GooooldGoldGoldGold

[powayseller]

Gold must follow the fake inflation, the CPI, not the true inflation. Inflation has been rising for the past few years. Maybe that’s why gold started its most recent run. If gold followed the true inflation, it would still be rising. So I think it follows the CPI. Any comments on that Chris? I am waiting for a good buy spot to put 10% of my net worth in gold. I am scared holding dollars. I don’t see how dollars can stay strong. As soon as the Fed lowers rates, in our recession, the dollar will weaken again. What do traders and FCBs buy whenever the dollar weakens? Any data on that, Chris? Do you have friends who are currency traders?

Somebody should make a true inflation number. Just take about 50 things that we all buy, like housing, insurance, tuition, music lessons for our kids, and don’t strip out the steaks (for the meat eaters out there, I’ll stick with tofu) and gas. Track this over time. I read a funny blip on The Big Picture, about a bunch of traders that kept a trader CPI. They kept track of price changes in a trader’s basket of goods: dry cleaning, WSJ, martinis, golfing. No matter how you set up your index, you will come up much higher than the government CPI, which minimizes the weightings of things we consume, and strips out the rest.

So the question is: does gold track true inflation, or just the government doctored numbers?

[HereWeGo]

If you look at recent gold trends, the value of gold seems to oscillate rather strongly about the trend line. If you truly believe gold will trend up in value, this is as good a time as any to buy, as gold seems to be in a local trough. If the price of gold does not fall on Monday, it’s probably a good buy for the inflationists hereabouts.

[Chris Johnston]

Chris Johnston
iamafuturestrader.com

Yes, the CPI index would be the best overall easy way of evaluating this. You could construct your own proxy index, but you have to be careful when looking back at what it “would have been” at certain times. Often components of things change over time so the “look back” for back testing relationships can lead to false conclusions.

I suggest keeping things as simple as possible, hence the CPI. I do agree it undermeasures true inflation, but still gives us an up or down trend. The trend is what matters more than the actual values themselves.

I do have currency trader friends, but they are very short term. They just keep the money in T-bills in between trades much like I do. Every trader has his own take on what relationships are causitive of price movements. I just urge two things. First, be careful of assumptions just based on an opinion or a belief in what will happen in the future. That belief could be wrong. Second, do your own research and be decisive. Once you make up your mind on something, take your course of action and do not listen to anyone else. It is easy to be dissuaded from your path on things. There will always be very bright people who disagree with your assesments. Stay the course, and go with your convictions.

If you are wrong, learn from it and do not make the same mistake next time. This is what I do. Here is a specific example. Through my research I had determined that a short position in bonds should be put on the very day the McCulley from PIMCO came out and said, “Do not short bonds.”
I never once considered not taking that trade due to this.

He has alot more money than I do, and is perceived as a bond guru by people around the world. How could I be short when he said that it the first thing not to do. Well, the market went on the next day to have 6 consecutive down closes. I was right, he was wrong. Now, if I had followed his advice I would have missed a profitable trade.

For those of you that think the dollar is going to get beat down heavily, and we are going into recession, have the conviction to place your money consistent with that outcome. I do not have any magic for this because I do not share that view. Who cares what I think.

Do not look back, do not be swayed by anyone who disagrees. Pull the trigger, and do not look for others to reinforce the view. You have done the research, take the trade!

[SDbear]

http://www.kitco.com/ind/laird/aug152006.html

Anice theory on the recent gold movements

[HereWeGo]

Then again, as Keith over at Housing Panic notes, the recent price chart of gold currently forms a disturbingly clear “Head and Shoulders” pattern, generally associated with a downturn.

[rseiser]

Guys,
I just got an e-mail from my friend who is the best contrarian indicator I know. (He was able to buy some stocks at exactly their top.) He was just passing along the bad news about NEM and that he thinks it will drop to $30 or even $20. Coincidentally, the e-mail came minutes before gold rallied to $600. Could this be the bottom in NEM again?

[rocketman]

I was wondering what was going on with NEM myself. I found this article from NewsWatch today. It looks like they’re going to be having problems for awhile…

“NEW YORK (MarketWatch) — Newmont Mining Corp. Wednesday said it expects equity gold sales to temporarily decline before increasing once development projects in Nevada, Ghana and Australia reach full production rates in 2008 and 2009. Denver-based Newmont now expects equity gold sales of 5.6 million to 5.8 million ounces for 2006 and of 5.2 million to 5.6 million ounces for 2007. The company cited lost sales from the Zarafshan-Newmont joint venture and lower than expected production from the Yanacocha project in Peru for the decline. Newmont also said it expects costs related to sales for 2007 to rise between 20% and 25% from its anticipated 2006 level of between $290 and $310 per ounce. The company also said it expects to generate pre-tax gains of about $295 million from the sale of its Black Gold heavy oil property in Canada and the Martabe project in Indonesia. It expects the gains to be partially offset by a $94 million non-cash write-off of the Zarafshan-Newmont joint venture due to the Uzbek government’s expropriation of the company’s assets. The company also agreed to acquire a 40% interest in Shore Gold Inc.’s Fort a la Corne joint venture, located in Saskatchewan, Canada, for $153 million.”

Take a look at some of the other players like NXG, SA and EGO. They’re not having any problems and are making gains.

Zeal said to start accumulating.

[powayseller]

I don’t subscribe to Zeal Speculator, so I’ve got to wait for October 1 to find out what to accumulate. Can you give me a heads up?

[Wiley]

Gold is all in the dollar.They are completely inverse eachother with the short term exceptions of the hedge/momentum players pushing too far either way.

Inflation=increase money supply. I think there is little doubt we’ve had plenty of that. I believe we’ll have even more when the foreigners stop buying our debt and the fed starts monetizing it. If they haven’t already.

If you cut out all the noise and look at every instance in history that a country (well empire) debased it’s currency as we are then you have to be gold bullish.

Chris, I like technical analysis also but I truly believe without a fundamental view it won’t work.

[rocketman]

Zeal Speculator thoughts.

PS – Adam has tossed us a few bones this week but tells us that the ZI is going to have a lot more trades since it only comes out once a month.

He likes Breakwater Resources in Toronto trading on the OT here in that States as BWLRF. Yesterday it was trading at .94.

He considers EGO Eldorado GoldCorp as the crem de la crem of gold stocks that is dirt cheap. Northagte Minerals NXG is also a big thumbs-up right now.

Zeal said that even though he really can’t call a bottom, some of these stocks have hit their 52 week low and should be consisdered for stradeling – keeping your trailing stop loose – and “slowly” accumulate rather than just jumping in with both feet. He does think we are going to see a turn soon. If you want more info on Breakwater, let me know.

Hope this helps. Gold was at $608.00 this morning.

[lewman]

I’m with Zeal and agree that I can start accumulate for the long term. But take a look at the gold chart. Since mid July, Gold’s in a well defined down channel with top of the channel currently at around $630ish. Until it breaks, it’s probably not going to go very far. But the drop is quite gradual. Marking the tops since mid-july you have gold going from $660 in mid-july to $640 in early september, and if gold does rally this time back to $630 you’re still talking about just a $30 drop or approx 5% in 3 months.

With overall weakness in commodities in general, there’s a good possibility that gold could be trapped in a range for months before a breakout on the upside could take it to the next level.

So I think there are both long and short term opportunities here. I intend to play the range for the short term. And when it hit the bottom of the channel I’d also accumulate for the long term.

Let see if it works out.

And note to Chris:
You may recall previously on your blog we had a discussion about your $574 warning. As I mentioned, similar pattern existed in 1973 which turned out to be an excellent buy opportunity. So I’m wondering what objective measures do you use to determine that a decisive break has indeed occurred ? I read somewhere that some traders would for example require price to stay below the target level for X trading days but would you be kind enough to share yours ?

[Author]

Posts