In an article published at Seeking Alpha, Jeff Clark argues the gold trade is not crowded. He uses a figure calculated by John Paulson, which divides the total amount in gold ETFs (at $1,200 gold) by the total amount available in money market funds. The ratio is only 2.7%.
Clark points out the gold trade seems crowded because gold assets and interest are high relative to the dearth years. That said, he notes an increase in the above ratio to 10% would cause the price to explode.
Monday, July 19, 2010
Harry Schultz Still Bullish On Gold
Harry Schultz is one of the original goldbugs, and a big name even back in the 1960s. [The late Paul Erdman was a "Harry L. Schultz man", or "HLSM."] In an interview with the Daily Bell, exerpted at LewRockwell.com, he said gold is destined to go much higher. One reasons is his belief that the gold markets are manipulated - he believes all market are - but the metal will break the bounds placed on it.
Interestingly, he's an Internet and computer skeptic. He says high tech has traded performance for dependability: it was generally expected that a typewriter would never "hang," but computers don't have that reliability. He also thinks the Internet may be a gigantic trap as the government can collect much more information on people than would otherwise be the case.
I should add that Schultz got his start in old media: newspapers.
Interestingly, he's an Internet and computer skeptic. He says high tech has traded performance for dependability: it was generally expected that a typewriter would never "hang," but computers don't have that reliability. He also thinks the Internet may be a gigantic trap as the government can collect much more information on people than would otherwise be the case.
I should add that Schultz got his start in old media: newspapers.
How Far Can Gold Go...
Dominic McCormick has written a thoughtful piece looking at gold's future, which attempts to clear up some misunderstanding about the metal as a portfolio holding. He pulls away from the gold-as-money issue, arguing that gold is a counter-cyclical asset relative to confidence in the financial system. As such, it can balance off financial assets whose value is tied to such confidence. He notes that gold is becoming more popular as an alternative investment, albeit in the teeth of a number of vocal gold skeptics. That rise in popularity leads him to conclude gold is closer to the end of its bull market than the beginning, although he does say the current bull market could go on for several years. [The metal's been been rising for more than nine years.] Given this increase in popularity, there is a chance of gold forming a blow-off top should it become a must-have asset.
One point he made caught my eye:
One point he made caught my eye:
Critics, meanwhile, get obsessed with arguments that gold doesn’t have an income stream, cannot be valued easily and relies heavily on speculative buyers/investors. It is therefore crucially reliant on “confidence” – something they argue is very fickle. This is true, but confidence affects the return on all investments. Even a stock or a market with a known dividend can fall 50 per cent if sentiment sours and its price/ earnings ratio falls from 20 to 10 without any change in the underlying fundamentals.The part about confidence being fickle made me wonder if those skeptics are confusing gold with the fractional-reserve system. A loss in confidence could collapse the fractional-reserve banking system far more quickly, and more completely, than a loss of confidence in gold. To the extent to which gold skeptics are fiat-money fractional-reserve system boosters, the shoe is on the other foot.
Stay The Course, TMFSinchiruna Advises
The current slump is frustrating, but TMFSinchiruna over at the Motley Fool says it's best for gold bulls to hold on and stay the course. He says he himself has traded some of his PMs, trying to sell on the upswing and buy when lower, but he only does so wtih 5-10% of his allocation. He said it's best to stand pat all told. [Marc Faber calls that kind of trading "be[ing] clever," and he strongly advises against it because of the risk of gold shooting upwards and leaving the trader buying less for more.]
TMFSinchiruna also points to a significant item at the bottom of the same entry: Zhang Monan, a researcher with the State Information Center think tank, says the PRC should gradually unload its Treasury securities now that demand for them is high. Monan also advocates moving some of the money into hard assets. [Full story here.]
Sinchurina has also linked to a real heartbreaker of a story, detailing the trouble that an old woman, afflicted with cancer had in redeeming her silver bullion certificates from Scotiabank. The Toronto-Dominion bank was more accomodating.
TMFSinchiruna also points to a significant item at the bottom of the same entry: Zhang Monan, a researcher with the State Information Center think tank, says the PRC should gradually unload its Treasury securities now that demand for them is high. Monan also advocates moving some of the money into hard assets. [Full story here.]
Sinchurina has also linked to a real heartbreaker of a story, detailing the trouble that an old woman, afflicted with cancer had in redeeming her silver bullion certificates from Scotiabank. The Toronto-Dominion bank was more accomodating.
Indian Gold Buying Strengthens On Lower Prices
According to a report by the Economic Times, there was a fair bit of buying due to gold prices dropping below $1,200.
"Good fall has led to good demand... there were deals at all levels be it $1,200/1,190/1,186 (an ounce)," said a dealer with a private bank in Mumbai, which deals in bullion....Sentiment, though, has been dampened somewhat by a weaker rupee.
"My order sheet is showing advance orders below $1,185," said another dealer from a state-run bullion dealing bank.
Gold Gets Down Below $1,190
This week's trading began with lassitude; gold stayed stuck around $1,192.50 all through Sunday night (ET). As night turned into morning, the metal began to drift downwards. Touching $1,190 around 3 AM, the metal rallied but couldn't make $1,195. That rally failing, gold moved down to $1,190; after a relief pullup, it descended below that level. Moody's downgrading Irish sovereign debt by one notch from Aa1 to Aa2 didn't help the metal any. As of 8:05 AM, the spot price was $1,187.20 for a drop of $5.80 on the day. The Kitco Gold Index attributed -$6.80 to predominant selling and +$1.00 to weakening of the greenback.
The U.S. Dollar Index drifted upwards a little last night, but didn't make it above 82.75. A spike-up to a little above that level failed to carry through, and the Index sunk well below 82.50 before stabilizing at slightly below that level; it laster crept slightly above. As of 8:09 AM, the Index was at 82.52.
A Bloomberg report, as webbed by Business Week, says gold has been under pressure because speculators are reducing long positions.
A Reuters article says gold has come under pressure because of a newfound deflation watch.
A Wall Street Journal article says gold is still range-bound as it waits for direction.
Regular trading saw gold sink a little after a relief rally that took it up above $1,188. The drop took place right at 8:30 despite there being no news to push it down. After getting as low as $1,182.70, the metal rebounded to $1,185. As of 8:53 AM ET, the spot price was $1,185.80 for a loss of $7.20. The Kitco Gold Index split the loss into -$6.35 for predominant selling and -$0.85 for greenback strength. The U.S. Dollar Index, after making it above 82.5, continued on a run that carried it up to 84.64 before tailing back As of 8:55, it was at 82.58.
The summer doldrums are back. It remains to be seen how much of a cushion physical buying will provide. Gold isn't likely to see $1,200 today, but it's still near the bottom of its multiday short-term range.
The U.S. Dollar Index drifted upwards a little last night, but didn't make it above 82.75. A spike-up to a little above that level failed to carry through, and the Index sunk well below 82.50 before stabilizing at slightly below that level; it laster crept slightly above. As of 8:09 AM, the Index was at 82.52.
A Bloomberg report, as webbed by Business Week, says gold has been under pressure because speculators are reducing long positions.
“Price direction is probably down for this week and gold will spend more time around the $1,180 and $1,190 levels,” said Robin Bhar, a metals analyst at Credit Agricole CIB in London. “Prices looked overbought and everybody was very long gold,” he said. A long position is typically a bet for rising prices....The article also notes that holdings of the SPDR Gold Shares Trust were unchanged on Friday.
{Still, s]ixteen of 24 traders, investors and analysts surveyed by Bloomberg, or 67 percent, said bullion will climb this week. Three forecast lower prices and five were neutral. Prices below $1,200 an ounce attract purchases particularly in Asia, Mark O’Byrne, executive director of GoldCore Ltd. in Dublin, said in a July 16 report.
A Reuters article says gold has come under pressure because of a newfound deflation watch.
"It's now deflation worries people are looking at," a Europe-based trader said, adding the market was wary after cautionary U.S. Federal Reserve minutes released last week. "Plus the euro is not helping either," he added....The article also mentions Dennis Garman's reassessment of his long-held strategy of buying Euro-denominated gold becuase of the Euro's recent strength.
"On the downside, $1,165 an ounce is a key support level and I don't think it could go all the way down. There's good demand in the physical market," the trader said.
Fresh worries on the eurozone's debt problems on news that the IMF and European Union suspended a review of Hungary's funding programme at the weekend could boost bullion's safe-haven appeal.
A Wall Street Journal article says gold is still range-bound as it waits for direction.
Analysts said market participants are cautious, uncertain about the yellow metal's next move. They said gold will likely take its cues from new economic figures and the European bank stress tests results, out Friday....The article also excerpts a Barclays Caital note that said gold's failure to break above $1,219 indicates greater downside than previously thought, although the firm expects the current short-term multiday range to continue.
The market should see trading volumes, which have already begun declining marginally, slip in the coming weeks as the "summer lull" takes full effect, TheBullionDesk.com analyst James Moore said.
Regular trading saw gold sink a little after a relief rally that took it up above $1,188. The drop took place right at 8:30 despite there being no news to push it down. After getting as low as $1,182.70, the metal rebounded to $1,185. As of 8:53 AM ET, the spot price was $1,185.80 for a loss of $7.20. The Kitco Gold Index split the loss into -$6.35 for predominant selling and -$0.85 for greenback strength. The U.S. Dollar Index, after making it above 82.5, continued on a run that carried it up to 84.64 before tailing back As of 8:55, it was at 82.58.
The summer doldrums are back. It remains to be seen how much of a cushion physical buying will provide. Gold isn't likely to see $1,200 today, but it's still near the bottom of its multiday short-term range.
Sunday, July 18, 2010
Credit Troubles On Financial Sense Newhour
This week's Financial Sense Newshour podcast highlighted two little-reported items from the news. The first involved uranium, but the second pertained more to gold. A mainland Chinese ratings agency downgraded U.S. sovereign debt from AAA to AA. Needless to say, the American rating agencies won't follow suit; that downgrade was far out of the mainstream. If heard about in the U.S., it was likely scoffed at.
In the third segment [.pdf file], it was brought up twice by Jim Puplava. He passed it by James Turk, and Peter Schiff later. It ties in with the deflation-to-hyperinflation theme. Schiff said the U.S. dollar is going to fall; Puplava reiterated his belief that there will be another stimulus and/or quantitative easing before the 2010 elections. Turk had an interesting sell point for gold, which he believes is going much higher: the time to "sell" gold is when you spend it.
There was also mention of Shadowstats inflation figures. As made clear in its inflation graph, this last decade was a lot like the 1970s if '70s inflation-calculation methodology is used. Another Shadowstats graph, of the M3 money supply, both puts doubt on the recurrence of inflation and adds to the QE2 story.
Puplava also mentioned that his firm has been advising clients to buy put options on their gold stocks, as those stocks have been acting poorly lately.
In the third segment [.pdf file], it was brought up twice by Jim Puplava. He passed it by James Turk, and Peter Schiff later. It ties in with the deflation-to-hyperinflation theme. Schiff said the U.S. dollar is going to fall; Puplava reiterated his belief that there will be another stimulus and/or quantitative easing before the 2010 elections. Turk had an interesting sell point for gold, which he believes is going much higher: the time to "sell" gold is when you spend it.
There was also mention of Shadowstats inflation figures. As made clear in its inflation graph, this last decade was a lot like the 1970s if '70s inflation-calculation methodology is used. Another Shadowstats graph, of the M3 money supply, both puts doubt on the recurrence of inflation and adds to the QE2 story.
Puplava also mentioned that his firm has been advising clients to buy put options on their gold stocks, as those stocks have been acting poorly lately.
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