gold


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gold-monthly

I was interested in this chart because of the MACD divergence. However, the Gold/Oil ratio suggests that gold does indeed have to fall lower to return to the 10yr ratio.

In the short term…say next 3mths, I think gold has a potentially trade-able bottom and is due for a bit of a bounce.

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We build wealth by increasing our own production. That is, we become more valuable to others within society when we do things that they find valuable. This is why society rewards great innovators and people who tend to work hard.

Betting on commodities like gold is often a bearish bet against human productivity and innovation. When you buy a block of gold you are essentially buying an insurance asset whose value will increase if the value of dollars collapses or falls. In other words, you are betting directly against the ability of US workers to produce and maintain the value of the dollar.

Betting on gold is largely a bet on faith. That is, you are betting on the idea that someone else will believe gold is more valuable in the future. Although gold is valuable to some degree as a commodity there is also a substantial portion of the population who wants to own gold because it is viewed as money or protection against paper money. I’ve referred to this in the past as a “faith put”, a premium in the price that inflates its value due to sheer faith.

I don’t mean to rant against gold. I just think that there are some fundamental reasons to keep gold in the proper perspective when we consider its value as a portion of our asset holdings. In my view, it’s not the type of asset you want to build a portfolio around due to the aforementioned thoughts….

I’m running out of time on my last assignment of the year, otherwise I would refute the argument…essentially that gold limits/reduces productivity.

The argument is so weak, surely it does not need rebutting?

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While I wouldn’t be buying gold at current levels, silver is a lot more attractive. Bitcoin, not at all. What if, in your Armageddon situation your computer went down? You can always dig up your hoard from the back garden.

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NOURIEL ROUBINI: 6 Reasons Why Gold Will Plunge To $1,000
Joe Weisenthal

Daily Ticker
Gold has been getting poleaxed in recent months, though it remains just below $1400/oz.
In a piece up at Project Syndicate, economist Nouriel Roubini says gold will fall to around $1,000 before the end of 2015.
He gives six reasons why.
We summarize:

Gold spikes during extreme crises. The crises are over.
Gold does well during periods when there’s a risk of high inflation. That clearly is no longer a big worry, given how much central banks have unsuccessfully tried to stoke even modest inflation.

Will the Federal Reserve get the timing right in removing the monetary stimulus so as to provide perfectly for just enough, but not too much inflation? Really? Not a chance in hell. Inflation remains a risk should the economy heat up, although, its looking really bad currently.

Now with the economy recovering, nobody wants to be in rocks that don’t pay any dividends.

A valid enough argument. But holding some assets in gold/silver is not a bad idea. The thing is getting on the train that moved 13yrs ago is the issue. Wait until gold is again hated.

Real interest rates are rising. That kills gold.

True, but until the Fed ends QE, no-one knows whether that will remain the case. Currently the Fed has been buying toxic MBS that the banking system still holds.

Governments with debt issues are selling gold.

I wouldn’t worry about government [apart from volume] timing, they are uniformly horrible.

Gold was juiced by right-wing fanatics in the US. That boom is over.

Is that an argument?

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Barry Ritholtz has a ‘gold’ post up. It has some poor arguments contained in the article.

3) Cyprus is a terrible example of “governments’ new confiscatory inclinations.” Readers need to recall that Cyprus banks were paying 6% in a zero interest rate environment. These were not “risk free checking accounts” but rather high yield, high risk trades. This “confiscation” as described by the usual paranoics was nothing more than a capital loss in a high risk trade. (about 16 months of interest payments).

That argument is accurate for time deposits. It is inaccurate for demand deposits. The banks took a haircut from ‘demand deposits’. This is clearly government sanctioned theft, so blatant, that even Joe Six-pac ‘get’s it’.

2) Quantitative easing has been going on int he US for 4 years, and worldwide for a while. What is the basis of Hathaway’s assumption that this is a net positive for Gold? We have so few examples of this phenomena that I do not understand his analysis here.

Continued monetary debasement will tend to push people into alternate forms of money.

History shows Gold trades differently than equities. Why? It comes back to those fundamentals.

It has none.

Its fundamental value is that it is, and has remained for thousands of years, money. Money has fundamental value in that it promotes exchange through removing the necessity for the ‘coincidence of wants’, in addition to numerous other valuable variables, which I have enunciated previously, and are not necessary to rebut Barry’s assertion.

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Gold is getting shellacked this morning, as is silver.

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Hulbert Gold Newsletter Sentiment Index

Gold is currently experiencing low sentiment readings. Not a major surprise, with Gold declining and going nowhere for quite some time now.

With the BoJ increasing its inflationary target via money expansion and the effects that will eventually have on other currencies, who’s economies also seek exports, will likely stimulate the PM markets once again. As a long term trade I’m looking more to silver currently.

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Gold, from its chart is saying what? Really, no-one knows. If it breaks support, the bears will argue its ultimate demise, if it breaks resistance the bulls that $30K beckons.

For me, gold as a long term position, or investment, is long gone. I missed the train. The price, if the bears are correct, is far too high to take on new long term positions that might be under water for decades.

The risk of missing out on further upside is a risk that can be offset. Either through other opportunities, viz, stocks, or through trading gold rather than investing.

Pairs trades are one way, short term trades based on the COT are another. I will take a look at the pairs trade that was signaled a couple of weeks ago.

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Not much. The trade is showing a loss currently, but there is five months remaining on this trade to make it profitable. Being market neutral, I have no view on direction other than the two assets will close the spread. With 5 months remaining on the trade, plenty of time.

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