GOLD & SILVER - next move?

[Atilla]

Mines buying back hedges because they know they will sell it higher as they see the fundamentals as supportive.
Central banks have been selling gold for years, cashing in and buying bonds. That is slowing down and Asian banks are starting to accumulate.

Thanks TWI,

If the mines are seeing strong fundamentals and even igher prices in gold than I'm well and trully happy...

 

[bottomleyp]

Bottomleyp

If the Gold 640 support level holds we may be approaching another rebound...

US have just announced they will shoot Iranians suspected of interfering in Iraq affairs. This is a escallation from arresting / detaining and releasing them.

Buy Gold 643.5 at the mo I'd say. Stop loss at 635... Good luck.

Started looking at Gold and Oil.
You say buy at 643.5,stop at 635
Are these spot positions or April contract ?

 

[Atilla]

Started looking at Gold and Oil.
You say buy at 643.5,stop at 635
Are these spot positions or April contract ?

They are rollover Cash Bets. You can get monthly bets to but I prefer these.

Thought behind it as in this thread price of gold IMO driven by

1. uncertainty in markets due to upcoming confrontation with Iran
2. increased economic activity
3. weakness in $ and switch by central banks to gold and the Euro



To add more fuel to the fire
=====================

Russian foreign minister Sergey Lavrov has questioned the occupation of Iraq by US and the increase in troop numbers. They are alarmed.

China's test on taking out their sattelite is no accident and you can be sure Iran is currently developing a ballistic missile with the same intention.

The recent announcement of $10bn for Afghanistan development to build schools and roads and hospitals is BS. It's to open up a rear front against Iran . The taliban have announced 2000 suicidal maniacs ready for a spring offensive against all foreign troops.

The Arabian committees have announced an attack on Iran will turn ME into a hell hole. Recent conflict in Leabonan is not just coincidental. You can be sure in event of conflict Leabonen and Syria will be drawn in as if Iran is attacked Syria will be next. If Israel has a part to play as inevitably it will then think how other Arab countries and popullations will respond?

The ex head of Mossad Efraim Halevy has commented that a third world war between millitant fundamentalists and the west has already started. Whilst I don't share his view just like US attack on Iraq has increased the terrorism threat without doubt, and attack on Iran will almost certainly lead to a major war in the Middle East that I don't believe can be won by any country as we will be up against China and Russia in a proxy war. Inevitably peoples paranoia lead to the very prospect they fear. Obsessive infatuation is very bad...

Bushes recent provocation to Iran re: arresting diplomatic staff and now shoot to kill policy is as I mentioned an effort to provoke a confrontation.

Just as the US administration got it wrong in Iraq they are wrong again. Iraq is another Vietnam already and the $ will pay the price. Oil and gold will rise.

Russia will gain as they are gold and oil producing countries. China may lose some speed but will not lose much. The ME will be redefined but US influence will decline.

I think if the calculation is that Iran's infrastructure will be damaged and their nuclear development will be stalled and that will teach them not to continue like Iraq then those calculations are wrong. Iran is not Iraq. Millions will die. If we don't pull our troops out we will be aligned with US and become likewise targets.

So what does all this FA and strategic analysis mean to our trades.

1. Gold will rise - always does in times of war and uncertainty.
2. Oil will rise as Iraq & Iran's oil fields will be out of production.
3. $ will fall and be worth much less. Gold and Euro and other currencies will rise.
4. Russia, Latin American countries and other Oil producing ME countries will benefit.
5. We may see other struggles for mineral resources and border conflicts may arise in Africa & Latin America and in Asia as smaller countries settle border and resource disputes
6. US will concede being an economic power and military power.

So perhaps Efraim Halevy may be right after all.

This may sound like conspiracy or fruit cake news but IMO the BBC and Western media provide sanitized news for mass consumption to support their political objectives. Listening to satellite news and topical debates on foreign stations like the Chineese CCTV or ME station like AlJazeera you get a much better grasp of developments and how developments are perceived by others.

PS. I think Climate Change is more of a threat to us all than above fruit cakes that we may be fed but nough said.

 

[DDI]

Dear Atilla,

I hope you are wrong. The hardline Iranian president is facing mounting pressure and there are signs (concerte ones) that the moderates will take the nuclear issue at hand which would involve negotiations and possible compromise. Of course this doesnt make a blinding difference if these crazy neocons push their malicious war plans but at least there is hope......

 

[Atilla]

Dear Atilla,

I hope you are wrong. The hardline Iranian president is facing mounting pressure and there are signs (concerte ones) that the moderates will take the nuclear issue at hand which would involve negotiations and possible compromise. Of course this doesnt make a blinding difference if these crazy neocons push their malicious war plans but at least there is hope......

Likewise I do hope I'm wrong about an attack on Iran too and events below do not take place but I think people need to plan for the worst and expect the best. Russia and China's involvement makes me uneasy about recent developments.

Considering up and coming Fed speak on US inflation and interest rates and subsequent potential $ strength, Gold is holding up well around 640-43 levels. I think we need more confirmation from the US about the strength of the economy.

In the event a compromise and peace looks likely and we we see Gold fall below 640-635 range then I'd say catracho analysis about a retracement to 580-600 highly likely.

Given Bush administration past record and recent developments I have already penciled in a small confrontation for starters.

 

[de123]

i think oil will test the 40s level,...57 is strong resistance, and it was from previous sell off a strong support,...come on fundamentals for oil is not strong at all, the speech from the union was just a medium bulish sign, ....you sound like my broker, who says buy on a dip ,...and i am gona wait and relax,...i rather sell what doesnt go up, and i already got a fact since many are longs and will take the profits, no matter if its peace or war...i say each bounce is good for a small profit on the way down,...

 

[Atilla]

i think oil will test the 40s level,...57 is strong resistance, and it was from previous sell off a strong support,...come on fundamentals for oil is not strong at all, the speech from the union was just a medium bulish sign, ....you sound like my broker, who says buy on a dip ,...and i am gona wait and relax,...i rather sell what doesnt go up, and i already got a fact since many are longs and will take the profits, no matter if its peace or war...i say each bounce is good for a small profit on the way down,...

Hi De123,

I'd say on the upside of peace in the World - gold is still likely to go up. It's finite in supply and SA, Australia and Russia only have so many mines. Commoditties did extremely well last year and this year should economic growth continue as expected high demand in metals will also continue.

Some say Gold is too expensive and so the Asians - Indians, stopped buying it. Well yes if price is too high it will impact demand. However,
a) India is become richer hence greater purchasing power
b) China likewise
c) Gold is a hedge against inflation as well as an investment opportunity to Joe public who sooner or later catches on. It is the asset of choice for the lay man with money.

There are some worries like a strenghening $, interest rises and slow economies which could take gold prices down but I'm all ears...

 

[ducati998]

Hi De123,

I'd say on the upside of peace in the World - gold is still likely to go up. It's finite in supply and SA, Australia and Russia only have so many mines. Commoditties did extremely well last year and this year should economic growth continue as expected high demand in metals will also continue.

Some say Gold is too expensive and so the Asians - Indians, stopped buying it. Well yes if price is too high it will impact demand. However,
a) India is become richer hence greater purchasing power
b) China likewise
c) Gold is a hedge against inflation as well as an investment opportunity to Joe public who sooner or later catches on. It is the asset of choice for the lay man with money.

There are some worries like a strenghening $, interest rises and slow economies which could take gold prices down but I'm all ears...

Gold is grossly overvalued.
If adjusted on an inflation basis alone, then circa $130oz
When you refer to China & India, are you referring to the governments, or the general populace?

Here are the latest Gold statistics, they speak for themselves;
jog on
d998

 

[Atilla]

Gold is grossly overvalued.
If adjusted on an inflation basis alone, then circa $130oz
When you refer to China & India, are you referring to the governments, or the general populace?

Here are the latest Gold statistics, they speak for themselves;
jog on
d998

Hi Ducati998,

I was referring to economic activity to support commodity prices on any downward Gold price movement. A little like oil I do not think gold is likely to drop back down to historical levels.

Commodities did get ahead of them selves last year yes but if I recall the $700 mark was touched when UN voted to place sanctions agains Iran at the time coupled with much talk about their nuclear intentions.

Gold is a special commodiity with some unique attributes;

1. Input product in manufacturing
2. Jewelry - self adornment
3. Unit of currency
4. Speculative asset / instrument
5. Finite supply - unless you discover some new mines
6. Indistructable etc etc...

So when you say it is over priced I take it your are bearish. Is this approach purely based on supply and demand for economic purposes or other reasons?

Why not hang up your jogging shoes and sit down for a nice cup of tea and lubricate your grey cells?

 

[ducati998]

Atilla

Gold is a special commodiity with some unique attributes;

1. Input product in manufacturing
2. Jewelry - self adornment
3. Unit of currency
4. Speculative asset / instrument
5. Finite supply - unless you discover some new mines
6. Indistructable etc etc...

So when you say it is over priced I take it your are bearish. Is this approach purely based on supply and demand for economic purposes or other reasons?

Why not hang up your jogging shoes and sit down for a nice cup of tea and lubricate your grey cells?

In regards to being a manufacturing input, this is fairly negligible, and can be discounted as fairly unimportant on a tonnage basis, but as the data indicates, at high prices, this useage will be curtailed, although not eliminated.

Jewellry, in contradistinction to your assertion, in tonnage terms falls [-18%] due to high prices, thus demand is in point of fact highly elastic, and not inelastic as many claim.

ETF's and speculative inflows are most responsible for the current and high price of gold.
Speculation can just as easily turn bearish, as remain bullish, that old 50/50 ratio. Whether the hot money stays bullish, or turns bearish, will have much to do with geo-political and economic trends, therefore, for an analysis on gold, you need an analysis on the aforementioned trends.

Finite supply, indestructible etc............................agreed.

Unit of currency.
To the Central Banks, certainly, to the man in the street, depends on which street you are standing I suppose, but, without a legal status as *money* this again is very speculative, and subject to geo-political risk in no small measure to generate the value accorded.

jog on
d998

 

[Atilla]

Atilla



In regards to being a manufacturing input, this is fairly negligible, and can be discounted as fairly unimportant on a tonnage basis, but as the data indicates, at high prices, this useage will be curtailed, although not eliminated.

Jewellry, in contradistinction to your assertion, in tonnage terms falls [-18%] due to high prices, thus demand is in point of fact highly elastic, and not inelastic as many claim.

ETF's and speculative inflows are most responsible for the current and high price of gold.
Speculation can just as easily turn bearish, as remain bullish, that old 50/50 ratio. Whether the hot money stays bullish, or turns bearish, will have much to do with geo-political and economic trends, therefore, for an analysis on gold, you need an analysis on the aforementioned trends.

Finite supply, indestructible etc............................agreed.

Unit of currency.
To the Central Banks, certainly, to the man in the street, depends on which street you are standing I suppose, but, without a legal status as *money* this again is very speculative, and subject to geo-political risk in no small measure to generate the value accorded.

jog on
d998

D998,

You see the reasons and I thank you for your comments on them all. I feel the same trying to account for the increase or decrease in the prices.

I'd agree Gold is an speculative instrument and this accounts for large part of movement but what transpires behind those speculative moves IMO is primarily geopolitical risk and governments switching $ into gold is the main reason for recent moves. (economic activity and demand for gold would be lesser secondary support - but China's lust for growth last year still took commodities through the ceiling).

In summary given my past rants on imminent geopolitical tension I think with the exception of;

1. Stabilisation in Iraq / Iran
2. A rise in US interest rates

Gold will rise...

My view that the US is going to carry out some limited surgical strike and choose to stop when it feels it has destroyed sufficient Iranian infrastructure is a miscalculation. This conflict will play out to be much worse than Vietnam with a bigger impact. Bigger region, more countries and ultimately oil supplies will be hit. I see Russia as the biggest gainer (gets to sell gold and oil at inflated prices plus weaponry).

The market still has not pencilled in these developments. When gold brakes $700 then it will.

 

[ducati998]

Atilla

I'd agree Gold is an speculative instrument and this accounts for large part of movement but what transpires behind those speculative moves IMO is primarily geopolitical risk and governments switching $ into gold is the main reason for recent moves. (economic activity and demand for gold would be lesser secondary support - but China's lust for growth last year still took commodities through the ceiling).

While I think we agree pretty much on speculation & geo-political risk as driving sentiment within the gold sector, I'm not so sure that we agree on the role [current] of Central Banks.

Central banks and supranational organisations hold around one fifth of global above-ground stocks of gold as a reserve asset, a figure that is decreasing steadily over time. Although a number of central banks have increased their gold reserves over the past decade, the sector as a whole has been a net seller, contributing an average of 562 tonnes to annual supply flows between 2001 and 2005. Since September 1999, the bulk of these sales have been covered under the Central Bank Agreement on Gold.

In addition to buying and selling, central banks also affect the gold market through their lending, swaps and other derivative activities; they are the main [although not the only] supplier of leased gold to the market. Bullion banks who borrow such gold may sell it into the market to hedge their own transactions, for example with mining companies who are selling such gold forward.

 

[catracho]

Gold is grossly overvalued.
If adjusted on an inflation basis alone, then circa $130oz
When you refer to China & India, are you referring to the governments, or the general populace?

Here are the latest Gold statistics, they speak for themselves;
jog on
d998

http://www.safehaven.com/article-4433.htm

Have a read then rethink your inflation adjusted gold price..

Or put it another way..if you had 100 USD in 1970 .how may would you need in the 21st C to buy the same amount of goods..adjusting for inflation? Approx 500..
check out...
www.measuringworth.com

 

[ducati998]

The point of contention will be in an accurate *inflation* figure.
My $130 figure was calculated from 1933 to 2006 @ 2.5% inflation.

Using your link, *inflation* is calculated @ 3.83%
Gold therefore calculates to $339

Either way, it is substantially less than $650+

jog on
d998

 

[Atilla]

The point of contention will be in an accurate *inflation* figure.
My $130 figure was calculated from 1933 to 2006 @ 2.5% inflation.

Using your link, *inflation* is calculated @ 3.83%
Gold therefore calculates to $339

Either way, it is substantially less than $650+

jog on
d998

I'm a little lost about the inflation figures since 1933. Is this the average inflation figure we are talking about to explain value of gold? In times of war and hyperinflation a barrel of Deutchmarks just possibly could buy you 1 egg. I would add the cost of producing all that paper was probably worth more than the monies.

If the price of gold is less than $650 why is it not then... Are we saying the market place is imperfect?

Where are all the sellers and speculators giving / shorting the damn thing away at these prices.?

I would say 640-650 holding up realy well. Only a matter of time before we see 675 for starters. Wait till end of February and see the price of gold. I think Feds speel will be critical.

 

[ducati998]

Atilla

I'm a little lost about the inflation figures since 1933. Is this the average inflation figure we are talking about to explain value of gold? In times of war and hyperinflation a barrel of Deutchmarks just possibly could buy you 1 egg. I would add the cost of producing all that paper was probably worth more than the monies.

If the price of gold is less than $650 why is it not then... Are we saying the market place is imperfect?

Yes, this is the average *inflation* figure for the US since 1933 [my arbitrary starting point]
With regards to Gold, if Gold reflected only inflation, then the inflation adjusted value would be the market price.

That Gold currently reflects; inflation + speculation + geo-political risk + intangibles = $650oz+

Is the market imperfect, viz. inefficient?
In the short term, the market is inefficient, in the long term, it is efficient.

jog on
d998

 

[Atilla]

Atilla



Yes, this is the average *inflation* figure for the US since 1933 [my arbitrary starting point]
With regards to Gold, if Gold reflected only inflation, then the inflation adjusted value would be the market price.

That Gold currently reflects; inflation + speculation + geo-political risk + intangibles = $650oz+

Is the market imperfect, viz. inefficient?
In the short term, the market is inefficient, in the long term, it is efficient.

jog on
d998

I Agree 100%.

Surprised about average inflation figures but it's good to know.

Regards,

 

[catracho]

NO - what gold represents is a store of value...soemthing that cannot be created (yet), something that is finite, difficult to extract, has held it's value relative to paper money....the price will reflect how the smart money feels about the world economic climate (ie faith in paper currency), political instability and conflict. If you had one ounce of gold in 1933, today you would still have one ounce of gold currently worth 640 ish dollars. Throughout history the smart money has survived by setting aside a percentage of their assets in gold, usually outside their own countries, for rough times .....

 

[ducati998]

NO - what gold represents is a store of value...soemthing that cannot be created (yet), something that is finite, difficult to extract, has held it's value relative to paper money....the price will reflect how the smart money feels about the world economic climate (ie faith in paper currency), political instability and conflict. If you had one ounce of gold in 1933, today you would still have one ounce of gold currently worth 640 ish dollars. Throughout history the smart money has survived by setting aside a percentage of their assets in gold, usually outside their own countries, for rough times .....

catracho

Well true, you would at current market prices.
But if you had bought it January 1980 @ $840oz+.................today, you would have the same gold worth $640oz

So, would you feel as cozy with that scenario? [taking into account inflation just to make it even more cozy]

jog on
d998

 

[Atilla]

NO - what gold represents is a store of value...soemthing that cannot be created (yet), something that is finite, difficult to extract, has held it's value relative to paper money....the price will reflect how the smart money feels about the world economic climate (ie faith in paper currency), political instability and conflict. If you had one ounce of gold in 1933, today you would still have one ounce of gold currently worth 640 ish dollars. Throughout history the smart money has survived by setting aside a percentage of their assets in gold, usually outside their own countries, for rough times .....

I'm not sure there is anything here that contradicts the formula...

Gold Price => inflation + speculation + geo-political risk + intangibles = $650oz+

It depends on which aspect you give greater weighting to in it's current time period price determination. It may sound strange but I agree with your comments too.

Don't understand the NO part. The store of value to me is like a unit of measurement - currency or purchasing power. How one perceives it's value doesn't change it's market behaviour or it's price determination.

I think gold is looking to brake out of it's little 640-646 band shortly. Upwards if interest rates stay what they are... I'm still bullish with geopolitical risk driving price up.

__________________________
"The world wants to be deceived, so let it be deceived."