GOLD BUGS SHOULD BE WATCHING CHINA
By Walter Kurtz, SoberLook.com
Never talk to a gold bug about a sell-off in gold. Each sell-off has to be a buying opportunity:
Dow Jones News Wire: In the medium-to-long term however, gold’s uptrend remains intact, gold developer G-Resources Vice Chairman Owen Hegarty said.
“The selling we’ve been seeing is more to do with pre-Christmas book squaring and technicals than anything else,” he said. “At the moment we’ve got tremendous volatility…and so it’s no surprise we’ve got some mispricings that will be corrected.”
Next year, gold will trend higher as investors seek safe stores of value and central banks continue adding to their gold reserves, he said.
Standard Chartered also remains bullish on the medium- to long-term prospects for gold, due to robust Asian demand forecasts and concerns over sovereign debt that should spur safe-haven buying, it said in a report Wednesday.
“Consumers should look to buy the dips in gold, on the basis that any weakness is likely to be short-lived and problems in the global economy will be supportive over the medium term,” it said.
Perhaps. It’s all “technicals” – Asia demand will pull gold out of its funk. True, Asia continues to be a big source of demand for gold. But should Asian economies begin to struggle, it is possible that gold will follow. Certainly in the short term the Asia risk impact on gold price is clearly visible. The chart below shows how gold futures have been moving in tandem with China’s stock market.
Biased charting. Look at the same Shanghai chart for the last 5 years – it’s down 60% from it’s peak in 2007, while gold is…….up, I believe. Let me check on that just to make sure.
http://www.ritholtz.com/blog/2011/12/what-was-that-about-correlation-causation/
A break below 1610 wouldl break a 3 year uptrend channel. Technically speaking..that’s not good.
With out Monetary Sugar in the U.S…DXY heading higher…and Fiscal Austerity in Europe…Right Now I would caution defending your old yellow friend.
On the flip side…just in time for the holidays to buy that gold bracelet. And matching pinky ring and necklace if your from Jersey.
If the change in the number of gold merchants paying someone to hold signs on roadways is an indicator, gold is done.
I was worried prematurely when Glenn Beck was peddling gold coins but that seemed to be an adaption of an old scam.
TPC wrote a post this fall that basically said that China lays in the floor for gold. When he did so I ran not walked out & exited my positions.
Reason? Empty cities, EU recession, our BSR. That is a demand shake imho. Latest movement in China is now beginning to reflect this in terms of technical weakness.
Comex @ the close came up from 1565 @ 4PM to about 1576, broke below the 200 MA, Kitco: “panic selling and stop positions”.
At least he wasn’t arguing an inverse correlation of the US $ and spot gold:
http://globaleconomicanalysis.blogspot.com/2011/12/dear-nouriel-roubini-fundamental-case.html
gold now the dow next.
1450 would touch 8 year channel bottom.
i will look to buy FSG (2x down DOW/ up gold)……gold is bottoming before the DOW as usual.
exit before ben announces qe3 end of feburary at DOW 9400
piigs exit EU march-may.
it’ll be 3-4 years to the final bottom…..when QE does no good but push gold higher.
dow /gold goes to parity…..1:1
this is not so much about china as it is about a deflationary wave that will push ben and the ECB to print money.
gold 2500$ in 12 months.
Ben can’t print money.
u just keep believing that.
It’s a legal and operational fact. You’ve been around here long enough to know this. If you have substantive proof otherwise, we’re all ears. Otherwise, you are relying on belief, not me.
Something is driving gold up for 11 years. That “something” appears to be correlated to QE and various easing programs by the Fed and central banks. I understand the mechanics of the equation, but gold continues to rise, after every correction, and the timing of its rise appears to have a 100% correlation to CB easing. I’m a simple guy, and that works for me. Buy low and hold has worked for 11 years with gold, and all the conditions appear to be in place for it to continue to work. If I bought at $1900 an ounce, I’d be concerned. However, just as when buying P&G or XOM or IBM, buying at peak, then having the economy fall down around your ears hurts when owning those securities as well, so if one applies some simple logic to gold (buy after major corrections), it serves a purpose to increase one’s wealth to a degree.
I appreciate your perspective, but my beef is with Mr. Boat’s misrepresentation of fact. I have no opinion one way or another about gold, per se. To me, the facts are, it is a malleable metal that is highly conductive and does not oxidize.
I don’t have the slightest idea about what gold will do. I think the China slowdown-> gold down; China up-> Gold up thesis does not have a solid ground. Given How long it went almost straight up, how risk/loss averse people are these days, the fact that many crazy people re overweight gold (i.e., having over 20% of your assets in gold) in what, let’s not kid ourselves, is a useless metal unless the current system fails; it may break 1500 easy.
Gold is all psicology. ZH was shocked at what Roubini tweeted today about Gold.
The chinese will sell their gold as well. When they need money in order to stay alive.
I am a gold bug. And I DO know gold can sell off/tank. And contrary to what the hyper-inflationistas say. Gold will – in the long run – do well in both inflation and deflation. Call it “”insurance”".
Octavio i’m always reading your clever posts but this time I think you’re a bit superficial and biased as all people in the world when the topic is gold (myself included). As you know the Harry Browne’s permanent portfolio outpermoded most of the other portofolios with minimum volatility and it’s 25% in gold. You wrote that gold is psycology. Right, like everything else so you cannnot invest wisely looking at a supposed usefulness of something without weighting how people react, think, despair etc… Daniel Kahneman is a much more important lecture than any other economic or finance textbook.
Alberto, U R rite. I have invested in the permanent portfolio, great style. I will rephrase what I said. I am not In Gold now but when and if I find it attractive, I jump in with leap options, that way I leverage my investment. The upside is penalized but the downside is limited to the option premium. U C, I try to profit from a big up move via no more than a 5% investment. The problem is that for a direct investment in gold to make a difference in a portfolio it must be at least around 20-25%. 5% in direct gold is a joke it does not insure against anything. And it doesn’t help much your return even if it doubles. However, with 20%+ in gold, it’s volatility (gold has ALWAYS being very volatile) will give you tummy aches, especially now when all risk assets classes are highly correlated.
I sold PRPFX When gold was at around 1850 in its way to 1900 this summer. I see that YTD it is about flat, just like the sp500, ergo my thesis of gold providing little diversification these days while you do get the volatility.
Yes if you trade gold you’re totally right. I did more or less the same. I’ve a permanent gold portfolio in coins. I’ve bought it may be 15 years ago. I’m not interested in its value, I count it as an “off personal balance asset”. It’s really for emergency and I will be happy if I will never need it. Then I’ve a trading portfolio that goes from zero to 20%. Now it’s 10% and it is balanced by an equal amount of US dollars at about 1.40 vs. euro. A larger part of my holdings is NOK, a strong currency that’s a good proxy of the euro if they will be able to kick the can further but a much stronger currency anyway. Of course this strategy is conditioned by the fact I’m living in Italy so I think it’s prudent. I don’t know what will happen in the next months. Evrything and its opposite are equal bets, the worst trading environments in decades.
You are better positioned than me. If the system goes kaput I will starve since I need an ATM to get cash. So where in Italy do you live? I am Italian, born in Venezuela, have relatives in Campobasso, Campolieto, a small paese with about 3000 people. I go visit most years. Have a brother in Greece too (ouch!)
I’m living in the center north of Italy 4 to 6 months a year, around the globe for the rest. I have 10% of my assets in gold coins 5% in bills and another section in the safer place around and all the other assets are world bank, bei and scandinavian bonds. I totally don’t care about return on capital but on return of capital, this at least for the next 2 years when the financial system will be totally different and I’m as pessimist as today since 2008. I would do it if I was an american, a german a briton or an indian. There are still so many deceived people everywhere but expecially in the US and GB. They are not safer, they will go down too, just differently. There is ONLY ONE financial system not the european, the american and so on, you know at least as good as me how deeply everything is linked. Not a surprise that Mr. Geithner is in Europe almost weekly. It’s vane. And when I read that GB banks or US are better than the insolvent european banks (they are insolvent indeed) I can’t avoid to smile. For me there is only one possible way out, the sweedish way. The first who proceed in that direction will win the currency war. The current financial system is dead but it will do more damage before being buried. We will have a few extremely hard years ahead.