Gold

Prospero · Senior Poster Joined: 01 Mar 2006 Posts: 82

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.

gregf · Posted: Fri Oct 10, 2008 11:00 am Post subject:

rffrydr · Posted: Fri Oct 10, 2008 10:47 am Post subject:

Margin Call to the Bugs; hedge-fund forced redemption....and dramatically higher expenses with no credit for mine expansion.
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gregf · Posted: Fri Oct 10, 2008 10:35 am Post subject:

It's very interesting to me that the GDX is about 50% off it's highs while the metal is within 10% or so,....

rffrydr · Posted: Wed Oct 08, 2008 6:53 am Post subject:

You can stick a few ounces in your mattress but the world now is one of institutions. Suppose they want to bug out too?

http://www.ft.com/cms/s/0/b2888234-94d1-11dd-953e-000077b07658.html
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rffrydr · Posted: Fri Oct 03, 2008 1:42 pm Post subject:

The new gold--"liquid gold"

http://online.wsj.com/article/SB122298871817500225.html
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rffrydr · Posted: Fri Sep 19, 2008 10:30 pm Post subject:

Gold speaks YMMV:

http://www.cnbc.com/id/15840232?video=860815021&play=1
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rffrydr · Posted: Tue Aug 26, 2008 7:50 am Post subject:

A little conspiracy talk for the bugs:

http://www.financialsense.com/Market/kirby/2008/0825.html
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HenryTo · Posted: Mon Aug 25, 2008 11:37 pm Post subject:

Odysseus,

Dividends can be a very powerful force. Please see first chart in the following commentary:

http://www.marketthoughts.com/z20080504.html

Even if you take the worst return series (i.e. Large Growth stocks out of the L-G, S-G, L-V, and S-V), it has still returned over 70x from 1962 to 2007. And about 33x from 1973 to 2007. Once you start diving into the value category, your historical returns are off the charts (more than 260x from 1962 to 2007 and more than 75x from 1973 to 2007 for large cap value stocks). I don't have the data series off-hand but I can post some historical total returns data of the S&P 500 (from 1926 to July 2008) tomorrow.

Odysseus · Posted: Mon Aug 25, 2008 8:28 pm Post subject:

That was probably the sorriest piece an analysis I've seen in a few years. I don't know the guy but he is a poster person for 'Let me massage the stastics and I'll prove the world is flat.'

Loved his 'the Government can confinscate your gold at lower prices.'

The government cares not a whit about gold or who owns it. An unproductive wheat farm, maybe but not gold. How absurd.

I liked his comparing gold to the treasury bubble. The dates of the excercise are instructive as well. Peak gold bubble of 1980 and trough bonds? How silly of me to think this was just a co-incidence.

Eras come and go. Compare the world price of gold (not the $35 and ounce fraud) to bonds from 1967 through 1980. Little different outcome eh? Hows bout 2000 to now?

I'm not a gold bug nut or champion and own less than an ounce that I wear on my finger but this loonie (no offence to my Canuck bros) needs a remedial course on sums and takeaways at Miss Norma's preschool.

Gold 1974 to date...25x

Oil 1969 to date...57x

Dow 1966 to date...11.3x

Ya, I know. No dividends but I can cheat also?

In the West, gold is a ware to all but the diehards. Other cultures identify with gold differently. Since those other cultures are accumulating our assignants at a rapid pace, they might prefer gold to Gucci leather as an investment.

Sorry for the semi-rant but I hate sloppy contrived analysis. It's what makes for pendantic dullards.
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rffrydr · Posted: Mon Aug 25, 2008 6:15 pm Post subject:

Simons on Gold:

Gold Has Lost Its Luster

By Howard Simons
RealMoney.com Contributor
8/19/2008 6:41 AM EDT
Click here for more stories by Howard Simons Try Jim Cramer's Action Alerts PLUS
CLICK HERE NOW

An email from a RealMoney reader a few weeks ago asked in part, "Anyway, are you for or against gold? It is not clear." I responded, "One cannot be "for" or "against" gold. Sometimes I'm bullish, sometimes I'm bearish. That's why it's 'not clear.'"

Because gold seems to be a religion as much as a market, this answer might infuriate some. After all, imagine the stunned silence in any religious gathering if you were to say, "Well, let me run the numbers before I decide whether I really believe this week. I did a month ago, so you never know. I still could be with you, brother."

But gold is a market and nothing more. And if I may allow myself one dig before proceeding, it is not a smarter market than any other, despite its proponents' claims in that direction. For if it were, the very smart traders who comprise that market would have acquired all of the world's wealth by now and enslaved the rest of us chumps. As Willie Nelson sang in another context:

All the Federales say,
They could've had him any day.
They only let him slip away,
Out of kindness, I suppose...

Gold's Warnings

First, you are invited to refer back to a column from early July on how gold had lost its constancy with respect to inflation and currency risks. This was a hint that gold was in trouble; when a market's behavior vis-à-vis its known fundamentals changes, its price is about to disconnect and move sharply. Sometimes, as in the case of the many bubbles we have seen in our collective lifetimes, the price can disconnect by going to unsustainable valuations.

Other times, it can disconnect and signal us the fundamentals are about to change. This was the case with gold. It was signaling that the problems of runaway inflation and dollar weakness were about to change. It also signaled something far more sinister, and that relates to the role of the federal government -- our own federales -- in the economy.

That column was written just over a week before the de facto nationalization of Fannie Mae (FNM - commentary - Cramer's Take) and Freddie Mac (FRE - commentary - Cramer's Take). As more and more of our financial system becomes beholden to the federal government as a source of funds, credit, shareholder protection and management entrenchment, it is going to have to play by the federales' rules.

One of those rules could be a repeat of the 1933-1974 experience banning U.S. citizens from holding gold in monetary form (the best predictor of something happening is whether it has happened previously). That would make gold's price move to whatever level someone decided. Would that level be higher or lower? Put me down for "lower."

Many Unhappy Returns

Now let's get to the meat of the matter -- whether gold is a good investment. As all investments must be judged in reference to the risk-free rate, let's compare the long-term total return of gold as measured by backward-adjusted futures to the total returns of both three-month Treasury bills and 10- to 15-year Treasury bonds as reported by Merrill Lynch. Backward-adjusted futures incorporate both the interest rate and physical costs of carry for a commodity.

Comparative Total Returns:
Bonds, Bills and Gold

http://images.thestreet.com/tsc/common/images/storyimages/081808_simons01.gif

Click here for larger image.
Source: Bloomberg; CRB-Infotech

The comparative performance going back to December 1977 is so lopsided we have to display it using two scales; gold is on the right. The last time the total return on gold exceeded that of three-month T-bills was April 1981, marked with a green line.

How can this be so? The answer is compound interest: While bonds and bills compound, gold faces discounting, or inverse compounding. The money tied up in gold futures includes an interest rate carry, and its cumulative effect over time is an enormous hurdle to overcome.

Comparative Returns Since Aug. 17, 2007

http://images.thestreet.com/tsc/common/images/storyimages/081808_simons02.gif

Click here for larger image.
Source: Bloomberg; CRB-Infotech

What if we shorten the timeframe up considerably, say to Aug. 17, 2007, the date the Federal Reserve cut rates before the opening? Let's widen the comparison out to include high-yield and investment-grade corporate bonds as well as three-month Treasury bills and an index of government bonds of all maturities. Once again, we have to use two scales, with the short-term total return on gold dwarfing that of the fixed-income instruments.

While gold's dive over the past month is the dominant feature on the chart above, please note how it was preceded by the dive in high-yield bonds' total return. Is there some sort of long-term relationship between high-yield bonds, which are a barometer of risk acceptance, and gold?

Gold Rose as Investors Fled Risk

http://images.thestreet.com/tsc/common/images/storyimages/081808_simons03.gif

We can take the data back to February 1990. Prior to Aug. 17, 2007, marked in blue, the general relationship was defined by the price of gold itself; the green trend curve declined as gold declined and rose as gold rose. After the credit crunch started to bite a year ago, marked in red, the relationship changed. Gold shot higher as high-yield bonds stalled. Gold's current retreat is still within that trading range for high-yield bonds.

This summarizes gold's dilemma: It had everything -- and I do mean everything -- going for it. You had higher inflation, dollar debasement, huge flows into commodity-related instruments and terrible returns elsewhere, and it finally collapsed under its own weight. If the credit crunch is going to be with us for a while -- and I am afraid it will be -- global economies will contract, wealth levels will recede and the fuel for a future gold rally will disappear.

That is not being "for" gold or "against" gold. That is saying it is a poor long-term investment in a risk-averse world.
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rffrydr · Posted: Sat Aug 23, 2008 7:34 pm Post subject:

Dr. Doom has been forced into an interesting contortion on his continued buying of gold in the face of his (and mine) prediction of plummeting asian surpluses and sharp appreciation in the dollar. It's now a "forced savings" only for those with strong equity-based cashflows. Keep buying down to $600. I wonder how his retail followers feel about this?

http://ftalphaville.ft.com/blog/2008/08/20/15214/dr-doom-let-us-just-assume-the-financial-system-blows-up/
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rffrydr · Posted: Fri Aug 22, 2008 4:46 pm Post subject:

US Mint has to interrupt sales of gold. A run on the American Eagle, that's some bullish sentiment:

http://www.bloomberg.com/apps/news?pid=20601087&sid=aCxIWL5S4le4&refer=home
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rffrydr · Posted: Thu Aug 21, 2008 10:03 pm Post subject:

Still a few ounces of funding to be put to use before the quarter:

http://www.busrep.co.za/index.php?fSectionId=&fArticleId=4569223
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dknoester

http://watch.bnn.ca/trading-day/august-2008/trading-day-august-19-2008/#clip84424

DK
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BlueDaze · Experienced Poster Joined: 22 Nov 2006 Posts: 76