Jul 082015
 

“Gold is strong,” I hear you ask, “are you crazy?” Yes, gold fell just below $1150, but in relative terms I think it performed OK over the past 24 hours. The chart below compares gold to some key currencies with the red dot corresponding to 3am US/8am Europe.

AUvsFX

Prior to Tuesday gold was following the performance of the currencies listed in the chart. As money ran to the (lets say “perceived”) safety of US dollar you can see the dollar strengthen as indicated by the black line. At the same time the other currencies were sold heavily but note that gold held its ground for a couple of hours, sold off a bit at 6am, held for a few more hours, then crashed just before 9am. It look to me like gold was attracting buying but eventually that was not enough to counter the selling pressure from the professional money (an others) I discussed yesterday.

Having said that, gold did not recover later in the trading day as most of the other currencies did, ending much worse off. However, if we look at the same time period but compare gold to the other precious metals and oil, the picture isn’t as bad (see below).

AUvsComm

Again, gold held up while platinum and palladium sold off, and come 9am silver and oil crashed much more than gold. Gold ended this 24 hour period the best performer.

The question here is will gold be able to hold above $1150, or indeed, has it bottomed? With professional market sentiment negative towards gold and Chinese demand weak (more about that tomorrow), there is risk of further downside. If gold can hold, it doesn’t mean it will rally as gold can trend sideways for many years, as it did in the mid 1990s for example (see below).

ussideways

You often won’t see such predictions made because they are boring, so analysts and commentators usually forecast increases or decreases. While such basing phases can be frustrating, as Justin at Next Big Trade notes,

“each failed attempt disheartens the bulls and continues to plunge more and more investors into giving up which eventually is what causes a super buying opportunity when the real Stage 2 breakout finally materializes. This is why the “bigger the base”, the higher the potential for a big trade because the bulls have been washed out of the investment.”

However, before you go out and load up, consider Steve Sjuggerud’s advice that an ideal investment has to have three characteristics:

1. It’s cheap (value)
2. It’s hated
3. And it’s in an uptrend (momentum)

Gold certainly has the first two covered but we haven’t seen a sustained upward trend yet, which is why Steve is holding off on investing in commodities that he sees exhibiting a similar set up to gold. They say they don’t ring a bell at the bottom, but if gold can hold $1150 then maybe it is time to brush up on your campanology.

  • The_Spanish_Inquisition

    Keep Stackin’ !
    (You know it makes sense….)

    one of the more depressingly predictable characteristics of the permabull charlatans is their fundamental inability to show any token of contrition of acceptance of their own limitations; ok, so to his credit in 2015 Turd Ferguson publicly (if metaphorically) “ate his own hat” when Silver failed to rally over $23/oz, but what of the other Snake Oil salesmen? We are not talking about “fundamentals”, theories or probabilities here, we are looking at hard facts, and yet what we see from the motor-mouths of KWN is not even mealy-mouthed explanations or lame excuses, but total silence in the hope that we have forgotten their failed predictions

    Of course, many of the permabulls may claim that Gold and Silver haven’t risen yet, but inevitably will: I cannot challenge that perspective, but what I can call out is the more egregious nonsense peddled by some of the retail bullion dealers, such as this:

    1. July 2014 Silver @ $20.95: Silver – the opportunity is NOW
    http://hiddensecretsofmoney.com/blog/silver-the-opportunity-is-now

    2. July 2015 Silver $14.70 : a Loss of 30%

    3. Statements, corrections, explanations, updates; None since April

    How do these people sleep at night?
    (Probably very comfortably, in their McMansions, with their personal wealth invested in something other than Precious Metals)

    • otoman

      If P.M. prices were based on the real thing, physical, and there were no such thing as “paper markets”, then gold would be where it should be, adjusted upwards according to inflation over the past 20 years. Of course if a person believes govt. adjusted inflation numbers, then there has been little to none over the past 20 years. But ONLY brain dead individuals would fit into that category. Want the true gold demand? https://www.bullionvault.com/gold-news/gold-investing-070720151

      • The_Spanish_Inquisition

        I love the smell of Goldbuggery in the morning: it smells like…. pig ignorance

        http://4.bp.blogspot.com/_k6BZ6v0UcC0/S9t20o1Q5jI/AAAAAAAABQ4/_mk7yVqUCD4/s1600/acropolis+now.jpg

        • otoman

          Gold has increased 400% in 10 years. The S&P at 70%. Rigged markets? Look at the volume of the stock indices in the past 6 years. 1/2 what it was? Yet the market has made new highs. What does that tell you? Moreover, you are dealing with a market that is calculated to look better than it is. ie: GM is delisted, another stronger stock takes it’s place. Kind of limits the downside does it not?
          BTW, there is at least 400% more sales in paper gold than physical that actually exists. Do the math yourself. Do all sales through derivatives, futures, pooled accounts, exchange-traded funds, gold certificates, etc. In the COMEX alone if all contracts were to take delivery, there is not enough available gold. And gold funds such as GLD are leveraged even higher.

          Ever seen a 100 year chart for the stock market? Crashes that have taken as long as 27 years just to get back to where it fell from. And at the least 7 years. Except the last which was spawned by QE’s imaginary money which the banks used to buy stocks that are inflated well beyond their real worth. Record profits acquired by cost cutting measures, NOT increased sales, which have resulted in the lowest work force per capita in 40 YEARS! And lower avg. income than 10 years ago. 50% more people on food stamps than 8 years ago.

          Do you realize that even though there is the same amount of gold, the world population has increased dramatically over the past 20 years, making less gold per person available, at the same time there are now more people capable of buying gold since emerging markets have increased income levels per person. Moreover, mine production is on the decline while potential participant buyers are increasing.

          The point about Bullion Vault is the fact that real physical gold is being bought and sold. Why are premiums on ebay much higher than on the paper market, or the fix price? Those 2 are REAL markets. Not imaginary gold being sold on paper. Tell me, if gold is such a bad investment, why have central banks across the world been buying by the tons in the past 2 years, and by far most have sold none. Why was Greece given a loan in gold just a couple weeks ago?
          I won’t argue this any further. History shows that EVERY generation has lost the majority of their savings through the stock market. YES, those that had control and were able to exit at the proper time made out. Most had no control. YOU live in a generation where GM went out of business with thousands of other blue chips in the last 20 years. The raping of the baby boomer generation.

          • The_Spanish_Inquisition

            “Ebay”

            ………………………………………………………………………………………………………..

            And that concludes the case for the Defence

  • Peter Cooper

    Wait for the Chinese policy response to its stock market crash. That’s what sent gold prices much higher in 2009. Arabianmoney.net has a view on this today.

  • Pingback: ¿Por qué el precio del oro puede bajar más allá de los 1.150?()