Robert Hallberg

Robert Hallberg
Contributor since: 2011
Thanks for the link…
Avi,
Last summer we did see an explosive rally towards the end of the summer but prices has historically been weaker during the summer months. I see a lot of value in the equities and I think this is a good time to pick up some bargains. I also think we will see a good size rally this year but I am not sure about the timing though. But it’s better to be too early than too late.
Hi Jon,
Thanks for your input. It added a lot of value to the topic.
Robert
Avi,
Anything is certainly possible but I think we are far away from the blow off phase. Historically, bull markets have lasted much longer and the public sentiment is nowhere near euphoric.
I think that we are looking at this through a different prospective, which is interesting. It looks like you follow an Elliot wave pattern while I look at the macro picture and the fundamentals. The problem I have with calling for a top this year is that we still have gigantic debts and continued money printing. These problems are nowhere close to have been solved and I doubt that they will be solved this year.
IMHO I don’t think gold will peak out for several years and I expect prices to be much higher when it does reach its top. A black swan event or perhaps war in the Middle East could possibly hasten this time line a little…
In addition to the shares I listed in the article I also NGD, AUY, and SLW for silver.
I also first heard about this on the Kaiser Report and then King World News, but just like you said, Debkafile was the first to report this story and it was picked up by dozens of other news agencies shortly after.
The news about the Iranian and Indian exchange for gold alone does not make it a trend, but there has made repeated calls among other nations for a new reserve currency. China and Russia in particular have been strong advocates for replacing the dollar and just because it hasn’t happen yet, it doesn’t mean that we are not moving in that direction. The British pound did not loose its reserve currency status overnight. It took decades before countries stopped using it.
Having the world’s reserves currency is both a blessing and a curse. I think the world will be better off if we get back on a gold standard. If you anchor the currency to gold or other tangibles you won’t see these massive deficits and debt levels that is now plaguing the world.
The index does not include dividends but I doubt it they would make up the difference. There are many companies that have outperformed the metal but most have not. Once we get to the mania phase I suspect that you will see some companies with phenomenal returns. Perhaps we will see some juniors going up a few thousand percent, just like they did in the last mania in the 1980’s. But you either have to be a good stock picker or have some luck to find those companies.
I do prefer silver bullion over paper derivatives. Own bullion for its safety but you can use SLV for trading.
I am aware that SLW is a silver streaming company. I have written about its business model and strategy in the past:
http://seekingalpha.co...
Ephud,
The source of the data comes from the US Mint and the Silver Institute.
US Mint: http://1.usa.gov/ySxlns;year=2012
Silver Institute: http://bit.ly/zfQpgo
Herve Jacques,
The market moves in cycles, or at least it has always done this historically. Until we reach the end (the mania phase / climax) of this bull market cycle we should expect new highs after each correction. The chart of previous corrections are meant to give the readers and idea of how long and how deep the correction will last based on previous data from the current bull market?
“How relevant is last week‘s pattern of weather changes to figure out tomorrow’s weather?”
Well, if you look at historical weather patterns like the monsoon season in Asia or what a summer looks like in Southern California you will get a pretty good idea of whether to expect rain or sun.
Here is an article that describes the different phases of a bull market
http://bit.ly/tTU3WA
The last 10 years are relevant because that is when the bull market began. The market has historically moved in cycles and until we reach the end (the mania phase / climax) of this bull market we should expect new highs after each correction. But you are right in noting that this bull market will eventually end, and a new bear market will follow. Although, I think we are several years away from this.
I agree, thank you for pointing that out! Gold deposits are getting harder to find and production costs for new developments are also on the way up.
There are many theories why the shares are lagging behind; some think that frightened investors prefer the safety of gold bullion, and others say that gold derivatives and ETFs has been competing with the shares for capital. Another possible reason for the disparity between the price of gold bullion and the gold mining shares could be that the mining companies are a proxy for the future price of gold.
Sure, but the intuitional players have barely touched it and many have no exposure at all. Wait until the mutual fund industry and pension funds starts buying it.
There is still a lot of skepticism of gold from the public and ownership is low. Gold only still represent less than 1% of global assets. http://seekingalpha.co...
The Singapore dollar is at 22.7% of gold over the same time span. So at 6th place among the currencies listed. Although Singapore does have a pretty sound economy…
Mr. Nolal,
If you don’t base your decisions on facts and figures what else should you use base it on? You used a lot of figures in your post…are those a lie?
Gold moves in cycles. During certain time periods gold gain value against other goods and during other time periods it loses value against other goods. I written about this before: http://seekingalpha.co...
If we have true deflation it is possible that gold drops in dollar terms but it will more than likely gain in value against other assets, such as the stock for example.
Gold is not always a good investment, but it happen to be in a bull market right now, and it would be wise to invest in it until the end of this bull market.
The last bull market ended in 1980. At that time Paul Volker increased the feds fund rate to about 20% and killed inflation, and we put our financial house in order. As the faith was restored in the dollar, gold plummeted and remained in a bear market for two decades.
Today, I doubt that the Fed will be able to raise interest rates with debt levels close to 100%. However, there will come a time when this bull market in gold is over and I will sell my gold. It is probably many years from today, though!
Why $2,400? Is there any log behind that figure?
Rather than to put a dollar figure on how far gold will go, I suggest comparing it to other tangible goods such as the Dow Jones, or real estate. There is a historical relationship between gold and the Dow Jones. At different points in time gold has been trading at a ratio of 1:1 or 2:1 to the Dow Jones, and whether we will see Dow at 4,000 and gold at 4,000, or the Dow at 10,000 and gold at 10,000 remains to be seen. At a 1:1 ratio I believe that it has reached its peak in terms of purchasing power relative to other financial assets, and it will be time to put your money into something else.
I wrote an article about the subject: http://seekingalpha.co...
Agree, physical gold is preferred over paper derivatives.
Inflation is running around 12% according to shadow stats…
If we have a deflationary contraction my guess is that the governments will kick money printing into high gear. But if we would actually have true deflation and a contraction of the money supply we will see bank-runs, bankruptcy, and default. In such an environment your money will not be safe in the bank or in a bond and people will favor gold as the ultimate safe haven asset.
Avi,
Gold was the only “hard asset” that was up for the year in 2008 during the deflationary bust. It did have quick correction along with all other assets but it shot right up in a matter of weeks and assumed its role as a safe haven. Silver, Copper, Oil, other commodities, etc were all down for the year but gold closed at a higher price.
Check out the chart for yourself: http://bit.ly/vK9o3H
China has created enormous wealth, and some of the state-directed projects have been beneficial, this was especially true in the early days of their economic reform. Despite writing a negative article about China, I believe that China may become the next economic superpower. However, I think they will get in serious economic trouble over the next couple of years. Every boom has a bust and China has had a giant boom fueled by credit growth. This will not stop them long term though, the United States still managed to become to most powerful nation in the world after the great depression.
Gold is a monetary metal and it is not really affected by the business cycle. Most demand for Gold comes from investments and jewelry, not industry. In addition, if there is a slowdown, Governments will print money and that is bullish for gold. FSG might be a good option but it is a leveraged EFT and it is be degraded over time.
See "facts and figures about gold" regarding demand for Gold
http://seekingalpha.co...
Yes, liquidity and volume drives the market. No one knows exactly when the mining stocks will breakout but we are getting closer by the day. They are already attractively priced. It is of course possible that they can get even cheaper if we run into another 2008 type of event. Buy on weakness but keep some dry powder to take advantage of opportunities…
The companies listed in GDXJ are not a cash rich as some of the majors and I would not expect them to increase dividend payout by much. Most of the companies in this index do not pay a dividend. GDX on the other hand have been increasing their dividend payouts.
I agree that we will see a decline in economic activity and belt tightening. However, I think this will trigger governments around the world to launch more QE programs which is inflationary. We already see this with the bailouts in Europe and continued low interest rates in the US, and as the economy continues to deteriorate there will be more and more calls for quantitative easing. I think that once the public realizes that gold will continue its ascent the gold shares will really start to take off.
Yes, most debt instruments is some form of a derivative
Fiat currencies can and do serve as money although it is far from ideal. Aristotle in the 4th century BCE defined the characteristics of a good money…
• Durable: A good money should not fall apart in your pocket nor evaporate. It should be indestructible. This is why we don’t use fruit for money.
• Divisible: A good money needs to be convertible into larger and smaller pieces without losing its value, to fit a transaction of any size. This is why we don’t use things like porcelain or pearls for money.
• Consistent: A good money is something that always looks the same, so that it's easy to recognize, each piece should be identical to the next. This is why and oil painting is not good money.
• Convenient: A good money contains a lot of value into a small package and is portable. This is why we don’t use water or oil for money.
• Intrinsically valuable: A good money is something many people want or can use. This is imperative to money functioning as a means of exchange. There is always someone, somewhere that will take gold in exchange for something else of value. This is why we don’t, shouldn’t use paper for money.
Thanks and good question…
They way I understand it is that the chart represents the total value of gold in terms of dollars versus other assets. So gold’s value versus other assets has increased by 0.5% over the last 10 years. Now gold has increased in price by 6 times or so but remember that an awful lot of derivatives and debt has been created during this time. Many banks still carry worthless credit default swaps and mortgages at book value.
World Gold Council, http://www.gold.org
Click on Investments, and then statistics