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Prospero
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 Posted: Thu Feb 01, 2007 9:16 pm Post subject: Gold |
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Gold hit my buy level yesterday. There's a nice triangle pattern going back to the $725 peak. The technical breakout has received relatively little attention from the gold gurus, which is promising. Of course, some people have noticed, but there are not too many screaming bulls around that I've noticed (apart from the perma-bulls). The rest, I guess, have been lulled by several months of ponderous action.
I'm betting we'll go up to $725 before there's a serious reaction. |
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rffrydr
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| Posted: Tue Jan 27, 2009 9:24 am Post subject: |
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Deflation: gold's best friend.
| Quote: | Gold
Published: January 26 2009 14:46 | Last updated: January 26 2009 15:50
Gold’s time may have come. The precious metal, as gold bugs will tell you, is unique. As a traditional store of value, it is a hedge against inflation. As a financial asset without any corresponding liability – unlike stocks or bonds, which represent a call on future cash flows – it also provides protection against the forces of deflation. And while investors can’t decide whether inflation or deflation is the bigger threat, gold prices have soared. On Monday, gold popped through the $900-per-ounce barrier, and hit record highs in sterling and euro terms.
Gold is unique in other ways too. For one, it produces no cash flows. Yet here too the deflationary bust has played into gold bugs’ hands. Falling interest rates have slashed the opportunity cost of owning gold; it may yield nothing, yet government bonds offer little more. That is also why gold-linked assets that do produce cash flows, such as mining companies, have done particularly well. Over the past three months, gold has held its own in dollar terms. Meanwhile, the Amex gold bugs index of mining stocks has doubled in value.
Another problem with pure gold is that it is in essence a momentum investment. It goes up until investors stop paying more for it; then it goes down. Because gold prices are already high, another alternative, as research outfit Gavekal suggests, may be platinum. Go back 20 years, and platinum has traditionally traded at 1.5 times the cost of gold. Now that ratio is 1.07 times; in relative terms, platinum is therefore cheap. Platinum also has a range of uses, in iPods, computers, car catalysts, anti-cancer drugs and spark plugs, to name a few. That also makes it a cheap option on economic recovery. “The only metal fit for a king,” Louis XV declared about platinum. And, perhaps, for investors too. |
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rffrydr
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rffrydr
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| Posted: Tue Nov 25, 2008 9:40 am Post subject: |
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For the Bugs, RIO valutions courtesy Alphaville:
| Quote: | Investors need to focus on the EV ratio and not the equity ratio. You could make
actually a massively bearish case if you take the historical EV exchange ratios between the two Groups and focus on the low point of that ratio (which was around 0.61x). At the moment the exchange ratio on an EV basis is around 0.93, so the EV would have to fall by 35%, implying that the Rio Tinto share price could fall by as much as 60% from here. THAT SAID, this ignores the potential of metal prices bouncing back and a stronger US$ also having a positive impact on costs for Rio Tinto. SO if you take the historical EV exchange ratio (of 0.81) between the two stocks you would probably get a better indication for now.
NH:
This would then imply a fall of c20% in the Rio Tinto share price from last
nights close assuming that BHP Billiton stays at the current level. So this would then point to a fair value on the basis of that exchange ratio of around 2,000p. A new fair exchange ratio would then be 2x based on the equity;
NH:
The focus now needs to be on the US$ and hence the metal prices. If you believe that there will be a bounce back in metal prices then Rio Tinto will be more geared to this than it is the case for BHP Billiton. If not, then you really should stay away from Rio Tinto for now. Having said that, investors at this point in time seem to ignore the benefits of a stronger US$ on costs, which is not insignificant.
NH:
Rio Tinto itself said that 50% in the fall of metal prices tend to be offset by lower costs. Remember most of the miners produce in countries such as Australia, South Africa and Chile, where a stronger US$ reduces local costs significantly. Most LME based metal prices now trade at or below the marginal cost of production from which they normally tend to bounce back. The fear now, however, is that the marginal cost of production would have to fall back as well, so that prices will fall more than so far anticipated. We would say that although a risk the market ignores the positives from lower costs;
NH:
The stock’s valuation appears attractive on the face of it, but the higher debt matters. We price our new target price for Rio Tinto at 2,000p on the basis of the historical EV ratio, which would price the stock at 6x 09E P/E (using marginal costs of production for the price assumptions).
NH:
This sounds attractive against the historical lows, but then we investors should note that if the stock falls back to its historical low on a sales multiple basis, the stock could fall significantly more. As said, it all depends on metal prices or on how quickly the Group gets rid of its debt from here |
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Rubedo
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| Posted: Sun Nov 09, 2008 1:05 pm Post subject: |
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http://www.321gold.com/editorials/russell/russell111008.html
The never-ending search for gold
Richard Russell snippet
Dow Theory Letters
Nov 10, 2008
Extracted from the Nov 7, 2008 edition of Richard's Remarks
November 7, 2008 -- I was born on July 22, 1924. In those days, families that could afford it had their babies in a hospital. Those were the days before air conditioning. My mom told me I was born during the hottest New York July she could ever remember. I grew up during the Jazz age; I was seven when the '29 crash hit and changed everything. As a teenager, I grew up during the Great Depression. I still remember those days well. My parents' best friends lost their jobs, kids moved back with their parents, and job openings literally disappeared. I often ate lunch at the Automat. Hungry men and women would be sitting at empty tables. As you left the restaurant, your plate was studied. If there was any food on the plate, somebody would immediately sit at the table and finish up the food that was left. Outside, men on street corners had little stands at which they sold apples. My dad always bought an apple for a dime. Each time he would mumble, "He needs it more than I do." Dad had a soft heart, and hated seeing old men in tattered clothes standing in the cold with a little stand on which apples were displayed. Long lines of desperate men strung out at employment agencies, you often see pictures of those lines in today's newspapers. Parks were dotted with makeshift houses called "hoovervilles," huts made of cardboard and flattened tin cans stapled together. Hollow-eyed men walked the streets of New York, asking for "spare change." Peddlers leading horses and wagons shouted, "I give cash for clothes." (Note: Goldman Sachs was founded by a street peddler.)
Last night Ryan and Faye and I went to my favorite restaurant. We were the ONLY people in the place. "This is eerie," I remarked, "It's scary,-- it reminds me of the Depression." The owner came over to talk to us. "How are things going?" I asked. The owner replied, "It's tough, but we have one thing in our favor. We own the building."
Yesterday, Ryan and I went to a Toyota dealer to look at a Prius. A few months ago people were paying a thousand dollar surcharge to get one of the hot Priuses. This time I was tough on the salesman. I told him what I was willing to spend. He looked at me as if to decide whether I was serious. Then he brought out his sales manager. He showed us a Prius, with the company internal rundown which showed the dealer's exact cost. I told the sales manager, "Look, I'm in the financial business. I know you guys want to get rid of inventory, and you've got a heck of a lot of it (the lot was crowded with cars). Let's trade this car for cash -- your cost. I'll give you your dealer's COST for the car." The sales manager paused a few seconds and started filling out paperwork. "What are you doing?" I asked. He looked up and smiled, "It's a deal." We shook hands.
Afterwards, Ryan turned to me and said, "I didn't know you could be so tough, Dad." I replied, "Hey, I'm a Depression baby. There aren't many people alive today who have seen what I've seen." Ryan asked, "Do you think we're going to have another depression?" I thought a minute and replied, "Yeah, I think we're seeing the start of it now." Which is exactly what I think.
I also went through the 1973-74 market collapse. This thing is almost worse. This week we saw the Dow fall over 900 points in two days. Wednesday and Thursday experienced two crushing 90% down-days in volume. Lowry's Selling Pressure Index is now down just 6 points from its recent record high. There's still a mountain of stocks to be sold. I'm afraid this bear market is saying something very serious. By next year I think anyone under the age of 50 will be dealing with the toughest economic times they have ever experienced. Why do I say that? Take it as the instincts of an old guy who has been there before. Last night in the restaurant brought back ugly memories. So did our trip to the Toyota dealer. The punch bowl has been smashed, and the wine, like blood, is running into the streets.
But there's a major difference between now and the 1930's. During the '30s nobody had dollars. Dollars were scarce as frog's teeth. If you did have dollars in the '30s, nobody doubted their value. Today I doubt the viability of Federal Reserve Notes (dollars). I wonder what they'll be worth a few years from now. Fiat currency is "fool's money". It's only money because some government says it is. All fiat money is a function of debt and confidence. There's only one currency that represents intrinsic wealth (no debt) on its own. And it's gold. If you can't understand that, you'll never understand why men over thousands of years have fought, explored, and died in the never-ending search for gold. |
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rffrydr
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diesel
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| Posted: Mon Nov 03, 2008 7:39 pm Post subject: |
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Additionally don't forget IMF gold sales are coming up which could depress prices short term.
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rffrydr
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| Posted: Mon Nov 03, 2008 11:04 am Post subject: |
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Not so fast..... when you're talking supply/demand you're talking aisia--india. And there, some of the age-old traditions are "reformulating":
http://www.ft.com/cms/s/0/d6277a34-fc69-11dc-9229-000077b07658.html
| Quote: | Demand for gold in India plummeted 64 per cent year-on-year in the fourth quarter after growing 40 per cent in the first three quarters of last year.
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http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a06hi8J26jak
| Quote: | | ``Everybody will notice how coordinated my clothes and jewelry are, and not really bother whether those earrings are fake or real,'' she said. |
The real question is with the dollar and the US Debt. The vast and accelerated expansion of borrowing it thought to tip us into stagflationary imbalance. I'm favoring the opposite view: that debt is more than offset by the great deleveraging, that debt is rolled at historically shrinking (almost no-existant T-bill rate) cost, that "other" debt, e.g. outside US is now terra incognita for a long long time.
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HenryTo
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| Posted: Sun Nov 02, 2008 10:43 am Post subject: |
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Look for new projects to be canceled or postponed as financing dries up. This should be bullish for gold prices in the longer-run.
-----------------------------------------------------------------------------------
Gold miners hunker down amid financial storm
Friday October 31, 4:23 pm ET
By Sandy Shore, AP Business Writer
Barrick Gold, Newmont may delay projects, exploration amid 'unprecedented' financial crisis
DENVER (AP) -- North American mining companies are hunkering down to ride out a global economic slowdown; looking to rein in spending and perhaps delay some projects and exploration.
Barrick Gold Corp. and Newmont Mining Corp., the world's largest gold producers, have been forced to wrestle with volatile commodities prices, fluctuating oil prices, inflation and frozen credit markets. Some analysts believe the industry will lower 2009 production forecasts but the impact primarily will be felt overseas, where most of the world's gold mines are located.
Executives this week were blunt about the immediate economic outlook.
"Our company and our industry are currently operating in an unprecedented macro business environment, consisting of extreme commodity price volatility, mass portfolio liquidation, global inflation and limited, if any, access to capital," Newmont Chief Executive Officer Richard O'Brien said.
While major projects already under way will continue, the expansion of existing mines and some smaller projects will likely be put on hold, Argus Research analyst Bill Selesky said Friday.
"With the way commodity prices have come off in the face of a slowing global economy, what the miners are doing is starting to evaluate all their ongoing projects," he said. "It's all because of the credit crunch."
The year began well. Denver-based Newmont reported a fivefold jump in its first-quarter net income as production costs fell and gold prices jumped to a record $1,000 an ounce in March. Barrick swung to a profit.
But the global economy began to falter as the U.S. mortgage crisis spread. Gold has fallen to around $720 an ounce this month. At the same time the costs for diesel used to power giant machines spiked.
Gold is competing with the dollar as a safe haven for capital, said JPMorgan analyst John Bridges.
"Gold supporters, in our opinion, are losing some faith," he wrote in a research note.
UBS on Friday revised its 2009 forecast for gold to $700 an ounce from $825 an ounce.
"UBS believes gold will remain under pressure in 2009 from a combination of slowing demand for jewelry and disinvestment as inflation slows," UBS analyst Brian MacArthur wrote.
Newmont this week reported a 51 percent drop in third quarter net income, blaming higher production costs, plummeting copper sales.
Costs applicable to gold sales increased about $100 an ounce, according to the company.
Barrick reported a 26 percent drop in net income largely due to $97 million in impairment charges, but it also faced higher production costs and sold less gold.
Since January, Newmont's stock price has fallen 45 percent, from a high of $57.55 a share to $26.34 a share Friday. Barrick's shares have dropped 44 percent from a high of $54.74 to $22.74 a share Friday afternoon.
Peter Munk, Barrick's founder, blamed forces outside of industry control.
"The redemptions, mutual funds, hedge funds, the re-gearing of the global financial system has created this," he said. "We've never seen such dislocations and, in fact, we've never seen such turmoil."
Compared with other commodities, however, Munk believes gold still holds its luster.
"The decrease in value over the past four or five months in gold is a fraction of what all the base metals, oil, sulfur, wheat, soybean, lead, nickel has gone through," he said. "Which again, indicates the tremendous monetary value of gold as a means of creating high-level liquidity in terms of panic." |
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rffrydr
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| Posted: Tue Oct 14, 2008 10:21 pm Post subject: |
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Utilities...I bet you never expected to be so close to the center of attention in our great bull born of fear--the "yield bull." Rhymes with TXU. You just thought you were sitting it out.
Well it time to make the case. As the last standing permabear (no guilded clothing) I can hardly do it justice. I did buy a little BOOM. The answer, even for the buggy, is: it depends. Depends on where the money goes. Frank, my half-Brotherbear understands this even as he's gathering up the golden shards of his failed bull--the last and best thing to go.
http://www.financialsense.com/Market/barbera/2008/1014.html
It's not an easy question, surveying this tidal wave of money now upon us. What we don't see is the money it is replacing. It's not itemized in a congressional bill--nor could be at even 400pages. (The capital injection was snuck in there quietly at the last minute. Glad to have those extra pages now). Some say it's a deflation that can't be counted. Perhaps gold will tell--but maybe it will be speaking japanese 
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gregf
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| Posted: Tue Oct 14, 2008 8:34 pm Post subject: |
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Just so we have our heads together. I bought gold and miners in a big way back in '99. It was my coming out party as a bear after having been an ignorant bull for 15 years (good timing to wake up). Gold had been in a very long bear market and was long over due to wake up - it made a lot of sense to me to be long gold - (a real asset) in '99. Particularly considering how hated it was,....
I was long gold until the 1st parabolic run into spring of 2006 and sold it all. I sold my silver position soon after and rolled out of my gold stocks/mutual funds at the same time. Obviously, I was early to buy (but, not as early as some diehard gold bugs, lol) and early to sell, but, I did make a tidy profit.
As a side note - I wish I had a picture of the person's face at the post office when I sold my 1st $1000 face value of junk US silver coinage - I think it weighed about 70lbs and was in a pretty small (but stout) box. They went to grab it like it was full of newspaper stuffing like most packages. That was funny!
My kids have solid custodial accounts (for college) because of the tech bubble and the run in gold stocks. My broker would have ulcers over me whenever we talked about those accounts - particularly when I was so far into gold (the yellow dog, hehehe), but, my kids returns have kicked my trading account over the past 15 years except 1. Buy and hold on the right side of a trade is a good place to be,,....
I was a traders trader from 1999 to March of 2001 when I rolled out of BEARX, USPIX and all my puts and went flat. I generated a lot of commissions for Schwab. The market had exhausted me mentally and physically.
For the next few years, I coasted on HSGFX and a couple other mutual funds and $ cost averaged into some utilities that I have owned for a couple decades. I never had more than 30-40% of my $ invested until recent history. My posting history on marketthoughts is a testament to that. I've posted more in the past few months than I have in the past few years.
And this is the only traders/investors forum I've posted on or followed for the last 4 years. My how time flies.
Back to point
A chart that is worthy of contemplation is the DOW/Gold ratio:
When I bought my gold positions, I saw the tech bubble as the same animal as the roaring 20's only, the internet was all "story stocks" without a real business. Which scared the crap out of me.
Fast forward through the tech wreck and it's bear market. When I sold out of my gold positions, it was pretty obvious to me that a repeat of the great depression was wishful thinking on the part of gold bugs and perma bears. I looked at it like a gift. Gold became another commodity to me. Until recent history.
To me the lesson to remember is -
history never repeats but it sometimes has a familiar rhyme,...
I do think that right now is a great time to get your financial house in order, if it's not already (get out of debt, have a reasonable lifestyle, manage a budget, watch the small stuff, etc).
I do agree with Hussman (we're not going into the next great depression), but, I also believe that gov't is doing some things which will have negative future consequences. We're opening the door in a big way to ideas that have a familiar ring with events of the past that were bad ideas - but now have new names,....
It only took a few days for the senate and house to take a 3 page paulson plan to >400 pages, from 0 pork to ~$150B in pork. Which, I 'm not saying the Paulson plan was perfect, but, it was simple and without pork,...
Our elected officials have never met a tax dollar they could not spend (either party) for a very long time. We're setting new boundaries on how big a fleece job they can get away with (which, I think the rescue plan was needed, but, it's going to have far more reaching consequences than anyone is thinking about now).
This crisis is another wake up call to those that will listen. I think as great as our free market system model is, they're desire to centralize power is far greater. History shows us this in spades - power ALWAYS consolidates (with one notable exception).
Our founding fathers endorsed and commited to the ONLY 'revolution' in history that decentralized power. And they were the wealthiest of our citizens, all were "made men" - they were the ruling elite, they could have been king(s) - but, they had a vision of the future that they believed was more important than themselves, their comfort, their fortunes. If we had lost the revolutionary war, they would have all be executed as traitors to the crown, their wealth confiscated by the state.
How novel. How unique. How selfless.
The fiat money system we have, which has ruled the world for so long, is destined to fail, like all fiat money systems which have preceeded it. Gold (and silver) will become the standard currency again. Hopefully later rather than sooner.
In any case, be a good student of history and it's rhymes. |
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diesel
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| Posted: Tue Oct 14, 2008 3:40 pm Post subject: |
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To illustrate I expect a pullback in gold similar to the one shown below in the 1970-1980 gold bull market. Somewhere around $650 wouldn't surprise me.
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gregf
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| Posted: Fri Oct 10, 2008 11:00 am Post subject: |
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| rffrydr wrote: | | Margin Call to the Bugs; hedge-fund forced redemption....and dramatically higher expenses with no credit for mine expansion. |
Gold has been decoupled from the stock index for about a year though? I overlaid a chart of CEF vs GDX,...realize that's not exact but good enough to see the divergence jump out,.. |
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rffrydr
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| Posted: Fri Oct 10, 2008 10:47 am Post subject: |
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Margin Call to the Bugs; hedge-fund forced redemption....and dramatically higher expenses with no credit for mine expansion.
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gregf
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| Posted: Fri Oct 10, 2008 10:35 am Post subject: |
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| It's very interesting to me that the GDX is about 50% off it's highs while the metal is within 10% or so,.... |
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rffrydr
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