a political piffing match, what effect will America's current political discord likely have on the dollar and thereby on gold? Is a dollar rally likely in the next few years?
<< <i>Norseman, right now the CFTC is specifically looking at the long side of commodities speculation. It's very possible they might invoke long side limits and leave the short side (ie hedgers) alone. That would make gold and silver an even bigger carnival than before. To think that 2 banks controlling up to 100% of the commercial short side of the silver futures are legitimate hedgers.
These guys think that the run up in oil to $147 was a problem. But have no issues with the short selling that ran it down to $33. That was all legitimate hedging (lol).
roadrunner >>
Where do you get your information that 2 banks control 100% of the commercial shorts?
<< <i>Without wishing to start a political piffing match, what effect will America's current political discord likely have on the dollar and thereby on gold? Is a dollar rally likely in the next few years?
What could fuel such a rally? The world is over flowing with dollars - every country has more than its fair share. Even without current economic conditions, it's hard to imagine that any government would want to place even more eggs into an already huge basket full of dollars.
A devaluation of the dollar (i.e., inflation) isn't going to occur because of an over-supply of dollars, it's going to happen because of a lack of demand (and even an urgency to dispose of) dollars.
<< <i>Would LOVE to see it bottom out at $400 one more time. I will load up if that ever happens. Always wanted a 1 kilo JM bar, and at $13,000 I could afford one! >>
I understand that when gold drops below $700 or so you wont be able to find any to buy!. People just wont sell gold at those levels they just put it away for a brighter gold price day.
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<< <i>
<< <i>Would LOVE to see it bottom out at $400 one more time. I will load up if that ever happens. Always wanted a 1 kilo JM bar, and at $13,000 I could afford one! >>
I understand that when gold drops below $700 or so you wont be able to find any to buy!. People just wont sell gold at those levels they just put it away for a brighter gold price day. >>
Quite true. We see resistance to selling everythime it gets down to $900.
Before the long-term rally that peaked on March 17, 2008, that saw gold get up to $1030+, we had people coming in to talk about selling gold who kept saying that they were waiting for it to get back up to $850 before they sold. THese were people who had been holding it since 1980!!!!!
The only way we ever bought these people's gold was from their kids or other heirs.
TD
Also, look back on the silver chart to summer of 2008 and you will see a permanent prompt increase in the bank's short %. This was the start of the commodity's deleveraging. The banks got serious and pinned silver to the wall and have held those shorts ever since. In fact they took up those positions just days or weeks before silver started to crash. If they were truly hedging back in 2005-2007 why the need to take up those huge % positions as silver weakened considerably after summer 2008? They went from holding 0-20% of the total net short position for years and then jumped to 75-100% of the total net short position. In fact about that same time frame banks increased their silver derivative position from $90 BILL to $190 BILL (25 yrs of silver production to 50 yrs.). I don't see any signs that the potential for manipulative behavior might be possible here, do you? Carry on CFTC.
One can find the actual data on www.cftc.gov under 2 sources: monthly bank participation report (futures only) and the weekly COT (commitment of trader) reports (futures only - CME- short report). The bank report lists the # of banks reporting to the CFTC and what positions they hold. That report can be compared to the COT report as well. The bank report comes out in the first week of each month.
Gene Arsenberg letter to the CFTC
roadrunner
bank itself doing it. It seems to me they have customers and they are the middleman in
the process. They simply report what is going on but do not divulge who their clients are?
I assume this is the case and to make it sound like some sort of conspiracy is odd.
please correct me if i am wrong and these positions are purely the banks and do not
represent customer's interests at all.
<< <i>I never quite understood why people think that when a bank holds a position it is the
bank itself doing it. It seems to me they have customers and they are the middleman in
the process. They simply report what is going on but do not divulge who their clients are?
I assume this is the case and to make it sound like some sort of conspiracy is odd.
please correct me if i am wrong and these positions are purely the banks and do not
represent customer's interests at all. >>
If what you are suggesting is the case, then don't you find it odd that an overwhelming number of clients who are short PM's bank at only 3 or 4 banks? Doesn't it strike you as odd that there isn't a reasonably similar proportion of customers at other banks that are also short PMs?
What I see as odd is the fact that people can so easily dismiss the "short conspiracy" while at the same time believing that 3-4 banks somehow earned the business of a majority of all short PM clients in the world. Both scenarios seem odd to me, but IMO there is far more plausibility in a bank conspiracy to short PMs than there is a coincidence that these banks have found almost every large investor who is perma-short PMs.
<< <i>
<< <i>I never quite understood why people think that when a bank holds a position it is the
bank itself doing it. It seems to me they have customers and they are the middleman in
the process. They simply report what is going on but do not divulge who their clients are?
I assume this is the case and to make it sound like some sort of conspiracy is odd.
please correct me if i am wrong and these positions are purely the banks and do not
represent customer's interests at all. >>
If what you are suggesting is the case, then don't you find it odd that an overwhelming number of clients who are short PM's bank at only 3 or 4 banks? Doesn't it strike you as odd that there isn't a reasonably similar proportion of customers at other banks that are also short PMs?
What I see as odd is the fact that people can so easily dismiss the "short conspiracy" while at the same time believing that 3-4 banks somehow earned the business of a majority of all short PM clients in the world. Both scenarios seem odd to me, but IMO there is far more plausibility in a bank conspiracy to short PMs than there is a coincidence that these banks have found almost every large investor who is perma-short PMs. >>
The vast majority of these shorts are naked and I would be willing to bet that a large amount of TARP money has been deployed into these naked short positions along with propping the stock market up.
If this isn't the case then why has the stock market had such a huge run on low volume while cash on the sideline stays at a very high level?? At some point GS and JPM will reverse course and start heavily shorting the stock market as this is what they do best, they did it in oil, they have done it for years in Gold and Silver and at some point they will do it in stocks while pumping the market...remember when GS pitched $200 oil???
It's much easier to run a market down via short positions especially when there are no limits on the size of your hedges than it is to run a market up with long positions as the Comex and CFTC usually always side with the shorts.
<< <i>
<< <i>
<< <i>I never quite understood why people think that when a bank holds a position it is the
bank itself doing it. It seems to me they have customers and they are the middleman in
the process. They simply report what is going on but do not divulge who their clients are?
I assume this is the case and to make it sound like some sort of conspiracy is odd.
please correct me if i am wrong and these positions are purely the banks and do not
represent customer's interests at all. >>
If what you are suggesting is the case, then don't you find it odd that an overwhelming number of clients who are short PM's bank at only 3 or 4 banks? Doesn't it strike you as odd that there isn't a reasonably similar proportion of customers at other banks that are also short PMs?
What I see as odd is the fact that people can so easily dismiss the "short conspiracy" while at the same time believing that 3-4 banks somehow earned the business of a majority of all short PM clients in the world. Both scenarios seem odd to me, but IMO there is far more plausibility in a bank conspiracy to short PMs than there is a coincidence that these banks have found almost every large investor who is perma-short PMs. >>
The vast majority of these shorts are naked and I would be willing to bet that a large amount of TARP money has been deployed into these naked short positions along with propping the stock market up.
If this isn't the case then why has the stock market had such a huge run on low volume while cash on the sideline stays at a very high level?? At some point GS and JPM will reverse course and start heavily shorting the stock market as this is what they do best, they did it in oil, they have done it for years in Gold and Silver and at some point they will do it in stocks while pumping the market...remember when GS pitched $200 oil???
It's much easier to run a market down via short positions especially when there are no limits on the size of your hedges than it is to run a market up with long positions as the Comex and CFTC usually always side with the shorts. >>
this has been discussed long before TARP was even an idea in someone's head. It was always a few banks
holding the majority of positions during many time frames.
If what you are suggesting is the case, then don't you find it odd that an overwhelming number of clients who are short PM's bank at only 3 or 4 banks? Doesn't it strike you as odd that there isn't a reasonably similar proportion of customers at other banks that are also short PMs?
I do not think if i had a company or money to take a position i would visit my local branch bank and work
with them. I would go to experts in the arena which would probably consist of 3-4 banks that are global players.
I think most people here can list them off the top of their heads as they are specialists in the field.
I think I have made a reasonable point that is pretty hard to answer without some inside knowledge.
It seems like a reasonable explanation and it is the conspiracy explanations that are reaching/grasping.
I am very open to some type of documentation that allows one to know the answer to this.
when i say "investment banking" i will bet you most people here name the same 3-5 well known institutions
that have a majority of the business. *(yes i know the term investment banking is outdated with goldman and
morgan throwing in the towel and becoming more of a universal regulated bank, if that is the right
term for it).
Are the majority of long gold positions concentrated within 2 large investment banks? Why wouldn't the same thing be true for the longs as it is for the shorts?
Let's get real.
I knew it would happen.
So out of 29,828 silver contracts held by 2 huge banks as of August 4th, only 15 contracts were long (approx 2000-1). In one of the worst times ever for the dollar, when PM's have been on an uptrend for 8 years straight, only 1 long customer gravitated towards these 2 banks for every 1,999 short customers. The data is from the CFTC bank participation report. And I suppose all those same bank "customers" added $100 BILL in short derivative silver contracts as well in July 2008. Yes, all the little people bring their savings to JPM, HSBC, and GS to short silver and gold. Isn't it odd that for the 15 reporting non-US banks hold 8,038 long silver futures contracts vs. 3,211 shorts. A ratio inverse to the 2 US banks and more in line to what silver has been doing for the past 8 years. Fwiw the ratio in gold for 2 US banks is 317-1 short to long. Again, the non-US banks have multiple more longs than shorts. What do the US banks know that the foreign bankers don't? Or better yet, what motives do those 2 US banks have that no one else in the world seems to have?
With the numbers provided by CFTC reports it's pretty obvious that it's far more likely that something manipulative is going on here rather than just the usual business with "customers." One doesn't have to dig deep at all to see that something stinks here. And why would one go to one of the so-called 3-4 "expert" banks that have essentially killed the financial/banking system? Yeah, ignore your local banker who might actually have your interests at heart and go to the big banks that have destroyed what was left of capitalism.
roadrunner
<< <i>I do not think if i had a company or money to take a position i would visit my local branch bank and work with them. I would go to experts in the arena which would probably consist of 3-4 banks that are global players.
Are the majority of long gold positions concentrated within 2 large investment banks? Why wouldn't the same thing be true for the longs as it is for the shorts?
Let's get real. >>
Maybe FC works for GS and wants to protect his bonus???
<< <i>I never quite understood why people think that when a bank holds a position it is the bank itself doing it. It seems to me they have customers and they are the middleman in the process. They simply report what is going on but do not divulge who their clients are? I assume this is the case and to make it sound like some sort of conspiracy is odd.
So out of 29,828 silver contracts held by 2 huge banks as of August 4th, only 15 contracts were long (approx 2000-1). In one of the worst times ever for the dollar, when PM's have been on an uptrend for 8 years straight, only 1 etc, etc..
roadrunner >>
RR. The same could be said about the gold position. Having been in the arb business for years, you can bet those banks are hedged with options, exchange traded equivalents, or more. Gene makes the mistake too of suggesting that Silver is a finite commodity. He's dead wrong there. Silver is mined continuously. Silver is down only because of the recession. People aren't buying jewelry like they were 2 years ago.
One of the problems with the paper insuring paper schemes is that has unraveled over the past 2 years. All these genius brokers and fund managers have just blown it. Considering the bankers' and brokers' failure in the paper game of MBS, CDS, etc. I'm not about to concede them anything but failure in their schemes to arbitrage silver and gold....esp with the huge amount of derivatives outstanding (ie up to 50 yrs of world production). Everyone out there is hedged and there is no risk....or so they all say. Considering that all the silver mined worldwide annually is worth <$1 BILL in value (ie 30% of cash for clunkers or a fraction of what the US borrows daily to keep operating) it is essentially inconsequential and very finite when compared to the $60 TRILL in paper money circulating the world and the $593 TRILL in paper derivatives. Gold is the only PM with any decent ratio and it is mined at about 2500 tons per year ($80 BILL)....still inconsequential. LMBA physical settlements tag silver at around 5 to 6X the amount of gold. You won't find the 67 gold to silver ratio existing anywhere else except on the paper futures market.
Gold is mined continuously but has 155,000 tons of historical backlog to support it. It is suggested by some that the total above ground stores of silver might be 3X to 6X the amount of gold. In both the case of gold and silver, what is mined each year is basically a drop in the bucket to the total remaining supply. And the supply is fairly well spread out. Whatever has been lost in the jewelry trade has more than been made up in the investment arena. Even the "mining" of jewelry boxes to the tune of 850 tons of scrap gold worldwide in the first half of the year did little to undermine the pog. What happens when this source of easy gold dries up? It fell 35% from 1st qtr to 2nd qtr. At some point people will realize they should hold on to it rather than mail it away to CASH4GOLD in order to fill another gold toilet seat order for a famous celebrity.
What it all boils down to is that eventually all this paper has to be supported by a real asset, something other than mere paper. Arbitrage isn't going to matter. In fact the arbitrage or paper trading/money laundering economy is history. When the sheeple finally get it, watch out for the whipsaw. At least in 1630's Holland you could plant the tulips. Then again those in 1923-24 Weimar successfully combusted their currency for its BTU value.
roadrunner
<< <i>I've always chuckled at "technical" indicators, trying to find some sense where there is no sense, trying to figure out a pattern for raindrops falling on the roof. "Waves" and "double bottoms," Has one of these ever proved to be accurate? I think not. >>
Actually charting and technical trading has served me very very well over the years. MJ
Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
<< <i>
<< <i>I've always chuckled at "technical" indicators, trying to find some sense where there is no sense, trying to figure out a pattern for raindrops falling on the roof. "Waves" and "double bottoms," Has one of these ever proved to be accurate? I think not. >>
Actually charting and technical trading has served me very very well over the years. MJ >>
I was in the library the other day, flipping through a book, "The Encyclopedia of Chart Patterns," by Thomas N. Bulkowski, published in 2000. Bulkowski had a similar skepticism as the first quote. He compiled a book with comprehensive data, in terms of failure rate, success, percentage gains, or losses, on dozens and dozens of chart patterns. The first poster might be extremely surprised at the accuracy rates of some chart patterns. Of course, as with all financial analysis (both fundamental and technical) the disclaimer is that this is looking at historical data, and doesn't guarantee anything going forward.
Years ago, Metastock was quite the popular technical analysis software package. Most users put in their own formulas, based on their hand chosen indicators. I liken the pursuit for that magic formula, by back testing on existing data, to looking for that "philosopher's stone" to turn lead into gold. Software has progressed, some programs could do the looking and the back testing, without much user input, and give the users buy and sell signals. These days, neural nets and even more advanced techniques are popular.
Technical analysis, just like reading the balance sheet and looking at financial, are tools. Nothing is going to be 100%. To think otherwise is folly. If an indicator is effective, and it gets published, it tends to lose effectiveness. The simplest examples of this are calendar trades. Once the data gets published, traders jump ahead of the published date for the trade and it starts to lose effectiveness. That doesn't mean that it is all a vain pursuit. It means the target keeps moving, and traders that trade real money best keep adjusting their aim, with education, study, some common sense, some intuition, all in the mix.
that is why TEN different technicians can look at the SAME chart and come up with TWENTY interpretations.
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TA works best for me to seek out "fear" and "greed" and trade on others traders emotions especially in combination at over and under bought levels.
MJ
Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
Go back and look at the longer term gold charts in the 1970's as well as from 2001-2009. The charts pretty well follow a clear 5 impulsive waves up and then 3 corrective waves down pattern during the up cycles. And then the inverse of that on the major downturns. Why weren't those patterns different each time, more random, and non-repeating?
The above could be coincidence or simply over-trained traders/investors guaranteeing a self-fulfilling prophecy of learned chart behaviors. I tend to think the repeating patterns of human behavior as well as nature are a huge part of those repetitive patterns. They play into fear and greed which cannot be changed in the vast majority of the population. It's why the majority buy high and sell low, and why the bankers/brokers buy low and sell higher. And those same patterns apply to most widely traded markets. But it sure doesn't hurt that the bankers/brokers manipulate the markets and they play off that advance knowledge. The age of computers, reduced regulation, and steadily growing corporate giants has only given them an even stronger hand to play from.
roadrunner
<< <i>RR. The same could be said about the gold position. Having been in the arb business for years, you can bet those banks are hedged with options, exchange traded equivalents, or more. Gene makes the mistake too of suggesting that Silver is a finite commodity. He's dead wrong there. Silver is mined continuously. Silver is down only because of the recession. People aren't buying jewelry like they were 2 years ago. >>
To that point, EVERYTHING is mined continuously. Are there any natural resources that we have run out of?
Try looking at things with a world-wide per-capita approach. The world population continues to grow, and the amount of gold and silver on a per person is very small... I can't remember the exact figures, but the amount is tiny. Large amounts of silver have been consumed, and no longer exist. And I'm always mystified at people's focus on jewellry demand. Only about 20% of silver production is used for jewellry. It's significant, but it's not that significant. Industrial uses for silver continue to expand.
<< <i>simply technical analysis is an art, and not a science.
that is why TEN different technicians can look at the SAME chart and come up with TWENTY interpretations. >>
This is true, there are many things to watch for in technical charting such as RSI, Bollinger bands, SMA, volume and everyone can interpret each reading differently. But at least you can chart out stocks and commodities and look for overbought and oversold conditions which can aid you buy sell decisions.
the one year gold chart shows a HUGE pennant formation and pennants usually reach a peak (point or tip of the pennant) and break to the upside. this "point" or "tip" would probably come at the 980 level, so should gold trade back to 980 the pennant formation will be completed and the breakout would follow.
Now... it either comes or its the third rally failure.
www.AlanBestBuys.com
www.VegasBestBuys.com
Now... it either comes or its the third rally failure.
Does a pennant formation imply in terms of volume that fewer and fewer people are willing to take any positions until a direction is more clearly established? Or is the pennant strictly a price chart formation?
Volume would have to be considered, in my view. I'm not looking at any chart, so my question is simply a blind question.
I knew it would happen.
PS. I'm also big on two day closes for confirmation. It also depends if I'm day trading, using future contracts or buying physical. I do hedge a a lot on my physical holdings. I mentioned in another post that I have a very decent swing trade going on long silver/ short gold on a fut's trade. I like this a lot still. Playing on the historical gold/silver ratio and it's a somewhat safe trade.............MJ
Fellas, leave the tight pants to the ladies. If I can count the coins in your pockets you better use them to call a tailor. Stay thirsty my friends......
another question, is a two day confirmation needed? again, the answer is yes and no -- it depends on how you interpret the moves. I dont have any "rule" because I think charts show trends and patterns and "one day does not make a trend" nor do "two days" make a trend.
www.AlanBestBuys.com
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Yes, but would a 3rd failure over $1000 really mean anything? The DOW took 6 tries and 11 yrs. to finally leave 1000 behind for good in the early 1980's. Obviously a 3rd failure at 1000 did not prevent DOW 10,000. We're looking at a number (ie 1000) with great signifcance to many people that started out life fixed at around $20/oz. 1000 Dow was probably the hardest nut to crack from 100 to 10,000. Gold spent 28 years just trying to get back to $875. The DOW spent 25 years just getting back to its 1929 peak. Things take time. Whether gold makes it or not on the 3rd time doesn't seem to matter considering that the economic and financial conditions remain unsovled.
roadrunner
Yep, TA can work. But you have to be sure of the chart formation, and you can't make a prediction every day of the week.
Save your gunpowder for when you see the whites in their eyes -- or in this case -- the definitive chart pattern. I saw the pennant and started this thread when it was pretty clear that this was going to be the deciding technical chart formation.
So your next question is, with this break out, how high will gold go?
Well, I can't say. All I can say is that once gold is in the "all clear" with no "overhead resistance" it can continue its climb without a fear of selling pressure, and it can benefit from those covering shorts or bears throwing in the towel.
But as I wrote on my website this morning, I still urge caution. Let's make sure this break out is "the real thing." A few dollars up does not mean a rocket is going to the moon.
And as I wrote here before, gold should be a small part of an overall investment package. It still doesnt pay interest or dividends, it costs money to store, and it's not insured.... and it can go down.
But it's nice to see a breakout.
www.AlanBestBuys.com
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I disagree strongly with this statement:
And as I wrote here before, gold should be a small part of an overall investment package. It still doesnt pay interest or dividends, it costs money to store, and it's not insured.... and it can go down.
Limiting any component in any portfolio to "a small part of an overall investment package" is much akin to doing nothing. Do the sensitivity analysis for ANY combination of assets and limit one component to a 5% or 10% level. Then play with any scenario for the whole package. Limiting any component to a small amount will absolutely limit the impact of that component. What you end up with is a portfolio full of "ballast".
The problem that I have with a portfolio full of ballast is that most of the ballast is denominated in dollars, and the dollar is sinking, sinking, sinking as the government is spending, spending, spending, and as unfunded liabilities (like social security and medicare) are looming, looming, looming......do you "get it" yet? Good portfolio management requires a reassessment of the portfolio balance as conditions change. News Flash - conditions have changed.
This is not the 1985 through 2000 era. The normal stock valuation parameters have been thrown out the window. Same goes for real estate, and especially bonds. Almost every government on the globe is playing the same shell game. I'm not recommending gold, although I probably hold over 75% of my net worth in pms. Everybody has to be responsible for their own finances. But in my mind, to suggest that gold should be limited to a small % of any portfolio is somewhat a disservice to your readers.
"Gold doesn't pay interest or dividends." Well, as I read the financial news, it looks like the rate on paper is going negative, or close to it - so that arguement is moot. "It costs money to store." No, it doesn't. "It's not insured." It can be insured, if desired. "And it can go down". True, one out of four ain't bad. However - stocks, bonds, real estate, cash - they can also go down, can't they?
But MoneyLA, the one important thing that you didn't mention is "counterparty risk". Unless I buy gold on margin and don't have possession, nobody can delete it from my account or tax it without my consent. In fact, nobody even has to know that I own it. If I own real estate, the city or county can raise taxes on me if they have irresponsibly overspent and want more money. The banks can up their fees. The issuers of bonds can waste money and issue more bonds, driving down the values of the outstanding bonds. Nobody can keep an ounce of gold from being an ounce of gold. Period.
I knew it would happen.
And frankly, I dont care about the slide in the dollar EXCEPT for the few imported things I buy. Because wherever I go things are priced in dollars and not Euros or Yen or Pounds.
Yes, the weak dollar will raise the price of gasoline, because oil is priced in dollars.
But when it comes to the supermarket and my credit card bills for dining out, I pay in dollars, and those bills are in dollars.
I will concede that my view of the falling dollar is simplistic, but Ive gone thru ups and downs with the dollar before, and the world survived nicely.
And sometimes a weaker dollar is what we need to boost tourism and exports, so a weaker dollar is not all bad. And in a recessionary economy, you want a weaker dollar to boost American business.
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But maybe a time for role reversal here. The chances of a kickback to retest the triangle that gold broke out from is very real. A move back to $960-$970 soon would be expected and probably healthy. The chart won't help us in this regard. The massive shift in dollar interest the past week portends further weakening of the dollar. And right now it's made a new low for the year and fighting to stay above 77.0. A move into the 74-76 range would almost guarantee $1033+ gold. The weaker dollar moves gold up and is the major reason why having only 5% of it in any size portfolio is almost worthless. In that quantity it's enough to help pay some expenses if a crisis scenario occurs and banks shut down, etc. If one wants to be able to buy the same amount of goods (or more) with their dollars, then there needs to be some protection from a devaluing currency. TIPs won't do it since they are indexed to a constantly changing basket of goods in the CPI index rather than to currency devaluation. If it were my $200,000 or $2,000,000 at stake I would want enough protection so I'm covered in the event of a further 25-40% devaluation of the dollar. And that would mean at least a 15% stake in PM's.
roadrunner
Peter Brimelow has another article at Market Watch this morning (the forum filter won't let me link it) citing the relatively low bullish sentiment amongst gold timer newsletters. This is amazing to me considering the strength and volume on this move. Breakouts into resistance, like this one, are often the best moves of all because many range traders sell or short into the initial breakout, then realize their mistake and jump on later to provide more fuel.
As always, just because the odds favor higher prices, the odds don't always play out, and some trades don't work out.
Frankly guys, I would rather see an explosion in prices now than a retest of the breakout point. A rocket launch now would be convincing while a retest would make me skeptical because the chart called for a big breakout, and if we dont get a big breakout now, when the heck will we??
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this raises the possibility that it was another market top but it does not mean for certain that it was a market top. some profit taking after the big move of the last week can be considered normal. but the next few days will tell the tale.
should gold fall below the breakout at 980 then this will look like a third rally failure at the 1,000 level. and even worse, it was a rally failure that never reached the highs of the previous rally failure. in other words, declining tops which is very negative.
but I speak too soon. the chart still says this break out will take gold much higher. I just raise the possibility that if gold falls below 980 the chart will be showing a much different story, and not a sweet one either.
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However, the dollar is continuing to weaken and although gold's movements in the short term may be dictated by currency movements, the news that Barrick, the world's largest gold producer, is to close the majority of its hedge book is another bullish factor. It signals that Barrick are confident that gold prices are going higher and thus the need to drastically reduce their hedge book.
This and continuing concerns regarding the outlook for the dollar should keep investor sentiment towards gold very positive. There continues to be the possibility of a short squeeze whereby large institutions with sizeable short positions are forced to buy back their short positions (in the same way that Barrick had to close their hedge book) causing a sharp increase in the price.
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Should gold fall below the breakout at 980 then this will look like a third rally failure at the 1,000 level. and even worse, it was a rally failure that never reached the highs of the previous rally failure. in other words, declining tops which is very negative.
A test back to the triangle in the $970-975 range was to be expected. We got $982 so far. A test of the triangle apex could also occur around $960-$965. The lower triangle trend line from April is now at $940. Technically, reaching any of these should not kill the bullish consolidation we've had for 18 months. $1000 won't go down without a fight from the gold cartel. The whole month of September will be volatile.....but generally upwards. Remember that we started out back around $950 or lesss. We might even see a 2nd backtest of that $975 just for giggles and weed out all remaining weak hands.
roadrunner
I still maintain that the charts call for a big rally, and any move back to BELOW 980 would not be healthy.
A move to below 980 would signal another rally failure and a third failure and market top.
so just hope this rally keeps going as the chart says it should.
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<< <i>from today's action it appears that the dip back to about 990 was simply profit taking. thats good for the bulls.
I still maintain that the charts call for a big rally, and any move back to BELOW 980 would not be healthy.
A move to below 980 would signal another rally failure and a third failure and market top.
so just hope this rally keeps going as the chart says it should. >>
I disagree. Even a pullback to the breakout point might not necessarily mean a failure. It is common on breakouts for a pullback to decline to the 50 day moving average. At the moment the 50 dma is below $980 spot, and I would see that kind of pullback as an excellent entry point for longs.
I knew it would happen.