Lonestar1

Why Are Gold and the Dollar Running Together?

We have had this virtual economy for so long that runs the real risk of virtualizing our currency. The Fed actions have corrupted our sense of wealth. Getting into gold is to get back some sense of purity.


On Feb 01 03:34 PM PrudentMan, CFA wrote:

> If gold is a hedge against inflation it should be selling around
> $4,000.00 an ounce. Admittedly, I don't have a clue as to why people
> buy gold as an investment any more that Tulip Bulbs.

The End of Gold, Part Two

Although this is a little too harsh, but it's true the article does not add anything new to the discussion on gold.

Both deflation & inflation threats are real. It is economic destruction vs money printing. We are living in a warped world, in which actions of central banks are causing great confusion to our sense of wealth while asset prices are destroyed.

What else would we want to hold if it is not tangible? Gold is tangible. It is real money, pure without stains.


On Feb 01 12:10 PM aw4000 wrote:

> The author needs his head examined!

Will Gold Break Its Downtrend?

To be fair, TA has its merit and frame work. But can you call this an article? I share Larry House's sentiment.

Happy Days for Gold?

From a technical viewpoint, the move last week was significant in several aspects:

(1). It broke the down trendline since 7/15/08. The next resistance, as Jeff pointed out, is $92 for GLD. $92 is the trendline level since 3/15/08 (the very top). A breakout above $92 would be very very bullish for gold.

(2). Last week, gold was on its own, despite up or down move of $. This is very important.

(3). Some pullback is possible at $92, if this resistance is not impulsively taken out.

(4) My original expectation is the breakout should be in early Feb when Feb futures contract delivary requests increase more forcefully than Dec contract. Clearly if $92 is taken out impulsively, gold would entering a new territory earlier.

(5). Retracement from $92 down to $83 area would keep the bull agenda intact.
----------------------...

Above is purely chart reading.

Fundamentally, let helicopter Ben airdrop to the pockets of goldbugs.

U.S. Mint Actions Discourage Gold Ownership

Good point. Gold is beginning to break away from the $ in the past few days. Gold is setting new ecord highs in many currencies. The only thing left for new record denominated in $ is a decisive breakout technically to take out the $900 area, which I expect to occur within two weeks.

Deep inflation or hyperinflation, they all mean destruction, which implies gold will be in no man's land.


On Jan 23 05:03 AM MisterPhi wrote:

> Just returning from a rapid visit to a small branch of Raiffeisenbank
> here in Switzerland. Gold demand still continues at very high rates,
> to the point that the bank's HQ has now decided to allow the sale
> of small bars that carry only the assayer's brand and not the bank's
> seal, in order to reduce turnaround time.
> We find it particularly interesting to note that the price of gold
> has severely decorrelated from USD weakness during this past week.
> This might be *the* trigger that will cause the second gold rally
> - not in dollar terms, this time, but in other currency bases.<br/>Studi...
>
> Mendrisio,
> Switzerland

U.S. Dollar Strength and Implications for Gold

There is only one one question:

why when the Fed fails, gold price has to go down?

This is only a assumption.

De-Leveraging Is Not Deflation

Even during war, a person would be willing to exchange his gold for the currency being used. But he is going to exchange only the amount to get by, not the whole amount he has. Of course, he can pay in bullion gold, if not for the problem of decimal inconvenience. The point is, he wants to hold on to his gold.

This would also be the case in an economic calamity when people believe gold may be the only trustworthy form of money.

It's all about the trust, whether it's gold, $, Yen or Sterling. Back in 80's, if you traveled in any 3rd world countries, they would be very happy to be paid by $ instead of the local currency. This is not true any more.

The theory of gold backwardation explains this well. It shows two things:

(a). demand outweighs supply in spot market,

(b). Supply by short in futures market is subject to increased probability of default as the short either has no gold, or tries to default and let the long suit.



On Jan 21 09:42 AM joegold wrote:

> one question, one only. Everyone says all fiat currencies will fail
> fine. Gold is the answer fine. IF this is the case, and the dollar
> and all other fiat currencies are worthless paper...why would anyone
> ever exchange one tenth of one millionth of one ounce of gold for
> paper money? I am not trying to be snarky, I am just trying to understand
> the argument.

Gold Breakdown

to asleeper:

Yes. Gold only looks bad in the 3 currencies: $, Chines Yuan & Japanese Yen.

I acutally posted eslewhere with a postulate that the strength of $ is partially derived from its reverse pack to Yuan & Yen. Some folks didn't like my observation. But if one looks at the new vocabulary "Chiamerica" created by the renowned Harvard Prof. Ferguson, and the eocnomic content underneath, it is not far fetched.

Gold Breakdown

It is a valid point that in a total chaos, the first priority is to pile up food supply in the house and double check your security alarm, and better yet, buy a gun. It sounded like a joke when Bear Sterns collapsed. But when Lehman collapsed, this is not a 100% joke any more.

Short-term traders can short or long gold ETFs, etc, and do whatever they like to make some money. But as a wealth protection tool, physical gold has an indisputable role. We are argueing about different things.

Can anybody explain why physical gold market is so tight if not for preservation of wealth, or as an insurance? I store about 50% of mine in $. The rest are in some other currencies (which I believe won't be destroyed in this depression) + Gold and silver + real estates.

As for $, massive devaluation is a must in order to rebuild America. It can not hang on an economy with 70%-80% services, a large % of which is a money losing financial games.

The rise of $ in the past few months are the result of several moves: payment squeeze on trade deficit countries who still prefer to settle in $; withdraw of oversea investment by US investors; potential easing by other central banks while the US is already done.

It appears to me all financial tricks have been played out. Currency swaps among other central banks are on the rise, which clearly try to squeeze the $ out of their mutual trade settlement system. The world can not go back to "goods for goods" trade. But they are trying to find other ways to settle. Wolrd trade volumes are falling fast.

Gold Breakdown

sorry for tyops there. Also, another clarification on bloomberg prices, there is a lag on futures. so the $5 different may be just due to the time difference. If match the time, the difference appears to be within $1. Just a clarification

Gold Breakdown

I agree with dieuwer. the chart is not well drawn. It stayed just barely above the bottom of the price channel since mid October. Also if you use spot price, together with other technical indicators, such as GPF, 50D MAV, etc, it is even more clear. On Bloomberg, use: Golds <INDEX> as a proxy of gold spot, you will see spot price is at leat $5 above the futures. Gold backwardation has been a hot topic a few weeks ago. I am not agoldbug, but the theory behind the backwardation is solid. I checked multiple local brokers on physical gold market condition to confirm the exceptional tightness. Technically speaking, my understanding is that the bears have completed their agenda. A breaout probably will be done by early February.

Let's see.

Gold Even More Attractive as Cash Yields Approach 0%

paper gold buyers need to have some patience. The technical breakout should materilize by early February. Also Gold needs to break away from the anti-$ pattern. Today is a good sign. Physical gold is still the best.

Five New Forces to Drive Gold Higher

There is no argument that $ has never been in such precarious state in its entire history. The break from the gold-peg did not cause a catastrophic collapse of $ was due to the fact that the west, including Japan, has to stay united to defeat a more pressing threat, i.e., the Soviet Union's expansionary policy. Instead, the $ is allowed to slide gradually and became "your problem" for the west. It was a small price to pay.

Today's world is different. $ is anchored to nothing. Or perhaps it is fair to say that $ is now pegged to a mix of Chinese yuan and Japanese yen, not the other way around as popularly manifested. Its strength in 2008 was derived from these two sources, in my mind. This is strange, because credit should be offered by producers, not the buyers.

And Europe is not threatened by anybody. That's why they were so itchy on G20 meeting in November. That is not to say they will have any chance to be successful. Indeed, they will have no chance.

I agree with the point 1 that this zero yields angered China and Japan. However, it is inconcieveable they would unwind their $ holdings, but there is no assurance that other lesser "stakeholders" wouldn't do so. Turbulance to come, for sure.

Gold is not an anti-$ trade. It is when all currencies are in question, which is clearly the case still unfolding given all the printing of paper money around the world, inlcuding China. How this is going to settle is wide open.