sammyg123

Gold's Short-Term Uptrend is Broken

I agree with the article. We still have to go through the "return to normal," fear, capitulation, and despair psychological phases before we return to the mean.

Why Commodities Are Likely to Struggle in 2008

Correction: In order to stimulate demand more supply is required. Oops. In order to meet rising demand - more supply is required to keep prices stable. My bad.

Why Commodities Are Likely to Struggle in 2008

Part of the Fed's job is to fight inflation, which should register in costs of production. The rise in commodities prices, including oil, which is like oxygen to industrial production, will contribute recessionary pressure. Decreased consumer demand due to higher prices is additional recessionary pressure. In order to stimulate demand, more commodity supply is required. The oil situation, when it comes to supply, looks pretty bleak. OPEC is a monopoly with little interest in lower prices, by definition. While the price of oil will fluctuate, it's not really a free market. Higher oil price is with us, and that stifles growth. Further, the price of oil affects prices throughout most supply chains, including the production of soft commodities, such as wheat, corn and soy, etc. This supports higher prices in these markets. I think the price of oil is of the primary oil here, and we are heading into summer. I expect commodities will fluctuate, but the overall trend seems fundamentally supported. I think bulls and bears will fight it out over an overall rising trend.

What a Week for Financials and Precious Metals

Option market seems to think GDX moves into the 50's by May. Perhaps this is a little optimistic? I suppose gold bullion stabilizes in the 900's, this might happen.

Global Precious Metals Correction: Healthy and Overdue

Quote from article: "Short positions in COMEX gold and silver have kept rising through the latest record advances. Who are those "investors" that can afford to short such markets without running into serious margin calls?

Secular bull markets do end. They also have corrections. It's hard to be convinced that the fundamentals, at this point, have really changed, however, maybe they will change, and those with more foresight than you or me have made their move and we are fools to keep our precious metals holdings in the short term.

As for me, I am not convinced that our economy is about to recover, and I am not convinced that the markets will either in the near term.

I expect there will be volatility in both directions. It does seem that the trend is broken in gold, so maybe it is best to accumulate, getting sample prices over the next few months.

I doubt your assessment that gold will reach 1200 by spring. I wouldn't mind if you were right though.

Gold and silver producers take short positions to lock in prices for their production. They can take short positions because this is the mechanism by which they deliver supply to the market. It's how they lock in profits. That's the "investors" with short positions, along with speculators who know more that we do, or are extremely lucky. Anyway, the futures markets are there for producers and consumers of the commodity, mostly. So, there's my semantic victory for the day - I object to your use of "investors with short positions." It is misleading, and lends credit to the Ben Steins in the world who think that traders like you and me control markets. Sometimes, it's actually supply and demand for the real commodity that sets the price. Go ahead, accuse me of naivete.

What Is It About These Divergences That Bothers Me?

I agree with all of the above. Also, gold stocks are dollar denominated paper assets with management, margin, and macroeconomic risk which is being priced in. Gold, however, is a dollar denominated HARD ASSET which is in demand and reacts faster and faster to price action in the currency and oil markets. I believe that gold stocks will catch up, but will have trouble due to the crisis in financial markets. For example, if I was a large bank or investment house with much assets in gold stocks and huge losses from subprime, I would be selling my stocks to shore up my balance sheet against losses in the subprime market. The bottom line is it makes sense to accumulate gold for the short and intermediate terms as per your personal strategy, but also to accumulate the gold stocks. Right now, the product that they produce is rising in price faster than their margin pressures. This could change, for if their margin pressures increase too fast, you will see mines closing and reducing production until the price of bullion is more supportive of their operation. The argument for bullion in the short term is stronger and stronger in this light, especially due to inflation of oil costs (oil is necessary for gold miners!) and also due to upward wage pressure. These things will balance out over time, which is what a gold stock trader must keep in his mind at this time.

To Buy a Gold Stock or an ETF? That is the Question

The market seems to be applying the price of bullion to this stock, which must mean that any management issues are priced in already, positively or negatively.