Charts of the Day: Gold, and Baltic Dry Index 35 comments
October 17, 2008
| about: GLD
-
Font Size:
-
Print
- TweetThis
One of the interesting charts I have been watching is that of gold (above). Gold bulls have said for years that a runup in inflation, a weak dollar, and a global financial crisis would all serve to too a flight of investors into gold. They also said that all of this would push prices well above $1000.
Well, guess what? We haven't seen it. To be fair, gold did have a nice run, but it didn't surpass $1,000. Moreover, look at all of the panic we have seen in the markets lately. And during all of this, gold prices have been unable to make new highs, and have now moved lower.
Gold hasn't even been able to surprass its highs from mid-July. To me, this series of lower highs speaks to lower prices in the near future, not higher. Moreover, if this hasn't been the absolute best period or market phase during which to own gold, what is?!? Gold bugs had better craft a new story to sell.
Last, I wanted to show a snapshot of the Baltic Dry Index (below). This is an index that tracks the activity of global shipping rates, and is a proxy for how robust the global economy is.
As you can see, this index has absolutely plummeted. This is a sign that the global economy is slowing markedly. For those that continue to think that emerging markets will continue to growh through this period without a hiccup, this chart begs to differ.
Well, guess what? We haven't seen it. To be fair, gold did have a nice run, but it didn't surpass $1,000. Moreover, look at all of the panic we have seen in the markets lately. And during all of this, gold prices have been unable to make new highs, and have now moved lower.
Gold hasn't even been able to surprass its highs from mid-July. To me, this series of lower highs speaks to lower prices in the near future, not higher. Moreover, if this hasn't been the absolute best period or market phase during which to own gold, what is?!? Gold bugs had better craft a new story to sell.
Last, I wanted to show a snapshot of the Baltic Dry Index (below). This is an index that tracks the activity of global shipping rates, and is a proxy for how robust the global economy is.
As you can see, this index has absolutely plummeted. This is a sign that the global economy is slowing markedly. For those that continue to think that emerging markets will continue to growh through this period without a hiccup, this chart begs to differ.
Related Articles
|
-
The Seeking Alpha 100
See allThe top 100 stock
market authors
selected for publication
Seeking Alpha 100 » -
Fastest Climbers
Authors with the largestSee all
increase in followers
in the last 7 days
Fastest Climbers » -
Top Commenters
Top commenters,See all
as ranked by their peers
Top Commenters » -
Top Instabloggers
The 100 most active
Instabloggers.-
1
David Fry
-
2
TraderMark
-
3
Don Dion
-
4
Cliff Wachtel
-
5
Mike Havrilla
Top Instabloggers » -
1
-
Top StockTalkers
TopSee all
StockTalkers.
Top StockTalkers »
This article has 35 comments:
Credit notes from one bank to another have been turned down so the shippers are unable to load and send their ships.
Gold has been kept down due to the anticipated and actual selling by banks from there stores as they raise cash to cover this ongoing credit situation.
Unless you think the Chinese will decide capitalism is too risky and go back to subsistence farming.
The time to own gold was a few years ago. As recent events show, it's too risky now.
If you do then I have a great condo in Miami, it will go up in value, TRUST ME.
Maybe you should ask yourself why the paper gold market doesn't reflect reality, and how long this will be the case?
As you actually admitted in print to admiring Paulson (who is so stupid he apparantly didn't see this disaster coming), I doubt that will be the case.
Just curious...what is the retail demand versus other types of demand for gold (industrial, central banking, etc)? I know zilch about gold, but I wouldn't expect retail demand to be a large proportion of the overall demand.
Bob
According to the World Gold Council, investment has averaged about 19% of demand for the past 5 years. Jewelry has taken up 68%, with India buying a fourth of that. That is important because in India, as in most other Asian countries, gold jewelry is considered a form of investment or wealth protection.
I would assume the 2008 numbers will show a significant increase in investment buying, along with a drop in jewelry use of gold.
Another indicator of demand for pm's is the fact that the U.S. mint is unable to get enough gold and silver to supply investor demand for coins.
Demand at the Austrian mint is up 240% over last year, and just sold 3x normal volume in September.
Rand Refineries, maker of the most widely traded gold bullion (krugerrand) ran out of stock in August.
Gold lease rates have tripled in barely over a week, showing banks unwillingness to part with their gold.
India averages 800 tons of gold demand per year - they took in 164 tons in august and sept. with their biggest traditional buying season in Oct.
Demand for pm's will probably continue to rise as "main st." realizes that the bailout is not intended to help them.
Target $ 500/ oz.
Half-kidding....
The gold price cycle is quite long and we are maybe close the the first third of this bull market which started in the early part of this century. The only thing that will invalidate this view is if physical metal trades below futures and under the current environment I am more likely to marry the pope than that happening.
So, look at GDX. Lower than it has been in a long, long time. Gold is going down. You want a trade? Long oil, short gold. They are both headed down, but if you figure oil bottoms at 50 or so, gold is definitely going down more - which puts it easily under 700.
Had its eyes closed last October, did it?
The gold bugs just do not seem to grasp that this is a deflationary period, not inflationary.
Throughout history gold has maintained a more or less stable purchasing power; that is its value against other commodities remains more or less fixed. With all other commodities plunging vs. the dollar, what makes anyone think gold will go up? The gold bugs are ignoring fundamentals in favor of wacko conspiracy theories.
Once the deleveraging is done the time to buy commodities will come back, along with significant inflation. We aren't there yet.
For those who MUST own physical gold, YOU CAN TAKE DELIVERY OF A FUTURES CONTRACT. Gold coin shortages are due to production capacity issues, not a shortage of actual gold.
I have to laugh when someone says things like, " The gold bugs are ignoring fundamentals in favor of wacko conspiracy theories. "
I guess that printing trillions of dollars of currency and treasury notes is fundamentally sound economics. Historically, fiat currency has been a proven failure and today's dollar, yen, euro and all the others will be no exception. If gold and silver coin shortages are due to production capacity issues, it would be logical to assume that there are a lot of people buying bullion coins. I guess all these "gold bugs " are wackos.
As for investment in gold and silver, it's the only real payment available, but if you want "guaranteed metal" expect to pay a much higher price than what the markets are showing. Don't buy into mining unless you are actually getting ownership of the mine and then have it checked by trained geologists before consideration. Owning a percentage of a mine is owning only paper, and I won't take the shaft for anything.Owning a piece of paper that says there is gold on deposit is just as bad. Get the metal and burn the paper unless you can find someone that will take it.
Seriously , go out to a coin show, flea market etc and buy a silver dollar, kennedy half, a.999 "international trade unit (1ounce Silver coin), cut all in half and then test with acid and see how many are really silver all the way through, there are incredibly good fakes out there that pass the ring test and weight tests. Same with gold but siver is cheaper as a test to learn by. Associates had to pay $110 an ounce to obtain guaranteed .999 silver for experimental purposes, and that may be a true example of where real silver is now!
Just interested in hearing your thoughts?
Get a life WACKOS!
I guess they do have their plusses. After I read their STUPID rants, I want to turn off my computer and go BUY MORE GOLD AND SILVER...so I do!
seekingalpha.com/artic...
and driving it down with short selling positions, it continues to bounce back, despite the enormity of this short. Silver mines keep expanding and more are being developed. Is everyone crazy? How can they keep getting financing for these projects? Don't banks know they have the only real money? A finite supply of fiat currency, based on faith?
Dave
Another customer walked in and asked " buying eagles(gold) today?" before they even finished cutting him a check they were already sold to another customer!
I really don't know or understand what the heck is going on, but this really sucks when the market is showing $10.00 +/- an oz. and it still is going to cost you +/- $15.-
:P
The answer to your question is manipulation by the big players--Comex, the bullion banks, hedge funds, central banks and investment bankers--who can drive the "free market" up or down to suit their ends. At times, some have been suspected of collusion. Little metal is actually exchanged. These are mostly paper transactions and prices have little to do with intrinsic value.
This and currency manipulation, in the face of a deteriorating U.S. economy, are artificially driving up the dollar and driving down precious metals. Take heart though; while the crooks maybe sucessful in the short run, they will eventually fail. Keep buying the metals when you can.
I would suggest you read James Conrad's articles on Seeking Alpha.
Sir Mystery, Oct 18 01:59 PM
-
[Quote] "I have halted accepting Checks, Money orders, Paypal
and almost all forms of "paper" except for cash, and have plans
for moving to a system of Gold, Silver, and Copper as only forms
of payment accepted if cash becomes too volatile." [/Quote]
-
Apparently, both of us are planning two steps ahead of the sheeple. My model for cash transactions is lifted directly from the USSR to be used here in the USSA. All shopping is done with Russian rubles / Paulson pesos. If that is all you have to offer, "Sorry, we have none today; come back tomorrow." If you have a pint of vodka / silver coin in addition to your folding fiat, then the product you seek magically appears from the back room and is swapped under the table for your payment. It is simply a two-tier mercantile system, one official for bookeeping and the other for physical reality. When fiat fails to perform its function as money, that is the way people have carried on throughout history. Fiat always fails, people always carry on. Money changers are always required to concentrate the retail silver payments into gold for sending to the wholesale suppliers. Protection money or product is always required to keep local enforcement off your back. That is called "insurance". In short, all trade emulates Mafia operations.
So, how close or different is this model to yours? Do you plan giving lessons to your local merchants and a selected bank manager in your town? How about using a coin dealer as the bank to keep the overnight metal for the merchants? Oh, never mind, coin dealers know even less about money than bankers. Ironic and frustrating, isn't it?
On the subject of fake coins, I always thought it cost more to fake a coin than the coin was worth. That is why coins are preferred to bars, no? Maybe modern technology has overcome that limitation. In any case, all my silver is in U.S. and Canada Mint sealed boxes from three of the biggest and oldest dealers in the Southwest. Well, all except for the silver that came directly from Casa de Moneda in Mexico City. Those are in metalized paper tubes with a seal accross each opening. Very neat - very efficient - very pretty coins. My last acquisitions were in 2006.
Since I do not have a business, I will only be spending my coins to live. I have no need to recieve coins and thereby do not have the problem with fakes -- unless, of course, if I am forced to become the town's moneychanger. Except for that eventuality, life is good at "The Daily Denarius"
High prices are never a reason to buy anything, and low prices are never a reason to sell anything. Collector coins sell for more than the metal itself because of manufacturing, storage, insurance, and retailing costs, plus sky-high margins enjoyed by coin sellers in this time of panic buying. The much talked about spread between comex prices and collector coin prices is largely due to panic-induced demand whipped up by internet sites like this, which periodically encourage people to buy whatever went up 6-12 months ago. It shows that the average gold buyer cannot afford bullion, so they pay more per oz for coins in their desperation to get gold. This demand by middle class and poor conspiracy theorists will eventually collapse when they run out of money in their retirement savings / kid's college funds. To an extent, this is already happening. The conspiracy theories about manipulation causing the recent price crash just add insult to injury.
There are 2 sure-fire ways to make money in gold:
1) Buy gold bullion and melt it into coins. Sell for immediate 25% markup!
2) Buy gold, lead, and carbon and simply melt them into forgery coins with gold exteriors and lead/carbon interiors that pass density, acid, spectrograph, magnetism, etc. tests. The coins themselves have no serial numbers or certification of origin. Production in places like China and North Korea would drive 100% margins even higher. Most goldbugs will never cut their beautiful coins in half, so these will be circulating for decades. Honest money indeed!
I guess I'll just machine some molds, go to my local smelter, melt down my gold bullion and make some fake coins to pawn off on some honest people. You remind me of the sub-slime criminals that re-package toxic mortgages and misrepresent them as triple A securities.
Anyone who takes advise from this poster should have his head examined.
In that sense, the gold salespeople who populate these boards are more like the people who sell mortgage securities than anybody.
Sorry, but you don't know what you're talking about. Gold is an element with its own unique atomic weight and if you create an alloy or sandwich other metals in between, the correct size and weight will not be consistant with the standard. Buying gold at a swap meet, garage sale, from newspaper classifieds or even on Ebay can be risky. Buying from reputable dealers and bullion banks is safe.
To put it into perspective, I know many smart people holding gold and silver and not one has ever been sold a fake. It's like anything else, if you buy from the wrong party, you're going to get burned; and if the deal sounds to good to be true, you'd be a fool to buy.
So quit trying to scare people with your stupid paranoia.
So you're saying no mixture of a heavier material and a lighter material could ever equal the specific density of gold? I have a neat magic trick then. I can make a gallon of sand and oil exactly equal the weight of a gallon of water.
"Buying from reputable dealers and bullion banks is safe."
About as safe as their supplier and their supplyer's supplyer. Forged dollars often make it through several layers of honest businesses before being discovered. Replace "bullion" with "mortgage-backed security" or "derivitives contract" to see the fallacy in closing ones eyes and relying on the biggest dealers in a market to provide a quality product.
"I know many smart people holding gold and silver and not one has ever been sold a fake."
How would they ever know? Cutting up the coins / bullion is the only way for normal consumers to establish that a block of metal is uniform. I've never heard of anyone doing this. That's what makes selling fake PM's so appealing. The deception might not be discovered for 100 years.
"I have a neat magic trick then. I can make a gallon of sand and oil exactly equal the weight of a gallon of water ".
Yeah, big deal. That's not magic. Make your mixture of oil and sand look and taste like water and that's magic.
Since you are such an expert on counterfeit bullion coins, can you tell us where these coins have turned up? Maybe you could supply us with some photos so we could see the quality of the strikes. Can you supply the actual dimensions and weights of these coins so we can compare them to authentic coins?
Back at the turn of the century, rare U.S. gold coins were counterfeited in Lebanon and the quality was quite good and passable; however, unlike your theory, these counterfeits were made of real gold. The giveaway was the color of the gold. The counterfeiters just couldn't get the copperish hue right; these coins were just too yellow.
So, please edify us with something more than your theory of mixing carbon, lead and gold to make fake bullion coins. At the very least, gives us your formula and show us one of your fakes.
If the Chinese can build your cellphone for $5, I would imagine they could figure out how to fool a goldbug. Besides, I'm not talking about diluting molten gold with cheaper materials, which would require the forger to solve color and hardness issues, I'm talking about covering cheaper materials with actual gold and selling it as solid. Not gold plating or painting. Getting the right density and avoiding magnetic materials is easy to do.
I could probably demonstrate this, but the equipment and material would probably cost me $10,000 (notice that's a much lower cost than forging paper currency, and most of the startup cost is material that will later be sold). Maybe then I could make a youtube video to warn others.
Although I'm concerned about millions of Americans going broke in retirement, and millions of kids having their college funds squandered, I'm not THAT motivated. If people refuse to do their critical thinking, I can't help them in the long run anyway.
I can see that I have wasted my time talking with an idiot.