GOLD: NOT JUST ANY OTHER COMMODITY
By Walter Kurtz, Sober Look
Gold has been selling off recently with copper and other commodities on the back of the rapidly strengthening US dollar and demand uncertainties (particularly from emerging markets).
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| US dollar against currency basket (DXY) |
But the tricky thing about gold is that it’s just another commodity until it’s not… We saw an example of that this morning as things started looking scary across financial markets. The 2-year German bond traded at negative yield for the first time as flight of capital accelerated (someone was willing to pay the German government to hold on to their euros for 2 years!).
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| Current 2-year bund yield (3 days, intraday) |
And as one would expect in such an environment, gold suddenly decoupled from copper. The sentiment quickly shifted from global demand uncertainty for commodities to urgent flight to safety. And gold became the beneficiary of this sentiment shift.
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| Gold futures vs. copper futures (3 days, intraday) |
8 Comments
That seems to make cent$ to me also. I personally don’t view Gold as a safe Haven..but who the hell am I to argue with many others with deeper pockets than I that think that to be true.
We like Gold/GDX..we don’t own it yet. We are looking for a large drop before we come back in to the tune of 25%-35% further down from here.
We may be wrong on this one. I don’t pretend to know what others think they are seeing but we will not come back into Gold unless it can move above a certain level.
We are not going Naked into gold here simply to diversify a portfolio. We think many investors will be scratching there heads wondering why they got this trade wrong when it’s said and done. I would imagine a bazooka of more easing would help the gold bugs and move the price above the moving average where I’d take a position as well. Absent any further easing..by June we will not own gold because it’s a safe asset. ITS NOT
Let me edit my comment-
Gold doesn’t care what I think! We will buy lower or Gold will tell us to go to hell and we need to own it. We don’t have an opinion either way on the yellow metal. Our job is to be flexible…so scratch the first comment.
of COURSE gold cares what you think! your opinion and those of the collective followers of gold, one way or another determine its price! it has no value other than what you and 1000′s of others DO think about it!
Nah, never want to scratch your comments VII, I learn too much from them! thanks!
rhp
As I said last week, I have got short again in gold/silver, already at profit. Have scrapped all my long commodity positions too (NG).
It wouldn’t be strange to see gold at 1000 in some months (or in 2013). I will get a small long position though when it stops falling, but I don’t know if it will take the last highs (at least not any time soon).
I sold 80% of my gold back when it was about 1660 an ounce. Now the tricky part is that I plan to buy a little to get back in, but at what price? My guess is that I might be able to buy gold as low as $ 1520 an ounce or even lower. ]
Again, my guess is that it doesn’t go a whole lot lower than 1500 to 1520, but who knows? It is even harder to value gold than it is to value the equity market!!
todays hard bounce off 1530 [for the 4th time in 8 months] has shown you where the floor is……..period.
answer to buffet on gold from david einhorn:
“The debate around currencies, cash, and cash equivalents continues. Over the last few years, we have come to doubt whether cash will serve as a good store of value. If you wrapped up all the $100 bills in circulation, it would form a cube about 74 feet per side. If you stacked the money seven feet high, you could store it in a warehouse roughly the size of a football field. The value of all that cash would be about a trillion dollars. In a hundred years, that money will have produced nothing. In a thousand years, it is likely that the cash will either be worthless or worth very little. It will not pay you interest or dividends and it won’t grow earnings, though you could burn it for heat. You’d have to pay someone to guard it. You could fondle the money. Alternatively, you could take every U.S. note in circulation, lay them end to end, and cover the entire 116 square miles of Omaha, Nebraska. Of course, if you managed to assemble all that money into your own private stash, the Federal Reserve could simply order more to be printed for the rest of us.
the germans are now saying the periphery must put up their gold to get Eurobonds…….what????…..that old heavy dusty useless relic???….why don’t they just get them to sign some papers and be done with it?……after all, paper’s been money since the chinese discovered it in the ninth century……..now that’s what the US needs–a paper money mine……wait, we already have one…….oh, well…..
http://www.telegraph.co.uk/finance/financialcrisis/9298180/Europes-debtors-must-pawn-their-gold-for-Eurobond-Redemption.html
No. The price of gold responds to what REAL interest rates are. When REAL interests rates become positive again gold should/could sell off dramatically. Until then I expect gold to do well.