Options
Look what happened to gold!
jpkinla
Posts: 822 ✭✭✭
Now that it is 2010 and the gold market is poised to breakout towards $1300 and above, I feel it is educational for us to review the period of 1979-1980. I have handy references here for a couple of pieces done several years back. I hope it is helpful to all.
Back in December 2005, I posted a reference to some charts for the 1979-1980 time frame in the gold market. Enough time has lapsed to do a revisit and I hope that all of you find this as useful as I did. There is an uncanny resemblance in the weekly and monthly charts to the 1979 period. Our move from $650 to $1030 followed by a sharp selloff is similar to the move from $200 to $450 and its subsequent selloff. I have put the link here for your review and comments.
A History Lesson of Gold Prices 1979-1980 revisited
It is my belief that we are closer to an epic move similar in magnitude to the 1980 move brought on by some event(s). Good luck!
I would have put this is the PM threads but I felt it was important enough and relevant enough for the greater population of forum readers.
Back in December 2005, I posted a reference to some charts for the 1979-1980 time frame in the gold market. Enough time has lapsed to do a revisit and I hope that all of you find this as useful as I did. There is an uncanny resemblance in the weekly and monthly charts to the 1979 period. Our move from $650 to $1030 followed by a sharp selloff is similar to the move from $200 to $450 and its subsequent selloff. I have put the link here for your review and comments.
A History Lesson of Gold Prices 1979-1980 revisited
It is my belief that we are closer to an epic move similar in magnitude to the 1980 move brought on by some event(s). Good luck!
I would have put this is the PM threads but I felt it was important enough and relevant enough for the greater population of forum readers.
0
Comments
$20 Saint Gaudens Registry Set
(MS 61)
BHNC member # 184!
http://www.busthalfaddict.com
when you get the 15 days to let go at the top. greed will ruin your chance
if you do not set your goals in advance i suppose.
I think all up-down buy-sell patterns eventually repeat. But that doesn't mean squat.
Free Trial
I believe it is a mistake to summarily dismiss technical analysis or at the least to view historical price. I suspect that the market will find its correct price one way or the other but it helps to study history when trying to make decisions on direction and trading.
$20 Saint Gaudens Registry Set
<< <i>Uh, should I be buying or selling right now? >>
I'll let you know in 4 years.
<< <i>Uh, should I be buying or selling right now? >>
Yes
tech tools lit up in different colors while speaking about macd divergences, head and shoulder reversals, rsi peaks, and your slow versus fast stochastics relativity, etc.
Toys Toys Toys ..... whoops I'm an adult now so they are definently tools of the trade, uh... i mean sand box, whatever.
<< <i>Yellowkid,
I believe it is a mistake to summarily dismiss technical analysis or at the least to view historical price. I suspect that the market will find its correct price one way or the other but it helps to study history when trying to make decisions on direction and trading. >>
Sorry, I just don't think they predict much of anything, if they did, all the analysts would be rich. I've been hearing about gold going through the roof since it went back down in, what '79? I'm sure someday it will, I hold some mining stocks, I just don't think anyone knows when. What would $1000 in gold invested in '79 bring you now? How about the same amount in the S&P? Gold is fun, especially if it is in the form of a classic coin, but there is a reason economists call it a non producing asset.
down $4,301.00 !!!
This is awful!
<< <i>I still can't believe I made that post almost four years ago already......Time flies! >>
Yeah, that was before the Precious Metals forum existed
I've been told I tolerate fools poorly...that may explain things if I have a problem with you. Current ebay items - Nothing at the moment
Silver, gold.....all the same to me! But it looks like someone had a delicious catch! Can't eat 90% bags too easily!
$20 Saint Gaudens Registry Set
Worry is the interest you pay on a debt you may not owe.
"Paper money eventually returns to its intrinsic value---zero."----Voltaire
"Everything you say should be true, but not everything true should be said."----Voltaire
There's a job waiting for you at the FED as spokesperson or lobbyist.
It's hard not to notice the very symmetry and repetitive wave action that gold followed from 1968-2009...in both up markets and down markets. I think the big 50% dump that gold took from Dec 1974 to August 1976 is somewhat similar to what it did from March 2008 to date. While there was no catastrophic asset deleveraging like we had in summer/fall of 2008, commodities across the board took a beating in the mid-1970's. Unless I'm mistaken didn't gold quadruple in price from 2001-2008? That sure seems like it went through the roof in only its first leg up. Some non-producing asset. All the while stocks didn't even keep up with inflation and the dollar lost 40% of its value. There are such things as economic and business cycles that extend years to decades to centuries. 40 years is nothing in a longer term trend. Keynesian Economists are bred to ignore gold and pay homage to paper assets considering that their grants and academic/govt careers are often closely hinged to how well they parrot the party line. It's the Austrian Economists that you should pay heed to. And they don't consider gold a non-asset.
What would $1000 invested in stocks in 1999 look like today? How about $1000 in gold? There really aren't all that many worthy gold analysts out there. Maybe a few dozen, a hundred? I see only a dozen or so that I think really know what they are talking about get it right more than not. Those guys make a decent living in all tradeable markets, stocks, bonds, currencies, etc. With gold making a return in 2002, they have come back to the forefront of the PM sector. Why not trade in a market that is actual money?
Don't assume gold will be tossed out and trashed like it was from 1980-2001. And to do that the nation had to be able to withstand strong double digit interest rates for several years....and gold had to be considered only as a commodity and not money. There are serious currency and financial issues facing all the major nations of the world that were not around in the 1980's. Some mixture of hard assets will be needed to lend stability to the paper currency regimes. Gold could easily play a long term role. What's the alternative? Devalue all the currencies by 10-1 and start over with "fresh valuable fiat"? The dollar being nearly as good as gold in the 1980's and 1990's pushed gold to the sidelines. No currencies are currently regarded as good as gold today. The slow down in CB sales should show you that. If the CB's could give back their trillions in currencies and take gold in exchange do you think they would do it? Of course they would. They want the gold....even though it's a non-producing asset. But they are playing a game of trying to get it back without paying for it.
I still like my original bet back in 2006 of seeing how well holding the DOW for 5 yrs will look in 2011. Right now, not very pretty. With a strong bout of inflation (from wherever), it could make it back to even. Eagle7 summed up the problem in a prophetic single sentence in mentioning that unlimited credit (being used in place of money) was the source of the problem and unsustainable. It's easy to show low inflation to the sheeple when credit-money is not even part of the various published money supplies.
roadrunner
<< <i>Sorry, I just don't think they predict much of anything, if they did, all the analysts would be rich. I've been hearing about gold going through the roof since it went back down in, what '79? I'm sure someday it will, I hold some mining stocks, I just don't think anyone knows when. What would $1000 in gold invested in '79 bring you now? How about the same amount in the S&P? Gold is fun, especially if it is in the form of a classic coin, but there is a reason economists call it a non producing asset.
There's a job waiting for you at the FED as spokesperson or lobbyist.
It's hard not to notice the very symmetry and repetitive wave action that gold followed from 1968-2009...in both up markets and down markets. I think the big 50% dump that gold took from Dec 1974 to August 1976 is somewhat similar to what it did from March 2008 to date. While there was no catastrophic asset deleveraging like we had in summer/fall of 2008, commodities across the board took a beating in the mid-1970's. Unless I'm mistaken didn't gold quadruple in price from 2001-2008? That sure seems like it went through the roof in only its first leg up. Some non-producing asset. All the while stocks didn't even keep up with inflation and the dollar lost 40% of its value. There are such things as economic and business cycles that extend years to decades to centuries. 40 years is nothing in a longer term trend. Keynesian Economists are bred to ignore gold and pay homage to paper assets considering that their grants and academic/govt careers are often closely hinged to how well they parrot the party line. It's the Austrian Economists that you should pay heed to. And they don't consider gold a non-asset.
What would $1000 invested in stocks in 1999 look like today? How about $1000 in gold? There really aren't all that many worthy gold analysts out there. Maybe a few dozen, a hundred? I see only a dozen or so that I think really know what they are talking about get it right more than not. Those guys make a decent living in all tradeable markets, stocks, bonds, currencies, etc. With gold making a return in 2002, they have come back to the forefront of the PM sector. Why not trade in a market that is actual money?
Don't assume gold will be tossed out and trashed like it was from 1980-2001. And to do that the nation had to be able to withstand strong double digit interest rates for several years....and gold had to be considered only as a commodity and not money. There are serious currency and financial issues facing all the major nations of the world that were not around in the 1980's. Some mixture of hard assets will be needed to lend stability to the paper currency regimes. Gold could easily play a long term role. What's the alternative? Devalue all the currencies by 10-1 and start over with "fresh valuable fiat"? The dollar being nearly as good as gold in the 1980's and 1990's pushed gold to the sidelines. No currencies are currently regarded as good as gold today. The slow down in CB sales should show you that. If the CB's could give back their trillions in currencies and take gold in exchange do you think they would do it? Of course they would. They want the gold....even though it's a non-producing asset. But they are playing a game of trying to get it back without paying for it.
I still like my original bet back in 2006 of seeing how well holding the DOW for 5 yrs will look in 2011. Right now, not very pretty. With a strong bout of inflation (from wherever), it could make it back to even. Eagle7 summed up the problem in a prophetic single sentence in mentioning that unlimited credit (being used in place of money) was the source of the problem and unsustainable. It's easy to show low inflation to the sheeple when credit-money is not even part of the various published money supplies.
Gold didn't return anything unless you knew just when to buy and sell, multiple times. If you spent $1000 on gold 30 years ago, it is worth just about that that today. It just sits there, no dividends, no interest, no nothing unless it gives you a warm, fuzzy feeling. I checked on the S&P for the same period, $1000 left alone allowing dividends to accumulate would be worth 40 times that, even after the last decade of less than stellar returns. Let me reiterate though, I am not saying don't buy gold, if you have fun trading it more power to you, I just don't think having precious metals as the core of your worth is a good way to go.
You're trying to equate 1979 exactly with 2009, a hard thing to do. While gold is priced "close" to 1979 levels, the SM is close to 10X higher. Frankly, I'd take the gold unitl POG=DOW.
Look at the daily or weekly gold charts from 1971-1979, there were
litterally thousands of good places to enter a trade. The same is true from 2002-2009 and will continue for years longer.
I didn't buy gold 30 yrs ago I bought gold starting in 2002 when MS64 Saints were as cheap as $425. While I didn't earn any dividends I am more than happy tripling up on most on my 2002-2005 purchases. I didn't really know when to buy or even when to sell. One buys when an investment is oversold and sells it when it reaches the stage where everyone knows about it. Gold is years from that point. Dividends are not worth much when a stock price falls 50%. It's sort of like "saving" milk money on your 1040 home deductions while the price of the home falls 10% per year. It's a different world right now with very few decent companies offering dividends or being able to afford to. Price to earning ratios are so out of whack to be nonsensical. The game today in stocks is play it like a casino based only on stock price. The bankers love it. Good luck playing with dividends and earnings while the banks and brokers move the price to their advantage and then pick your pockets clean.
Gold bullion far outperformed the DOW in the 1970's w/o dividends and it is has been doing so since 2002. If you want dividends and gold, get some good miners, they outperformed bullion and the general stock market in the 1970's. But 5% isn't going to do anything for you when 95% of your equity is at risk to begin with.
How many people do you personally know that bought bullion gold in late 1979 and still own it? How many do you know that bought some in the last 10 yrs? Why do we care about who bought gold in 1979 when they should have bought in 1971-1973 or from 1975-1978? What would you say to those like MoneyLA when they buy gold after it blows past $1000 for good? Aren't they inviting the same disaster as those who bought in late 1979 or Jan. 1980?
roadrunner
My bias is to the upside but I do recognize the powers to be do not want to see that and there may be a selloff to shake out the weaker longs.
Curious what others feel about the premiums on generic gold these days. I believe $20 Libs in MS64 at $2800 are rich with $950 gold. We were at $2000 when gold was $850.
Saints in MS65 also seem rich to me based on the historic relationship.
There is obviously good demand for generics from those who believe confiscation is coming.
$20 Saint Gaudens Registry Set
Both the DOW and S&P are highly manipulated indexes, don't believe all the BS "historical returns" you read about.......very similar to the BS historical returns that rare coins supposedly returned over any given period of time.
$20 Saint Gaudens Registry Set
<< <i>Probably good to review the 1979-1980 period again as we start an accelerated move......
The 1979-80 bubble was driven by one force, the Hunt Brothers, and the bubble burst when the government changed the rules on commodity speculation.
IMHO, the current rise is too broad to be smacked down by any one factor. There will be swings up and down along the way, but I believe that the long-term trend will be upwards.
MOO
TD
I agree with you Captn, this is not analogous to 1979-1980 in terms of the underlying market factors. However, the chart is useful in order to see how fast things can develop. The 1923 Weimar chart can also be instructive.
I knew it would happen.
Today our government is out of control with its spending and unless they reel it in the market could even continue to go higher. Of course nobody has a crystal ball, so it may continue up or it may go down. I'm guessing sideways for a while (up or down about 15% until the end of the year.).
President, Racine Numismatic Society 2013-2014; Variety Resource Dimes; See 6/8/12 CDN for my article on Winged Liberty Dimes; Ebay
I would argue that while clearly the Hunt brothers manipulated silver to the upside back in that period, we have the Gold Cartel manipulating the market to the downside today. I posted the illustration to show how fast a move can occur and to illustrate that while we may not see identical results, I suspect we will see fireworks develop.
History will not repeat itself but it may rhyme. Right?
$20 Saint Gaudens Registry Set