Gold: The Moriarty Warning

When someone who is paid to be a rah-rah cheerleader on the precious metals turns cautious you have to sit up and take notice. Bob Moriarty of 321gold.com did just that last week:

Gold and silver are behaving well but they too, are overdone. You don't have to be 100% invested all of the time. If you have some profits, take some money off the table. If you don't have profits, you haven't been reading me for the last nine months.

We probably are not at exactly a trading top but we are pretty close. Better to sell a day early than a day late.

The last time he warned on gold was on March 7, 2008, just before the metal price fell apart. I pointed out the high risk condition and got a lot of hate mail for it.

This time, Barrick's (ABY) de-hedging program and equity issue may have been the signal to tactically turn cautious on the precious metal complex.

Nothing goes straight up. Be warned.

Comments

[ManAboutDallas:]

Really a shame Moriarty is such a megalomaniacal, hubris-consumed nutcase who thinks he's an expert on everything; on the few occasions he really does have it right, nobody pays attention.

Sep 18 03:38 PM

[tb1975:]

If you are in gold for the right reasons, then the long term is all that matters. I wouldn't take profits here. I'd wait to there was a clear and legitimate reason for the 8 year bull run to be over in gold.

Are we printing less money? Is the dollar set to rally long term? Are interest rates high? etc, etc. When the answer to those questions is yes, that's when you sell gold.

If you are trying to time the market and jump in and out, good luck with that. I'll hold and pay long term gains tax rather than the harsh short term gains tax.

Sep 18 03:38 PM

[twitee:]

Gold is not going up because of inflation. Gold is a reserved currency that is inversely proportional to the value and stability of $US.

Gold will rise due to inflation or recession, so if you are a long term investor you will gain no matter what the manipulated markets are indicating.

Sep 18 04:00 PM

[gjg49:]

you might want to check the tax code.
page 66 of irs publication 550 indicates that the long term cap gains rate for collectibles (and this includes gold--gold, silver, and platinum are specifically noted) is 28%. that may be less than your tax rate on ordinary income, but the tax rate for long term gains should probably not be a consideration for whether you hold or sell gold.


On Sep 18 03:38 PM tb1975 wrote:

> If you are in gold for the right reasons, then the long term is all
> that matters. I wouldn't take profits here. I'd wait to there was
> a clear and legitimate reason for the 8 year bull run to be over
> in gold.
>
> Are we printing less money? Is the dollar set to rally long term?
> Are interest rates high? etc, etc. When the answer to those questions
> is yes, that's when you sell gold.
>
> If you are trying to time the market and jump in and out, good luck
> with that. I'll hold and pay long term gains tax rather than the
> harsh short term gains tax.

Sep 18 04:54 PM

[tb1975:]

I have checked the tax code. I own an ETN- with ticker DGP. It sells future contracts on gold and not gold itself and is therefore exempt from the collectible tax. I am up 35% since I bought last December and will pay 20% capital gains tax when I sell.


On Sep 18 04:54 PM gjg49 wrote:

> you might want to check the tax code.
> page 66 of irs publication 550 indicates that the long term cap gains
> rate for collectibles (and this includes gold--gold, silver, and
> platinum are specifically noted) is 28%. that may be less than your
> tax rate on ordinary income, but the tax rate for long term gains
> should probably not be a consideration for whether you hold or sell
> gold.

Sep 18 06:29 PM

[bkdc:]

I welcome a big correction. It's a buying opportunity. I will hold what I have. Yellow. Shiny. Pretty.

Sep 18 06:49 PM

[highlarche:]

Well the way I see it, if the stock market sells off because of a lower bond auction and higher rates, then the country is going to have a real problem. The U.S. Can't afford higher rates so its one of two choices. The first is a devaluation of the dollar [remember Argentina] or a depression. I see inflate or die. That being the case gold will rise regardless of any event.

Sep 19 10:33 AM

[Chris - Lon...:]

Did Bob miss the rally? Maybe he wants to cheerlead a gold decline so he can buy in. Either way, I will take some profits on ETFs but have absolutely no intention of selling the physical.

Sep 19 10:57 AM

[The Recusant:]

OK, first we can buy gold or silver ETFs, like GLD or SLV, but there's a catch. They could be worthless if a big crash were to occur and paper gold becomes worthless or if the promised bullion doesn't exist. But then there are EFTs that are considered safe with bullion stored outside the US system, like GTU, CEF, or SGOL. Or are they safe? Then we can buy ETF shorts on the dollar or ETNs on gold futures. Again, they are paper promises. Then there's foreign currency funds, scary, but maybe a safer route than paper ETFs and ETNs. And last but certainly not least, we have the actual bullion. Buying gold and silver to stuff away somewhere. But then Uncle Sam may confiscate the gold (or even the silver if they prefer). Is anything safe??? Ah, yes...there's the miners!

Sep 19 11:28 AM

[Michael Clark:]

Gold will continue to rally. This is an historical period of stock decline/gold advance. See below for a larger picture:

seekingalpha.com/insta...

Sep 19 01:01 PM

[Jason Hamlin:]

Any good analyst will caution investors after a significant and sustained move to the upside. I don't view Moriarity as a particularly worthwhile indicator of the future direction of the gold price. He's just advising taking some profits off the table, which is a safe move.

I don't agree that with the notion that gold can't continue climbing higher at this juncture and I don't think great caution is warranted.

The last two major uplegs both began in September, both lasted just under 2 years and both put in gains of around 70% (Sept 04 - May 06 and Sept 06 - March 08).

The current upleg started in November of 08, is less than a year old and is only up 39% thus far. Furthermore, the current move is coming off a 6-month consolidation around the $950 level, which suggests it should have the legs to continue higher. About 30% higher if history is any indicator.

Not only the technical picture points higher, but the fundamentals are a perfect storm for higher prices as well. China is buying and encouraging their citizens to do the same, Russia is buying, central banks have become net buyers and Indian investors are making up for slouching jewelry demand with new ETF demand. More and more investors are also requesting physical delivery, which is hurting the ability of paper shorts to manipulate. All of this against the back drop of record deficit spending and a crashing dollar and you have the right ingredients for much more upside.

My prediction is that while it is always prudent to take some profits off the table, Moriarity and others are way too early to be talking about any significant correction. While small pullbacks will happen along the way, I think gold will reach $1,250 before any meaningful correction/consolidation.

Sep 19 02:26 PM

[The Geoffster:]

The beauty of gold is that it is accepted everywhere as money. No counterpary risk and no capital gains taxes. Paper gold is the next best thing but see above. I own both. If paper collapses, I'll survive but I'll probably need my weapons stash too.

Sep 19 08:00 PM

[rick12345:]

Yoy won't be paying any tax unless you sell early next week.

On Sep 18 06:29 PM tb1975 wrote:

> I have checked the tax code. I own an ETN- with ticker DGP. It
> sells future contracts on gold and not gold itself and is therefore
> exempt from the collectible tax. I am up 35% since I bought last
> December and will pay 20% capital gains tax when I sell.

Sep 20 03:04 AM

[rick12345:]

I find it a tad hypocritical to suggest that equities are overpriced based on an accelerating world economy, while gold is undervalued in light of fundamentals which are vague at the least. The only reason China, Russia and other central banks are buying gold is due to the fact that they have no faith in the US dollar as a future store of value. Furthermore, do you really believe they are buying gold ETF's on the New York Stock Exchange.

Sep 20 03:29 AM

[Hephasteus:]

When the market crashes again and it will crash. All things must balance on income and liquid cash flows and neither the banking industry or corporate america have got the income to keep prices where they are. WHEN it crashes the money will go to 2 places. Gold and bonds. It went gold during the great depression and I have a feeling it will go mostly gold this time. If you're in gold then you won't lose at all or you'll either win HUGE or win a little. If you're in bonds you either lose big or win big. Now can live in a frozen bubble but the future has to have an income and it just isn't happening.

Sep 20 05:23 AM

[TheFounder:]

Gold made several attempts to cross 1000 and have never passed it by much. Today, due to various macro factors it seems well poised to cross and continue towards new high records. It is worth the risk at this point to allocate certain % of ones portfolio to gold, at least for inflation protection. Because most people believe that gold provides adequate protection from inflation or currency devaluation, it is now, when the fed is already printing but inflation has not yet increased, when people will start paying a premium for gold, therefore I perceive the downside risk to be limited for 1-2 years.

Sep 20 08:50 AM

[nmelendez:]

Problem with GLD and SLV is theye are taxed as real gold. So when, say, you sell 50% of your GLD it gets taxed at 28% while the miners are considered stocks and taxed at the capitol gains rate. Sorry, i am not about to increase my taxes by 8%. Also i believe it's considered a short term gain on an annual basisi so you get taxed annually independant of time held. I think i'll stick with the real thing and the miners.

Sep 20 05:23 PM

[secmaven:]

The gold chart is showing either a distribution to or a base from which a further advance is assured. Given the out of control Federal deficit why would big money be exchanging gold for paper during the last 18 months? If JP Morgan was not short 30 million ounces of gold on the CRIMEX the coming advance would already have occurred.

Sep 20 09:06 PM

[ManAboutDallas:]

You gun nuts are a hoot. Your "weapons stash" will be worthless the minute somebody - more than likely MANY "somebodys" - shows up who's a better or luckier shot than you are.

Then they won't be prying your gun from your cold, dead fingers. No, they'll be prying your gun from your still-warm, maybe even still-alive fingers, right before they put you out of your misery with one final shot right between your eyes, while you're crying "Mommy!".

On Sep 19 08:00 PM The Geoffster wrote:

> but I'll probably need my weapons stash too.

Sep 20 10:35 PM

[tb1975:]

Yeah, the miners did great when the market tanked last year- NOT!

Gold had a downturn last fall, but not of the magnitude equities did. To suggest miners are insulated from risk is just silly.


On Sep 19 11:28 AM The Recusant wrote:

> OK, first we can buy gold or silver ETFs, like GLD or SLV, but there's
> a catch. They could be worthless if a big crash were to occur and
> paper gold becomes worthless or if the promised bullion doesn't exist.
> But then there are EFTs that are considered safe with bullion stored
> outside the US system, like GTU, CEF, or SGOL. Or are they safe?
> Then we can buy ETF shorts on the dollar or ETNs on gold futures.
> Again, they are paper promises. Then there's foreign currency funds,
> scary, but maybe a safer route than paper ETFs and ETNs. And last
> but certainly not least, we have the actual bullion. Buying gold
> and silver to stuff away somewhere. But then Uncle Sam may confiscate
> the gold (or even the silver if they prefer). Is anything safe???
> Ah, yes...there's the miners!

Sep 26 07:52 AM