CTMike

Revisiting Gold's Valuation

Interesting study. Seems to be a lot of rounding of numbers. One in particular is 5 billion oz of gold. When I checked, the number I got was 3.4 billion oz of above ground gold still in existence. Now that's a 30% difference. Less gold means higher price per oz so instead of $1500 to $3000 it becomes $2000 to $4000. Unfortunately if the other numbers have similar accuracy we could easily get a +/- 50% or even more on the numbers; $750 to $4500. That probably fits within the range of most other estimates so we haven't learned much.
Again, the study concept has merit but just not sure about the numbers.

I was playing with a study that assumed China decided to engage in an economic war with the USA by buying gold recognizing that the dollar would be trashed. Today they could buy 2.2B oz with their $2T of USA dollars. Of course that won't happen because the price of gold would skyrocket as soon as the world recognizes the war has begun. Lets assume the Chinese slowly starts buying so as not to get attention. If they could accululate 0.2B oz (6,200 tons), then they would come out even if gold would rise to $10,000 per oz. Can they find that much gold? Unlikely. Would they settle for a big loss? Is it fesible gold could go to $20,000 per oz which would give them a more realistic target of 3,100 tons? GLD has 1,100 tons in their vault and it wouldn't take long to accumulate it all if you were serious. Ya, this is a crazy doomsday scenario but it is just as interesting as the scenario above. AND, remember; long term for us is the next quarter - for the Chinese, its next century.

Wednesday Outlook: Commodities, Global Markets

It's beginning to seem like the half life of major events such as the Fed buying treasuries is not much more than a day; after 1 day the impact is 50% diminished, 2 days 75% diminished, 3 days 87.5% etc. This clearly says the market is without direction and the next piece of news will whip it in another direction. Also, makes the market incredibly susceptible to short term manipulation. Unless you have the inside track on the next piece of news, you have a 50% chance of winning/loosing in the short term. I'm with David, might as well go to Las Vegas than invest in this market.

The next collectors book will be "The Great Financial Crises of 2008-2010; How the Public Was Fleeced in the Greatest Con Game In Human History". Do you really think the world would come to an end if some of the super banks disappear. I've never seen a vacuum last more than a few nano seconds. The vultures and local banks would immediately step in and pick the carcases of anything of value and let the toxic assets rot as they should. My local small town bank does a great job at supporting the community the old fashioned way - nobody on the payroll makes 7 digits and they don't even know what a financial engineer is. (AND, when GE money market recently put a 21 day hold on a credit union check even though it cleared after just 3 business days, my local bank worked with me to avoid problems.)

Waiting patiently for reality to come back.

Wednesday Outlook: Commodities, Global Markets

I see what you are talking about. Looks a little sloppy to me. My experience with H&S's is thay are not strong indicators and sloppiness just makes them weaker.

Look at March 08 to mid Feb 09 plus mid Feb 09 to today. That's a text book cup and handle with a perfect handle. One can argue that the cup is sloppy so breakout will be prone to failure. But my expereince is that a good handle and a solid breakout are more important.

Of all the charting/analysis/etc. I've done over the years, I've had more success with the cup and handle formation than anything else. Keep in mind that we will need a strong breakout above 100ish (quickly and with extremely high volume) to be valid. From there it could go to 130ish if you believe in chart gods. More often than not, breakouts are followed by a pull back to the top of the cup but then its off to the races if it holds.


On Mar 18 02:33 PM paultaut wrote:

> Ok, I see where you're coming from.
>
> a Pattern within my pattern.
>
> I start with the first breach of $100 last year, with the left shoulder
> being the low around 84 in early april.
>
> If GLD can manage to hold the same $84 area on this move to the Downside,
> I will have my right shoulder.
>
> It used to be so much easier.

Wednesday Outlook: Commodities, Global Markets

H&S Top - left shoulder late Jan/early Feb, Top Feb 20, right shoulder now. Neckline to top was 87 to 97 so a chartist would predict we could be going to 77. Just not sure how many traders are watching GLD this way and therefore help the "prediction" come true?? This is pretty short time frame but meets the minimum of 6 weeks. Won't show up unless you use a daily chart.

I am now using 6 month and 1 year charts. Maybe if there is a legitimate rally, I will use longer term charts but for now I think its mixing apples and oranges (maybe punch bowls and ter*s).
I gave up on Bolingers a while back because I felt like many of these algorithms, you can find many examples where they are helpful (the ones in the books) but just as many or even more that are useless/wrong. When I looked at GLD after your note I used 20 day moving average and 2 deviations on a 6 month chart..
I'll go way back the the $700 days to see if I can see your H&S. I sort of feel like gold has many of the factors that make charts usefully for typical stocks but has the added complexity of just being "gold".
Finally I really don't like the feel of coin shortages. My experience is telling me that this is all hype to suck out as much money as possible from the average guy (Chuckie?) and then pull the plug. This is classic marketing - create a demand and then a perceived shortage to drive up the price. Works until you reach buyer exhaustion. With all the financial chaos and trillions of new dollars rushing into the system and the market looking 6 months to a year out, why hasn't gold exploded?
I have GLD, SLV, bullion in both gold and silver, and several gold equities. I'm starting to feel sick.


On Mar 18 10:31 AM paultaut wrote:

> Where is the Head? of the H&S top.
>
> I have a perceived neckline, an inverted pyramid with the nadir about
> $700, which I use as the Head for the Bottom, left shoulder formed,
> right shoulder forming.
>
> Are you looking at something smaller than a 1 year chart? If so,
> please point to the time frame.

Wednesday Outlook: Commodities, Global Markets

paultaut - how did you set up your Bolinger? The services I use all ask for conditions.. Plus, I think the head and shoulders top formation on the daily GLD chart looks a lot stronger than the bottom you mentioned.

David Fry - I worked in the Washington environment for many years and what you see is only the tip of the iceberg. There are a few congressmen that are trying to do the right thing but they get ostracized by the herd. Don't ever believe a single word that comes out of their mouths. You need to set in on just a few backroom conversations and you will quickly learn they are a bunch of phony scoundrels that have a sliver tongue. They will say whatever necessary to 1) discredit the other party, 2) assure reelection 3) enrich themselves, 4) get more power, 5) make themselves "look" like true patriots. What drives their decisions has nothing to do with what the public wants or what is in the best interest of the country - never even considered other than making public statements to make it look like that is what they are doing.
Enough of that. I'm beginning to see the press commentaries fall in line with the administration. It's like they have been told they will be arrested as terrorists is they print anything negative. All of a sudden the light at the end of the tunnel isn't a train (and they are ignoring the whistle) but sunny recovery just like BB is saying. Even world events are falling into line. What happened to N Korea? Has Iran's nuclear program disappeared. Are India and Pakistan best friends. What about all the revenge killings that the Taliban continue to carry out? OH, sorry just like Ben fixing the economy, Hillary has made all world problems better no too. My point is that you are one of the few that hasn't sold your sole. BUT, and this is a huge BUT, we all know perception is reality and if everybody begins to believe things are turning around, is it possible the "real" momentum could begin to turn too? If so, at what point will "you" say ignore the facts and jump on the train? Or will your position continue to be don't jump on the train even though its leaving the station because right around the corner is a cliff and no bridge?

Gold: Not a Bubble

This is a fascinating comment if true. That would be an excellent indicator that a bubble is about to burst. Spot gold today is $930 in round numbers. If you could only get less than $900 for coins, I would say the bubble is letting out air and time to get out. The few dealers I've checkd with are still buying coins for over spot so based on this simple bubble test; we aren't there yet.


On Mar 15 02:12 PM Mark123 wrote:

> Be careful on ebay... I paid for 10 oz and got NOTHING.. It took
> me 2 months to get a paypal refund..... Additionally, don't forget,
> during the Dec 1979 and Jan 1980 run up to 850, not a dealer around
> would buy your gold back at spot...they were paying well under spot...
> good luck to all

Gold: Not a Bubble

From what I read, CEF and GTU have a extremely hefty premium. Why in the world would somebody buy a ETF that is selllin at over a 20% premium to spot price is beyonf me. Works only as long as someboy else is willing to pay the premium when you are ready to sell. Am I missing something here/ If you think I'm wrong on the premium, just check their web sites.


On Mar 15 01:58 PM Sakata wrote:

> On Mar 15 01:06 PM mr freddo wrote:

Gold: Not a Bubble

I haven't seen any place that offers volume discounts on gold coins other than shipping cost and I've been shopping around quite a bit. Gold bars do sell at a lower cost per ounce than gold coins but I really don't call that a discount. As previously mentioned, you will get some of the coin premium back when you sell coins but there will be no premium for bars. I've had my best luck with Bullion Direct and a samll place in New Orleans called Jefferson mint. The best price of all is as noted; 100 oz bars from COMEX. I've never heard anybody being successful at getting orders of less than 100 oz.

On Mar 15 11:15 AM Sakata wrote:

> On Mar 15 10:35 AM @TexasER wrote:

The Case Against Gold

Unfortunately, Louise, no matter how smat he has been in the past, has never run into this situation in the past. Tell me please, when was the last time we had a deficite of 2+ Trillion dollars and climbing. If the market is so smart and projects into the future, then why isn't gold already at $3500? Something is going on that Louise doesn't understand unless he forsees the DOW at 2000 in the near term - or maybe the DOW at 1000 and gold at $500?


On Mar 04 12:15 PM freddyv wrote:

> "Historically gold has been a place to hide when the dollar is weak."
>
>
> You miss the point: ALL currencies are weak and so gold will be the
> true, "currency of last resort."
>
> Louise Yamada pointed out that gold is likely to come into a 1:1
> to 1:2 ratio of the Dow within the next few years and that makes
> a lot of sense.
>
> If you don't know who Louise Yamada is I suggest you Google her because
> she is probably the single best analyst on Wall Street today. She
> is no spring chicken and understands how to use technical analysis
> in combination with all sorts of other data.

The Case Against Gold

Hope and praying is not an investment strategI'll pray for you - you need it.


On Mar 04 11:07 AM Kraut wrote:

> Usually we don't regret the choices we made, but mostly those we
> didn't made.
>
> I haven't been invested in stocks but in container ships - and because
> of falling imports/exports the outlook is grim, making me anticipate
> no returns for this year and I'm not too optimistic about next year.
>
>
> The whole issue of gold at the moment is something I consider essential
> risk diversification.
>
> If the economy makes a turnaround, my returns will come back. A little
> idle gold (physical, stocks) is a cost I'm more than willing to take!
>
>
> However, in the worse case scenario (let us all start to pray), gold
> will turn out to be a "life insurance". To miss this is something
> I could ill afford.

The Case Against Gold

John,
You don't live in Zimbabwe (I hope).

If you investment horizon is 20 or 100 years, you may be safe. But do you really care what your portfolio will be in 100 years if you need it to fund your life style in a few years or even 10 years. The problem with historical data is that it can't predict accurately near term.

Yep, gold has been good to us for several years but pleas to explain why it has not been good for the last year. The world is coming unglued and gold has not responded. If you can't explain this with facts then you don't know. If you don't know, you are not any smarter than everybody else that is guessing.


On Mar 04 09:49 AM John Polomny wrote:

> Yawn another fool who has learned nothing and forgotten nothing.
> Gold is the best performing asset for the last eight years. Every
> year we are told that gold has topped, it produces no income, it
> is a commodity, etc... ad infinitum. The fact is for over 5000 years
> gold has been a store of value. Look at the the Dow to gold ratio,
> it has went from around 40:1 to a recent 8:1 and will eventually
> get to 1:1. That will be the top for gold. I agree it will be volatile
> but I have been holding gold since 1998 and so far so good. I recently
> caught a video on the internet that showed people in Zimbabwe panning
> for a few grams of gold to buy bread for the day. The food sellers
> were not accepting dollars, euros or rand they were accepting gold.

The Case Against Gold

Kelm,

I agree with you. I've been a gold holder/investor since 1980. More than ever, this market is unpredictable. All the facts point to gold going up (a lot) but since when do facts equate to reality?
I'm at a total loss as to what to do with my investments/life's savings.

Investing in anything today is not much different than a visit to the local casino. Unfortunately, I honestly believe you have better odds at the casino - at least you know exactly, to the decimal point, what your odds are at the casino and in the market you are at the mercy of some of the best minds in the world trying to pick your pockets with no rules.. Right now, under the pillow seems to be my safest option.

Gold should be going up and isn't. Why? Some force we don't understand is preventing it from going up and if we don't understand it, how can we possibly put a risk on it - - no thanks! Like this article suggests, noting is going up for now. So why put $$ in gold, or anything, if you don't have a clue if it Will go up or down 50%? "If" you trust your cash fund , that may be the place to be. And since recent experience suggests no place is really safe, maybe your pillow along with a 45 handgun is the place to be until things settle down.

The hardest thing for me remember is that you don't have to make a big return "today" - - be patient and wait until the waters are safe again. Tomorrow always comes and eventually tomorrow will be safer - OR, there is a clear direction to go. I'm still long GLD plus several gold securities but ready to pull the trigger for safer waters (pillow).

For you folks that think I have no guts/brains, you haven't been around long enough. I can remember the days when the best minds became doctors, lowers, etc. Look at Harvard, Princeton, Yale, etc. They are not focused on humanity anymore. They were forced to get with the times and have changed their focus to market manipulation (my words) to enrich yourself. I can't compete with these guys and you are a fool if you think you can.

I'm an engineer by training with specialty in failure analysis. Right now all the data suggests a force we don't understand/recognize is in control. Unless you understand what is in control, you have extremely little chance (random) of being successful. If you recognize the force, at least you have a change of predicting the near term direction.

Everything is subject to the a natural law of distribution. When this all settles, there will be a few folks that "guessed" right and made a fortune. 99.99% of everybody else guessed wrong and lost a little to a lot. Then there are the folks that really know what is going on - you will know them in 10 or 20 years.

Finally, if anybody can explain the movement in gold, please self nominate yourself for the Nobel prize in economics. Let's see data; not probably, maybe, etc. Facts prove theories. Proven theories can make you successful; anything else is a gamble!




On Mar 04 08:47 AM kelm wrote:

> As my readers know I have been long gold until this week when I went
> neutral and then short. I continue to believe that before this crisis
> has worked itself out we will see a period where there is a mass
> flight to gold sending it dramatically higher, though that period
> may be brief with a rapid fall back. However, the action late last
> week and early this week indicates that gold is fast losing strength
> in the near term and is likely headed for a substantial fall. As
> long as gold ETFs are driving the buying of the metal while people
> globally are turning in massive amounts of scrap to convert into
> local currencies the conditions to move higher appear absent. This
> was not my view even a week ago but the facts have changed.
>
> What the author points out is that we are in a very volatile period.
> Many long term predictions based on fundamentals will prove correct
> but if the timing is off and you don't change course you will be
> dead right rather than profitably right.

Gold Bugs vs. Gold Haters

Tetrapod, $4 (it's actually closer to $4.5) per coin over spot comes out to about 30%. That's a pretty stiff premium especially since I bought from them last year for about 5% over spot.


On Mar 01 01:54 PM Tetrapod wrote:

>

Gold Bugs vs. Gold Haters

"redistribution of wealth"
I usually don't live in fear but with Obama in charge I can see a scenario that he announces that gold is a commodity used by the wealthy to store wealth and he then announces that the government will buy back (confiscate) all the gold along with a redistribution scheme. Don't rule out Obama and company using the official value the government carries on its books for the gold buy back scheme; somewhere around $42 per ounce. (Sounds rediculous? What the difference between that and simply raising taxes on the wealthy? Either way he's picking your pocket.) If the government then turns around and sells the gold at market price, they have their redistribution scheme at an enormous profit. Even if they buy it back at somewhere around market price in all likelyhood, the price will collapse. OK, so you say you simply will ignore the confiscation law and keep your gold. That will do you no good because the only place to sell it will be on the black market or foreign countries; good luck with that.
Silver "may" in the long run be safer to own than gold. Maybe that is why every bullion dealer I have visited on the web is asking for a 30+% premium for silver coins and only 5 or 6% for gold coins. If anybody knows where silver coins can be purchased for far less of a premium, please let me know - - I'm finding it hard to swallow the 30%.


On Mar 01 09:06 AM know nothing wrote:

> Has anyone given any thought to the fact that ever since the early
> 80's the stock market has been in a bull market, with only a couple
> down years?Then came new ways to invest in the market complete with
> tax breaks,(401k's Ira's mutual funds...ect) so most people invested
> their retirement money in the stock market, and noone talked about
> gold or silver as a investment at that time. Now with the ever changing
> financial environment, and the Obama plan of distributing the wealth,
> it's time to reconsider your investment strategy. This should include
> some gold and silver.
>
> When the next generation bears witness to the amount of wealth lost
> by their parents, and the horror story's begin to be told, we will
> have a new generation trying to preserve their wealth. This could
> be the beginning of a new bull market, that could last for generations.
>
>
> Now that most everyone has been investing in the stock market and
> not precious metals, when the stock market investor realizes that
> the stock market will never be the same, maybe people will start
> to invest in something that is viewed as stable, it shouldn't take
> much of a shift in physcology to make golds price soar.

Tuesday Outlook: Commodities, Emerging Markets

Dave, Be careful for what you ask for. If you get your own personal stimulus package from Congress, you may have to divorce and they get to pick your new spouse; or a least have an observer placed in your household. We all need to step back and look at what is happening before our eyes. Firing the CEO of GM is the job of the board of directors or shareholders, not Congress. If Congress wants to impact management, they need to wake up the shareholders. Can you just imagine Congress getting involved in this? I'm gaggin just thinking about it. The only thing they are good at is putting the blame on somebody else. Stalin, Lenin and their boys would be proud of what we are doing.
PS: Toilet paper will be $100 bills. $1's will be used in the fireplace.