LR European

Gold Bears Stop Sector from Overheating

Well presented and thorough. Thank you. Perhaps my only quibble comes towards the end of your article when you ask the question:

"How long will it take the 1.3 billion gold-starved consumers of China to buy their fill? Perhaps the better way to phrase the question is: how many thousands of tons of gold will it take to satisfy this bloc representing more than 20% of our entire population?"

As I am sure you are aware, the vast majority of that 1.3 billion struggle to afford basic sustenance and have little hope of feeding their gold hunger.

Nevertheless, within that massive group is a tiny percentage of many tens of millions of Chinese who can and do afford to invest and are certainly helping on the demand side of the equation. So your argument was right, but the quantum was just a wee bit over-exuberant. ;-)

Gold Closing In on 20% Above 200-Day Moving Average

Its not different this time. That's the point. Gold has always been a refuge at times of uncertainty. Deflation is as much a driver as inflation.

I think you are almost certain to be proved right in your doubt, but no time soon and not until the price is substantially higher. There is no mania visible. The article makes the case quite convincingly that inflows into gold have slowed not accelerated. That is not the sort pattern seen at bubble peaks.


On Nov 18 04:04 PM woollyB wrote:

> Gold looks like tech in 1999 and real estate in 2005. Nobody thinks
> it can go down. If you think gold can only go up from here, its
> all-time high, you should explain why "this time is different." And
> if the explanation has to do with inflation, the Fed, etc., well,
> there are always compelling arguments at the top. That's why it's
> a top.

Gold as a Hedge, Not an Investment

There is a simple fact that the article misses: the performance of gold is correlated to instability. Not to inflation or to deflation. except in so far as those accompany economic instability.

In this context, yes, gold can be a trade against all the world's currencies. In fact, it often has been throughout history.


On Nov 16 11:03 AM Brian McMorris wrote:

> You hit on a key point that others somehow miss: The US Dollar is
> the world's reserve currency. This means that one way or the other,
> almost every other currency is indexed to the dollar (China's link
> is direct). So, when the dollar goes down, all currencies go down,
> more or less depending on the degree of linkage.
>
> Gold as a trade against all the world's currencies makes no sense.
> Gold might trade higher in a relative sense, one currency against
> another (as Oil does), but as an alternative to paper currency?
> I don't think so. Global fiat currency is based on the aggregate
> asset base of the world. There is not enough, nor enough interest
> in gold as a representative of the global asset base for it to serve
> as currency (and really no need). It is a speculative play only,
> and therefore is as likely to go down as up, especially once supplies
> begin to increase.

Chart of the Day: Gold and the Dow

If you were to cut out the extremes - equity over-valuation in the late '20s, 60's and '90s the ratio has consistently traded below 10. A move to 5 now would imply (estimated by eye) a doubling in the gold price or a halving in the Dow.

Sentiment Overview: A Scarcity of Bulls

Excellent piece, drawing a lot of relevant information together without bias. Thank you.

China: Is This Classic Post-Bubble Price Action?

That is precisely what is exciting about China's prospects. As the 3/4 of the population is lifted out of extreme poverty they start to be able to afford the non-essentials. Growth from zero to 1 is an infinite percentage move!

The recent data on car sales and white good sales in China bears out this dynamic.


On Nov 05 05:11 PM untrusting investor wrote:

> True, but how much can the average Chinese consumer purchase with
> an average per capital income of something like $6K? One has to guess
> that most of that per capita income would barely provide for subsistence
> living. Saw the statistics on China per capita breakdown and it was
> something like 3/4 of the entire population is $6K or less in annual
> income. The other 1/4 is of course doing better but much of that
> was at about the $20K annual level.

Gold Prices: A Familiar Trend

Your chart shows that gold corrected sharply after its accelerated peak in the early 80s and then proceeded to form an extended base from which it has finally broken up decisively.

Why do you not think that is a screaming buy signal?

Before worrying about the price action wait for an acceleration such as shown on the chart from the late 70s - a rate of change which is obviously unsustainable. We are not there yet on the basis of the chart you show.

New 'Crash' Warnings for U.S. Markets

I take it you're not long the market then?

An more nuanced report of Marc Faber's recent comments would mention that he sees a crash coming BUT is uncertain as to the timing. It could be a few days or weeks or it could be in several years, but given the vast imbalances in the global economy when it comes is may well rock the foundations of capitalism!

Colourful, eh? I guess if you can afford to stay out of the market you probably could. Otherwise, keep working it, but stay frightened.

Gold: Who's Left to Buy?

Who's left to buy? You give the answer yourself when you say that 'every trader category is getting shorter'. Sooner or later investor allocations to gold will increase/ broaden and sooner or later there will be a short squeeze in gold as 'every trader category' scrambles to buy. Here's hoping! :-)

Gold: What Professional Futures Traders Think

While true that the main driver for gold at the moment is the US$, the price is currently rising in most currencies. A quick scan through the charts shows that although not hitting new short-term highs (yet?) in many of the stronger currencies gold's trend of more than a few months looks consistent in every mainstream currency.

Precious Metals: Breakout, Fakeout or Shakeout?

A beautifully argued article. Thank you. However, I think you are wrong on a number of counts.

1)You suggest that gold has not performed in a year of financial crisis. There are few assets close to their all time highs apart from gold, so....

2)You suggest that everyone who could possibly want to be in the trade has been brought in to gold. Actually the allocation to gold among the big funds (pensions, general mutuals etc.) remains close to zero and the same applies to the major wealth managers. Gold remains a minority interest among private investors, albeit with a widening circle, but we have not begun to travel the slope of broad acceptance.

3)You suggest that a shake out is needed before gold can take off. Possibly, but I think you overstate this. Gold's consolidation over the past year has been one of the lengthiest in the current bull market and sellers have been thinned out already. We may well see what lies behind door #3, but I suspect it will be a small room that no one wants to remain in for long...

Has Gold Finally Broken Out?

...or, more frequently, "investing".


On Sep 04 10:45 AM Graham and Dodd Investor wrote:

> People want to buy gold, but not "sell" it by giving it away as a
> present. This is called hoarding.

Gold Remains Rangebound

It would be worth checking (eventually!), but my impression is that the PMs have been making something of a habit over the last several years out of giving a dull mid section of the year before settling in to a trend in September which lasts through the end of the year...

My expectation is for strength and I am positioned accordingly. Unpleasant though the current churning activity is, it provides the resilience underneath the coming trend by shaking out nervous/ weak holders who will more than likely be back to buy at higher levels once trends are in motion.

Gold and Silver Facing Resistance Levels

"Disclosure: No positions" Why on earth?

Promising Signs for the Economy and the Equity Markets

Excellent, well balanced article. Thank you.